Everspin
Annual Report 2018

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10‑K(Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the fiscal year ended December 31, 2018ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001‑37900Everspin Technologies, Inc.(Exact name of Registrant as specified in its Charter)Delaware26‑2640654(State or other jurisdictionof incorporation or organization)(I.R.S. EmployerIdentification No.)5670 W. Chandler Boulevard, Suite 100Chandler, Arizona 85226(Address of principal executive offices including zip code)Registrant’s telephone number, including area code: (480) 347‑1111Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.0001 Per Share; Common stock traded on the Nasdaq Stock MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒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 thepreceding 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 past90 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to thebest of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to thisForm 10‑K. ☒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 emerginggrowth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 ofthe 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 orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). YES NO ☒As of June 29, 2018, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock ofRegistrant held by non-affiliates, based upon the closing sales price for the Registrant’s common stock for such date, as quoted on the Nasdaq Global Market, wasapproximately $116.6 million. Shares of common stock held by each officer, director and entities affiliated with directors have been excluded because such personsmay be deemed to be “affiliates” as that term is defined under the rules and regulations of the Exchange Act. This determination of affiliate status is not necessarily aconclusive determination for any other purpose.The number of shares of Registrant’s Common Stock outstanding as of March 6, 2019 was 17,095,552. DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Shareholders, which will be filed with the Securities and ExchangeCommission within 120 days after the end of the Registrant’s fiscal year ended December 31, 2018, are incorporated by reference into Part III of this Report. Table of ContentsTable of ContentsPagePART I Item 1. Business4Item 1A. Risk Factors12Item 1B. Unresolved Staff Comments31Item 2. Properties32Item 3. Legal Proceedings32Item 4. Mine Safety Disclosures32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities33Item 6. Selected Financial Data33Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations34Item 7A. Quantitative and Qualitative Disclosures About Market Risk48Item 8. Financial Statements and Supplementary Data49Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure77Item 9A. Controls and Procedures77Item 9B. Other Information78 PART III Item 10. Directors, Executive Officers and Corporate Governance79Item 11. Executive Compensation79Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters79Item 13. Certain Relationships and Related Transactions, and Director Independence79Item 14. Principal Accounting Fees and Services79 PART IV Item 15. Exhibits, Financial Statement Schedules80Item 16. Form 10-K Summary84SIGNATURES 85 2 Table of ContentsForward-Looking StatementsThis Annual Report on Form 10‑K contains forward-looking statements concerning our business, operations andfinancial performance and condition, as well as our plans, objectives and expectations for our business operations andfinancial performance and condition. Any statements contained herein that are statements of events or results that may occurin the future are deemed to be forward-looking statements. In some cases, you can identify forward-looking statements byterminology such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,”“intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “will,” “would,” and othersimilar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or othercomparable terminology, although not all forward-looking statements contain these words. These forward-looking statementsinclude, but are not limited to, statements about:·estimates of our future revenue, expenses, capital requirements and our needs for additional financing;·the implementation of our business model and strategic plans for our products, technologies and businesses;·competitive companies and technologies and our industry;·our ability to manage and grow our business by expanding our sales to existing customers or introducing ourproducts to new customers;·our ability to establish and maintain intellectual property protection for our products or avoid claims ofinfringement;·our ability to hire and retain key personnel;·our financial performance;·our estimates of the MRAM market opportunity; and·the volatility of our share price.Forward-looking statements are based on management’s current expectations, estimates, forecasts, and projectionsabout our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees offuture performance or development and involve known and unknown risks, uncertainties, and other factors that are in somecases beyond our control. As a result, any or all of our forward-looking statements in this report may turn out to be inaccurate.Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of thesignificant uncertainties in these forward-looking statements, you should not regard these statements as a representation orwarranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Factorsthat may cause actual results to differ materially from current expectations include, among other things, those listed under“Risk Factors” and elsewhere in this report. 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 investorsthat our business and financial performance are subject to substantial risks and uncertainties. Except as required by law, weassume no obligation to update or revise these forward-looking statements for any reason, even if new information becomesavailable in the future.3 Table of Contents PART I Item 1. Business.OverviewWe are the leading provider of magnetoresistive random access memory (MRAM) solutions. Our MRAM solutions offerthe persistence of non-volatile memory, a type of memory that retains information even in the absence of power, with thespeed and endurance of random access memory (RAM). This enables the protection of mission critical data particularly in theevent of power interruption or failure. Our MRAM solutions allow our customers in the industrial, automotive andtransportation, and enterprise storage markets to design high performance, power efficient and reliable systems without theneed for bulky batteries or capacitors.Our MRAM technology, unlike traditional semiconductor memory technologies, stores data as a magnetic state ratherthan an electrical charge, and is offered as either a discrete or embedded solution. Our products read and write data at speedson par with most dynamic RAM (DRAM) and static RAM (SRAM). Our products offer the non-volatility of flash memory butwith significantly superior endurance. We offer our MRAM products with different densities and interfaces to address thevarious needs of our customers. Our lower-density MRAM products, which we define as having bit densities from 128kb to16Mb, offer write-speeds on par with SRAM, with virtually unlimited endurance. Our higher density products, which wedefine as having bit densities at or greater than 256Mb, offer write-speeds on par with DRAM and have superior endurancecompared to most other non-volatile memory technologies.Our lower-density products are optimized for use in industrial, automotive and transportation applications, while ourhigher-density products are optimized for use in enterprise storage applications. In the enterprise storage market, wecollaborate with industry-leading memory controller companies to enable compatibility of their controllers with our MRAMproducts, facilitating the adoption of our solutions into our customers’ existing end products. We sell our products directlyand through our established distribution channel to industry-leading original equipment manufacturers (OEMs) and originaldesign manufacturers (ODMs)We leverage both internal and outsourced manufacturing capabilities to produce our MRAM products. We purchaseindustry-standard complementary metal-oxide semiconductor (CMOS) wafers from semiconductor foundries and completethe processing of our products by inserting our magnetic-bit technology at our 200mm fabrication facility in Chandler,Arizona. We have entered into a manufacturing agreement with GLOBALFOUNDRIES for 300mm high-volume productionof our higher-density products. We believe our strategic relationship with GLOBALFOUNDRIES accelerates thedevelopment of our MRAM solutions, provides us with leading-edge outsourced manufacturing capabilities, and a financialmodel with higher variable cost. In addition, GLOBALFOUNDRIES has the ability to embed our technology in its productsfor sale to its customers, from which we would earn licensing or royalty revenue.For the years ended December 31, 2018 and 2017 we recorded revenue of $49.4 million and $35.9 million, gross marginof 51.3% and 59.8%, and a net loss of $17.8 million and $21.1 million, respectively. As of December 31, 2018, we had 95employees, more than half of whom are engaged in research and development. Our headquarters are located in Chandler,Arizona. Our principal design center is in Austin, Texas, and we have additional sales operations in the Americas, Europe andAsia-Pacific regions.The Opportunity for Fast, Persistent MemoryMRAMTraditional memory technologies have either fast write-speeds or are non-volatile, but not both. MRAM combines bothfeatures into a single solution, making it an ideal memory to protect data in the event of power interruption or failure, and tostore data that is frequently written and accessed. We believe customers that employ MRAM in their systems are able todesign higher performance, lower power, more reliable and simpler systems than they would be able to design using otherexisting memory technologies. The following attributes make MRAM an increasingly important application specificmemory solution for system architectures that require non-volatile memory with the speed and endurance of RAM:Non-volatile. MRAM can retain data in the event of power interruption or failure, which enables end-system designersto create products without costly and bulky power-loss protection systems, such as batteries and capacitors.4 Table of ContentsFast Write- Speeds. MRAM offers write-speeds that are on par with the fastest available volatile memory technologies,including most DRAM and SRAM and is significantly faster than other non-volatile memories used today. For example,MRAM writes a block over 100,000 times faster than NAND flash, a type of non-volatile flash memory.Superior Write- Cycle Endurance. MRAM offers superior write-cycle endurance to existing non-volatile solutions,enabling end-systems designers to offer products that are not limited by memory wear-out. For example, MRAM write-cycleendurance is nearly 10 million times greater than NAND flash.Scalable to Greater Densities and Smaller Process Geometries. MRAM’s write-speed and endurance are scalable withincreasing bit densities and smaller geometries, which we believe will allow system designers to employ MRAM inapplications that require more memory and smaller form factors.Proven to be Manufacturable at High Volumes. MRAM can be manufactured in high volumes and in advanced nodes,and is compatible with standard CMOS processes.Low Energy Requirement. MRAM utilizes energy efficiently over the duration of its write and read cycles. It has theability to be completely powered down, consuming no energy while still retaining data, which data can be accessed quicklyonce power is restored.These attributes enable MRAM to be used as a true Persistent Memory, by which we mean a form of memory that hasnon-volatility that is similar to storage but with performance that is similar to DRAM or SRAM. MRAM has already provenits commercial viability as a discrete and embedded solution in application-specific memory markets and we believe it willbecome a mainstream memory technology in the future.Discrete MRAM Market OpportunityWe expect the introduction of increasingly higher density MRAM solutions will result in greater adoption of MRAMtechnology into a wider range of applications and end markets.We expect our Toggle MRAM solutions, which have lower bit densities ranging from 128kb to 16Mb, to continue toserve customers in the industrial, automotive and transportation end markets, where products tend to have long product lifecycles. As MRAM bit densities increase, MRAM solutions will be well-suited to address a wider range of large and growingmarkets, such as server and storage, increasing the overall market opportunity for MRAM. We believe our Spin-torqueTransfer (STT) MRAM solutions, which are designed to have bit densities at or greater than 256Mb, will drive the rapidadoption of our products into enterprise storage applications. Further, the introduction of MRAM solutions with bit densitiesof 1Gb or greater should expand the opportunity for MRAM into additional adjacent markets such as server and mobilecomputing.Embedded MRAM TechnologyIn addition to use as a discrete product, MRAM can serve as embedded memory in a variety of CMOS technologies.Memory accounts for a significant portion of the area of System-on-a-Chips (SoCs), application-specific integrated circuits(ASICs), application-specific standard products, microcontrollers, baseband processors, storage controllers, applicationprocessors and field-programmable gate arrays. Memory that is integrated in these products is called embedded memory andoffers similar performance to its discrete counterparts.Today’s mainstream embedded memory solutions include embedded SRAM (eSRAM), embedded Flash (eFlash), andembedded DRAM (eDRAM). We believe these technologies have process and cost challenges in scaling to advanced CMOSprocessing nodes at 28nm and below. Embedded MRAM’s (eMRAM) compatibility with CMOS processes, combined withits lower leakage, byte addressability, small cell size and high write-cycle endurance make it well-suited as a replacement foreSRAM, eFlash and eDRAM. We believe the use of eMRAM will be more cost effective for foundries by maintainingcompatibility with standard CMOS, thus improving manufacturing efficiency.eSRAM, which uses six transistors (6‑T) to construct a memory bit, requires more silicon area and additional power dueto leakage current from its multiple-transistor architecture. Embedded MRAM, which uses a single transistor architecture,results in less leakage current and requires a smaller area on an integrated circuit to achieve equivalent or better performancethan eSRAM.5 Table of ContentseFlash requires relatively high voltage and area overhead to program the memory bits, which is contrary to the trend ofscaling down the CMOS process for lower power and less chip area. eFlash also has a limited number of write cycles, whichcan render it ineffective as working memory on the chip. Compared to eFlash, eMRAM requires lower voltage to programbits, which results in greater power efficiency and it has higher write-cycle endurance. eMRAM is byte-addressable and hassymmetric read and write timing, which makes it suitable as working memory. eFlash must be erased and programmed inpages, which is less efficient for intensive writing applications.eDRAM is a volatile memory that does not retain data when power is off. eDRAM manufacturing requires additionalprocess steps and costs to build a capacitor to store the data. This manufacturing process could diminish the functionality ofthe memory or logic components in the integrated circuit. eMRAM, however, can be added towards the end of themanufacturing process, which does not impact the overall performance of the integrated circuit.The versatility of eMRAM can simplify the design and architecture of the overall integrated circuit by providing theability to have one memory type serve as both working memory and code storage memory.Our SolutionsWe have a strong track record of innovation in MRAM technology, as demonstrated by our successive introduction ofMRAM products that address an increasingly broad spectrum of applications. Our MRAM discrete solutions as well as otherofferings are described as follows.Toggle MRAMOur Toggle products, which we have been shipping since 2008, are primarily designed to address applications in theindustrial, and automotive and transportation markets. Our customers in these markets require memory technology that isnon-volatile, writes continuously at high speeds to limit data loss, operates in harsh environments, and maintains enduranceover long product lifecycles. To address these requirements, we designed our Toggle MRAM products to offer the persistenceof non-volatile memory, speeds comparable to SRAM, reliability across a wide temperature range, and virtually unlimitedwrite-cycles. We have designed our Toggle products to be compatible with industry standard interfaces, including standardSRAM, Serial Peripheral Interface (SPI) and Quad SPI (QSPI) interfaces, enabling our customers to replace incumbent memorysolutions with our Toggle MRAM solutions. We believe this has been important for the initial success and early adoption ofour Toggle products.Spin-Transfer Torque MRAMOur STT-MRAM products, which are currently shipping in 256Mb densities, are initially targeted for enterprise storagemarket, which includes high performance Solid-State Drives (SSDs), Redundant array of independent disks (RAID) and serverapplications. Our customers require low latency, protection of data against power interruption and failure, high density andreliability. Our STT-MRAM products offer performance comparable to DRAM, and are up to five orders of magnitude fasterthan flash block writes, non-volatile to protect against power loss, and offer endurance superior to Flash memory. We use ourPerpendicular Magnetic Tunnel Junction (PMTJ) technology to deliver bit density and power efficiency increases to create atrue Persistent Memory solution. Our STT-MRAM products are designed with derivative standard DDR3 and DDR4interfaces, which we believe will facilitate market adoption of our products in the enterprise storage and server markets. Our1Gb density offering is currently in development.Embedded MRAMWe offer eMRAM to our customers for integration in their SoC solutions. We also enable GLOBALFOUNDRIES to offereMRAM in the solutions they manufacture for their customers. Our embedded memory solutions offer high performance, lowcost and low power and can be manufactured using standard CMOS. eMRAM offers significant advantages over existingembedded memory solutions, particularly in endurance, bandwidth, energy and area requirements, leakage and persistence.We believe our eMRAM solutions offer the performance benefits and process compatibility to become the embeddedmemory of choice for our current and future foundry partners.6 Table of ContentsSensorsWe have developed and are currently shipping a high performance, high-reliability magnetic sensor based on ourMagnetic Tunnel Junction (MTJ) technology, which is at the core of our memory technology. Our magnetic sensor offersthree-axis orientation in a single die, and is integrated into consumer electronics applications as an electronic compass. Webelieve our magnetic sensor technology can be used for additional power management applications in the industrial, andautomotive and transportation end markets. We currently license our magnetic sensor technology to third parties for theircommercial use and plan to continue this strategy.AerospaceAerospace and satellite electronic systems require memory that is able to withstand exposure to the levels of radiationencountered in avionics and space applications. MRAM is not susceptible to radiation induced errors because data is storedas a magnetic state rather than as an electrical charge. Aerospace and satellite equipment manufacturers license ourtechnology for use in their electronic systems. Through license agreements, we provide manufacturing service andtechnology access to certain of our customers, and we sell products to value added subcontractors.Our TechnologyMemory ArchitectureOur MRAM solutions are based on our MTJ technology, which writes data by establishing a stable magnetic state, andreads data by measuring the resistance of the MTJ. MTJ devices are multilayered structures, including thin metal anddielectric layers, which are fabricated with methods commonly used in semiconductor manufacturing. The resistance isdetermined by the orientation of the magnetic field in the free layer relative to the fixed layer.Toggle MRAM TechnologyOur Toggle MRAM technology uses a magnetic field to program, or write, bits. A significant advantage of this “fieldswitching” is virtually unlimited write endurance, as reversing the free-layer magnetization with a magnetic field does nothave any wear-out mechanism. Field Switched MRAM products are currently in production at the 180nm and 130nm nodes. Field Switched MRAM bit cell. Each bit cell comprises an MTJ connected in series with a select transistor.STT-MRAM TechnologyOur STT-MRAM technologies use the spin-torque transfer property, which is the manipulation of the spin of electronswith a polarizing current, to establish the desired magnetic state of the free layer to program, or write, the bits in the memoryarray. Spin-transfer torque MRAM (STT-MRAM), provides a significant reduction in switching energy compared to Field-switched (Toggle) MRAM, and is highly scalable, enabling higher density memory products. Our STT-MRAM uses aPerpendicular MTJ. We have developed materials and Perpendicular MTJ stack designs with high perpendicular magneticanisotropy, which provides long data retention, small cell size, greater density, high endurance and low power.7 Table of ContentsSchematic depiction of the Perpendicular MTJ bit cell Embedded MRAM TechnologyMRAM technology is more easily embedded than most other memory technologies, due to the way the MRAM moduleis integrated in standard CMOS. Since the MRAM module is inserted between metal layers in the back-end-of-line part of thefabrication process, above the transistor layers, it does not disturb the CMOS fabrication process. Integrating MRAM instandard CMOS for SoC applications does not impact the performance of the integrated circuit.Sales and MarketingOur MRAM products are used by top-tier customers in the industrial, automotive and transportation, and enterprisestorage markets. We consider our customer to be the end customer purchasing either directly from a distributor, a contract manufactureror us. An end customer purchasing through a contract manufacturer typically instructs the contract manufacturer to obtainour products and to incorporate our products with other components for sale by the contract manufacturer to the endcustomer. Although we actually sell the products to, and are paid by the distributors and contract manufacturers, we refer tothe end customer as our customer.During the year ended December 31, 2018, more than 800 end customers purchased our products. One customeraccounted for more than 10% of our revenue during 2018. No end customers accounted for more than 10% of our revenueduring 2017.We sell our products through a direct sales channel and a network of representatives and distributors. The majority ofour customers, and their associated contract manufacturers, buy our products through our distributors. We maintain sales,supply chain and logistics operations and have distributors in Asia to service the production needs of contract manufacturerssuch as Flextronics, Foxconn, Inventec and Sanmina. We also maintain direct selling relationships with several strategiccustomers. Our direct sales representatives are located in North America, the United Kingdom, Germany, Hong Kong, andTaiwan.Our typical sales cycle consists of a sales and development process in which our field engineers and sales personnelwork closely with our customers’ design engineers. This process can take from three to 18 months to complete, and asuccessful sales cycle culminates in a design win. Note that some customers for our newer STT-MRAM products may need tomodify their controllers to integrate our technology, adding additional time to the cycle. Once we establish a relationshipwith a customer, we continue a sales process to maintain our position and to secure subsequent new design wins at thecustomer. Each customer lead, whether new or existing, is tracked through our CRM tool and followed in stages of prospect,design in, design win and production. This tracking results in a design win pipeline that provides a measure of the futurebusiness potential of the opportunities.Our technical support personnel have expertise in hardware and software, and have access to our development team toensure proper service and support for our OEM customers. Our field application and engineering team provides technicaltraining and design support to our customers.8 Table of ContentsManufacturingWe rely on third-party suppliers for most phases of the manufacturing process, including initial fabrication andassembly.Wafer ManufacturingWe manufacture our Toggle MRAM products and provide foundry services for embedded MRAM, licensed MRAMproducts and MTJ-based sensors in our 200mm manufacturing facility. Our facility is in an ISO‑4 clean room andour manufacturing line is ISO 9001:2015 certified. We actively manage inventory, including automated process flows,process controls and recipe management, and we use standard equipment to manufacture our products.Our STT-MRAM products are produced in a 300mm GLOBALFOUNDRIES fabrication facility.Assembly and TestWe have designed test protocols to maximize yields at assembly and final test, reduce manufacturing costs and improvequality. Our design and product engineering teams have developed and implemented wafer-level test programs tocharacterize the behavior of our MRAM devices. We create predictive models and test each of our parts to assure thereliability of the products in the field. We also add unique electronic part identification numbers to provide materialtraceability.To protect the Toggle MRAM devices from stray magnetic fields, we developed packaging solutions, which we havequalified at independent, industry-leading sub-contractors, including Amkor, OSE, GTC, ChipMos and UTAC. We havesuccessfully qualified our MRAM devices in various packages at temperatures ranging from commercial to automotivegrade. As part of our commitment to quality, our quality management system has been certified to ISO 9001:2015 and ISO14000 standards. Our foundry vendors and sub-contractors are also ISO 9001 and ISO 14001 certified.STT-MRAM Joint Development AgreementOn October 17, 2014, we entered into a joint development agreement with GLOBALFOUNDRIES Inc., a semiconductorfoundry, for the joint development of our STT-MRAM technology. The term of the agreement is the later of four years fromthe effective date or until the completion, termination, or expiration of the last statement of work entered into pursuant to thejoint development agreement.The joint development agreement also states that the specific terms and conditions for the production and supply of thedeveloped MRAM technology would be pursuant to a separate manufacturing agreement entered into between the parties.See “—STT-MRAM Manufacturing Agreement” below.Under the joint development agreement, each party granted licenses to its relevant intellectual property to the otherparty. For certain jointly developed works, the parties have agreed to follow an invention allocation procedure to determineownership. In addition, GLOBALFOUNDRIES possesses the exclusive right to manufacture our discrete and embedded SpinTransfer Torque MRAM devices developed pursuant to the agreement until the earlier of three years after the qualification ofthe MRAM device for a particular technology node or four years after the completion of the relevant statement of work underwhich the device was developed. For the same exclusivity period associated with the relevant device, GLOBALFOUNDRIESagreed not to license intellectual property developed in connection with the agreement to named competitors of ours.Generally, unless otherwise specified in the agreement or a statement of work, we and GLOBALFOUNDRIES sharedefined project costs equally under the joint development agreement. If GLOBALFOUNDRIES manufactures, sells ortransfers wafers containing production qualified MRAM devices that utilized certain Everspin design information to itscustomers, GLOBALFOUNDRIES will pay royalties to us for each such wafer transferred or sold to a customer.Except for breaches of confidentiality provisions and each party’s indemnification obligations to one another under theagreement, liability under the agreement is capped at a range depending on project costs and royalty amounts. Either9 Table of Contentsparty may terminate the agreement if the other party materially breaches a term of the agreement, and fails to remedy thebreach after receiving notice from the non-breaching party. If a party terminates the manufacturing agreement for materialbreach in accordance with its terms, that party may also terminate the joint development agreement.On May 27, 2016, we entered into an amendment to the joint development agreement to modify the payment scheduleand to clarify our payment obligations for certain past project costs. Under the amendment, GLOBALFOUNDRIES mayterminate the joint development agreement with us if we materially breach a term of the agreement, such as, but not limitedto, by our failing to pay any undisputed sum which has been outstanding for 45 or more days from the date of invoice, andfail to remedy the breach within 60 days after receiving notice from GLOBALFOUNDRIES. In October 2018, we entered intothe third amendment to the joint development agreement. The third amendment was effective as of January 1, 2018 andextended the term of the joint development agreement until December 2019. This extended agreement also modified ourpayment obligations for certain ongoing project costs. See “Risk Factors” for further discussion of our agreements withGLOBALFOUNDRIES.STT-MRAM Manufacturing AgreementOn October 23, 2014, we entered into a manufacturing agreement with GLOBALFOUNDRIES Singapore Pte. Ltd. thatsets forth the specific terms and conditions for the production and supply of wafers manufactured using our Spin TransferTorque MRAM technology developed under the joint development agreement with GLOBALFOUNDRIES. Pursuant to thatjoint development agreement, GLOBALFOUNDRIES possesses certain exclusive rights to manufacture such wafers for ourdiscrete and embedded STT-MRAM devices. Our manufacturing agreement with GLOBALFOUNDRIES includes acustomary forecast and ordering mechanism for the supply of certain of our wafers, and we are obligated to order and pay for,and GLOBALFOUNDRIES is obligated to supply, wafers consistent with the binding portion of our forecast.GLOBALFOUNDRIES also has the ability to discontinue its manufacture of any of our wafers upon due notice andcompletion of the notice period. The initial term of the manufacturing agreement is for three years, which automaticallyrenews for successive one year periods thereafter unless either party provides sufficient advance notice of non-renewal.Except for breaches of confidentiality provisions and each party’s indemnification obligations to one another under theagreement, liability under the agreement is capped at the lesser of a set amount or the total purchase price received byGLOBALFOUNDRIES from us in the twelve months immediately preceding the claim for the specific product that caused thedamages. Either party may terminate the agreement if the other party materially breaches a term of the agreement, and fails toremedy the breach after receiving notice from the non-breaching party. GLOBALFOUNDRIES may terminate the agreementif we fail to pay any undisputed sum which has been outstanding for sixty or more days from the date of invoice.BacklogAs of December 31, 2018, our backlog was $13.0 million, compared to $13.7 million as of December 31, 2017, andincludes all purchase orders scheduled for delivery within the subsequent 12 months. Our business and, to a large extent, thatof the entire semiconductor industry, is characterized by short-term orders and shipment schedules. Orders constituting ourcurrent backlog are subject to changes in delivery schedules, or to cancellation at the customer's option without significantpenalty. Thus, while backlog is useful for scheduling production, backlog as of any particular date may not be a reliablemeasure of sales for any future period.CompetitionOur products, all of which offer the persistence of non-volatile memory with the speed and endurance of random accessmemory, enable the protection of mission critical data particularly in the event of power interruption or failure. Our solutionsare designed for use in applications in the industrial, automotive and transportation, and enterprise storage markets where thecombination of high write-cycle endurance and fast write-speeds are of critical importance.Our principal competitors to our Toggle Field Switched MRAM products, which are tailored primarily for the industrial,automotive and transportation, and enterprise storage markets, include companies that offer nonvolatile SRAM (NVSRAM),SRAM, and ferroelectric RAM (FRAM) products, such as Cypress, Fujitsu, Integrated Silicon Solution (ISSI), Macronix,Microchip, Micron, Renesas, Samsung and Toshiba. Our STT-MRAM products are designed primarily for the enterprisestorage market, which includes high performance SSDs, RAID systems and servers. Our10 Table of ContentsSTT-MRAM products are intended to replace DRAM-based solutions, which comprised DRAM and additional back-uppower supply components, such as super capacitors and batteries that are required to make DRAM persistent. Customerstypically purchase DRAM and super capacitors and batteries from separate vendors, and pair them together in order to createa DRAM-based solution capable of protecting data against power interruption or loss. Companies that offer DRAM devicesinclude Hynix, Micron, Samsung, and several other smaller companies. In the future we may also face competition fromcompanies developing MRAM technologies, such as Avalanche, Spin Transfer Technologies, Samsung and other larger andsmaller semiconductor companies. We may also face indirect competition from RRAM, 3D XPoint and NAND Flashmanufacturers in some market applications.Our sensor products compete with giant magnetoresistive (GMR), anisotropic magnetoresistive (AMR) and Hall effectsensors supplied by Alps, Asahi Kasei Microdevices, Crocus, Fairchild, Invensys (now Schneider), Kionix and Micronix.Our ability to compete successfully in the market for our products is based on a number of factors, including:·our product attributes and specifications;·customer adoption of MRAM technology despite the price per bit premium of our products verses competingtechnologies;·successful controller supplier and customer engagements throughout the product life cycle;·high quality and reliability as measured by our customers;·the ease of implementation of our products by customers;·preferred supplier status at numerous customers and ODMs·manufacturing expertise and strength;·reputation and strength of customer relationships;·competitive pricing in the market against the competition while maintaining our gross margin profile;and·our success in meeting the needs of future customer requirements through continued development of new products.We believe we compete favorably with respect to each of these factors.Intellectual PropertyOur success depends, in part, on our ability to protect our products and technologies from unauthorized third-partycopying and use. To accomplish this, we rely on a combination of intellectual property rights, including patents, tradesecrets, copyrights and trademarks, as well as customary contractual protections. As of December 31, 2018, we held 426issued patents that expire at various times between January 2019 and December 2037, and had 162 patent applicationspending. Included in our issued patents and pending applications are patents/applications in the United States, China,Europe, France, Germany, Ireland, Italy, Japan, the Netherlands, the Republic of Korea, Singapore, Taiwan, and the UnitedKingdom.We seek to file for patents that have broad application in the semiconductor industry and that would be helpful in themagnetoresistive memory and sensor markets. However, there can be no assurance that our pending patent applications orany future applications will be approved, that any issued patents will provide us with competitive advantages or will not bechallenged by third parties, or that the patents or applications of others will not have an adverse effect on our ability to dobusiness. In addition, there can be no assurance that others will not independently develop substantially equivalentintellectual property or otherwise gain access to our trade secrets or intellectual property, or disclose such intellectualproperty or trade secrets, or that we can effectively protect our intellectual property.We seek to enforce our IP and to monetize our patent portfolio through licensing of third parties in return for cashremuneration, patent cross licenses or both. We recognized revenue from licensing our IP during the first quarter of 2018.11 Table of ContentsWe generally control access to and use of our confidential information through employing internal and externalcontrols, including contractual protections with employees, contractors and customers. We rely in part on U.S. andinternational copyright laws to protect our mask work. All employees and consultants are required to execute confidentialityagreements in connection with their employment and consulting relationships with us. We also require them to agree todisclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship.Environmental RegulationWe must comply with many different federal, state, local and foreign governmental regulations related to the use,storage, discharge and disposal of certain chemicals and gases used in our manufacturing processes. Our facilities have beendesigned to comply with these regulations and we believe that our activities are conducted in material compliance with suchregulations. Any changes in such regulations or in their enforcement could require us to acquire costly equipment or to incurother significant expenses to comply with environmental regulations. Any failure by us to adequately control the storage,use, discharge and disposal of regulated substances could result in significant future liabilities.Increasing public attention has been focused on the environmental impact of electronic manufacturing operations.While we have not experienced any materially adverse effects on our operations from recently adopted environmentalregulations, our business and results of operations could suffer if for any reason we fail to control the storage or use of, or toadequately restrict the discharge or disposal of, hazardous substances under present or future environmental regulations.EmployeesAt December 31, 2018, we had 95 employees in the United States and 27 full time equivalent contractors andconsultants in Singapore, China, Taiwan, Japan, the Republic of Korea, the United Kingdom, the United States and Italy.None of our employees are either represented by a labor union or subject to a collective bargaining agreement. We have notexperienced any work stoppages, and we consider our relations with our employees and contractors to be good.Corporate InformationWe were incorporated in Delaware in May 2008. In June 2008, Freescale Semiconductor, Inc. (now a wholly-ownedsubsidiary of NXP Semiconductors N.V.), spun-out its MRAM business as Everspin. Our offices are located at 5670 W.Chandler Boulevard, Suite 100, Chandler, Arizona 85226. Our telephone number is (480) 347-1111. Our corporate website isat www.Everspin.