What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-29 · 174 added, 120 removed, 550 unchanged (35% of the section changed)

30 unchanged sentences

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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.

As discussed in Note 2 to the financial statements, Inventory is valued at the lower of cost or net realizable value.

At December 31, 2024, the Company’s inventory balance was $9.1 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.

The data sources include information received from the Company’s 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.

To test the Company’s accounting for inventory, we performed audit procedures that included, among others, performing 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.

Accounting for the strategic award in Other income, net

Description of the Matter

As discussed in Note 3 to the financial statements, the Company received a strategic award and entered an arrangement to develop a long-term plan to sustain its manufacturing operations for applications in the aerospace and defense segments.

The Company expects to receive approximately $14.6 million as it performs under the arrangement.

Auditing the Company’s accounting for this arrangement was especially challenging due to the complex and highly judgmental nature of evaluating its terms and the Company's analogies to the revenue accounting guidance.

How We Addressed the Matter in Our Audit

To test the Company’s accounting for the arrangement, we performed audit procedures that included, among others, inspecting the contract and related source documentation that establish the performance requirements and assessing whether management’s analogies to the revenue literature was a consistent and rational application of accounting policy.

/s/ Ernst & Young LLP

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Property and equipment, net

Intangible assets, net

Right-of-use assets

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Deferred revenue

Current portion of long-term debt

Lease liabilities, current portion

Other liabilities

Contract obligations

Software liabilities, current portion

Total current liabilities

Long-term debt, net of current portion

Lease liabilities, net of current portion

Software liabilities, net of current portion

Long-term income tax liability

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5,000,000 shares authorized;

no shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

no shares issued and outstanding as of December 31, 2024 and 2023, 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

22,059,697 and 21,080,472 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Additional paid-in capital

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Total operating expenses

Income from operations

(Loss) income from operations

Interest expense

1 unchanged sentence

Net income before income taxes

Income tax benefit (expense)

Income tax benefit

Net income and comprehensive income

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Weighted average shares of common stock outstanding:

1 Operating expenses include stock-based compensation as follows:

Research and development

General and administrative

Sales and marketing

Total stock-based compensation

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

5 unchanged sentences

Issuance of common stock under stock incentive plans and exercise of stock options

Exercise of warrants

Stock-based compensation expense

1 unchanged sentence

Issuance of common stock under stock incentive plans and exercise of stock options

Exercise of warrants

Stock-based compensation expense

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Deferred revenue

Contract obligations

Lease liabilities, net

2 unchanged sentences

Purchases of property and equipment

Purchases of intangible assets

Proceeds received from sale of property and equipment

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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

Payments on finance leases

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

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Interest paid

Cash paid for taxes

Operating cash flows paid for operating leases

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Non-cash investing and financing activities:

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

Internal-use software asset obtained in exchange for software liabilities

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

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Everspin Technologies, Inc.

(the Company) was incorporated in Delaware on May 16, 2008.

(“we”, “our”, “us”, “Everspin Technologies”, “Everspin”, or 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.

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however, actual results may differ from the Company’s estimates.

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.

Segment Information

The Company’s MRAM technology solutions are sold as products and services through MRAM-based products, licenses and royalties of MRAM and magnetic sensor technology and backend foundry and design services.

The Company identifies and manages the business activities in one reportable segment.

Everspin’s Chief Executive Officer is the Chief Operating Decision Maker (CODM).

The CODM utilizes the Company’s long-range plan, which includes product development roadmaps and long-range financial models, as a key input to resource allocation.

The CODM makes decisions on resource allocation, assesses performance of the business, and monitors budget versus actual results using net income.

Significant segment expenses within net income are those separately presented on the Company’s Statements of Income and Comprehensive Income, which include cost of revenue, research and development, and selling, general and administrative expenses.

Cash and Cash Equivalents

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The Company’s evaluation determined that no material allowance for doubtful accounts was necessary at December 31, 2024 and 2023.

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.

The unbilled accounts receivable is an estimate of the unconditional consideration to which the Company expects to be entitled for uses of the Company’s intellectual property.

The Company’s right is unconditional because nothing other than the passage of time is required before payment of the amounts are due.

