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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM TO
Commission File Number 001-37900
Everspin Technologies, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
26-2640654
(I.R.S. Employer
Identification No.)
5670 W. Chandler Boulevard, Suite 130
Chandler, Arizona 85226
(Address of principal executive offices including zip code)
Registrant’s telephone number, including area code: (480) 347-1111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001
Trading Symbol(s)
MRAM
Securities registered pursuant to Section 12(g) of the Act: None
Name of the exchange on which registered
The Nasdaq Stock Market LLC
Indicate 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 the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of
“large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b). ☐
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 30, 2023, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock of the Registrant 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, was approximately $191.0 million. Shares of common stock held by each officer,
director and entities affiliated with directors have been excluded because such persons may 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 a conclusive determination for any other purpose.
The number of shares of Registrant’s common stock outstanding as of February 26, 2024, was 21,225,496.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the end
of the Registrant’s fiscal year ended December 31, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
PART I
Table of Contents
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
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Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements concerning our business, operations and
financial performance and condition, as well as our plans, objectives and expectations for our business operations and
financial performance and condition. Any statements contained herein that are statements of events or results that may
occur in the future are deemed to be forward-looking statements. In some cases, forward-looking statements can be
identified by terminology such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “due,” “estimate,”
“expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “will,”
“would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of
these terms or other comparable terminology, although not all forward-looking statements contain these words. These
forward-looking statements include, 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;
● our expectations regarding current supply constraints;
● competitive companies and technologies and our industry;
● our ability to manage and grow our business by expanding our sales to existing customers or introducing our
products to new customers;
● our ability to establish and maintain intellectual property (IP) protection for our products or avoid claims of
infringement;
● 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 projections
about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of
future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some
cases 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 the significant uncertainties in these forward-looking statements, these statements should not be regarded as a
representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time
frame, or at all. Factors that 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. Additionally, there may be other risks that are otherwise described from time to time in the reports that we
file with the Securities and Exchange Commission (SEC). We caution investors that our business and financial
performance are subject to substantial risks and uncertainties. Except as required by law, we assume no obligation to
update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant
subject. These statements are based upon information available to us as of the date of this report, and while we believe such
information forms a reasonable basis for such statements, such information may be limited or incomplete, and our
statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially
available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely
upon these statements.
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Risk Factor Summary
We are subject to a variety of risks and uncertainties, including risks related to our financial condition, risks related to
our business and our industry, risks related to our intellectual property and technology, risks related to regulatory matters
and compliance, risks related to our common stock and certain general risks, which could have a material adverse effect on
our business, financial condition, results of operations and cash flows. These risks include, but are not limited to, the
following principal risks:
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We may need additional funding and may be unable to raise capital when needed, which could force us to
delay, reduce, or eliminate planned activities.
We cannot be certain that we will sustain profitability.
The limited history of STT-MRAM adoption makes it difficult to evaluate our current business and future
prospects.
We may be unable to match production with customer demand for a variety of reasons including
macroeconomic factors due to the cyclical nature of the semiconductor industry, our inability to accurately
forecast customer demand, supply chain constraints, or the capacity constraints of our suppliers, which could
adversely affect our operating results.
As we expand into new potential markets, we expect to face intense competition, including from our
customers and potential customers, and may not be able to compete effectively, which could harm our
business.
We rely on third parties to distribute, manufacture, package, assemble and test our products, which exposes
us to a number of 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.
Disruptions in our supply chain may adversely impact our ability to fulfill customer demand which, in turn,
may adversely impact our business, results of operations, and financial condition.
Our joint development agreement and strategic relationships involve numerous risks.
We must continuously develop new and enhanced products, and if we are unable to successfully market our
new and enhanced products for which we incur significant expenses to develop, our results of operations and
financial condition will be materially adversely affected.
Our success and future revenue depend on our ability to secure design wins and on our customers’ ability to
successfully sell the products that incorporate our solutions. Securing design wins is a lengthy, expensive,
and competitive process, and may not result in actual orders and sales, which could cause our revenue to
decline.
The loss of one or several of our customers or reduced orders or pricing from existing customers may have a
significant adverse effect on our operations and financial results.
We face competition and expect competition to increase in the future. If we fail to compete effectively, our
revenue growth and results of operations will be materially and adversely affected.
Our costs may increase substantially if we or our third-party manufacturing contractors do not achieve
satisfactory product yields or quality.
The complexity of our products may lead to defects, which could negatively impact our reputation with
customers and result in liability.
We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving
higher levels of design integration, which may result in reduced manufacturing yields, delays in product
deliveries and increased expenses.
Changes to industry standards and technical requirements relevant to our products and markets could
adversely affect our business, results of operations, and prospects.
Our success depends on our ability to attract and retain key employees, and our failure to do so could harm
our ability to grow our business and execute our business strategies.
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We currently maintain, and are seeking to expand, operations outside the United States which exposes us to
significant risks.
For a more complete discussion of the material risk factors applicable to us, see “Risk Factors” in Part I, Item 1A of this
report.
Item 1. Business.
General
PART I
Everspin is a pioneer in the successful commercialization of Magnetoresistive Random Access Memory (MRAM)
technology. Our portfolio of MRAM technologies, including Toggle MRAM and Spin-transfer Torque MRAM (STT-
MRAM), is delivering superior performance, persistence and reliability in non-volatile memories that transform how
mission-critical data is protected against power loss. With over 15 years of MRAM technology and manufacturing
leadership, our memory solutions deliver significant value to our customers in key markets such as industrial, medical,
automotive/transportation, aerospace, and data center. We are the leading supplier of discrete MRAM components and a
successful licensor of our broad portfolio of related technology intellectual property.
We sell our products directly and through our established distribution channels to industry-leading original equipment
manufacturers (OEMs) and original design manufacturers (ODMs).
We manufacture our MRAM products using both captive and third-party manufacturing capabilities. We purchase
industry-standard complementary metal-oxide semiconductor (CMOS) wafers from semiconductor foundries and perform
back end of line (BEOL) processing that includes our magnetic-bit technology at our 200mm fabrication facility in
Chandler, Arizona. We also manufacture full-flow 300mm CMOS wafers with our STT-MRAM magnetic-bit technology
integrated in BEOL as part of our strategic relationship with GLOBALFOUNDRIES.
For the years ended December 31, 2023 and 2022, we recorded revenue of $63.8 million and $60.0 million, gross
margin of 58.4% and 56.6%, and net income of $9.1 million and $6.1 million, respectively. Our headquarters is located in
Chandler, Arizona. Our principal design center is in Austin, Texas, and we have additional sales operations in the
Americas, Europe, and Asia-Pacific regions.
Product Overview
We have a strong track record of innovation in MRAM technology, as demonstrated by our successive introduction of
MRAM products that address an increasingly broad spectrum of applications. Our MRAM discrete solutions as well as
other offerings are described as follows:
Toggle MRAM
Our Toggle MRAM products have been in production since 2008 and are currently shipping in 128kb to 32Mb
densities. These high performance, non-volatile memories are designed primarily to address applications in the industrial,
medical, automotive/transportation, and data center markets. We offer these products with industry standard interfaces,
including Parallel, Serial Peripheral Interface (SPI) and Quad SPI (QSPI) interfaces, enabling our customers to easily
replace legacy memory components like Static Random Access Memory (SRAM) and Ferroelectric Random Access
Memory (FRAM) with Toggle MRAM. We have never had an end-of-life event for any of our Toggle MRAM products
which enables our customers to design in a product with the assurance that it will be available for many years to come.
Spin-Transfer Torque MRAM
STT-MRAM technology can be tuned to deliver products in Dynamic Random Access Memory (DRAM), SRAM and
NOR Flash applications. Our STT-MRAM products targeting DRAM replacement started production in 2017 and are
currently shipping in 256Mb and 1Gb densities. These high density, high performance persistent memories are
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delivering significant value to SSD, Persistent Memory Cards, Fabric Accelerator, and other applications in the data center
market. We offer these products with DDR3 and DDR4 derivative interfaces, facilitating the replacement of battery-backed
DRAM with STT-MRAM.
STT-MRAM enabled scaling of our Toggle MRAM products to higher densities on advanced CMOS nodes. In 2022,
we started production of high density (8Mb to 128Mb) STT-MRAM products on 28nm CMOS node with standardized SPI,
xSPI, QSPI, and Octal SPI (OSPI) interfaces. These products are enabling our customers to simplify their system
architecture and easily replace legacy memory components like SRAM and FRAM. They are ideal for use in electronic
systems where data persistence and integrity, low power, low latency, and security are paramount, such as industrial IoT,
artificial intelligence (AI), network/enterprise infrastructure, process automation and control, aeronautics/avionics,
medical, and gaming.
Due to the limitations of NOR scaling past 45nm and availability of STT-MRAM on 22nm technology, we believe
there is potential for STT-MRAM to enter multiple non-volatile memory (NVM) markets where fast reads/writes, high
cycle counts, and extended data retention are required. We introduced the first STT-MRAM product addressing this
segment of the market in 2022 and are currently shipping in 16Mb to 128Mb densities. STT-MRAM is uniquely positioned
to deliver higher density (> 256Mb) monolithic parts for NOR replacement. These products are ideal for replacing NOR in
Field Programmable Gate Array (FPGA) systems to store configuration memory and simultaneously enabling 100x faster
Over The Air (OTA) updates. Today, no viable single chip solution exists except STT-MRAM.
Typically, on power up of a FPGA, the configuration memory that is stored off- or on- chip in a NOR chip is
downloaded to the SRAM cells that execute the Look Up Tables (LUTs). This sequence of events creates a time lag
between the power up and the execution of the LUTs. In addition, there is a security concern with the download of the
configuration bit stream from the NOR to the SRAM. We have developed our STT-MRAM technology to act as the
"configuration memory” in a FPGA eliminating the security concern and enabling instant-on characteristics. Furthermore,
the STT-MRAM based configuration memory can be programmed multiple times with OTA updates or can be hard coded
depending on the application. Since STT-MRAM can be scaled to advanced nodes and is already available on 22nm,
monolithic embedded solutions are possible, we believe this solution is ideal for next generation FPGAs.
TMR Sensors
Our 3D Tunnel Magneto Resistance (TMR) sensors provide extremely high magnetic sensitivity in a single
component that performs 3D magnetic field measurements in a monolithic solution. We offer these die-level devices to be
integrated into consumer electronic applications that utilize a high sensitivity 3D compass function.
Licensing, Royalty, and Patent Overview
We leverage our broad IP portfolio to enable licensing, royalty revenue streams, and patent sales from non-core
applications that can derive valuable differentiation through the use of Everspin MRAM and TMR sensor IP. For example,
this includes the following:
● We have licensed GLOBALFOUNDRIES to offer embedded MRAM in the solutions they manufacture for their
customers providing high-performance non-volatile embedded memory.
● We have licensed base MRAM design technology (EAR99) for use in radiation tolerant aerospace applications
to customers for their custom designs.
● We have licensed TMR sensor IP in 3D magnetic field sensing.
● We have completed patent sales by transferring, assigning, and delivering patents to customers.
● We have executed agreements for the development of a strategic radiation hardened (RAD-Hard) field
programmable gate array product, consisting of technology and design licenses.
Foundry Services Overview
In our Chandler facility, we perform BEOL manufacturing services for customers who want to add MRAM and TMR
sensor functionality to their memory or application base circuits. These services allow aerospace and satellite
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electronic system manufacturers to integrate our EAR99 technology that is able to withstand exposure to the levels of
radiation encountered in avionics and space applications by virtue of such technology being magnetic rather than electrical
charge based which would be susceptible to alpha particles.
Sales and Marketing
We sell our products through a direct sales channel and a network of representatives and distributors. The majority of
our customers, and their associated contract manufacturers, buy our products through our distributors. We maintain sales,
support, supply chain and logistics operations and have distributors in Asia to service the production needs of contract
manufacturers. We also maintain direct selling relationships with several strategic customers. Our direct sales
representatives are located in North America, Germany, Italy, Japan, Hong Kong, and Taiwan.
Our typical sales cycle consists of a sales and development process in which our field engineers and sales personnel
work closely with our customers’ design engineers. This process can take from three to 18 months to complete, and a
successful sales cycle culminates in a design win. Note that some customers of our STT-MRAM products may need to
modify their controllers to integrate our technology, adding additional time to the cycle. Once we establish a relationship
with a customer, we continue a sales process to maintain our position and to secure subsequent new design wins at the
customer. 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
future business potential of the opportunities.
We have established relationships with several storage controller and FPGA companies, including Phison Electronics,
Sage Micro, and Xilinx as well as IP core companies, including Cadence and Northwest Logic, to facilitate the integration
of our MRAM solutions into our customers’ end products.
Our technical support personnel have expertise in hardware and software, and have access to our development team
to ensure proper service and support for our OEM customers. Our field application and engineering team provides
technical training and design support to our customers.
We consider our customer to be an end customer purchasing either directly from a distributor or a contract
manufacturer, or a customer purchasing directly from us. An end customer purchasing through a contract manufacturer
typically instructs the contract manufacturer to obtain our products and to incorporate our products with other components
for sale by the contract manufacturer to the end customer. Although we actually sell the products to, and are paid by, the
distributors and contract manufacturers, we refer to the end customer as our customer.
During the year ended December 31, 2023, more than 1,400 end customers purchased our products. Our two largest
end customers together accounted for 22% of our total revenue for the year ended December 31, 2023, and each of these
customers accounted for more than 10% of our revenue during that period. Our four largest end customers together
accounted for 24% of our total revenue for the year ended December 31, 2022, and one of those customers individually
accounted for more than 10% of our total revenue during the period.
Manufacturing
We rely on third-party suppliers for most phases of the manufacturing process, including initial fabrication, final test,
and assembly.
Wafer Manufacturing
We perform BEOL manufacturing for our Toggle MRAM products and provide foundry services for licensed MRAM
products and Magnetic Tunnel Junction (MTJ)-based sensors in our 200mm manufacturing facility. Our facility is in an
ISO-4 clean room and our 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 300mm fabrication facilities operated by GLOBALFOUNDRIES.
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Assembly and Test
Our product and test engineering teams develop and implement wafer-level and final test programs for the
manufacture of our MRAM devices.
We utilize third-party industry-leading assembly and test sub-contractors, including Amkor, OSE, GTC, ChipMos and
UTAC. We have successfully qualified our MRAM devices in various packages at temperatures ranging from commercial
to automotive grade. As part of our commitment to quality, our quality management system has been certified to ISO
9001:2015 and ISO 14001:2015 standards. Our foundry vendors and sub-contractors are also ISO 9001 and ISO 14001
certified.
Arrangements with GLOBALFOUNDRIES
Joint Development Agreement
Since October 17, 2014, we have participated in a joint development agreement with GLOBALFOUNDRIES Inc., a
semiconductor foundry, for the joint development of STT-MRAM technology to produce a family of discrete and
embedded MRAM technologies. The term of the agreement is until the completion, termination, or expiration of the last
statement of work entered into pursuant to the joint development agreement. The agreement was extended on December
31, 2019 to include a new phase of support for 12nm MRAM development.
The joint development agreement also states that the specific terms and conditions for the production and supply of
the developed MRAM technology would be pursuant to a separate manufacturing agreement entered into between the
parties. See “Manufacturing Agreement” below.
Under the joint development agreement, each party granted licenses to its relevant intellectual property to the other
party. For certain jointly developed works, the parties have agreed to follow an invention allocation procedure to determine
ownership. In addition, GLOBALFOUNDRIES possesses the exclusive right to manufacture our discrete and embedded
STT-MRAM devices developed pursuant to the agreement until the earlier of three years after the qualification of the
MRAM device for a particular technology node or four years after the completion of the relevant statement of work under
which the device was developed. For the same exclusivity period associated with the relevant device,
GLOBALFOUNDRIES agreed not to license intellectual property developed in connection with the agreement to named
competitors of ours.
If GLOBALFOUNDRIES manufactures, sells, or transfers wafers containing production qualified MRAM devices
that utilized certain Everspin design information to its customers, 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
the agreement, liability under the agreement is capped at a range depending on project costs and royalty amounts. Either
party may terminate the agreement if the other party materially breaches a term of the agreement, and fails to remedy the
breach after receiving notice from the non-breaching party. If a party terminates the manufacturing agreement for material
breach in accordance with its terms, that party may also terminate the joint development agreement.
See “Risk Factors” for further discussion of our agreements with GLOBALFOUNDRIES.
Manufacturing Agreement
On October 23, 2014, we entered into a manufacturing agreement with GLOBALFOUNDRIES Singapore Pte. Ltd.
that sets forth the specific terms and conditions for the production and supply of wafers manufactured using our STT-
MRAM technology developed under the joint development agreement with GLOBALFOUNDRIES. Pursuant to that joint
development agreement, GLOBALFOUNDRIES possesses certain exclusive rights to manufacture such wafers for our
discrete and embedded STT-MRAM devices. Our manufacturing agreement with GLOBALFOUNDRIES includes a
customary 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 and
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completion of the notice period. The initial term of the manufacturing agreement is for three years, which automatically
renews 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
the agreement, liability under the agreement is capped at the lesser of a set amount or the total purchase price received by
GLOBALFOUNDRIES from us in the 12 months immediately preceding the claim for the specific product that caused the
damages. Either party may terminate the agreement if the other party materially breaches a term of the agreement, and fails
to remedy the breach after receiving notice from the non-breaching party. GLOBALFOUNDRIES may terminate the
agreement if we fail to pay any undisputed sum which has been outstanding for sixty or more days from the date of
invoice.
Product Warranty
Because the design and manufacturing process for semiconductor products is highly complex, it is possible that we
may produce products that do not comply with applicable specifications, contain defects, or are otherwise incompatible
with end uses. In accordance with industry practice, we generally provide a limited warranty that our products are in
compliance with applicable specifications existing at the time of delivery and will operate to those specifications during a
stated warranty period. Under our standard terms and conditions of sale, liability for certain failures of product during a
stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to,
amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty coverage than that
provided under our standard terms and conditions.
Competition
As an emerging specialty memory product supplier, we face intense competition from a wide variety of other memory
technology manufacturers.
Our principal competitors to our Toggle MRAM products include companies that offer nonvolatile SRAM
(NVSRAM), SRAM, and FRAM products, such as Infineon, Fujitsu, Integrated Silicon Solution (ISSI), Macronix,
Microchip, Micron, Renesas, Samsung and Toshiba. Our STT-MRAM products replace discrete NOR, DRAM and
NVSRAM where persistence is required and thus compete with DRAM and NVSRAM suppliers such as Hynix, Micron,
Winbond, Samsung, and several other smaller companies. In the future we may also face competition from companies
developing MRAM technologies, such as Avalanche, Samsung and other larger and smaller semiconductor companies. We
may also face indirect competition from resistive random-access memory (RRAM), NOR and NAND Flash manufacturers
in some market applications.
Our ability to compete successfully in the market for our products is based on a number of factors, including:
● our products’ attributes and specifications;
● customer adoption of MRAM technology despite the price per bit premium of our products versus competing
technologies;
● 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;
● product manufacturing yield analysis and testing;
● manufacturing capacity and allocation;
● reputation and strength of customer relationships;
● competitive pricing in the market against the competition while maintaining our gross margin profile; and
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● our success in meeting the needs of future customer requirements through continued development of new
products.
Intellectual Property
Our success depends, in part, on our ability to protect our products and technologies from unauthorized third-party
copying and use. To accomplish this, we rely on a combination of intellectual property rights, including patents, trade
secrets, copyrights, and trademarks, as well as customary contractual protections. As of December 31, 2023, we held 529
issued patents that expire at various times between March 2026 and February 2044 and had 136 patent applications
pending. 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 United
Kingdom.
We seek to file for patents that have broad application in the semiconductor industry and that would be helpful in the
magnetoresistive memory and sensor markets. However, there can be no assurance that our pending patent applications or
any future applications will be approved, that any issued patents will provide us with competitive advantages or will not be
challenged by third parties, or that the patents or applications of others will not have an adverse effect on our ability to do
business. In addition, there can be no assurance that others will not independently develop substantially equivalent
intellectual property or otherwise gain access to our trade secrets or intellectual property, or disclose such intellectual
property 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 and patent sales in
return for cash remuneration, patent cross licenses or both. See “Licensing, Royalty, and Patent Overview” for additional
information.
We generally control access to and use of our confidential information through employing internal and external
controls, including contractual protections with employees, contractors, and customers. We rely in part on U.S. and
international copyright laws to protect our intellectual property. All employees and consultants are required to execute
confidentiality agreements in connection with their employment and consulting relationships with us. We also require them
to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting
relationship.
Environmental Regulation
We 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
been designed to comply with these regulations and we believe that our activities are conducted in material compliance
with such regulations. Any changes in such regulations or in their enforcement could require us to acquire costly
equipment or to incur other 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.