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, andamendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free ofcharge on our website. The information contained on or that can be accessed through our website is not incorporated byreference into this report, and you should not consider information on our website to be part of this report. Item 1A. Risk Factors.The following are important factors that could cause actual results or events to differ materially from those containedin any forward-looking statements made by us or on our behalf. The risks and uncertainties described below are not the onlyones we face. Additional risks and uncertainties not presently known to us or that we deem immaterial also may impair ourbusiness operations. If any of the following risks or such other risks actually occurs, our business could be harmed. 12 Table of ContentsRisk Factors Related to Our Business and Our IndustryWe have a history of losses which may continue in the future, and we cannot be certain that we will achieve or sustainprofitability.We have incurred net losses since our inception. We incurred net losses of $17.8 million and $21.1 million for the yearsended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had an accumulated deficit of $134.0million. We expect to incur significant expenses related to the continued development and expansion of our business,including in connection with our efforts to develop and improve upon our products and technology, maintain and enhanceour research and development and sales and marketing activities and hire additional personnel. While our products offerunique benefits over other industry memory technologies, our per-bit cost to product our product is currently higher thancompeting technologies. As a result, our ability to capture market share and generate sufficient revenue to transition toprofitability and generate consistent positive cash flows is uncertain. We do not know whether our revenue will grow rapidlyenough to absorb these costs, and our limited operating history makes it difficult to assess the extent of these expenses, ortheir impact on our results of operations.Further, our revenue may not increase or may decline for a number of possible reasons, many of which are outside ourcontrol, including a decline in demand for our products, increased competition, business conditions that adversely affect thesemiconductor memory industry, including reduced demand for products in the end markets that we serve, or our failure tocapitalize on growth opportunities. If we fail to generate sufficient revenue to support our operations, we may not be able toachieve or sustain profitability. If revenue does not grow sufficiently, we may not be able to meet our debt covenants,including the liquidity ratio and sales targets.Our limited history of making our STT-MRAM products makes it difficult to evaluate our current business and futureprospects.We have been in existence as a stand-alone company since 2008, when Freescale Semiconductor, Inc. (subsequentlyacquired by NXP Semiconductor) spun-out its MRAM business as Everspin. We have been shipping magnetoresistiverandom access memory (MRAM) products since our incorporation in 2008. However, we only began to manufacture and shipour Spin Transfer Torque MRAM (STT-MRAM) products in the fourth quarter of 2017.Our limited experience selling our STT-MRAM products, combined with the rapidly evolving and competitive natureof our market, makes it difficult to evaluate our current business and future prospects. In addition, we have limited insightinto emerging trends that may adversely affect our business, financial condition, results of operations and prospects. We haveencountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidlychanging industries, including unpredictable and volatile revenue and increased expenses as we continue to grow ourbusiness. The viability and demand for our products may be affected by many factors outside of our control, such as thefactors affecting the growth of the industrial, automotive and transportation, and enterprise storage industries and changes inmacroeconomic conditions. If we do not manage these risks and overcome these difficulties successfully, our business willsuffer.We may be unable to match production with customer demand for a variety of reasons including our inability to accuratelyforecast customer demand or the capacity constraints of our suppliers, which could adversely affect our operating results.We make planning and spending decisions, including determining production levels, production schedules, componentprocurement commitments, personnel needs and other resource requirements, based on our estimates of product demand andcustomer requirements. Our products are typically purchased pursuant to individual purchase orders. While our customersmay provide us with their demand forecasts, they are not contractually committed to buy any quantity of products beyondpurchase orders. Furthermore, many of our customers may increase, decrease, cancel or delay purchase orders already in placewithout significant penalty. The short-term nature of commitments by our customers and the possibility of unexpectedchanges in demand for their products reduce our ability to accurately estimate future customer requirements. On occasion,customers may require rapid increases in production, which can strain our resources, necessitate more onerous procurementcommitments and reduce our gross margin. If we overestimate customer demand, we may purchase products that we may notbe able to sell, which could result in decreases in our prices or write-downs of unsold inventory. Conversely, if weunderestimate customer demand or if sufficient manufacturing capacity is unavailable, we could lose sales opportunities andcould lose market share or13 Table of Contentsdamage our customer relationships. We manufacture MRAM products at our 200mm facility we lease in Chandler, Arizonaand use a single foundry, GLOBALFOUNDRIES for production of higher density products on advanced technology nodes,which may not have sufficient capacity to meet customer demand. The rapid pace of innovation in our industry could alsorender significant portions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpectedexpenses or write-downs of inventory values that could adversely affect our business, operating results and financialcondition.We may require additional capital to fund our business, which may not be available to us on favorable terms or at all.We believe that our existing cash and cash equivalents as of December 31, 2018, coupled with our anticipated growthand sales levels will be sufficient to meet our anticipated cash requirements for at least the next 12 months. Our future capitalrequirements will depend on many factors, including our growth rate, the timing and extent of our spending to supportresearch and development activities, the timing and cost of establishing additional sales and marketing capabilities, and theintroduction of new products. We may be required to seek additional equity or debt financing, and we cannot assure you thatany such additional financing will be available to us on acceptable terms or at all. If we are unable to raise additional capitalor generate sufficient cash from operations to adequately fund our operations, we will need to curtail planned activities toreduce costs. Doing so will likely harm our ability to execute on our business plan.If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible intoequity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and anynew equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Ifwe are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability tocontinue to grow or support our business and to respond to business challenges could be significantly limited.As we expand into new potential markets, we expect to face intense competition, including from our customers andpotential customers, and may not be able to compete effectively, which could harm our business.We expect that our new and future MRAM products will be applicable to markets in which we are not currentlyoperating. Selling into such new markets, could put us into direct competition with our current or potential customers orother competitors with substantially more resources and experience than us. The markets in which we operate and mayoperate in the future are extremely competitive and are characterized by rapid technological change, continuous evolvingcustomer requirements and declining average selling prices. We may not be able to compete successfully against current orpotential competitors, which include our current or potential customers as they seek to internally develop solutionscompetitive with ours or as we develop products potentially competitive with their existing products. If we do not competesuccessfully, our market share and revenue may decline. We compete with large semiconductor manufacturers and designersand others, and our current and potential competitors have longer operating histories, significantly greater resources andname recognition and a larger base of customers than we do. This may allow them to respond more quickly than we can tonew or emerging technologies or changes in customer requirements. In addition, these competitors may have greatercredibility with our existing and potential customers. Some of our current and potential customers with their own internallydeveloped solutions may choose not to purchase products from third-party suppliers like us.We rely on third parties to distribute, manufacture, package, assemble and test our products, which exposes us to a numberof risks, including reduced control over manufacturing and delivery timing and potential exposure to price fluctuations,which could result in a loss of revenue or reduced profitability.Although we operate an integrated magnetic fabrication line located in Chandler, Arizona, we purchase wafers fromthird parties and outsource the manufacturing, packaging, assembly and testing of our products to third-party foundries andassembly and testing service providers. We use a single foundry, GLOBALFOUNDRIES Singapore Pte. Ltd., for productionof higher density products on advanced technology nodes. Our primary product package and test operations are located inChina, Taiwan and other Asian countries. We also use standard CMOS wafers from third-party foundries, which we process atour Chandler, Arizona, facility.14 Table of ContentsRelying on third-party distribution, manufacturing, assembly, packaging and testing presents a number of risks,including but not limited to:·our interests could diverge from those of our foundries, or we may not be able to agree with them on ongoingdevelopment, manufacturing and operational activities, or on the amount, timing, or nature of further investmentsin our joint development;·capacity and materials shortages during periods of high demand;·reduced control over delivery schedules, inventories and quality;·the unavailability of, or potential delays in obtaining access to, key process technologies;·the inability to achieve required production or test capacity and acceptable yields on a timely basis;·misappropriation of our intellectual property;·the third party’s ability to perform its obligations due to bankruptcy or other financial constraints;·exclusive representatives for certain customer engagements;·limited warranties on wafers or products supplied to us; and·potential increases in prices.We currently do not have long-term supply contracts with our third-party contract manufacturers for our MRAMproducts, including NXP, United Microelectronics Corporation, Taiwan Semiconductor Manufacturing Company, Limited(TSMC), United Test and Assembly Center (UTAC), Global Testing Corporation (GTC), ChipMos, OSE Taiwan, and Amkor,and we typically negotiate pricing on a per-purchase order basis and in some cases on an annual basis. Therefore, they are notobligated to perform services or supply components to us for any specific period, in any specific quantities, or at any specificprice, except as may be provided in a particular purchase order. During periods of high demand and tight inventories, ourthird-party foundries and packaging, assembly and testing contractors may allocate capacity to the production of othercompanies’ products while reducing deliveries to us, or significantly raise their prices. In particular, they may allocatecapacity to other customers that are larger and better financed than us or that have long-term agreements, decreasing thecapacity available to us. Shortages of capacity available to us may be caused by the actions of their other, large customersthat may be difficult to predict, such as major product launches.Our manufacturing agreement with GLOBALFOUNDRIES includes a customary forecast and ordering mechanism forthe supply of certain of our wafers, and we are obligated to order and pay for, and GLOBALFOUNDRIES is obligated tosupply, wafers consistent with the binding portion of our forecast. However, our manufacturing arrangement is also subject toboth a minimum and maximum order quantity that while we believe currently addresses our projected foundry capacityneeds, may not address our maximum foundry capacity requirements in the future. We may also be obligated to pay forunused capacity if our demand decreases in the future, or if our estimates prove inaccurate. GLOBALFOUNDRIES also hasthe ability to discontinue its manufacture of any of our wafers upon due notice and completion of the notice period. Thiscould cause us to have to find another foundry to manufacture those wafers or redesign our core technology and would meanthat we may not have products to sell until such time. Any time spent engaging a new manufacturer or redesigning our coretechnology could be costly and time consuming and may allow potential competitors to take opportunities in the marketplace. Moreover, if we are unable to find another foundry to manufacture our products or if we have to redesign our coretechnology, this could cause material harm to our business and operating results.If we need other foundries or packaging, assembly and testing contractors, or if we are unable to obtain timely andadequate deliveries from our providers, we might not be able to cost-effectively and quickly retain other vendors to satisfyour requirements. Because the lead-time needed to establish a relationship with a new third-party supplier could be severalquarters, there is no readily available alternative source of supply for any specific component. In addition, the time andexpense to qualify a new foundry could result in additional expense, diversion of resources or lost sales, any of which wouldnegatively impact our financial results.If any of our current or future foundries or packaging, assembly and testing subcontractors significantly increases thecosts of wafers or other materials or services, interrupts or reduces our supply, including for reasons outside of their control, orif any of our relationships with our suppliers is terminated, our operating results could be adversely affected.15 Table of ContentsSuch occurrences could also damage our customer relationships, result in lost revenue, cause a loss in market share or damageour reputation.Our joint development agreement and strategic relationships involve numerous risks.We have entered into strategic relationships to manufacture products and develop new manufacturing processtechnologies and products. These relationships include our joint development agreement with GLOBALFOUNDRIES todevelop advanced MTJ technology and STT-MRAM. These relationships are subject to various risks that could adverselyaffect the value of our investments and our results of operations. These risks include the following:·our interests could diverge from those of our foundries, or we may not be able to agree with them on ongoingdevelopment, manufacturing and operational activities, or on the amount, timing, or nature of further investmentsin our joint development;·we may experience difficulties in transferring technology to a foundry;·we may experience difficulties and delays in getting to and/or ramping production at foundries;·our control over the operations of foundries is limited;·due to financial constraints, our joint development collaborators may be unable to meet their commitments to usand may pose credit risks for our transactions with them;·due to differing business models or long-term business goals, our collaborators may decide not to join us in fundingcapital investment, which may result in higher levels of cash expenditures by us;·our cash flows may be inadequate to fund increased capital requirements;·we may experience difficulties or delays in collecting amounts due to us from our collaborators;·the terms of our arrangements may turn out to be unfavorable;·we are migrating toward a fabless model as 300mm production becomes required and this increases risks related toless control over our critical production processes; and·changes in tax, legal, or regulatory requirements may necessitate changes in our agreements.In addition, under the terms of our joint development agreement with GLOBALFOUNDRIES, we share the developmentcosts. Further, our joint development agreement expires in December 2019 unless a statement of work is in place at that time,in which case it expires on the date the last statement of work is finished. If GLOBALFOUNDRIES fails to extend orterminates the joint development agreement, our ability to continue to develop our MRAM technology will be significantlyimpaired.If our strategic relationships are unsuccessful, our business, results of operations, or financial condition may bematerially adversely affected.The market for semiconductor memory products is characterized by declines in average selling prices, which we expect tocontinue, and which could negatively affect our revenue and margins.Our customers for some of our products may see the average selling price of competitive products decrease year-over-year and we expect this trend to continue. When such pricing declines occur, we may not be able to mitigate the effects byselling more or higher margin units, or by reducing our manufacturing costs. In such circumstances, our operating resultscould be materially and adversely affected. Our stand-alone and embedded MRAM products have experienced decliningaverage selling prices over their life cycle. The rate of decline may be affected by a number of factors, including relativesupply and demand, the level of competition, production costs and technological changes. As a result of the decreasingaverage selling prices of our products following their launch, our ability to increase or maintain our margins depends on ourability to introduce new or enhanced products with higher average selling prices and to reduce our per-unit cost of sales andour operating costs. We may not be able to reduce our costs as rapidly as companies that operate their own manufacturing,assembly and testing facilities, and our costs may even increase because we rely in part on third parties to manufacture,assemble and test our products, which could also reduce our gross margins. In addition, our new or enhanced products maynot be as successful or enjoy as high margins as we expect. If we are unable16 Table of Contentsto offset any reductions in average selling prices by introducing new products with higher average selling prices or reducingour costs, our revenue and margins will be negatively affected and may decrease.The semiconductor memory market is highly cyclical and has experienced severe downturns in the past, generally as aresult of wide fluctuations in supply and demand, constant and rapid technological change, continuous new productintroductions and price erosion. During downturns, periods of intense competition, or the presence of oversupply in theindustry, the selling prices for our products may decline at a high rate over relatively short time periods as compared tohistorical rates of decline. We are unable to predict selling prices for any future periods and may experience unanticipated,sharp declines in selling prices for our products.Unfavorable economic and market conditions, domestically and internationally, may adversely affect our business,financial condition, results of operations and cash flows.We have significant customer sales both in the U.S. and internationally. We also rely on domestic and internationalsuppliers, manufacturing partners and distributors. We are therefore susceptible to adverse U.S. and international economicand market conditions. If any of our manufacturing partners, customers, distributors or suppliers experience serious financialdifficulties or cease operations, our business will be adversely affected. In addition, the adverse impact of an unfavorableeconomy may adversely impact customer spending, which may adversely impact demand for our products.Further, increasing trade tensions and tariffs, particularly with China, may increase the costs we incur to produce ourproducts. Although we are seeking to qualify alternative suppliers and facilities in the event that it becomes necessary toobtain materials from other sources to limit the effect of tariffs, there is no guarantee that we will be able to do so or, if we are,that these alternative sources will fully mitigate the effect that tariffs and other trade restrictions will have on our business,which may have an adverse effect on our financial condition and results of operations.We must continuously develop new and enhanced products, and if we are unable to successfully market our new andenhanced products for which we incur significant expenses to develop, our results of operations and financial conditionwill be materially adversely affected.To compete effectively in our markets, we must continually design, develop and introduce new and improvedtechnology and products with improved features in a cost-effective manner in response to changing technologies and marketdemand. This requires us to devote substantial financial and other resources to research and development. We are developingnew technology and products, which we expect to be one of the drivers of our revenue growth in the future. However, as it istaking us longer than we expected to develop our 1Gb STT-MRAM product, we may not succeed in developing andmarketing this and other new and enhanced products. We also face the risk that customers may not value or be willing to bearthe cost of incorporating our new and enhanced products into their products, particularly if they believe their customers aresatisfied with current solutions. Regardless of the improved features or superior performance of our new and enhancedproducts, customers may be unwilling to adopt our solutions due to design or pricing constraints, or because they do notwant to rely on a single or limited supply source. Because of the extensive time and resources that we invest in developingnew and enhanced products, if we are unable to sell customers our new products, our revenue could decline and our business,financial condition, results of operations and cash flows would be negatively affected. For example, we generated limitedrevenue from sales of our STT-MRAM products to date. While we expect revenue from our STT-MRAM products to increase,if we are unable to generate more customer adoption of our 256Mb product and scale MRAM to gigabit densities to addressapplications currently served by DRAM, we may not be able to materially increase our revenue. If we are unable tosuccessfully develop and market our new and enhanced products that we have incurred significant expenses developing, ourresults of operations and financial condition will be materially and adversely affected.Our success and future revenue depend on our ability to secure design wins and on our customers’ ability to successfullysell the products that incorporate our solutions. Securing design wins is a lengthy, expensive and competitive process, andmay not result in actual orders and sales, which could cause our revenue to decline.We sell to customers that incorporate MRAM into their products. A design win occurs after a customer has tested ourproduct, verified that it meets the customer’s requirements and qualified our solutions for their products. We believe we aredependent on the adoption of our 256Mb and 1Gb MRAM products by our customers to secure design wins. In the fourthquarter of 2017, we recorded revenue for our first sale of 40nm 256Mb STT-MRAM products and we ramped17 Table of Contentsup production in 2018 and into 2019. To date we have not sold any of our 1Gb MRAM products. Our customers may needseveral months to years to test, evaluate and adopt our product and additional time to begin volume production of theproduct that incorporates our solution. Due to this generally lengthy design cycle, we may experience significant delays fromthe time we increase our operating expenses and make investments in our products to the time that we generate revenue fromsales of these products. Moreover, even if a customer selects our solution, we cannot guarantee that this will result in anysales of our products, as the customer may ultimately change or cancel its product plans, or efforts by our customer to marketand sell its product may not be successful. We may not generate any revenue from design wins after incurring the associatedcosts, which would cause our business and operating results to suffer. Any further delay in the development of our 1GbMRAM product, or failure of our customers to adopt our 1Gb MRAM products, could inhibit revenue growth or causedeclines, which would significantly harm our business and prevent us from becoming profitable.If a current or prospective customer designs a competitor’s solution into its product, it becomes significantly moredifficult for us to sell our solutions to that customer because changing suppliers involves significant time, cost, effort and riskfor the customer even if our solutions are superior to other solutions and remain compatible with their product design. Ourability to compete successfully depends on customers viewing us as a stable and reliable supplier to mission critical customerapplications when we have less production capacity and less financial resources compared to most of our larger competitors.If current or prospective customers do not include our solutions in their products and we fail to achieve a sufficient number ofdesign wins, our results of operations and business may be harmed.We rely on our relationships with original equipment manufacturers (OEMs) and original design manufacturers (ODMs) toenhance our solutions and market position, and our failure to continue to develop or maintain such relationships in thefuture would harm our ability to remain competitive.We develop our products for leading OEMs and ODMs that serve a variety of end markets and are developing devicesfor automotive and transportation, industrial and storage applications. For each application, manufacturers create productsthat incorporate specialized semiconductor technology, which makers of memory products use as the basis for their products.These manufacturers set the specifications for many of the key components to be used on each generation of their productsand, in the case of memory components, generally qualify only a few vendors to provide memory components for theirproducts. As each new generation of their products is released, vendors are validated in a similar fashion. We must workclosely with OEMs and ODMs to ensure our products become qualified for use in their products. As a result, maintainingclose relationships with leading OEMs and ODMs that are developing devices for automotive and transportation, industrialand storage applications is crucial to the long-term success of our business. We could lose these relationships for a variety ofreasons, including our failure to qualify as a vendor, our failure to demonstrate the value of our new solutions, declines inproduct quality, or if OEMs or ODMs seek to work with vendors with broader product suites, greater production capacity orgreater financial resources. If our relationships with key industry participants were to deteriorate or if our solutions were notqualified by our customers, our market position and revenue could be materially and adversely affected.The loss of one or several of our customers or reduced orders or pricing from existing customers may have a significantadverse effect on our operations and financial results.We have derived and expect to continue to derive a significant portion of our revenues from a small group of customersduring any particular period due in part to the concentration of market share in the semiconductor industry. Our four largestend customers together accounted for 29% of our total revenue for the year ended December 31, 2018, and one of thesecustomers individually accounted for more than 10% of our total revenue during the period. Our four largest end customerstogether accounted for 28% of our total revenue for the year ended December 31, 2017, but none of these customersindividually accounted for more than 10% of our total revenue during the period. The loss of a significant customer, abusiness combination among our customers, a reduction in orders or decrease in price from a significant customer ordisruption in any of our commercial or distributor arrangements may result in a significant decline in our revenues and couldhave a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows.18 Table of ContentsOur results of operations can fluctuate from period to period, which could cause our share price to fluctuate.Our results of operations have fluctuated in the past and may fluctuate from period to period in the future due to avariety of factors, many of which are beyond our control. Factors relating to our business that may contribute to thesefluctuations include the following factors, as well as other factors described elsewhere in this report:·the receipt, reduction, delay or cancellation of orders by large customers;·the gain or loss of significant customers or distributors;·the timing and success of our launch of new or enhanced products and those of our competitors;·market acceptance of our products and our customers’ products;·the level of growth or decline in the industrial, automotive and transportation, enterprise storage and other markets;·the timing and extent of research and development and sales and marketing expenditures;·the amount and timing of operating expenses related to the maintenance and expansion of our business, operationsand infrastructure;·changes in our product mix;·our ability to reduce the manufacturing costs of our products;·competitive pressures resulting in lower than expected average selling prices;·fluctuations in sales by and inventory levels of OEMs and ODMs that incorporate our memory products in theirproducts;·cyclical and seasonal fluctuations in our markets;·fluctuations in the manufacturing yields of our third-party manufacturers;·quality issues that arise from manufacturing issues at our third-party manufacturers;·events that impact the availability of production capacity at our third-party subcontractors and other interruptionsin the supply chain including due to geopolitical events, natural disasters, materials shortages, bankruptcy or othercauses;·supply constraints for and changes in the cost of the other components incorporated into our customers’ products;·the timing of expenses related to the acquisition of technologies or businesses;·product rates of return or price concessions in excess of those expected or forecasted;·costs associated with the repair and replacement of defective products;·unexpected inventory write-downs or write-offs;·costs associated with litigation over intellectual property rights and other litigation;·the length and unpredictability of the purchasing and budgeting cycles of our customers;·changes in accounting standards, such as revenue recognition, which we are required to adopt beginning in 2018;·changes in tax laws, such as the Tax Cuts and Jobs Act of 2017 recently enacted;·loss of key personnel or the inability to attract qualified engineers; and·geopolitical events, such as war, threat of war or terrorist actions, or the occurrence of natural disasters.The semiconductor memory industry is highly cyclical and our markets may experience significant cyclicalfluctuations in demand as a result of changing economic conditions, budgeting and buying patterns of customers and otherfactors. As a result of these and other factors affecting demand for our products and our results of operations in any19 Table of Contentsgiven period, the results of any prior quarterly or annual periods should not be relied upon as indicative of our future revenueor operating performance. Fluctuations in our revenue and operating results could also cause our stock price to decline.If sales of our customers’ products decline or if their products do not achieve market acceptance, our business andoperating results could be adversely affected.Our revenue depends on our customers’ ability to commercialize their products successfully. The markets for ourcustomers’ products are extremely competitive and are characterized by rapid technological change. Competition in ourcustomers’ markets is based on a variety of factors including price, performance, product quality, marketing and distributioncapability, customer support, name recognition and financial strength. As a result of rapid technological change, the marketsfor our customers’ products are characterized by frequent product introductions, short product life cycles, fluctuating demandand increasing product capabilities. As a result, our customers’ products may not achieve market success or may becomeobsolete. We cannot assure you that our customers will dedicate the resources necessary to promote and commercialize theirproducts, successfully execute their business strategies for such products, or be able to manufacture such products inquantities sufficient to meet demand or cost-effectively manufacture products at a high volume. Our customers do not havecontracts with us that require them to manufacture, distribute or sell any products. Moreover, our customers may developinternally, or in collaboration with our competitors, technology that they may utilize instead of the technology available tothem through us. Our customers’ failure to achieve market success for their products, including as a result of general declinesin our customers’ markets or industries, could negatively affect their willingness to utilize our products, which may result in adecrease in our revenue and negatively affect our business and operating results.Our revenue also depends on the timely introduction, quality and market acceptance of our customers’ products thatincorporate our solutions. Our customers’ products are often very complex and subject to design complexities that may resultin design flaws, as well as potential defects, errors and bugs. We incur significant design and development costs inconnection with designing our solutions for customers’ products. If our customers discover design flaws, defects, errors orbugs in their products, or if they experience changing market requirements, failed evaluations or field trials, or issues withother vendors, they may delay, change or cancel a project. If we have already incurred significant development costs, we maynot be able to recoup those costs, which in turn would adversely affect our business and financial results.We face competition and expect competition to increase in the future. If we fail to compete effectively, our revenue growthand results of operations will be materially and adversely affected.The global semiconductor market in general, and the semiconductor memory market in particular, are highlycompetitive. We expect competition to increase and intensify as other semiconductor companies enter our markets, many ofwhich have greater financial and other resources with which to pursue technology development, product design,manufacturing, marketing and sales and distribution of their products. Increased competition could result in price pressure,reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue andoperating results. Currently, our competitors range from large, international companies offering a wide range of traditionalmemory technologies to companies specializing in other alternative, specialized emerging memory technologies. Ourprimary memory competitors include Cypress, Fujitsu, Integrated Silicon Solution, Macronix, Microchip, Micron, Renesas,Samsung, and Toshiba. The main competition for sensor products includes AMR, Crocus, GMR and Hall Effect. Thesetechnologies directly compete with our products and are supplied by ALPS Electric, Asahi Kasei Microdevices, Fairchild,Invensys (now Schneider), Kionix and Micronas. In addition, as the MRAM market opportunity grows, we expect newentrants such as Avalanche Technologies may enter this market and existing competitors, including leading semiconductorcompanies, may make significant investments to compete more effectively against our products. These competitors coulddevelop technologies or architectures that make our products or technologies obsolete.Our ability to compete successfully depends on factors both within and outside of our control, including:·the functionality and performance of our products and those of our competitors;·our relationships with our customers and other industry participants;·prices of our products and prices of our competitors’ products;20 Table of Contents·our ability to develop innovative products;·our competitors’ greater resources to make acquisitions;·our ability to obtain adequate capital to finance operations;·our ability to retain high-level talent, including our management team and engineers; and·the actions of our competitors, including merger and acquisition activity, launches of new products and otheractions that could change the competitive landscape.Competition could result in pricing pressure, reduced revenue and loss of market share, any of which could materiallyand adversely affect our business, results of operations and prospects. In the event of a market downturn, competition in themarkets in which we operate may intensify as our customers reduce their purchase orders. Our competitors that aresignificantly larger and have greater financial, technical, marketing, distribution, customer support and other resources ormore established market recognition than us may be better positioned to accept lower prices and withstand adverse economicor market conditions.Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualificationprocess. