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What changed in EVERSPIN TECHNOLOGIES INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EVERSPIN TECHNOLOGIES INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+154 added−174 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-02)

Top changes in EVERSPIN TECHNOLOGIES INC.'s 2023 10-K

154 paragraphs added · 174 removed · 131 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

18 edited+1 added−0 removed57 unchanged
Biggest changeWe have not experienced any work stoppages, and we consider our relations with our employees and contractors to be good. Corporate Information We were incorporated in Delaware in May 2008. In June 2008, Freescale Semiconductor, Inc. (now a wholly-owned subsidiary of NXP Semiconductors N.V.), spun-out its MRAM business as Everspin. Our offices are located at 5670 W.
Biggest changeNone of our employees are either represented by a labor union or subject to a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees and contractors to be good. Corporate Information We were incorporated in Delaware in May 2008. In June 2008, Freescale Semiconductor, Inc.
We offer these products with DDR3 and DDR4 derivative interfaces, facilitating the replacement of battery-backed DRAM with STT-MRAM. STT-MRAM enabled scaling of our Toggle MRAM products to higher densities on advanced CMOS nodes. In 2022, we started production of high density (8Mb to 128Mb) STT-MRAM products on 28nm CMOS node with standardized SPI, QSPI, and Octal SPI (OSPI) interfaces.
We offer these products with DDR3 and DDR4 derivative interfaces, facilitating the replacement of battery-backed DRAM with STT-MRAM. STT-MRAM enabled scaling of our Toggle MRAM products to higher densities on advanced CMOS nodes. In 2022, we started production of high density (8Mb to 128Mb) STT-MRAM products on 28nm CMOS node with standardized SPI, xSPI, QSPI, and Octal SPI (OSPI) interfaces.
Our STT-MRAM products replace discrete NOR, DRAM and SRAM where persistence is required and thus compete with DRAM and SRAM suppliers such as Hynix, Micron, Winbond, Samsung, and several other smaller companies. In the future we may also face competition from companies developing MRAM technologies, such as Avalanche, Samsung and other larger and smaller semiconductor companies.
Our STT-MRAM products replace discrete NOR, DRAM and NVSRAM where persistence is required and thus compete with DRAM and NVSRAM suppliers such as Hynix, Micron, Winbond, Samsung, and several other smaller companies. In the future we may also face competition from companies developing MRAM technologies, such as Avalanche, Samsung and other larger and smaller semiconductor companies.
We have never had an end-of-life event for any of our Toggle MRAM products which enables our customers to design in a product with the assurance that it will be available for many years to come. 5 Table of Contents Spin-Transfer Torque MRAM Spin Transfer Torque MRAM (STT-MRAM) technology can be tuned to deliver products in Dynamic Random Access Memory (DRAM), SRAM and NOR Flash applications.
We have never had an end-of-life event for any of our Toggle MRAM products which enables our customers to design in a product with the assurance that it will be available for many years to come. Spin-Transfer Torque MRAM STT-MRAM technology can be tuned to deliver products in Dynamic Random Access Memory (DRAM), SRAM and NOR Flash applications.
These services allow aerospace and satellite electronic system manufacturers to integrate our EAR99 technology that is able to withstand exposure to the levels of radiation encountered in avionics and space applications by virtue of such technology being magnetic rather than electrical charge based which would be susceptible to alpha particles.
These services allow aerospace and satellite 6 Table of Contents electronic system manufacturers to integrate our EAR99 technology that is able to withstand exposure to the levels of radiation encountered in avionics and space applications by virtue of such technology being magnetic rather than electrical charge based which would be susceptible to alpha particles.
Our STT-MRAM products targeting DRAM replacement started production in 2017 and are currently shipping in 256Mb and 1Gb densities. These high density, high performance persistent memories are delivering significant value to SSD, Persistent Memory Cards, Fabric Accelerator, and other applications in the data center market.
Our STT-MRAM products targeting DRAM replacement started production in 2017 and are currently shipping in 256Mb and 1Gb densities. These high density, high performance persistent memories are 5 Table of Contents delivering significant value to SSD, Persistent Memory Cards, Fabric Accelerator, and other applications in the data center market.
Our four largest end customers together accounted for 47% of our total revenue for the year ended December 31, 2021, and one of these customers individually accounted for more than 10% of our total revenue during the period. Manufacturing We rely on third-party suppliers for most phases of the manufacturing process, including initial fabrication, final test, and assembly.
Our four largest end customers together accounted for 24% of our total revenue for the year ended December 31, 2022, and one of those customers individually accounted for more than 10% of our total revenue during the period. Manufacturing We rely on third-party suppliers for most phases of the manufacturing process, including initial fabrication, final test, and assembly.
As of December 31, 2022, we held 520 issued patents that expire at various times between February 2023 and October 2042 and had 146 patent applications pending. Included in our issued patents and pending applications are patents/applications in the United States, China, Europe, France, Germany, Ireland, Italy, Japan, the Netherlands, the Republic of Korea, Singapore, Taiwan, and the United Kingdom.
As of December 31, 2023, we held 529 issued patents that expire at various times between March 2026 and February 2044 and had 136 patent applications pending. Included in our issued patents and pending applications are patents/applications in the United States, China, Europe, France, Germany, Ireland, Italy, Japan, the Netherlands, the Republic of Korea, Singapore, Taiwan, and the United Kingdom.
For the years ended December 31, 2022 and 2021, we recorded revenue of $60.0 million and $55.1 million, gross margin of 56.6% and 60.0%, and net income of $6.1 million and $4.3 million, respectively. Our headquarters is located in Chandler, Arizona.
For the years ended December 31, 2023 and 2022, we recorded revenue of $63.8 million and $60.0 million, gross margin of 58.4% and 56.6%, and net income of $9.1 million and $6.1 million, respectively. Our headquarters is located in Chandler, Arizona.
During the year ended December 31, 2022, more than 1,300 end customers purchased our products. Our four largest end customers together accounted for 24% of our total revenue for the year ended December 31, 2022, and one of these customers accounted for more than 10% of our revenue during that period.
During the year ended December 31, 2023, more than 1,400 end customers purchased our products. Our two largest end customers together accounted for 22% of our total revenue for the year ended December 31, 2023, and each of these customers accounted for more than 10% of our revenue during that period.
Our manufacturing agreement with GLOBALFOUNDRIES includes a customary forecast and ordering mechanism for the supply of certain of our wafers, and we are obligated to order and pay for, and GLOBALFOUNDRIES is obligated to supply, wafers consistent with the binding portion of our forecast. 8 Table of Contents GLOBALFOUNDRIES also has the ability to discontinue its manufacture of any of our wafers upon due notice and completion of the notice period.
Our manufacturing agreement with GLOBALFOUNDRIES includes a customary forecast and ordering mechanism for the supply of certain of our wafers, and we are obligated to order and pay for, and GLOBALFOUNDRIES is obligated to supply, wafers consistent with the binding portion of our forecast.
For example, this includes the following: ● We have licensed GLOBALFOUNDRIES to offer embedded MRAM in the solutions they manufacture for their customers providing high-performance non-volatile embedded memory. ● We have licensed base MRAM design technology (EAR99) for use in radiation tolerant aerospace applications to customers for their custom designs. ● We have licensed TMR sensor IP in 3D magnetic field sensing. ● We have completed patent sales by transferring, assigning, and delivering patents to customers. 6 Table of Contents Foundry Services Overview In our Chandler facility, we perform BEOL manufacturing services for customers who want to add MRAM and TMR sensor functionality to their memory or application base circuits.
For example, this includes the following: ● We have licensed GLOBALFOUNDRIES to offer embedded MRAM in the solutions they manufacture for their customers providing high-performance non-volatile embedded memory. ● We have licensed base MRAM design technology (EAR99) for use in radiation tolerant aerospace applications to customers for their custom designs. ● We have licensed TMR sensor IP in 3D magnetic field sensing. ● We have completed patent sales by transferring, assigning, and delivering patents to customers. ● We have executed agreements for the development of a strategic radiation hardened (RAD-Hard) field programmable gate array product, consisting of technology and design licenses.
As part of our commitment to quality, our quality management system has been certified to ISO 9001:2015 and ISO 14001:2015 standards. Our foundry vendors and sub-contractors are also ISO 9001 and ISO 14001 certified.
We have successfully qualified our MRAM devices in various packages at temperatures ranging from commercial to automotive grade. As part of our commitment to quality, our quality management system has been certified to ISO 9001:2015 and ISO 14001:2015 standards. Our foundry vendors and sub-contractors are also ISO 9001 and ISO 14001 certified.
The initial term of the manufacturing agreement is for three years, which automatically renews for successive one year periods thereafter unless either party provides sufficient advance notice of non-renewal.