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.

At December 31, 2024 and 2023, the unbilled accounts receivable balance was $ 0.2 million and $ 0.5 million, respectively.

The Company’s unbilled conditional consideration is recorded to a contract asset account included in Prepaid Expenses and Other Current Assets.

The conditions to the Company’s right to the consideration can include a contractual requirement to satisfy a performance obligation that has not yet begun or for which performance is in process as of the balance sheet date.

At December 31, 2024 and 2023, the unbilled contract asset balance was $ 0.5 million and none , 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

balance of trade accounts receivable.

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.

At December 31, 2023 and 2022, the allowance for product returns and price adjustments was $ 410,000 and $ 384,000 , respectively.

At December 31, 2024 and 2023, the allowance for product returns and price adjustments was $ 0.4 million and $ 0.4 million, respectively.

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

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Accounts Receivable

Year Ended December 31,

Less than 10%

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.

Inventory is valued at the lower of cost, using the first-in, first-out or specific identification method, 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.

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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.

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.

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):

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

December 31, 2024

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Total assets measured at fair value

Warrant liability

Total liabilities measured at fair value

Property and Equipment

Property and Equipment, Net

Property and equipment are stated at cost, less accumulated depreciation and amortization.

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Lesser of useful life of the asset or the remaining lease term

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

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.

Intangible Assets, Net

The Company’s intangible assets are comprised of internally developed software and licensed software from third parties to be used in research and development activities that have alternative future use.

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.

Licensed software is initially recorded at fair value based on the present value of the license fees to be paid over the term of the license, with a corresponding liability.

The licensed software intangible asset is amortized on a straight-line basis over the shorter of the license term or the economic life of the asset, beginning when the asset is substantially ready for use.

The licensed software liability is accreted to its settlement amount using the effective interest method.

The Company leases office, lab, manufacturing space and equipment in various locations with initial lease terms of up to seven years .

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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.

These optional periods have not been considered in the determination of the right-of-use (“ROU”) assets 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.

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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.

Impairment of Long-lived Assets

The Company evaluates its long-lived assets, including property and equipment, leases, and intangible assets, at the asset group level, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.

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.

Government Tax Credits, Incentives and Grants

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The Company typically has to meet certain requirements to retain the government funding.

The Company records operating-related

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 records operating-related 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.

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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 recognized the $ 2.0 million tax credit within other income, net in the statements of income and comprehensive income during the year ended December 31, 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.

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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.

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.

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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.

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 interdependence 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.

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.

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).

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Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Other Income, Net

Other income, net primarily consists of interest income and expense, a strategic award, realized gains and losses on sale of assets, and gains and losses on foreign currency transactions.

Product Warranty

4 unchanged sentences

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.

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, amortization of certain intangible assets, depreciation of research and development related capital equipment and overhead and are expensed as incurred.

Stock-based Compensation

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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.

The Company determines the expected stock price volatility based on the historical volatility of its common stock.

Industry peers consist of several public companies in the technology industry similar in size, stage of life cycle and financial leverage.

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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 Adopted Accounting Pronouncements

The Company adopted Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280 ) – Improvements to Reportable Segment Disclosures , which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation.

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted ASU 2023-07 effective January 1, 2024, on a retrospective basis.

The adoption of ASU 2023-07 did not change the way that the Company identifies its single reportable segment and, as a result, did not have a material impact on the Company’s segment-related disclosures.

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.

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The Company is currently evaluating the impact that the standard will have on its financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220):

Disaggregation of Income Statement Expenses , which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses.

ASU 2024-03 is effective for the Company’s annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, on a prospective basis, with the option for retrospective application.

Early adoption is permitted for annual financial statements that have not yet been issued.

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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The Company evaluated events after December 31, 2024, 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.

Statements of Operations and Comprehensive (Loss) Income Components

The Company sells products to its distributors, ODMs and OEMs.

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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):

The Company recognizes revenue by geography based on the region in which its products are sold, and not to where the end products in which they are assembled are shipped.