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operatingresults would suffer.Prior to selecting and purchasing our products, our customers typically require that our products undergo extensivequalification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability. Thisqualification process may continue for several months or years. However, obtaining the requisite qualifications for a memoryproduct does not assure any sales of the product. Even after successful qualification and sales of a product to a customer, asubsequent revision in our third-party contractors’ manufacturing process or our selection of a new contract manufacturermay require a new qualification process, which may result in delays and excess or obsolete inventory. After our products arequalified and selected, it can and often does take several months or years before the customer commences volume productionof systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design,engineering, sales, marketing and management efforts, to qualify our products with customers in anticipation of sales. If weare unsuccessful or delayed in qualifying any of our products with a customer, sales of those products may be precluded ordelayed, which may impede our growth and harm our business.Our costs may increase substantially if we or our third-party manufacturing contractors do not achieve satisfactory productyields or quality.The fabrication process is extremely complicated and small changes in design, specifications or materials can result inmaterial decreases in product yields or even the suspension of production. From time to time, we and/or the third-partyfoundries that we contract to manufacture our products may experience manufacturing defects and reduced manufacturingyields. In some cases, we and/or our third-party foundries may not be able to detect these defects early in the fabricationprocess or determine the cause of such defects in a timely manner. There may be a higher risk of product yield issues in newerSTT-MRAM products.Generally, in pricing our products, we assume that manufacturing yields will continue to improve, even as thecomplexity of our products increases. Once our products are initially qualified either internally or with our third-partyfoundries, minimum acceptable yields are established. We are responsible for the costs of the units if the actual yield is abovethe minimum set with our third-party foundries. If actual yields are below the minimum we are not required to purchase theunits. Typically, minimum acceptable yields for our new products are generally lower at first and gradually improve as weachieve full production, but yield issues can occur even in mature processes due to break downs in mechanical systems,equipment failures or calibration errors. Unacceptably low product yields or other product manufacturing problems couldsubstantially increase overall production time and costs and adversely impact our operating results. Product yield losses willincrease our costs and reduce our gross margin. In addition to significantly harming our results of operations and cash flow,poor yields may delay shipment of our products and harm our relationships with existing and potential customers.21 Table of ContentsThe complexity of our products may lead to defects, which could negatively impact our reputation with customers andresult in liability.Products as complex as ours may contain defects when first introduced to customers or as new versions are released.Delivery of products with production defects or reliability, quality or compatibility problems could significantly delay orhinder market acceptance of the products or result in a costly recall and could damage our reputation and adversely affect ourability to retain existing customers and attract new customers. Defects could cause problems with the functionality of ourproducts, resulting in interruptions, delays or cessation of sales of these products to our customers. We may also be requiredto make significant expenditures of capital and resources to resolve such problems. We cannot assure you that problems willnot be found in new products, both before and after commencement of commercial production, despite testing by us, oursuppliers or our customers. Any such problems could result in:·delays in development, manufacture and roll-out of new products;·additional development costs;·loss of, or delays in, market acceptance;·diversion of technical and other resources from our other development efforts;·claims for damages by our customers or others against us; and·loss of credibility with our current and prospective customers.Any such event could have a material adverse effect on our business, financial condition and results of operations.We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levelsof design integration, which may result in reduced manufacturing yields, delays in product deliveries and increasedexpenses.We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available fromour third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to other technologies toimprove performance and reduce costs. These ongoing efforts require us from time to time to modify the manufacturingprocesses for our products and to redesign some products, which in turn may result in delays in product deliveries. We mayface difficulties, delays and increased expense as we transition our products to new processes, and potentially to newfoundries. We will depend on our third-party foundries as we transition to new processes. We cannot assure you that ourthird-party foundries will be able to effectively manage such transitions or that we will be able to maintain our relationshipwith our third-party foundries or develop relationships with new third-party foundries. If we or any of our third-partyfoundries experience significant delays in transitioning to new processes or fail to efficiently implement transitions, we couldexperience reduced manufacturing yields, delays in product deliveries and increased expenses, any of which could harm ourrelationships with our customers and our operating results.As smaller line width geometry manufacturing processes become more prevalent, we intend to move our future productsto increasingly smaller geometries to integrate greater levels of memory capacity and/or functionality into our products. Thistransition will require us and our third-party foundries to migrate to new designs and manufacturing processes for smallergeometry products. We may not be able to achieve smaller geometries with higher levels of design integration or to delivernew integrated products on a timely basis. We periodically evaluate the benefits, on a product-by-product basis, of migratingto smaller geometry process technologies to increase product value. We are dependent on our relationships with our third-party foundries to transition to smaller geometry processes successfully. We cannot assure you that our third-party foundrieswill be able to effectively manage any such transition. If we or our third-party foundries experience significant delays in anysuch transition or fail to implement a transition, our business, financial condition and results of operations could bematerially harmed.Changes to industry standards and technical requirements relevant to our products and markets could adversely affect ourbusiness, results of operations and prospects.Our products are only a part of larger electronic systems. All products incorporated into these systems must comply withvarious industry standards and technical requirements created by regulatory bodies or industry participants to operateefficiently together. Industry standards and technical requirements in our markets are evolving and may change significantlyover time. For our products, the industry standards are developed by the Joint Electron Device Engineering22 Table of ContentsCouncil, an industry trade organization. In addition, large industry-leading semiconductor and electronics companies play asignificant role in developing standards and technical requirements for the product ecosystems within which our productscan be used. Our customers also may design certain specifications and other technical requirements specific to their productsand solutions. These technical requirements may change as the customer introduces new or enhanced products and solutions.Our ability to compete in the future will depend on our ability to identify and comply with evolving industry standardsand technical requirements. The emergence of new industry standards and technical requirements could render our productsincompatible with products developed by other suppliers or make it difficult for our products to meet the requirements ofcertain of our customers in automotive and transportation, industrial, storage and other markets. As a result, we could berequired to invest significant time and effort and to incur significant expense to redesign our products to ensure compliancewith relevant standards and requirements. If our products are not in compliance with prevailing industry standards andtechnical requirements for a significant period of time, we could miss opportunities to achieve crucial design wins, ourrevenue may decline and we may incur significant expenses to redesign our products to meet the relevant standards, whichcould adversely affect our business, results of operations and prospects.Failure to protect our intellectual property could substantially harm our business.Our success and ability to compete depend in part upon our ability to protect our intellectual property. We rely on acombination of intellectual property rights, including patents, mask work protection, copyrights, trademarks, trade secretsand know-how, in the United States and other jurisdictions. The steps we take to protect our intellectual property rights maynot be adequate, particularly in foreign jurisdictions such as China. Any patents we hold may not adequately protect ourintellectual property rights or our products against competitors, and third parties may challenge the scope, validity orenforceability of our issued patents, which third parties may have significantly more financial resources with which tolitigate their claims than we have to defend against them. In addition, other parties may independently develop similar orcompeting technologies designed around any patents or patent applications that we hold. Some of our products andtechnologies are not covered by any patent or patent application, as we do not believe patent protection of these productsand technologies is critical to our business strategy at this time. A failure to timely seek patent protection on products ortechnologies generally precludes us from seeking future patent protection on these products or technologies.In addition to patents, we also rely on contractual protections with our customers, suppliers, distributors, employees andconsultants, and we implement security measures designed to protect our trade secrets and know-how. However, we cannotassure you that these contractual protections and security measures will not be breached, that we will have adequate remediesfor any such breach or that our customers, suppliers, distributors, employees or consultants will not assert rights tointellectual property or damages arising out of such contracts.We may initiate claims against third parties to protect our intellectual property rights if we are unable to resolve matterssatisfactorily through negotiation. Litigation brought to protect and enforce our intellectual property rights could be costly,time-consuming and distracting to management. It could also result in the impairment or loss of portions of our intellectualproperty, as an adverse decision could limit our ability to assert our intellectual property rights, limit the value of ourtechnology or otherwise negatively impact our business, financial condition and results of operations. Additionally, anyenforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. Ourfailure to secure, protect and enforce our intellectual property rights could materially harm our business.We may face claims of intellectual property infringement, which could be time-consuming, costly to defend or settle, resultin the loss of significant rights, harm our relationships with our customers and distributors, or otherwise materiallyadversely affect our business, financial condition and results of operations.The semiconductor memory industry is characterized by companies that hold patents and other intellectual propertyrights and that vigorously pursue, protect and enforce intellectual property rights. These companies include patent holdingcompanies or other adverse patent owners who have no relevant product revenue and against whom our own patents mayprovide little or no deterrence. From time to time, third parties may assert against us and our customers’ patent and otherintellectual property rights to technologies that are important to our business. We have in the past, and may in the future, facesuch claims.23 Table of ContentsClaims that our products, processes or technology infringe third-party intellectual property rights, regardless of theirmerit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management andtechnical personnel. We may also be obligated to indemnify our customers or business partners in connection with any suchlitigation, which could result in increased costs. Infringement claims also could harm our relationships with our customers ordistributors and might deter future customers from doing business with us. If any such proceedings result in an adverseoutcome, we could be required to:·cease the manufacture, use or sale of the infringing products, processes or technology;·pay substantial damages for infringement;·expend significant resources to develop non-infringing products, processes or technology, which may not besuccessful;·license technology from the third-party claiming infringement, which license may not be available oncommercially reasonable terms, or at all;·cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability tocompete with that competitor; or·pay substantial damages to our customers to discontinue their use of or to replace infringing technology sold tothem with non-infringing technology, if available.Any of the foregoing results could have a material adverse effect on our business, financial condition and results ofoperations. Furthermore, our exposure to the foregoing risks may also be increased if we acquire other companies ortechnologies. For example, we may have a lower level of visibility into the development process with respect to intellectualproperty or the care taken to safeguard against infringement risks with respect to the acquired company or technology. Inaddition, third parties may make infringement and similar or related claims after we have acquired technology that had notbeen asserted prior to the acquisition.We make significant investments in new technologies and products that may not achieve technological feasibility orprofitability or that may limit our revenue growth.We have made and will continue to make significant investments in research and development of new technologies andproducts, including new and more technically advanced versions of our MRAM technology.Investments in new technologies are speculative and technological feasibility may not be achieved. Commercialsuccess depends on many factors including demand for innovative technology, availability of materials and equipment,selling price the market is willing to bear, competition and effective licensing or product sales. We may not achievesignificant revenue from new product investments for a number of years, if at all. Moreover, new technologies and productsmay not be profitable, and even if they are profitable, operating margins for new products and businesses may not be as highas the margins we have experienced historically or originally anticipated. Our inability to capitalize on or realize substantialrevenue from our significant investments in research and development could harm our operating results and distractmanagement, harming our business.Our success depends on our ability to attract and retain key employees, and our failure to do so could harm our ability togrow our business and execute our business strategies.Our success depends on our ability to attract and retain our key employees, including our management team andexperienced engineers. Competition for personnel in the semiconductor memory technology field, and in the MRAM spacein particular, is intense, and the availability of suitable and qualified candidates is limited. We compete to attract and retainqualified research and development personnel with other semiconductor companies, universities and research institutions.Given our experience as an early entrant in the MRAM space, our employees are frequently contacted by MRAM startupsand MRAM groups within larger companies seeking to employ them. The members of our management and key employeesare at-will. If we lose the services of any key senior management member or employee, we may not be able to locate suitableor qualified replacements, and may incur additional expenses to recruit and train new personnel, which could severely impactour business and prospects. The loss of the services of one or more of our key employees, especially our key engineers, or ourinability to attract and retain qualified engineers, could harm our business, financial condition and results of operations.24 Table of ContentsWe may not be able to effectively manage our growth, and we may need to incur significant expenditures to address theadditional operational and control requirements of our growth, either of which could harm our business and operatingresults.As we continue to expand our business, we expect our headcount and overall size of our operations to growsignificantly. To effectively manage our growth, we must continue to expand our operational, engineering and financialsystems, procedures and controls and to improve our accounting and other internal management systems, such as our ERPsystem. This may require substantial managerial and financial resources, and our efforts in this regard may not be successful.Our current systems, procedures and controls may not be adequate to support our future operations. If we fail to adequatelymanage our growth, or to improve our operational, financial and management information systems, or fail to effectivelymotivate or manage our new and future employees, the quality of our products and the management of our operations couldsuffer, which could adversely affect our operating results.We may engage in acquisitions of, or investments in, other companies, each of which may divert our management’sattention, result in additional dilution to stockholders or use resources that are necessary to operate our business.We may in the future seek to acquire or invest in businesses, products or technologies that we believe couldcomplement or expand our business, enhance our technical capabilities or otherwise offer growth opportunities. However,our term loan and revolving credit facility prohibits our ability to merge with or acquire any other entity and so we couldonly do so with the lender’s consent. If we were to pursue such acquisitions or investments, they could create risks for us,including:·difficulties in assimilating acquired personnel, operations and technologies or realizing synergies expected inconnection with an acquisition, particularly with acquisitions of companies with large and widespread operations,complex products or that operate in markets in which we historically have had limited experience;·unanticipated costs or liabilities, including possible litigation, associated with the acquisition;·incurrence of acquisition-related costs;·diversion of management’s attention from other business concerns;·use of resources that are needed in other parts of our business; and·use of substantial portions of our available cash to consummate an acquisition.A significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill, which mustbe assessed for impairment at least annually. If such acquisitions do not yield expected returns, we may be required to takecharges to our earnings based on this impairment assessment process, which could harm our results of operations.We may be unable to complete acquisitions at all or on commercially reasonable terms, which could limit our futuregrowth. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of additional debt, whichcould adversely affect our operating results and result in a decline in our stock price and further restrict our ability to pursuebusiness opportunities, including potential acquisitions. In addition, if an acquired business fails to meet our expectations,our operating results may suffer.We maintain operations outside of the United States and intend to expand our international operations, which exposes usto significant risks.We have limited operations in Europe and Asia. We intend to expand our operations internationally. The success of ourbusiness depends, in large part, on our ability to operate successfully from geographically disparate locations and to furtherexpand our international operations and sales. Operating in international markets requires significant resources andmanagement attention and subjects us to regulatory, economic and political risks that are different from those we face in theUnited States. We cannot be sure that further international expansion will be successful. In addition, we face risks in doingbusiness internationally that could expose us to reduced demand for our products, lower prices for our products or otheradverse effects on our operating results. Among the risks we believe are most likely to affect us are:·difficulties, inefficiencies and costs associated with staffing and managing foreign operations;·longer and more difficult customer qualification and credit checks;25 Table of Contents·greater difficulty collecting accounts receivable and longer payment cycles;·the need for various local approvals to operate in some countries;·difficulties in entering some foreign markets without larger-scale local operations;·compliance with local laws and regulations;·unexpected changes in regulatory requirements, including the elimination of tax holidays;·reduced protection for intellectual property rights in some countries;·adverse tax consequences as a result of repatriating cash generated from foreign operations to the United States;·adverse tax consequences, including potential additional tax exposure if we are deemed to have established apermanent establishment outside of the United States;·the effectiveness of our policies and procedures designed to ensure compliance with the Foreign Corrupt PracticesAct of 1977 and similar regulations;·fluctuations in currency exchange rates, which could increase the prices of our products to customers outside of theUnited States, increase the expenses of our international operations by reducing the purchasing power of the U.S.dollar and expose us to foreign currency exchange rate risk if, in the future, we denominate our international salesin currencies other than the U.S. dollar;·new and different sources of competition; and·political and economic instability, and terrorism.Our failure to manage any of these risks successfully could harm our operations and reduce our revenue.To comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and ifwe fail to comply with environmental regulations, we could be subject to substantial fines or be required to have oursuppliers alter their processes.The semiconductor memory industry is subject to a variety of international, federal, state and local governmentalregulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling,generation, disposal and labeling of toxic or other hazardous substances. Failure to comply with environmental regulationscould subject us to civil or criminal sanctions and property damage or personal injury claims. Compliance with current orfuture environmental laws and regulations could restrict our ability to expand our business or require us to modify processesor incur other substantial expenses which could harm our business. In response to environmental concerns, some customersand government agencies impose requirements for the elimination of hazardous substances, such as lead (which is widelyused in soldering connections in the process of semiconductor packaging and assembly), from electronic equipment. Forexample, the European Union adopted its Restriction on Hazardous Substance Directive which prohibits, with specifiedexceptions, the sale in the EU market of new electrical and electronic equipment containing more than agreed levels of leador other hazardous materials and China has enacted similar regulations. Environmental laws and regulations such as thesecould become more stringent over time, causing a need to redesign technologies, imposing greater compliance costs andincreasing risks and penalties associated with violations, which could seriously harm our business.Some of the facilities of our suppliers are located near known earthquake fault zones, and the occurrence of an earthquakeor other catastrophic disaster could damage our facilities, which could cause us to curtail our operations.Some of our foundries and suppliers’ facilities in Asia are located near known earthquake fault zones and, therefore, arevulnerable to damage from earthquakes. We are also vulnerable to damage from other types of disasters, such as power loss,fire, floods and similar events. If any such disaster were to occur, our ability to operate our business could be seriouslyimpaired. In addition, we may not have adequate insurance to cover our losses resulting from disasters or other similarsignificant business interruptions. Any significant losses that are not recoverable under our insurance policies couldseriously impair our business and financial condition.26 Table of ContentsProvisions of our credit facility may restrict our ability to pursue our business strategies.Borrowings under our existing credit facility are secured by substantially all of our assets, except for intellectualproperty. Our term loan facility prohibits our ability to, among other things:·dispose of or sell assets;·consolidate or merge with other entities;·incur additional indebtedness;·create liens on our assets;·pay dividends;·make investments;·enter into transactions with affiliates; and·redeem subordinated indebtedness.These restrictions are subject to certain exceptions. In addition, our existing credit facility requires that we meet certainoperating covenants, such as maintaining insurance on the collateral and meeting certain financial covenants, such as aminimum liquidity ratio. The operating restrictions and covenants in the term loan facility, as well as any future financingagreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expandor fully pursue our business strategies. Our ability to comply with these covenants may be affected by events beyond ourcontrol, and we may not be able to meet those covenants. A breach of any of these covenants could result in a default underthe credit facility, which could cause all of the outstanding indebtedness thereunder to either become immediately due andpayable or increase by five percent of the interest rate charged during the period of the unremedied breach.The Tax Cuts and Jobs Act could adversely affect our business and financial condition.In December 2017 the Tax Cuts and Jobs Act (“2017 Tax Act”) became law, which significantly amended the InternalRevenue Code of 1986. The 2017 Tax Act, among other things, reduced the corporate tax rate from a top marginal rate of35% to a flat rate of 21%, limits the tax deduction for interest expense to 30% of adjusted earnings, eliminates net operatingloss carrybacks, imposes a one-time tax on offshore earnings at reduced rates regardless of whether they are repatriated,allows immediate deductions for certain new investments instead of deductions for depreciation expense over time, andmodifies or repeals many business deductions and credits. The rate reduction took effect on January 1, 2018. Interpretationsof this legislation are being released by various regulatory agencies and it is possible that there could be significant changesin interpretations that we may not be yet aware of, and which could adversely impact our financial results.Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, a corporation thatundergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, orNOLs, to offset future taxable income, and tax credits to offset tax. As of December 31, 2018, we had federal net operatingloss carryforwards of approximately $112.3 million, of which $99.7 million will begin to expire in 2028 if not utilized, and$12.6 million will carryover indefinitely. As of December 31, 2018, we had state net operating loss carryforwards ofapproximately $44.3 million, of which $43.5 million will begin to expire in 2023 if not utilized, and $0.8 million willcarryover indefinitely. The federal NOLs generated prior to 2018 will continue to be governed by the NOL tax rules as theyexisted prior to the adoption of the new Tax Act, which means that generally they will expire 20 years after they weregenerated if not used prior thereto. The 2017 Tax Act repealed the 20-year carryforward and two-year carryback of NOLsoriginating after December 31, 2017 and also limits the NOL deduction to 80% of taxable income for tax years beginningafter December 31, 2017. Any NOLs generated in 2018 will be carried forward and will not expire. There is no current impactto the us as we continue to be in a tax loss position for US tax purposes. We may experience an ownership change in thefuture, and our ability to utilize our NOLs and tax credits could be further limited by Section 382 of the Code. Futurechanges in our stock ownership, many of which are outside of our control, could result in an ownership change underSection 382 of the Code. Our net operating losses and tax credits could also be27 Table of Contentsimpaired under state laws. As a result, we might not be able to utilize a material portion of our state NOLs and tax credits.If we fail to retain finance personnel and strengthen our financial reporting systems and infrastructure, we may not be ableto timely and accurately report our financial results or comply with the requirements of being a public company, includingcompliance with the Sarbanes-Oxley Act and SEC reporting requirements.We have accounting and finance staff members to maintain the effectiveness of our closing and financial reportingprocesses. Any inability to retain such personnel would have an adverse impact on our ability to accurately and timelyprepare our financial statements. We may be unable to locate and hire qualified professionals with requisite technical andpublic company experience when and as needed. In addition, new employees will require time and training to learn ourbusiness and operating processes and procedures. If our finance and accounting organization is unable for any reason torespond adequately to the demands of being a public company, the quality and timeliness of our financial reporting maysuffer, which could result in the identification of material weaknesses in our internal controls. Any consequences resultingfrom inaccuracies or delays in our reported financial statements could cause the trading price of our common stock to declineand could harm our business, operating results and financial condition.Interruptions in our information technology systems could adversely affect our business.We rely on the efficient and uninterrupted operation of complex information technology systems and networks tooperate our business. Any significant disruption to our systems or networks, including, but not limited to, new systemimplementations, computer viruses, security breaches, facility issues, natural disasters, terrorism, war, telecommunicationfailures or energy blackouts, could have a material adverse impact on our operations, sales and financial results. Suchdisruption could result in a loss of our intellectual property or the release of sensitive competitive information or supplier,customer or employee personal data. Any loss of such information could harm our competitive position, result in a loss ofcustomer confidence, and cause us to incur significant costs to remedy the damages caused by any such disruptions orsecurity breaches. Additionally, any failure to properly manage the collection, handling, transfer or disposal of personal dataof employees and customers may result in regulatory penalties, enforcement actions, remediation obligations, litigation, finesand other sanctions.We may experience attacks on our data, attempts to breach our security and attempts to introduce malicious softwareinto our IT systems. If attacks are successful, we may be unaware of the incident, its magnitude, or its effects until significantharm is done. Any such attack or disruption could result in additional costs related to rebuilding of our internal systems,defending litigation, responding to regulatory actions, or paying damages. Such attacks or disruptions could have a materialadverse impact on our business, operations and financial results.Third-party service providers, such as wafer foundries, assembly and test contractors, distributors and other vendorshave access to certain portions of our and our customers’ sensitive data. In the event that these service providers do notproperly safeguard the data that they hold, security breaches and loss of data could result. Any such loss of data by our third-party service providers could negatively impact our business, operations and financial results, as well as our relationship withour customers.If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal controls inthe future, we may not be able to accurately report our financial condition or results of operations which may adverselyaffect investor confidence in us and, as a result, the value of our common stock.We are required, under Section 404 of the Sarbanes-Oxley Act to furnish a report by management on, among otherthings, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any materialweaknesses identified by our management in our internal control over financial reporting. A material weakness is adeficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of our annual and interim financial statements will not be detected or prevented on atimely basis. In connection with the audit of our financial statements as of and for the years ended December 31, 2018, 2016and 2015, we identified material weaknesses in our internal control over financial reporting, as defined in the standardsestablished by the Public Company Accounting Oversight Board of the United States. Although we enhanced our internalcontrols, processes and related documentation necessary to remediate our material weakness and to perform the evaluationneeded to comply with Section 404, and have concluded that we do not currently have any material weaknesses, there can beno assurances that we will not have any material weaknesses in the future.28 Table of ContentsWhen we cease to be an “emerging growth company” under the federal securities laws, our auditors will be required toexpress an opinion on the effectiveness of our internal controls. If we are unable to confirm that our internal control overfinancial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internalcontrols, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause theprice of our common stock to decline.The issuance of new accounting standards or future interpretations of existing accounting standards could adversely affectour operating results.We prepare our financial statements in accordance with accounting principles generally accepted in the United States ofAmerica, or GAAP. A change in those principles could have a significant effect on our reported results and might affect ourreporting of transactions completed before a change is announced. GAAP is issued and subject to interpretation by theFinancial Accounting Standards Board, the SEC and various other bodies formed to promulgate and interpret accountingprinciples. A change in these principles or interpretations could have a significant effect on our reported financial results, andcould affect the reporting of transactions completed before the announcement of a change. For example, beginning with ourfirst quarter of 2018, we adopted the new revenue recognition standard, which changed the way we recognize revenue. Theissuance of new accounting standards or future interpretations of existing accounting standards, or changes in our businesspractices or estimates, could result in future changes in our revenue recognition or other accounting policies that could havea material adverse effect on our results of operations.Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain morecomplex and may result in damage to our reputation with customers.Pursuant to the Dodd-Frank Act, the SEC has adopted requirements for companies that use certain minerals and metals,known as conflict minerals, in their products, whether or not these products are manufactured by third parties. Theserequirements require companies to perform diligence and disclose and report whether or not such minerals originate from theDemocratic Republic of Congo and adjoining countries. The implementation of these requirements could adversely affectthe sourcing, availability and pricing of minerals used in the manufacture of our products, and affect our costs andrelationships with customers, distributors and suppliers as we must obtain additional information from them to ensure ourcompliance with the disclosure requirement. In addition, we will incur additional costs to comply with the disclosurerequirements, including costs related to determining the source of any of the relevant minerals and metals used in ourproducts. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals andmetals used in our products through the due diligence procedures that we implement, which may harm our reputation. In suchevent, we may also face difficulties in satisfying customers who require that all of the components of our products arecertified as conflict mineral free and these customers may discontinue, or materially reduce, purchases of our products, whichcould result in a material adverse effect on our results of operations and our financial condition may be adversely affected.Risks Related to Our Common StockAn active trading market may not be sustained.Although our stock is currently traded on the Nasdaq Stock Market, an active trading market may not be sustained. Thelack of an active market may impair the value of your shares and your ability to sell your shares at the time you wish to sellthem. An inactive market may also impair our ability to both raise capital by selling shares and acquire other complementaryproducts, technologies or businesses by using our shares as consideration.We expect that the price of our common stock will fluctuate substantially.The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to manyfactors, including:·the introduction of new products or product enhancements by us or others in our industry;·disputes or other developments with respect to our or others’ intellectual property rights;·product liability claims or other litigation;·quarterly variations in our results of operations or those of others in our industry;29 Table of Contents·sales of large blocks of our common stock, including sales by our executive officers and directors;·changes in earnings estimates or recommendations by securities analysts; and·general market conditions and other factors, including factors unrelated to our operating performance or theoperating performance of our competitors.Stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated ordisproportionate to the operating performance of those companies. Broad market and industry factors may significantly affectthe market price of our common stock, regardless of our actual operating performance. These fluctuations may be even morepronounced in the trading market for our common stock.In addition, in the past, class action litigation has often been instituted against companies whose securities haveexperienced periods of volatility in market price, or for other reasons. Securities litigation brought against us followingvolatility in our stock price or otherwise, regardless of the merit or ultimate results of such litigation, could result insubstantial costs, which would hurt our financial condition and operating results and divert management’s attention andresources from our business.These and other factors may make the price of our stock volatile and subject to unexpected fluctuation.Securities analysts may not publish favorable research or reports about our business or may publish no information at all,which could cause our stock price or trading volume to decline.The trading market for our common stock is influenced to some extent by the research and reports that industry orfinancial analysts publish about us and our business. We do not control these analysts. If any of the analysts who cover usprovide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price coulddecline. If one or more of these analysts cease coverage of our company or fail to publish reports covering us regularly, wecould lose visibility in the market, which in turn could cause our stock price or trading volume to decline.We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to“emerging growth companies” will make our common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptionsand relief from various reporting requirements that are applicable to other public companies that are not “emerging growthcompanies.” In particular, while we are an “emerging growth company” (1) we will not be required to comply with theauditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (2) we will be exempt from any rules that maybe adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement tothe auditor’s report on financial statements, (3) we will be subject to reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements, and (4) we will not be required to hold nonbinding advisoryvotes on executive compensation or stockholder approval of any golden parachute payments not previously approved.We may remain an “emerging growth company” until as late as December 31, 2021, though we may cease to be an“emerging growth company” earlier under certain circumstances, including (1) if the market value of our common stock thatis held by nonaffiliates exceeds $700 million as of any June 30, in which case we would cease to be an “emerging growthcompany” as of the following December 31, or (2) if our gross revenue exceeds $1.07 billion in any fiscal year.Investors may find our common stock less attractive if we rely on the exemptions and relief granted by the JOBS Act. Ifsome investors find our common stock less attractive as a result, there may be a less active trading market for our commonstock and our stock price may decline or become more volatile.Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could causeour stock price to fall.Sales of a substantial number of shares of our common stock in the public market by our existing stockholders, or theperception that these sales might occur, could depress the market price of our common stock and could impair our ability toraise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on theprevailing market price of our common stock.30 Table of ContentsOur directors, officers and principal stockholders have significant voting power and may take actions that may not be inthe best interests of our other stockholders.Our officers, directors and principal stockholders each holding more than 5% of our common stock, collectively,control a significant percentage of our outstanding common stock. As a result, these stockholders, if they act together, will beable to control the management and affairs of our company and most matters requiring stockholder approval, including theelection of directors and approval of significant corporate transactions. This concentration of ownership may have the effectof delaying or preventing a change of control and might adversely affect the market price of our common stock. Thisconcentration of ownership may not be in the best interests of our other stockholders.Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult andmay prevent attempts by our stockholders to replace or remove our current management.Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws maydiscourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable,including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could alsolimit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing themarket price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders toreplace or remove our current management by making it more difficult for stockholders to replace members of our board ofdirectors. Because our board of directors is responsible for appointing the members of our management team, these provisionscould in turn affect any attempt by our stockholders to replace current members of our management team. Among others,these provisions include that:·our board of directors has the right to expand the size of our board of directors and to elect directors to fill avacancy created by the expansion of the board of directors or the resignation, death or removal of a director, whichprevents stockholders from being able to fill vacancies on our board of directors;·our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, orholders, controlling a majority of our capital stock would not be able to take certain actions other than at annualstockholders’ meetings or special stockholders’ meetings called by the board of directors, the chairman of theboard, the chief executive officer or the president;·our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability ofminority stockholders to elect director candidates;·the affirmative vote of holders of at least 66‑2/3% of the voting power of all of the then outstanding shares ofvoting stock, voting as a single class, will be required (a) to amend certain provisions of our certificate ofincorporation, including provisions relating to the size of the board, removal of directors, special meetings, actionsby written consent and cumulative voting and (b) to amend or repeal our bylaws, although our bylaws may beamended by a simple majority vote of our board of directors;·stockholders must provide advance notice and additional disclosures to nominate individuals for election to theboard of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage ordeter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors orotherwise attempting to obtain control of our company; and·our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the abilityto issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock withvoting or other rights or preferences that could impede the success of any attempt to acquire us.Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the DelawareGeneral Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock frommerging or combining with us for a period of three years after the date of the transaction in which the person acquired inexcess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Item 1B Unresolved Staff Comments.None.31 Table of Contents Item 2. Properties.We lease office space for our corporate headquarters located in Chandler, Arizona and for our design facility located inAustin, Texas. The leases expire in January 2022.We have an operating lease for our Arizona manufacturing facility, which includes a total of 18,327 square feet of officeand fabrication space, which has a term through January 2021. We have an operating lease for 27,974 square feet of office and laboratory space in Arizona, with an initial term thatends on January 31, 2022, with an option to renew the lease through August 31, 2024.We believe our existing facilities are well maintained and in good operating condition and they are adequate for ourforeseeable business needs. Item 3. Legal Proceedings.From time to time, we may become involved in legal proceedings arising from the ordinary course of our business.Management is currently not aware of any matters that will have a material adverse effect on our financial position, results ofoperations or cash flows. Item 4. Mine Safety Disclosures.Not applicable.32 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities.Trading Market for our Common StockOur common stock has been listed on the Nasdaq Global Market under the symbol “MRAM” since October 7, 2016.Prior to that date, there was no public trading market for our common stock.Holders of RecordAs of March 6, 2019, we had 27 holders of record of our common stock. The actual number of stockholders is greaterthan this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in streetname by brokers and other nominees. This number of holders of record also does not include stockholders whose shares maybe held in trust by other entities.Dividend PolicyWe have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and anyfuture earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cashdividends in the foreseeable future. Any future determination related to dividend policy will be made at the discretion of ourboard of directors. Under our Loan and Security Agreement with Silicon Valley Bank entered into in May 2017, we are notallowed to pay any cash dividends without the consent of Silicon Valley Bank. Item 6. Selected Financial Data. Not required for a smaller reporting company.33 Table of Contents Item 7. 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 togetherwith the “Selected Financial Data” and our audited financial statements and related notes included elsewhere in thisreport. This discussion and other parts of this report contain forward-looking statements that involve risk and uncertainties,such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factorsset forth in the “Risk Factors” section of this report, our actual results could differ materially from the results described inor implied by the forward-looking statements contained in the following discussion and analysis.OverviewWe are the leading provider of MRAM solutions. Our MRAM solutions offer the persistence of non-volatile memory, atype of memory that retains information even in the absence of power, with the speed and endurance of random accessmemory (RAM). This enables the protection of mission critical data particularly in the event of power interruption or failure.Our MRAM solutions allow our customers in the industrial, automotive and transportation, and enterprise storage markets todesign high performance, power efficient and reliable systems without the need for bulky batteries or capacitors.We derive our revenue from the sale of MRAM-based products in discrete unit form, the sale of services, licenses of androyalties on our MRAM and magnetic sensor technology, the sale of backend foundry services and design services to thirdparties.We work directly with our distributors and customers to have our MRAM devices designed into and qualified for theirproducts. Although we maintain direct sales, support, and development relationships with our customers, once our productsare designed into a customer’s product, we sell a majority of our products to those customers through distributors. Wegenerated 71% and 74% of our revenue from products sold through distributors for the years ended December 31, 2018 and2017, respectively.We maintain a direct selling relationship, for strategic purposes, with several key customer accounts. Our sales team andrepresentatives are organized into three primary regions: North America; Europe, Middle East and Africa (EMEA); and Asia-Pacific and Japan (APJ). We recognize revenue by geography based on the region in which our products are sold, and not towhere the end products in which they are assembled are shipped. Our revenue by region for the periods indicated was asfollows (in thousands): Year EndedDecember 31, 2018 2017North America $9,124 $6,340EMEA 11,175 8,031APJ 29,118 21,565 $49,417 $35,936 Our revenue increased across all regions for the year ended December 31, 2018, compared to the same period in 2017,primarily due to volume growth and new customer wins.We leverage both internal and outsourced capabilities to manufacture our MRAM products. We purchase industry-standard complementary metal-oxide semiconductor (CMOS) wafers from semiconductor foundries and complete thefabrication by inserting our magnetic-bit technology at our 200mm fabrication facility in Chandler, Arizona. We believe thisallows us to streamline research and development, rapidly prototype new products, and bring new products to market quicklyand cost effectively. This strategy significantly reduces the capital investment that would otherwise be required to operatemanufacturing facilities of our own. We utilize leading semiconductor foundry GLOBALFOUNDRIES to support full turnkeyhigh-volume production of our high density MRAM products on 300mm wafers at advanced process nodes.During the years ended December 31, 2018 and 2017, we continued to invest in research and development to supportthe development and production of our Spin Transfer Torque MRAM (STT-MRAM) technology. We believe our continuedinvestment will allow us to continue to develop and deploy products based on our STT-MRAM34 Table of Contentstechnology. For the years ended December 31, 2018 and 2017, our research and development expenses were $23.6 millionand $25.4 million, respectively. We expect that our research and development expenses will increase in the future as wecontinue to develop our MRAM technology internally and through our joint development agreement withGLOBALFOUNDRIES.For the years ended December 31, 2018 and 2017, we recorded revenue of $49.4 million and $35.9, million, grossmargin of 51.3% and 59.8%, and a net loss of $17.8 million and $21.1 million, respectively.Key MetricsWe monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness ofour business strategies and assess operational efficiencies. These financial metrics include revenue, gross margin, operatingexpenses and operating income determined in accordance with GAAP. Additionally, we monitor and project cash flow todetermine our sources and uses for working capital to fund our operations. We also monitor Adjusted EBITDA, a non-GAAPfinancial measure. We define Adjusted EBITDA as net income or loss adjusted for interest expense, tax, depreciation andamortization, stock-based compensation expense, and compensation expense related to the vesting of common stock held byGLOBALFOUNDRIES resulting from our joint development agreement.Our management and board of directors use Adjusted EBITDA to understand and evaluate our operating performanceand trends, to prepare and approve our annual budget and to develop short-term and long-term operating and financingplans. Accordingly, we believe that Adjusted EBITDA provides useful information for investors in understanding andevaluating our operating results in the same manner as our management and our board of directors. Adjusted EBITDA was$(12.0) million and $(15.6) million in 2018 and 2017, respectively. The changes were primarily a result of increasedpersonnel-related costs, excluding stock-based compensation, contract labor and expenses resulting from our jointdevelopment agreement with GLOBALFOUNDRIES. Personnel-related costs and contract labor costs were $20.0 million in2018 and $18.8 million in 2017. The increase in personnel-related and contract labor is consistent with our strategy toexpand our operations and develop our MRAM technologies and products to support future growth. Expenses from our jointdevelopment agreement were $5.8 million in 2018 and $5.2 million in 2017. Year EndedDecember 31, 2018 2017Adjusted EBITDA reconciliation: Net loss $(17,754) $(21,100)Depreciation and amortization 1,450 1,191Stock-based compensation expense 2,668 2,048Compensation expense related to vesting of GLOBALFOUNDRIEScommon stock 753 1,472Interest expense 890 764Adjusted EBITDA $(11,993) $(15,625) Factors Affecting Our Results of OperationsDesign wins. To continue to grow our revenue, we must continue to achieve design wins for our MRAM products. Weconsider a design win to occur when an original equipment manufacturer (OEM) or contract manufacturer notifies us that ithas qualified one of our products as a component in a product or system for production. Because the life cycles for ourcustomers’ products can last for many years, if these products have successful commercial introductions, we expect tocontinue to generate revenues over an extended period of time for each successful design win. Any delay in the developmentof our products, or failure of our customers to adopt our products, could inhibit revenue growth or cause declines, whichwould significantly harm our business. In the fourth quarter of 2017, we recorded revenue for our first sale of 40nm 256MbSTT-MRAM products and we ramped up production in 2018.Customer acceptance of our technology and customer product success. For our customers to use our products, they mayhave to redesign certain components of their existing designs. We have established relationships with several storagecontroller and Field Programmable Gate Array (FPGA) companies, including Xilinx, Lattice and Rizwan as well as IP corecompanies, including Cadence, Synopsys, and Northwest Logic, to facilitate the integration of our MRAM solutions into ourcustomers end products. Delays in our customers’ design cycles may have adverse effects on the demand, and therefore sales,of our products.35 Table of ContentsCustomer concentration. A relatively small number of end customers have historically accounted for asignificant percentage of our revenue. Revenue, including through distributors, from our four largest end customers,collectively, accounted for 29% and 28% of our total revenue in 2018 and 2017, respectively. One of these customersindividually accounted for more than 10% of our total revenue in 2018 and none of these customers individually accountedfor more than 10% of our total revenue in 2017. It would be difficult to replace lost revenue resulting from the loss,reduction, cancellation or delay in purchase orders by any one of these end customers. Consolidation among our customersmay further concentrate our customer base and expose us to increased risks relating to increased customer concentration. Inaddition, any significant pricing pressure exerted by a significant customer could adversely affect our operating results.Pricing, product cost and gross margins of our products. Our gross margin has been, and will continue to be, affectedby a variety of factors, including the timing of changes in pricing, shipment volumes, new product introductions, changes inproduct mix, changes in our purchase price of fabricated wafers, assembly and test service expenses, manufacturing yieldsand inventory write downs, if any. In general, newly introduced products, and products with higher densities andperformance, tend to be priced higher than older, more mature products. Average selling prices in the semiconductor industrytypically decline as products mature. Consistent with this historical trend, we expect that the average selling prices of ourproducts will decline as they mature. In the normal course of business, we seek to offset the effect of declining average sellingprices on existing products by reducing manufacturing expenses and introducing newer, higher value-added products. If weare unable to maintain overall average selling prices or to offset any declines in average selling prices with savings onproduct costs, our gross margin will decline.Gross margin impact of licensing revenue. Our licensing revenue, which we collect as licensing fees and royaltypayments, generates significantly higher gross margin than product revenue. Due to the high gross margin profile of thisrevenue stream, fluctuations in licensing revenue may have a greater impact on gross margin than a corresponding change inthe demand for our products. Therefore, as licensing revenue fluctuates, we may see significant variations in gross margin.Technology, process, and product development investment. We invest heavily to develop our MRAM technology,including the core MRAM technology, the joint development agreement with GLOBALFOUNDRIES, and the design of newand innovative products based on MRAM, to provide solutions to our current and future customers. We anticipate that wewill continue to invest in our research and development to achieve our technology and product roadmaps. Our productdevelopment is targeted to specific segments of the market where we believe the densities and performance of our productscan provide the most benefit. We believe our close coordination with our customers regarding their future productrequirements enhances the efficiency of our research and development expenditures.Components of Results of OperationsRevenueWe derive our revenue from the sale of our MRAM-based products in discrete unit form, the licensing of our MRAMand magnetic sensor technology and related royalties, the sale of backend foundry services, and design services to thirdparties. We recognize sales of products in discrete unit form at a point in time, we recognize revenue related to licensingagreements when we have delivered rights to the technology, we recognize revenue related to royalty agreements in theperiod in which sales generated from products sold using our technology occurs, and we recognize sales of backend foundryservices and design services to third parties over time.For some our products, we provide price protection and product return rights. As such, for sales through distributors ofour discrete MRAM products, at the time of revenue recognition, which occurs when control of the products has beentransferred to the distributor, we estimate product returns and the expected price concessions that will be provided to thedistributor, which is included in the transaction price. We estimate the credits to the distributors based on the historical rateof credits provided to distributors relative to sales or, for some customers the credit is based on a previously negotiated fixedrate. Our licensing revenue is largely dependent on a small number of transactions during a given year.36 Table of ContentsCost of Sales and Gross MarginCost of sales primarily includes the cost of our products including costs to purchase wafers, costs paid for waferfabrication, costs associated with the assembly and testing of our products, shipping costs and costs of our manufacturingpersonnel. Cost of sales also includes indirect costs, such as warranty, inventory valuation reserves and overhead costs.Gross profit is revenue less cost of sales. Gross margin is gross profit expressed as a percentage of total revenue. Weexpect that our gross margin may fluctuate from period to period, primarily as a result of changes in average selling price,revenue mix among our products, product yields and manufacturing costs. In addition, we may reserve against the value atwhich we carry our inventory based upon the product’s life cycle and conditions in the markets in which we sell. Declines inaverage selling prices may be paired with improvements in our cost of sales, which may offset some of the gross marginreduction that could result from lower selling prices.Operating ExpensesOur operating expenses consist of research and development, general and administrative and sales and marketingexpenses. Personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation, are among themost significant component of each of our operating expense categories.Research and Development ExpensesOur research and development expenses consist primarily of personnel-related expenses for the design and developmentof our products and technologies, development wafers required to validate and characterize our technology, and expensesassociated with our joint development agreement with GLOBALFOUNDRIES. Research and development expenses alsoinclude consulting services, circuit design costs, materials and laboratory supplies, fabrication and new packagingtechnology, and an allocation of related facilities and equipment costs. We recognize research and development expenses asthey are incurred. We expect our research and development expenses to decrease as a result of less spending in the future inconnection with our joint development agreement with GLOBAL FOUNDRIES.General and Administrative ExpensesOur general and administrative expenses consist primarily of personnel expenses, allocated facilities costs, expenses foroutside professional services, and expenses for personnel and consultants engaged in executive, finance, legal, informationtechnology and administrative activities. We expect our general and administrative expenses to remain flat as we havereached a level of stabilization in staffing and costs of being a public company.Sales and Marketing ExpensesOur sales and marketing expenses consist primarily of compensation for our sales, marketing, and business developmentpersonnel, including bonuses and commissions for our sales representatives. We expect our sales and marketing expenses,excluding variable commissions, to remain flat as we have reached a level of stabilization for staffing of sales personnel andrepresentatives and marketing activities.Interest ExpenseInterest expense consists of cash and non-cash components. The non-cash component consists of interest expenserecognized from the amortization of debt discounts derived from the issuance of a warrant, the end of term fee and debtissuance costs capitalized on our balance sheets as a reduction of the debt balance. Interest expense is due to our borrowingsunder our loan agreements.Other Income, NetOther income, net consists primarily of the interest income earned on our cash equivalents and foreign currencyexchange gains and losses. Our foreign currency exchange gains and losses relate to transactions and asset and liabilitybalances denominated in currencies other than the U.S. dollar.37 Table of ContentsLoss on Extinguishment of DebtIn the second quarter of 2017, we repaid the outstanding balance of our revolving loan and term loan at which time werecognized the unamortized balance of the debt discount and a prepayment penalty for the term loan as a loss onextinguishment of debt.Results of OperationsThe following table sets forth our results of operations for the periods indicated: Year Ended December 31, 2018 2017 2018 2017 (In thousands)(As a percentage ofrevenue)Product sales$39,514 $30,838 80% 86%Licensing, royalty, and other revenue 9,903 5,098 20 14 Total revenue 49,417 35,936 100 100 Cost of sales 24,083 14,451 49 40 Gross profit 25,334 21,485 51 60 Operating expenses: Research and development 23,637 25,437 48 71 General and administrative 12,551 11,516 25 32 Sales and marketing 6,467 4,740 13 13 Total operating expenses 42,655 41,693 86 116 Loss from operations (17,321) (20,208) (35) (56) Interest expense (890) (764) (2) (2) Other income, net 457 118 1 — Loss on extinguishment of debt — (246) — (1) Net loss$(17,754) $(21,100) (36)% (59)% Comparison of the Years Ended December 31, 2018 and 2017Revenue Year Ended December 31, Change 2018 2017 Amount % (Dollars in thousands) Product sales $39,514 $30,838 $8,676 28.1%Licensing, royalty, and other revenue 9,903 5,098 4,805 94.3%Total revenue $49,417 $35,936 $13,481 37.5% Total revenue increased by $13.5 million, or 37.5%, from $35.9 million during the year ended December 31, 2017, to$49.4 million during the year ended December 31, 2018. Product sales increased by $8.7 million or 28.1% from $30.8million, to $39.5 million. The increase was primarily due to $10.8 million in increased sales volume and mix in our MRAMproducts partially offset by a $2.1 million decrease in sales of our legacy products as a result of a decrease in demand for ourlegacy products.Licensing, royalty, and other revenue is a highly variable revenue item characterized by a small number of transactionsannually with revenue based on size and terms of each transaction. Licensing, royalty, and other revenue increased by $4.8million in 2018, from $5.1 million to $9.9 million. The increase was due to a non-refundable license fee related to a cross-license agreement entered into with a customer in March 2018, an increase of $0.5 million in royalty revenue, and anincrease of $0.3 million in sales of our backend foundry service. These increases were offset in part by a $0.7 million decreasein milestone payments earned for research and development activities performed on behalf of GLOBALFOUNDRIES.The increase in revenue is also due in part to our adoption of the new revenue accounting standard whereby revenuefrom sales to distributors is recognized upon delivery of the product to the distributor. In 2017, revenue from38 Table of Contentssales in which distributors were granted concessions or price protection credits was deferred until the sale of the products tothe end customer was completed. This change resulted in a $0.6 million increase in revenue in 2018.Cost of Sales and Gross Margin Year EndedDecember 31, Change 2018 2017 Amount % (Dollars in thousands) Cost of sales $24,083 $14,451 $9,632 66.7% Gross margin 51.3% 59.8% * * *Not meaningful.Cost of sales increased by $9.6 million, or 66.7%, from $14.5 million during the year ended December 31, 2017, to$24.1 million during the year ended December 31, 2018. The increase was primarily due to increased sales volume and loweryields on our MRAM products, as well as one time scrapping events in which we scrapped $1.6 million of inventory items,partially offset by lower sales volume of backend foundry services and legacy products.Gross margin decreased from 59.8% during the year ended December 31, 2017, to 51.3% during the year endedDecember 31, 2018. The decrease was primarily due to inventory items that were scrapped during 2018, as well as loweryields on our MRAM products that were partially offset by a onetime licensing event in the first quarter of 2018.Operating Expenses Year Ended December 31, Change 2018 2017 Amount % (Dollars in thousands) Research and development $23,637 $25,437 $(1,800) (7.1)%Research and development as a % of revenue 48% 71% Research and Development Expenses. Research and development expenses decreased by $1.8 million, or 7.1%, from$25.4 million during the year ended December 31, 2017, to $23.6 million during the year ended December 31, 2018. Thedecrease was due to a $1.7 million decrease in spending on direct materials and supplies used in research and developmentactivities due to the timing of purchases, a $1.3 million decrease in employee and contract labor costs due to a decrease inheadcount, a $0.7 million decrease in the amount attributable to the vesting of shares of common stock issued toGLOBALFOUNDRIES due to revaluing shares, and a $0.5 million decrease in equipment maintenance due to less repairs onmachinery. These decreases were partially offset by a $0.8 million increase in process engineering costs due to increasingproduction capacity, a $0.6 million increase in expenses incurred in our joint development agreement withGLOBALFOUNDRIES due to the use of more technologically advanced materials, a $0.5 million increase in softwareexpenses due to the purchase of software to improve simulations, a $0.2 million increase in rent expense due to increased rentexpense for our new headquarters, which we moved into in December 2017, and a $0.2 million dollar increase in depreciationexpense. Year Ended December 31, Change 2018 2017 Amount % (Dollars in thousands) General and administrative $12,551 $11,516 $1,035 9.0%General and administrative as a % of revenue 25% 32% General and Administrative Expenses. General and administrative expenses increased by $1.0 million, or 9.0%, from$11.5 million during the year ended December 31, 2017, to $12.6 million during the year ended December 31, 2018. Theincrease was primarily due a $1.4 million increase in employee and contract labor costs due to an increase in headcount, ofwhich $0.5 million was due to increased stock-based compensation expense and the repricing of certain stock options in theyear ended December 31, 2018, and an increase of $0.1 million in software expenses. These increases were partially offset bya decrease of $0.5 million in professional services due to costs incurred in 2017 related to recently becoming a publiccompany.39 Table of Contents Year Ended December 31, Change 2018 2017 Amount % (Dollars in thousands) Sales and marketing $6,467 $4,740 $1,727 36.4%Sales and marketing as a % of revenue 13% 13% Sales and Marketing Expenses. Sales and marketing expenses increased by $1.7 million, or 36.4%, from $4.7 millionduring the year ended December 31, 2017, to $6.5 million during the year ended December 31, 2018. The increase wasprimarily due to a $1.7 million increase in employee and contract labor costs as a result of higher headcount and an increasein salaries, bonuses and stock-based compensation expenseInterest Expense Year EndedDecember 31, Change 2018 2017 Amount % (Dollars in thousands) Interest expense $890 $764 $126 16.5% Interest expense increased by $0.1 million, or 16.5%, from $0.8 million during the year ended December 31, 2017, to$0.9 million during the year ended December 31, 2018. The increase was primarily due to higher interest expense on our2017 Credit Facility and Amended Credit Facility with Silicon Valley Bank, compared to our prior facility with Ares VentureFinance, due to an increase in the principal outstanding and an increase in the prime rate during the period.Other Income, Net Year EndedDecember 31, Change 2018 2017 Amount % (Dollars in thousands)Other income, net $457 $118 $339 287.3% Other income, net increased by $0.3 million, or 287.3%, from $0.1 million during the year ended December 31, 2017, to$0.5 million during the year ended December 31, 2018. The increase was primarily related to an increase in interest incomeearned on our cash balances as a result of the increase in our cash balances from the follow-on public offering in February2018. Loss on extinguishment of debt Year EndedDecember 31, Change 2018 2017 Amount % (Dollars in thousands)Loss on debt extinguishment $ — $246 $(246) **Not meaningful.Loss on extinguishment of debt was $0.2 million during the year ended December 31, 2017, due to the payoff of ourprior facility with Ares Venture Finance in May 2017. There was no such loss during the year ended December 31, 2018.Liquidity and Capital ResourcesWe have generated significant losses since our inception and had an accumulated deficit of $134.0 million as ofDecember 31, 2018. We have financed our operations primarily through the sale of our common stock in our initial publicoffering (IPO), sales of our redeemable convertible preferred stock, debt financing and the sale of our products. As ofDecember 31, 2018, we had $23.4 million of cash and cash equivalents, compared to $13.0 million as of December 31, 2017.40 Table of ContentsIn November 2017, we filed a Registration Statement (File No. 333-221331) registering the offer and sale of up to$100.0 million of our securities, and in February 2018 we completed a follow-on underwritten public offering of our commonstock under the Registration Statement, completing the sale of 3,722,447 shares at an offering price of $7.00 per share forproceeds of $24.5 million, net of $1.9 million of underwriting discounts and commissions and other offering costs. In May 2017, we executed a Loan and Security Agreement with Silicon Valley Bank for a $12.0 million term loan,which we amended in July 2018 to extend the interest only payment period until December 31, 2018. The term of theamended loan is two years following the interest only payment period, which would be extended by one year if we achievecertain milestones. The outstanding balance of the loan is to be repaid monthly beginning on January 1, 2019 over theremaining two-year term of the amended loan with an end of term fee of $0.8 million due upon maturity. The amended loan issecured by a first priority perfected security interest in our assets excluding any intellectual property, as described furtherbelow under “Credit Facilities.”As of December 31, 2018, and as of March 15, 2019, we believe that our existing cash and cash equivalents, coupledwith our anticipated growth and sales levels will be sufficient to meet our anticipated cash requirements for at least the nexttwelve months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extentof our spending to support research and development activities, the timing and cost of establishing additional sales andmarketing capabilities, and the introduction of new products. If we need to raise additional capital to fund our operations, wemay be required to seek additional equity or debt financing, and such additional financing may not be available to us onacceptable terms or at all. If we are unable to raise additional capital or generate sufficient cash from operations to adequatelyfund our operations, we will need to curtail planned activities to reduce costs and extend the time period over which ourcurrent resources will be able to fund operations. Doing so will likely harm our ability to execute on our business plan.The following table summarizes our cash flows for the periods indicated (in thousands): Year EndedDecember 31, 2018 2017 (In thousands)Cash used in operating activities $(14,673) $(18,888)Cash used in investing activities (1,914) (3,070)Cash provided by financing activities 27,016 5,181 Cash Used in Operating ActivitiesDuring the year ended December 31, 2018, cash used in operating activities was $14.7 million, which consisted of a netloss of $17.8 million, adjusted by non-cash charges of $5.3 million and a change of $2.2 million in our net operating assetsand liabilities. The non-cash charges consisted of stock-based compensation of $2.7 million, depreciation and amortizationof $1.5 million, compensation expense related to vesting of common stock issued to GLOBALFOUNDRIES under our jointdevelopment agreement of $0.8 million, and non-cash interest expense of $0.4 million. The change in our net operatingassets and liabilities was primarily due to an increase of $3.8 million in accounts receivable due to an increased sales volumeand timing of cash receipts for outstanding balances and a decrease of $0.2 million in accounts payable due to the timing ofpayments. These were partially offset by an increase of $1.3 million in accrued liabilities primarily due to an increase ininventory purchases in connection with the joint development agreement with GLOBALFOUNDRIES, an increase in accruedpayroll, and the timing of payments and a decrease of $0.7 million in inventory due to increased sales.During the year ended December 31, 2017, cash used in operating activities was $18.9 million, which consisted of a netloss of $21.1 million, adjusted by non-cash charges of $5.2 million and a change of $3.0 million in our net operating assetsand liabilities. The non-cash charges consisted of stock-based compensation of $2.0 million, compensation expense relatedto vesting of common stock issued to GLOBALFOUNDRIES under our joint development agreement of $1.5 million,depreciation and amortization of $1.2 million, non-cash interest expense of $0.3 million and loss on debt extinguishment of$0.2 million. The change in our net operating assets and liabilities was primarily due to an increase in inventory of $3.9million to meet demands of future sales and growing backlog, an increase of $0.4 million in accounts receivable due to thetiming of cash receipts for outstanding balances and a $0.1 million decrease in deferred income on shipments to distributors.These were partially offset by an increase in prepaid41 Table of Contentsexpenses and other current assets, accounts payable, and accrued liabilities, of $1.4 million due to the timing of payments.Cash Used in Investing ActivitiesCash used in investing activities during the years ended December 31, 2018 and 2017 was $1.9 million and $3.1million, respectively, which consisted of capital expenditures primarily for the purchase of manufacturing equipment andpurchased software.Cash Provided by Financing ActivitiesDuring the year ended December 31, 2018, cash provided by financing activities was $27.0 million consisting of netproceeds from the issuance of common stock in our February 2018 follow-on underwritten public offering of $24.5 million,proceeds of $1.0 million in borrowings, and $2.5 million from stock option exercises and purchases of shares in ouremployee stock purchase plan, offset in part by payments of long-term debt of $1.0 million.During the year ended December 31, 2017, cash provided by financing activities was $5.2 million consisting of $12.0million from borrowings under our 2017 long-term debt facility, and $1.6 million in proceeds from the exercise of stockoptions and purchase of shares under the employee stock purchase plan, partially offset by $8.4 million in payments on our2015 long-term debt facility and capital lease obligations.Off-Balance Sheet ArrangementsWe have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.Credit FacilitiesPrior FacilitiesIn June 2015, we entered into a loan and security agreement with Ares Venture Finance for a term loan of $8.0 millionand a $4.0 million revolving loan for working capital purposes and to repay our existing debt to another lender. In April2017, the loan was terminated and we repaid the outstanding balance of $1.1 million on the revolving loan. In May 2017, werepaid the outstanding principal balance of $6.2 million on the term loan. 2017 Credit FacilityIn May 2017, we entered into a Loan and Security Agreement with Silicon Valley Bank for a term loan of $12.0 million.The term loan bears for interest at a floating rate equal to the prime rate minus 0.75%. The term loan provided for a period ofinterest-only payments through April 30, 2018, followed by fixed principal and interest payments based on either a 24-month amortization schedule or a 36-month amortization schedule if