GLOBALFOUNDRIES also has the ability to discontinue its manufacture of any of our wafers upon due notice and 8 Table of Contents completion of the notice period. The initial term of the manufacturing agreement is for three years, which automatically renews for successive one year periods thereafter unless either party provides sufficient advance notice of non-renewal.
Assembly and Test Our product and test engineering teams develop and implement wafer-level and final test programs for the manufacture of our MRAM devices. We utilize third-party industry-leading assembly and test sub-contractors, including Amkor, OSE, GTC, ChipMos and UTAC. We have successfully qualified our MRAM devices in various packages at temperatures ranging from commercial to automotive grade.
Our STT-MRAM products are produced in 300mm fabrication facilities operated by GLOBALFOUNDRIES. 7 Table of Contents Assembly and Test Our product and test engineering teams develop and implement wafer-level and final test programs for the manufacture of our MRAM devices. We utilize third-party industry-leading assembly and test sub-contractors, including Amkor, OSE, GTC, ChipMos and UTAC.
We actively manage inventory, including automated process flows, process controls and recipe management, and we use standard equipment to manufacture our products. 7 Table of Contents Our STT-MRAM products are produced in 300mm fabrication facilities operated by GLOBALFOUNDRIES.
We actively manage inventory, including automated process flows, process controls and recipe management, and we use standard equipment to manufacture our products.
Employees As of December 31, 2022, we had 74 total employees in the United States, all of which were full-time employees, and 15 full-time equivalent and 3 part-time equivalent contractors and consultants in China, Germany, Italy, Japan, Malaysia, Singapore, and Taiwan. None of our employees are either represented by a labor union or subject to a collective bargaining agreement.
Employees As of December 31, 2023, we had 83 total employees in the United States, of which 82 were full-time employees and one was a part-time employee, along with 18 full-time equivalent and four part-time equivalent contractors and consultants in the United States, China, Germany, Italy, Japan, Malaysia, Singapore, and Taiwan.
Chandler Boulevard, Suite 130, Chandler, Arizona 85226. Our telephone number is (480) 347-1111.
(now a wholly-owned subsidiary of NXP Semiconductors N.V.), spun-out its MRAM business as Everspin. Our offices are located at 5670 W. Chandler Boulevard, Suite 130, Chandler, Arizona 85226. Our telephone number is (480) 347-1111.
Added
Foundry Services Overview In our Chandler facility, we perform BEOL manufacturing services for customers who want to add MRAM and TMR sensor functionality to their memory or application base circuits.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+10 added−19 removed109 unchanged
Biggest changeAs a result, we expect that we will require additional attention from management with respect to our additional reporting requirements and will incur increased costs, which could include higher legal fees, accounting fees, consultant fees and fees associated with investor relations activities, among others. ​ General Risk Factors ​ Unfavorable economic and market conditions, domestically and internationally, may adversely affect our business, financial condition, results of operations and cash flows. ​ We have significant customer sales both in the United States and internationally.
Biggest changeIf a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant 25 Table of Contents additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. ​ General Risk Factors ​ Unfavorable economic and market conditions, domestically and internationally, may adversely affect our business, financial condition, results of operations and cash flows. ​ We have significant customer sales both in the United States and internationally.
We also rely on achieving specific cost reduction targets 11 Table of Contents that have uncertainty in their timing and magnitude. We may also incur unforeseen expenses in the ongoing operation of our business that cause us to exceed our operational spending plan.
We also rely on achieving specific cost reduction targets that have uncertainty in their timing and magnitude. We may also incur unforeseen expenses in the ongoing operation of our 11 Table of Contents business that cause us to exceed our operational spending plan.
Among others, these provisions include that: ​ ● our board of directors has the right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ​ ● our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors, the chairman of the board or the chief executive officer; ​ ● our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ​ ● the affirmative vote of holders of at least 66-2/3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, will be required (a) to amend certain provisions of our certificate of incorporation, including provisions relating to the size of the board, special meetings, actions by written consent and cumulative voting and (b) to amend or repeal our amended and restated bylaws, although such bylaws may be amended by a simple majority vote of our board of directors; ​ ● stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and ​ ● our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. ​ Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. ​ Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. ​ Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: ● any derivative action or proceeding brought on our behalf; 26 Table of Contents ● any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders; ● any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; and ● any action asserting a claim against us that is governed by the internal-affairs doctrine. ​ This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act.
Among others, these provisions include that: ​ ● our board of directors has the right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; ​ ● our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors, the chairman of the board or the chief executive officer; ​ 24 Table of Contents ● our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; ​ ● the affirmative vote of holders of at least 66-2/3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, will be required (a) to amend certain provisions of our certificate of incorporation, including provisions relating to the size of the board, special meetings, actions by written consent and cumulative voting and (b) to amend or repeal our amended and restated bylaws, although such bylaws may be amended by a simple majority vote of our board of directors; ​ ● stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and ​ ● our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. ​ Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. ​ Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. ​ Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: ● any derivative action or proceeding brought on our behalf; ● any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders; ● any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; and ● any action asserting a claim against us that is governed by the internal-affairs doctrine. ​ This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act.
The success and profitability, as well as the expansion, of our international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as the following: ​ ● public health issues, such as the COVID-19 pandemic, which can result in varying impacts to our business, employees, partners, customers, distributors or suppliers internationally as discussed elsewhere in this “Risk Factors” section; ​ ● difficulties, inefficiencies and costs associated with staffing and managing foreign operations; ​ ● longer and more difficult customer qualification and credit checks; ​ ● greater difficulty collecting accounts receivable and longer payment cycles; ​ ● the need for various local approvals to operate in some countries; ​ ● difficulties in entering some foreign markets without larger-scale local operations; ​ ● changes in import/export laws, trade restrictions, regulations and customs and duties and tariffs (foreign and domestic); ​ ● compliance with local laws and regulations; ​ ● unexpected changes in regulatory requirements, including the elimination of tax holidays; ​ ● reduced protection for intellectual property rights in some countries; ​ ● adverse tax consequences as a result of repatriating cash generated from foreign operations to the United States; ​ ● adverse tax consequences, including potential additional tax exposure if we are deemed to have established a permanent establishment outside of the United States; ​ ● the effectiveness of our policies and procedures designed to ensure compliance with the Foreign Corrupt Practices Act of 1977 and similar regulations; ​ ● fluctuations in currency exchange rates, which could increase the prices of our products to customers outside of the United States, increase the expenses of our international operations by reducing the purchasing power of the U.S. dollar and expose us to foreign currency exchange rate risk if, in the future, we denominate our international sales in currencies other than the U.S. dollar; ​ ● new and different sources of competition; ​ ● political, economic, and social instability; ​ ● terrorism and acts of war, such as the military conflict in Ukraine, which could have a negative impact on sales throughout Europe and Asia; and ​ 21 Table of Contents ● US Department of Commerce regulations or restrictions on exports of certain semiconductor technologies and equipment to China. ​ Our failure to manage any of these risks successfully could harm our operations and reduce our revenue. ​ Risk Factors Related to Our Intellectual Property and Technology ​ Failure to protect our intellectual property could substantially harm our business. ​ Our success and ability to compete depend in part upon our ability to protect our intellectual property.
The success and profitability, as well as the expansion, of our international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as the following: ​ ● public health issues, such as COVID-19, which can result in varying impacts to our business, employees, partners, customers, distributors or suppliers internationally as discussed elsewhere in this “Risk Factors” section; ​ ● difficulties, inefficiencies and costs associated with staffing and managing foreign operations; ​ ● longer and more difficult customer qualification and credit checks; ​ ● greater difficulty collecting accounts receivable and longer payment cycles; ​ ● the need for various local approvals to operate in some countries; ​ ● difficulties in entering some foreign markets without larger-scale local operations; ​ ● changes in import/export laws, trade restrictions, regulations and customs and duties and tariffs (foreign and domestic); ​ ● compliance with local laws and regulations; ​ ● unexpected changes in regulatory requirements, including the elimination of tax holidays; ​ ● reduced protection for intellectual property rights in some countries; ​ ● adverse tax consequences as a result of repatriating cash generated from foreign operations to the United States; ​ ● adverse tax consequences, including potential additional tax exposure if we are deemed to have established a permanent establishment outside of the United States; ​ ● the effectiveness of our policies and procedures designed to ensure compliance with the Foreign Corrupt Practices Act of 1977 and similar regulations; ​ ● fluctuations in currency exchange rates, which could increase the prices of our products to customers outside of the United States, increase the expenses of our international operations by reducing the purchasing power of the U.S. dollar and expose us to foreign currency exchange rate risk if, in the future, we denominate our international sales in currencies other than the U.S. dollar; ​ ● new and different sources of competition; ​ ● political, economic, and social instability; ​ 19 Table of Contents ● terrorism and acts of war, such as the military conflict in Ukraine, which could have a negative impact on sales throughout Europe and Asia; and ​ ● US Department of Commerce regulations or restrictions on exports of certain semiconductor technologies and equipment to China. ​ Our failure to manage any of these risks successfully could harm our operations and reduce our revenue. ​ Risk Factors Related to Our Intellectual Property and Technology ​ Failure to protect our intellectual property could substantially harm our business. ​ Our success and ability to compete depend in part upon our ability to protect our intellectual property.