Employees
As of December 31, 2023, we had 83 total employees in the United States, of which 82 were full-time employees and
one was a part-time employee, along with 18 full-time equivalent and four part-time equivalent contractors and consultants
in the United States, China, Germany, Italy, Japan, Malaysia, Singapore, and Taiwan. None of our employees are either
represented by a labor union or subject to a collective bargaining agreement. We have not experienced any work stoppages,
and we consider our relations with our employees and contractors to be good.
Corporate Information
We were incorporated in Delaware in May 2008. In June 2008, Freescale Semiconductor, Inc. (now a wholly-owned
subsidiary of NXP Semiconductors N.V.), spun-out its MRAM business as Everspin. Our offices are located at 5670 W.
Chandler Boulevard, Suite 130, Chandler, Arizona 85226. Our telephone number is (480) 347-1111. Our corporate website
is at www.Everspin.com.
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Available Information
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(Exchange Act), are available free of charge on our website, as soon as reasonably practicable after we electronically file
them with, or furnish them to, the SEC. The information contained on or that can be accessed through our website is not
incorporated by reference into this report, and information on our website should not be considered 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 contained
in any forward-looking statements made by us or on our behalf. The risks and uncertainties described below are not the
only ones we face. Additional risks and uncertainties not presently known to us or that we deem immaterial also may
impair our business operations. If any of the following risks or such other risks actually occurs, our business, financial
condition, results of operations and cash flows could be harmed.
Risk Factors Related to Our Financial Condition
We may need additional funding and may be unable to raise capital when needed, which could force us to delay, reduce,
or eliminate planned activities.
Our total revenue was approximately $63.8 million for the year ended December 31, 2023, and $60.0 million for the
year ended December 31, 2022. As of December 31, 2023, we had cash and cash equivalents of approximately $36.9
million. Based on our current operating plan, we believe our existing cash and cash equivalents, coupled with our
anticipated growth and sales levels, will be sufficient to meet our anticipated cash requirements for at least the next 12
months. However, our existing capital may be insufficient to meet our long-term requirements. We have no committed
sources of funding and there is no assurance that additional funding will be available to us in the future or be secured on
acceptable terms. If adequate funding is not available when needed, we may be forced to curtail operations, including our
commercial activities and research and development programs, or cease operations altogether, file for bankruptcy, or
undertake any combination of the foregoing. In such event, our stockholders may lose their entire investment in our
company.
Further, we may need to raise additional funds through financings or borrowings in order to accomplish our long-term
planned objectives. If we raise additional funds through issuances of equity, convertible debt securities or other securities
convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our
company, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of
our common stock.
In addition, if we do not meet our payment obligations to third parties as they become due, we may be subject to
litigation claims and our creditworthiness would be adversely affected. Even if we are successful in defending against these
claims, litigation could result in substantial costs and would be a distraction to management, and may have other
unfavorable results that could further adversely impact our financial condition. Stockholders should not rely on our balance
sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be
available for distribution to stockholders, in the event of liquidation.
We cannot be certain that we will sustain profitability.
While our products offer unique benefits over other industry memory technologies, the rate of adoption of our products
and our ability to capture market share from legacy technologies is uncertain. Our revenue may also be adversely impacted
by a number of other possible reasons, many of which are outside our control, including business conditions that adversely
affect the semiconductor memory industry resulting in a decline in end market demand for our products, adverse impacts
resulting from COVID-19, increased competition, ongoing supply chain constraints, or our failure to capitalize on growth
opportunities. We also rely on achieving specific cost reduction targets that have uncertainty in their timing and magnitude.
We may also incur unforeseen expenses in the ongoing operation of our
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business that cause us to exceed our operational spending plan. As a result, our ability to generate sufficient revenue
growth and/or control expenses to transition to profitability and generate consistent positive cash flows is uncertain.
Risk Factors Related to Our Business and Our Industry
The limited history of STT-MRAM adoption makes it difficult to evaluate our current business and future prospects.
We have been in existence as a stand-alone company since 2008, when Freescale Semiconductor, Inc. (subsequently
acquired by NXP Semiconductor) spun-out its MRAM business as Everspin. We have been shipping magnetoresistive
random-access memory (MRAM) products since our incorporation in 2008. However, we only began to manufacture and
ship our STT-MRAM products in the fourth quarter of 2017. We began to manufacture our second set of STT-MRAM
products targeting the NVSRAM markets in the fourth quarter of 2022.
Our limited experience in selling our STT-MRAM products, combined with the rapidly evolving and competitive
nature of our markets, makes it difficult to evaluate our current business and future prospects. In addition, we have limited
insight into emerging trends that may adversely affect our business, financial condition, results of operations and prospects.
We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in
rapidly changing industries, including unpredictable and volatile revenue and increased expenses as we continue to grow
our business. The viability and demand for our products may be affected by many factors outside of our control, such as the
factors affecting the growth of the industrial, automotive, transportation, and data center market segments and changes in
macroeconomic conditions. If we do not manage these risks and overcome these difficulties successfully, our business will
suffer.
We may be unable to match production with customer demand for a variety of reasons including macroeconomic
factors due to the cyclical nature of the semiconductor industry, our inability to accurately forecast customer demand,
supply chain constraints, 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, component
procurement commitments, personnel needs, and other resource requirements, based on our estimates of product demand
and customer requirements. Our products are typically purchased pursuant to individual purchase orders. While our
customers may provide us with their demand forecasts, they are not contractually committed to buy any quantity of
products beyond purchase orders. Furthermore, many of our customers may increase, decrease, cancel, or delay purchase
orders already in place without significant penalty. The short-term nature of commitments by our customers and the
possibility of unexpected changes 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 procurement commitments, and reduce our gross margin. If we overestimate customer demand,
we may purchase products that we may not be able to sell, which could result in decreases in our prices or write-downs of
unsold inventory. Conversely, we could lose sales opportunities and could lose market share or damage our customer
relationships if, for example, we underestimate customer demand, are affected by supply chain constraints, or sufficient
manufacturing is unavailable. We manufacture MRAM products at our 200mm facility we lease in Chandler, Arizona and
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 also
render significant portions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpected
expenses or write-downs of inventory values that could adversely affect our business, operating results, and financial
condition.
As we expand into new potential markets, we expect to face intense competition, including from our customers and
potential 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 currently
operating. The markets in which we operate and may operate in the future are extremely competitive and are characterized
by rapid technological change, continuous evolving customer requirements and declining average selling prices. We may
not be able to compete successfully against current or potential competitors, which include our current or potential
customers as they seek to internally develop solutions competitive with ours or as we develop products potentially
competitive with their existing products. If we do not compete successfully, our market share and revenue may decline. We
compete with large semiconductor manufacturers and designers and others, and our current and
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potential competitors have longer operating histories, significantly greater resources and name recognition and a larger
base of customers than we do. This may allow them to respond more quickly than we can to new or emerging technologies
or changes in customer requirements. In addition, these competitors may have greater credibility with our existing and
potential customers. Some of our current and potential customers with their own internally developed 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
number of 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 from
third parties and outsource the manufacturing, packaging, assembly and testing of our products to third-party foundries and
assembly and testing service providers. We use a single foundry, GLOBALFOUNDRIES Singapore Pte. Ltd., for
production of higher density products on advanced technology nodes. Our primary product package and test operations are
located in China, Taiwan and other Asian countries. We also use standard CMOS wafers from third-party foundries, which
we process at our Chandler, Arizona facility.
Relying 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 ongoing
development, manufacturing and operational activities, or on the amount, timing, or nature of further investments
in our joint development;
● capacity and materials shortages during periods of high demand or supply constraints;
● 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 including due to inflation.
Our manufacturing agreement with GLOBALFOUNDRIES includes a customary 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. However, our manufacturing arrangement is also subject
to both a minimum and maximum order quantity that while we believe currently addresses our projected foundry capacity
needs, may not address our maximum foundry capacity requirements in the future. We may also be obligated to pay for
unused capacity if our demand decreases in the future, or if our estimates prove inaccurate. GLOBALFOUNDRIES also
has the ability to discontinue its manufacture of any of our wafers upon due notice and completion of the notice period.
This could cause us to have to find another foundry to manufacture those wafers or redesign our core technology and
would mean that we may not have products to sell until such time. Any time spent engaging a new manufacturer or
redesigning our core technology 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 core technology, this could cause material harm to our business and operating results.
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If we need other foundries or packaging, assembly, and testing contractors, or if we are unable to obtain timely and
adequate deliveries from our providers, we might not be able to cost-effectively and quickly retain other vendors to satisfy
our requirements. Because the lead time needed to establish a relationship with a new third-party supplier could be several
quarters, there is no readily available alternative source of supply for any specific component. In addition, the time and
expense to qualify a new foundry could result in additional expense, diversion of resources or lost sales, any of which
would negatively impact our financial results.
If any of our current or future foundries or packaging, assembly and testing subcontractors significantly increases the
costs of wafers or other materials or services, interrupts or reduces our supply, including for reasons outside of their
control, such as due to COVID-19, or if any of our relationships with our suppliers is terminated, our operating results
could be adversely affected. Such occurrences could also damage our customer relationships, result in lost revenue, cause a
loss in market share, or damage our reputation.
Disruptions in our supply chain and increased cost of components used in our products may adversely impact our
business, results of operations and financial condition, including our ability to fulfill customer demand.
If we fail to procure sufficient components used in our products, we may be unable to deliver our products to our
customers on a timely basis, which could lead to customer dissatisfaction and could harm our reputation and ability to
compete. We would likely experience significant delays or cessation in producing some of our products if a labor strike,
natural disaster, public health crisis, geopolitical event, or other supply disruption were to occur, including as a result of
COVID-19 or the military conflict in Ukraine, at any of our main suppliers.
Further, the upturn in the semiconductor industry has stretched the supply chain, and we are subject to supply
shortages, as well as higher costs as suppliers opportunistically raise prices. For example, there is currently a worldwide
shortage of semiconductor, memory and other electronic components affecting many industries. Our products are
dependent on some of these electronic components. A continued shortage of electronic components may impact us
significantly and could cause us to experience extended lead times and increased prices from our suppliers, which could be
significant. Extended lead times and decreased availability of key components could result in a significant disruption to our
production schedule, all of which would have an adverse effect on our business, results of operations and financial
condition. Additionally, the military conflict in Ukraine creates additional uncertainty and risks relating to our supply chain
and the cost of components. See “—General Risk Factors—Unfavorable economic, market and geopolitical conditions,
domestically and internationally, may adversely affect our business, financial condition, results of operations and cash
flows” for additional information.
We do not have any guarantees of supply from our third-party suppliers, and in certain cases we have limited
contractual arrangements or are relying on standard purchase orders or on component parts available on the open market,
which may further result in increased costs combined with reduced availability. A continued delay in our ability to produce
and deliver our products could also cause our customers to purchase alternative products from our competitors and/or harm
our reputation.
Our joint development agreement and strategic relationships involve numerous risks.
We have entered into strategic relationships to manufacture products and develop new manufacturing process
technologies and products. These relationships include our joint development agreement with GLOBALFOUNDRIES to
develop advanced MTJ technology and STT-MRAM. These relationships are subject to various risks that could adversely
affect 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 ongoing
development, manufacturing and operational activities, or on the amount, timing, or nature of further investments
in 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;
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● due to financial constraints, our joint development collaborators may be unable to meet their commitments to us
and 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
funding capital 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 to
less control over our critical production processes; and
● changes in tax, legal, or regulatory requirements may necessitate changes in our agreements.
The term of the agreement, as amended, is the completion, termination, or expiration of the last statement of work
entered into pursuant to the joint development agreement.
If our strategic relationships are unsuccessful, our business, results of operations, or financial condition may be
materially adversely affected.
We must continuously develop new and enhanced products, and if we are unable to successfully market our new and
enhanced products for which we incur significant expenses to develop, our results of operations and financial condition
will be materially adversely affected.
To compete effectively in our markets, we must continually design, develop, and introduce new and improved
technology and products with improved features in a cost-effective manner in response to changing technologies and
market demand. This requires us to devote substantial financial and other resources to research and development. We are
developing new technology and products, which we expect to be one of the drivers of our revenue growth in the future. We
also face the risk that customers may not value or be willing to bear the cost of incorporating our new and enhanced
products into their products, particularly if they believe their customers are satisfied with current solutions. Regardless of
the improved features or superior performance of our new and enhanced products, customers may be unwilling to adopt
our solutions due to design or pricing constraints, or because they do not want to rely on a single or limited supply source.
Because of the extensive time and resources that we invest in developing new 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, if we are unable to generate more customer adoption of our 1Gb
product and address new growth opportunities with subsequent STT-MRAM products, we may not be able to materially
increase our revenue. If we are unable to successfully develop and market our new and enhanced products that we have
incurred significant expenses developing, our results 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
successfully sell the products that incorporate our solutions. Securing design wins is a lengthy, expensive, and
competitive process, and may not result in actual orders and sales, which could cause our revenue to decline.
We sell to customers, including OEMs and ODMs, that incorporate MRAM into their products. A design win occurs
after a customer has tested our product, verified that it meets the customer’s requirements and qualified our solutions for
their products. We believe we are dependent, among other things, on the adoption of our 256Mb and 1Gb MRAM products
by our customers to secure design wins. Our customers may need several months to years to test, evaluate, and adopt our
product and additional time to begin volume production of the product that incorporates our solution. Due to this generally
lengthy design cycle, we may experience significant delays from the time we increase our operating expenses and make
investments in our products to the time that we generate revenue from sales of these products. Moreover, even if a
customer selects our solution, we cannot guarantee that this will result in any sales of our products, as the customer may
ultimately change or cancel its product plans, or efforts by our customer to market and sell its
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product may not be successful. We may not generate any revenue from design wins after incurring the associated costs,
which would cause our business and operating results to suffer.
If a current or prospective customer incorporates a competitor’s solution into its product, it becomes significantly more
difficult for us to sell our solutions to that customer because changing suppliers involves significant time, cost, effort, and
risk for the customer even if our solutions are superior to other solutions and remain compatible with their product design.
Our ability to compete successfully depends on customers viewing us as a stable and reliable supplier to mission-critical
customer applications 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 of design wins, our results of operations and business may be harmed.
The loss of one or several of our customers or reduced orders or pricing from existing customers may have a significant
adverse 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
customers during any particular period due in part to the concentration of market share in the semiconductor industry. Our
two largest end customers together accounted for 22% of our total revenue for the year ended December 31, 2023, and each
of these customers accounted for more than 10% of our revenue during that period. Our four largest end customers together
accounted for 24% of our total revenue for the year ended December 31, 2022, and one of those customers individually
accounted for more than 10% of our total revenue during the period. The loss of a significant customer, a business
combination among our customers, a reduction in orders or decrease in price from a significant customer or disruption in
any of our commercial or distributor arrangements may result in a significant decline in our revenues and could have a
material adverse effect on our business, liquidity, results of operations, financial condition, and cash flows.
We face competition and expect competition to increase in the future. If we fail to compete effectively, our revenue
growth and results of operations will be materially and adversely affected.
The global semiconductor market in general, and the semiconductor memory market in particular, are highly
competitive. We expect competition to increase and intensify as other semiconductor companies enter our markets, many
of which 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 revenue, and profitability and loss of market share, any of which could materially and adversely affect our
business, revenue, and operating results. Currently, our competitors range from large, international companies offering a
wide range of traditional memory technologies to companies specializing in other alternative, specialized emerging
memory technologies. Our primary memory competitors include Fujitsu, Infineon, Integrated Silicon Solution, Intel,
Macronix, Microchip, Micron, Renesas, Samsung, and Toshiba. In addition, as the MRAM market opportunity grows, we
expect new entrants may enter this market and existing competitors, including leading semiconductor companies, may
make significant investments to compete more effectively against our products. These competitors could develop
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;
● 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
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● the actions of our competitors, including merger and acquisition activity, launches of new products and other
actions that could change the competitive landscape.
In the event of a market downturn, competition in the markets in which we operate may intensify as our customers
reduce their purchase orders. Our competitors that are significantly larger and have greater financial, technical, marketing,
distribution, customer support and other resources or more established market recognition than us may be better positioned
to accept lower prices and withstand adverse economic or market conditions.
Our costs may increase substantially if we or our third-party manufacturing contractors do not achieve satisfactory
product yields or quality.
The fabrication process is extremely complicated and small changes in design, specifications or materials can result in
material decreases in product yields or even the suspension of production. From time to time, we and/or the third-party
foundries that we contract to manufacture our products may experience manufacturing defects and reduced manufacturing
yields. In some cases, we and/or our third-party foundries may not be able to detect these defects early in the fabrication
process or determine the cause of such defects in a timely manner. There may be a higher risk of product yield issues in
newer STT-MRAM products.
Generally, in pricing our products, we assume that manufacturing yields will continue to improve, even as the
complexity of our products increases. Once our products are initially qualified either internally or with our third-party
foundries, minimum acceptable yields are established. We are responsible for the costs of the units if the actual yield is
above the minimum set with our third-party foundries. If actual yields are below the minimum, we are not required to
purchase the units. Typically, minimum acceptable yields for our new products are generally lower at first and gradually
improve as we achieve 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 could substantially increase overall production time and costs and adversely impact our operating
results. Product yield losses may also increase 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.
The complexity of our products may lead to defects, which could negatively impact our reputation with customers and
result 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 or
hinder market acceptance of the products or result in a costly recall and could damage our reputation and adversely affect
our ability to retain existing customers and attract new customers. Defects could cause problems with the functionality of
our products, resulting in interruptions, delays, or cessation of sales of these products to our customers. We may also be
required to make significant expenditures of capital and resources to resolve such problems. We cannot assure our
stockholders that problems will not be found in new products, both before and after commencement of commercial
production, despite testing by us, our suppliers, or our customers. For example, 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.
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We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher
levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and
increased expenses.
We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available
from our third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to other
technologies to improve performance and reduce costs. These ongoing efforts require us from time to time to modify the
manufacturing processes for our products and to redesign some products, which in turn may result in delays in product
deliveries.
For example, as smaller line width geometry manufacturing processes become more prevalent, we intend to move our
future products to increasingly smaller geometries to integrate greater levels of memory capacity and/or functionality into
our products. This transition will require us and our third-party foundries to migrate to new designs and manufacturing
processes for smaller geometry products.
We may face difficulties, delays, and increased expense as we transition our products to new processes, and potentially
to new foundries. We will depend on our third-party foundries as we transition to new processes. We cannot assure our
stockholders that our third-party foundries will be able to effectively manage such transitions or that we will be able to
maintain our relationship with our third-party foundries or develop relationships with new third-party foundries. If we or
any of our third-party foundries experience significant delays in transitioning to new processes or fail to efficiently
implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased
expenses, any of which could harm our relationships with our customers and our operating results.
Changes to industry standards and technical requirements relevant to our products and markets could adversely affect
our business, results of operations and prospects.
Our products are only a part of larger electronic systems. All products incorporated into these systems must comply
with various industry standards and technical requirements created by regulatory bodies or industry participants to operate
efficiently together. Industry standards and technical requirements in our markets are evolving and may change
significantly over time. For our products, the industry standards are developed by the Joint Electron Device Engineering
Council, an industry trade organization. In addition, large industry-leading semiconductor and electronics companies play a
significant role in developing standards and technical requirements for the product ecosystems within which our products
can be used. Our customers also may design certain specifications and other technical requirements specific to their
products and 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 standards
and technical requirements. The emergence of new industry standards and technical requirements could render our
products incompatible with products developed by other suppliers or make it difficult for our products to meet the
requirements of certain of our customers in automotive, transportation, industrial, data storage, and other markets. As a
result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to
ensure compliance with relevant standards and requirements. If our products are not in compliance with prevailing industry
standards and technical requirements for a significant period of time, we could miss opportunities to achieve crucial design
wins, our revenue may decline and we may incur significant expenses to redesign our products to meet the relevant
standards, which could adversely affect our business, results of operations and prospects.
Our success depends on our ability to attract and retain key employees, and our failure to do so could harm our ability
to grow our business and execute our business strategies.
Our success depends on our ability to attract and retain our key employees, including our management team and
experienced engineers. Competition for personnel in the semiconductor memory technology field, and in the MRAM space
in particular, is intense, and the availability of suitable and qualified candidates is limited. We compete to attract and retain
qualified 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 startups
and MRAM groups within larger companies seeking to employ them. The members of our management and our key
employees are at-will. If we lose the services of any key senior management member or employee, we may not be able to
locate suitable or qualified replacements, and may incur additional expenses to recruit and train new
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personnel, which could severely impact our business and prospects. The loss of the services of one or more of our key
employees, especially our key engineers, or our inability to attract and retain qualified engineers, could harm our business,
financial condition, and results of operations.
We currently maintain and are seeking to expand operations outside of the United States which exposes us to significant
risks.
The success of our business depends, in large part, on our ability to operate successfully from geographically disparate
locations and to further expand our international operations and sales. Operating in international markets requires
significant resources and management attention and subjects us to regulatory, economic, and political risks that are
different from those we face in the United States. We cannot be sure that further international expansion will be successful.