we met certain sales milestones, and an additionalpayment of 6% of the Loan Amount when the loan was prepaid or repaid, whether at maturity or as a result of a prepayment oracceleration or otherwise. As of December 31, 2017, we determined we would not meet the sales milestones and as such theterm loan was based on a 24-month amortization schedule.In July 2018, we entered into the First Amendment to the Loan and Security Agreement with Silicon Valley Bank toextend the interest only payment period until December 31, 2018. The term of the amended loan is two years following theinterest only payment period, which would be extended by one year if we achieve certain milestones. The outstandingbalance of the loan is to be repaid monthly beginning on January 1, 2019 over the remaining two-year term of the amendedloan with an end of term fee of 7% of the Loan Amount due upon maturity. Borrowings under the Amended Credit Facilitymature in December 2020.Security for the Amended Credit Facility includes all of our assets except for intellectual property. The Amended CreditFacility contains customary covenants restricting our activities, including limitations on our ability to sell assets, engage inmergers and acquisitions, enter into transactions involving related parties, incur indebtedness or grant liens or negativepledges on our assets, make loans or make other investments. Under these covenants, we are prohibited from paying cashdividends with respect to our capital stock. The Amended Credit Facility also contains a material adverse42 Table of Contentseffect clause which provides that an event of default will occur if, among other triggers, an event occurs that couldreasonably be expected to result in a material adverse effect on our business, operations or condition, or on our ability toperform our obligations under the term loan. We were in compliance with all covenants at December 31, 2018.Critical Accounting Policies and Significant Judgements and EstimatesOur financial statements have been prepared in accordance with generally accepted accounting principles in the UnitedStates, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financialstatements, as well as the reported revenue generated and expenses incurred during the reporting periods. We base ourestimates on our historical experience and on various other factors that we believe are reasonable under the circumstances,the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readilyapparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.Revenue RecognitionOn January 1, 2018, we adopted Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts withCustomers (Topic 606) using the modified retrospective method applied to those contracts which were not completed as ofJanuary 1, 2018. We present results for reporting periods beginning after January 1, 2018 under Topic 606, while prior periodamounts are not adjusted and continue to be reported in accordance with Topic 605, Revenue.We recognize revenue when a customer obtains control of the promised products or services, in an amount that reflectsthe consideration we expect to receive in exchange for those products or services. We recognize revenue net of allowancesfor returns and price concessions, and any taxes collected from customers, which are subsequently remitted to governmentalauthorities.Topic 606 permits the application of certain practical expedients. Our billing practices approximate our performance asmeasured by an output method, where each output represents the completion of a performance obligation. Accordingly, weutilize the invoice practical expedient as defined in Topic 606, resulting in recognition of revenue in the amount that wehave the right to invoice.We incur direct and incremental costs of obtaining contracts and expense such costs as incurred, as the life of theunderlying contract is less than one year. Accordingly, we have concluded, based on the structure of our contracts, noadjustments are necessary under Topic 606.Nature of Products and Services We derive our revenue from the sale of MRAM-based products in discrete unit form, licenses of and royalties on ourMRAM and magnetic sensor technology, the sale of backend foundry services, and design services to third parties. Werecognize sales of products in discrete unit form at a point in time, revenue related to licensing agreements when we havedelivered control of the technology, revenue related to royalty agreements in the period in which sales generated fromproducts sold using our technology occurs, sales of backend foundry services over time, and design services to third partieseither at a point in time or over time, depending on the nature of the services.Product Revenue For products sold in their discrete form, we either sell our products directly to OEMs, original design manufacturers(ODMs), contract manufacturers (CMs), or through a network of distributors, who in turn sell to those customers. For salesdirectly to OEMs, ODMs and CMs, we recognize revenue when the OEM, ODM or CM obtains control of the product, whichoccurs at a point in time, generally upon shipment to the customer.We sell a majority of our products to our distributors at a uniform list price. However, distributors may resell ourproducts to end customers at a very broad range of individually negotiated price points. We provide distributors with priceconcessions subsequent to the delivery of product to them and such amounts are dependent on the end customer and productsales price. We base the price concessions on a variety of factors, including customer, product, quantity, geography andcompetitive differentiation. Price protection rights grant distributors the right to a credit in the event of43 Table of Contentsdeclines in the price of our products. Under these circumstances, we remit back to the distributor a portion of their originalpurchase price after the resale transaction is completed in the form of a credit against the distributors’ outstanding accountsreceivable balance. The credits are on a per unit basis and are not given to the distributor until the distributor providesinformation regarding the sale to their end customer. We estimate these credits and record such estimates in the same periodthe related revenue is recognized, resulting in a reduction of product revenue and the establishment of an allowance for priceconcessions for amounts due to distributors. We estimate credits to distributors based on the historical rate of creditsprovided to distributors relative to sales. Revenue on shipments to distributors is recorded when control of the products hasbeen transferred to the distributor.We estimate the amount of our product sales that may be returned by our customers and record this estimate as areduction of revenue in the period the related product revenue is recognized. We estimate our product return liability byanalyzing our historical returns, current economic trends and changes in customer demand and acceptance of products. Wehave received insignificant returns to date and believe that returns of our products will continue to be minimal. At the time of shipment to distributors, we record a trade receivable for the selling price as there is a legally enforceableobligation of the distributor to pay for the product delivered, an allowance is recorded for the estimated discount that will beprovided to the distributor, and the net of these amounts is recorded as revenue on the statement of operations.License Revenue For licenses of technology, recognition of revenue is dependent upon whether we have delivered rights to thetechnology, and whether there are future performance obligations under the contract. In some instances, the licenseagreements call for future events or activities to occur in order for milestones amounts to become due from the customer. Theterms of such agreements include payment to us of one or more of the following: non-refundable upfront fees; and royaltieson net sales of licensed products. Historically, these license agreements have not included other future performanceobligations once the license has been transferred to the customer. We allocate the transaction price in each agreement to the identified performance obligations based on the standaloneselling price (SSP) of each distinct performance obligation. Judgment is required to determine SSP. In instances where SSP isnot directly observable, such as when a license or service is not sold separately, SSP is determined using information thatmay include market conditions and other observable inputs. We recognize revenue from non-refundable up-front payments when the license is transferred to the customer and wehave no other performance obligations.Royalties We recognize revenue from sales-based royalties from licenses of our technology at the later of when (1) the sale occursor (2) the performance obligation to which some or all of the sales-based royalty has been allocated is satisfied (in whole or inpart).Other Revenue For certain revenue streams, we recognize revenue based on the pattern of transfer of the services. We use the inputmethod of measuring costs incurred to date compared to total estimated costs to be incurred under the contract as this methodmost faithfully depicts its performance. We record an unbilled receivable (within accounts receivable, net) for the portion ofthe work that has been completed but not invoiced at the end of each reporting period.Revenue from milestone payments must be estimated using either the expected value method or the most likely amountmethod. At the inception of each agreement that includes milestone payments, we evaluate whether the milestones areconsidered probable of being reached and estimate the amount to be included in the transaction price by using the mostlikely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the associatedmilestone value is included in the transaction price. At the end of each subsequent reporting period, we re-evaluate theprobability or achievement of each such milestone and any related constraint, and if necessary, adjust our estimate of theoverall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenuesand earnings in the period of adjustment.44 Table of ContentsInventoryWe record inventories at the lower of cost, determined on a first-in, first-out basis or specific identification method, ormarket. We routinely evaluate quantities and values of inventory on hand and inventory that may be returned fromdistributors in light of current market conditions and market trends, and record provisions for inventories in excess ofdemand and subject to obsolescence. This evaluation may take into consideration expected demand, the effect new productsmay have on the sale of existing products, technological obsolescence and other factors. We record inventory write-downsfor the valuation of inventory when required based on the analysis of the information immediately above and inventorybalances are not readjusted until sold. Unanticipated changes in technology or customer demand could result in a decrease indemand for our products, which may require additional inventory write-downs that could materially affect our results ofoperations.Stock-based CompensationWe recognize compensation costs related to stock options granted to employees and directors based on the estimatedfair value of the awards on the date of grant. We have made an accounting policy election to account for forfeitures as theyoccur, rather than estimate expected forfeitures. We estimate the grant date fair value and the resulting stock-basedcompensation expense using the Black-Scholes option-pricing model. We expense the grant date fair value of stock-basedawards on a straight-line basis over the period during which the employee is required to provide service in exchange for theaward (generally the vesting period).We estimate the fair value of our stock-based awards using the Black-Scholes option-pricing model, which requires theinput of highly subjective assumptions. Our assumptions are as follows:Expected Term. The expected term represents the period we expect the stock-based awards to be outstanding. We usethe simplified method to determine the expected term, which is calculated as the average of the time to vesting and thecontractual life of the options.Expected Volatility. Since we do not have a long trading history for our common stock, we derive the expectedvolatility from the average historical volatilities of publicly traded companies within our industry that we consider tobe comparable to our business over a period approximately equal to the expected term for employees’ options and theremaining contractual life for non-employees’ options. We will continue to apply this process until a sufficient amountof historical information regarding the volatility of our own stock price becomes available.Risk-free Interest Rate. We base the risk-free interest rate on the U.S. Treasury yield with a maturity equal to theexpected term of the option in effect at the time of grant.Dividend Yield. We assume the expected dividend to be zero as we have never paid dividends and have no current plansto pay any dividends on our common stock.In addition to the assumptions used in the Black-Scholes option-pricing model. We will continue to use judgment inevaluating the expected volatility and expected terms utilized for our stock-based compensation calculations on aprospective basis.We recorded stock-based compensation expense of $2.7 million and $2.0 million for the years ended December 31,2018 and 2017, respectively.Historically, for all periods prior to the IPO, the fair value of the shares of common stock underlying our stock-basedawards was estimated on each grant date by our board of directors. In order to determine the fair value of our common stockunderlying option grants, our board of directors considered, among other things, contemporaneous valuations of ourcommon stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by theAmerican Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity SecuritiesIssued as Compensation. Given the absence of a public trading market for our common stock, our board of directors exercisedreasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fairvalue of our common stock, including: the rights, preferences and privileges of our preferred stock relative to those of ourcommon stock; our operating results and financial condition; our levels of available capital resources; equity marketconditions affecting comparable public companies; general U.S. market conditions; and the lack of marketability of ourcommon stock.45 Table of ContentsAfter the completion of the IPO, our board of directors determined the fair value of each share of underlying commonstock based on the closing price of our common stock as reported on the date of grant.JOBS Act Accounting ElectionWe are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, andtherefore we may take advantage of certain exemptions from various public company reporting requirements, including notbeing required to have our internal control over financial reporting audited by our independent registered public accountingfirm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligationsregarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements ofholding a nonbinding advisory vote on executive compensation and any golden parachute payments. We may takeadvantage of these exemptions until we are no longer an “emerging growth company.” We will cease to be an “emerginggrowth company” upon the earliest of: (1) December 31, 2021, (2) the last day of the first fiscal year in which our annualgross revenues are $1.07 billion or more, (3) the date on which we have, during the previous rolling three-year period, issuedmore than $1.0 billion in non-convertible debt securities, and (4) the date on which we are deemed to be a “large acceleratedfiler” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act.Recently Adopted PronouncementsASU No. 2014-09, Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)No. 2014‑09, Revenue from Contracts with Customers (Topic 606). Areas of revenue recognition that will be affectedinclude, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value ofmoney, contract costs and disclosures. The new standard permits adoption either by using (i) a full retrospective approach forall periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initiallyapplying the new standard recognized at the date of initial application and providing certain additional disclosures. The newstandard is effective for annual reporting periods beginning after December 15, 2017. We adopted this standard on January 1,2018 using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenuestandard as an adjustment to the opening balance of its accumulated deficit. The comparative information has not beenrestated and continues to be reported under the accounting standards in effect for those periods. Topic 606 permits the application of certain practical expedients. Our billing practices approximate our performance asmeasured by an output method, where each output represents the completion of a performance obligation. Accordingly, weutilize the invoice practical expedient as defined in Topic 606, resulting in recognition of revenue in the amount that wehave the right to invoice.We incur direct and incremental costs of obtaining contracts and such costs are expensed as incurred, as the life of theunderlying contract is less than one year. Accordingly, we have concluded, based on the structure of our contracts, noadjustments are necessary under Topic 606.As a result of the adoption of the new standard, we changed our accounting policy for revenue recognition and thedetails of the significant changes and quantitative impact of the changes are disclosed below.Distributor sales- Some of our contracts with distributors provide the distributor with certain concessions and priceprotection credits. Under Topic 605, Revenue, these concessions and price protection credits were not fixed ordeterminable and, as a result, the associated revenue was deferred until delivery of the product to the end customer. Atthe time of shipment to distributors, we recorded a trade receivable for the selling price as there was a legallyenforceable obligation of the distributor to pay for the product delivered, inventory was reduced by the carrying valueof goods shipped, and the net of these amounts, the gross profit, was recorded as deferred income on shipments todistributors on the balance sheet. Under Topic 606, we recognize revenue from sales to distributors when control of theproduct is transferred to the distributor and estimate the amount of concessions and price protection credits at the pointof revenue recognition. Accordingly, the balance of the deferred income on shipments to distributors was eliminated asa cumulative effect adjustment of implementing Topic 606 as of January 1, 2018, net of our estimate of concessions andprice protection credits for those contracts.46 Table of ContentsPerformance obligations delivered over time- Topic 605 permitted straight-line recognition of revenue for performanceobligations that were delivered over time. The new revenue standard requires an entity to recognize revenue based onthe pattern of transfer of the services. Entities must use either an input method or an output method to measure progresstoward complete satisfaction of a performance obligation. We determined that the input method of measuring timeelapsed to date compared to total estimated time to be incurred under the contract most faithfully depicts ourperformance. Under Topic 606, we will record an unbilled receivable (within accounts receivable, net) for the portion ofthe service that has been completed but not invoiced at the end of each reporting period.Milestone payments – Topic 605 permitted recognition using the milestone method, whereby revenue was recognizedupon the completion of substantive milestones once the customers acknowledge the milestones have been met and thecollection of the amounts is reasonably assured. The milestone method no longer exists under the new revenuestandard. Revenue from milestone payments must be estimated using either the expected value method or the mostlikely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the associatedmilestone value is included in the transaction price. The adoption of Topic 606 did not have an impact on milestonerevenue recorded to date as the practical expedient adopted for a single contract resulted in revenue recognition similarto milestone revenue under Topic 605. Sales-based royalties – Topic 605 permitted recognition of royalties when reported to us, which generally coincidedwith the receipt of payment. Under the new revenue standard, we record revenue generated from sales-based royaltiesfrom licenses of our technology at the later of when (1) the sale occurs or (2) the performance obligation to which someor all of the sales-based royalty has been allocated is satisfied (in whole or in part).ASU No. 2017-09, Compensation-Stock Compensation In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) Scope ofModification Accounting, which is intended to amend the scope of modification accounting for share-based paymentarrangements. The amendments in the update provide guidance on types of changes to the terms or conditions of share-basedpayment awards that would require us to apply modification accounting under ASC 718, Compensation-StockCompensation. This ASU is effective for annual reporting periods beginning after December 15, 2017, and early adoptionwas permitted. We adopted this standard on January 1, 2018 and the impact of its adoption on our financial statements wasnot material.ASU No. 2016-15, Statement of Cash Flows In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of CertainCash Receipts and Cash Payments. ASU 2016-15 identifies how certain cash receipts and cash payments are presented andclassified in the Statement of Cash Flows. The standard is effective for fiscal years and interim periods beginning afterDecember 15, 2017. The standard should be applied retrospectively and early adoption was permitted, including adoption inan interim period. We adopted this standard on January 1, 2018, and the impact of its adoption on our financial statementswas not material. Recently Issued PronouncementsIn February 2016, the FASB issued ASU No. 2016‑02, Leases, which establishes a comprehensive new lease accountingmodel. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar tocurrent lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with acorresponding right-of-use asset for leases with a lease-term of more than twelve months. This ASU is effective for fiscal yearsand interim periods within those years beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10,Codification Improvements to Topic 842 Leases and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements. ASU2018-10 clarifies how to apply certain aspects of ASU 2016-02. We will adopt this standard on January 1, 2019 using themodified retrospective method. We are substantially complete with our analysis as to the impact of adoption and estimatethat the adoption will result in the recognition of right-of-use assets and lease liabilities for operating leases within the rangeof approximately $3.6 million to $4.0 million on our balance sheet, with no material impact to our statement of operations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement47 Table of Contentsof Credit Losses on Financial Instruments, which amends the incurred loss impairment methodology in current GAAP with amethodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportableinformation to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods withinthose years, beginning after December 15, 2019, and requires a cumulative effect adjustment to the balance sheet as of thebeginning of the first reporting period in which the guidance is effective. We are evaluating the impact of the adoption ofASU 2016-13 on our financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and toimprove financial reporting for nonemployee share-based payments. The ASU expands the scope of Topic 718, (whichcurrently only includes share-based payments to employees) to include share-based payments issued to nonemployees forgoods or services. Consequently, the accounting for share-based payments to nonemployees and employees will besubstantially aligned. The standard is effective for fiscal years beginning after December 15, 2018, including interim periodswithin that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606. We adoptedthis standard on January 1, 2019, and the impact of its adoption on our financial statements was not material.In August 2018, the Securities and Exchange Commission (SEC) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative,overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis ofstockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption ofstockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis shouldpresent a reconciliation of the beginning balance to the ending balance of each period for which a statement ofcomprehensive income is required to be filed. This final rule is effective on November 5, 2018; however, in light of theproximity of the effective date to the filing date for most filers’ quarterly reports, the SEC will allow a filer’s first presentationof the changes in stockholders’ equity to be included in its Form 10-Q for the quarter that begins after the effective date. Wewill begin to present a statement of changes in stockholders’ equity in our quarterly financial statements beginning onJanuary 1, 2019. Item 7A. Quantitative and Qualitative Disclosures About Market Risk.Not required for a smaller reporting company.48 Table of Contents Item 8. Financial Statements and Supplementary Data.EVERSPIN TECHNOLOGIES, INC.INDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 50Financial Statements: Balance Sheets 51Statements of Operations and Comprehensive Loss 52Statements of Stockholders’ Equity 53Statements of Cash Flows 54Notes to Financial Statements 55 49 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of Everspin Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Everspin Technologies, Inc. (the Company) as of December 31, 2018and 2017, and the related statements of operations and comprehensive loss, stockholders’ equity and cash flows for each ofthe two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “financialstatements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of theCompany at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in theperiod ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. Adoption of ASU No. 2014-09 As discussed in Note 2 to the financial statements, the Company changed its method of accounting for revenue from sales tocustomers in 2018 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinionon the Company’s financial statements based on our audits. We are a public accounting firm registered with the PublicCompany Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to theCompany in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether dueto error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control overfinancial reporting. As part of our audits we are required to obtain an understanding of internal control over financialreporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whetherdue to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a testbasis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation ofthe financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLPWe have served as the Company’s auditor since 2008.Phoenix, ArizonaMarch 15, 201950 Table of ContentsEVERSPIN TECHNOLOGIES, INC.Balance Sheets(In thousands, except share and per share amounts) December 31, 2018 2017Assets Current assets: Cash and cash equivalents $23,379 $12,950Accounts receivable, net 7,522 4,041Inventory 9,097 9,837Prepaid expenses and other current assets 688 590Total current assets 40,686 27,418Property and equipment, net 4,286 3,946Other assets 73 73Total assets $45,045 $31,437 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $2,637 $2,920Accrued liabilities 5,001 3,748Deferred income on shipments to distributors — 1,720Current portion of long-term debt 5,977 3,987Total current liabilities 13,615 12,375Long-term debt, net of current portion 6,509 8,178Total liabilities 20,124 20,553Commitments and contingencies Stockholders’ equity: Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized; no shares issuedand outstanding as of December 31, 2018 and December 31, 2017 — —Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 17,095,456 and12,817,201 shares issued and outstanding as of December 31, 2018 and December 31, 2017 2 1Additional paid-in capital 158,912 128,422Accumulated deficit (133,993) (117,539)Total stockholders’ equity 24,921 10,884Total liabilities and stockholders’ equity $45,045 $31,437 The accompanying notes are an integral part of these financial statements.51 Table of ContentsEVERSPIN TECHNOLOGIES, INC.Statements of Operations and Comprehensive Loss(In thousands, except share and per share amounts) Year Ended December 31, 2018 2017Product sales $39,514 $30,838Licensing, royalty, and other revenue 9,903 5,098Total revenue 49,417 35,936Cost of sales 24,083 14,451Gross profit 25,334 21,485Operating expenses: Research and development 23,637 25,437General and administrative 12,551 11,516Sales and marketing 6,467 4,740Total operating expenses 42,655 41,693Loss from operations (17,321) (20,208)Interest expense (890) (764)Other income, net 457 118Loss on extinguishment of debt — (246)Net loss and comprehensive loss $(17,754) $(21,100)Net loss per common share, basic and diluted $(1.08) $(1.69)Weighted-average shares used to compute net loss per common share, basic and diluted 16,372,638 12,484,984 The accompanying notes are an integral part of these financial statements.52 Table of ContentsEVERSPIN TECHNOLOGIES, INC.Statements of Stockholders’ Equity(In thousands, except share amounts) Additional Total Common Stock Paid-In Accumulated Stockholders’ Shares Amount Capital Deficit EquityBalance at December 31, 2016 12,498,128 $ 1 $123,309 $(96,439) $26,871Issuance of common stock upon exercise ofstock options 281,483 — 1,337 — 1,337Issuance of common stock under EmployeeStock Purchase Plan 37,590 — 256 — 256Compensation expense related to vesting ofcommon stock issued to GLOBALFOUNDRIES — — 1,472 — 1,472Stock-based compensation expense — — 2,048 — 2,048Net loss — — — (21,100) (21,100)Balance at December 31, 2017 12,817,201 1 128,422 (117,539) 10,884Adjustment to opening balance for adoption ofnew accounting standard — — — 1,300 1,300Issuance of common stock in secondaryoffering, net of issuance costs 3,772,447 1 24,523 — 24,524Issuance of common stock under stock incentiveplans 505,808 — 2,503 — 2,503Issuance of warrant — — 43 — 43Compensation expense related to vesting ofcommon stock issued to GLOBALFOUNDRIES — — 753 — 753Stock-based compensation expense — — 2,668 — 2,668Net loss — — — (17,754) (17,754)Balance at December 31, 2018 17,095,456 $ 2 $158,912 $(133,993) $24,921 The accompanying notes are an integral part of these financial statements.53 Table of ContentsEVERSPIN TECHNOLOGIES, INC.Statement of Cash Flows(In thousands) Year Ended December 31, 2018 2017Cash flows from operating activities Net loss $(17,754) $(21,100)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,450 1,191Loss on disposal of property and equipment 19 —Stock-based compensation 2,668 2,048Non-cash loss on extinguishment of debt — 185Non-cash interest expense 375 297Compensation expense related to vesting of common stock to GLOBALFOUNDRIES 753 1,472Changes in operating assets and liabilities: Accounts receivable (3,816) (385)Inventory 694 (3,871)Prepaid expenses and other current assets (98) 460Other assets — (23)Accounts payable (178) 809Accrued liabilities 1,253 136Deferred income on shipments to distributors — (107)Shipping term reversal (39) —Net cash used in operating activities (14,673) (18,888)Cash flows from investing activities Purchases of property and equipment (1,914) (3,070)Net cash used in investing activities (1,914) (3,070)Cash flows from financing activities Proceeds from the issuance of common stock, net of offering costs 24,524 —Proceeds from debt 1,000 12,000Payments on debt (1,000) (8,356)Payments of debt issuance costs — (49)Payments on capital lease obligation (11) (7)Proceeds from exercise of stock options and purchase of shares in employee stock purchase plan 2,503 1,593Net cash provided by financing activities 27,016 5,181Net increase (decrease) in cash and cash equivalents 10,429 (16,777)Cash and cash equivalents at beginning of period 12,950 29,727Cash and cash equivalents at end of period $23,379 $12,950Supplementary cash flow information: Interest paid $504 $467Non-cash investing and financing activities: Purchases of property and equipment in accounts payable $11 $116Purchases of property and equipment under capital lease obligations $ — $31Issuance of warrant in lieu of financing costs $43 $ — The accompanying notes are an integral part of these financial statements.54 Table of Contents EVERSPIN TECHNOLOGIES, INC.Notes to Financial Statements1. Organization and OperationsEverspin Technologies, Inc. (the Company) was incorporated in Delaware on May 16, 2008. The Company’smagnetoresistive random access memory (MRAM) solutions offer the persistence of non-volatile memory with the speed andendurance of random access memory (RAM) and enable the protection of mission critical data particularly in the event ofpower interruption or failure. The Company’s MRAM solutions allow its customers in the industrial, automotive andtransportation, and enterprise storage markets to design high performance, power efficient and reliable systems without theneed for bulky batteries or capacitors.Ability to continue as a going concernThe Company believes that its existing cash and cash equivalents as of December 31, 2018 will be sufficient to meet itsanticipated cash requirements for at least the next 12 months from the financial statement issuance date. The Company’sfuture capital requirements will depend on many factors, including its growth rate, the timing and extent of its spending tosupport 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 ordebt financing, to sustain operations beyond that point, and such additional financing may not be available on acceptableterms or at all. If the Company is unable to raise additional capital or generate sufficient cash from operations to adequatelyfund its operations, it will need to curtail planned activities to reduce costs. Doing so will likely harm its ability to executeon its business plan. 2. Summary of Significant Accounting PoliciesUse of EstimatesThe accompanying financial statements have been prepared in accordance with accounting principles generallyaccepted in the United States of America (U.S. GAAP). The preparation of the financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those relatedto revenue recognition, fair value of assets and liabilities, inventory, product warranty reserves, income taxes, and stock-based compensation. The Company believes its estimates and assumptions are reasonable; however, actual results may differfrom the Company’s estimates.SegmentsThe Company’s chief operating decision maker is its Chief Executive Officer who reviews financial informationpresented on a consolidated basis for purposes of allocating resources and evaluating financial performance for the entireCompany. As a result, the Company has single operating and reportable segment..Cash and Cash EquivalentsThe Company considers all highly liquid, short-term investments with maturity dates of 90 days or less at the date ofpurchase to be cash equivalents. The Company’s cash equivalents consist solely of money market funds.Accounts ReceivableAccounts receivable are recorded at the invoiced amount and do not bear interest. The Company generally does notrequire collateral or other security in support of accounts receivable. Allowances are provided for individual accountsreceivable when the Company becomes aware of a customer’s inability to meet its financial obligations, such as in the case ofbankruptcy, deterioration in the customer’s operating results or change in financial position. If circumstances related tocustomers change, estimates of the recoverability of receivables would be further adjusted. The Company also considers anumber of factors in evaluating the sufficiency of its allowance for doubtful accounts, including the length of55 Table of Contentstime receivables are past due, significant one-time events, creditworthiness of customers and historical experience. Accountbalances are charged off against the allowance after all means of collection have been exhausted and the potential forrecovery is considered remote. At December 31, 2018 and 2017, there was no allowance for doubtful accounts.The Company establishes an allowance for product returns. The Company analyzes historical returns, current economictrends and changes in customer demand and acceptance of products when evaluating the adequacy of sales returns. As thereturns are processed as credits on future purchases, the allowance is recorded against the balance of trade accountsreceivable. In addition, the Company establishes an allowance for estimated price concessions related to its distributeragreements. The Company estimates credits to distributors based on the historical rate of credits provided to distributorsrelative to sales. The allowance for product returns and the allowance for price concessions were $144,000 and $569,000 atDecember 31, 2018, respectively, and $147,000 and $0 at December 31, 2017, respectively.Accounts receivable, net consisted of the following (in thousands): December 31, 2018 2017Trade accounts receivable $7,297 $4,188Unbilled accounts receivable 938 —Allowance for accounts receivable (713) (147)Accounts receivable, net $7,522 $4,041 Concentration of Credit RiskFinancial instruments that potentially expose the Company to a concentration of credit risk consist principally of cashand cash equivalents that are held by a financial institution in the United States and accounts receivable. Amounts ondeposit with a financial institution may at times exceed federally insured limits. The Company maintains its cash accountswith high credit quality financial institutions and accordingly, minimal credit risk exists with respect to the financialinstitutions.Significant customers are those which represent more than 10% of the Company’s total revenue or net accountsreceivable 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 thedistributors of the Company’s products in addition to end customers that the Company sells to directly. For each significantcustomer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable, netare as follows: Revenue Accounts Receivable, net Year Ended As of December 31, December 31, Customers 2018 2017 2018 2017 Customer A 13%16% * * Customer B 11% * * * Customer C 10% * * 11%Customer D * 15% * * Customer E * * 23% * Customer F * * 21% * Customer G * * 11% 15%Customer H * * 11% * Customer I * * * 10%*Less than 10%InventoryInventory is valued at the lower of cost, using the first-in, first-out or specific identification method, or market. Thecarrying value of inventory is adjusted for excess and obsolete inventory based on inventory age, shipment history and theforecast of demand over a specific future period. At the point of loss recognition, a new lower cost basis for that56 Table of Contentsinventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in thatnew cost basis.Fair Value of Financial InstrumentsFair value is defined as an exit price, representing the amount that would be received to sell an asset, or paid to transfera liability, in an orderly transaction between market participants. The framework for measuring fair value provides a three-tierhierarchy 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 observableeither directly or indirectly; and Level 3— Unobservable inputs in which there is little or no market data requiring the reporting entity to develop itsown assumptions. The carrying value of accounts receivable, accounts