These risks include the following: ​ ​ ● our interests could diverge from those of our foundries, or we may not be able to agree with them on ongoing development, manufacturing and operational activities, or on the amount, timing, or nature of further investments in our joint development; ​ ● we may experience difficulties in transferring technology to a foundry; ​ ● we may experience difficulties and delays in getting to and/or ramping production at foundries; ​ ● our control over the operations of foundries is limited; ​ ● due to financial constraints, our joint development collaborators may be unable to meet their commitments to us and may pose credit risks for our transactions with them; ​ ● due to differing business models or long-term business goals, our collaborators may decide not to join us in funding capital investment, which may result in higher levels of cash expenditures by us; ​ 16 Table of Contents ● our cash flows may be inadequate to fund increased capital requirements; ​ ● we may experience difficulties or delays in collecting amounts due to us from our collaborators; ​ ● the terms of our arrangements may turn out to be unfavorable; ​ ● we are migrating toward a fabless model as 300mm production becomes required and this increases risks related to less control over our critical production processes; and ​ ● changes in tax, legal, or regulatory requirements may necessitate changes in our agreements. ​ The term of the agreement, as amended, is the completion, termination, or expiration of the last statement of work entered into pursuant to the joint development agreement. ​ If our strategic relationships are unsuccessful, our business, results of operations, or financial condition may be materially adversely affected. ​ We must continuously develop new and enhanced products, and if we are unable to successfully market our new and enhanced products for which we incur significant expenses to develop, our results of operations and financial condition will be materially adversely affected. ​ To compete effectively in our markets, we must continually design, develop, and introduce new and improved technology and products with improved features in a cost-effective manner in response to changing technologies and market demand.
These risks include the following: ​ ​ ● our interests could diverge from those of our foundries, or we may not be able to agree with them on ongoing development, manufacturing and operational activities, or on the amount, timing, or nature of further investments in our joint development; ​ ● we may experience difficulties in transferring technology to a foundry; ​ ● we may experience difficulties and delays in getting to and/or ramping production at foundries; ​ ● our control over the operations of foundries is limited; 14 Table of Contents ​ ● due to financial constraints, our joint development collaborators may be unable to meet their commitments to us and may pose credit risks for our transactions with them; ​ ● due to differing business models or long-term business goals, our collaborators may decide not to join us in funding capital investment, which may result in higher levels of cash expenditures by us; ​ ● our cash flows may be inadequate to fund increased capital requirements; ​ ● we may experience difficulties or delays in collecting amounts due to us from our collaborators; ​ ● the terms of our arrangements may turn out to be unfavorable; ​ ● we are migrating toward a fabless model as 300mm production becomes required and this increases risks related to less control over our critical production processes; and ​ ● changes in tax, legal, or regulatory requirements may necessitate changes in our agreements. ​ The term of the agreement, as amended, is the completion, termination, or expiration of the last statement of work entered into pursuant to the joint development agreement. ​ If our strategic relationships are unsuccessful, our business, results of operations, or financial condition may be materially adversely affected. ​ We must continuously develop new and enhanced products, and if we are unable to successfully market our new and enhanced products for which we incur significant expenses to develop, our results of operations and financial condition will be materially adversely affected. ​ To compete effectively in our markets, we must continually design, develop, and introduce new and improved technology and products with improved features in a cost-effective manner in response to changing technologies and market demand.
Any of the foregoing could adversely affect our business, financial condition, results of operations and cash flows. ​ Our business may be adversely impacted by natural disasters and other catastrophic events. ​ Our operations and business, and those of our manufacturing partners, customers, distributors, or suppliers, can be disrupted by natural disasters; industrial accidents; public health issues, such as the COVID-19 pandemic; cybersecurity incidents; interruptions of service from utilities, transportation, telecommunications, or IT systems providers; manufacturing equipment failures; or other catastrophic events.
Any of the foregoing could adversely affect our business, financial condition, results of operations and cash flows. ​ Our business may be adversely impacted by natural disasters and other catastrophic events. ​ Our operations and business, and those of our manufacturing partners, customers, distributors, or suppliers, can be disrupted by natural disasters; industrial accidents; public health issues, such as COVID-19; cybersecurity incidents; interruptions of service from utilities, transportation, telecommunications, or IT systems providers; manufacturing equipment failures; or other catastrophic events.
Our revenue may also be adversely impacted by a number of other possible reasons, many of which are outside our control, including business conditions that adversely affect the semiconductor memory industry resulting in a decline in end market demand for our products, adverse impacts resulting from the COVID-19 pandemic, increased competition, ongoing supply chain constraints, or our failure to capitalize on growth opportunities.
Our revenue may also be adversely impacted by a number of other possible reasons, many of which are outside our control, including business conditions that adversely affect the semiconductor memory industry resulting in a decline in end market demand for our products, adverse impacts resulting from COVID-19, increased competition, ongoing supply chain constraints, or our failure to capitalize on growth opportunities.
We would likely experience significant delays or cessation in producing some of our products if a labor strike, natural disaster, public health crisis, geopolitical event, or other supply disruption were to occur, including as a result of the COVID-19 pandemic or the military conflict in Ukraine, at any of our main suppliers.
We would likely experience significant delays or cessation in producing some of our products if a labor strike, natural disaster, public health crisis, geopolitical event, or other supply disruption were to occur, including as a result of COVID-19 or the military conflict in Ukraine, at any of our main suppliers.
For example, any such problems could result in: ​ ● delays in development, manufacture and roll-out of new products; ​ ● additional development costs; ​ ● loss of, or delays in, market acceptance; ​ ● diversion of technical and other resources from our other development efforts; ​ ● claims for damages by our customers or others against us; and ​ ● loss of credibility with our current and prospective customers. ​ Any such event could have a material adverse effect on our business, financial condition, and results of operations. ​ We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. ​ We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available from our third-party foundries.
For example, any such problems could result in: ​ ● delays in development, manufacture and roll-out of new products; ​ ● additional development costs; ​ ● loss of, or delays in, market acceptance; ​ ● diversion of technical and other resources from our other development efforts; ​ ● claims for damages by our customers or others against us; and ​ ● loss of credibility with our current and prospective customers. ​ Any such event could have a material adverse effect on our business, financial condition, and results of operations. ​ 17 Table of Contents We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. ​ We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available from our third-party foundries.
Securities litigation brought against us following volatility in our stock price or otherwise, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business. ​ These and other factors may make the price of our stock volatile and subject to unexpected fluctuation. ​ 25 Table of Contents Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management. ​ Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.
Securities litigation brought against us following volatility in our stock price or otherwise, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business. ​ These and other factors may make the price of our stock volatile and subject to unexpected fluctuation. ​ Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management. ​ Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.
These competitors could develop technologies or architectures that make our products or technologies obsolete. ​ Our ability to compete successfully depends on factors both within and outside of our control, including: ​ ● the functionality and performance of our products and those of our competitors; ​ ● our relationships with our customers and other industry participants; ​ ● prices of our products and prices of our competitors’ products; ​ ● our ability to develop innovative products; ​ ● our competitors’ greater resources to make acquisitions; ​ ● our ability to obtain adequate capital to finance operations; ​ ● our ability to retain high-level talent, including our management team and engineers; and ​ ● the actions of our competitors, including merger and acquisition activity, launches of new products and other actions that could change the competitive landscape. ​ In the event of a market downturn, competition in the markets in which we operate may intensify as our customers reduce their purchase orders.
These competitors could develop technologies or architectures that make our products or technologies obsolete. ​ Our ability to compete successfully depends on factors both within and outside of our control, including: ​ ● the functionality and performance of our products and those of our competitors; ​ ● our relationships with our customers and other industry participants; ​ ● prices of our products and prices of our competitors’ products; ​ ● our ability to develop innovative products; ​ ● our competitors’ greater resources to make acquisitions; ​ ● our ability to obtain adequate capital to finance operations; ​ ● our ability to retain high-level talent, including our management team and engineers; and ​ 16 Table of Contents ● the actions of our competitors, including merger and acquisition activity, launches of new products and other actions that could change the competitive landscape. ​ In the event of a market downturn, competition in the markets in which we operate may intensify as our customers reduce their purchase orders.
If any such proceedings result in an adverse outcome, we could be required to: ​ ● cease the manufacture, use or sale of the infringing products, processes or technology; ​ ● pay substantial damages for infringement; 22 Table of Contents ​ ● expend significant resources to develop non-infringing products, processes or technology, which may not be successful; ​ ● license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; ​ ● cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or ​ ● pay substantial damages to our customers to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available. ​ Any of the foregoing results could have a material adverse effect on our business, financial condition, and results of operations.
