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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-37900

Everspin Technologies, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware

    

26-2640654

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

5670 W. Chandler Boulevard, Suite 130

Chandler, Arizona 85226

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (480347-1111

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001

MRAM

The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

Emerging growth company

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

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

The number of shares of the Registrant’s Common Stock outstanding as of April 30, 2024, was 21,521,155.

Table of Contents

    

Page

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Condensed Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023

3

Condensed Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023 (unaudited)

4

Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (unaudited)

5

Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)

6

Notes to Condensed Financial Statements (unaudited)

7

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

EXHIBIT INDEX

39

SIGNATURES

41

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

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

EVERSPIN TECHNOLOGIES, INC.

Condensed Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

March 31, 

December 31,

2024

2023

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

34,801

$

36,946

Accounts receivable, net

 

13,078

 

11,554

Inventory

 

8,053

 

8,391

Prepaid expenses and other current assets

 

450

 

988

Total current assets

 

56,382

 

57,879

Property and equipment, net

 

4,078

 

3,717

Right-of-use assets

5,494

 

5,495

Other assets

 

212

 

212

Total assets

$

66,166

$

67,303

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

2,434

$

2,916

Accrued liabilities

 

2,122

 

4,336

Deferred revenue

81

336

Lease liabilities, current portion

1,259

1,190

Total current liabilities

 

5,896

 

8,778

Lease liabilities, net of current portion

4,322

4,390

Long-term income tax liability

162

214

Total liabilities

$

10,380

$

13,382

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 March 31, 2024 and December 31, 2023, respectively

Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 21,406,511 and 21,080,472 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

2

2

Additional paid-in capital

 

193,636

 

191,569

Accumulated deficit

 

(137,852)

 

(137,650)

Total stockholders’ equity

 

55,786

 

53,921

Total liabilities and stockholders’ equity

$

66,166

$

67,303

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

3

EVERSPIN TECHNOLOGIES, INC.

Condensed Statements of Operations and Comprehensive (Loss) Income

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Product sales

$

10,860

$

13,777

Licensing, royalty, patent, and other revenue

3,570

 

1,069

Total revenue

 

14,430

 

14,846

Cost of product sales

6,002

6,123

Cost of licensing, royalty, patent, and other revenue

268

293

Total cost of sales

 

6,270

 

6,416

Gross profit

 

8,160

 

8,430

Operating expenses:1

 

  

 

  

Research and development

 

3,418

 

3,199

General and administrative

 

4,036

 

3,220

Sales and marketing

 

1,306

 

1,315

Total operating expenses

 

8,760

 

7,734

(Loss) income from operations

 

(600)

 

696

Interest expense

 

 

(63)

Other income, net

 

398

 

128

Net (loss) income and comprehensive income

$

(202)

$

761

Net (loss) income per common share:

Basic

$

(0.01)

$

0.04

Diluted

$

(0.01)

$

0.04

Weighted average shares of common stock outstanding:

Basic

 

21,252,359

 

20,450,994

Diluted

 

21,252,359

 

20,832,074

1Operating expenses include stock-based compensation as follows:

Research and development

$

580

$

446

General and administrative

980

611

Sales and marketing

154

103

Total stock-based compensation

$

1,714

$

1,160

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

4

EVERSPIN TECHNOLOGIES, INC.

Condensed Statements of Stockholders’ Equity

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended March 31, 2024

Additional

Total

Common Stock

Paid-In

Accumulated

Stockholders’

  

Shares

  

Amount

  

Capital

  

Deficit

  

Equity

Balance at December 31, 2023

21,080,472

$

2

$

191,569

$

(137,650)

$

53,921

Exercise of stock options

96,116

353

353

Issuance of common stock under stock incentive plans

229,923

Stock-based compensation expense

1,714

1,714

Net loss

(202)

(202)

Balance at March 31, 2024

21,406,511

$

2

$

193,636

$

(137,852)

$

55,786

Three Months Ended March 31, 2023

Additional

Total

Common Stock

Paid-In

Accumulated

Stockholders’

  

Shares

  

Amount

  

Capital

  

Deficit

  

Equity

Balance at December 31, 2022

20,374,288

$

2

$

185,364

$

(146,702)

$

38,664

Exercise of stock options

3,020

13

13

Issuance of common stock under stock incentive plans

157,436

Stock-based compensation expense

1,160

1,160

Net income

761

761

Balance at March 31, 2023

20,534,744

$

2

$

186,537

$

(145,941)

$

40,598

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

5

EVERSPIN TECHNOLOGIES, INC.