payable, and other accruals readily convertible into cashapproximate fair value because of the short-term nature of the instruments. As of December 31, 2018, based on Level 2 inputsand the borrowing rates available to the Company for loans with similar terms and consideration of the Company’s creditrisk, the carrying value of the Company’s variable interest rate debt, excluding unamortized debt issuance costs,approximates fair value. The Company’s financial instruments consist of Level 1 assets. Where quoted prices are available inan active market, securities are classified as Level 1. Level 1 assets consist of highly liquid money market funds that areincluded in cash equivalents.The following tables sets forth the fair value of the Company’s financial assets measured at fair value on a recurringbasis (in thousands): December 31, 2018 Level 1 Level 2 Level 3 TotalAssets: Money market funds $23,478 $ — $ — $23,478Total assets measured at fair value $23,478 $ — $ — $23,478 December 31, 2017 Level 1 Level 2 Level 3 TotalAssets: Money market funds $13,369 $— $— $13,369Total assets measured at fair value $13,369 $ — $ — $13,369 Property and EquipmentProperty and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation begins at thetime the asset is placed in service. Maintenance and repairs are charged to operations as incurred. Depreciation is computedusing the straight-line method over the following estimated useful lives of the assets: Useful LivesComputer and network equipment 2 yearsManufacturing equipment 2 – 7 yearsFurniture and fixtures 7 yearsSoftware 3 years Leasehold improvements are amortized over the shorter of the lease term or useful life. Upon sale or retirement of assets,the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected inoperations. Amortization expense of assets acquired through capital leases is included in the statements of operations andcomprehensive loss.57 Table of ContentsImpairment of Long-lived AssetsThe Company evaluates its long-lived assets, including property and equipment, for impairment whenever events orchanges in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of theseassets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset isexpected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment ismeasured as the difference between the carrying value and the fair value of the impaired asset. There have been noimpairments of the Company’s long-lived assets during any of the periods presented.LeasesThe Company leases office, lab, and manufacturing space in various locations. Rent expense under operating leases isrecognized on a straight-line basis over the lease term taking into consideration rent abatements, scheduled rent increasesand any lease incentives.Debt Issuance CostsThe Company defers and amortizes issuance costs, underwriting fees, end of term payments, and related expensesincurred in connection with the issuance of debt instruments using the effective interest method over the terms of therespective instruments. Debt issuance costs are reflected as a direct reduction of the carrying amount of the related debtliability. Revenue RecognitionThe Company recognizes revenue when a customer obtains control of the promised products or services, in an amountthat reflects the consideration the Company expects to receive in exchange for those products or services. Revenue isrecognized net of allowances for returns and price concessions, and any taxes collected from customers, which aresubsequently remitted to governmental authorities.Nature of Products and Services The Company’s revenue is derived from the sale of MRAM-based products in discrete unit form, licenses of androyalties on its MRAM and magnetic sensor technology, the sale of backend foundry services and design services to thirdparties. Sales of products in discrete unit form are recognized at a point in time, revenue related to licensing agreements isrecognized when the Company has delivered control of the technology, revenue related to royalty agreements is recognizedin the period in which sales generated from products sold using the Company’s technology occurs, sales of backend foundryservices are recognized over time, and design services to third parties are recognized either at a point in time or over time,depending on the nature of the services.Product RevenueFor products sold in their discrete form, the Company either sells its products directly to original equipmentmanufacturers (OEMs), original design manufacturers (ODMs) and contract manufacturers (CMs), or through a network ofdistributors, who in turn sell to those customers. For sales directly to OEMs, ODMs and CMs, revenue is recognized when theOEM, ODM or CM obtains control of the product, which occurs at a point in time, generally upon shipment to the customer.The Company sells the majority of its products to its distributors at a uniform list price. However, distributors may resellthe Company’s products to end customers at a very broad range of individually negotiated price points. Distributors areprovided with price concessions subsequent to the delivery of product to them and such amounts are dependent on the endcustomer and product sales price. The price concessions are based on a variety of factors, including customer, product,quantity, geography and competitive differentiation. Price protection rights grant distributors the right to a credit in theevent of declines in the price of the Company’s products. Under these circumstances, the Company remits back to thedistributor a portion of their original purchase price after the resale transaction is completed in the form of a credit against thedistributors’ outstanding accounts receivable balance. The credits are on a per unit basis and are not given to the distributoruntil the distributor provides information regarding the sale to their end customer. The Company estimates these credits andrecords such estimates in the same period the related revenue is recognized,58 Table of Contentsresulting in a reduction of product revenue and the establishment of an allowance for price concessions due to distributors.The Company estimates credits to distributors based on the historical rate of credits provided to distributors relative to sales.Revenue on shipments to distributors is recorded when control of the products has been transferred to the distributor.The Company estimates the amount of its product sales that may be returned by its customers and records this estimateas a reduction of revenue in the period the related product revenue is recognized. The Company estimates its product returnliability by analyzing its historical returns, current economic trends and changes in customer demand and acceptance ofproducts. The Company has received insignificant returns to date and believes that returns of its products will continue to beminimal. At the time of shipment to distributors, the Company records a trade receivable for the selling price as there is a legallyenforceable obligation of the distributor to pay for the product delivered, an allowance is recorded for the estimated discountthat will be provided to the distributor, and the net of these amounts is recorded as revenue on the statement of operations.License RevenueFor licenses of technology, recognition of revenue is dependent upon whether the Company has delivered rights to thetechnology, and whether there are future performance obligations under the contract. In some instances, the licenseagreements call for future events or activities to occur in order for milestones amounts to become due from the customer. Theterms of such agreements include payment to the Company of one or more of the following: non-refundable upfront fees; androyalties on net sales of licensed products. Historically, these license agreements have not included other future performanceobligations for the Company once the license has been transferred to the customer. Revenue from non-refundable up-front payments is recognized when the license is transferred to the customer and theCompany has no other performance obligations. RoyaltiesRevenue from sales-based royalties from licenses of the Company’s technology are recognized at the later of when (1)the sale occurs or (2) the performance obligation to which some or all of the sales-based royalty has been allocated is satisfied(in whole or in part). Other RevenueFor certain revenue streams, the Company recognizes revenue based on the pattern of transfer of the services. TheCompany uses the input method of measuring costs incurred to date compared to total estimated costs to be incurred underthe contract as this method most faithfully depicts its performance. The Company will record an unbilled receivable (withinaccounts receivable, net) for the portion of the work that has been completed but not invoiced at the end of each reportingperiod. Revenue from milestone payments must be estimated using either the expected value method or the most likely amountmethod. At the inception of each agreement that includes milestone payments, the Company evaluates whether themilestones are considered probable of being reached and estimates the amount to be included in the transaction price byusing the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, theassociated milestone value is included in the transaction price. At the end of each subsequent reporting period, the Companyre-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts itsestimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which wouldaffect revenues and earnings in the period of adjustment. Product WarrantyThe Company generally sells products with a limited warranty of product quality and a limited indemnification ofcustomers against intellectual property infringement claims related to the Company’s products. The Company accrues forknown warranty and indemnification issues if a loss is probable and can be reasonably estimated, and accrues for estimatedlosses incurred for unidentified issues based on historical experience. A warranty liability was not recorded at59 Table of ContentsDecember 31, 2018 and 2017, as the estimated future warranty costs were not material based on the Company’s historicalexperience.Research and DevelopmentResearch and development expenses are incurred in support of internal development programs or as part of our jointdevelopment agreement with GLOBALFOUNDRIES and joint collaboration agreement with Silterra Malaysia Sdn. Bhd. (seeNote 10). Research and development expenses include personnel-related costs (including stock-based compensation), circuitdesign costs, purchases of materials and laboratory supplies, fabrication and packaging of experimental integrated circuitproducts, depreciation of research and development related capital equipment and overhead, and are expensed as incurred.Stock-based CompensationStock-based compensation arrangements include stock option grants and restricted stock unit (RSU) awards under theCompany’s equity incentive plans, as well as shares issued under the Company’s Employee Stock Purchase Plan (ESPP),through which employees may purchase the Company’s common stock at a discount to the market price.The Company measures its stock option grants made to employees based on the estimated fair value of the options as ofthe grant date using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized over therequisite service period using the straight-line method. The Company has made an accounting policy election to account forforfeitures as they occur, rather than estimating expected forfeitures at the time of the grant. Stock-based compensation expense for options granted to non-employees as consideration for services received ismeasured on the date of performance at the fair value of the consideration received or the fair value of the equity instrumentsissued, using the Black-Scholes option-pricing model, whichever can be more reliably measured. Compensation expense foroptions granted to non-employees is periodically remeasured as the underlying options vest.Income TaxesThe Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets andliabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilitiesand are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. TheCompany must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance isprovided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will besustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely thannot to be realized upon the ultimate settlement. The Company’s policy is to recognize interest and penalties related to theunderpayment of income taxes as a component of income tax expense or benefit. The Company does not have anyunrecognized tax benefits.Net Loss per Common ShareBasic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares ofcommon stock outstanding for the period less shares subject to repurchase, without consideration of potentially dilutivesecurities. Diluted net loss per common share is the same as basic net loss per common share since the effect of potentiallydilutive securities is anti-dilutive.Prior Period ReclassificationsCertain amounts in the prior period have been reclassified to conform with current period presentation. There was noimpact on total revenue or net loss for the prior period.60 Table of ContentsRecently Adopted Pronouncements ASU No. 2014-09, Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)No. 2014‑09, Revenue from Contracts with Customers (Topic 606). Areas of revenue recognition that will be affectedinclude, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value ofmoney, contract costs and disclosures. The new standard permits adoption either by using (i) a full retrospective approach forall periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initiallyapplying the new standard recognized at the date of initial application and providing certain additional disclosures. The newstandard is effective for annual reporting periods beginning after December 15, 2017. The Company adopted this standard onJanuary 1, 2018 using the modified retrospective method. The Company recognized the cumulative effect of initiallyapplying the new revenue standard as an adjustment to the opening balance of its accumulated deficit. The comparativeinformation has not been restated and continues to be reported under the accounting standards in effect for those periods.Topic 606 permits the application of certain practical expedients. The Company’s billing practices approximate theCompany’s performance as measured by an output method, where each output represents the completion of a performanceobligation. Accordingly, the Company utilizes the invoice practical expedient as defined in Topic 606, resulting inrecognition of revenue in the amount that the Company has the right to invoice.Unsatisfied performance obligations primarily represent contracts for products with future delivery dates and with anoriginal expected duration of one year or less. As allowed under Topic 606, the Company has opted to not disclose theamount of unsatisfied performance obligations as these contracts have original expected durations of less than one year.The Company incurs direct and incremental costs of obtaining contracts and such costs are expensed as incurred, as thelife of the underlying contract is less than one year. Accordingly, the Company has concluded, based on the structure of itscontracts, no adjustments are necessary under Topic 606.As a result of the adoption of the new standard, the Company changed its accounting policy for revenue recognitionand the details of the significant changes and quantitative impact of the changes are disclosed below. Distributor sales – Some of the Company's contracts with distributors provide the distributor with certainconcessions and price protection credits. Under Topic 605, Revenue, these concessions and price protection creditswere not fixed or determinable and, as a result, the associated revenue was deferred until delivery of the product tothe end customer. At the time of shipment to distributors, the Company recorded a trade receivable for the sellingprice as there was a legally enforceable obligation of the distributor to pay for the product delivered, inventory wasreduced by the carrying value of goods shipped, and the net of these amounts, the gross profit, was recorded asdeferred income on shipments to distributors on the balance sheet. Under Topic 606, the Company recognizesrevenue from sales to distributors when control of the product is transferred to the distributor and estimates theamount of the concessions and price protection credits at the point of revenue recognition. Accordingly, the balanceof the deferred income on shipments to distributors was eliminated as a cumulative effect adjustment ofimplementing Topic 606 as of January 1, 2018, net of the Company’s estimate of concessions and price protectioncredits for those contracts.Performance obligations delivered over time – Topic 605 permitted straight-line recognition of revenue forperformance obligations that were delivered over time. The new revenue standard requires an entity to recognizerevenue based on the pattern of transfer of the services. Entities must use either an input method or an outputmethod to measure progress toward complete satisfaction of a performance obligation. The Company determinedthat the input method of measuring time elapsed to date compared to total estimated time to be incurred under thecontract most faithfully depicts its performance. Under Topic 606, the Company will record an unbilled receivable(within accounts receivable, net) for the portion of the service that has been completed but not invoiced at the endof each reporting period.61 Table of ContentsMilestone payments – Topic 605 permitted recognition using the milestone method, whereby revenue wasrecognized upon the completion of substantive milestones once the customers acknowledge the milestones havebeen met and the collection of the amounts is reasonably assured. The milestone method no longer exists under thenew revenue standard. Revenue from milestone payments must be estimated using either the expected value methodor the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur,the associated milestone value is included in the transaction price. The adoption of Topic 606 did not have animpact on milestone revenue recorded to date as the practical expedient adopted for a single contract resulted inrevenue recognition similar to milestone revenue under Topic 605.Sales-based royalties – Topic 605 permitted recognition of royalties when reported to the Company, whichgenerally coincided with the receipt of payment. Under the new revenue standard, revenue generated from sales-based royalties from licenses of technology are recognized at the later of when (1) the sale occurs or (2) theperformance obligation to which some or all of the sales-based royalty has been allocated is satisfied (in whole or inpart).There was no impact to the recognition of revenue for non-refundable, up-front payments for licenses of theCompany’s technology, which occurs when the license is transferred to the customer and there are no otherperformance obligations.The change in revenue recognition upon adoption of Topic 606 resulted in a decrease in the accumulated deficit balanceof $1.3 million on January 1, 2018.The following table summarizes the impact of adopting Topic 606 on select balance sheet line items (in thousands): Balances without the adoption ofDecember 31, 2018 As reported Adjustments Topic 606Accounts receivable, net $7,522 $(1,211) $6,311Inventory 9,097 190 9,287Total current assets 40,686 (1,021) 39,665Total assets 45,045 (1,021) 44,024Deferred income on shipments to distributors — 3,017 3,017Total current liabilities 13,615 3,017 16,632Total liabilities 20,124 3,017 23,141Accumulated deficit (133,993) (4,038) (138,031)Total liabilities and stockholders’ equity 45,045 (1,021) 44,024 The following table summarizes the impact of adopting Topic 606 on select statement of operations line items (inthousands, except per share data): Results without the adoption ofYear Ended December 31, 2018 As reported Adjustments Topic 606Product sales $39,514 $(2,915) $36,599Licensing, royalty, and other revenue 9,903 (577) 9,326Total revenue 49,417 (3,492) 45,925Cost of sales 24,083 (754) 23,329Gross profit 25,334 (2,738) 22,596Loss from operations (17,321) (2,738) (20,059)Net loss and comprehensive loss (17,754) (2,738) (20,492)Net loss per common share, basic and diluted (1.08) (0.17) (1.25) The adoption had no impact to cash used in operating, investing or financing activities in the statement of cash flows. 62 Table of ContentsASU No. 2017-09, Compensation-Stock Compensation In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) Scope ofModification Accounting, which is intended to amend the scope of modification accounting for share-based paymentarrangements. The amendments in the update provide guidance on types of changes to the terms or conditions of share-basedpayment awards that would require the Company to apply modification accounting under ASC 718, Compensation-StockCompensation. This ASU is effective for annual reporting periods beginning after December 15, 2017, and early adoptionwas permitted. The Company adopted this standard on January 1, 2018, and the impact of its adoption on the Company’sfinancial statements was not material.ASU No. 2016-15, Statement of Cash FlowsIn August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of CertainCash Receipts and Cash Payments. ASU 2016-15 identifies how certain cash receipts and cash payments are presented andclassified in the Statement of Cash Flows. The standard is effective for fiscal years and interim periods beginning afterDecember 15, 2017. The standard should be applied retrospectively and early adoption was permitted, including adoption inan interim period. The Company adopted this standard on January 1, 2018, and the impact of its adoption on the Company’sfinancial statements was not material.Recently Issued PronouncementsIn February 2016, the FASB issued ASU No. 2016‑02, Leases, which establishes a comprehensive new lease accountingmodel. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar tocurrent lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with acorresponding right-of-use asset for leases with a lease-term of more than twelve months. This ASU is effective for fiscal yearsand interim periods within those years beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10,Codification Improvements to Topic 842 Leases and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements. ASU2018-10 clarifies how to apply certain aspects of ASU 2016-02. The Company will adopt this standard on January 1, 2019using the modified retrospective method. The Company is substantially complete with its analysis as to the impact ofadoption and estimates that the adoption will result in the recognition of right-of-use assets and lease liabilities for operatingleases within the range of approximately $3.6 million to $4.0 million on its balance sheet, with no material impact to itsstatement of operations.In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement ofCredit Losses on Financial Instruments, which amends the incurred loss impairment methodology in current GAAP with amethodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportableinformation to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods withinthose years, beginning after December 15, 2019, and requires a cumulative effect adjustment to the balance sheet as of thebeginning of the first reporting period in which the guidance is effective. The Company is evaluating the impact of theadoption of ASU 2016-13 on its financial statements. In June 2018, the FASB issued ASU No. 2018‑07, Compensation-Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and toimprove financial reporting for nonemployee share based payment. The ASU expands the scope of Topic 718, (whichcurrently only includes share-based payments to employees) to include share-based payments issued to nonemployees forgoods or services. Consequently, the accounting for share-based payments to nonemployees and employees will besubstantially aligned. The standard is effective for fiscal years beginning after December 15, 2018, including interim periodswithin that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606. TheCompany adopted this standard on January 1, 2019, and the impact of its adoption on the Company’s financial statementswas not material.In August 2018, the Securities and Exchange Commission (SEC) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative,overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis ofstockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption ofstockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis shouldpresent a reconciliation of the beginning balance to the ending balance of each period for which a63 Table of Contentsstatement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018, however in lightof the proximity of the effective date to the filing date for most filers’ quarterly reports, the SEC will allow a filer’s firstpresentation of the changes in stockholders’ equity to be included in its Form 10-Q for the quarter that begins after theeffective date. The Company will begin to present a statement of changes in stockholders’ equity in its quarterly financialstatements beginning on January 1, 2019. 3. RevenueThe Company sells the majority of its products to its distributors, but does recognize some revenue under licensing androyalty agreements. The following table presents the Company’s revenues disaggregated by sales channel, (in thousands): Year Ended December 31, 2018Distributor$35,126Non-distributor 14,291Total revenue$49,417 The following table presents the Company’s revenues disaggregated by timing of recognition (in thousands): Year Ended December 31, 2018Point in time$45,102Over time 4,315Total revenue$49,417 The following table presents the Company’s revenues disaggregated by type (in thousands): Year Ended December 31, 2018Product sales$39,514License fees 5,000Royalties 588Other revenue 4,315Total revenue$49,417 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 thegeographic region to which the product is delivered or licensee is located (in thousands): Year Ended December 31, 2018North America$9,124EMEA 11,175APJ 29,118Total revenue$49,417 64 Table of Contents4. Balance Sheet ComponentsInventoryInventory consisted of the following (in thousands): December 31, 2018 2017Raw materials $288 $682Work-in-process 6,759 7,970Finished goods 2,050 1,185Total inventory $9,097 $9,837 Property and Equipment, NetProperty and equipment, net consisted of the following (in thousands): December 31, 2018 2017Manufacturing equipment $11,723 $10,465Computer and network equipment 820 710Furniture and fixtures 110 218Software 680 455Leasehold improvements 1,432 1,474Total property and equipment, gross 14,765 13,322Less: accumulated depreciation (10,479) (9,376)Total property and equipment, net $4,286 $3,946 Depreciation and amortization expense during the years ended December 31, 2018 and 2017 was $1.5 million and $1.2million, respectively.Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands): December 31, 2018 2017Accrued payroll-related expenses $1,558 $1,331Accrued joint development agreement expenses 661 749Accrued inventory 1,678 897Deferred rent 390 230Accrued sales commissions payable to sales representatives 51 75Other 663 466Total accrued liabilities $5,001 $3,748 5. Commitments and ContingenciesOperating LeasesDuring 2017, the Company entered into a lease for 27,974 square feet of office space for its corporate headquarterslocated in Chandler, Arizona. The lease expires in January 2022, however the Company has the option to renew the leasethrough August 2024. Rent expense is recognized on a straight-line basis over the term of the leases and, accordingly, theCompany records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability.In April 2018, the Company entered into a lease termination agreement that released the Company from any furtherobligations on its previous headquarters’ space in Chandler, Arizona. The remaining unamortized balance of deferred65 Table of Contentsrent of $18,000 was written off and a lease termination fee of $43,000 was recognized as rent expense on the statement ofoperations and comprehensive loss.The Company leases office and lab space for its design facility located in Austin, Texas. The lease expires in January2022.The Company has another operating lease for its Arizona manufacturing facility, which includes office and fabricationspace. This lease is cancellable upon 24 months’ notice by either of the parties. In March 2017, the Company amended thepremises covered to remove laboratory space, decrease fabrication space and expand office space. In October 2017, theCompany extended the lease through January 31, 2020, which could be further extended through January 31, 2021 if anoption to extend is initiated by the lessor. In August 2018, the Company amended its lease agreement for its Arizonamanufacturing facility to extend the lease term through January 2021. The following is a schedule of minimum rental commitments under the Company’s operating leases at December 31,2018 (in thousands):Year Ending December 31, Amount2019 $1,6452020 1,7012021 8462022 472023 —Thereafter —Total minimum lease payments $4,239 Total rent expense was $1.6 million and $1.4 million for the years ended December 31, 2018 and 2017, respectively.Legal ProceedingsFrom time to time, the Company may become involved in legal proceedings arising from the ordinary course of itsbusiness. Management is currently not aware of any matters that it expects will have a material adverse effect on the financialposition, results of operations or cash flows of the Company.IndemnificationsIn the ordinary course of business, the Company enters into agreements that may include indemnification provisions.Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses sufferedor incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. Insome cases, the indemnification will continue after the termination of the agreement. The maximum potential amount offuture payments the Company could be required to make under these provisions is not determinable. The Company has neverincurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has alsoentered into indemnification agreements with its directors and officers that may require the Company to indemnify itsdirectors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullestextent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance.6. Debt and Related WarrantsPrior FacilitiesIn June 2015, the Company executed a Loan and Security Agreement with Ares Venture Finance (2015 CreditFacility) comprising an $8.0 million term loan and a $4.0 million revolving loan. In April 2017, the Company repaid theoutstanding balance of $1.1 million on the revolving loan at which time the unamortized balance of the debt discount of$10,000 was recognized as a loss on extinguishment of debt. In May 2017, the Company repaid the outstanding principalbalance of $6.2 million on the term loan at which time the unamortized balance of the debt discount was $175,000, and66 Table of Contentspaid a prepayment penalty of $61,000. The unamortized debt discount balance and the prepayment penalty were recognizedas a loss on extinguishment of debt in the statements of operations and comprehensive loss.2017 Credit FacilityOn May 4, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (2017 CreditFacility) for a $12.0 million term loan. The term loan provided for interest at a floating rate equal to the prime rate minus0.75%. The term loan provided for a period of interest-only payments through April 30, 2018, followed by fixed principaland interest payments based on either a 24-month amortization schedule or a 36-month amortization schedule if theCompany met certain sales milestones. As of December 31, 2017, the Company determined it would not meet the salesmilestones and as such the term loan was based on a 24-month amortization schedule. An end of term fee of 6% of theamount borrowed must be made when the loan is prepaid or repaid, whether at maturity or as a result of a prepayment oracceleration or otherwise. On July 6, 2018, the Company entered into the First Amendment to the 2017 Credit Facility (the Amended CreditFacility). The Amended Credit Facility extends the period of interest-only payments through December 31, 2018, followedby fixed principal and interest payments based on either a 24-month or a 36-month amortization schedule if the Companyachieves certain milestones. The Company determined it would not meet the milestones, as such the Amended Credit Facilityis based on a 24-month amortization schedule. The Amended Credit Facility provides for interest at a floating rate equal tothe prime rate minus 0.75%. As of December 31, 2018, the interest rate was 4.75%. The terms of the Amended Credit Facilityinclude the refund of $1.0 million in principal payments previously made by the Company. An end of term fee of 7% of theamount borrowed must be made when the loan is prepaid or repaid, whether at maturity or as a result of a prepayment oracceleration or otherwise. The additional payment is being accreted using the effective interest method. As of December 31,2018, the effective interest rate under the Amended Credit Facility was 7.77%. Borrowings under the Amended CreditFacility mature in December 2020. Security for the Amended Credit Facility includes all of the Company’s assets except for intellectual property. TheCompany is required to comply with certain covenants under the Amended Credit Facility, including requirements tomaintain a minimum liquidity ratio, meet certain revenue targets, and restrictions on certain actions without the consent ofthe lender, such as limitations on its ability to engage in mergers or acquisitions, sell assets, enter into transactions involvingrelated parties, incur indebtedness or grant liens or negative pledges on its assets, make loans or make other investments.Under these covenants, the Company is prohibited from paying cash dividends with respect to its capital stock. TheCompany was in compliance with all covenants at December 31, 2018. The Amended Credit Facility contains a materialadverse effect clause which provides that an event of default will occur if, among other triggers, an event occurs that couldreasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on theCompany’s ability to perform its obligations under the term loan. As of December 31, 2018, management believes that it isremote that the clause will be triggered within the next twelve months, and therefore the term loan is classified as long-term. The carrying value of the Company’s Amended Credit Facility at December 31, 2018, was as follows (in thousands): Current Long-Term Portion Debt TotalCredit Facility $6,000 $6,840 $12,840Unamortized debt discounts (33) (341) (374)Net carrying value $5,967 $6,499 $12,466 The carrying value of the Company’s 2017 Credit Facility at December 31, 2017, was as follows (in thousands): Current Long-Term Portion Debt TotalCredit Facility $4,000 $8,720 $12,720Unamortized debt discounts (23) (563) (586)Net carrying value $3,977 $8,157 $12,134 67 Table of ContentsThe table below includes the principal repayments due under the Amended Credit Facility as of December 31, 2018 (inthousands): Principal Repayment as ofDecember 31, 20182019 $6,0002020 6,8402021 —2022 —2023 —Total principal repayments $12,840 Capital Lease ObligationsThe Company leases certain equipment under capital lease obligations expiring in October 2020. The balance of thecapital lease obligations was $20,000 and $31,000 at December 31, 2018 and 2017, respectively.Property and equipment under capital leases amounted to $31,000 at December 31, 2018 and 2017.Accumulated depreciation and amortization on these assets was $13,000 and $2,000 at December 31, 2018and 2017, respectively.Future minimum rental commitments under the Company’s capital lease obligations are $10,000 for each of the yearsended December 31, 2019 and 2020.7. Stockholders’ EquityCommon StockCommon stockholders are entitled to dividends if and when declared by the board of directors. As of December 31,2018, no dividends on common stock had been declared by the board of directors.In February 2018, the Company completed a follow-on underwritten public offering of its common stock under itsRegistration Statement filed in November 2017 (File No. 333-221331), selling 3,772,447 shares of its common stock at anoffering price of $7.00 per share for proceeds of $24.5 million, net of $1.9 million of underwriting discounts andcommissions and other offering costs. The Company had reserved shares of common stock for future issuance as follows: December 31, 2018 2017Options issued and outstanding 1,475,299 1,593,195Shares available for future option grants 764,145 83,929RSUs subject to future vesting 93,560 30,680Common stock warrants 27,836 27,690Total 2,360,840 1,735,494 WarrantsIn connection with a credit facility, Silicon Valley Bank held warrants to purchase 9,229 shares of the Company’scommon stock at an exercise price of $26.00 per share. These warrants were cancelled when the Company entered into theAmended Credit Facility (see Note 6) and the Company subsequently issued a warrant to SVB for the purchase of 9,375shares of the Company’s common stock at an exercise price of $8.91 per share. The warrant can be exercised at any time andexpires five years after the date of issuance. The Company estimated the fair value of the warrant as $43,000 on the date ofissuance using the Black-Scholes option pricing model. The warrant was recorded as a discount to the debt and will beamortized into interest expense over the remaining term of the loan using the effective interest method.68 Table of ContentsIn connection with the 2015 Credit Facility, Ares Venture Finance holds a warrant to purchase 18,461 shares of theCompany’s common stock at an exercise price of $26.00 per share. The warrant can be exercised at any time and expires10 years after the date of issuance.8. Stock-Based Compensation2016 Employee Incentive PlanThe Company’s board of directors adopted the 2016 Equity Incentive Plan (the 2016 Plan) on April 25, 2016, whichwas subsequently approved on September 20, 2016 by the Company’s stockholders. The 2016 Plan became effective onOctober 7, 2016, the date the Company’s registration statement was declared effective by the SEC.The Company’s 2016 Plan provides for the grant of incentive stock options, nonstatutory stock options, stockappreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms ofequity compensation to employees, directors and consultants. In addition, the Company’s 2016 Plan provides for the grant ofperformance cash awards to employees, directors and consultants.The maximum number of shares of common stock that may be issued under the Company’s 2016 Plan is 500,000subject to an automatic increase on January 1 of each year, beginning on January 1, 2017, and continuing through andincluding January 1, 2026, by 3% of the total number of shares of capital stock outstanding on December 31 of the precedingcalendar year, or a lesser number of shares determined by the Company’s board of directors.2008 Employee Incentive PlanThe 2008 Equity Incentive Plan (the 2008 Plan) provided for the issuance of incentive stock options (ISO),nonqualified stock options, and other stock compensation awards. Under the terms of the 2008 Plan, the exercise price of anISO shall be not less than 100% of the fair value of the stock at the date of grant, as determined by the board of directors, or inthe case of certain ISOs, at 110% of the fair market value at the date of grant.The term and vesting periods for options granted under the 2008 Plan were determined by the Company’s board ofdirectors. Options granted generally vest over four years. Options must be exercised within a 10‑year period or sooner if sospecified within the option agreement.No further grants will be made under the Company’s 2008 Plan. However, any outstanding stock awards granted underthe 2008 Plan will remain outstanding, subject to the terms of the Company’s 2008 Plan and the applicable