If any such proceedings result in an adverse outcome, we could be required to: ​ ● cease the manufacture, use or sale of the infringing products, processes or technology; ​ ● pay substantial damages for infringement; ​ ● expend significant resources to develop non-infringing products, processes or technology, which may not be successful; ​ ● license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; ​ ● cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or ​ ● pay substantial damages to our customers to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available. ​ Any of the foregoing results could have a material adverse effect on our business, financial condition, and results of operations.
Our competitors that are significantly larger and have greater financial, technical, marketing, distribution, customer support and other resources or more established market recognition than us may be better positioned to accept lower prices and withstand adverse economic or market conditions. 18 Table of Contents ​ Our costs may increase substantially if we or our third-party manufacturing contractors do not achieve satisfactory product yields or quality. ​ The fabrication process is extremely complicated and small changes in design, specifications or materials can result in material decreases in product yields or even the suspension of production.
Our competitors that are significantly larger and have greater financial, technical, marketing, distribution, customer support and other resources or more established market recognition than us may be better positioned to accept lower prices and withstand adverse economic or market conditions. ​ Our costs may increase substantially if we or our third-party manufacturing contractors do not achieve satisfactory product yields or quality. ​ The fabrication process is extremely complicated and small changes in design, specifications or materials can result in material decreases in product yields or even the suspension of production.
The loss of the services of one or more of our key employees, especially our key engineers, or our inability to attract and retain qualified engineers, could harm our business, financial condition, and results of operations. ​ 20 Table of Contents We currently maintain and are seeking to expand operations outside of the United States which exposes us to significant risks. ​ The success of our business depends, in large part, on our ability to operate successfully from geographically disparate locations and to further expand our international operations and sales.
The loss of the services of one or more of our key employees, especially our key engineers, or our inability to attract and retain qualified engineers, could harm our business, financial condition, and results of operations. ​ We currently maintain and are seeking to expand operations outside of the United States which exposes us to significant risks. ​ The success of our business depends, in large part, on our ability to operate successfully from geographically disparate locations and to further expand our international operations and sales.
These ongoing efforts require us from time to time to modify the 19 Table of Contents manufacturing processes for our products and to redesign some products, which in turn may result in delays in product deliveries. ​ For example, as smaller line width geometry manufacturing processes become more prevalent, we intend to move our future products to increasingly smaller geometries to integrate greater levels of memory capacity and/or functionality into our products.
These ongoing efforts require us from time to time to modify the manufacturing processes for our products and to redesign some products, which in turn may result in delays in product deliveries. ​ For example, as smaller line width geometry manufacturing processes become more prevalent, we intend to move our future products to increasingly smaller geometries to integrate greater levels of memory capacity and/or functionality into our products.
In addition, the time and expense to qualify a new foundry could result in additional expense, diversion of resources or lost sales, any of which would negatively impact our financial results. ​ 15 Table of Contents If any of our current or future foundries or packaging, assembly and testing subcontractors significantly increases the costs of wafers or other materials or services, interrupts or reduces our supply, including for reasons outside of their control, such as due to the COVID-19 pandemic, or if any of our relationships with our suppliers is terminated, our operating results could be adversely affected.
In addition, the time and expense to qualify a new foundry could result in additional expense, diversion of resources or lost sales, any of which would negatively impact our financial results. ​ If any of our current or future foundries or packaging, assembly and testing subcontractors significantly increases the costs of wafers or other materials or services, interrupts or reduces our supply, including for reasons outside of their control, such as due to COVID-19, or if any of our relationships with our suppliers is terminated, our operating results could be adversely affected.
We compete with large semiconductor manufacturers and designers and others, and our current and potential competitors have longer operating histories, significantly greater resources and name recognition and a larger base of customers than we do. This may allow them to respond more quickly than we can to new or emerging technologies or changes in customer requirements.
We compete with large semiconductor manufacturers and designers and others, and our current and 12 Table of Contents potential competitors have longer operating histories, significantly greater resources and name recognition and a larger base of customers than we do. This may allow them to respond more quickly than we can to new or emerging technologies or changes in customer requirements.
For example, the European Union adopted its Restriction on Hazardous Substance Directive which prohibits, with specified exceptions, the sale in the EU market of new electrical and electronic equipment containing more than agreed levels of lead or other hazardous materials and China has enacted similar regulations.
For example, the European Union adopted its Restriction on Hazardous Substance Directive which prohibits, with specified exceptions, the sale in the EU market of new electrical and electronic equipment 22 Table of Contents containing more than agreed levels of lead or other hazardous materials and China has enacted similar regulations.
In such event, our stockholders may lose their entire investment in our company. ​ Further, we may need to raise additional funds through financing or borrowings in order to accomplish our long-term planned objectives.
In such event, our stockholders may lose their entire investment in our company. ​ Further, we may need to raise additional funds through financings or borrowings in order to accomplish our long-term planned objectives.
We have in the past, and may in the future, face such claims. ​ Claims that our products, processes, or technology infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel.
We have in the past, and may in the future, face such claims. ​ 20 Table of Contents Claims that our products, processes, or technology infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel.
Moreover, even if a customer selects our solution, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or efforts by our customer to market and sell its product may not be successful.
Moreover, even if a customer selects our solution, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or efforts by our customer to market and sell its 15 Table of Contents product may not be successful.
The federal NOLs generated prior to 2018 will continue to be governed by 24 Table of Contents the NOL tax rules as they existed prior to the adoption of the 2017 Tax Cuts and Jobs Act (2017 Tax Act) , which means that generally they will expire 20 years after they were generated if not used prior thereto.
The federal NOLs generated prior to 2018 will continue to be governed by the NOL tax rules as they existed prior to the adoption of the 2017 Tax Cuts and Jobs Act (2017 Tax Act) , which means that generally they will expire 20 years after they were generated if not used prior thereto.
Moreover, if we are unable to find another foundry to manufacture our products or if we have to redesign our core technology, this could cause material harm to our business and operating results. ​ If we need other foundries or packaging, assembly, and testing contractors, or if we are unable to obtain timely and adequate deliveries from our providers, we might not be able to cost-effectively and quickly retain other vendors to satisfy our requirements.
Moreover, if we are unable to find another foundry to manufacture our products or if we have to redesign our core technology, this could cause material harm to our business and operating results. ​ 13 Table of Contents If we need other foundries or packaging, assembly, and testing contractors, or if we are unable to obtain timely and adequate deliveries from our providers, we might not be able to cost-effectively and quickly retain other vendors to satisfy our requirements.
If we lose the services of any key senior management member or employee, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new personnel, which could severely impact our business and prospects.
If we lose the services of any key senior management member or employee, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new 18 Table of Contents personnel, which could severely impact our business and prospects.
Our ability to compete successfully depends on customers viewing us as a stable and reliable supplier to 17 Table of Contents mission-critical customer applications when we have less production capacity and less financial resources compared to most of our larger competitors.
Our ability to compete successfully depends on customers viewing us as a stable and reliable supplier to mission-critical customer applications when we have less production capacity and less financial resources compared to most of our larger competitors.
As a result, we might not be able to utilize a material portion of our state NOLs and tax credits. ​ Risks Related to Our Common Stock ​ We expect that the price of our common stock will fluctuate substantially. ​ The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including: ​ ● the duration and severity of the COVID-19 pandemic and its effects on our business, financial condition, results of operations and cash flows; ​ ● the introduction of new products or product enhancements by us or others in our industry; ​ ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or restructurings; ​ ● disputes or other developments with respect to our or others’ intellectual property rights; ​ ● product liability claims or other litigation; ​ ● quarterly variations in our results of operations or those of others in our industry; ​ ● sales of large blocks of our common stock, including sales by our executive officers and directors; ​ ● changes in senior management or key personnel; ​ ● changes in earnings estimates or recommendations by securities analysts; and ​ ● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors, including those due to the duration and severity of the COVID-19 pandemic and the military conflict in Ukraine. ​ Stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
As a result, we might not be able to utilize a material portion of our state NOLs and tax credits. ​ Risks Related to Our Common Stock ​ We expect that the price of our common stock will fluctuate substantially. ​ The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including: ​ ● the introduction of new products or product enhancements by us or others in our industry; ​ 23 Table of Contents ● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments or restructurings; ​ ● disputes or other developments with respect to our or others’ intellectual property rights; ​ ● product liability claims or other litigation; ​ ● quarterly variations in our results of operations or those of others in our industry; ​ ● sales of large blocks of our common stock, including sales by our executive officers and directors; ​ ● changes in senior management or key personnel; ​ ● changes in earnings estimates or recommendations by securities analysts; and ​ ● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors, including the effects of COVID-19 and the military conflict in Ukraine. ​ Stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
In addition, the adverse impact of general economic factors that are beyond our control, including, but not limited to, housing markets, recession, inflation, deflation, consumer credit activity, consumer debt levels, fuel and energy costs, interest rates, tax rates and policy, unemployment trends, potential industry downturn, the impact of natural disasters such as pandemics, civil disturbances, terrorist activities and acts of war, including the military conflict in Ukraine, may adversely impact consumer spending, which 27 Table of Contents may adversely impact our customers’ spending and demand for our products.