Revenue by region for the periods indicated was as follows (in thousands):

Year Ended December 31,

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Total revenue

Other Income, Net

On August 14, 2024, the Company received a strategic award to develop a long-term plan to provide manufacturing services for aerospace and defense segments (the Award).

Under the Award, the Company will provide a plan to mitigate risks to its MRAM manufacturing supply chain.

Pursuant to the Award, the Company may receive cash payments upon the achievement of certain technical tasks and deliverables.

The Award allows for milestones totaling up to approximately $ 14.6 million for the Company over a span of 2.5 years.

The Award is not in the ordinary course of the Company’s business and hence not a contract with a customer.

The Company has applied the revenue recognition principles under ASC 606 by analogy.

The Company records the total consideration from the Award as other income using an input method based on costs incurred to date relative to the total expected costs of the Award over its term.

Amounts invoiced in excess of income recognized are recorded as a contract obligations liability on the balance sheets.

This liability represents the Company’s obligation to perform future services for which the Company has received or is entitled to receive payment but which are not yet fulfilled.

During the year ended December 31, 2024, the Company has invoiced $ 8.1 million related to this Award of which no balance is outstanding as of December 31, 2024.

The contract obligations liability was $ 2.0 million as of December 31, 2024.

The Company recorded $ 6.1 million of other income related to this Award in the year ended December 31, 2024.

Balance Sheet Components

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Total property and equipment, net

Depreciation and amortization expense during the years ended December 31, 2023 and 2022 was $ 1.2 million and $ 1.0 million, respectively.

Depreciation expense during years ended December 31, 2024 and 2023 was $ 1.6 million and $ 1.2 million, respectively.

Intangible Assets, Net

The gross carrying amounts and accumulated amortization of intangible assets are as follows at the dates indicated (in thousands):

December 31, 2024

Gross Carrying

Internal-use software

Total intangible asset

Amortization expense for intangible assets was $ 0.1 million and zero for the years ended December 31, 2024 and 2023, respectively.

The table below presents estimated future amortization expense for finite-lived intangible assets (in thousands):

As of December 31, 2024

Accrued Liabilities

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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).

In the year ended December 31, 2024, the Company executed a contractual arrangement with a customer for the development of a strategic radiation hardened field programmable gate array product.

The total consideration in the arrangement is $ 1.8 million.

The Company is recognizing revenue related to the performance obligation 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 third quarter of 2024.

As of and for the year ended December 31, 2024, the Company has billed $ 1.6 million for the performance under the agreement and has recognized $ 1.5 million in revenue for the year ended December 31, 2024, with the difference of $ 0.1 million recorded in deferred revenue.

The Company expects to recognize the remaining $ 0.1 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, 2025.

In the year ended December 31, 2024, the Company executed a contractual arrangement with a customer for the development of a strategic radiation hardened high-reliability eMRAM macro.

The total consideration in the arrangement is $ 1.2 million.

As of and for the year ended December 31, 2024, the Company has billed $ 1.2 million for the performance under the agreement and has recognized $ 1.1 million in revenue, with the difference of $ 0.1 million in recorded in deferred revenue.

In 2021, the Company executed contractual arrangements with a customer for the development of a RAD-Hard product, consisting of a technology license, design license agreement and development subcontract (RAD-Hard 1).

The Company does not share in the rights to future revenues or royalties.

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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 interdependence 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.

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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.

The Company has recognized $ 0.7 million in revenue for the each of years ended December 31, 2024 and 2023, and $ 6.4 million in revenue since inception of the contractual agreements.

Deferred revenue related to these agreements was $ 0.1 million and $ 0.3 million as of December 31, 2024 and 2023, respectively.

Commitments and Contingencies

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.

Finance leases relate to a server lease expiring in February 2029.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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Weighted-average discount rate

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 operating leases were $ 1.4 million for both of the years ended December 31, 2024 and 2023, respectively.

Lease costs for the Company’s finance lease were immaterial for the years ended December 31, 2024 and 2023.

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The Company currently has directors’ and officers’ insurance.

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.

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, 2024 or 2023.