In addition, we face risks in doing business internationally that could expose us to reduced demand for our products, lower
prices for our products or other adverse effects on our operating results. The success and profitability, as well as the
expansion, of our international operations are subject to numerous risks and uncertainties, many of which are outside of our
control, such as the following:
● public health issues, such as COVID-19, which can result in varying impacts to our business, employees, partners,
customers, distributors or suppliers internationally as discussed elsewhere in this “Risk Factors” section;
● difficulties, inefficiencies and costs associated with staffing and managing foreign operations;
● longer and more difficult customer qualification and credit checks;
● 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;
● changes in import/export laws, trade restrictions, regulations and customs and duties and tariffs (foreign and
domestic);
● 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 a
permanent establishment outside of the United States;
● the effectiveness of our policies and procedures designed to ensure compliance with the Foreign Corrupt Practices
Act of 1977 and similar regulations;
● fluctuations in currency exchange rates, which could increase the prices of our products to customers outside of the
United 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 sales
in currencies other than the U.S. dollar;
● new and different sources of competition;
● political, economic, and social instability;
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● terrorism and acts of war, such as the military conflict in Ukraine, which could have a negative impact on sales
throughout Europe and Asia; and
● US Department of Commerce regulations or restrictions on exports of certain semiconductor technologies and
equipment to China.
Our failure to manage any of these risks successfully could harm our operations and reduce our revenue.
Risk Factors Related to Our Intellectual Property and Technology
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 a
combination of intellectual property rights, including patents, mask work protection, copyrights, trademarks, trade secrets
and know-how, in the United States and other jurisdictions. The steps we take to protect our intellectual property rights
may not be adequate, particularly in foreign jurisdictions such as China. Any patents we hold may not adequately protect
our intellectual property rights or our products against competitors, and third parties may challenge the scope, validity, or
enforceability of our issued patents, which third parties may have significantly more financial resources with which to
litigate their claims than we have to defend against them. In addition, other parties may independently develop similar or
competing technologies designed around any patents or patent applications that we hold. Some of our products and
technologies are not covered by any patent or patent application, as we do not believe patent protection of these products
and technologies is critical to our business strategy at this time. A failure to timely seek patent protection on products or
technologies 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,
and consultants, and we implement security measures designed to protect our trade secrets and know-how. However, we
cannot assure our stockholders that these contractual protections and security measures will not be breached, that we will
have adequate remedies for any such breach or that our customers, suppliers, distributors, employees, or consultants will
not assert rights to intellectual 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
matters satisfactorily 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
intellectual property, as an adverse decision could limit our ability to assert our intellectual property rights, limit the value
of our technology or otherwise negatively impact our business, financial condition, and results of operations. Additionally,
any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us.
Our failure 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,
result in the loss of significant rights, harm our relationships with our customers and distributors, or otherwise
materially adversely affect our business, financial condition, and results of operations.
The semiconductor memory industry is characterized by companies that hold patents and other intellectual property
rights and that vigorously pursue, protect, and enforce intellectual property rights. These companies include patent holding
companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may
provide little or no deterrence. From time to time, third parties may assert against us and our customers’ patent and other
intellectual property rights to technologies that are important to our business. We have in the past, and may in the future,
face such claims.
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Claims that our products, processes, or technology infringe third-party intellectual property rights, regardless of their
merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and
technical personnel. We may also be obligated to indemnify our customers or business partners in connection with any such
litigation, which could result in increased costs. Infringement claims also could harm our relationships with our customers
or distributors and might deter future customers from doing business with us. If any such proceedings result in an adverse
outcome, 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 be
successful;
● license technology from the third-party claiming infringement, which license may not be available on
commercially reasonable terms, or at all;
● cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to
compete with that competitor; or
● pay substantial damages to our customers to discontinue their use of or to replace infringing technology sold to
them with non-infringing technology, if available.
Any of the foregoing results could have a material adverse effect on our business, financial condition, and results of
operations. Furthermore, our exposure to the foregoing risks may also be increased if we acquire other companies or
technologies. For example, we may have a lower level of visibility into the development process with respect to intellectual
property or the care taken to safeguard against infringement risks with respect to the acquired company or technology. In
addition, third parties may make infringement and similar or related claims after we have acquired technology that had not
been asserted prior to the acquisition.
We make significant investments in new technologies and products that may not achieve technological feasibility or
profitability or that may limit our revenue growth.
We have made and will continue to make significant investments in research and development of new technologies
and products, including new and more technically advanced versions of our MRAM technology.
Investments in new technologies are speculative and technological feasibility may not be achieved. Commercial
success 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 achieve
significant revenue from new product investments for a number of years, if at all. Moreover, new technologies and
products may not be profitable, and even if they are profitable, operating margins for new products and businesses may not
be as high as the margins we have experienced historically or originally anticipated. Our inability to capitalize on or realize
substantial revenue from our significant investments in research and development could harm our operating results and
distract management, harming our business.
Interruptions in or other compromises of our information technology systems or data or that of third parties upon
whom we rely could adversely affect our business.
We rely on the efficient, uninterrupted and uncompromised operation of complex information technology systems and
networks (and those of third parties) to operate our business. Any significant disruption to or other compromise of our
systems, networks or data (or those of third parties upon whom we rely), including, but not limited to, due to new system
implementations, computer viruses, social-engineering attacks, personnel (including former personnel) misconduct or error,
supply-chain attacks, ransomware attacks, software bugs, software or hardware failure, security breaches, facility issues,
natural disasters, terrorism, war, telecommunication failures, energy blackouts, loss, theft or similar threats, could have a
material adverse impact on our operations, sales, and financial results. Such disruption or other compromise could result in
a loss of our intellectual property or the release of sensitive competitive information or supplier, customer, personnel or
other relevant stakeholder’s personal data. Additionally, future or past business
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transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as
our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and
technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or
integrated entities, and it may be difficult to integrate companies into our information technology environment and security
program. Any loss of such information could harm our competitive position, result in a loss of customer confidence, result
in breaches of applicable obligations (such as laws and contracts) and cause us to incur significant costs to remedy the
damages caused by any such disruptions or security breaches. Additionally, any failure to properly manage the collection,
handling, transfer, or disposal of personal data of employees and customers may result in regulatory penalties, bans on
processing personal data or orders not to use or destroy data, enforcement actions, remediation obligations, litigation, fines,
and other actions.
We may experience attacks on our data and/or information systems, attempts to breach our security and attempts to
introduce malicious software into our IT systems. Such threats are prevalent and continue to rise, are increasingly difficult
to detect, and come from a variety of sources. During times of war and other major conflicts, we and the third parties upon
which we rely may be vulnerable to a heightened risk of these attacks. If attacks are successful, we may be unaware of the
incident, its magnitude, or its effects until significant harm 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 material adverse impact on our business, operations, and financial
results. Attempts to gain unauthorized access to our IT systems or other attacks have in the past, in certain instances and to
certain degrees, been successful (but have not caused significant harm), and may in the future be successful, and in some
cases, we might be unaware of an incident or its magnitude and effects.
Third-party service providers, such as wafer foundries, assembly and test contractors, distributors and other vendors
have access to certain portions of our and our customers’ sensitive data. Our ability to monitor these third parties’
information security practices is limited, and these third parties may not have adequate information security measures in
place. In the event that these service providers do not properly 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 with our customers.
While we have implemented security measures designed to protect against security incidents, there can be no
assurance that these measures will be effective. We take steps designed to detect, mitigate, and remediate vulnerabilities in
our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We
may not, however, detect and remediate all such vulnerabilities including on a timely and effective basis. Further, we may
experience delays in developing and deploying remedial measures and patches designed to address identified
vulnerabilities. Vulnerabilities could be exploited and result in a security incident.
We may expend significant resources or modify our business activities to try to protect against security incidents.
Additionally, certain data privacy and security obligations may require us to implement and maintain specific security
measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive
data.
Risk Factors Related to Regulatory Matters and Compliance
To comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and
if we fail to comply with environmental regulations, we could be subject to substantial fines or be required to have our
suppliers alter their processes.
The semiconductor memory industry is subject to a variety of international, federal, state, and local governmental
regulations 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 regulations
could subject us to civil or criminal sanctions and property damage or personal injury claims. Compliance with current or
future environmental laws and regulations could restrict our ability to expand our business or require us to modify
processes or incur other substantial expenses which could harm our business. In response to environmental concerns, some
customers and government agencies impose requirements for the elimination of hazardous substances, such as lead (which
is widely used in soldering connections in the process of semiconductor packaging and assembly), from electronic
equipment. For example, the European Union adopted its Restriction on Hazardous Substance Directive which prohibits,
with specified exceptions, the sale in the EU market of new electrical and electronic equipment
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containing more than agreed levels of lead or other hazardous materials and China has enacted similar regulations.
Environmental laws and regulations such as these could become more stringent over time, causing a need to redesign
technologies, imposing greater compliance costs, and increasing risks and penalties associated with violations, which could
seriously harm our business.
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 environmental
regulations, our business and results of operations could suffer if for any reason we fail to control the storage or use of, or
to adequately restrict the discharge or disposal of, hazardous substances under present or future environmental regulations.
Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more
complex and may result in damage to our reputation with customers.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection 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. These requirements require companies to perform diligence and disclose and
report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. These
requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of our
products, and affect our costs and relationships with customers, distributors, and suppliers as we must obtain additional
information from them to ensure our compliance with the disclosure requirement. In addition, we incur additional costs in
complying with the disclosure requirements, including costs related to determining the source of any of the relevant
minerals and metals used in our products. Since our supply chain is complex, we have not been able to sufficiently verify
the origins for these minerals and metals used in our products through the due diligence procedures that we implement,
which may harm our reputation. In such event, we may also face difficulties in satisfying customers who require that all of
the components of our products are certified as conflict mineral free and these customers may discontinue, or materially
reduce, purchases of our products, which could result in a material adverse effect on our results of operations and our
financial condition may be adversely affected.
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 that
undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or
NOLs, to offset future taxable income and tax credits to offset tax. As of December 31, 2023, we had gross federal net
operating loss carryforwards of approximately $96.2 million, of which $55.8 million will expire in 2028 through 2037 if
not utilized, and $40.5 million will carryover indefinitely. As of December 31, 2023, we had state net operating loss
carryforwards of approximately $48.7 million, of which $45.9 million will expire in 2028 through 2043 if not utilized, and
$2.8 million will carryover indefinitely. The federal NOLs generated prior to 2018 will continue to be governed by the
NOL tax rules as they existed prior to the adoption of the 2017 Tax Cuts and Jobs Act (2017 Tax Act), which means that
generally they will expire 20 years after they were generated if not used prior thereto. The 2017 Tax Act repealed the 20-
year carryforward and two-year carryback of NOLs originating after December 31, 2017, and also limits the NOL
deduction to 80% of taxable income for tax years beginning after December 31, 2017. Any NOLs generated in 2018 and
forward will be carried forward and will not expire. There is no current impact to us as the NOLs that we are utilizing in
the current year were generated prior to 2018, and therefore, are not subject to the 80% limitation. Future changes in our
stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the
Code. The ability to utilize our net operating losses and tax credits could also be impaired under state law. As a result, we
might not be able to utilize a material portion of our state NOLs and tax credits.
Risks Related to Our Common Stock
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 many
factors, including:
● the introduction of new products or product enhancements by us or others in our industry;
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● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital
commitments or restructurings;
● 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;
● sales of large blocks of our common stock, including sales by our executive officers and directors;
● changes in senior management or key personnel;
● changes in earnings estimates or recommendations by securities analysts; and
● general market conditions and other factors, including factors unrelated to our operating performance or the
operating performance of our competitors, including the effects of COVID-19 and the military conflict in Ukraine.
Stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those companies. Further, the semiconductor memory industry is highly
cyclical, and our markets may experience significant cyclical fluctuations in demand as a result of changing economic
conditions, budgeting and buying patterns of customers and other factors. Fluctuations in our revenue and operating results
could also cause our stock price to decline.
In addition, in the past, class action litigation has often been instituted against companies whose securities have
experienced periods of volatility in market price, or for other reasons. Securities litigation brought against us following
volatility in our stock price or otherwise, regardless of the merit or ultimate results of such litigation, could result in
substantial costs, which would hurt our financial condition and operating results and divert management’s attention and
resources from our business.
These and other factors may make the price of our stock volatile and subject to unexpected fluctuation.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult
and may 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 may
discourage, 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 also limit the price that investors might be willing to pay in the future for shares of our common stock,
thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any
attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to
replace members of our board of directors. Because our board of directors is responsible for appointing the members of our
management team, these provisions could 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 a
vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which
prevents 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, or
holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual
stockholders’ meetings or special stockholders’ meetings called by the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors, the chairman of the board or the chief executive
officer;
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● our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors,
which limits the ability of minority 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 of
voting stock, voting as a single class, will be required (a) to amend certain provisions of our certificate of
incorporation, including provisions relating to the size of the board, special meetings, actions by written consent
and cumulative voting and (b) to amend or repeal our amended and restated bylaws, although such bylaws may be
amended by a simple majority vote of our board of directors;
● stockholders must provide advance notice and additional disclosures to nominate individuals for election to the
board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage
or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors
or otherwise attempting to obtain control of our company; and
● our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability
to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with
voting 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
Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock
from merging or combining with us for a period of three years after the date of the transaction in which the person acquired
in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and
the federal district courts of the United States of America will be the exclusive forums for substantially all disputes
between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for
disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is
the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
● any derivative action or proceeding brought on our behalf;
● any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or
our stockholders;
● any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and
restated certificate of incorporation or our amended and restated bylaws; and
● any action asserting a claim against us that is governed by the internal-affairs doctrine.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act.
Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such
Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent
having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts,
among other considerations, our amended and restated certificate of incorporation provides that, unless we consent in
writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum
for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have
determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in
a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously
assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of
incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and
there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and
our directors, officers, and other employees. If a court were to find either exclusive-forum provision in our amended and
restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant
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additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.
General Risk Factors
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 United States and internationally. We also rely on domestic and
international suppliers, manufacturing partners and distributors. We are therefore susceptible to adverse U.S. and
international economic and market conditions. If any of our manufacturing partners, customers, distributors or suppliers
experience slowdowns in their business, serious financial difficulties or cease operations, our business will be adversely
affected. In addition, the adverse impact of general economic factors that are beyond our control, including, but not limited
to, housing markets, recession, inflation, deflation, consumer credit activity, consumer debt levels, exchange rate volatility,
fuel and energy costs, interest rates, bank failures, tax rates and policy, unemployment trends, potential industry downturn,
the impact of natural disasters such as pandemics, civil disturbances, terrorist activities and acts of war, including the
military conflict in Ukraine, may adversely impact consumer spending, which may adversely impact our customers’
spending and demand for our products. As an example, in the United States, capital markets have experienced and continue
to experience volatility and disruption. Furthermore, inflation rates in the United States have recently increased to levels
not seen in decades resulting in federal action to increase interest rates, affecting capital markets. In addition to the
foregoing, adverse developments that affect financial institutions, transactional counterparties or other third parties, such as
bank failures, or concerns or speculation about any similar events or risks, could lead to market-wide liquidity problems,
which in turn may cause third parties, including customers, to become unable to meet their obligations under various types
of financial arrangements as well as general disruptions or instability in the financial markets. Additionally, the military
conflict in Ukraine and escalating geopolitical tensions resulting from such conflict have resulted and may continue to
result in sanctions, tariffs, and import-export restrictions which, when combined with retaliatory actions taken by Russia,
could cause further inflationary pressures and economic and supply chain disruptions, as well as cause us to experience
extended lead times and increased prices from our suppliers. Any of the foregoing could adversely affect our business,
financial condition, results of operations and cash flows.
Our business may be adversely impacted by natural disasters and other catastrophic events.
Our operations and business, and those of our manufacturing partners, customers, distributors, or suppliers, can be
disrupted by natural disasters; industrial accidents; public health issues, such as COVID-19; cybersecurity incidents;
interruptions of service from utilities, transportation, telecommunications, or IT systems providers; manufacturing
equipment failures; or other catastrophic events. For example, some of our foundries and suppliers’ facilities in Asia are
located near known earthquake fault zones and, therefore, are vulnerable 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 natural
disasters or other catastrophic events were to occur, our ability to operate our business could be seriously impaired. In
addition, we may not have adequate insurance to cover our losses resulting from disasters or other similar significant
business interruptions. Any significant losses that are not recoverable under our insurance policies could seriously impair
our business and financial condition.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
We implement and maintain various information security processes designed to identify, assess and manage material risks
from cybersecurity threats to our critical computer networks, third party hosted services, communications systems,
hardware and software, products and our critical data, including intellectual property, confidential information that is
proprietary, strategic or competitive in nature (collectively, “Information Systems and Data”).
Our Senior Director of Information Technology (“IT”), internal IT, information security and legal functions, and third-
party service providers (collectively, “Cybersecurity Team”) help identify, assess and manage the Company’s
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cybersecurity threats and risks. Our Cybersecurity Team identifies and assesses risks from cybersecurity threats by
monitoring and evaluating our threat environment. The Cybersecurity Team uses various methods designed to accomplish
this task including, for example: manual tools, automated tools, subscribing to reports and services that identify
cybersecurity threats, analyzing reports of threats and threat actors, scanning the threat environment, evaluating our and our
industry’s risk profile, maintaining policies designed to coordinate our efforts with law enforcement to respond to threats,
internal and external audits, conducting threat assessments, conducting third party threat assessments, and conducting
vulnerability assessments.
Depending on the relevant information systems environment, we implement and maintain various technical, physical, and
organizational measures, processes, standards and policies designed to manage and mitigate material risks from
cybersecurity threats to our Information Systems and Data, including, for example: an incident response strategy, incident
detection and response measures, a vulnerability management policy, risk assessments, encryption of certain data, network
security controls, data segregation, access controls, physical security controls, systems monitoring controls, personnel
training, penetration testing, cybersecurity insurance, dedicated cybersecurity personnel, background checks for certain
personnel, vendor management strategies, and asset management strategy (such as tracking and disposal of Company
information systems).
Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall
risk management processes. For example, the Senior Director of IT works with management to prioritize our risk
management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business.
We use service providers in an effort to identify, assess, and manage material risks from cybersecurity threats,
including for example: threat intelligence service providers, cybersecurity consultants, penetration testing firms,
cybersecurity software providers, managed cybersecurity service providers, and professional services firms (including legal
counsel).
We use service providers to perform a variety of functions throughout our business, such as application providers,
hosting companies, and contract manufacturing organizations. We maintain a vendor management strategy designed to
manage cybersecurity risks associated with our use of these providers. The strategy includes vendor risk assessments,
security assessment reviews, and imposing information security contractual obligations on a vendor as appropriate.
Depending on the nature of the services provided, the sensitivity of the Information Systems and Data at issue, and the
identity of the provider, our vendor management strategy may involve different levels of assessment designed to help
identify, mitigating and manage cybersecurity risks associated with a particular provider.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do
so, see our risk factors under Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K, including “Interruptions in
or other compromises of our information technology systems or data or that of third parties upon whom we rely could
adversely affect our business.”
Governance
Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
The board of directors is responsible for overseeing Company’s cybersecurity risk management processes, including
oversight and mitigation of risks from cybersecurity threats.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company
management, including our Senior Director of IT, the Chief Executive Officer, and the Chief Financial Officer. Our Senior
Director of IT has approximately 25 years of experience in IT and cybersecurity.
Our cybersecurity incident response and vulnerability management policies are designed to escalate certain cybersecurity
incidents and threats to management members depending on the circumstances, including the Chief Executive Officer and
Chief Financial Officer. The Chief Executive Officer and Chief Financial Officer work with the Company’s incident
response team in an effort to help the Company mitigate and remediate cybersecurity incidents of which they are notified.
In addition, the Company’s management and its designees report to the board of directors for certain cybersecurity
incidents.
The board of directors receives periodic reports from management and its designees concerning the Company’s
significant cybersecurity threats and risks, and the processes the Company has implemented in an effort to address them.
The board of directors also has access to various reports, summaries or presentations related to cybersecurity threats, risk,
and mitigation.
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Item 2. Properties.
We lease office space for our corporate headquarters located in Chandler, Arizona and for our design facility located
in Austin, Texas. We also lease fabrication, lab, and office space for our manufacturing operations in Chandler, Arizona.
The Chandler, Arizona corporate headquarters lease is for 18,815 square feet of office and laboratory space. The prior
lease for the Chandler, Arizona corporate headquarters facility expired in January 2022, upon which a new lease was
entered into, with an initial term that ends on January 31, 2029, and an option to renew the lease through January 31, 2034.
The Austin, Texas lease is for 6,171 square feet of space for our design facility. The prior lease for the Austin, Texas
facility expired in January 2022, upon which a new lease was entered into with an initial term that ends on April 15, 2027,
and an option to renew the lease through April 15, 2030. The Chandler, Arizona manufacturing operations lease is for
11,496 square feet of fabrication, lab, and office space. The prior Chandler, Arizona manufacturing operations lease was
initially set to expire in January 2023 but was renewed and amended in 2022 to extend the lease through January 2028.