Condensed Statement of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended March 31, 

    

2024

    

2023

Cash flows from operating activities

 

  

 

  

Net (loss) income

$

(202)

$

761

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

 

 

Depreciation and amortization

 

398

 

333

Stock-based compensation

 

1,714

 

1,160

Loss on prepayment and termination of credit facility

170

Non-cash warrant revaluation

23

Non-cash interest expense

 

 

26

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(1,524)

 

(544)

Inventory

 

338

 

404

Prepaid expenses and other current assets

 

538

 

119

Accounts payable

 

(36)

 

125

Accrued liabilities

 

(2,266)

 

(1,457)

Deferred revenue

(255)

77

Lease liabilities, net

2

7

Net cash (used in) provided by operating activities

 

(1,293)

 

1,204

Cash flows from investing activities

 

 

Purchases of property and equipment

 

(1,205)

 

(1,011)

Net cash used in investing activities

 

(1,205)

 

(1,011)

Cash flows from financing activities

 

 

Payments on long-term debt

 

 

(2,790)

Proceeds from exercise of stock options

 

353

 

13

Net cash provided by (used in) financing activities

 

353

 

(2,777)

Net decrease in cash and cash equivalents

 

(2,145)

 

(2,584)

Cash and cash equivalents at beginning of period

 

36,946

 

26,795

Cash and cash equivalents at end of period

$

34,801

$

24,211

Supplementary cash flow information:

 

 

Interest paid

$

$

37

Operating cash flows paid for operating leases

$

349

$

375

Financing cash flows paid for finance leases

$

8

$

3

Non-cash investing and financing activities:

 

 

Right-of-use assets obtained in exchange for finance lease liabilities

$

297

$

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

6

EVERSPIN TECHNOLOGIES, INC.

Notes to Unaudited Condensed Financial Statements

1. Organization and Nature of Business

Everspin Technologies, Inc. (the Company) was incorporated in Delaware on May 16, 2008. The Company’s magnetoresistive random-access memory (MRAM) solutions offer the persistence of non-volatile memory with the speed and endurance of random-access memory (RAM) and enable the protection of mission critical data particularly in the event of power interruption or failure. The Company’s MRAM solutions allow its customers in key markets, such as industrial, medical, automotive/transportation, aerospace and data center markets to design high performance, power efficient and reliable systems without the need for bulky batteries or capacitors.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2023, has been derived from the audited financial statements at that date but does not include all of the information required by GAAP for complete financial statements. These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information. The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or for any other future year.

The accompanying condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC.

Use of Estimates

The preparation of the condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, fair value of assets and liabilities, inventory 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.

Accounts receivable, net

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

7

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

March 31, 

December 31,

2024

2023

Trade accounts receivable

$

13,234

$

11,489

Unbilled accounts receivable

296

475

Allowance for product returns and price adjustments

(452)

(410)

Accounts receivable, net

$

13,078

$

11,554

Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents that are held by a financial institution in the United States and accounts receivable. Amounts on deposit with a financial institution may at times exceed federally insured limits.