In addition, the adverse impact of general economic factors that are beyond our control, including, but not limited to, housing markets, recession, inflation, deflation, consumer credit activity, consumer debt levels, exchange rate volatility, fuel and energy costs, interest rates, bank failures, tax rates and policy, unemployment trends, potential industry downturn, the impact of natural disasters such as pandemics, civil disturbances, terrorist activities and acts of war, including the military conflict in Ukraine, may adversely impact consumer spending, which may adversely impact our customers’ spending and demand for our products.
Our four largest end customers together accounted for 24% of our total revenue for the year ended December 31, 2022, and one of these customers accounted for more than 10% of our revenue during that period.
Our four largest end customers together accounted for 24% of our total revenue for the year ended December 31, 2022, and one of those customers individually accounted for more than 10% of our total revenue during the period.
Any loss of such information could harm our competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by any such disruptions or security breaches.
Any loss of such information could harm our competitive position, result in a loss of customer confidence, result in breaches of applicable obligations (such as laws and contracts) and cause us to incur significant costs to remedy the damages caused by any such disruptions or security breaches.
However, our existing capital may be insufficient to meet our long-term requirements. We have no committed sources of funding other than our revolving line of credit facility and there is no assurance that additional funding will be available to us in the future or be secured on acceptable terms.
However, our existing capital may be insufficient to meet our long-term requirements. We have no committed sources of funding and there is no assurance that additional funding will be available to us in the future or be secured on acceptable terms.
Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition. ​ ​ ​ 28 Table of Contents Item 1B. Unresolved Staff Comments. None.
Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition. ​ Item 1B. Unresolved Staff Comments. None.
Additionally, any failure to properly manage the collection, handling, transfer, or disposal of personal data of employees and customers may result in regulatory penalties, enforcement actions, remediation obligations, litigation, fines, and other sanctions. ​ We may experience attacks on our data, attempts to breach our security and attempts to introduce malicious software into our IT systems.
Additionally, any failure to properly manage the collection, handling, transfer, or disposal of personal data of employees and customers may result in regulatory penalties, bans on processing personal data or orders not to use or destroy data, enforcement actions, remediation obligations, litigation, fines, and other actions. ​ We may experience attacks on our data and/or information systems, attempts to breach our security and attempts to introduce malicious software into our IT systems.
We also rely on domestic and international suppliers, manufacturing partners and distributors. We are therefore susceptible to adverse U.S. and international economic and market conditions. If any of our manufacturing partners, customers, distributors or suppliers experience slowdowns in their business, serious financial difficulties or cease operations, including as a result of the COVID-19 pandemic, our business will be adversely affected.
We also rely on domestic and international suppliers, manufacturing partners and distributors. We are therefore susceptible to adverse U.S. and international economic and market conditions. If any of our manufacturing partners, customers, distributors or suppliers experience slowdowns in their business, serious financial difficulties or cease operations, our business will be adversely affected.
We may be unable to match production with customer demand for a variety of reasons including macroeconomic factors due to the cyclical nature of the semiconductor industry, our inability to accurately forecast customer demand, supply chain constraints, or the capacity constraints of our suppliers, which could adversely affect our operating results. ​ We make planning and spending decisions, including determining production levels, production schedules, component procurement commitments, personnel needs, and other resource requirements, based on our estimates of product demand and customer requirements.
If we do not manage these risks and overcome these difficulties successfully, our business will suffer. ​ We may be unable to match production with customer demand for a variety of reasons including macroeconomic factors due to the cyclical nature of the semiconductor industry, our inability to accurately forecast customer demand, supply chain constraints, or the capacity constraints of our suppliers, which could adversely affect our operating results. ​ We make planning and spending decisions, including determining production levels, production schedules, component procurement commitments, personnel needs, and other resource requirements, based on our estimates of product demand and customer requirements.
Our inability to capitalize on or realize substantial revenue from our significant investments in research and development could harm our operating results and distract management, harming our business. ​ Interruptions in our information technology systems could adversely affect our business. ​ We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business.
Our inability to capitalize on or realize substantial revenue from our significant investments in research and development could harm our operating results and distract management, harming our business. ​ Interruptions in or other compromises of our information technology systems or data or that of third parties upon whom we rely could adversely affect our business. ​ We rely on the efficient, uninterrupted and uncompromised operation of complex information technology systems and networks (and those of third parties) to operate our business.
As of December 31, 2022, we had cash and cash equivalents of approximately $26.8 million. Based on our current operating plan, we believe our existing cash and cash equivalents, coupled with availability under our credit facility and our anticipated growth and sales levels, will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
As of December 31, 2023, we had cash and cash equivalents of approximately $36.9 million. Based on our current operating plan, we believe our existing cash and cash equivalents, coupled with our anticipated growth and sales levels, will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
Some of our current and potential customers with their own internally developed solutions may choose not to purchase products from third-party suppliers like us. 14 Table of Contents We rely on third parties to distribute, manufacture, package, assemble and test our products, which exposes us to a number of risks, including reduced control over manufacturing and delivery timing and potential exposure to price fluctuations, which could result in a loss of revenue or reduced profitability. ​ Although we operate an integrated magnetic fabrication line located in Chandler, Arizona, we purchase wafers from third parties and outsource the manufacturing, packaging, assembly and testing of our products to third-party foundries and assembly and testing service providers.
We rely on third parties to distribute, manufacture, package, assemble and test our products, which exposes us to a number of risks, including reduced control over manufacturing and delivery timing and potential exposure to price fluctuations, which could result in a loss of revenue or reduced profitability. ​ Although we operate an integrated magnetic fabrication line located in Chandler, Arizona, we purchase wafers from third parties and outsource the manufacturing, packaging, assembly and testing of our products to third-party foundries and assembly and testing service providers.
Such disruption could result in a loss of our intellectual property or the release of sensitive competitive information or supplier, customer, or employee personal data.
Such disruption or other compromise could result in a loss of our intellectual property or the release of sensitive competitive information or supplier, customer, personnel or other relevant stakeholder’s personal data.
As of December 31, 2022, we had gross federal net operating loss carryforwards of approximately $119.9 million, of which $79.1 million will expire in 2028 through 2037 if not utilized, and $40.8 million will carryover indefinitely.
As of December 31, 2023, we had gross federal net operating loss carryforwards of approximately $96.2 million, of which $55.8 million will expire in 2028 through 2037 if not utilized, and $40.5 million will carryover indefinitely.
The viability and demand for our products may be affected by many factors outside of our control, such as the factors affecting the growth of the industrial, automotive, transportation, and data center market segments and changes in macroeconomic conditions. If we do not manage these risks and overcome these difficulties successfully, our business will suffer.
The viability and demand for our products may be affected by many factors outside of our control, such as the factors affecting the growth of the industrial, automotive, transportation, and data center market segments and changes in macroeconomic conditions.
As of December 31, 2022, we had state net operating loss carryforwards of approximately $50.3 million, of which $47.5 million will expire in 2028 through 2041 if not utilized, and $2.8 million will carryover indefinitely.
As of December 31, 2023, we had state net operating loss carryforwards of approximately $48.7 million, of which $45.9 million will expire in 2028 through 2043 if not utilized, and $2.8 million will carryover indefinitely.
However, we only began to manufacture and ship our Spin Transfer Torque MRAM (STT-MRAM) products in the fourth quarter of 2017. ​ Our limited experience selling our STT-MRAM products, combined with the rapidly evolving and competitive nature of our market, makes it difficult to evaluate our current business and future prospects.
We began to manufacture our second set of STT-MRAM products targeting the NVSRAM markets in the fourth quarter of 2022. ​ Our limited experience in selling our STT-MRAM products, combined with the rapidly evolving and competitive nature of our markets, makes it difficult to evaluate our current business and future prospects.
Our four largest end customers together accounted for 47% of our total revenue for the year ended December 31, 2021, and one of these customers individually accounted for more than 10% of our total revenue during the period.
Our two largest end customers together accounted for 22% of our total revenue for the year ended December 31, 2023, and each of these customers accounted for more than 10% of our revenue during that period.
(subsequently acquired by NXP Semiconductor) spun-out its MRAM business as Everspin. We have been shipping magnetoresistive random-access memory (MRAM) products since our incorporation in 2008.
(subsequently acquired by NXP Semiconductor) spun-out its MRAM business as Everspin. We have been shipping magnetoresistive random-access memory (MRAM) products since our incorporation in 2008. However, we only began to manufacture and ship our STT-MRAM products in the fourth quarter of 2017.