We believe our existing facilities are well maintained and in good operating condition and they are adequate for our
foreseeable 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
of operations or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Trading Market for our Common Stock
Our 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 Record
As of February 26, 2024, we had 17 holders of record of our common stock. The actual number of stockholders is
greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held
in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose
shares may be held in trust by other entities.
Dividends
We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any
cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any
future earnings to support operations and to finance the growth and development of our business. Any future determination
to pay dividends will be made at the discretion of our board of directors subject to applicable laws, and will depend upon,
among other factors, our results of operations, financial condition, contractual restrictions, and capital requirements. Our
future ability to pay cash dividends on our capital stock may also be limited by the terms of any future debt or preferred
securities or future credit facility.
Item 6. [Reserved].
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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 together
with our audited financial statements and related notes included elsewhere in this report. 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 factors set forth in the “Risk Factors”
section of this report, our actual results could differ materially from the results described in or implied by the forward-
looking statements contained in the following discussion and analysis.
For an overview of our business, see “Part I – Item 1. Business.”
Key Metrics
We monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness
of our business strategies, and assess operational efficiencies. These financial metrics include revenue, gross margin,
operating expenses, and operating income determined in accordance with generally accepted accounting principles in the
United States (GAAP). Additionally, we monitor and project cash flow to determine our sources and uses for working
capital to fund our operations. We also monitor Adjusted EBITDA, a non-GAAP financial measure, and design wins. We
define Adjusted EBITDA as net income or loss adjusted for interest expense, taxes, depreciation and amortization, stock-
based compensation expense, and restructuring costs, if any.
Adjusted EBITDA. Our management and board of directors use Adjusted EBITDA to understand and evaluate our
operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term
operating and financing plans. Accordingly, we believe that Adjusted EBITDA provides useful information for investors in
understanding and evaluating our operating results in the same manner as our management and our board of directors.
Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a
substitute for, net income reported in accordance with GAAP. The following table presents a reconciliation of net income,
the most directly comparable GAAP measure, to Adjusted EBITDA for the periods indicated:
Adjusted EBITDA reconciliation:
Net income
Depreciation and amortization
Stock-based compensation expense
Interest expense
Income tax (benefit) expense
Adjusted EBITDA
Year Ended December 31,
2023
2022
$
$
9,052
1,205
5,005
63
(16)
15,309
$
$
6,129
982
4,408
274
14
11,807
Our Adjusted EBITDA for the year ended December 31, 2023 includes a one-time employee retention tax credit
received of $2.0 million in the second quarter of 2023.
Design wins. To continue to grow our revenue, we must continue to achieve design wins for our MRAM products.
We consider a design win to occur when an OEM or contract manufacturer notifies us that it has qualified one of our
products as a component in a product or system for production. Because the life cycles for our customers’ products can last
for many years, if these products have successful commercial introductions, we expect to continue to generate revenues
over an extended period of time for each successful design win. New design wins in each successive quarter of 2023 were
66, 62, 37, and 52, respectively, compared to 61, 49, 48, and 52 in each successive quarter of 2022, respectively.
Effect of COVID-19 on our Business
The COVID-19 outbreak resulted in government authorities around the world implementing numerous measures to try
to reduce the spread of COVID-19. Overall, our business remained operational in the midst of COVID-19. The United
States Government has declared that it was no longer treating COVID-19 as a pandemic. Since our business is
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dependent on a global supply chain, we expect to continue to navigate the impact of COVID-19, particularly in some Asian
countries. We will continue to monitor the situation and take additional actions as warranted. These actions may include
further altering our operations in order to protect the best interests of our employees, customers and suppliers, and to
comply with government requirements, while also planning and executing our business to best support our customers,
suppliers, and partners.
The ultimate extent of the impact of COVID-19 on our business, results of operations and financial condition will
depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. See “Risk
Factors” in Part II, Item 1A of this report for additional risks we face due to COVID-19.
Results of Operations
Below are factors we want to highlight for understanding our 2023 annual results and year over year comparison with
proper historical perspective:
● The first half of 2023 was impacted by supply chain challenges that were overcome in the second half of the year
as the industry reverted to pre-COVID-19 seasonal patterns.
● Our commitment to improving our manufacturing excellence enabled us to drive yield improvements within our
internal and external foundries network to sustain and improve existing product margins.
The following table sets forth our results of operations for the periods indicated:
Year Ended December 31,
2023
2022
2023
2022
(In thousands)
(As a percentage of revenue)
Product sales
Licensing, royalty, patent, and other revenue
Total revenue
Cost of product sales
Cost of licensing, royalty, patent, and other
revenue
Total cost of sales
Gross profit
Operating expenses:
Research and development
General and administrative
Sales and marketing
Total operating expenses
Income from operations
Interest expense
Other income, net
Net income before income taxes
Income tax benefit (expense)
Net income and comprehensive income
$ 53,123
10,642
63,765
24,693
$ 55,032
4,953
59,985
25,112
1,827
26,520
37,245
928
26,040
33,945
11,776
14,296
5,288
31,360
5,885
(63)
3,214
9,036
16
$ 9,052
11,108
11,741
4,869
27,718
6,227
(274)
190
6,143
(14)
$ 6,129
83 %
17
100
39
92 %
8
100
42
3
42
58
19
22
8
49
9
—
5
14
—
14 %
2
43
57
19
20
8
47
10
—
—
10
—
10 %
Comparison of the Years Ended December 31, 2023 and 2022
Revenue
We generated 78% and 85% of our revenue from products sold through distributors for the years ended December 31,
2023 and 2022, respectively.
We maintain a direct selling relationship, for strategic purposes, with several key customer accounts. We have
organized our sales team and representatives into three primary regions: Asia-Pacific (APAC); North America; and
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Europe, Middle East and Africa (EMEA). We recognize revenue by geography based on the region in which our products
are sold, and not to where the end products in which they are assembled are shipped. Our revenue by region for the periods
indicated was as follows (in thousands):
APAC
North America
EMEA
Total revenue
Product sales
Licensing, royalty, patent, and other
revenue
Total revenue
Year Ended December 31,
2023
33,096
15,922
14,747
63,765
$
$
$
$
2022
35,631
14,533
9,821
59,985
Year Ended December 31,
Change
2023
2022
Amount
%
$
53,123
$
(Dollars in thousands)
55,032
$
(1,909)
(3.5)%
10,642
63,765
$
4,953
59,985
$
$
5,689
3,780
114.9 %
6.3 %
Total revenue increased by $3.8 million, or 6.3%, from $60.0 million during the year ended December 31, 2022, to
$63.8 million during the year ended December 31, 2023. The increase was primarily driven by the increase in licensing,
royalty, patent, and other revenue of $5.7 million due to revenue recognized under our RAD-Hard projects. This was offset
by a decline in product sales due to volume shifts in customer demand of $1.9 million or 3.5%, from $55.0 million during
the year ended December 31, 2022, to $53.1 million during the year ended December 31, 2023.
Licensing, royalty, patent, and other revenue is a highly variable revenue item characterized by a small number of
transactions annually with revenue based on size and terms of each transaction. We estimate royalty revenue earned
throughout the year, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing,
royalty, patent, and other revenue increased by $5.7 million, from $5.0 million during the year ended December 31, 2022,
to $10.6 million during the year ended December 31, 2023. The increase was primarily due to an increase in licensing
revenues of $5.5 million from our contractual agreements with customers for the development of RAD-Hard products,
along with an increase of $0.7 million of other revenue related to a contractual arrangement with a customer for the
development of reliability models for strategic radiation hardened toggle MRAM, offset in part by a decrease of $0.5
million in royalty revenue. There were no patent sales during the year ended December 31, 2023.
Cost of Sales and Gross Margin
Cost of sales
Cost of licensing, royalty, patent, and other
revenue
Total cost of sales
Gross margin
Year Ended December 31,
Change
2023
2022
Amount %
(Dollars in thousands)
$ 24,693
$ 25,112
$ (419)
(1.7)%
1,827
$ 26,520
928
$ 26,040
58.4 %
56.6 %
899
$ 480
*
96.9 %
1.8 %
*
Cost of product sales decreased by $0.4 million, or 1.7%, from $25.1 million during the year ended December 31,
2022, to $24.7 million during the year ended December 31, 2023. The decrease was primarily due to a reduction in product
sales compared to the prior year.
Cost of licensing, royalty, patent, and other revenue increased by $0.9 million, or 96.9%, from $0.9 million during
the year ended December 31, 2022, to $1.8 million during the year ended December 31, 2023. The increase was due to an
increase in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.
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Our gross margin increased from 56.6% during the year ended December 31, 2022, to 58.4% during the year ended
December 31, 2023. Our gross margin increased by offsetting increased pricing from suppliers with increased yields on our
toggle products and increased licensing revenue to offset the decrease in product sales.
Operating Expenses
Our operating expenses consist of research and development, general and administrative and sales and marketing
expenses. Personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation, are among the
most significant component of each of our operating expense categories.
Research and development
Research and development as a % of revenue
Year Ended December 31,
2023
2022
Change
Amount %
(Dollars in thousands)
$ 11,776
$ 11,108
$ 668
6.0 %
19 %
19 %
Research and Development Expenses. Research and development expenses increased by $0.7 million, or 6.0%, from
$11.1 million during the year ended December 31, 2022, to $11.8 million during the year ended December 31, 2023. The
increase was primarily due to higher expenses relating to the development and enhancement of our new xSPI family of
STT-MRAM products and increases in share-based compensation.
General and administrative
General and administrative as a % of revenue
Year Ended December 31,
2023
2022
Change
Amount %
$ 14,296
(Dollars in thousands)
$ 11,741
$ 2,555
21.8 %
22 %
20 %
General and Administrative Expenses. General and administrative expenses increased by $2.6 million, or 21.8%,
from $11.7 million during the year ended December 31, 2022, to $14.3 million during the year ended December 31, 2023.
The increase was primarily due to increases in professional service costs, share-based compensation, and depreciation.
Sales and marketing
Sales and marketing as a % of revenue
Year Ended December 31,
Change
2023
2022
Amount %
(Dollars in thousands)
$ 5,288
$ 4,869
$ 419
8.6 %
8 %
8 %
Sales and Marketing Expenses. Sales and marketing expenses increased by $0.4 million, or 8.6%, from $4.9 million
during the year ended December 31, 2022, to $5.3 million during the year ended December 31, 2023. The increase was
primarily due to an increase in variable compensation costs and contract labor.
Interest Expense
Year Ended December 31,
Change
2023
2022
Amount %
Interest expense
$
63
(Dollars in thousands)
274
$ (211)
$
(77.0)%
Interest expense decreased by $0.2 million, or 77.0%, from $0.3 million during the year ended December 31, 2022, to
$0.1 million during the year ended December 31, 2023. The decrease was due to having no outstanding balance under our
2019 Credit Facility as we paid off the outstanding balance in full in March 2023, resulting in no interest incurred during
the remainder of 2023 after the outstanding balance was paid in full.
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Other Income, Net
Year Ended December 31,
Change
Other income, net
2023
$ 3,214
$
2022
(Dollars in thousands)
$ 3,024
190
Amount %
1,591.6 %
Other income, net changed by $3.0 million, from $0.2 million of expense during the year ended December 31, 2022,
to $3.2 million of income during the year ended December 31, 2023. The increase was primarily due to the employee
retention tax credit received during the second quarter of 2023 of $2.0 million, along with an increase in interest income
earned on the money market cash account as a result of increased cash balances and increasing interest rates, offset by a
loss on prepayment and termination of our 2019 Credit Facility.
Liquidity and Capital Resources
As of December 31, 2023, we had $36.9 million of cash and cash equivalents, compared to $26.8 million as of
December 31, 2022. As of December 31, 2023, we have no outstanding debt as we paid off our 2019 Credit Facility in full
in March 2023. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the
next 12 months. Our future capital requirements will depend on many factors, including, among other things, our growth
rate, the timing and extent of our spending to support research and development activities, the timing and cost of
establishing additional sales and marketing capabilities, and the introduction of new products.
Additionally, see “Credit Facilities” below for information regarding our debt financing.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Cash Flows From Operating Activities
Year Ended December 31,
2023
2022
(In thousands)
$
$
13,128
(1,385)
(1,592)
9,493
(2,586)
(1,521)
During the year ended December 31, 2023, cash provided by operating activities was $13.1 million, which consisted
of net income of $9.1 million, non-cash charges of $6.4 million and changes in net operating assets and liabilities of $2.3
million. The non-cash charges primarily consisted of stock-based compensation of $5.0 million, depreciation and
amortization of $1.2 million, and a loss on prepayment and termination of our 2019 credit facility of $0.2 million. The
change in our net operating assets and liabilities was primarily due to an increase in accounts receivable of $0.9 million due
to timing of cash receipts for outstanding balances, an increase in inventory of $1.7 million to meet anticipated production
volumes, an increase in prepaid and other current assets of $0.4 million, an increase in other assets of $0.2 million, an
increase in accounts payable of $0.5 million, an increase in accrued liabilities of $0.8 million, and a decrease in deferred
revenue of $0.5 million.
During the year ended December 31, 2022, cash provided by operating activities was $9.5 million, which primarily
consisted of net income of $6.1 million, adjusted by non-cash charges of $5.3 million and a decrease of $1.9 million in our
net operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation of $4.4 million,
depreciation and amortization of $1.0 million, and non-cash interest expense of $0.1 million, offset by a gain on disposal of
property and equipment of $0.2 million. The change in our net operating assets and liabilities was primarily due to an
increase of $2.5 million in accounts receivable due to an increased sales volume and timing of cash receipts for outstanding
balances and a $0.3 million increase in inventory. These were offset by an increase of $0.6 million in accounts payable due
to timing of invoice due dates and a $0.2 million increase in lease liabilities.
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Cash Flows From Investing Activities
During the year ended December 31, 2023, cash used in investing activities was $1.4 million, which consisted of
capital expenditures primarily for the purchase of manufacturing equipment offset by a nominal amount in proceeds
received on the sale of property and equipment.
During the year ended December 31, 2022, cash used in investing activities was $2.6 million, which consisted of
capital expenditures primarily for the purchase of manufacturing equipment and purchased software offset by a nominal
amount in proceeds received on the sale of property and equipment.
Cash Flows From Financing Activities
During the year ended December 31, 2023, cash used in financing activities was $1.6 million, which primarily
consisted of $2.8 million of payments to pay off our 2019 Credit Facility offset by $1.2 million in proceeds from stock
option exercises and purchases of shares under our employee stock purchase plan.
During the year ended December 31, 2022, cash used in financing activities was $1.5 million, which primarily
consisted of $2.4 million in payments on long-term debt offset by $0.9 million in proceeds from stock option exercises and
purchases of shares under our employee stock purchase plan.
Credit Facilities
In May 2017, we executed a Loan and Security Agreement (2017 Credit Facility) with Silicon Valley Bank (SVB) for
a $12.0 million term loan, which we subsequently amended in January 2019 and June 2019. In August 2019, we executed
an Amended and Restated Loan and Security Agreement (2019 Credit Facility), which amended and restated the 2017
Credit Facility, providing for a formula revolving line of credit (Line of Credit) and a term loan (2019 Term Loan) with
SVB to refinance in full the outstanding principal balance of $8.0 million under the 2017 Credit Facility.
In July 2020, we executed the first amendment to the 2019 Credit Facility with SVB. The amendment, among other
things, extended the initial 12-month interest-only period for the term loan to a 16-month interest-only period and lowered
the floor interest rate. The floor interest rates for 2019 Term Loan and the Line of Credit Facility were reduced from 4.75%
and 6.75% to 3.75% and 4.75%, respectively.
The amended Line of Credit allowed for a maximum draw of $5.0 million, subject to a formula borrowing base, has a
two-year term and bears interest at a floating rate equal to the Wall Street Journal (WSJ) prime rate plus 1.5%, per annum,
subject to a floor of 4.75%. The Line of Credit required a commitment fee of 1.6% of the maximum availability of the Line
of Credit, which was paid in August 2019 upon closing, and was accounted for as a debt discount. The Line of Credit also
provided for a termination fee equal to 1% of the maximum availability under the Line of Credit, which was due in case of
a termination of the Line of Credit prior to the scheduled maturity date, and an unused facility fee equal to 0.125% per
annum of the average unused portion of the Line of Credit, which is expensed as incurred. The Line of Credit was set to
mature on August 5, 2023.
The amended 2019 Term Loan provided for a $6.0 million term loan. The amended 2019 Term Loan had a term of 46
months, and a 16-month interest-only period followed by 30 months of equal principal payments of $200,000 per month,
plus accrued interest. The 2019 Term Loan incurred interest at a floating rate equal to the WSJ prime rate minus 0.75%,
subject to a floor of 3.75%. A final payment of 7% of the original principal amount of the 2019 Term Loan was to be made
when the 2019 Term Loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or
otherwise. The additional payment, which is accounted for as a debt discount, was being accreted using the effective
interest method. The 2019 Term Loan had a prepayment fee equal to 2% of the total commitment, which was due only if
the 2019 Term Loan was prepaid prior to the scheduled maturity date for any reason. The 2019 Term Loan was to mature
on June 1, 2023.
In conjunction with entering into the 2019 Credit Facility, on August 5, 2019, we and SVB amended and restated the
warrant issued to SVB in connection with the first amendment to the 2017 Credit Facility, which was a warrant to purchase
9,375 shares of our common stock at an exercise price of $8.91 per share, to add an option by SVB to put the warrant back
to us for $50,000 upon expiration or a liquidity event, to be prorated if SVB exercises a portion of the warrant. The
warrants were set to expire on July 6, 2023. The warrant was classified as a liability and recorded at fair
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value within other liabilities in our balance sheet. Due to the put right, the warrant was subject to fair value remeasurement
at each subsequent reporting date until the exercise or expiration of the warrant. Any resulting change in the fair value of
the warrant was to be recorded as other income, net, in our statements of income and comprehensive income. The other
income recognized for the years ended 2023 and 2022 related to the change in fair value of the warrant has been minimal
and immaterial to the financial statements. These warrants were extinguished as of December 31, 2023.
Collateral for the 2019 Credit Facility included all of our assets except for intellectual property. We were required to
comply with certain covenants under the 2019 Credit Facility, including requirements to maintain a minimum cash balance
and availability under the Line of Credit, and restrictions on certain actions without the consent of the lender, such as
limitations on our ability to engage in mergers or acquisitions, sell assets, incur indebtedness, or grant liens or negative
pledges on our assets, make loans or make other investments. Under these covenants, we were prohibited from paying cash
dividends with respect to our capital stock. The 2019 Credit Facility contained a material adverse effect clause which
provides that an event of default will occur if, among other triggers, an event occurs that could reasonably be expected to
result in a material adverse effect on our business, operations, or condition, or on our ability to perform our obligations
under the 2019 Term Loan.
In March 2023, the 2019 Credit Facility, consisting of our Term Loan and Line of Credit, was paid in full, and there
was no outstanding balance as of December 31, 2023. We paid an early termination and prepayment fee of $170,000,
which was recorded within other income, net, within the statements of income and comprehensive income for the year
ended December 31, 2023. We were in compliance with all covenants throughout the 2019 Credit Facility payoff date in
March 2023.
The amortization of the debt issuance costs and accretion of the debt discount is included in interest expense within the
statements of income and comprehensive income and included in non-cash interest expense within the statement of cash
flows.
For additional information about the 2019 Credit Facility, see Note 6 in the accompanying Notes to Financial
Statements in Part II, Item 8 of this Form 10-K.
Critical Accounting Policies and Significant Judgements and Estimates
Our financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue
generated and expenses incurred during the reporting periods. We base our estimates 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 readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
Revenue Recognition
We recognize revenue when a customer obtains control of the promised products or services, in an amount that
reflects the consideration we expect to receive in exchange for those products or services. We recognize revenue net of
allowances for returns and price concessions, and any taxes imposed on revenue transactions, which are subsequently
remitted to governmental authorities.
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 our
MRAM and magnetic sensor technology, the sale of backend foundry services, and design services to third parties. We
recognize sales of products in discrete unit form at a point in time, revenue related to licensing agreements when we have
delivered control of the technology, revenue related to royalty agreements in the period in which sales generated from
products sold using our technology occurs, sales of backend foundry services over time, and design services to third parties
either at a point in time or over time, depending on the nature of the services.
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Product Revenue
For products sold in their discrete form, we either sell our products directly to OEMs, ODMs, contract manufacturers
(CMs), or through a network of distributors, who in turn sell to those customers. For sales directly to OEMs, ODMs and
CMs, we recognize revenue when the OEM, ODM or CM obtains control of the product, which occurs at a point in time,
generally upon shipment to the customer.