The Company paid an early termination and prepayment fee of $ 0.2 million, 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

Stockholders’ Equity

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Stock-Based Compensation

Share-Based Compensation Expense

The following table presents the details of the Company's share-based compensation expense (in thousands):

Year Ended December 31,

General and administrative

Research and development

Sales and marketing

Cost of sales

Total stock-based compensation

2016 Employee Incentive Plan

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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.

The 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 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 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, 2024, of the 3,038,336 shares of common stock reserved and available for grant under the 2016 Plan, 545,525 shares of common stock remain available for grant under the 2016 Plan.

The Company authorized 632,414 shares during the year ended December 31, 2024.

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.

Due to the adoption of the 2016 Plan, no further grants will be made under the 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.

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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:

The following table summarizes the stock option activity for all grants under the 2008 Plan and 2016 Plan:

Options Outstanding

Available for

(In thousands)

Balance—December 31, 2023

RSUs cancelled/forfeited

Warrants exercised

Options granted

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Options exercisable—December 31, 2024

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.

No options were granted during the year ended December 31, 2024.

The weighted-average grant date fair value of options granted was $ 3.85 per share during the year ended December 31, 2023.

As of December 31, 2024, there was $ 0.7 million of total unrecognized compensation expense related to unvested options which is expected to be recognized over a weighted-average period of 0.9 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 Company estimated the fair value of each option grant using the Black-Scholes option-pricing model based on the assumptions below.

The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards.

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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.

The Company had 1,031,800 shares available for issuance under the ESPP as of December 31, 2024.

Employees purchased 69,166 shares for $ 0.4 million during the year ended December 31, 2024, and 87,718 shares for $ 0.4 million during the year ended December 31, 2023.

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.

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 fair 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, 2024:

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As of December 31, 2024, there was $ 6.2 million of unrecognized stock-based compensation expense related to RSUs to be recognized over a weighted-average period of 2.4 years.

Compensation cost capitalized within inventory at December 31, 2023 and 2022 was not material.

Compensation cost capitalized within inventory was immaterial as of December 31, 2024 and 2023.

The Company has a defined contribution employee benefit plan pursuant to Section 401(k) of the Internal Revenue Code.

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Property and equipment, net by country was as follows (in thousands):

Year Ended December 31,

United States

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IRC section 162(m) limitation

R&D tax credits

Change in valuation allowance

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The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):

Year Ended December 31,

Deferred tax assets:

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Depreciation and amortization

Research and experimental credits

Research and experimental expenditures

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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.

Accordingly, the Company recorded a partial valuation allowance against its net deferred tax assets as of December 31, 2024 and 2023, respectively.

The net valuation allowance increased by $3.6 million in 2024, as reflected below (in thousands).

Year Ended December 31,

Valuation Allowance at beginning of year

Current Year Change

Valuation Allowance at end of year

As of December 31, 2024, the Company has federal net operating loss carryforwards of approximately $ 89.2 million, of which $ 53.2 million will expire in 2030 through 2037 if not utilized, and $ 36.0 million that will carryover indefinitely.

In addition, the Company has state net operating loss carryforwards of approximately $ 48.3 million, of which $ 45.5 million will expire in 2030 through 2040 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

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.

Further, a portion of the carryforwards may expire before utilized to reduce future income tax liabilities as a result of the annual limitation.

Consistent with prior years, 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.

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Unrecognized tax expense, end of year

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.

Included in the balance of unrecognized tax benefits as of December 31, 2024, are $ 0.1 million of tax benefit that, if recognized, would affect the effective tax rate.

Included in the balance of uncertain tax benefits as of December 31, 2024 is $ 1.3 million 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.

The Company has accrued penalties and interest of $ 0.2 million, as of both December 31, 2024 and 2023.

On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy.

On December 20, 2021, the OECD released the Model GloBE Rules for Pillar Two defining a 15% global minimum tax rate for large multinational corporations.

The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Model GloBE Rules for Pillar Two expected by calendar year 2024.

The Company is continuing to evaluate the Model GloBE Rules for Pillar Two and related legislation, and their potential impact on future periods, but does not expect it to have a material impact.

Net Income Per Common Share

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Year Ended December 31,

warrant liability fair value gain recognized

Warrant liability fair value loss recognized

Net income attributable to common stockholders, diluted

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data