Significant customers are those which represent more than 10% of the Company’s total revenue or net accounts receivable balance at each respective balance sheet date. For the purposes of this disclosure, the Company defines “customer” as the entity that is purchasing the products or licenses directly from the Company, which includes the distributors of the Company’s products in addition to end customers that the Company sells to directly. For each significant customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable, net are as follows:

Revenue

Accounts Receivable

 

Three Months Ended March 31, 

March 31, 

December 31,

 

Customers

2024

    

2023

    

    

2024

    

2023

 

Customer A

*

15

%

*

13

%

Customer B

*

14

%

*

*

Customer C

21

%

12

%

23

%

22

%

Customer D

24

%

18

%

44

%

37

%

*

Less than 10%

Fair Value of Financial Instruments

Fair value is defined as an exit price, representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. The framework for measuring fair value provides a three-tier hierarchy prioritizing inputs to valuation techniques used in measuring fair value as follows:

Level 1— Observable inputs such as quoted prices for identical assets or liabilities in active markets;

Level 2— Inputs, other than quoted prices for identical assets or liabilities in active markets, which are observable either directly or indirectly; and

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

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. 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.

8

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

March 31, 2024

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

  

  

  

Money market funds

$

34,817

  

$

  

$

  

$

34,817

Total assets measured at fair value

$

34,817

  

$

  

$

  

$

34,817

December 31, 2023

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

  

  

  

Money market funds

$

36,946

  

$

  

$

  

$

36,946

Total assets measured at fair value

$

36,946

  

$

  

$

  

$

36,946

Recently Adopted Accounting Pronouncements

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 condensed 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 condensed financial statements.

3. Revenue

The Company sells products to its distributors, original design manufacturers (ODMs), and original equipment manufacturers (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):

Three Months Ended March 31, 

    

2024

    

2023

Distributor

$

10,287

$

12,842

Non-distributor

4,143

2,004

Total revenue

$

14,430

$

14,846

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

Three Months Ended March 31, 

    

2024

    

2023

Point in time

$

10,967

$

13,870

Over time

3,463

976

Total revenue

$

14,430

$

14,846

9

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

Three Months Ended March 31, 

    

2024

    

2023

Product sales

$

10,860

$

13,777

Licensing

3,221

918

Royalties

107

93

Other revenue

242

58

Total revenue

$

14,430

$

14,846

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

Three Months Ended March 31, 

    

2024

    

2023

APAC

$

6,930

$

7,591

North America

4,708

2,925

EMEA

2,792

4,330

Total revenue

$

14,430

$

14,846

4. Balance Sheet Components

Inventory

Inventory consisted of the following (in thousands):

March 31, 

December 31, 

    

2024

    

2023

Raw materials

$

272

$

189

Work-in-process

 

6,473

 

6,724

Finished goods

 

1,308

 

1,478

Total inventory

$

8,053

$

8,391

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

March 31, 

December 31,

    

2024

    

2023

Payroll-related expenses

$

929

$

3,347

Inventory

303

317

Other

 

890

 

672

Total accrued liabilities

$

2,122

$

4,336

Deferred Revenue

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

10

Company determined the licenses were not distinct within the context of the contract and combined the license with other performance obligations. The total transaction price of $6.5 million was allocated to the single performance obligation.

The Company recognizes revenue related to the performance obligations over time using the input method based on costs incurred to date relative to the total expected costs of the contract and began recognizing revenue in the second quarter of 2021 over the 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 March 31, 2024, 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 $0.3 million in revenue for the three months ended March 31, 2024, and $5.9 million in revenue since inception of the contractual agreements. As a result, the Company has recorded $0.1 million in deferred revenue as of March 31, 2024. The Company expects to recognize the remaining $0.6 million of the transaction price as services are performed throughout the contractual period and performance is expected to be complete in the year ended December 31, 2024.

5. Leases

Operating leases consist primarily of office space expiring at various dates through 2029. Finance leases relate to server leases expiring at various dates through 2029. 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 March 31, 2024

    

Amount

2024

$

1,108

2025

1,482

2026

1,497

2027

1,380

2028

595

Thereafter

48

Total lease payments

6,110

Less: imputed interest

(529)

Total lease liabilities

5,581

Less: current portion of lease liabilities

(1,259)

Total lease liabilities, net of current portion

$

4,322

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

March 31, 

December 31,

    

2024

    

2023

Weighted-average remaining lease term (years)

    

4.13

4.37

    

Weighted-average discount rate

4.50

%

4.50

%

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

March 31, 

December 31,

    