stock awardagreements, until such outstanding stock awards that are stock options are exercised or until they terminate or expire by theirterms, or until such stock awards are fully settled, terminated or forfeited. At December 31, 2018, 407,780 options under the2008 Plan remained outstanding.69 Table of ContentsSummary of Stock Option ActivityThe following table summarizes the stock option and award activity for all grants under the 2008 Plan and 2016 Plan: Options Outstanding Weighted- Weighted- Options and Average Average Awards Exercise Remaining Aggregate Available for Number of Price Per Contractual Intrinsic Grant Options Share Life (years) Value (In thousands)Balance—December 31, 2017 83,929 1,593,195 $8.88 6.6 $1,997Immaterial prior period adjustment (1,026) 11,477 4.84 Authorized 1,084,516 — — RSUs granted (80,950) — — RSUs cancelled/forfeited 3,000 — — Options granted (434,665) 434,665 8.52 Options exercised — (448,411) 4.99 $1,915Options cancelled/forfeited 109,341 (115,627) 8.68 Balance—December 31, 2018 764,145 1,475,299 $7.60 7.8 $284Options exercisable—December 31, 2018 617,718 $6.79 6.4 $276 During the years ended December 31, 2018 and 2017, the Company granted options with a weighted-average grant datefair value of $4.45 and $6.48 per share, respectively.The total fair value of options vested during the year was $1.9 million and $1.5 million, for the years endedDecember 31, 2018, and 2017, respectively.2016 Employee Stock Purchase PlanThe Company’s board of directors adopted the 2016 Employee Stock Purchase Plan (the ESPP) on April 25, 2016,which was subsequently approved on September 20, 2016 by the Company’s stockholders. The purpose of the ESPP is tosecure the services of new employees, to retain the services of existing employees and to provide incentives for suchindividuals to exert maximum efforts toward the Company’s success and that of the Company’s affiliates. The ESPP isintended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. The board ofdirectors, or a duly authorized committee thereof, will administer the Company’s ESPP.The maximum aggregate number of shares of common stock that may be issued pursuant to the exercise of purchaserights under the Company’s ESPP that are granted to employees or to employees of any of the Company’s designatedaffiliates is 96,153 shares, subject to annual increases. The number of shares of common stock reserved for issuance under theCompany’s ESPP will increase automatically each year, beginning on January 1, 2017, and continuing through andincluding January 1, 2026, by 1% of the total number of shares of common stock outstanding on December 31 of thepreceding calendar year, or a lesser number as determined by the board of directors. In 2018 and 2017, there was an increaseof 128,172 and 124,981 shares, respectively, reserved for issuance under the Company’s ESPP due to this provision. Sharessubject to purchase rights granted under the Company’s ESPP that terminate without having been exercised in full will notreduce the number of shares available for issuance under the Company’s ESPP. There are two offering periods each year andeach offering under the ESPP will consist of two purchase periods of approximately six months in duration and will runconcurrently. The Company had 269,389 shares available for issuance under the Company’s ESPP as of December 31, 2018.Employees purchased 42,327 shares for $266,000 during the year ended December 31, 2018 and 37,590 shares for $256,000during the year ended December 31, 2017.70 Table of ContentsThe following table summarizes the assumptions used in the Black-Scholes option-pricing model to determine fairvalue of the Company’s common shares issued under the ESPP: Year Ended December 31, 2018 2017 Expected volatility 59.5 – 87.8% 49.3 – 72.7% Risk-free interest rate 0.94 – 2.11% 0.49 – 1.02% Expected term (in years) 0.5 – 1.0 0.5 – 1.0 Dividend yield —% —% Modification of Stock-Based AwardsIn February 2018, the Company modified the terms of 400,000 vested and unvested stock option awards granted tothe Chief Executive Officer, by reducing their exercise price from $16.25 per share to $7.64 per share. There was no change toany of the other terms of the option awards. The modification resulted in an incremental value of $600,000 being allocated tothe options, of which $63,000 was recognized to expense immediately based on options that were vested at the time of themodification. The remaining incremental value of $537,000 attributable to unvested options will be recognized over theremaining vesting term through September 2021. In August 2017, the Company entered into a Separation Agreement with its former Chief Executive Officer whichresulted in the acceleration in the vesting of certain unvested stock options as well as the extension of the exercise period forall vested options. As a result of the modification, the Company recorded stock-based compensation expense of $310,000during the year ended December 31, 2017 to reflect the revised service period for the stock options and related vesting ofshares that would otherwise not have vested. Restricted Stock UnitsIn September 2017, the Company’s board of directors authorized the issuance of Restricted Stock Units (RSUs), underthe 2016 Plan and adopted a form of Restricted Stock Unit Award Agreement, which is intended to serve as a standard formagreement for RSU grants issued to employees, executive officers, directors and consultants. The fair value of the RSUs isrecognized as expense ratably over the vesting period, as determined by the board of directors on the date of grant.The following table summarizes RSU activity for the year ended December 31, 2018: RSUs Outstanding Weighted- Average Number of Grant Date RestrictedStock FairValue Per Units ShareBalance—December 31, 2017 30,680 $10.55Granted 80,950 8.48Vested (15,070) 13.41Cancelled/forfeited (3,000) 8.10Balance—December 31, 2018 93,560 $8.38 The fair value of RSUs is determined on the date of grant based on the market price of the Company’s common stock onthat date. As of December 31, 2018, there was $594,000 of unrecognized stock-based compensation expense related to RSUsto be recognized over a weighted-average period of 2.7 years.71 Table of ContentsStock-based Compensation ExpenseThe Company recognized stock-based compensation expense from awards granted to employees and non-employeesunder its equity incentive plans and from its ESPP as follows, excluding amounts related to GLOBALFOUNDRIES, Inc. (GF)(in thousands): Year EndedDecember 31, 2018 2017Research and development $492 $488General and administrative 1,811 1,297Sales and marketing 365 263Total $2,668 $2,048 As of December 31, 2018, there was $4.8 million of total unrecognized compensation expense related to unvestedoptions which the Company expects recognize over a weighted-average period of 2.7 years. Compensation cost capitalizedwithin inventory at December 31, 2018 and 2017 was not material.Employee Stock-based CompensationStock-based compensation expense for employees was $2.6 million and $2.0 million, for the years ended December 31,2018 and 2017, respectively.The Company estimated the fair value of each option grant using the Black-Scholes option-pricing model. The fairvalue of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards.The fair value of employee stock options was estimated using the assumptions below. Year Ended December 31, 2018 2017 Expected volatility 51.9 – 56.6% 46.7 – 52.0% Risk-free interest rate 2.64 - 2.94% 1.85 - 2.14% Expected term (in years) 5.7 – 6.1 5.3 – 6.1 Dividend yield —% —% Expected volatility. Since the Company does not have a sufficient trading history for its common stock, the expectedvolatility was derived from the average historical volatilities of publicly traded companies within a similar industry that areconsidered to be comparable to the Company’s business over a period approximately equal to the expected term foremployees’ options.Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield with a maturity equal to theexpected term of the option in effect at the time of grant.Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. TheCompany used the simplified method to determine the expected term, which is calculated as the average of the time tovesting and the contractual life of the options.Dividend yield. The Company has never paid dividends on its common stock and is prohibited from paying dividendson its common stock. Therefore, the Company used an expected dividend yield of zero.Non-employee Stock-based CompensationStock-based compensation expense related to stock options granted to non-employees is recognized as the stockoptions vest. During the year ended December 31, 2018, the Company granted options to purchase 8,400 shares of commonstock to non-employees with a weighted-average exercise price of $8.91 per share. During the year ended December 31,2017, the Company granted options to purchase 16,800 shares of common stock to non-employees with a weighted-averageexercise price of $13.74 per share. 72 Table of ContentsOptions to purchase 43,865 shares and 37,872 shares of common stock were outstanding with a weighted-averageexercise price of $9.25 and $9.16 per share as of December 31, 2018 and 2017, respectively. Stock-based compensationexpense for non-employees was $31,000 and $69,000 for the years ended December 31, 2018 and 2017, respectively.The Company believes that the fair value of the stock options is more reliably measurable than the fair value of servicesreceived. The fair value of the stock options granted is calculated at each reporting date using the Black-Scholes optionpricing model with the following assumptions: Year Ended December 31, 2018 2017 Expected volatility 52.9 – 54.8%46.7 – 60.5%Risk-free interest rate 2.68 - 2.97%2.09 – 2.44%Expected term (in years) 8.0 – 8.8 7.2 – 9.6 Dividend yield —% —%9. 401(k) PlanThe Company has a defined contribution employee benefit plan pursuant to Section 401(k) of the Internal RevenueCode. The plan allows eligible employees to defer a portion of their annual compensation up to certain statutory limits. Atthe election of the Board of Directors, the Company may elect to match employee contributions but has not done so to date.10. Significant AgreementsGLOBALFOUNDRIES, Inc. Joint Development AgreementOn October 17, 2014, the Company entered into a Joint Development Agreement (JDA) with GF for the jointdevelopment of the Company’s Spin Transfer Torque MRAM (STT-MRAM) technology. The term of the agreement is thelater of four years from the effective date or until the completion, termination or expiration of the last statement of workentered into pursuant to the JDA. The JDA also states that the specific terms and conditions for the production and supply ofthe developed STT-MRAM technology would be pursuant to a separate manufacturing agreement entered into between theparties. In October 2018, the Company entered into the Third Amendment to the JDA with GF, which extended the term ofthe JDA until December 2019.Under the JDA, each party licenses its relevant intellectual property to the other party. For certain jointly developedworks, the parties have agreed to follow an invention allocation procedure to determine ownership. In addition, GF possessesthe exclusive right to manufacture the Company’s discrete and embedded STT-MRAM devices developed pursuant to theagreement until the earlier of three years after the qualification of the MRAM device for a particular technology node orfour years after the completion of the relevant statement of work under which the device was developed. For the sameexclusivity period associated with the relevant device, GF agreed not to license intellectual property developed inconnection 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 transfers tocustomers wafers containing production quantified STT-MRAM devices that utilize certain design information, GF will berequired to pay the Company a royalty.The Company incurred project costs, recognized as research and development expense, of $5.8 million and $5.2 millionduring the years ended December 31, 2018 and 2017, respectively. 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 Companyis entitled to revenues under the SOW and its Amendment upon delivery and acceptance of product. The Companyrecognized revenue from GF of $1.0 million and $1.6 million for the year ended December 31, 2018 and 2017 respectively.On October 21, 2014, GF participated, along with other investors, in the Company’s Series B redeemable convertiblepreferred stock financing and purchased 192,307 shares at $26.00 per share. Contemporaneously, the Company sold 461,538shares of its common stock to GF at a discounted price of $0.00026 per share. The common73 Table of Contentsshares vest upon the achievement of a goal as set forth in the Statement of Work #1 (the SOW) under the JDA. The Companyhas determined that the issuance of these shares of common stock to GF represents compensation for services to be providedunder the JDA. Accordingly, the shares are accounted for similar to a stock award granted to a non-employee of the Companyand are remeasured to their fair value as they vest. A total of 211,538 shares of common stock became vested on August 21,2016, the designated Initial Measurement Date. The remaining shares vest on a monthly basis thereafter through October 21,2018. As of December 31, 2018, all shares issued to GF were fully vested.During the years ended December 31, 2018 and 2017, the Company recognized non-cash compensation expense of$0.8 million and $1.5 million, respectively, in research and development expense, related to the vesting of the shares ofcommon stock.Silterra Malaysia Sdn. Bhd. Joint Collaboration Agreement In September 2018, the Company entered into a Joint Collaboration Agreement (JCA) with Silterra Malaysia Sdn. Bhd.(Silterra), and another third party. The JCA will create additional manufacturing capacity for the Company’s Toggle MRAMproducts. Initial production is expected to start in 2020. Under the JCA the Company will pay non-recurring engineeringcosts of $1.0 million. During the year ended December 31, 2018, the Company paid $0.8 million of JCA costs.License Agreement In March 2018, the Company entered into a global cross-license agreement with a customer pursuant to which theCompany granted a worldwide, non-exclusive, non-transferable, irrevocable, royalty-bearing license under the Company’spatents to use, sell, import and export the Company’s products. Under the cross-license agreement, the Company received anon-refundable license fee and is entitled to quarterly royalty payments based upon low single digits of the average sellingprice of products covered under the license agreement. The license was transferred to the customer and the Companyrecognized revenue related to the non-refundable license fee during the year ended December 31, 2018. The cross-licenseagreement will remain in effect until the licensed patents have expired, been abandoned, or ruled invalid.11. Geographic InformationProperty and equipment, net by country was as follows (in thousands): December 31, 2018 2017United States $2,714 $2,594Singapore 912 696Taiwan 258 656Other 402 — $4,286 $3,946 Revenue from customers is designated based on the geographic region or country to which the product is delivered orlicensee is located. Revenue by country was as follows (in thousands): Year Ended December 31, 2018 2017Japan $10,254 $4,128Germany 6,724 2,964United States 6,746 4,759China 5,083 2,588Singapore 3,818 8,067All other 16,792 13,430Total revenue $49,417 $35,93674 Table of Contents12. Income TaxesFor the years ended December 31, 2018 and 2017, the Company recorded no provision or benefit for income taxesprimarily due to losses incurred. The Company has incurred net operating losses for all the periods presented.The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows: Year EndedDecember 31, 2018 2017 Tax at statutory federal rate (21.0)% (34.0)% State taxes, net of federal benefit (1.7) (1.4) Stock-based compensation 1.5 (0.8) Nondeductible executive compensation 0.9 — Change in valuation allowance 20.6 (34.2) Federal tax rate change — 70.2 Other (0.3) 0.2 Provision for income taxes (0.0)% (0.0)% The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assetsare as follows (in thousands): December 31, 2018 2017Deferred tax assets: Net operating loss carryforwards $25,359 $22,586Inventory 1,442 1,520Accruals 760 401Depreciation and amortization 88 60Limitation on business interest 96 —Stock-based compensation 1,416 1,228Gross deferred tax assets 29,161 25,795Valuation allowance (29,073) (25,721)Deferred tax assets 88 74Deferred tax liabilities: Prepaid expenses (88) (74)Deferred tax liabilities (88) (74)Net deferred tax assets $ — $ — The Company is required to reduce its deferred tax assets by a valuation allowance if it is more likely than not thatsome or all of its deferred tax assets will not be realized. Management must use judgment in assessing the potential need for avaluation allowance, which requires an evaluation of both negative and positive evidence. The weight given to the potentialeffect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. Indetermining the need for and amount of the valuation allowance, if any, the Company assesses the likelihood that it will beable to recover its deferred tax assets using historical levels of income, estimates of future income and tax planning strategies.As a result of historical cumulative losses, the Company determined that, based on all available evidence, there wassubstantial uncertainty as to whether it will recover recorded net deferred taxes in future periods. Accordingly, the Companyrecorded a valuation allowance against all of its net deferred tax assets as of December 31, 2018 and 2017. In 2018, there wasno utilization of the valuation allowance and the net valuation allowance increased by $3.4 million. In 2017, the valuationallowance decreased by $7.1 million, from the December 31, 2016 balance of $32.8 million, due to the Tax Cuts and JobsAct, which was enacted in December 2017 and reduced the corporate tax rate from 34% to 21%. The rate reduction tookeffect on January 1, 2018. The carrying value of the Company’s deferred tax assets is also determined by the enacted UScorporate income tax rate.As of December 31, 2018, the Company had federal net operating loss carryforwards of approximately $112.3 million,of which $99.7 million will begin to expire in the year of 2028 if not utilized, and $12.6 million will carryover indefinitely.In addition, the Company had state net operating loss carryforwards of approximately $44.3 million, of which $43.5 millionwill begin to expire in 2023 if not utilized, and $0.8 million will carryover indefinitely.75 Table of ContentsThe Tax Reform Act of 1986 (the Act) provides for a limitation on the annual use of net operating loss and research anddevelopment tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit theCompany’s ability to utilize these carryforwards.The Company files income tax returns in the U.S. federal and various state jurisdictions. The Company is subject to U.S.federal and state income tax examinations by authorities for all tax years beginning in 2008, due to the accumulated netoperating losses that are being carried forward for tax purposes. The Company has not identified any unrecognized tax benefits as of December 31, 2018 and 2017. As the Companyhas a full valuation allowance on its deferred tax assets, any unrecognized tax benefits would reduce the deferred tax assetsand the valuation allowance in the same amount. The Company does not expect the amount of unrecognized tax benefits tomaterially change in the next twelve months.13. Net Loss Per Common ShareThe following table sets forth the computation of basic and diluted net loss per share (in thousands, except share andper share amounts): Year Ended December 31, 2018 2017Numerator: Net loss $(17,754) $(21,100)Denominator: Weighted-average common shares outstanding 16,413,733 12,640,094Less: weighted-average unvested common shares subjected torepurchase (41,095) (155,110)Weighted-average common shares outstanding used tocalculate net loss per common share, basic and diluted 16,372,638 12,484,984Net loss per common share, basic and diluted $(1.08) $(1.69) The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss percommon share for the periods presented, because their inclusion would be anti-dilutive: Year Ended December 31, 2018 2017Options to purchase common stock 1,475,299 1,593,195Restricted stock units 93,560 30,680Common stock subject to repurchase — 96,153Common stock warrants 27,836 27,690Total 1,596,695 1,747,71876 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None. Item 9A. Controls and Procedures.Evaluation of disclosure controls and procedures.Our management, with the participation of our management team, including our Chief Executive Officer (CEO) andChief Financial Officer (CFO) evaluated the effectiveness of the design and operation of our disclosure controls andprocedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934, as amended) as ofDecember 31, 2018.Based on this evaluation, our CEO and CFO concluded that, our disclosure controls and procedures were not effectiveat the reasonable assurance level as of December 31, 2018, based on the material weakness described below.Management’s Annual Report on Internal Control Over Financial Reporting This Annual Report on Form 10-K includes a report of management’s assessment regarding internal control overfinancial reporting. This Annual Report on Form 10-K does not include an attestation report of our independent registeredpublic accounting firm because, as an “emerging growth company” under the JOBS Act, our independent registered publicaccounting firm is not required to issue such an attestation report. The following report is provided by management in respect of our internal control over financial reporting (as definedin Rule 13a-15(f) of the Exchange Act): Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Ourmanagement used the Committee of Sponsoring Organizations of the Treadway Commission Internal Control - IntegratedFramework (2013), or the COSO framework, to evaluate the effectiveness of internal control over financial reporting.Management believes that the COSO framework is a suitable framework for its evaluation of financial reporting because it isfree from bias, permits reasonably consistent qualitative and quantitative measurements of our internal control over financialreporting, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of ourinternal control over financial reporting are not omitted and is relevant to an evaluation of internal control over financialreporting. Management has assessed the effectiveness of our internal control over financial reporting as of December 31,2018 and has concluded that such internal control over financial reporting was not effective, based on the material weaknessdescribed below. Material weakness in internal control over financial reporting.In connection with the preparation of our unaudited condensed financial statements for the quarter ended September30, 2018, we identified an error in the previously filed financial statements that caused us to restate and amend ourpreviously issued condensed financial statements and related financial information as of and for the three and six monthsended June 30, 2018. This error was the result of a material weakness in our internal control over financial reporting, whichcontinued to exist at December 31, 2018. Specifically, (i) our information technology systems did not provide managementthe ability to accurately monitor inventory movements and quantities at third-party locations, (ii) internal processes toprovide for clear communication between operational and financial personnel within the company were insufficient, and (iii)we had insufficient personnel with the appropriate level of experience to prevent and detect errors on a timely basis in ourfinancial statements.To remediate this material weakness, we are taking the following actions:·We are currently updating our information technology tools, including our ERP system to enhance our ability tomonitor inventory and its movement through our manufacturing process and provide checks and balances to third-party reports.·We have, and continue to put in place, management dashboard tools to alert all involved as to the performance ofinventory against our business goals.77 Table of Contents ·We are establishing multi-discipline processes to actively manage and make decisions regarding our inventory tosupport our business objectives.·We are providing additional training to our Operations Teams and updating procedures with our third-partyAssembly Houses.·We have hired additional qualified personnel to assist management with its financial statement close process andprovide oversight of our financial reporting. Changes in internal control over financial reporting. Except for the actions to remediate the material weakness described above, there were no changes in our internalcontrol over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, asamended) that occurred during the year ended December 31, 2018 that materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.Inherent limitation on the effectiveness of internal control.The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherentlimitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls andprocedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financialreporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances.In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business,but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financialreporting. Item 9B. Other Information.None. 78 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance.Information required by this item will be contained in our definitive proxy statement to be filed with the Securities andExchange Commission on Schedule 14A in connection with our 2019 Annual Meeting of Stockholders, or the ProxyStatement, which will be filed not later than 120 days after the end of our fiscal year ended December 31, 2018, under theheadings “Management,” “Proposal 1 - Election of Directors,” “Board Committees and Meetings,” and“Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated herein by reference.We have adopted a Code of Business Conduct and Ethics that applies to our officers, directors and employees which isavailable on our website at www.everspin.com. The Code of Business Conduct and Ethics is intended to qualify as a “code ofethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K. In addition,we intend to promptly disclose (1) the nature of any substantive amendment to our Code of Business Conduct and Ethics thatapplies to our principal executive officer, principal financial officer, principal accounting officer or controller or personsperforming similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code ofethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of thewaiver, on our website in the future. Item 11. Executive Compensation.The information required by this item regarding executive compensation is incorporated by reference to the informationset forth in the sections titled “Executive Compensation” and “Compensation of Non-Employee Board Members” in ourProxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this item regarding security ownership of certain beneficial owners and management isincorporated by reference to the information set forth in the sections titled “Security Ownership of Certain Beneficial Ownersand Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” in our Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence.The information required by this item regarding certain relationships and related transactions and directorindependence is incorporated by reference to the information set forth in the sections titled “Certain Relationships andRelated Party Transactions” and “Proposal 1 - Election of Directors”, respectively, in our Proxy Statement. Item 14. Principal Accounting Fees and Services.The information required by this item regarding principal accountant fees and services is incorporated by reference tothe information set forth in the section titled “Principal Accountant Fees and Services” in our Proxy Statement.79 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules.(a) The following documents are filed as part of this report:1. Financial StatementsInformation in response to this Item is included in Part II, Item 8 of this Annual Report on Form 10‑K.2. Financial Statement SchedulesAll schedules are omitted because they are not applicable or the required information is shown in the financialstatements or notes thereto.3. Exhibits80 Table of ContentsEXHIBIT INDEX† Incorporation By Reference ExhibitNumber Description Form SEC File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation. 8‑K 001‑37900 3.1 10/13/2016 3.2 Amended and Restated Bylaws. S‑1 333‑213569 3.6 9/09/2016 4.1 Form of Common Stock Certificate of the registrant. S‑1 333‑213569 4.1 9/09/2016 4.2Warrant to Purchase Common Stock, dated as of July 6, 2018,between the registrant and Silicon Valley Bank.10-Q001-379004.208/09/2018 4.3 Reference is made to Exhibits 3.1 and 3.2. 10.1† Form of Indemnity Agreement between the registrant and itsdirectors and officers. S‑1 333‑213569 10.1 9/09/2016 10.2† 2008 Equity Incentive Plan, as amended, and Form of StockOption Grant Notice, Option Agreement and Form of Notice ofExercise. S-1/A 333‑213569 10.2 9/26/2016 10.3† Amended and Restated 2016 Equity Incentive Plan. 8-K 001-37900 10.1 5/22/2018 10.4† Form of Stock Option Grant Notice, Option Agreement andForm of Notice of Exercise used with the 2016 Equity IncentivePlan. S-1/A 333‑213569 10.3 9/26/2016 10.5† Form of Restricted Stock Unit Award Agreement under the 2016Equity Incentive Plan. 10-Q 001‑37900 10.3 11/13/2017 10.6† 2016 Employee Stock Purchase Plan. S-1/A 333‑213569 10.4 9/26/2016 10.7 Lease, dated as of June 6, 2008, by and between the registrantand Freescale Semiconductor, Inc. S-1 333‑213569 10.5 9/09/2016 10.8 Amendment No. 1 to Lease, dated as of February 2, 2009, by andbetween the registrant and Freescale Semiconductor, Inc. S-1 333‑213569 10.6 9/09/2016 10.9 Amendment No. 2 to Lease, dated as of February 18, 2010, byand between the registrant and Freescale Semiconductor, Inc. S-1 333‑213569 10.7 9/09/2016 10.10 Amendment No. 3 to Lease, dated as of July 20, 2011, by andbetween the registrant and Freescale Semiconductor, Inc. S-1 333‑213569 10.8 9/09/2016 10.11 Amendment No. 4 to Lease, dated as of June, 2014 by andbetween the registrant and Freescale Semiconductor, Inc. S-1 333‑213569 10.9 9/09/2016 10.12 Amendment No. 5 to Lease, dated as of March 22, 2017 by andbetween the registrant and Freescale Semiconductor, Inc. 8-K 001‑37900 10.1 3/28/2017 10.13 Amendment No. 6 to Lease, dated as of October 31, 2017 by andbetween the registrant and NXP USA, Inc. (formerly FreescaleSemiconductor, Inc.) 10-K 001‑37900 10.40 3/15/2018 81 Table of Contents10.14 Amendment No. 7 to Lease, effective as of June 30, 2018 by andbetween the registrant and NXP USA, Inc. (formerly FreescaleSemiconductor, Inc.) 10-Q 001-37900 10.1 11/14/2018 10.15 Loan and Security Agreement, dated as of May 4, 2017 by andbetween the registrant and Silicon Valley Bank. 8-K 001‑37900 10.1 5/9/2017 10.16 First Amendment to Loan and Security Agreement, dated as ofJuly 6, 2018 by and between the registrant and Silicon ValleyBank. 10-Q 001-37900 10.2 8/9/2018 10.17 Office Lease Agreement, dated as of January 7, 2011 by andbetween the registrant and Jutland 4141 Investments, Ltd dbaChandler Office Center. S-1 333‑213569 10.16 9/09/2016 10.18 Lease Termination Agreement, dated as of April 12, 2018, byand between the registrant and Jutland 4141 Investments, Ltd. 10-Q 001-37900 10.4 8/9/2018 10.19 Commercial Industrial Lease Agreement, dated as of May 18,2012 by and between the registrant and Principal Life InsuranceCompany. S-1 333‑213569 10.17 9/09/2016 10.20 Amendment No. 1 to Commercial Industrial Lease Agreement,dated August 12, 2016 by and between the registrant and LegacyStonelake JV-T, LLC, successor in interest to Principal LifeInsurance Company. S-1 333‑213569 10.22 9/09/2016 10.21 Sublease Agreement, dated January 31, 2017 by and between theregistrant and NXP USA, Inc. and Consent to of Landlord toSublease, dated March 10, 2017, by and among the registrant,NXP USA, Inc. and VWP-BV CM 5670, LLC. 8-K 001‑37900 10.1 3/28/2017 10.22 First Amendment to Sublease Agreement, dated February 13,2017, by and between the registrant and NXP USA, Inc. andConsent to of Landlord to Amendment to Sublease, datedMarch 10, 2017, by and among the registrant, NXP USA, Inc. andVWP-BV CM 5670, LLC. 8-K 001‑37900 10.2 3/28/2017 10.23 Second Amendment to Sublease Agreement dated March 2, 2017by and between the Company and NXP USA, Inc. and Consent ofLandlord to Sublease, dated March 10, 2017, by and among theregistrant, NXP USA, Inc. and VWP-BV CM 5670, LLC. 8-K 001‑37900 10.3 3/28/2017 10.24 Third Amendment to Sublease Agreement, dated October 17,2017 by and between the registrant and NXP USA, Inc. andConsent of Landlord to Sublease, dated March 10, 2017, by andamong the registrant, NXP USA, Inc. and VWP-BV CM 5670,LLC. 10-K 001‑37900 10.39 3/15/2018 10.25+ STT-MRAM Joint Development Agreement, dated as of October17, 2014 by and between the registrant andGLOBALFOUNDRIES Inc. S-1 333‑213569 10.18 9/09/2016 10.26+ Amendment No. 1 to the STT-MRAM Joint DevelopmentAgreement, dated as of May 27, 2016 by and between theregistrant and GLOBALFOUNDRIES Inc. S-1 333‑213569 10.19 9/09/201682 Table of Contents 10.27*++ Amendment No. 3 to the STT-MRAM Joint DevelopmentAgreement, effective as of January 1, 2018 by and between theregistrant and GLOBALFOUNDRIES Inc. 10.28+ Manufacturing Agreement, dated as of October 23, 2014 by andbetween the registrant and GLOBALFOUNDRIES Singapore Pte.Ltd. S-1 333‑213569 10.20 9/09/2016 10.29 Restricted Stock Purchase Agreement, dated as of October 21,2014 by and between the registrant and GLOBALFOUNDRIESInc. S-1 333‑213569 10.21 9/09/2016 10.30 Common Stock Purchase Agreement, dated as of September 23,2016 by and between the registrant and GigaDevice (HK)Limited. S-1/A 333‑213569 10.23 9/26/2016 10.31† Non-employee Director Compensation. 10-Q 001‑37900 10.4 11/18/2016 10.32† Executive Compensation Information. 8-K 001‑37900 Item5.02 1/23/2017 10.33† Executive Employment Agreement, dated as of April 25,2016 by and between the registrant and Phillip LoPresti. S-1 333‑213569 10.14 9/09/2016 10.34† Separation and Consulting Agreement, dated as of August 23,2017 by and between the registrant and Phillip LoPresti. 10-Q 001‑37900 10.2 11/13/2017 10.35† Executive Employment Agreement, dated as of April 25,2016 by and between the registrant and Dr. Jon Slaughter. 10-K 001‑37900 10.25 3/29/2017 10.36† Executive Employment Agreement, dated as of April 26, 2017by and between the registrant and Annie Flaig. 10-Q 001‑37900 10.2 8/11/201710.37†* Separation Agreement, dated November 8, 2018 by and betweenthe registrant and Annie Flaig. 10.38† Executive Employment Agreement, dated as of August 18, 2017between the registrant and Kevin Conley. 8-K 001‑37900 10.1 8/23/2017 10.39† Executive Employment Agreement, dated as of January 9, 2017by and between the registrant and Patrick Patla. 10-K 001‑37900 10.38 3/15/2018 10.40 Separation Agreement, dated as of June 6, 2018 by and betweenthe registrant and Patrick Patla. 10-Q 001-37900 10.3 8/9/2018 23.1* Consent of Ernst & Young LLP, Independent Registered PublicAccounting Firm. 31.1* Certification of Principal Executive Officer Pursuant toRules 13a‑14(a) and 15d‑14(a) under the Securities ExchangeAct of 1934, as amended. 31.2* Certification of Principal Financial Officer Pursuant toRules 13a‑14(a) and 15d‑14(a) under the Securities ExchangeAct of 1934, as amended. 83 Table of Contents32.1** Certification of Principal Executive Officer and PrincipalFinancial Officer Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *Filed herewith.**Furnished herewith. Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of thatsection, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or otherdocument filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specificallystated in such filing.+Confidential treatment has been granted for certain portions of this exhibit.++Confidential treatment has been requested for certain portions of this exhibit.†Indicates a management contract or compensatory plan.(b) We have filed, or incorporated into this Annual Report on Form 10‑K by reference, the exhibits listed on theExhibit Index immediately above.