From time to time, we may provide distributors with price adjustments subsequent to the delivery of product to them
and such amounts are dependent on the end customer and product sales price. Price adjustments can be 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 the event of declines in the price of our products. Under these circumstances, we remit
back to the distributor a portion of their original purchase price after the resale transaction is completed in the form of a
credit against the distributors’ outstanding accounts receivable balance. The credits are on a per unit basis and are not given
to the distributor until the distributor provides information regarding the sale to their end customer. We estimate these
credits and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product
revenue and the establishment of an allowance for price adjustments for amounts due to distributors. We estimate credits to
distributors based on the historical rate of credits provided to distributors relative to sales and evaluation of current market
conditions. Revenue on shipments to distributors is recorded when control of the products has been transferred to the
distributor.
We estimate the amount of our product sales that may be returned by our customers and record this estimate as a
reduction of revenue in the period the related product revenue is recognized. We estimate our product return liability by
analyzing our historical returns, current economic trends and changes in customer demand and acceptance of products. We
have received insignificant returns to date and believe that returns of our products will continue to be minimal.
Upon the transfer of control, generally at shipment, we record a trade receivable for the selling price as there is a
legally enforceable obligation of the distributor to pay for the product delivered, an allowance is recorded for the estimated
discount that will be provided to the distributor, and the net of these amounts is recorded as revenue on the statements of
income and comprehensive income.
License Revenue
For licenses of technology, recognition of revenue is dependent upon whether we have delivered rights to the
technology, and whether there are future performance obligations under the contract. In some instances, the license
agreements call for future events or activities to occur in order for milestone amounts to become due from the customer.
The terms of such agreements include payment to us of one or more of the following: non-refundable upfront fees; and
royalties on net sales of licensed products. Historically, these license agreements have not included other future
performance obligations once the license has been transferred to the customer.
We recognize revenue from non-refundable upfront payments when the license is transferred to the customer and we
have no other performance obligations.
We also have entered into multiple contractual agreements with customers for the development of a RAD-Hard
product, consisting of a technology license, a design license agreement and development contract and for the development
of a strategic radiation hardened field programmable gate array product, consisting of a technology license to provide
design and development services under the contractual agreements. We applied a five-step approach in determining the
amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the
performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the
performance obligations in the contract; and (5) recognizing revenue when the performance obligation is satisfied.
We concluded these contractual arrangements represent one arrangement and evaluated our promises to the customer
and whether the performance obligations granted under the arrangement were distinct. The licenses provided to the
customer are not transferable, are of limited value without the promised development services, and the customer cannot
benefit from the license agreements without the specific obligated services in the development subcontract, as there is
strong interdependency between the licenses and the development subcontract. Accordingly, we determined the
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licenses were not distinct within the context of the contract and combined the license with other performance obligations.
As a result, we are recognizing revenue related to the performance obligations over time using the input method based
on costs incurred to date relative to the total expected costs of the contract over the performance obligation period.
Inventory
We record inventories at the lower of cost, determined on a first-in, first-out basis or net realizable value. We write
down inventory for estimated excess or obsolete inventory equal to the difference between cost and estimated net realizable
value. Inventory write downs establish a new cost basis for inventory and charges are not subsequently reversed even if
circumstances subsequently indicate that increased carrying amounts are recoverable. In estimating these reserves, our
evaluation takes into consideration historical and expected future demand considering current market conditions and
trends, the effect new products may have on the sale of existing products, technological obsolescence, and other factors.
We record inventory write-downs for the valuation of inventory when required based on our analyses and any write-downs
result in a new cost basis for the affected item.
Recent Accounting Pronouncements
See Note 2 in the accompanying Notes to Financial Statements in Part II, Item 8 of this Form 10-K for more
information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we
have made one yet, of their potential impact on our financial condition of results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not required for a smaller reporting company.
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Item 8. Financial Statements and Supplementary Data.
EVERSPIN TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Financial Statements:
Balance Sheets
Statements of Income and Comprehensive Income
Statements of Stockholders’ Equity
Statements of Cash Flows
Notes to Financial Statements
39
Page
40
42
43
44
45
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To 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, 2023
and 2022, the related statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the
two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in
the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the account or disclosures to which it relates.
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Accounting for Inventory
Description of the
Matter
As discussed in Note 2 to the financial statements, Inventory is valued at the lower of cost or net
realizable value using the first-in, first-out method. At December 31, 2023 the Company’s inventory
balance was $8.4 million.
Auditing the Company's accounting for inventory was challenging and complex primarily due to the
high volume of transactions and multiple data sources involved in the initiation, processing, and
recording of inventory transactions. The data sources include information received from the
Company’s several third-party suppliers involved in the manufacturing process.
How We
Addressed the
Matter in Our
Audit
To test the Company’s accounting for inventory, we performed audit procedures that included,
among others, performing physical observation and direct confirmations of inventory held at third-
party suppliers, and testing a sample of inventory transactions and manufacturing costs incurred
during the year to evaluate the cost of inventory.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
Phoenix, Arizona
February 29, 2024
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EVERSPIN TECHNOLOGIES, INC.
Balance Sheets
(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use assets
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued liabilities
Deferred revenue
Current portion of long-term debt
Lease liabilities, current portion
Other liabilities
Total current liabilities
Long-term debt, net of current portion
Lease liabilities, net of current portion
Long-term income tax liability
Total liabilities
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized; no shares
issued and outstanding as of December 31, 2023 and December 31, 2022,
respectively
Common stock, $0.0001 par value per share; 100,000,000 shares authorized;
21,080,472 and 20,374,288 shares issued and outstanding as of December 31, 2023
and December 31, 2022, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2023
December 31,
2022
$
$
$
$
$
36,946
11,554
8,391
988
57,879
3,717
5,495
212
67,303
$
$
$
2,916
4,336
336
—
1,190
—
8,778
—
4,390
214
13,382
$
26,795
10,665
6,683
604
44,747
3,883
6,641
62
55,333
2,778
3,533
821
2,594
1,122
27
10,875
—
5,580
214
16,669
—
—
2
191,569
(137,650)
53,921
67,303
$
2
185,364
(146,702)
38,664
55,333
The accompanying notes are an integral part of these financial statements.
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Table of Contents
EVERSPIN TECHNOLOGIES, INC.
Statements of Income and Comprehensive Income
(In thousands, except share and per share amounts)
Product sales
Licensing, royalty, patent, and other revenue
Total revenue
Cost of product sales
Cost of licensing, royalty, patent, and other revenue
Total cost of sales
Gross profit
Operating expenses:1
Research and development
General and administrative
Sales and marketing
Total operating expenses
Income from operations
Interest expense
Other income, net
Net income before income taxes
Income tax benefit (expense)
Net income and comprehensive income
Net income per common share:
Basic
Diluted
Weighted average shares of common stock outstanding:
Basic
Diluted
1Operating expenses include stock-based compensation as follows:
Research and development
General and administrative
Sales and marketing
Total stock-based compensation
Year Ended December 31,
2023
2022
$
$
$
$
$
$
53,123
10,642
63,765
24,693
1,827
26,520
37,245
11,776
14,296
5,288
31,360
5,885
(63)
3,214
9,036
16
9,052
0.44
0.42
20,748,302
21,367,304
1,981
2,519
505
5,005
$
$
$
$
$
$
55,032
4,953
59,985
25,112
928
26,040
33,945
11,108
11,741
4,869
27,718
6,227
(274)
190
6,143
(14)
6,129
0.30
0.29
20,130,336
20,775,925
1,704
2,190
514
4,408
The accompanying notes are an integral part of these financial statements.
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EVERSPIN TECHNOLOGIES, INC.
Statements of Stockholders’ Equity
(In thousands, except share amounts)
Balance at December 31, 2021
Issuance of common stock under stock incentive plans and
exercise of stock options
Stock-based compensation expense
Net income
Balance at December 31, 2022
Issuance of common stock under stock incentive plans and
exercise of stock options
Exercise of warrants
Stock-based compensation expense
Net income
Balance at December 31, 2023
Common Stock
Shares
19,858,460
$
Amount
Additional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
2
$
180,067
$
(152,831) $
515,828
—
—
20,374,288
705,948
236
—
—
21,080,472
$
$
—
—
—
2
—
—
—
—
2
$
$
889
4,408
—
185,364
1,198
2
5,005
—
191,569
$
$
—
—
6,129
(146,702) $
—
—
—
9,052
(137,650) $
27,238
889
4,408
6,129
38,664
1,198
2
5,005
9,052
53,921
The accompanying notes are an integral part of these financial statements.
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Table of Contents
EVERSPIN TECHNOLOGIES, INC.
Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Year Ended December 31,
2023
2022
$
9,052
$
Depreciation and amortization
Gain on sale of property and equipment
Stock-based compensation
Loss on prepayment and termination of credit facility
Non-cash warrant revaluation
Non-cash interest expense
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued liabilities
Deferred revenue
Lease liabilities, net
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property and equipment
Proceeds received from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Payments on long-term debt
Payments of debt issuance costs
Proceeds from exercise of stock options and purchase of shares in employee stock purchase
plan
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplementary cash flow information:
Interest paid
Operating cash flows paid for operating leases
Financing cash flows paid for finance leases
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities
Right-of-use assets obtained in exchange for finance lease liabilities
Purchases of property and equipment in accounts payable and accrued liabilities
Cashless exercise of warrants
$
$
$
$
$
$
$
$
1,205
(15)
5,005
170
(25)
26
(889)
(1,708)
(384)
(150)
499
803
(485)
24
13,128
(1,404)
19
(1,385)
(2,790)
—
1,198
(1,592)
10,151
26,795
36,946
37
1,384
12
$
$
$
$
— $
— $
$
446
$
2
6,129
982
(167)
4,408
—
(23)
105
(2,472)
(287)
158
(28)
563
(46)
(11)
182
9,493
(2,788)
202
(2,586)
(2,400)
(10)
889
(1,521)
5,386
21,409
26,795
169
1,320
11
6,837
36
807
—
The accompanying notes are an integral part of these financial statements.
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EVERSPIN TECHNOLOGIES, INC.
Notes to Financial Statements
1. Organization and Operations
Everspin Technologies, Inc. (the Company) was incorporated in Delaware on May 16, 2008. The Company’s
magnetoresistive random access memory (MRAM) solutions offer the persistence of non-volatile memory with the speed
and endurance of random access memory (RAM) and enable the protection of mission critical data particularly in the event
of power interruption or failure. The Company’s MRAM solutions allow its customers in key markets, such as industrial,
medical, automotive/transportation, aerospace, and data center, to design high performance, power-efficient and reliable
systems without the need for bulky batteries or capacitors.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an
ongoing basis, management evaluates its estimates, including those related to revenue recognition, fair value of assets and
liabilities, inventory net realizable value, deferred tax assets and related valuation allowances, and stock-based
compensation. The Company believes its estimates and assumptions are reasonable; however, actual results may differ
from the Company’s estimates.
Segments
The Company’s chief operating decision maker is its Chief Executive Officer who reviews financial information for
purposes of allocating resources and evaluating financial performance for the entire Company. As a result, the Company
has single operating and reportable segment.
Cash and Cash Equivalents
The Company considers all highly liquid, short-term investments with maturity dates of 90 days or less at the date of
purchase to be cash equivalents. The Company’s cash equivalents consist solely of money market funds.
Accounts Receivable, Net
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company generally does not
require collateral or other security in support of accounts receivable. Allowances would be provided for individual
accounts receivable when the Company becomes aware of a customer’s inability to meet its financial obligations, such as
in the case of bankruptcy, deterioration in the customer’s operating results or change in financial position. If circumstances
related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company also
considers a number of factors in evaluating the sufficiency of its allowance for doubtful accounts, including the length of
time receivables are past due, significant one-time events, creditworthiness of customers and historical experience.
Account balances would be charged off against the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote. The Company’s evaluation determined that no material allowance for doubtful
accounts was necessary at December 31, 2023 and 2022.
The unbilled accounts receivable is an estimate of consideration to which the Company expects to be entitled for uses
of the Company’s intellectual property. Certain customers report on a lagged basis and actual information is not available
timely. The estimates recorded are based on historical trends in the customer’s usage and current market conditions. At
December 31, 2023 and 2022, the unbilled accounts receivable balance was $475,000 and $551,000, respectively.
The Company establishes an allowance for product returns. The Company analyzes historical returns, current
economic trends and changes in customer demand and acceptance of products when evaluating the adequacy of sales
returns. Returns are processed as credits on future purchases and, as a result, the allowance is recorded against the
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balance of trade accounts receivable. In addition, the Company from time to time may establish an allowance for estimated
price adjustments related to its distributor agreements. The Company estimates credits to distributors based on the
historical rate of credits provided to distributors relative to sales and evaluation of current market conditions. At December
31, 2023 and 2022, the allowance for product returns and price adjustments was $410,000 and $384,000, respectively.
Accounts receivable, net consisted of the following (in thousands):
Trade accounts receivable
Unbilled accounts receivable
Allowance for product returns and price adjustments
Accounts receivable, net
Concentration of Credit Risk
$
December 31,
2023
11,489
475
(410)
11,554
$
$
December 31,
2022
10,498
551
(384)
10,665
$
Financial instruments that potentially expose the Company to a concentration of credit risk consist principally of cash
and cash equivalents that are held by a financial institution in the United States and accounts receivable. Amounts on
deposit with a financial institution may at times exceed federally insured limits.
Significant customers are those which represent more than 10% of the Company’s total revenue or net accounts
receivable balance at each respective balance sheet date. For the purposes of this disclosure, the Company defines
“customer” as the entity that is purchasing the products or licenses directly from the Company, which includes the
distributors of the Company’s products in addition to end customers that the Company sells to directly. For each significant
customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable, net
are as follows:
Revenue
Year Ended December 31,
Accounts Receivable
December 31,
December 31,
2023
2022
2023
2022
*
15 %
12 %
11 %
17 %
18 %
15 %
11 %
*
*
*
13 %
*
22 %
37 %
30 %
18 %
*
*
*
Customers
Customer A
Customer B
Customer C
Customer D
Customer E
*
Less than 10%
Inventory
Inventory is valued at the lower of cost, using the first-in, first-out or net realizable value. The carrying value of
inventory is adjusted for excess and obsolescence based on the Company’s evaluation which takes into consideration
historical and expected future demand, the effect new products may have on the sale of existing products, technological
obsolescence, and other factors including inventory age and shipment. At the point of loss recognition, a new lower cost
basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or
increase in that new cost basis.
Fair Value of Financial Instruments
Fair value is defined as an exit price, representing the amount that would be received to sell an asset, or paid to
transfer a liability, in an orderly transaction between market participants. The framework for measuring fair value provides
a three-tier hierarchy prioritizing inputs to valuation techniques used in measuring fair value as follows:
Level 1— Observable inputs such as quoted prices for identical assets or liabilities in active markets;
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Level 2— Inputs, other than quoted prices for identical assets or liabilities in active markets, which are observable
either directly or indirectly; and
Level 3— Unobservable inputs in which there is little or no market data requiring the reporting entity to develop its
own assumptions.
The carrying value of accounts receivable, accounts payable, and other accruals readily convertible into cash
approximate fair value because of the short-term nature of the instruments. The Company’s financial instruments consist of
Level 1 assets and a Level 3 liability. Where quoted prices are available in an active market, securities are classified as
Level 1. Level 1 assets consist of highly liquid money market funds that are included in cash equivalents. The Company’s
Level 3 liability consisted of warrants issued in connection with the 2019 Credit Facility (as defined in Note 6). These
warrants were extinguished as of December 31, 2023. The change in the fair value of the warrant liability during the year
ended December 31, 2023, was immaterial.
The following tables sets forth the fair value of the Company’s financial assets and liabilities measured at fair value
on a recurring basis (in thousands):
Assets:
Money market funds
Total assets measured at fair value
Level 1
Level 2
Level 3
Total
December 31, 2023
$
$
36,946 $
36,946 $
— $
— $
— $
— $
36,946
36,946
Assets:
Money market funds
Total assets measured at fair value
Liabilities:
Warrant liability
Total liabilities measured at fair value
$
$
$
$
Level 1
Level 2
Level 3
Total
December 31, 2022
26,812 $
26,812 $
— $
— $
— $
— $
26,812
26,812
— $
— $
— $
— $
27 $
27 $
27
27
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation begins at the
time the asset is placed in service. Maintenance and repairs are charged to operations as incurred. Depreciation is computed
using the straight-line method over the following estimated useful lives of the assets:
Computer and network equipment
Manufacturing equipment
Furniture and fixtures
Software
Leasehold improvements
2 years
2 – 7 years
7 years
3 years
Lesser of useful life of the asset or the remaining lease term
Useful Lives
Costs incurred to develop software for internal use during the application development phase are capitalized and
amortized over such software’s estimated useful life. Costs related to the design or maintenance of internal-use software are
included in operating expenses as incurred. Upon sale or retirement of assets, the cost and related accumulated depreciation
are removed from the balance sheet and any resulting gain or loss is reflected in operations. Amortization expense of assets
acquired through finance leases is included in the statements of income and comprehensive income.
Impairment of Long-lived Assets
The Company evaluates its long-lived assets, including property and equipment, at the asset group level, for
impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be
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recoverable. If such events or changes in circumstances occur, for purposes of this assessment, long-lived assets are
grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the
cash flows of other assets and liabilities. Recoverability of these assets is measured by comparison of the carrying amount
of each asset group to the future undiscounted cash flows the asset group is expected to generate over its remaining life. If
the asset group is considered to be impaired, the amount of any impairment is measured as the difference between the
carrying value and the fair value of the impaired asset. There have been no impairments of the Company’s long-lived assets
during either of the periods presented.
Leases
The Company leases office, lab, manufacturing space and equipment in various locations with initial lease terms of
up to seven years. These leases require monthly lease payments that may be subject to annual increases throughout the
lease term. The terms of these leases also include renewal options at the election of the Company to renew or extend the
lease for a range of an additional two to five years. These optional periods have not been considered in the determination of
the right-of-use-assets (ROU) or lease liabilities associated with these leases as the Company did not consider it reasonably
certain it would exercise the options.
The Company determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use
an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. The classification of the Company’s leases as operating or finance leases along with the initial
measurement and recognition of the associated ROU assets and lease liabilities is performed at the lease commencement
date. The measurement of lease liabilities is based on the present value of future lease payments over the lease term. The
Company uses its incremental borrowing rate, based on the information available at commencement date, to determine the
present value of lease payments when its leases do not provide an implicit rate. The Company uses the implicit rate when
readily determinable. The ROU asset is based on the measurement of the lease liability, includes any lease payments made
prior to or on lease commencement and excludes lease incentives and initial direct costs incurred, as applicable. Lease
expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. Amortization
expense for ROU assets associated with finance leases is recognized on a straight-line basis over the shorter of the useful
life of the asset or the lease term and interest expense associated with finance leases is recognized on the balance of the
lease liability using the effective interest method based on the estimated incremental borrowing rate.
The Company has lease agreements with lease and non-lease components. The Company has elected to not separate
lease and non-lease components for any leases involving real estate and office equipment classes of assets and, as a result,
accounts for the lease and non-lease components as a single lease component. The Company has elected to separate lease
and non-lease components for any leases involving manufacturing facility classes of assets. Further, the Company elected
the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to leases with
terms of 12 months or less (short-term leases) for all classes of assets. As of December 31, 2023, the Company did not
have any short-term leases.
Operating leases are included in right-of-use assets, lease liabilities, and lease liabilities, net of current portion in the
Company’s balance sheet. Finance leases are immaterial.
Debt Issuance Costs
The Company deferred and amortized issuance costs, underwriting fees, end of term payments, and related expenses
incurred in connection with the issuance of debt instruments using the effective interest method over the terms of the
respective instruments. Debt issuance costs were reflected as a direct reduction of the carrying amount of the related debt
liability.
Government Tax Credits, Incentives and Grants
From time to time, the Company may receive government funding in the form of tax credits, operating-related grants,
capital-related grants, or other incentives to support various business activities, including capital development, research and
development, and other activities as defined by the relevant government agency awarding the tax credit, incentive, or grant.
The amount received is typically based on the amount of qualifying costs incurred. The Company typically has to meet
certain requirements to retain the government funding. The Company records operating-related
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grants and non-income related tax credits as other income in the statements of income and comprehensive income when
there is reasonable assurance that the grant will be received, and the Company will comply with the conditions specified in
the grant agreement.
The Company received Employee Retention Tax Credit (“ERTC”) refunds from the United States Treasury totaling
$2.0 million, relating to the payroll periods from October 1, 2020 through September 30, 2021. The amounts were received
pursuant to provisions within the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the Taxpayer
Certainty and Disaster Tax Relief Act of 2020 enacted as part of the Consolidated Appropriations Act, 2021 (“Relief Act”),
the American Rescue Plan Act of 2021 (“ARPA”) which provide tax relief and other stimulus measures, including the
ERTC. The ERTC program allows for employers to claim a refundable tax credit against a portion of the employer share of
Social Security tax for qualified wages paid to employees from March 13, 2020 through September 30, 2021.
The Company recognized the $2.0 million tax credit within other income, net in the statements of income and
comprehensive income in the second quarter of 2023, which is when the amount was received and it was determined that
those amounts were reasonably assured to be retained by the Company. The Company’s compliance with the program’s
qualifications may be subject to audit through the year ended December 31, 2025, which is when the statute of limitation
expires. The Company has received all expected ERTC refunds based on applications that have been submitted.