Any such loss of data by our 23 Table of Contents third-party service providers could negatively impact our business, operations, and financial results, as well as our relationship with our customers. ​ Risk Factors Related to Regulatory Matters and Compliance ​ To comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and if we fail to comply with environmental regulations, we could be subject to substantial fines or be required to have our suppliers alter their processes. ​ The semiconductor memory industry is subject to a variety of international, federal, state, and local governmental regulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic or other hazardous substances.
Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data. ​ Risk Factors Related to Regulatory Matters and Compliance ​ To comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and if we fail to comply with environmental regulations, we could be subject to substantial fines or be required to have our suppliers alter their processes. ​ The semiconductor memory industry is subject to a variety of international, federal, state, and local governmental regulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic or other hazardous substances.
Any significant disruption to our systems or networks, including, but not limited to, new system implementations, computer viruses, security breaches, facility issues, natural disasters, terrorism, war, telecommunication failures or energy blackouts, could have a material adverse impact on our operations, sales, and financial results.
Any significant disruption to or other compromise of our systems, networks or data (or those of third parties upon whom we rely), including, but not limited to, due to new system implementations, computer viruses, social-engineering attacks, personnel (including former personnel) misconduct or error, supply-chain attacks, ransomware attacks, software bugs, software or hardware failure, security breaches, facility issues, natural disasters, terrorism, war, telecommunication failures, energy blackouts, loss, theft or similar threats, could have a material adverse impact on our operations, sales, and financial results.
In the event that these service providers do not properly safeguard the data that they hold, security breaches and loss of data could result.
Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. In the event that these service providers do not properly safeguard the data that they hold, security breaches and loss of data could result.
In addition, many of the following risks and uncertainties may be exacerbated by the ongoing COVID-19 pandemic, including any new variants that may become predominant, and any worsening of the global business and economic environment as a result. ​ ​ Risk Factors Related to Our Financial Condition and Our Indebtedness ​ We may need additional funding and may be unable to raise capital when needed, which could force us to delay, reduce, or eliminate planned activities. ​ Our total revenue was approximately $60.0 million for the year ended December 31, 2022, and $55.1 million for the year ended December 31, 2021.
If any of the following risks or such other risks actually occurs, our business, financial condition, results of operations and cash flows could be harmed. ​ ​ Risk Factors Related to Our Financial Condition ​ We may need additional funding and may be unable to raise capital when needed, which could force us to delay, reduce, or eliminate planned activities. ​ Our total revenue was approximately $63.8 million for the year ended December 31, 2023, and $60.0 million for the year ended December 31, 2022.
There is no current impact to us as we continue to be in a loss position for U.S. income tax purposes. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the Code.
There is no current impact to us as the NOLs that we are utilizing in the current year were generated prior to 2018, and therefore, are not subject to the 80% limitation. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the Code.
Additional risks and uncertainties not presently known to us or that we deem immaterial also may impair our business operations. If any of the following risks or such other risks actually occurs, our business, financial condition, results of operations and cash flows could be harmed.
Additional risks and uncertainties not presently known to us or that we deem immaterial also may impair our business operations.
Such attacks or disruptions could have a material adverse impact on our business, operations, and financial results. ​ Third-party service providers, such as wafer foundries, assembly and test contractors, distributors and other vendors have access to certain portions of our and our customers’ sensitive data.
Such attacks or disruptions could have a material adverse impact on our business, operations, and financial results.
In addition, these competitors may have greater credibility with our existing and potential customers.
In addition, these competitors may have greater credibility with our existing and potential customers. Some of our current and potential customers with their own internally developed solutions may choose not to purchase products from third-party suppliers like us.
Removed
As a result, our ability to generate sufficient revenue growth and/or control expenses to transition to profitability and generate consistent positive cash flows is uncertain. ​ Provisions of our credit facility may restrict our ability to pursue our business strategies. ​ Borrowings under our existing credit facility are secured by substantially all of our assets, except for intellectual property.
Added
As a result, our ability to generate sufficient revenue growth and/or control expenses to transition to profitability and generate consistent positive cash flows is uncertain. ​ Risk Factors Related to Our Business and Our Industry ​ The limited history of STT-MRAM adoption makes it difficult to evaluate our current business and future prospects. ​ We have been in existence as a stand-alone company since 2008, when Freescale Semiconductor, Inc.
Removed
Additionally, the operating restrictions and covenants relating to our existing credit facility restrict, and any future financing agreements that we may enter into may further restrict, our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies.
Added
Additionally, future or past business 21 Table of Contents transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Removed
For example, our existing credit facility prohibits our ability to, among other things: ​ ● dispose of or sell assets; ​ ● consolidate or merge with other entities; ​ ● incur additional indebtedness; ​ ● create liens on our assets; ​ ● pay dividends; ​ ● make investments; ​ ● enter into transactions with affiliates; and ​ ● redeem subordinated indebtedness. ​ These restrictions are subject to certain exceptions.
Added
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
Removed
In addition, our existing credit facility requires that we meet certain operating covenants, such as maintaining insurance on the collateral and meeting certain financial covenants, such as maintaining a minimum cash balance and availability under our revolving line of credit facility.
Added
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks.
Removed
Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet those covenants. A breach of any of these covenants could result in an event of default under the credit facility.
Added
Attempts to gain unauthorized access to our IT systems or other attacks have in the past, in certain instances and to certain degrees, been successful (but have not caused significant harm), and may in the future be successful, and in some cases, we might be unaware of an incident or its magnitude and effects. ​ Third-party service providers, such as wafer foundries, assembly and test contractors, distributors and other vendors have access to certain portions of our and our customers’ sensitive data.
Removed
We are required to make mandatory prepayments of the outstanding loan upon the acceleration by lender following the occurrence of an event of default, along with a payment of the end of term fee, the prepayment fee and any other obligations that are due and payable at the time of prepayment.
Added
Any such loss of data by our third-party service providers could negatively impact our business, operations, and financial results, as well as our relationship with our customers. ​ While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Removed
In the event of default, the interest rate in effect will increase by 5.0% per annum. ​ Risk Factors Related to Our Business and Our Industry ​ The ongoing COVID-19 global pandemic has adversely affected, and is expected to continue to adversely affect, our business, results of operations and financial condition.
Added
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities including on a timely and effective basis.
Removed
The widespread outbreak of any other illnesses or communicable diseases could also adversely affect our business, results of operations and financial condition. ​ We could be negatively impacted by the widespread outbreak of an illness, any other communicable disease or any other public health crisis that results in economic and trade disruptions, including the disruption of global supply chains.
Added
Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident. ​ We may expend significant resources or modify our business activities to try to protect against security incidents.
Removed
More recently, new variants of COVID-19 have emerged. The spread of these new strains caused many government authorities and businesses to implement measures to try to reduce the spread that had become less prevalent.
Added
As an example, in the United States, capital markets have experienced and continue to experience volatility and disruption. Furthermore, inflation rates in the United States have recently increased to levels not seen in decades resulting in federal action to increase interest rates, affecting capital markets.
Removed
While some of these restrictions have begun to be lifted, the lingering impact of the COVID-19 pandemic continues to create significant volatility throughout the global economy, including supply chain constraints, labor supply issues, and higher inflation.
Added
In addition to the foregoing, adverse developments that affect financial institutions, transactional counterparties or other third parties, such as bank failures, or concerns or speculation about any similar events or risks, could lead to market-wide liquidity problems, which in turn may cause third parties, including customers, to become unable to meet their obligations under various types of financial arrangements as well as general disruptions or instability in the financial markets.
Removed
Accordingly, it is unclear at this point the full impact COVID-19 and its variants will have on the global economy and on our Company. ​ As a result of the COVID-19 pandemic and the related responses from government authorities, our business, results of operations and financial condition have been adversely impacted.
Removed
For example, we have experienced electronics supply chain and demand disruptions from extended factory shutdowns, particularly in some Asian countries, which 12 Table of Contents created unusual order patterns, and subsequently slowed Toggle MRAM demand, particularly from our industrial customers.
Removed
Further, in an effort to protect the health and safety of our employees, we took the following actions: transitioned most of our office and support employees and contractors to working from home; suspended all non-essential business travel; and implemented social distancing guidelines for our employees and contractors who must work in our manufacturing and laboratory locations. ​ Additionally, our business, results of operations and financial condition have been and may be further impacted in several ways, including, but not limited to, the following: ​ ● further disruptions to our operations, including due to additional facility closures, restrictions on our operations and sales, marketing and distribution efforts and/or interruptions to our research and development activities, product development and other important business activities; ● further reduced demand for our products, particularly due to disruptions to the businesses and operations of our customers; ● interruptions, availability or delays in global shipping to transport our products; ● further slowdowns, stoppages or other limitations in the supply chain for our products, in addition to higher costs, such as due to suppliers raising prices; ● limitations on employee resources and availability, including due to sickness, government restrictions, labor supply shortages, and the desire of employees to avoid contact with large groups of people or mass transit disruptions; ● a continuation or worsening of general economic conditions, including increased inflation; ● greater difficulty in collecting customer receivables; ● a fluctuation in foreign currency exchange rates or interest rates could result from market uncertainties; and ● an increase in the cost or the difficulty to obtain debt or equity financing could affect our financial condition or our ability to fund operations or future investment opportunities. ​ Additionally, COVID-19 could impact our internal controls over financial reporting as a portion of our workforce is required to work from home and therefore new processes, procedures, and controls could be required to respond to changes in our business environment.