2024

    

2023

Weighted-average remaining lease term (years)

    

4.79

1.09

    

Weighted-average discount rate

3.92

%

4.50

%

11

6. Debt

2019 Credit Facility

In March 2023, our credit facility with a lender pursuant to an Amended and Restated Loan and Security Agreement (the 2019 Credit Facility), consisting of a term loan and line of credit, was paid in full, and there was no outstanding balance as of March 31, 2024. The Company paid an early termination and prepayment fee of $170,000, which was recorded within other income (expense) within the condensed statements of operations and comprehensive (loss) income for the three months ended March 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 condensed statements of operations and comprehensive (loss) income and included in non-cash interest expense within the statement of cash flows.

7. Stock-Based Compensation

Summary of Stock Option and Award Activity

The following table summarizes the stock option and award activity for the three months ended March 31, 2024:

Options Outstanding

Weighted-

Weighted-

Options and

Average

Average

Aggregate

Awards

Exercise

Remaining

Intrinsic

Available for

Number of

Price Per

Contractual

Value

Grant

    

Options

    

Share

    

Life (years)

    

(In thousands)

Balance—December 31, 2023

 

598,397

1,829,428

$

5.96

6.9

$

5,676

Authorized

 

632,414

RSUs granted

(854,927)

RSUs cancelled/forfeited

Warrants exercised

Options granted

$

Options exercised

 

(96,116)

$

3.67

$

470

Options cancelled/forfeited

 

$

Balance—March 31, 2024

 

375,884

 

1,733,312

$

6.09

6.7

$

3,405

Options exercisable—March 31, 2024

 

 

1,304,017

$

5.80

6.4

$

2,935

The total grant date fair value of options vested was $0.3 million and $1.9 million during the three months ended March 31, 2024 and 2023, respectively. There were no options granted during the three months ended March 31, 2024. The weighted-average grant date fair value of options granted during the three months ended March 31, 2023 was $3.20 per share.

As of March 31, 2024, there was $1.9 million of total unrecognized stock-based compensation expense related to unvested options which is expected to be recognized over a weighted-average period of 1.5 years. Stock-based compensation cost for options capitalized within inventory at March 31, 2024 and 2023 was not material.

2016 Employee Stock Purchase Plan

In January 2024, there was an increase of 210,804 shares reserved for issuance under the Company’s Employee Stock Purchase Plan (ESPP) pursuant to the terms of the ESPP. The Company had 1,100,966 shares available for future issuance under the Company’s ESPP as of March 31, 2024. Employees did not purchase any shares during the three months ended March 31, 2024 and 2023, respectively.

12

Restricted Stock Units

The following table summarizes restricted stock units (RSUs) activity for the three months ended March 31, 2024:

RSUs Outstanding

    

Weighted-

    

Average

Number of

    

Grant Date

Restricted Stock

    

Fair Value Per

    

Units

    

Share

Balance—December 31, 2023

905,781

$

6.59

Granted

 

854,927

$

8.93

Vested

(229,923)

$

6.43

Cancelled/forfeited

$

Balance—March 31, 2024

 

1,530,785

    

$

7.92

The fair value of RSUs is determined on the date of grant based on the market price of the Company’s common stock on that date.

As of March 31, 2024, there was $10.9 million of unrecognized stock-based compensation expense related to RSUs to be recognized over a weighted-average period of 2.8 years. Stock-based compensation cost related to RSUs capitalized within inventory at March 31, 2024 and 2023 was not material.

8. Significant Agreements

GLOBALFOUNDRIES, Inc. Joint Development Agreement

Since October 17, 2014, the Company has participated in a joint development agreement (JDA) with GLOBALFOUNDRIES Inc. (GF), a semiconductor foundry, for the joint development of Spin-transfer Torque MRAM (STT-MRAM), technology to produce a family of discrete and embedded MRAM technologies. The term of the JDA is until the completion, termination, or expiration of the last statement of work entered into pursuant to the JDA. The JDA 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 JDA 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.