Revenue Recognition
The Company recognizes revenue when a customer obtains control of the promised products or services, in an
amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue
is recognized net of allowances for returns and price adjustments, and any taxes imposed on specific revenue-producing
transactions, which are subsequently 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 and
royalties on its MRAM and magnetic sensor technology, the sale of backend foundry services and design services to third
parties. Sales of products in discrete unit form are recognized at a point in time, revenue related to licensing agreements is
recognized when the Company has delivered control of the technology, revenue related to royalty agreements is recognized
in the period in which sales generated from products sold using the Company’s technology occurs, sales of backend
foundry services 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 Revenue
For products sold in their discrete form, the Company either sells its products directly to OEMs, ODMs and CMs, or
through a network of distributors, who in turn sell to those customers. For sales directly to OEMs, ODMs and CMs,
revenue is recognized when the OEM, ODM or CM obtains control of the product, which occurs at a point in time,
generally upon shipment to the customer. Contracts for sales of products are generally less than one year.
From time to time, the Company may provide distributors with price adjustments subsequent to the delivery of
product to them and such amounts are dependent on the end customer and product sales price. Price adjustments can be
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 the event of declines in the price of the Company’s products.
Under these circumstances, the Company remits back to the distributor a portion of their original purchase price after the
resale transaction is completed in the form of a credit against the distributors’ outstanding accounts receivable balance. The
credits are on a per unit basis and are not given to the distributor until the distributor provides information regarding the
sale to their end customer. The Company estimates these credits and record such estimates in the same period the related
revenue is recognized, resulting in a reduction of product revenue and the establishment of an allowance for price
adjustments for amounts due to distributors. The Company estimates credits to distributors based on the historical rate of
credits provided to distributors relative to sales and evaluation of current market conditions. Revenue on shipments to
distributors is recorded when control of the products has been transferred to the distributor.
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The Company estimates the amount of our product sales that may be returned by its customers and records this
estimate as a reduction of revenue in the period the related product revenue is recognized. The Company estimates its
product return liability by analyzing its historical returns, current economic trends and changes in customer demand and
acceptance of products. The Company has received insignificant returns to date and believes that returns of its products
will continue to not be material.
Upon the transfer of control, generally at shipment, the Company records a trade receivable for the selling price as
there is a legally enforceable obligation of the distributor to pay for the product delivered, an allowance is recorded for the
estimated discount that will be provided to the distributor, and the net of these amounts is recorded as revenue on the
statements of income and comprehensive income.
License Revenue
For licenses of technology, recognition of revenue is dependent upon whether the Company has delivered rights to the
technology, and whether there are future performance obligations under the contract. In some instances, the license
agreements call for future events or activities to occur in order for milestones amounts to become due from the customer.
The terms of such agreements include payment to the Company of one or more of the following: non-refundable upfront
fees; and royalties on net sales of licensed products. Historically, these license agreements have not included other future
performance obligations for the Company once the license has been transferred to the customer.
Revenue from non-refundable upfront payments is recognized when the license is transferred to the customer and the
Company has no other performance obligations.
The Company entered into a contractual agreement with a customer in 2021 for the development of a RAD-Hard
product, consisting of a technology license, a design license agreement and development contract, and separate contractual
agreements with a customer in 2022 and 2023 for the development of a strategic radiation hardened field programmable
gate array product, consisting of a technology license to provide design and development services under the contractual
agreement. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized:
(1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the
transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing
revenue when the performance obligation is satisfied.
The Company concluded these contractual arrangements represent one arrangement and evaluated its promises to the
customer and whether the performance obligations granted under the arrangement were distinct. The licenses provided to
the customer are not transferable, are of limited value without the promised development services, and the customer cannot
benefit from the license agreements without the specific obligated services in the development subcontract, as there is
strong interdependency between the licenses and the development subcontract. Accordingly, the Company determined the
licenses were not distinct within the context of the contract and combined the license with other performance obligations.
As a result, the Company is recognizing revenue related to the performance obligations over the duration of the
contract using the input method based on costs incurred to date relative to the total expected costs of the contract over the
contract period.
Patents
In an effort to monetize on its intellectual property, the Company may sell patents to customers. The performance
obligations are satisfied at the point in time at which the customer obtains control of the patents.
Royalties
Revenue 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). The Company will record an unbilled receivable (within accounts receivable, net) for the
portion of sales-based royalties that have been earned, but not invoiced at the end of each reporting period.
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Other Revenue
For certain revenue streams, the Company recognizes revenue based on the pattern of transfer of the services. The
Company uses the input method of measuring costs incurred to date compared to total estimated costs to be incurred under
the contract as this method most faithfully depicts its performance. The Company will record an unbilled receivable (within
accounts receivable, net) for the portion of the work that has been completed but not invoiced at the end of each reporting
period.
At the inception of each agreement that includes milestone payments, the Company evaluates whether the milestones
are considered probable of being reached and estimates the amount to be included in the transaction price by using 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. At the end of each subsequent reporting period, the Company re-
evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts its
estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would
affect revenues and earnings in the period of adjustment.
Product Warranty
The Company generally sells products with a limited warranty of product quality and a limited indemnification of
customers against intellectual property infringement claims related to the Company’s products. The Company accrues for
known warranty and indemnification issues if a loss is probable and can be reasonably estimated and accrues for estimated
losses incurred for unidentified issues based on historical experience. A warranty liability was not recorded at December
31, 2023 and 2022, as the estimated future warranty costs were not material based on the Company’s historical experience.
Research and Development
Research and development expenses are incurred in support of internal development programs or as part of the
Company’s joint development agreement with GLOBALFOUNDRIES (see Note 10). Research and development expenses
include personnel-related costs (including stock-based compensation), circuit design costs, purchases of materials and
laboratory supplies, fabrication and packaging of experimental integrated circuit products, depreciation of research and
development related capital equipment and overhead and are expensed as incurred.
Stock-based Compensation
Stock-based compensation arrangements include stock option grants and restricted stock unit (RSU) awards under the
Company’s equity incentive plans, as well as shares issued under the Company’s Employee Stock Purchase Plan (ESPP),
through which employees may purchase the Company’s common stock at a discount to the market price.
The Company uses RSUs with a service condition as its primary equity incentive compensation instrument for
employees. Share-based compensation expense for RSUs is measured on the grant date based on the fair market value of
the Company’s common stock and is recognized over the requisite service period using the straight-line method. The
Company accounts for forfeitures as they occur.
The Company measures its stock option grants based on the estimated fair value of the options as of the grant date
using the Black-Scholes option-pricing model. Stock-based compensation expense for stock option grants is recognized
over the requisite service period using the straight-line method. The Company accounts for forfeitures as they occur.
Expected volatility. The Company determines the expected stock price volatility based on the historical volatility of
its common stock and the historical volatilities of a peer group. Industry peers consist of several public companies in the
technology industry similar in size, stage of life cycle and financial leverage. If circumstances change such that the
identified companies are no longer similar, the Company will revise its peer group to substitute more suitable companies in
this calculation.
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield with a maturity equal to the
expected term of the option in effect at the time of grant.
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Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding.
The Company used the simplified method to determine the expected term, which is calculated as the average of the time to
vesting and the contractual life of the options.
Dividend yield. The Company has never paid dividends on its common stock and is prohibited from paying dividends
on its common stock. Therefore, the Company used an expected dividend yield of zero.
Income Taxes
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance
is provided 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 be
sustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely than
not to be realized upon the ultimate settlement. The Company’s policy is to recognize interest and penalties related to the
underpayment of income taxes as a component of income tax expense or benefit.
Net Income per Common Share
Basic net income per common share is calculated by dividing the net income by the weighted-average number of
shares of common stock outstanding for the period less shares subject to repurchase, without consideration of potentially
dilutive securities. Diluted earnings per share is calculated using the treasury stock method by dividing net income by the
total weighted average shares of common stock outstanding in addition to the potential impact of dilutive securities
including restricted stock units, warrants, and options. In periods with a net loss, diluted net loss per common share is the
same as basic net loss per common share since the effect of potentially dilutive securities is anti-dilutive.
Recently Issued Pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which
amends the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit
losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss
estimates. As the Company is a smaller reporting company, ASU 2016-13 is effective for the Company’s annual reporting
periods, and interim periods within those years, beginning after December 15, 2022, and requires a cumulative effect
adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. In April
2019, the FASB issued ASU 2019-04, Codification Improvements Financial Instruments-Credit Losses (Topic 326). ASU
2019-04 provides narrow-scope amendments to help apply ASU 2016-13, and is effective with the adoption of ASU 2016-
13. The Company adopted ASU 2016-13 and ASU 2019-04 on January 1, 2023, and it did not have a material impact on its
financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures, which is intended to improve an entity’s income tax disclosures, primarily through disaggregated information
about an entity’s effective income tax rate reconciliation and additional disclosures regarding income taxes paid. ASU
2023-09 is effective for the Company’s annual reporting periods, and interim periods within those years, beginning after
December 15, 2024, on a prospective basis. The Company is currently evaluating the impact that the standard will have on
its financial statements.
The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not
applicable or not expected to have a significant impact to the financial statements.
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Subsequent Events
The Company evaluated events after December 31, 2023, and through the date the financial statements were issued,
and determined any events or transactions occurring during this period that would require recognition or disclosure are
appropriately addressed in these financial statements.
3. Revenue
The Company sells products to its distributors, ODMs and OEMs. The Company also recognizes revenue under
licensing, patent, and royalty agreements with some customers. The following table presents the Company’s revenues
disaggregated by sales channel (in thousands):
Distributor
Non-distributor
Total revenue
Year Ended December 31,
2023
2022
$
$
49,845
13,920
63,765
$
$
50,943
9,042
59,985
The following table presents the Company’s revenues disaggregated by timing of recognition (in thousands):
Point in time
Over time
Total revenue
Year Ended December 31,
2023
2022
$
$
54,183
9,582
63,765
$
$
56,675
3,310
59,985
The following table presents the Company’s revenues disaggregated by type (in thousands):
Product sales
Licensing
Royalties
Other revenue
Total revenue
Year Ended December 31,
2023
2022
$
$
53,123
7,476
862
2,304
63,765
$
$
55,032
1,937
1,414
1,602
59,985
The Company licenses its intellectual property and is entitled to consideration based on the customer’s sales. The
Company makes estimates in instances when the customer reports sales on a lagged basis and actual information is not
available timely. The estimates are based on historical trends in the customer’s activity and current market conditions. In
the year ended December 31, 2023, the Company recognized less than $0.1 million of royalty revenue related to activity
occurring in the year ended December 31, 2022. In the year ended December 31, 2022, the Company recognized $0.3
million of royalty revenue related to activity occurring in the year ended December 31, 2021. This is a change in estimate
and is based on actual information received from the customer. The amounts are reported in licensing, royalty, patent and
other revenue in the statements of income and comprehensive income.
We recognize revenue by geography based on the region in which our products are sold, and not to where the end
products in which they are assembled are shipped. Our revenue by region for the periods indicated was as follows (in
thousands):
APAC
North America
EMEA
Total revenue
Year Ended December 31,
2023
2022
$
$
33,096
15,922
14,747
63,765
$
$
35,631
14,533
9,821
59,985
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4. Balance Sheet Components
Inventory
Inventory consisted of the following (in thousands):
Raw materials
Work-in-process
Finished goods
Total inventory
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
Manufacturing equipment
Computer and network equipment
Furniture and fixtures
Software
Leasehold improvements
Total property and equipment, gross
Less: accumulated depreciation
Total property and equipment, net
December 31, December 31,
2023
2022
$
$
189
6,724
1,478
8,391
$
$
666
4,746
1,271
6,683
December 31, December 31,
2023
13,494
520
113
825
1,476
16,428
(12,711)
3,717
$
$
2022
16,130
1,124
187
929
1,444
19,814
(15,931)
3,883
$
$
Depreciation and amortization expense during the years ended December 31, 2023 and 2022 was $1.2 million and
$1.0 million, respectively.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
Payroll-related expenses
Inventory
Other
Total accrued liabilities
Deferred Revenue
December 31,
2023
December 31,
2022
$
$
3,347
317
672
4,336
$
$
2,886
185
462
3,533
During the year ended December 31, 2022, the Company executed contractual arrangements with a customer for the
development of a RAD-Hard product, consisting of a technology license, design license agreement and development
subcontract (RAD-Hard 1). The Company does not share in the rights to future revenues or royalties. The total
arrangements are for $6.5 million in consideration.
The Company concluded these contractual arrangements represent one arrangement and evaluated its promises to the
customer and whether the performance obligations granted under the arrangement were distinct. The licenses provided to
the customer are not transferable, are of limited value without the promised development services, and the customer cannot
benefit from the license agreements without the specific obligated services in the development subcontract, as there is
strong interdependency between the licenses and the development subcontract. Accordingly, the Company determined the
licenses were not distinct within the context of the contract and combined the license with other performance obligations.
The total transaction price of $6.5 million was allocated to the single performance obligation.
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The Company recognizes revenue related to the performance obligations over time using the input method based on
costs incurred to date relative to the total expected costs of the contract and began recognizing revenue in the second
quarter of 2021 over the contract period. This method depicts performance under the contract and requires the Company to
make estimates about the future costs expected to be incurred to perform under the contact, including labor and material
costs.
As of December 31, 2023, the Company has billed $6.0 million for the performance under the RAD-Hard 1
contractual agreements. Under the input method of recognition, the Company has recognized $0.7 million in revenue for
the year ending December 31, 2023, and $5.7 million in revenue since inception of the contractual agreements. As a result,
the Company has recorded $0.3 million in deferred revenue as of December 31, 2023. The Company expects to recognize
the remaining $0.8 million of the transaction price as services are performed throughout the contractual period and
performance is expected to be complete in the year ended December 31, 2024.
As of December 31, 2022, the Company had recorded $0.8 million in deferred revenue, of which $0.7 million was
recognized as revenue during the year ending December 31, 2023.
5. Commitments and Contingencies
Leases
Operating leases consist of fabrication, lab, and office space expiring at various dates through 2029. Finance leases
relate to a server lease expiring in January 2025. The Company’s lease agreements do not contain any material residual
value guarantees or material restrictive covenants.
The undiscounted future non-cancellable lease payments under the Company’s operating and finance leases were as
follows (in thousands):
As of December 31, 2023
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total lease liabilities
Less: current portion of lease liabilities
Total lease liabilities, net of current portion
Amount
$
$
1,411
1,416
1,431
1,314
529
38
6,139
(559)
5,580
(1,190)
4,390
Other information related to the Company's operating lease liabilities was as follows:
Weighted-average remaining lease term (years)
Weighted-average discount rate
December 31,
2023
4.37
4.50 %
December 31,
2022
5.35
4.50 %
Other information related to the Company’s finance lease liabilities was as follows:
Weighted-average remaining lease term (years)
Weighted-average discount rate
December 31,
2023
1.09
4.50 %
December 31,
2022
2.09
4.50 %
Lease costs for the Company’s operating leases were $1.4 million for the years ended December 31, 2023 and 2022,
respectively. Lease costs for the Company’s finance lease were immaterial for the years ended December 31, 2023 and
2022.
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Legal Proceedings
From time to time, the Company may become involved in legal proceedings arising from the ordinary course of its
business. Management is currently not aware of any matters that it expects will have a material adverse effect on the
financial position, results of operations or cash flows of the Company.
Indemnifications
In 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
suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party
actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential
amount of future payments the Company could be required to make under these provisions is not determinable. The
Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.
The Company has also entered into indemnification agreements with its directors and officers that may require the
Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as
directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and
officers’ insurance.
6. Debt
In March 2023, the 2019 Credit Facility, consisting of the Company’s Term Loan and Line of Credit, was paid in full,
and there was no outstanding balance as of December 31, 2023. The Company paid an early termination and prepayment
fee of $170,000, which was recorded within other income (expense) within the statements of income and comprehensive
income for the year ended December 31, 2023. The Company was in compliance with all covenants throughout the 2019
Credit Facility payoff date in March 2023.
The amortization of the debt issuance costs and accretion of the debt discount is included in interest expense within the
statements of income and comprehensive income and included in non-cash interest expense within the statement of cash
flows.
The carrying value of the Company’s 2019 Credit Facility at December 31, 2022, was as follows (in thousands):
Credit Facility
Unamortized debt discounts
Net carrying value
Current
Portion
Long-Term
Debt
Total
$
$
2,620
(26)
2,594
$
$
— $
—
— $
2,620
(26)
2,594
7. Stockholders’ Equity
Common Stock
Common stockholders are entitled to dividends if and when declared by the board of directors. As of December 31,
2023, no dividends on common stock had been declared by the board of directors.
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Reserved Shares of Common Stock
The Company had reserved shares of common stock for future issuance as follows:
Options issued and outstanding
Shares available for future option grants
RSUs subject to future vesting
Common stock warrants
Total
Warrants
December 31, December 31,
2023
1,793,485
598,397
905,781
18,461
3,316,124
2022
1,994,726
689,472
656,646
18,461
3,359,305
In connection with the Company’s prior credit facility with Ares Venture Finance entered into in June 2015, the
Company issued Ares Venture Finance a warrant to purchase 18,461 shares of the Company’s common stock at an exercise
price of $26.00 per share. The warrant can be exercised at any time and expires on June 5, 2025.
8. Stock-Based Compensation
2016 Employee Incentive Plan
The Company’s board of directors adopted the 2016 Equity Incentive Plan (the 2016 Plan) on April 25, 2016, which
was subsequently approved on September 20, 2016 by the Company’s stockholders. The 2016 Plan became effective on
October 7, 2016, the date the Company’s S-8 registration statement relating to the 2016 Plan was declared effective by the
SEC.
The Company’s 2016 Plan provides for the grant of incentive stock options, non-statutory stock options, stock
appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms
of equity compensation to employees, directors, and consultants. In addition, the Company’s 2016 Plan provides for the
grant of performance 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 was initially
500,000 subject to an automatic increase on January 1 of each year, beginning on January 1, 2017, and continuing through
and including January 1, 2026, by 3% of the total number of shares of capital stock outstanding on December 31 of the
preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. On May 20, 2021,
the Company’s stockholders approved an amendment to the 2016 Plan to increase the total number of authorized shares of
common stock available for grant thereunder by an additional 550,000 shares. At December 31, 2023, of the 3,297,663
shares of common stock reserved and available for grant under the 2016 Plan, 598,397 shares of common stock remain
available for grant under the 2016 Plan.
2008 Employee Incentive Plan
The 2008 Equity Incentive Plan (the 2008 Plan) provided for the issuance of incentive stock options (ISO),
nonqualified stock options, and other stock compensation awards.
Due to the adoption of the 2016 Plan, no further grants will be made under the Company’s 2008 Plan. However, any
outstanding stock awards granted under the 2008 Plan will remain outstanding, subject to the terms of the Company’s 2008
Plan and the applicable stock award agreements, until such outstanding stock awards that are stock options are exercised or
until they terminate or expire by their terms, or until such stock awards are fully settled, terminated, or forfeited. At
December 31, 2023, 35,943 options under the 2008 Plan remained outstanding.
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Summary of Stock Option Activity
The following table summarizes the stock option and award activity for all grants under the 2008 Plan and 2016 Plan:
Balance—December 31, 2022
Authorized
RSUs granted
RSUs cancelled/forfeited
Warrants exercised
Options granted
Options exercised
Options cancelled/forfeited
Balance—December 31, 2023
Options exercisable—December 31, 2023
Options Outstanding
Weighted- Weighted-
Average
Average
Exercise
Remaining
Price Per Contractual
Aggregate
Intrinsic
Value
Number of
Options
1,994,726
Share
$ 5.88
Life (years) (In thousands)
1,275
7.8
$
Options and
Awards
Available for
Grant
689,472
611,228
(713,301)
7,057
(236)
(8,000)
$ 6.47
8,000
— (161,121) $ 4.99
(12,177) $ 6.48
$ 5.96
$ 5.67
1,829,428
1,296,776
12,177
598,397
$
$
$
6.9
6.5
679
5,676
4,411
During the years ended December 31, 2023 and 2022, the Company granted options with a weighted-average grant
date fair value of $3.85 and $5.40 per share, respectively.
The total fair value of options vested during the year was $2.0 million and $1.3 million, for the years ended
December 31, 2023, and 2022, respectively.
As of December 31, 2023, there was $2.3 million of total unrecognized compensation expense related to unvested
options which is expected to be recognized over a weighted-average period of 1.7 years. Compensation cost capitalized
within inventory at December 31, 2023 and 2022 was not material.
The Company estimated the fair value of each option grant using the Black-Scholes option-pricing model. The fair
value 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.