Removed
Further, should any key employees become ill from COVID-19 and unable to work, the attention of the management team could be diverted. ​ The emergence of different variants of COVID-19 and the prevalence of breakthrough cases of infection among fully vaccinated people adds additional uncertainty and could result in further impacts to our business and operations, including those discussed above. ​ Although we will continue to monitor the situation and take further actions, which may include further altering our operations, in order to protect the best interests of our employees, customers and suppliers and comply with government requirements, there is no certainty that such measures will be enough to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed. ​ Any of the foregoing could adversely affect our business, results of operations and financial condition.
Removed
The potential effects of COVID-19 may also impact many of our other risk factors discussed in this “Risk Factors” section.
Removed
The ultimate extent of the impact of the COVID-19 pandemic on our business, results of operations and financial condition will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted, including, but not limited to the duration and spread of the COVID-19 outbreak and its severity; the emergence and severity of its variants; the actions to contain the virus or treat its impact, such as the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to use them; general economic factors, such as increased inflation; supply chain restraints; labor supply issues; and how quickly and to what extent normal economic and operating conditions can resume. 13 Table of Contents ​ The limited history of STT-MRAM adoption makes it difficult to evaluate our current business and future prospects. ​ We have been in existence as a stand-alone company since 2008, when Freescale Semiconductor, Inc.
Removed
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. ​ Effective December 31, 2021, we ceased to be an “emerging growth company,” and certain reduced reporting requirements applicable to emerging growth companies no longer apply to us, which is expected to increase our costs as a public company and place additional demands on management. ​ Effective December 31, 2021, we ceased to be classified as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the JOBS Act).
Removed
We have previously taken advantage of certain reduced reporting requirements pursuant to the JOBS Act specifically applicable to emerging growth companies, including exemptions from the requirements of holding advisory “say-on-pay” and the related “say-on frequency” votes on executive compensation.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business.
Biggest changeDividends We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business.
Not applicable. ​ ​ 29 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Trading Market for our Common Stock Our common stock has been listed on the Nasdaq Global Market under the symbol “MRAM” since October 7, 2016.
Not applicable. ​ ​ 28 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Trading Market for our Common Stock Our common stock has been listed on the Nasdaq Global Market under the symbol “MRAM” since October 7, 2016.
Prior to that date, there was no public trading market for our common stock. Holders of Record As of February 28, 2023, we had 19 holders of record of our common stock.
Prior to that date, there was no public trading market for our common stock. Holders of Record As of February 26, 2024, we had 17 holders of record of our common stock.
Removed
Dividends We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. In addition, our existing credit facility prohibits our ability to pay dividends on our capital stock.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 29 ​ ​ ​ PART II ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30 Item 6. [Reserved] 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A.
Biggest changeItem 4. Mine Safety Disclosures 28 ​ ​ ​ PART II ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. [Reserved] 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 40 Item 8. Financial Statements and Supplementary Data 41
Quantitative and Qualitative Disclosures About Market Risk 38 Item 8. Financial Statements and Supplementary Data 39

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSection 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.INS* Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ​ ​ 101.SCH* Inline XBRL Taxonomy Extension Schema Document. ​ ​ 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. ​ ​ 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. ​ ​ 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. ​ ​ 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 104* ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ * Filed herewith. ** Furnished herewith.
Biggest changeSection 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 97.1* ​ Incentive Compensation Recoupment Policy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.INS* ​ Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.SCH* ​ Inline XBRL Taxonomy Extension Schema Document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.CAL* ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.DEF* ​ Inline XBRL Taxonomy Extension Definition Linkbase Document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.LAB* ​ Inline XBRL Taxonomy Extension Label Linkbase Document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101.PRE* ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 104* ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). ​ ​ ​ ​ ​ ​ ​ ​ ​ * Filed herewith. ** Furnished herewith.
Item 5.02 ​ 5/12/2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 23.1* ​ Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24.1* ​ Power of Attorney (included on the Signatures page of this Annual Report on Form 10-K). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 75 Table of Contents 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32.1** ​ Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
Item 5.02 ​ 5/12/2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 23.1* ​ Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 24.1* ​ Power of Attorney (included on the Signatures page of this Annual Report on Form 10-K). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 72 Table of Contents 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32.1** ​ Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
Not provided. ​ 77 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Chandler, Arizona, on March 2, 2023. ​ Everspin Technologies, Inc. ​ ​ ​ ​ By: /s/ Sanjeev Aggarwal ​ ​ Sanjeev Aggarwal ​ ​ Chief Executive Officer ​ ​ (Principal Executive Officer ) ​ ​ ​ ​ ​ ​ ​ By: /s/ Anuj Aggarwal ​ ​ Anuj Aggarwal ​ ​ Chief Financial Officer ​ ​ (Principal Financial and Accounting Officer) ​ ​ 78 Table of Contents KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Sanjeev Aggarwal and Anuj Aggarwal, and each of them, as his true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Not provided. ​ 74 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Chandler, Arizona, on February 29, 2024. ​ Everspin Technologies, Inc. ​ ​ ​ ​ By: /s/ Sanjeev Aggarwal ​ ​ Sanjeev Aggarwal ​ ​ Chief Executive Officer ​ ​ (Principal Executive Officer ) ​ ​ ​ ​ ​ ​ ​ By: /s/ Anuj Aggarwal ​ ​ Anuj Aggarwal ​ ​ Chief Financial Officer ​ ​ (Principal Financial and Accounting Officer) ​ ​ 75 Table of Contents KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Sanjeev Aggarwal and Anuj Aggarwal, and each of them, as his true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. ​ ​ ​ ​ ​ Signature Title Date ​ ​ ​ ​ ​ /s/ Sanjeev Aggarwal ​ Chief Executive Officer and Director ​ March 2, 2023 Sanjeev Aggarwal ​ (Principal Executive Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Anuj Aggarwal ​ Chief Financial Officer ​ March 2, 2023 Anuj Aggarwal ​ (Principal Financial and Accounting Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Darin G.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. ​ ​ ​ ​ ​ Signature Title Date ​ ​ ​ ​ ​ /s/ Sanjeev Aggarwal ​ Chief Executive Officer and Director ​ February 29, 2024 Sanjeev Aggarwal ​ (Principal Executive Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Anuj Aggarwal ​ Chief Financial Officer ​ February 29, 2024 Anuj Aggarwal ​ (Principal Financial and Accounting Officer) ​ ​ ​ ​ ​ ​ ​ /s/ Darin G.
Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. + Confidential treatment has been granted for certain portions of this exhibit. ++ Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed. † Indicates a management contract or compensatory plan. 76 Table of Contents (b) We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the Exhibit Index immediately above.
Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. + Confidential treatment has been granted for certain portions of this exhibit. ++ Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed. 73 Table of Contents † Indicates a management contract or compensatory plan.
Billerbeck ​ Chairman of the Board ​ March 2, 2023 Darin G. Billerbeck ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Lawrence G. Finch ​ Director ​ March 2, 2023 Lawrence G.
Billerbeck ​ Chairman of the Board ​ February 29, 2024 Darin G. Billerbeck ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Lawrence G. Finch ​ Director ​ February 29, 2024 Lawrence G.
Finch ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Geoff Ribar ​ Director ​ March 2, 2023 Geoff Ribar ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Tara Long ​ Director ​ March 2, 2023 Tara Long ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Glen Hawk ​ Director ​ March 2, 2023 Glen Hawk ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 79
Finch ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Geoff Ribar ​ Director ​ February 29, 2024 Geoff Ribar ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Tara Long ​ Director ​ February 29, 2024 Tara Long ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Glen Hawk ​ Director ​ February 29, 2024 Glen Hawk ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Douglas Mitchell ​ Director ​ February 29, 2024 Douglas Mitchell ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 76
(c) See Item 15(a)2 above. Item 16. Form 10-K Summary .
(b) We have filed or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the Exhibit Index immediately above. (c) See Item 15(a)2 above. Item 16. Form 10-K Summary .