9. Net (Loss) Income Per Common Share

Basic net (loss) 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, potentially dilutive securities are excluded from the Company’s calculation of earnings per share as their inclusion would have an antidilutive effect.

13

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

Basic EPS

Three Months Ended March 31, 

    

    

2024

    

2023

Numerator:

 

 

  

 

  

Net (loss) income

$

(202)

$

761

Denominator:

 

  

 

  

Weighted-average shares of common stock outstanding, basic

 

21,252,359

 

20,450,994

Net (loss) income per common share, basic

$

(0.01)

$

0.04

Diluted EPS

Three Months Ended March 31, 

    

    

2024

    

2023

Numerator:

 

 

  

 

  

Net (loss) income

$

(202)

$

761

Warrant liability fair value loss recognized  

23

Net (loss) income attributable to common stockholders, diluted

$

(202)

$

784

Denominator:

 

  

 

  

Weighted-average shares of common stock outstanding, basic

 

21,252,359

 

20,450,994

Dilutive effect of stock options and RSUs

381,080

Weighted-average shares of common stock outstanding, diluted

 

21,252,359

 

20,832,074

Net (loss) income per common share, diluted

$

(0.01)

$

0.04

Potentially dilutive securities representing 1.5 million and 1.6 million stock options and RSUs that were outstanding during the three months ended March 31, 2024, and 2023, respectively, were excluded from the computation of diluted earnings per common share during these periods as their inclusion would have an antidilutive effect.

14

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes included in Part I, Item 1 of this report and with our audited financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2023.

Forward-Looking Statements

This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, among other things, our industry, business, future plans, strategies, objectives, expectations, intentions and financial performance, as well as anticipated impacts from, and our responses to, COVID-19 and our expectations regarding current supply constraints, and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and elsewhere in this report, as well as in our other filings with the Securities and Exchange Commission (SEC). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

Everspin is a pioneer in the successful commercialization of Magnetoresistive Random Access Memory (MRAM) technology. Our portfolio of MRAM technologies, including Toggle MRAM and Spin-transfer Torque MRAM (STT-MRAM), is delivering superior performance, persistence and reliability in non-volatile memories that transform how mission-critical data is protected against power loss. With over 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 OEMs and ODMs.

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

Key Metrics

We monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. These financial metrics include revenue, gross margin, operating expenses and operating income determined in accordance with GAAP. Additionally, we monitor and project cash flow to determine our sources and uses for working capital to fund our operations. We also monitor Adjusted

15

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:

Three Months Ended March 31, 

    

2024

    

2023

Adjusted EBITDA reconciliation:

 

  

 

  

Net (loss) income

$

(202)

$

761

Depreciation and amortization

 

398

 

333

Stock-based compensation expense

 

1,714

 

1,160

Interest expense

 

 

63

Adjusted EBITDA

$

1,910

$

2,317

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 the COVID-19 pandemic. The United States Government has declared that it was no longer treating COVID-19 as a pandemic. Since our business is 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 the existence of COVID-19.

16

Results of Operations

The following tables set forth our results of operations for the periods indicated:

Three Months Ended March 31, 

    

2024

    

2023

    

2024

    

2023

    

(In thousands)

(As a percentage of revenue)

Product sales

$

10,860

$

13,777

75

%

93

%

Licensing, royalty, patent, and other revenue

 

3,570

 

1,069

 

25

 

7

Total revenue

 

14,430

 

14,846

 

100

 

100

Cost of product sales

6,002

6,123

42

41

Cost of licensing, royalty, patent, and other revenue

268

293

2

2

Total cost of sales

 

6,270

 

6,416

 

43

 

43

Gross profit

 

8,160

 

8,430

 

57

 

57

Operating expenses:

 

  

 

  

 

  

 

  

Research and development

 

3,418

 

3,199

 

24

 

22

General and administrative

 

4,036

 

3,220

 

28

 

22

Sales and marketing

 

1,306

 

1,315

 

9

 

9

Total operating expenses

 

8,760

 

7,734

 

61

 

52

(Loss) income from operations

 

(600)

 

696

 

(4)

 

5

Interest expense

 

 

(63)

 

 

Other income, net

 

398

 

128

 

3

 

1

Net (loss) income and comprehensive (loss) income

$

(202)

$

761

(1)

%

5

%

Comparison of the three months ended March 31, 2024 and 2023

Revenue

We generated 71% and 87% of our revenue from products sold to distributors for the three months ended March 31, 2024 and 2023, respectively.