Expected volatility
Risk-free interest rate
Expected term (in years)
Dividend yield
2016 Employee Stock Purchase Plan
Year Ended
December 31,
2023
2022
50.9 - 73.9 % 73.7 - 74.1 %
2.33 - 3.45 % 2.13 - 2.93 %
6.01 - 6.05
6.05 - 6.08
— %
— %
The 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 Company had 890,161
shares available for issuance under the Company’s ESPP as of December 31, 2023. Employees purchased 87,718 shares for
$394,000 during the year ended December 31, 2023, and 77,221 shares for $342,000 during the year ended December 31,
2022.
Restricted Stock Units
In September 2017, the Company’s board of directors authorized the issuance of restricted stock units (RSUs), under
the 2016 Plan and adopted a form of Restricted Stock Unit Award Agreement, which is intended to serve as a standard
form agreement for RSU grants issued to employees, executive officers, directors, and consultants. The fair
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value of the RSUs is recognized 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, 2023:
Balance—December 31, 2022
Granted
Vested
Cancelled/forfeited
Balance—December 31, 2023
RSUs Outstanding
Weighted-
Average
Grant Date
Number of
Restricted Stock Fair Value Per
Units
$
656,646
713,301
$
(457,109) $
(7,057) $
905,781 $
Share
6.45
6.52
6.29
6.32
6.59
The fair value of RSUs is determined on the date of grant based on the market price of the Company’s common stock
on that date. As of December 31, 2023, there was $4.6 million of unrecognized stock-based compensation expense related
to RSUs to be recognized over a weighted-average period of 1.8 years. Compensation cost capitalized within inventory at
December 31, 2023 and 2022 was not material.
9. 401(k) Plan
The Company has a defined contribution employee benefit plan pursuant to Section 401(k) of the Internal Revenue
Code. The plan allows eligible employees to defer a portion of their annual compensation up to certain statutory limits. At
the election of the Board of Directors, the Company may elect to match employee contributions but has not done so to date.
10. Significant Agreements
GLOBALFOUNDRIES, Inc. Joint Development Agreement
Since October 17, 2014, the Company has participated in a joint development agreement (JDA) with
GLOBALFOUNDRIES Inc. (GF), a semiconductor foundry, for the joint development of STT-MRAM technology to
produce a family of discrete and embedded MRAM technologies. The term of the agreement is until the completion,
termination, or expiration of the last statement of work entered into pursuant to the joint development agreement. The
agreement was extended on December 31, 2019 to include a new phase of support for 12nm MRAM development.
Under the current JDA extension terms, each party licenses its relevant intellectual property to the other party. For
certain jointly developed works, the parties have agreed to follow an invention allocation procedure to determine
ownership. In addition, GF possesses the exclusive right to manufacture the Company’s discrete and embedded STT-
MRAM devices developed pursuant to the agreement until the earlier of three years after the qualification of the MRAM
device for a particular technology node or four years after the completion of the relevant statement of work under which
the device was developed. For the same exclusivity period associated with the relevant device, GF agreed not to license
intellectual property developed in connection with the JDA to named competitors of the Company.
If GF manufactures, sells, or transfers to customers wafers containing production quantified STT-MRAM devices that
utilize certain design information, GF will be required to pay the Company a royalty.
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11. Geographic Information
Property and equipment, net by country was as follows (in thousands):
United States
Singapore
Other
December 31,
2023
2022
2,555
1,077
85
3,717
$
$
2,335
1,459
89
3,883
$
$
Revenue from customers is designated based on the geographic region or country to which the product is delivered or
the licensee is located. Revenue by country was as follows (in thousands):
United States
Japan
Hong Kong
Germany
Singapore
China
Canada
All other
Total revenue
12. Income Taxes
Year Ended December 31,
2023
14,599
12,216
10,748
9,767
4,285
2,727
1,324
8,099
63,765
$
$
2022
14,585
12,442
12,820
3,839
1,075
3,739
5,670
5,815
59,985
$
$
For the years ended December 31, 2023 and 2022, the Company’s provision for income tax consisted of (in
thousands):
Current:
Federal
State
Foreign
Total Current
Deferred:
Federal
State
Foreign
Total Deferred
Provision for income taxes
61
Year Ended December 31,
2023
2022
$
$
$
$
$
— $
134
—
134
$
$
40
(190)
—
(150) $
(16) $
—
14
—
14
—
—
—
—
14
Table of Contents
The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
Tax at statutory federal rate
State taxes, net of federal benefit
Stock-based compensation
IRC section 162(m) limitation
Change in valuation allowance
Other
Provision for income taxes
Year Ended December 31,
2023
2022
21.0 %
1.7
0.6
3.9
(28.5)
1.1
(0.2)%
21.0 %
1.9
4.2
1.1
(28.0)
—
0.2 %
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax
assets are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Inventory
Accruals
Depreciation and amortization
Research and experimental expenditures
Stock-based compensation
Right of use liability
Gross deferred tax assets
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Right of use asset
Other
Deferred tax liabilities
Net deferred tax assets
December 31,
2023
2022
$ 22,068
287
863
13
4,728
268
1,245
29,472
(27,748)
1,724
$ 27,110
273
737
27
2,229
270
1,477
32,123
(30,328)
1,795
(1,226)
(348)
(1,574)
150
$
(1,463)
(332)
(1,795)
—
$
The Company is required to reduce its deferred tax assets by a valuation allowance if it is more likely than not that
some or all of its deferred tax assets will not be realized. Management must use judgment in assessing the potential need
for a valuation allowance, which requires an evaluation of both negative and positive evidence. The weight given to the
potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively
verified. In determining the need for and amount of the valuation allowance, if any, the Company assesses the likelihood
that it will be able to recover its deferred tax assets using historical levels of income, estimates of future income and tax
planning strategies. As a result of projected taxable income, the Company determined that, based on all available evidence,
there was substantial certainty as to whether it will recover recorded net deferred taxes for certain state jurisdictions in
future periods. However, as it pertains to the federal, Arizona, and Colorado net deferred tax assets, based on all the
available evidence, there is substantial uncertainty as to whether it will recover recorded net deferred taxes in future
periods. Accordingly, the Company recorded a partial and full valuation allowance against all of its net deferred tax assets
as of December 31, 2023 and 2022, respectively. The net valuation allowance decreased by $2.6 million in 2023.
As of December 31, 2023, the Company has federal net operating loss carryforwards of approximately $96.2 million,
of which $55.8 million will expire in 2028 through 2037 if not utilized, and $40.5 million that will carryover indefinitely.
In addition, the Company has state net operating loss carryforwards of approximately $48.7 million, of which $45.9 million
will expire in 2028 through 2043 if not utilized, and $2.8 million that will carryover indefinitely.
The Tax Reform Act of 1986 (the Act) provides for a limitation on the annual use of net operating loss carryforwards
following certain ownership changes (as defined by the Act and codified under Section 382 of the U.S. Internal Revenue
Code of 1986, as amended (the Code)) that could limit the Company’s ability to utilize these carryforwards. Further, a
portion of the carryforwards may expire before utilized to reduce future income tax liabilities
62
Table of Contents
as a result of the annual limitation. The Company experienced an ownership change in October 2016 and as a result, $43.8
million ($9.2 million tax effected) of the federal NOLs are expected to expire unutilized due to limitation under Section
382 of the Code. The NOLs expected to expire unutilized are included in the NOL carryforward amounts disclosed, subject
to a valuation allowance.
The Company files income tax returns in the U.S. federal and various state jurisdictions. The Company is generally
subject to U.S. federal and state income tax examination for all tax years beginning in 2008, due to the net operating losses
that are carried forward.
A summary of changes in the Company’s gross unrecognized tax benefits for the years ended December 31, 2023 and
2022 was as follows (in thousands):
Unrecognized tax expense, beginning of the year
Decrease related to prior year tax positions
Increase related to prior year tax positions
Increase related to current year tax positions
Unrecognized tax expense, end of year
Year Ended December 31,
2023
2022
$
$
105
—
368
—
473
$
$
105
(16)
—
16
105
Included in the balance of unrecognized tax benefits as of December 31, 2023, are $105,000 of tax benefit that, if
recognized, would affect the effective tax rate. Included in the balance of uncertain tax benefits as of December 31, 2023 is
$368,000 of tax benefits that, if recognized, would result in adjustments to deferred taxes.
The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefit as a component
of income tax expense. The Company has accrued penalties and interest of $155,000, as of both December 31, 2023 and
2022.
13. Net Income Per Common Share
The following table sets forth the computation of basic and diluted net income per share (in thousands, except share
and per share amounts):
Basic EPS
Numerator:
Net income
Denominator:
Weighted-average shares of common stock outstanding, basic
Net income per common share, basic
63
Year Ended December 31,
2023
2022
$
9,052
$
6,129
20,748,302
0.44
$
20,130,336
0.30
$
Table of Contents
Diluted EPS
Numerator:
Net income
Less: warrant liability fair value gain recognized
Net income attributable to common stockholders, diluted
Denominator:
Weighted-average shares of common stock outstanding, basic
Dilutive effect of stock options and RSUs
Weighted-average shares of common stock outstanding,
diluted
Net income per common share, diluted
Year Ended December 31,
2023
2022
$
$
9,052
(25)
9,027
$
$
6,129
(23)
6,106
20,748,302
619,002
20,130,336
645,589
21,367,304
0.42
$
20,775,925
0.29
$
The following outstanding shares of potentially dilutive securities outstanding have been excluded from the
computation of diluted net income per common share for the periods presented as their inclusion would be anti-dilutive:
Options to purchase common stock
RSUs
Common stock warrants
ESPP
Total
Year Ended December 31,
2023
613,652
330,082
18,461
—
962,195
2022
841,845
4,147
18,461
—
864,453
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) and
Chief Financial Officer (CFO) evaluated the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023.
Based on this evaluation, our CEO and CFO concluded that, our disclosure controls and procedures were effective at
the reasonable assurance level as of December 31, 2023.
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 over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). This Annual Report on Form 10-
K does not include an attestation report of our independent registered public accounting firm because, as a “smaller
reporting company”, and non-accelerated filer, our independent registered public accounting 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:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our management used the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control -
Integrated Framework (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
64
Table of Contents
reporting because it is free from bias, permits reasonably consistent qualitative and quantitative measurements of our
internal control over financial reporting, is sufficiently complete so that those relevant factors that would alter a conclusion
about the effectiveness of our internal control over financial reporting are not omitted and is relevant to an evaluation of
internal control over financial reporting. Management has assessed the effectiveness of our internal control over financial
reporting as of December 31, 2023, and has concluded that such internal control over financial reporting was effective.
Changes in internal control over financial reporting.
There have been no changes in our internal control over financial reporting that occurred during the year ended
December 31, 2023, that materially affected, or are reasonably likely to materially 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 inherent
limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and
procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over
financial reporting, 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 become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate. 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
financial reporting.
Item 9B. Other Information.
Trading Arrangements of Directors and Executive Officers.
None of our directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a
non-Rule 10b5-1 trading arrangement (as defined under Item 408(a) of Regulation S-K) during the quarter ended
December 31, 2023.
Election of a Director.
On February 26, 2024, Douglas Mitchell was elected as a member of our board of directors. Mr. Mitchell was
appointed to serve on our Nominating and Corporate Governance Committee, effective immediately. There is no
arrangement or understanding between Mr. Mitchell and any other person pursuant to which he was selected as a director.
Mr. Mitchell does not have any direct or indirect material interest in any transaction required to be disclosed pursuant to
Item 404(a) of Regulation S-K. We will enter into our standard indemnification and standard non-disclosure agreement
with Mr. Mitchell.
Mr. Mitchell will participate in our non-employee director compensation program. In connection with Mr. Mitchell’s
election to our board of directors, Mr. Mitchell will be granted an initial RSU award with a grant value of $250,000, which
will vest 50% on each of the first and second anniversary from the date of grant. Mr. Mitchell will also receive an annual
cash retainer of $55,000 for his service on our board of directors.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
65
Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information required by this item will be contained in our definitive proxy statement to be filed with the SEC on
Schedule 14A in connection with our 2024 Annual Meeting of Stockholders, or the Proxy Statement, which will be filed
not later than 120 days after the end of our fiscal year ended December 31, 2023, under the headings “Management,”
“Proposal 1 - Election of Directors,” “Board Committees and Meetings,” and, to the extent applicable, “Delinquent
Section 16(a) Reports,” 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
is available on our website at www.everspin.com. The Code of Business Conduct and Ethics is intended to qualify as a
“code of ethics” 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 that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or
persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our
code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the
date of the waiver, 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
information set forth in the sections titled “Executive Compensation” and “Compensation of Non-Employee Board
Members” in our Proxy 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 is
incorporated by reference to the information set forth in the sections titled “Security Ownership of Certain Beneficial
Owners and 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 director
independence is incorporated by reference to the information set forth in the sections titled “Certain Relationships and
Related Party Transactions” and “Corporate Governance”, respectively, in our Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by this item regarding principal accountant fees and services is incorporated by reference to
the information set forth in the section titled “Principal Accountant Fees and Services” in our Proxy Statement.
66
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this report:
1. Financial Statements
Information in response to this Item is included in Part II, Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is shown in the financial
statements or notes thereto.
3. Exhibits
67
Table of Contents
Exhibit
Number
Description
Form
SEC File No.
Exhibit
Filing Date
EXHIBIT INDEX
Incorporation By Reference
Amended and Restated Certificate of
Incorporation.
8-K
001-37900
Amendment to Amended and Restated
Certificate of Incorporation.
8-K
001-37900
Amendment to Amended and Restated
Certificate of Incorporation.
8-K
001-37900
Amendment to Amended and Restated
Certificate of Incorporation
8-K
001-37900
8-K
S-1
001-37900
333-213569
10-Q
001-37900
3.1
3.1
3.1
3.1
3.2
4.1
4.2
10/13/2016
5/22/2019
5/27/2020
5/25/2023
5/22/2019
9/09/2016
11/08/2019
3.1
3.1.1
3.1.2
3.1.3
3.2
4.1
4.2
4.3
4.4
10.1†
10.2†
10.3†
10.3.1†
10.4†
10.5†
Amended and Restated Bylaws.
Form of Common Stock Certificate of
the registrant.
Amended and Restated Warrant to
Purchase Common Stock, dated as of
August 5, 2019, between the registrant
and Silicon Valley Bank.
Warrant to Purchase Common Stock,
dated as of July 15, 2020, between the
registrant and Silicon Valley Bank.
Description of Common Stock.
Form of Indemnity Agreement between
the registrant and its directors and
officers.
2008 Equity Incentive Plan, as
amended, and Form of Stock Option
Grant Notice, Option Agreement and
Form of Notice of Exercise.
Amended and Restated 2016 Equity
Incentive Plan.
First Amendment to the Amended and
Restated 2016 Equity Incentive Plan.
Form of Stock Option Grant Notice,
Option Agreement and Form of Notice
of Exercise used with the 2016 Equity
Incentive Plan.
Form of Restricted Stock Unit Award
Agreement under the 2016 Equity
Incentive Plan.
10-Q
001-37900
4.3
8/06/2020
10-K
S-1
001-37900
333-213569
4.4
10.1
3/04/2021
9/09/2016
S-1/A
333-213569
10.2
9/26/2016
8-K
001-37900
10.1
5/22/2018
8-K
001-37900
10.1
5/25/2021
S-1/A
333-213569
10.3
9/26/2016
10-Q
001-37900
10.3
11/13/2017
68
Table of Contents
10.6†
2016 Employee Stock Purchase Plan.
S-1/A
333-213569
10.7
10.7.1
10.7.2
10.7.3
10.7.4
10.7.5
10.7.6
10.7.7
10.7.8
10.7.9
Lease, dated as of June 6, 2008, by and
between the registrant and Freescale
Semiconductor, Inc.
Amendment No. 1 to Lease, dated as of
February 2, 2009, by and between the
registrant and Freescale Semiconductor,
Inc.
Amendment No. 2 to Lease, dated as of
February 18, 2010, by and between the
registrant and Freescale Semiconductor,
Inc.
Amendment No. 3 to Lease, dated as of
July 20, 2011, by and between the
registrant and Freescale Semiconductor,
Inc.
Amendment No. 4 to Lease, dated as of
June, 2014 by and between the
registrant and Freescale Semiconductor,
Inc.
Amendment No. 5 to Lease, dated as of
March 22, 2017 by and between the
registrant and Freescale Semiconductor,
Inc.
Amendment No. 6 to Lease, dated as of
October 31, 2017 by and between the
registrant and NXP USA, Inc. (formerly
Freescale Semiconductor, Inc.).
Amendment No. 7 to Lease, effective as
of June 30, 2018 by and between the
registrant and NXP USA, Inc. (formerly
Freescale Semiconductor, Inc.).
Amendment No. 8 to Lease, effective as
of November 30, 2019 by and between
the registrant and NXP USA, Inc.
(formerly Freescale Semiconductor,
Inc.).
Amendment No. 9 to Lease, effective as
of March 31, 2020 by and between the
registrant and NXP USA, Inc. (formerly
Freescale Semiconductor, Inc.).
S-1
333-213569
10.4
10.5
9/26/2016
9/09/2016
S-1
333-213569
10.6
9/09/2016
S-1
333-213569
10.7
9/09/2016
S-1
333-213569
10.8
9/09/2016
S-1
333-213569
10.9
9/09/2016
8-K
001-37900
10.1
3/28/2017
10-K
001-37900
10.40
3/15/2018
10-Q
001-37900
10.1
11/14/2018
10-K
001-37900
10.15
3/13/2020
10-Q
001-37900
10.2
8/06/2020
69
Table of Contents
10.7.10
10.8
10.8.1
10.8.2
10.8.3
10.9
10.9.1
10.10
10.10.1
Amendment No. 10 to Lease, effective
as of February 12, 2022 by and between
the registrant and NXP USA, Inc.
(formerly Freescale Semiconductor,
Inc.)
Amended and Restated Loan and
Security Agreement, dated as of August
5, 2019, between the registrant and
Silicon Valley Bank.
First Amendment to Amended and
Restated Loan and Security Agreement,
dated as of July 15, 2020, by and
between the registrant and Silicon
Valley Bank.
Second Amendment to Amended and
Restated Loan and Security Agreement,
dated as of July 28, 2021, by and
between the registrant and Silicon
Valley Bank.
Third Amendment to Amended and
Restated Loan and Security Agreement,
dated as of July 22, 2022, by and
between the registrant and Silicon
Valley Bank
Commercial Industrial Lease
Agreement, dated as of May 18, 2012
by and between the registrant and
Principal Life Insurance Company.
Amendment No. 1 to Commercial
Industrial Lease Agreement, dated
August 12, 2016 by and between the
registrant and Legacy Stonelake JV-T,
LLC, successor in interest to Principal
Life Insurance Company.
Sublease Agreement, dated January 31,
2017 by and between the registrant and
NXP USA, Inc. and Consent to of
Landlord to Sublease, dated March 10,
2017, by and among the registrant,
NXP USA, Inc. and VWP-BV CM
5670, LLC.
First Amendment to Sublease
Agreement, dated February 13, 2017,
by and between the registrant and NXP
USA, Inc. and Consent of Landlord to
Amendment to Sublease, dated March
10, 2017, by and among the registrant,
NXP USA, Inc. and VWP-BV CM
5670, LLC.
10-K
001-37900
10.7.10
3/2/2023
10-Q
001-37900
10.1
11/08/2019
10-Q
001-37900
10.3
8/06/2020
10-Q
001-37900
10.5
8/12/2021
10-Q
001-37900
10.1
8/12/2022
S-1
333-213569
10.17
9/09/2016
S-1
333-213569
10.22
9/09/2016
8-K
001-37900
10.1
3/28/2017
8-K
001-37900
10.2
3/28/2017
70
Table of Contents
10.10.2
10.10.3
10.11++
10.11.1++
10.11.2++
10.11.3++
10.11.4++
10.12+
10.13
Second Amendment to Sublease
Agreement dated March 2, 2017 by and
between the registrant and NXP USA,
Inc. and Consent of Landlord to
Sublease, dated March 10, 2017, by and
among the registrant, NXP USA, Inc.
and VWP-BV CM 5670, LLC.
Third Amendment to Sublease
Agreement, dated October 17, 2017 by
and between the registrant and NXP
USA, Inc. and Consent of Landlord to
Sublease, dated March 10, 2017, by and
among the registrant, NXP USA, Inc.
and VWP-BV CM 5670, LLC.
STT-MRAM Joint Development
Agreement, dated as of October 17,
2014 by and between the registrant and
GLOBALFOUNDRIES Inc.
Amendment No. 1 to the STT-MRAM
Joint Development Agreement, dated as
of May 27, 2016 by and between the
registrant and GLOBALFOUNDRIES
Inc.
Amendment No. 2 to the STT-MRAM
Joint Development Agreement,
effective as of July 25, 2017 by and
between the registrant and
GLOBALFOUNDRIES Inc.
Amendment No. 3 to the STT-MRAM
Joint Development Agreement,
effective as of January 1, 2018 by and
between the registrant and
GLOBALFOUNDRIES Inc.
Amendment No. 4 to the STT-MRAM
Joint Development Agreement,
effective as of December 31, 2019 by
and between the registrant and
GLOBALFOUNDRIES, Inc.