(c) See Item 15(a)2 above.Item 16. Form 10-K SummaryNot provided.84 Table of Contents SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registranthas duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Chandler, Arizona,on March 15, 2019. Everspin Technologies, Inc. By:/s/ Kevin Conley Kevin Conley President and Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer) By:/s/ Jeffrey Winzeler Jeffrey Winzeler Chief Financial Officer (Principal Financial and Accounting Officer) 85 Table of ContentsKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes andappoints Kevin Conley and Jeffrey Winzeler, and each of them, as his true and lawful attorneys-in-fact and agents, each withthe full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and allamendments to this Annual Report on Form 10‑K, and to file the same, with all exhibits thereto and other documents inconnection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, andeach of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done inand about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying andconfirming all that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to bedone by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below bythe following persons on behalf of the Registrant in the capacities and on the dates indicated.Signature Title Date /s/ Kevin Conley President and Chief Executive Officer March 15, 2019Kevin Conley (Principal Executive Officer) /s/ Jeffrey Winzeler Chief Financial Officer March 15, 2019Jeffrey Winzeler (Principal Financial and Accounting Officer) /s/ Lawrence G. Finch Director March 15, 2019Lawrence G. Finch /s/ Ronald C. Foster Director March 15, 2019Ronald C. Foster /s/ Stephen J. Socolof Director March 15, 2019Stephen J. Socolof /s/ Peter Hébert Director March 15, 2019Peter Hébert /s/ Geoffrey R. Tate Director, Lead Director March 15, 2019Geoffrey R. Tate /s/ Mike Gustafson Director March 15, 2019Mike Gustafson /s/ Darin Billerbeck Director March 15, 2019Darin Billerbeck /s/ Geoff Ribar Director March 15, 2019Geoff Ribar 86Exhibit 10.27[*] = Certain confidential information contained in this document, marked by brackets, has been omitted andfiled separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the SecuritiesExchange Act of 1934, as amended.AMENDMENT #3 TOSTT-MRAM JOINT DEVELOPMENT AGREEMENTThis Amendment #3 (the “Amendment No. 3”) is entered into by and between Everspin Technologies,Inc. (“Everspin”), and GLOBALFOUNDRIES Inc. (“GLOBALFOUNDRIES”), and amends and supplementsthat certain STT-MRAM Joint Development Agreement between the parties dated October 17, 2014, as amended (the“Agreement”). This Amendment No. 3 is effective as of January 1, 2018 (the “Amendment Effective Date”).WHEREAS Everspin and GLOBALFOUNDRIES have agreed to modify the cost sharing associated with28nm and 22nm Project Costs; andWHEREAS Everspin and GLOBALFOUNDRIES wish to reduce the royalty percentages due for MRAMproducts manufactured by GLOBALFOUNDRIES;NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend the Agreementas follows:1. All capitalized terms used in this Amendment but not otherwise defined herein shall have the meanings givensuch terms in the Agreement and, unless otherwise specified, references to Sections refer to Sections of theAgreement.2. Section 1.1 is deleted in its entirety and replaced with the following:“The term of this Agreement shall have a period lasting five (5) years from the Effective Date; provided,however, that if the term of a duly executed Statement of Work extends beyond the term of this Agreement, thisAgreement shall end three (3) months after such Statement of Work is completed, expires or isterminated. During this three (3) month time frame, the Parties will discuss in good faith either a newdevelopment agreement for advanced STT-MRAM development or additional SOW’s to be executed underthis Agreement.”3. The following shall be appended to the end of Section 2.4:“Notwithstanding the escalation path described above, [*] and [*] shall [*]; provided it is consistent with [*],such as [*], and/or [*].”4. The following shall be appended to the end of Section 3.2: 1 “Beginning in 2019, unless otherwise agreed upon by the Parties, Everspin will bear and pay exclusively for allProject Costs incurred for the [*] and GLOBALFOUNDRIES will bear and pay for all the Project Costs forthe [*].”5. Section 3.7 is deleted in its entirety and replaced with the following:“For Project Costs incurred in 2018 (“2018 Project Costs”), Everspin shall pay GLOBALFOUNDRIES amaximum of [*] pursuant to the business processes and terms outlined in Section 3.4 of the Agreement.”6. Section 7.1.3 is deleted in its entirety and replaced with the following:“7.1.3 grant sublicenses thereunder (to the extent contained in the Design Information) solely to its customers,contractors, university collaborators and IP providers/EDA vendors, and to such customers’ contractors and IPproviders/EDA vendors (collectively, “Everspin Sublicensees”), the sublicenses so granted to be of scope thatincludes only the GLOBALFOUNDRIES IP that is necessary to design, develop and test, or assist Everspin orEverspin customers with designing, developing and testing, STT-MRAM Devices to be manufactured solelyby GLOBALFOUNDRIES, and that restricts such Everspin Sublicensees from using suchGLOBALFOUNDRIES IP for any purposes other than designing, developing and testing, or assistingEverspin or Everspin customers with designing, developing and testing, such STT-MRAM Devices. If suchEverspin Sublicensees are universities, Everspin will notify GLOBALFOUNDRIES and any publicationrelated to STT-MRAM design, development or testing allowed under this Section 7.1.3 shall include anacknowledgement to Everspin and/or GLOBALFOUNDRIES as relevant, and;”7. Section 7.2.3 is deleted in its entirety and replaced with the following:“7.2.3 grant sublicenses thereunder (to the extent contained in the Design Information) to its Customers,contractors, university collaborators and IP providers/EDA vendors, and to such customers’ contractors and IPproviders/EDA vendors, (collectively, “GLOBALFOUNDRIES Sublicensees”), the sublicenses so granted tobe of scope that includes only the Everspin IP that is necessary to design, develop and test, or assistGLOBALFOUNDRIES or GLOBALFOUNDRIES Customers with designing, developing and testing, STT-MRAM Devices to be manufactured solely by GLOBALFOUNDRIES, and that restricts suchGLOBALFOUNDRIES Sublicensees from using such Everspin IP for any purposes other than designing,developing and testing, or assisting GLOBALFOUNDRIES or GLOBALFOUNDRIES Customers withdesigning, developing and testing, such STT-MRAM Devices; provided that during the Exclusivity Period forany STT-MRAM Device no sublicense granted pursuant to this Section 7.2.3 shall include the ability for thethird party to design and develop STT-MRAM Devices which [*]. If such GLOBALFOUNDRIESSublicensees are universities, GLOBALFOUNDRIES will notify Everspin and any publication related toSTT-MRAM design, development or testing allowed under this Section[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.2 7.2.3 shall include an acknowledgement to Everspin and/or GLOBALFOUNDRIES as relevant, and”8. The following shall be added as Section 7.4.3:“7.4.3. In the event that, prior to the expiration of the relevant Exclusivity Period, GLOBALFOUNDRIESunilaterally and without prior warning, issues an end of life notice as permitted under the MA for an EverspinDiscrete STT-MRAM Device, the Parties mutually agree (acting in good faith) to negotiate either (i) a have-made license, which may include either license fees and/or royalties, to Everspin under theGLOBALFOUNDRIES IP to enable the manufacture of Discrete STT-MRAM Devices for Everspin, suchlicense to include transition support if needed to enable another foundry, or (ii) another commerciallyreasonable plan to continue manufacture of such Discrete STT-MRAM Device by GLOBALFOUNDRIESfor a minimum of [*] or until such date as another foundry has been identified and qualified for volumeproduction. Failure to come to mutual agreement on (i) or (ii) above shall not constitute a breach of theAgreement. Neither Party will rely on the successful conclusion of such negotiations and any business decisioneither Party makes in anticipation of reaching agreement is at the sole risk of the Party making the decision,even if the other Party is aware of, or has indicated approval of, such decision. Each Party will be responsiblefor its own expenses and costs related to these discussions and neither Party is authorized to make anycommitments or statements on behalf of the other.”9. The following shall be added as Section 12.5:“12.5. Should Everspin terminate this Agreement for cause pursuant to Section 12.1.1 solely as a result ofGLOBALFOUNDRIES’ breach of Section 7.4.3, then Sections 2.4, 3.4, 3.7, 4, 6 through 9 (other than 7.2,7.3, 7.4, 7.6, 8.2 and 8.3), and 12 through 17 (other than 13.2), 20, 21.4, and 21.8 will survive expiration ofthis Agreement.”10. Section 17.1 is deleted in its entirety and replaced with the following :“In the event GLOBALFOUNDRIES manufactures and sells or transfer wafers containing productionqualified Embedded STT-MRAM Devices that utilize Design Information to Customers (“Royalty Wafer”),then pursuant to Section 17.4 GLOBALFOUNDRIES shall pay Everspin a royalty percentage of the netselling price, excluding all amounts for bump, packaging and test, for each Royalty Wafer as shown below(“Royalty Amount”).17.1.1 For the first one thousand (1,000) Royalty Wafers sold or transferred to Customers, a royalty of[*]%.17.1.2 For all Royalty Wafers sold or transferred to Customers during the [*] years following theperiod set forth in Section 17.1.1, a royalty of [*]%.[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.3 17.1.3 For all Royalty Wafers sold or transferred to Customers during the [*] years following theperiod set forth in Section 17.1.2, a royalty of [*]%.GLOBALFOUNDRIES’ obligation to pay any royalties to Everspin pursuant to this Agreement will terminatewhen the time period set forth in Section 17.1.3 has passed.”11. MiscellaneousAll references to the Agreement in any other document shall be deemed to refer to the Agreement as modifiedby this Amendment No. 3. Except as modified by this Amendment No. 3, all of the terms and conditions of theAgreement shall remain in full force and effect. In the event that the terms of this Amendment No. 3 conflictwith the terms of the Agreement, the terms of this Amendment No. 3 shall control.12. EXECUTIONThis Amendment No. 3 may be executed in any number of counterpart originals, each of which shall bedeemed an original instrument for all purposes, but all of which shall comprise one and the sameinstrument. This Amendment No. 3 may be delivered by electronic mail or facsimile, and a scanned version ofthis Amendment No. 3 shall be binding as an original.IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorizedrepresentatives, effective as of the Amendment Effective Date. Everspin Technologies, Inc. GLOBALFOUNDRIES Inc. By:/s/ Angelo Ugge By:/s/ David Bennett PrintedName:Angelo Ugge PrintedName:David Bennett Title:Vice President, Corp. Business Dev. Title:VP, Strategic Agreements & Initiatives [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with theSecurities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.4Exhibit 10.37 November 8, 2018 Anne Flaig401 Harrison St. Apt # 30eSan Francisco, CA 94105 Dear Anne: This letter sets forth the substance of the separation agreement (the “Agreement”) that Everspin Technologies, Inc. (the “Company”) isoffering to you. 1. SEPARATION. Your employment termination date will be December 31, 2018 (the “Separation Date”), though you willnot be expected to perform duties after November 16, 2018 at the latest, except to make yourself reasonably available to answer inquiriesregarding the transition of your duties prior to the Separation Date as requested by the Company. 2. ACCRUED SALARY. On the Separation Date, the Company will pay you all accrued salary earned through the SeparationDate, subject to standard payroll deductions and withholdings. 3. SEVERANCE BENEFITS. If you timely sign this Agreement, allow it to become effective, and remain in compliance withyour legal and contractual obligations to the Company, then the Company will deem your termination from the Company to be atermination without Cause, as defined in your Executive Employment Agreement with the Company dated April 26, 2014 (the“Employment Agreement”), and provide you with the following severance benefits in accordance with the terms of the EmploymentAgreement: a. Cash Severance. The Company will pay you six (6) months of your base salary (for a total of $137,500.00), whichwill be paid (less deductions and withholdings) over the course of six (6) months following the Separation Date in accordance with theCompany’s regular payroll schedule; provided, however, that no payments will be made to you before March 1, 2019 (the “Payment StartDate”). On the Payment Start Date, the Company will pay you a lump sum of $45,833.33 which is equivalent to the salary continuationpayments that you would have received from the Separation Date until the Payment Start Date had the Company begun making paymentsunder this paragraph on the Separation Date. b. Lump Sum Payment. Within ten (10) days after your Separation Date (as defined above), the Company will payyou a one-time $50,000.00 severance payment, less deductions and withholdings. c. Bonus. Within ten (10) days after your Separation Date (as defined above), the Company will pay you yourremaining 2018 quarterly bonus, in the amount of $17,181.50 less deductions and withholdings. d. Key Sales Objective Payment. Within ten (10) days after your Separation Date (as defined above), the Companywill pay you $39,187.50 which represents your full KSO target for the period of October through December 2018. e. Paid COBRA. Provided that you timely elect continued coverage under COBRA, then the Company shallreimburse you for the COBRA premiums to continue your health insurance coverage (including coverage for eligible dependents, ifapplicable) through the period starting on the Separation Date and ending on June 14th, 2019. You must timely pay your premiums, andthen provide the Company with proof of same to obtain reimbursement for your COBRA premiums under this Section 3.d. f. Accelerated Vesting. During your employment, you were granted certain equity interests (the “Awards”). TheCompany will accelerate the vesting of the Awards such that, as of the Separation Date, you will be deemed vested in those Awards thatwould have vested in the six (6) months following the Separation Date had you remained employed.1 4. OTHER COMPENSATION OR BENEFITS. You acknowledge that, except as expressly provided in this Agreement, youwill not receive any additional compensation, severance, or benefits after the Separation Date. You further expressly acknowledge andagree that the severance benefits being provided to you under this Agreement are in full satisfaction of any severance benefits you areeligible to receive under the Employment Agreement. 5. EXPENSE REIMBURSEMENTS. You agree that, within ten (10) days after the Separation Date, you will submit yourfinal documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, forwhich you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business practice. 6. RETURN OF COMPANY PROPERTY. By the Separation Date, you agree to return to the Company all Companydocuments (and all copies thereof) and other Company property within your possession, custody or control, including, but not limited to,Company files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recordedinformation, tangible property (including, but not limited to), credit cards, entry cards, identification badges, and keys; and, any materialsof any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). 7. PROPRIETARY INFORMATION OBLIGATIONS. You acknowledge your continuing obligations under yourEmployee Proprietary Information and Inventions Assignment Agreement, a copy of which is attached hereto as Exhibit A. 8. MUTUAL NON-DISPARAGEMENT. You agree not to disparage the Company, its officers, directors, employees,shareholders, and agents, in any manner likely to be harmful to its or their business, business reputation or personal reputation; and theCompany (through its officers and directors) agrees not to disparage you in any manner likely to be harmful to you or your business,business reputation or personal reputation; provided that you and the Company will respond accurately and fully to any question, inquiryor request for information when required by legal process. In response to inquiries from potential future employers, Company will onlyconfirm your dates of employment and position held. Nothing herein is intended to prevent you from responding accurately to interviewquestions with potential future employers under the condition that it does not violate your proprietary information obligation. 9. NO ADMISSIONS. You understand and agree that the promises and payments in consideration of this Agreement shall notbe construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makesno such admission. 10. RELEASE OF CLAIMS. In exchange for the consideration under this Agreement to which you would not otherwise beentitled, you hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents,attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities andobligations, both known and unknown occurring at any time prior to and including the date you sign this Agreement, that arise out of orare in any way related to: (a) all claims arising out of or in any way related to your employment with the Company or the termination ofthat employment; (b) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions,vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in theCompany; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d)all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal,state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising underthe federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the Age Discrimination inEmployment Act (“ADEA”) the Arizona Wage Act, the Arizona Employment Protection Act, the Arizona Civil Rights Act, the ArizonaRevised Statutes, the Arizona Administrative Rules, the Texas Human Rights Act and the Texas Labor Code. Notwithstanding theforegoing, you are not releasing the Company hereby from any obligation to indemnify you pursuant to the Articles and Bylaws of theCompany, any valid fully executed indemnification agreement with the Company, applicable law, or applicable directors and officers’liability insurance. Also, excluded from this Agreement are any claims that cannot be waived by law. 11. ADEA RELEASE. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you haveunder the ADEA, and that the consideration given for the waiver and releases you have given in this Agreement is in addition to anythingof value to which you were already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (a) yourwaiver and release does not apply to any rights or claims that arise after the date you sign this Agreement; (b) you should consult with anattorney prior to signing this Agreement (although you may choose voluntarily not to do so); (c) you have twenty-one (21) days toconsider this Agreement (although you may choose voluntarily to sign it sooner); (d) you have seven (7) days following the date you signthis Agreement to revoke this Agreement (in a written revocation sent to me); and (e) this Agreement will not be effective until the dateupon which the revocation period has expired, which will be the eighth day after you sign this Agreement provided that you do not revokeit (the “Effective Date”).2 12. PROTECTED RIGHTS. You understand that nothing in this Agreement limits your ability to file a charge or complaintwith the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the OccupationalSafety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency orcommission (“Government Agencies”). You further understand this Agreement does not limit your ability to communicate with anyGovernment Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency,including providing documents or other information, without notice to the Company. While this Agreement does not limit your right toreceive an award for information provided to the Securities and Exchange Commission, you understand and agree that, to maximum extentpermitted by law, you are otherwise waiving any and all rights you may have to individual relief based on any claims that you havereleased and any rights you have waived by signing this Agreement. 13. REPRESENTATIONS. You hereby represent that you have been paid all compensation owed and for all hours worked,have received all the leave and leave benefits and protections for which you are eligible pursuant to the Family and Medical Leave Act orotherwise, and have not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim. 14. MISCELLANEOUS. This Agreement, including Exhibit A, constitutes the complete, final and exclusive embodiment ofthe entire agreement between you and the Company with regard to its subject matter. It is entered into without reliance on any promise orrepresentation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties orrepresentations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer ofthe Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, andinure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined tobe invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provisionin question will be modified so as to be rendered enforceable. This Agreement will be deemed to have been entered into and will beconstrued and enforced in accordance with the laws of the State of Arizona without regard to conflict of laws principles. Any ambiguity inthis Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement shall be in writing andshall not be deemed to be a waiver of any successive breach. This Agreement may be executed in counterparts and facsimile signatures willsuffice as original signatures. If this Agreement is acceptable to you, please sign below and return the original to me. You have twenty-one (21) calendar days to decidewhether you would like to accept this Agreement, and the Company’s offer contained herein will automatically expire if you do not signand return it within this timeframe. Sincerely, By:/s/ Jim Everett Jim Everett Vice President of Global Human Resources Exhibit A – Employee Proprietary Information and Inventions Assignment Agreement I HAVE READ, UNDERSTAND AND AGREE FULLY TO THE FOREGOING AGREEMENT: /s/ Anne Flaig 11/14/18Anne Flaig Date 3 EXHIBIT A EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT 4 EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS ASSIGNMENT AGREEMENT In consideration of my employment or continued employment by Everspin Technologies, Inc. (“Company”), andthe compensation paid to me now and during my employment with the Company, I agree to the terms of this Agreement as follows: 1. CONFIDENTIAL INFORMATION PROTECTIONS. 1.1 Nondisclosure; Recognition of Company’s Rights. At all times during and after my employment, I will hold in confidenceand will not disclose, use, lecture upon, or publish any of Company’s Confidential Information (defined below), except as may be requiredin connection with my work for Company, or as expressly authorized by the Chief Executive Officer (the “CEO”) of Company. I willobtain the CEO’s written approval before publishing or submitting for publication any material (written, oral, or otherwise) that relates tomy work at Company and/or incorporates any Confidential Information. I hereby assign to Company any rights I may have or acquire inany and all Confidential Information and recognize that all Confidential Information shall be the sole and exclusive property of Companyand its assigns. 1.2 Confidential Information. The term “Confidential Information” shall mean any and all confidential knowledge, data orinformation related to Company’s business or its actual or demonstrably anticipated research or development, including without limitation(a) trade secrets, inventions, ideas, processes, computer source and object code, data, formulae, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques; (b) information regarding products, services, plans for researchand development, marketing and business plans, budgets, financial statements, contracts, prices, suppliers, and customers; (c) informationregarding the skills and compensation of Company’s employees, contractors, and any other service providers of Company; and (d)the existence of any business discussions, negotiations, or agreements between Company and any third party. 1.3 Third Party Information. I understand that Company has received and in the future will receive from third partiesconfidential or proprietary information (“Third Party Information”) subject to a duty on Company’s part to maintain the confidentialityof such information and to use it only for certain limited purposes. During and after the term of my employment, I will hold Third PartyInformation in strict confidence and will not disclose to anyone (other than Company personnel who need to know such information inconnection with their work for Company) or use. Third Party Information, except in connection with my work for Company or unlessexpressly authorized by an officer of Company in writing. 1.4 No Improper Use of Information of Prior Employers and Others. I represent that my employment by Company doesnot and will not breach any agreement with any former employer, including any noncompete agreement or any agreement to keep inconfidence or refrain from using information acquired by me prior to my employment by Company. I further represent that I have notentered into, and will not enter into, any agreement, either written or oral, in conflict with my obligations under this Agreement. Duringmy employment by Company, I will not improperly make use of, or disclose, any information or trade secrets of any former employer orother third party, nor will I bring onto the premises of Company or use any unpublished documents or any property belonging to anyformer employer or other third party, in violation of any lawful agreements with that former employer or third party. I will use in theperformance of my duties only information that is generally known and used by persons with training and experience comparable to myown, is common knowledge in the industry or otherwise legally in the public domain, or is otherwise provided or developed by Company. 2. INVENTIONS. 2.1 Inventions and Intellectual Property Rights. As used in this Agreement, the term “Invention” means any ideas, concepts,information, materials, processes, data, programs, know-how, improvements, discoveries, developments, designs, artwork, formulae,copyrightable works, and techniques and all Intellectual Property Rights in any of the items listed above. The term “Intellectual PropertyRights” means all trade secrets, copyrights, trademarks, mask work rights, patents and other intellectual property rights recognized by thelaws of any jurisdiction or country. 2.2 Prior Inventions. I have disclosed on Exhibit A a complete list of all Inventions that (a) I have, or I have caused to be,alone or jointly with others, conceived, developed, or reduced to practice prior to the commencement of my employment by Company; (b)in which I have an ownership interest or which I have a license to use; (c) and that I wish to have excluded from the scope of thisAgreement (collectively referred to as “Prior Inventions”). If no Prior Inventions are listed in Exhibit A, I warrant that there are no PriorInventions. I agree that I will not Incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions (defined below)without Company’s prior written consent. If, in the course of my employment with Company, I incorporate a Prior Invention into aCompany process, machine or other work, I hereby grant Company a non-exclusive, perpetual, fully-paid and royalty-free, Irrevocable andworldwide license, with rights to sublicense through multiple levels of sublicenses, to reproduce, make derivative1 works of, distribute, publicly perform, and publicly display in any form or medium, whether now known or later developed, make, havemade, use, sell, import, offer for sale, and exercise any and all present or future rights in, such Prior Invention. 2.3 Assignment of Company Inventions. Inventions assigned to the Company or to a third party as directed by the Companypursuant to the section titled “Government or Third Party” are referred to in this Agreement as “Company Inventions.” Subject to thesection titled “Government or Third Party” and except for Inventions that I can prove qualify fully under the provisions of a SpecificInventions Law (as defined below) and I have set forth in Exhibit A, I hereby assign and agree to assign in the future (when any suchInventions or Intellectual Property Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to Company all myright, title, and interest in and to (i) any and all Inventions (and all Intellectual Property Rights with respect thereto) made, conceived,reduced to practice, or learned by me, either alone or with others, during the period of my employment by Company and (ii) any and allpriority rights corresponding to any patent applications of such Intellectual Property Rights, Including the right to claim priority, providedby any International Convention, including the Paris Convention. To the extent necessary, company accepts all such assignments. 2.4 Specific Inventions Law. I recognize that, in the event of a specifically applicable state law, regulation, rule or publicpolicy (“Specific Inventions Law”), this Agreement will not be deemed to require assignment of any invention which qualifies fully forprotection under a Specific Inventions Law by virtue of the fact that any such invention was, for example, developed entirely on my owntime without using the company’s equipment, supplies, facilities, or trade secrets and neither related to the company’s actual or anticipatedbusiness, research or development, nor resulted from work performed by me for the Company. Examples of Specific Inventions Lawsinclude California Labor Code Section 2870 and the Revised Code of Washington Section 49.44.140. 2.5 Obligation to Keep Company Informed. While employed with the Company and for one (1) year after my employmentends, I will promptly and fully disclose to the Company in writing (a) all Inventions I author, conceive or reduce to practice, either alone orwith others and including any that might be covered under a Specific Inventions Law, and (b) all patent applications I file or in which I amnamed as an inventor or co-inventor. 2.6 Government or Third Party. I agree that, as directed by the Company, I will assign to a third party, including withoutlimitation the United States, all my right, title, and interest in and to any particular Company Invention. 2.7 Enforcement of Intellectual Property Rights and Assistance. During and after the period of my employment, I will assistCompany in every proper way to obtain and enforce United States and foreign Intellectual Property Rights relating to Company Inventionsin all countries. If the Company is unable to secure my signature on any document needed in connection with such purposes, I herebyirrevocably designate and appoint Company and its duly authorized officers and agents as my agent end attorney in fact, whichappointment is coupled with an interest, to act on my behalf to execute and file any such documents and to do all other lawfully permittedacts to further such purposes with the same legal force and effect as if executed by me. 2.8 Incorporation of Software Code. I agree that I will not incorporate into any Company software or otherwise deliver toCompany any software code licensed under the GNU General Public License or Lesser General Public License or any other license that, byits terms, requires or conditions the use or distribution of such code on the disclosure, licensing, or distribution of any source code ownedor licensed by Company. 3. RECORDS. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any otherform that is required by the Company) of all Inventions made by me during the period of my employment by the Company, which recordsshall be available to, and remain the sole property of, the Company at all times. 4. ADDITIONAL ACTIVITIES. I agree that (a) during the term of my employment by Company, I will not, without Company’sexpress written consent, engage in any employment or business activity that is competitive with, or would otherwise conflict with myemployment by, Company, and (b) for the period of my employment by Company and for one (1) year thereafter, I will not, either directlyor indirectly, solicit or attempt to solicit any employee, independent contractor, or consultant of Company to terminate his, her or itsrelationship with Company in order to become an employee, consultant, or independent contractor to or for any other person or entity. 5. RETURN OF COMPANY PROPERTY. Upon termination of my employment or upon Company’s request at any other time, I willdeliver to Company all of Company’s property, equipment, and documents, together with all copies thereof, and any other materialcontaining or disclosing any Inventions, Third Party Information or Confidential Information and certify in writing that I have fullycomplied with the foregoing obligation. I agree that I will not copy, delete, or alter any information contained upon my Companycomputer or Company equipment before I return it to Company. In addition, If I have used any personal computer, server, or e-mail systemto receive, store, review, prepare or transmit any Company Information, including but not limited to, Confidential Information,2 I agree to provide the Company with a computer-useable copy of all such Confidential Information and then permanently deleteand expunge such Confidential Information from those systems; and I agree to provide the Company access to my system as reasonablyrequested to verify that the necessary copying and/or deletion is completed. I further agree that any property situated on Company’spremises and owned by Company is subject to inspection by Company’s personnel at any time with or without notice. Prior to thetermination of my employment or promptly after termination of my employment, I will cooperate with Company in attending an exitinterview and certify in writing that I have complied with the requirements of this section. 6. NOTIFICATION OF NEW EMPLOYER. If I leave the employ of Company, I consent to the notification of my new employer ofmy rights and obligations under this Agreement, by Company providing a copy of this Agreement or otherwise. 7. GENERAL PROVISIONS. 7.1 Governing Law and Venue. This Agreement and any action related thereto will be governed and interpreted by and underthe laws of the State of Arizona; without giving effect to any conflicts of laws principles that require the application of the law of adifferent state. I expressly consent to personal jurisdiction and venue in the state and federal courts for the county in which Company’sprincipal place of business is located for any lawsuit filed there against the by Company arising from or related to this Agreement. 7.2 Severability. If any provision of this Agreement is, for any reason, held to be invalid or unenforceable, the other provisionsof this Agreement will remain enforceable and the invalid or unenforceable provision will be deemed modified so that it is valid andenforceable to the maximum extent permitted by law. 7.3 Survival. This Agreement shall survive the termination of my employment and the assignment of this Agreement byCompany to any successor or other assignee and be binding upon my heirs and legal representatives. 7.4 Employment. I agree and understand that nothing in this Agreement shall give me any right to continued employment byCompany, and it will not interfere in any way with my right or Company’s right to terminate my employment at any time, with or withoutcause and with or without advance notice. 7.5 Notices. Each party must deliver all notices or other communications required or permitted under this Agreement in writingto the other party at the address listed on the signature page, by courier, by certified or registered mail (postage prepaid and return receiptrequested), or by a nationally-recognized express mail service. Notice will be effective upon receipt or refusal of delivery. If delivered bycertified or registered mail, notice will be considered to have been given five (5) business days after it was mailed, as evidenced by thepostmark. If delivered by courier or express mail service, notice will be considered to have been given on the delivery date reflected by thecourier or express mail service receipt. Each party may change its address for receipt of notice by giving notice of the change to the otherparty. 7.6 Injunctive Relief. I acknowledge that, because my services are personal and unique and because I will have access to theConfidential Information of Company, any breach of this Agreement by me would cause irreparable injury to Company for whichmonetary damages would not be an adequate remedy and, therefore, will entitle Company to injunctive relief (including specificperformance). The rights and remedies provided to each party in this Agreement are cumulative and in addition to any other rights andremedies available to such party at law or in equity. 7.7 Waiver. Any waiver or failure to enforce any provision of this Agreement on one occasion will not be deemed a waiver ofthat provision or any other provision on any other occasion. 7.8 Export. I agree not to export, directly or indirectly, any U.S. technical data acquired from Company or any productsutilizing such data, to countries outside the United States, because such export could be in violation of the United States export laws orregulations. 7.9 Entire Agreement. If no other agreement governs nondisclosure and assignment of inventions during any period in whichI was previously employed or am in the future employed by Company as an independent contractor, the obligations pursuant to sections ofthis Agreement titled ‘‘Confidential Information Protections’’ and ‘‘Inventions” shall apply. This Agreement is the final, complete andexclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior communications betweenus with respect to such matters. No modification of or amendment to this Agreement, or any waiver of any rights under this Agreement, willbe effective unless in writing and signed by me and the CEO of Company. Any subsequent change or changes in my duties, salary orcompensation will not affect the validity or scope of this Agreement. 3 This Employee Proprietary Information and Inventions Assignment Agreement shall be effective as of the first day of myemployment with Company. EMPLOYEE: I HAVE READ, UNDERSTAND, AND ACCEPT THISAGREEMENT AND HAVE BEEN GIVEN THE OPPORTUNITYTO REVIEW IT WITH INDEPENDENT LEGAL COUNSEL. COMPANY: EVERSPIN TECHNOLOGIES, INC. ACCEPTED AND AGREED: /s/ Annie Flaig /s/ Jim Everett(Signature) (Signature) By:/s/ Annie Flaig By:/s/ Jim Everett Title:SVP, WW Sales Title:Director of Human Resources Date:5/12/17 Date:April 26, 2017 Address:301 Mission ST #10ESan Francisco, CA 94105 Address:1347 N. Alma School Rd. Suite #220Chandler, AZ 85224 4 EXHIBIT A INVENTIONS 1. Prior Inventions Disclosure. The following is a complete list of all Prior Inventions (as provided in Section 2.2 of the attachedEmployee Proprietary Information and Inventions Assignment Agreement, defined herein as the “Agreement”): ☒ None ☐ See immediately below: 2. Limited Exclusion Notification. THIS IS TO NOTIFY you in accordance with any applicable Specific Inventions Law that the foregoing Agreement between youand Company does not require you to assign or offer to assign to Company any Invention that you develop entirely on your own timewithout using Company’s equipment, supplies, facilities or trade secret information, except for those Inventions that either: a. Relate at the time of conception or reduction to practice to Company’s business, or actual or demonstrably anticipatedresearch or development; or b. Result from any work performed by you for Company.To the extent a provision in the foregoing Agreement purports to require you to assign an Invention otherwise excluded from thepreceding paragraph, the provision is against the public policy of this state and is unenforceable. This limited exclusion does not apply to any patent or Invention covered by a contract between Company and the United Statesor any of its agencies requiring full title to such patent or Invention to be in the United States.A-1Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-8 No. 333-214018) pertaining to the Everspin Technologies, Inc. 2008 EquityIncentive Plan, 2016 Equity Incentive Plan and the 2016 Employee Stock Purchase Plan,(2)Registration Statement (Form S-8 No. 333-219938) pertaining to the Everspin Technologies, Inc. 2016 EquityIncentive Plan and the 2016 Employee Stock Purchase Plan,(3)Registration Statement (Form S-3 No. 333-221331) of Everspin Technologies, Inc.,(4)Registration Statement (Form S-8 No. 333-225119) pertaining to the Everspin Technologies, Inc. 2016 EquityIncentive Plan and the 2016 Employee Stock Purchase Plan; of our report dated March 15, 2019, with respect to the financial statements of Everspin Technologies, Inc. included in thisAnnual Report (Form 10-K) for the year ended December 31, 2018. /s/ Ernst & Young LLP Phoenix, ArizonaMarch 15, 2019 Exhibit 31.1 Certification of the Principal Executive Officer I, Kevin Conley, certify that: 1.I have reviewed this Form 10-K of Everspin Technologies, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e), 15d-15(e)), and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred duringthe registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting. Date: March 15, 2019 /s/ Kevin ConleyKevin ConleyPresident and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2 Certification of Principal Financial Officer I, Jeffrey Winzeler, certify that: 1.I have reviewed this Form 10-K of Everspin Technologies, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e), 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred duringthe registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting. Date: March 15, 2019 /s/ Jeffrey WinzelerJeffrey Winzeler(Principal Financial Officer)  /s/ Kevin Conley Kevin Conley President and Chief Executive Officer(Principal Executive Officer) /s/ Jeffrey Winzeler Jeffrey Winzeler Chief Financial Officer(Principal Financial Officer)Exhibit 32.1 Certification Pursuant to18 U.S.C. Section 1350,As Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of Everspin Technologies, Inc. (the “Company”) on Form 10-K for the year endedDecember 31, 2018 (the “Report”), Kevin Conley, President and Chief Executive Officer of the Company, and JeffreyWinzeler, Chief Financial Officer of the Company, each hereby certifies, pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18of the United States Code (18 U.S.C. Section 1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that, to the best of his knowledge: 1.The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company. Date: March 15, 2019 This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and ExchangeCommission and is not to be incorporated by reference into any filing of Everspin Technologies, Inc. under the Securities Actof 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form10-K), irrespective of any general incorporation language contained in such filing. 

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