In addition to selling our products to our distributors, 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: North America; EMEA; and APAC. We recognize revenue by geography based on the region in which our customer is located and to which our products are sold, and not to where the end products in which they are assembled are shipped. Our revenue by region and by type of revenue for the periods indicated were as follows (in thousands):

Three Months Ended March 31, 

2024

    

2023

APAC

$

6,930

$

7,591

North America

4,708

2,925

EMEA

2,792

4,330

Total revenue

$

14,430

$

14,846

Three Months Ended

 

March 31, 

Change

 

    

2024

    

2023

    

Amount

    

%

 

(Dollars in thousands)

 

Product sales

$

10,860

$

13,777

$

(2,917)

 

(21.2)

%

Licensing, royalty, patent, and other revenue

 

3,570

 

1,069

 

2,501

 

234.0

%

Total revenue

$

14,430

$

14,846

$

(416)

 

(2.8)

%

17

Total revenue decreased by $0.4 million, or 2.8%, from $14.8 million during the three months ended March 31, 2023 to $14.4 million during the three months ended March 31, 2024. The decrease was primarily due to a decrease in product sales of $2.9 million due to timing of customer demand, offset by an increase in licensing revenue generated from our RAD-Hard projects of $2.3 million, along with an increase of $0.2 million in other revenue related to foundry services.

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. Our best estimate of royalty revenue earned is made throughout the year for royalty contracts with an annual performance period, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing, royalty, patent, and other revenue increased by $2.5 million, from $1.1 million during the three months ended March 31, 2023, to $3.6 million during the three months ended March 31, 2024. The increase was driven by an increase of $2.3 million in licensing revenue generated from our RAD-Hard projects, along with an increase of $0.2 million of other revenue related to foundry services.

Cost of Sales and Gross Margin

Three Months Ended

 

March 31, 

Change

 

    

2024

    

2023

    

Amount

%

 

(Dollars in thousands)

 

Cost of product sales

$

6,002

$

6,123

$

(121)

(2.0)

%

Cost of licensing, royalty, patent, and other revenue

268

293

(25)

(8.5)

%

Total cost of sales

$

6,270

$

6,416

$

(146)

    

(2.3)

%

Gross margin

 

56.5

%  

 

56.8

%  

 

  

 

  

Cost of product sales decreased by $0.1 million, or 2.0%, from $6.1 million during the three months ended March 31, 2023, to $6.0 million during the three months ended March 31, 2024. The decrease was primarily due to a reduction in product sales and increased pricing from suppliers, partially offset by increased yields on our toggle products.

Cost of licensing, royalty, patent, and other revenue remained consistent at $0.3 million during the three months ended March 31, 2024 and 2023. Cost of licensing, royalty, patent, and other revenue primarily relates to licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Gross margin decreased from 56.8% during the three months ended March 31, 2023, to 56.5% during the three months ended March 31, 2024. Gross margin decreased as a result of a decrease in product sales and increased pricing from suppliers, partially offset by increased yields on our toggle products and increased licensing revenue.

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 components of each of our operating expense categories.

Three Months Ended

 

March 31, 

Change

 

    

2024

    

2023

    

Amount

    

%

 

(Dollars in thousands)

 

Research and development

$

3,418

$

3,199

$

219

 

6.8

%

Research and development as a % of revenue

24

%  

22

%  

Research and Development Expenses. Research and development expenses increased by $0.2 million, or 6.8%, from $3.2 million during the three months ended March 31, 2023, to $3.4 million during the three months ended March 31,

18

2024. The primary driver of research and development expenses relates to our new xSPI family of STT-MRAM products.