Manufacturing Agreement, dated as of
October 23, 2014 by and between the
registrant and GLOBALFOUNDRIES
Singapore Pte. Ltd.
Restricted Stock Purchase Agreement,
dated as of October 21, 2014 by and
between the registrant and
GLOBALFOUNDRIES Inc.
8-K
001-37900
10.3
3/28/2017
10-K
001-37900
10.39
3/15/2018
10-Q
001-37900
10.1
11/2/2023
10-Q
001-37900
10.2
11/2/2023
10-K
001-37900
10.11.2
3/04/2021
10-Q
001-37900
10.3
11/2/2023
10-K
001-37900
10.11.4
3/04/2021
S-1
333-213569
10.20
9/09/2016
S-1
333-213569
10.21
9/09/2016
71
Table of Contents
10.14
10.15
10.16†
10.17†
10.18†
10.19†
10.20†
10.21†
10.22†
10.23†
10.24†
23.1*
24.1*
Common Stock Purchase Agreement,
dated as of September 23, 2016 by and
between the registrant and GigaDevice
(HK) Limited.
Subcontract Agreement, dated as of
October 3, 2022, by and between the
registrant and QuickLogic Corporation.
Non-employee Director Compensation
Program, as Amended.
Offer Letter, dated December 30, 2020,
by and between the registrant and Darin
Billerbeck.
Executive Employment Agreement,
effective as of April 3, 2021, by and
between the registrant and Sanjeev
Aggarwal.
Executive Employment Agreement,
effective as of July 2, 2021, by and
between the registrant and Anuj
Aggarwal.
First Amendment to Executive
Employment Agreement, effective as of
March 14, 2022, by and between the
registrant and Sanjeev Aggarwal.
First Amendment to Offer Letter,
effective as of March 14, 2022, by and
between the registrant and Darin
Billerbeck.
First Amendment to Executive
Employment Agreement, effective as of
March 14, 2022, by and between the
registrant and Anuj Aggarwal.
Executive Severance and Change in
Control Plan.
Restricted Stock Unit Grants to
Executive Chairman, CEO and CFO
Consent of Ernst & Young LLP,
Independent Registered Public
Accounting Firm.
Power of Attorney (included on the
Signatures page of this Annual Report
on Form 10-K).
S-1/A
333-213569
10.23
9/26/2016
10-Q
001-37900
10.2
11/10/2022
10-Q
001-37900
10.1
5/4/2023
10-K
001-37900
10.26
3/04/2021
8-K
001-37900
10.1
7/22/2021
8-K
001-37900
10.2
7/22/2021
8-K
001-37900
10.1
3/02/2022
8-K
001-37900
10.2
3/02/2022
8-K
001-37900
10.3
3/02/2022
8-K
001-37900
10.4
3/02/2022
8-K
001-37900
Item 5.02
5/12/2022
72
Table of Contents
31.1*
31.2*
32.1**
Certification of Principal Executive
Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities
Exchange Act of 1934, as amended.
Certification of Principal Financial
Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities
Exchange Act of 1934, as amended.
Certification of Principal Executive
Officer and Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
97.1*
Incentive Compensation Recoupment
Policy
101.INS*
Inline XBRL Instance Document – the
instance document does not appear in
the Interactive Data File because its
XBRL tags are embedded within the
Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension
Schema Document.
101.CAL*
Inline XBRL Taxonomy Extension
Calculation Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension
Definition Linkbase Document.
101.LAB*
Inline XBRL Taxonomy Extension
Label Linkbase Document.
101.PRE*
Inline XBRL Taxonomy Extension
Presentation Linkbase Document.
104*
Cover Page Interactive Data File
(formatted as Inline XBRL and
contained in Exhibit 101).
*
Filed herewith.
** Furnished herewith. Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that
section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other
document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically
stated in such filing.
+ Confidential treatment has been granted for certain portions of this exhibit.
++ Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and
(ii) would likely cause competitive harm if publicly disclosed.
73
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†
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 the
Exhibit Index immediately above.
(c) See Item 15(a)2 above.
Item 16. Form 10-K Summary.
Not provided.
74
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in
Chandler, Arizona, on February 29, 2024.
Everspin Technologies, Inc.
By: /s/ Sanjeev Aggarwal
Sanjeev Aggarwal
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Anuj Aggarwal
Anuj Aggarwal
Chief Financial Officer
(Principal Financial and Accounting Officer)
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Table of Contents
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Sanjeev Aggarwal and Anuj Aggarwal, and each of them, as his true and lawful attorneys-in-fact and agents, each
with the full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below
by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Sanjeev Aggarwal
Sanjeev Aggarwal
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Anuj Aggarwal
Anuj Aggarwal
Chief Financial Officer
(Principal Financial and Accounting Officer)
February 29, 2024
February 29, 2024
/s/ Darin G. Billerbeck
Darin G. Billerbeck
/s/ Lawrence G. Finch
Lawrence G. Finch
/s/ Geoff Ribar
Geoff Ribar
/s/ Tara Long
Tara Long
/s/ Glen Hawk
Glen Hawk
/s/ Douglas Mitchell
Douglas Mitchell
Chairman of the Board
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
Director
Director
Director
Director
Director
76
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 Equity
Incentive 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 Equity
Incentive Plan and the 2016 Employee Stock Purchase Plan,
3) Registration Statement (Form S-8 No. 333-225119) pertaining to the Everspin Technologies, Inc. 2016 Equity
Incentive Plan and the 2016 Employee Stock Purchase Plan,
4) Registration Statement (Form S-8 No. 333-230349) pertaining to the Everspin Technologies, Inc. 2016 Equity
Incentive Plan and the 2016 Employee Stock Purchase Plan,
5) Registration Statement (Form S-8 No. 333-237146) pertaining to the Everspin Technologies, Inc. 2016 Equity
Incentive Plan and the 2016 Employee Stock Purchase Plan,
6) Registration Statement (Form S-8 No. 333-253884) pertaining to the Everspin Technologies, Inc. 2016 Equity
Incentive Plan and the 2016 Employee Stock Purchase Plan,
7) Registration Statement (Form S-8 No. 333-258794) pertaining to the Everspin Technologies, Inc. Amended and
Restated 2016 Equity Incentive Plan,
8) Registration Statement (Form S-8 No. 333-263404) pertaining to the Everspin Technologies, Inc. Amended and
Restated 2016 Equity Incentive Plan and Everspin Technologies, Inc. 2016 Employee Stock Purchase Plan,
9) Registration Statement (Form S-8 No. 333-270242) pertaining to the Everspin Technologies, Inc. Amended and
Restated 2016 Equity Incentive Plan and Everspin Technologies, Inc. 2016 Employee Stock Purchase Plan, and
10) Registration Statement (Form S-3 No. 333-275585) of Everspin Technologies, Inc.;
of our report dated February 29, 2024, with respect to the financial statements of Everspin Technologies, Inc. included in
this Annual Report (Form 10-K) for the year ended December 31, 2023.
/s/ Ernst & Young LLP
Phoenix, Arizona
February 29, 2024
Certification of the Principal Executive Officer
Exhibit 31.1
I, Sanjeev Aggarwal, 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 material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading 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 present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e), 15d-15(e)), and internal control over financial reporting (as
defined 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
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation 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 our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially 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
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 29, 2024
/s/ Sanjeev Aggarwal
Sanjeev Aggarwal
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certification of Principal Financial Officer
I, Anuj Aggarwal, 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 material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading 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 present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e), 15d-15(e)) and internal control over financial reporting (as
defined 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
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation 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 our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially 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
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 29, 2024
/s/ Anuj Aggarwal
Anuj Aggarwal
(Chief Financial Officer)
(Principal Financial Officer)
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the Annual Report of Everspin Technologies, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2023 (the “Report”), Sanjeev Aggarwal, Chief Executive Officer of the Company, and Anuj Aggarwal,
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 18 of 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 of
operations of the Company.
Date: February 29, 2024
/s/ Sanjeev Aggarwal
Sanjeev Aggarwal
Chief Executive Officer
(Principal Executive Officer)
/s/ Anuj Aggarwal
Anuj Aggarwal
Chief Financial Officer
(Principal Financial Officer)
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange
Commission and is not to be incorporated by reference into any filing of Everspin Technologies, Inc. under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of
the Form 10-K), irrespective of any general incorporation language contained in such filing.
EVERSPIN TECHNOLOGIES, INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
Exhibit 97.1
1.
INTRODUCTION
The Board of Directors (the “Board”) of Everspin Technologies, Inc., a Delaware corporation (the
“Company”), has determined that it is in the best interests of the Company and its stockholders to adopt this
Incentive Compensation Recoupment Policy (this “Policy”) providing for the Company’s recoupment of
Recoverable Incentive Compensation that is received by Covered Officers of the Company under certain
circumstances. Certain capitalized terms used in this Policy have the meanings given to such terms in
Section 3 below.
This Policy is designed to comply with, and shall be interpreted to be consistent with, Section 10D
of the Exchange Act, Rule 10D-1 promulgated thereunder (“Rule 10D-1”) and Nasdaq Listing Rule 5608
(the “Listing Standards”).
2.
EFFECTIVE DATE
This Policy shall apply to all Incentive Compensation that is received by a Covered Officer on or
after October 2, 2023 (the “Effective Date”). Incentive Compensation is deemed “received” in the
Company’s fiscal period in which the Financial Reporting Measure specified in the Incentive Compensation
award is attained, even if the payment or grant of such Incentive Compensation occurs after the end of that
period.
3.
DEFINITIONS
“Accounting Restatement” means an accounting restatement that the Company is required to
prepare due to the material noncompliance of the Company with any financial reporting requirement under
the securities laws, including any required accounting restatement to correct an error in previously issued
financial statements that is material to the previously issued financial statements, or that would result in a
material misstatement if the error were corrected in the current period or left uncorrected in the current
period.
“Accounting Restatement Date” means the earlier to occur of (a) the date that the Board, a
committee of the Board authorized to take such action, or the officer or officers of the Company authorized
to take such action if Board action is not required, concludes, or reasonably should have concluded, that the
Company is required to prepare an Accounting Restatement, or (b) the date that a court, regulator or other
legally authorized body directs the Company to prepare an Accounting Restatement.
“Administrator” means the Compensation Committee or, in the absence of such committee, the
Board.
“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
“Compensation Committee” means the Compensation Committee of the Board.
“Covered Officer” means each current and former Executive Officer.
“Exchange” means the Nasdaq Stock Market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Executive Officer” means the Company’s president, principal financial officer, principal
accounting officer (or if there is no such accounting officer, the controller), any vice-president of the
Company in charge of a principal business unit, division, or function (such as sales, administration, or
finance), any other officer who performs a policy-making function, or any other person who performs
similar policy-making functions for the Company. Executive officers of the Company’s parent(s) or
subsidiaries are deemed executive officers of the Company if they perform such policy-making functions
for the Company. Policy-making function is not intended to include policy-making functions that are not
significant. Identification of an executive officer for purposes of this Policy would include at a minimum
executive officers identified pursuant to Item 401(b) of Regulation S-K promulgated under the Exchange
Act.
“Financial Reporting Measures” means measures that are determined and presented in accordance
with the accounting principles used in preparing the Company’s financial statements, and any measures
derived wholly or in part from such measures, including Company stock price and total stockholder return
(“TSR”). A measure need not be presented in the Company’s financial statements or included in a filing
with the SEC in order to be a Financial Reporting Measure.
“Incentive Compensation” means any compensation that is granted, earned or vested based wholly
or in part upon the attainment of a Financial Reporting Measure.
“Lookback Period” means the three completed fiscal years immediately preceding the Accounting
Restatement Date, as well as any transition period (resulting from a change in the Company’s fiscal year)
within or immediately following those three completed fiscal years (except that a transition period of at
least nine months shall count as a completed fiscal year). Notwithstanding the foregoing, the Lookback
Period shall not include fiscal years completed prior to the Effective Date.
“Recoverable Incentive Compensation” means Incentive Compensation received by a Covered
Officer during the Lookback Period that exceeds the amount of Incentive Compensation that would have
been received had such amount been determined based on the Accounting Restatement, computed without
regard to any taxes paid (i.e., on a gross basis without regard to tax withholdings and other deductions). For
any compensation plans or programs that take into account Incentive Compensation, the amount of
Recoverable Incentive Compensation for purposes of this Policy shall include, without limitation, the
amount contributed to any notional account based on Recoverable Incentive Compensation and any
earnings to date on that notional amount. For any Incentive Compensation that is based on stock price or
TSR, where the Recoverable Incentive Compensation is not subject to mathematical recalculation directly
from the information in an Accounting Restatement, the Administrator will determine the amount of
Recoverable Incentive Compensation based on a reasonable estimate of the effect of the Accounting
Restatement on the stock price or TSR upon which the Incentive Compensation was received. The
Company shall maintain documentation of the determination of that reasonable estimate and provide such
documentation to the Exchange in accordance with the Listing Standards.
“SEC” means the U.S. Securities and Exchange Commission.
4.
RECOUPMENT
(a)
Applicability of Policy. This Policy applies to Incentive Compensation received by a
Covered Officer (i) after beginning services as an Executive Officer, (ii) who served as an Executive Officer
at any time during the performance period for such Incentive Compensation, (iii) while the Company had a
class of securities listed on a national securities exchange or a national securities association, and (iv) during
the Lookback Period.
(b)
Recoupment Generally. Pursuant to the provisions of this Policy, if there is an
Accounting Restatement, the Company must reasonably promptly recoup the full amount of the
Recoverable Incentive Compensation, unless the conditions of one or more subsections of Section 4(c) of
this Policy are met and the Compensation Committee, or, if such committee does not consist solely of
independent directors, a majority of the independent directors serving on the Board, has made a
determination that recoupment would be impracticable. Recoupment is required regardless of whether the
Covered Officer engaged in any misconduct and regardless of fault, and the Company’s obligation to recoup
Recoverable Incentive Compensation is not dependent on whether or when any restated financial statements
are filed.
(c)
Impracticability of Recovery. Recoupment may be determined to be impracticable if, and
only if:
(i)
the direct expense paid to a third party to assist in enforcing this Policy would
exceed the amount of the applicable Recoverable Incentive Compensation; provided that, before
concluding that it would be impracticable to recover any amount of Recoverable Incentive
Compensation based on expense of enforcement, the Company shall make a reasonable attempt to
recover such Recoverable Incentive Compensation, document such reasonable attempt(s) to
recover, and provide that documentation to the Exchange in accordance with the Listing Standards;
or
(ii)
recoupment of the applicable Recoverable Incentive Compensation would likely
cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to
employees of the Company, to fail to meet the requirements of Code Section 401(a)(13) or Code
Section 411(a) and regulations thereunder.
(d)
Sources of Recoupment. To the extent permitted by applicable law, the Administrator
shall, in its sole discretion, determine the timing and method for recouping Recoverable Incentive
Compensation hereunder, provided that such recoupment is undertaken reasonably promptly. The
Administrator may, in its discretion, seek recoupment from a Covered Officer from any of the following
sources or a combination thereof, whether the applicable compensation was approved, awarded, granted,
payable or paid to the Covered Officer prior to, on or after the Effective Date: (i) direct repayment of
Recoverable Incentive Compensation previously paid to the Covered Officer; (ii) cancelling prior cash or
equity-based awards (whether vested or unvested and whether paid or unpaid); (iii) cancelling or offsetting
against any planned future cash or equity-based awards; (iv) forfeiture of deferred compensation, subject to
compliance with Code Section 409A; and (v) any other method authorized by applicable law or contract.
Subject to compliance with any applicable law, the Administrator may effectuate recoupment under this
Policy from any amount otherwise payable to the Covered Officer, including amounts payable to such
individual under any otherwise applicable Company plan or program, e.g., base salary, bonuses or
commissions and compensation previously deferred by the Covered Officer. The Administrator need not
utilize the same method of recovery for all Covered Officers or with respect to all types of Recoverable
Incentive Compensation.
(e)
indemnification
No Indemnification of Covered Officers. Notwithstanding any
agreement, applicable insurance policy or any other agreement or provision of the Company’s certificate of
incorporation or bylaws to the contrary, no Covered Officer shall be entitled to indemnification or
advancement of expenses in connection with any enforcement of this Policy by the Company, including
paying or reimbursing such Covered Officer for insurance premiums to cover potential obligations to the
Company under this Policy.
(f)
Indemnification of Administrator. Any members of the Administrator, and any other
members of the Board who assist in the administration of this Policy, shall not be personally liable for any
action, determination or interpretation made with respect to this Policy and shall be indemnified by the
Company to the fullest extent under applicable law and Company policy with respect to any such action,
determination or interpretation. The foregoing sentence shall not limit any other rights to indemnification of
the members of the Board under applicable law or Company policy.
(g)
No “Good Reason” for Covered Officers. Any action by the Company to recoup or any
recoupment of Recoverable Incentive Compensation under this Policy from a Covered Officer shall not be
deemed (i) “good reason” for resignation or to serve as a basis for a claim of constructive termination under
any benefits or compensation arrangement applicable to such Covered Officer, or (ii) to constitute a breach
of a contract or other arrangement to which such Covered Officer is party.
5.
ADMINISTRATION
Except as specifically set forth herein, this Policy shall be administered by the Administrator. The
Administrator shall have full and final authority to make any and all determinations required under this
Policy. Any determination by the Administrator with respect to this Policy shall be final, conclusive and
binding on all interested parties and need not be uniform with respect to each individual covered by this
Policy. In carrying out the administration of this Policy, the Administrator is authorized and directed to
consult with the full Board or such other committees of the Board as may be necessary or appropriate as to
matters within the scope of such other committee’s responsibility and authority. Subject to applicable law,
the Administrator may authorize and empower any officer or employee of the Company to take any and all
actions that the Administrator, in its sole discretion, deems necessary or appropriate to carry out the purpose
and intent of this Policy (other than with respect to any recovery under this Policy involving such officer or
employee).
6.
SEVERABILITY
If any provision of this Policy or the application of any such provision to a Covered Officer shall be
adjudicated to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Policy, and the invalid, illegal or unenforceable
provisions shall be deemed amended to the minimum extent necessary to render any such provision or
application enforceable.
7.
NO IMPAIRMENT OF OTHER REMEDIES
Nothing contained in this Policy, and no recoupment or recovery as contemplated herein, shall limit
any claims, damages or other legal remedies the Company or any of its affiliates may have against a
Covered Officer arising out of or resulting from any actions or omissions by the Covered Officer. This
Policy does not preclude the Company from taking any other action to enforce a Covered Officer’s
obligations to the Company, including, without limitation, termination of employment and/or institution of
civil proceedings. This Policy is in addition to the requirements of Section 304 of the Sarbanes-Oxley Act
of 2002 (“SOX 304”) that are applicable to the Company’s Chief Executive Officer and Chief Financial
Officer and to any other compensation recoupment policy and/or similar provisions in any employment,
equity plan, equity award, or other individual agreement, to which the Company is a party or which the
Company has adopted or may adopt and maintain from time to time; provided, however, that compensation
recouped pursuant to this Policy shall not be duplicative of compensation recouped pursuant to SOX 304 or
any such compensation recoupment policy and/or similar provisions in any such employment, equity plan,
equity award, or other individual agreement except as may be required by law.
8.
AMENDMENT; TERMINATION
The Administrator may amend, terminate or replace this Policy or any portion of this Policy at any
time and from time to time in its sole discretion. The Administrator shall amend this Policy as it deems
necessary to comply with applicable law or any Listing Standard.
9.
SUCCESSORS
This Policy shall be binding and enforceable against all Covered Officers and, to the extent required
by Rule 10D-1 and/or the applicable Listing Standards, their beneficiaries, heirs, executors, administrators
or other legal representatives.
10.
REQUIRED FILINGS
The Company shall make any disclosures and filings with respect to this Policy that are required by
law, including as required by the SEC.
*
*
*
*
*
EVERSPIN TECHNOLOGIES, INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
FORM OF EXECUTIVE ACKNOWLEDGMENT
I, the undersigned, agree and acknowledge that I am bound by, and subject to, the Everspin Technologies, Inc. Incentive
Compensation Recoupment Policy, as may be amended, restated, supplemented or otherwise modified from time to time (the
“Policy”). In the event of any inconsistency between the Policy and the terms of any employment agreement, offer letter or
other individual agreement with Everspin Technologies, Inc. (the “Company”) to which I am a party, or the terms of any
compensation plan, program or agreement, whether or not written, under which any compensation has been granted,
awarded, earned or paid to me, the terms of the Policy shall govern.
In the event that the Administrator (as defined in the Policy) determines that any compensation granted, awarded, earned or
paid to me must be forfeited or reimbursed to the Company pursuant to the Policy, I will promptly take any action necessary
to effectuate such forfeiture and/or reimbursement. I further agree and acknowledge that I am not entitled to indemnification,
and hereby waive any right to advancement of expenses, in connection with any enforcement of the Policy by the Company.
Agreed and Acknowledged:
Name:
Title:
Date:
6