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee “Risk Factors” in Part II, Item 1A of this report for additional risks we face due to the COVID-19 pandemic. ​ Results of Operations Below are factors we want to highlight for understanding our 2022 annual results and year over year comparison with proper historical perspective: ● 2022 represented a year of broad semiconductor supply chain challenges driven by factors including the COVID-19 pandemic and international trade conflicts, which significantly impacted our results. ● Our relationships with our foundry partners and assembly and test partners contributed significantly to our ability to secure more capacity and support the growth of product revenue in 2022 compared to 2021. ● Our manufacturing efficiency and yields improved throughout 2022 resulting in significantly higher product margins compared to 2021. 32 Table of Contents The following table sets forth our results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2022 2021 2022 2021 ​ ​ ​ (In thousands) ​ (As a percentage of revenue) ​ Product sales ​ $ 55,032 ​ $ 43,931 ​ ​ 92 % ​ 80 % Licensing, royalty, patent, and other revenue ​ 4,953 ​ 11,215 ​ 8 ​ 20 ​ Total revenue ​ 59,985 ​ 55,146 ​ 100 ​ 100 ​ Cost of product sales ​ ​ 25,112 ​ ​ 21,045 ​ ​ 42 ​ ​ 38 ​ Cost of licensing, royalty, patent, and other revenue ​ ​ 928 ​ ​ 1,029 ​ ​ 2 ​ ​ 2 ​ Total cost of sales ​ 26,040 ​ 22,074 ​ 43 ​ 40 ​ Gross profit ​ 33,945 ​ 33,072 ​ 57 ​ 60 ​ Operating expenses: ​ ​ ​ ​ ​ Research and development ​ 11,108 ​ 12,628 ​ 19 ​ 23 ​ General and administrative ​ 11,741 ​ 10,949 ​ 20 ​ 20 ​ Sales and marketing ​ 4,869 ​ 4,460 ​ 8 ​ 8 ​ Total operating expenses ​ 27,718 ​ 28,037 ​ 47 ​ 51 ​ Income from operations ​ 6,227 ​ 5,035 ​ 10 ​ 9 ​ Interest expense ​ (274) ​ (547) ​ — ​ (1) ​ Other income (expense), net ​ 190 ​ (141) ​ — ​ — ​ Net income before income taxes ​ 6,143 ​ 4,347 ​ 10 ​ 8 ​ Income tax expense ​ (14) ​ (4) ​ — ​ — ​ Net income and comprehensive income ​ $ 6,129 ​ $ 4,343 ​ ​ 10 % ​ 8 % ​ ​ Comparison of the Years Ended December 31, 2022 and 2021 Revenue We generated 85% and 66% of our revenue from products sold through distributors for the years ended December 31, 2022 and 2021, respectively.
Biggest changeThe following table sets forth our results of operations for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 2022 2023 2022 ​ ​ ​ (In thousands) ​ (As a percentage of revenue) ​ Product sales ​ $ 53,123 ​ $ 55,032 ​ ​ 83 % ​ 92 % Licensing, royalty, patent, and other revenue ​ 10,642 ​ 4,953 ​ 17 ​ 8 ​ Total revenue ​ 63,765 ​ 59,985 ​ 100 ​ 100 ​ Cost of product sales ​ ​ 24,693 ​ ​ 25,112 ​ ​ 39 ​ ​ 42 ​ Cost of licensing, royalty, patent, and other revenue ​ ​ 1,827 ​ ​ 928 ​ ​ 3 ​ ​ 2 ​ Total cost of sales ​ 26,520 ​ 26,040 ​ 42 ​ 43 ​ Gross profit ​ 37,245 ​ 33,945 ​ 58 ​ 57 ​ Operating expenses: ​ ​ ​ ​ ​ Research and development ​ 11,776 ​ 11,108 ​ 19 ​ 19 ​ General and administrative ​ 14,296 ​ 11,741 ​ 22 ​ 20 ​ Sales and marketing ​ 5,288 ​ 4,869 ​ 8 ​ 8 ​ Total operating expenses ​ 31,360 ​ 27,718 ​ 49 ​ 47 ​ Income from operations ​ 5,885 ​ 6,227 ​ 9 ​ 10 ​ Interest expense ​ (63) ​ (274) ​ — ​ — ​ Other income, net ​ 3,214 ​ 190 ​ 5 ​ — ​ Net income before income taxes ​ 9,036 ​ 6,143 ​ 14 ​ 10 ​ Income tax benefit (expense) ​ 16 ​ (14) ​ — ​ — ​ Net income and comprehensive income ​ $ 9,052 ​ $ 6,129 ​ ​ 14 % ​ 10 % ​ ​ Comparison of the Years Ended December 31, 2023 and 2022 Revenue We generated 78% and 85% of our revenue from products sold through distributors for the years ended December 31, 2023 and 2022, respectively.
To continue to grow our revenue, we must continue to achieve design wins for our MRAM products. We consider a design win to occur when an OEM or contract manufacturer notifies us that it has qualified one of our products as a component in a product or system for production.
Design wins . To continue to grow our revenue, we must continue to achieve design wins for our MRAM products. We consider a design win to occur when an OEM or contract manufacturer notifies us that it has qualified one of our products as a component in a product or system for production.
The 2019 Term Loan matures on June 1, 2023. ​ In conjunction with entering into the 2019 Credit Facility, on August 5, 2019, we and SVB amended and restated the warrant issued to SVB in connection with the first amendment to the 2017 Credit Facility, which was a warrant to purchase 9,375 shares of our common stock at an exercise price of $8.91 per share, to add an option by SVB to put the warrant back to us for $50,000 upon expiration or a liquidity event, to be prorated if SVB exercises a portion of the warrant.
The 2019 Term Loan was to mature on June 1, 2023. ​ In conjunction with entering into the 2019 Credit Facility, on August 5, 2019, we and SVB amended and restated the warrant issued to SVB in connection with the first amendment to the 2017 Credit Facility, which was a warrant to purchase 9,375 shares of our common stock at an exercise price of $8.91 per share, to add an option by SVB to put the warrant back to us for $50,000 upon expiration or a liquidity event, to be prorated if SVB exercises a portion of the warrant.
GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.
We are required to comply with certain covenants under the 2019 Credit Facility, including requirements to maintain a minimum cash balance and availability under the Line of Credit, and restrictions on certain actions without the consent of the lender, such as limitations on our ability to engage in mergers or acquisitions, sell assets, incur indebtedness, or grant liens or negative pledges on our assets, make loans or make other investments.
We were required to comply with certain covenants under the 2019 Credit Facility, including requirements to maintain a minimum cash balance and availability under the Line of Credit, and restrictions on certain actions without the consent of the lender, such as limitations on our ability to engage in mergers or acquisitions, sell assets, incur indebtedness, or grant liens or negative pledges on our assets, make loans or make other investments.
The 2019 Credit Facility contains a material adverse effect clause which provides that an event of default will occur if, among other triggers, an event occurs that could reasonably be expected to result in a material adverse effect on our business, operations, or condition, or on our ability to perform our obligations under the 2019 Term Loan.
The 2019 Credit Facility contained a material adverse effect clause which provides that an event of default will occur if, among other triggers, an event occurs that could reasonably be expected to result in a material adverse effect on our business, operations, or condition, or on our ability to perform our obligations under the 2019 Term Loan.
The additional payment, which is accounted for as a debt discount, is being accreted using the effective interest method. The 2019 Term Loan has a prepayment fee equal to 2% of the total commitment, which is due only if the 2019 Term Loan is prepaid prior to the scheduled maturity date for any reason.
The additional payment, which is accounted for as a debt discount, was being accreted using the effective interest method. The 2019 Term Loan had a prepayment fee equal to 2% of the total commitment, which was due only if the 2019 Term Loan was prepaid prior to the scheduled maturity date for any reason.
The Line of Credit also provides for a termination fee equal to 1% of the maximum availability under the Line of Credit, which is due in case of a termination of the Line of Credit prior to the scheduled maturity date, and an unused facility fee equal to 0.125% per annum of the average unused portion of the Line of Credit, which is expensed as incurred.
The Line of Credit also provided for a termination fee equal to 1% of the maximum availability under the Line of Credit, which was due in case of a termination of the Line of Credit prior to the scheduled maturity date, and an unused facility fee equal to 0.125% per annum of the average unused portion of the Line of Credit, which is expensed as incurred.
From time to time, we may provide distributors with price adjustments subsequent to the delivery of product to them and such amounts are dependent on the end customer and product sales price. Price adjustments can be based on a 38 Table of Contents variety of factors, including customer, product, quantity, geography, and competitive differentiation.
From time to time, we may provide distributors with price adjustments subsequent to the delivery of product to them and such amounts are dependent on the end customer and product sales price. Price adjustments can be based on a variety of factors, including customer, product, quantity, geography, and competitive differentiation.
We maintain a direct selling relationship, for strategic purposes, with several key customer accounts. We have organized our sales team and representatives into three primary regions: Asia-Pacific (APAC); North America; and Europe, Middle East and Africa (EMEA).
We maintain a direct selling relationship, for strategic purposes, with several key customer accounts. We have organized our sales team and representatives into three primary regions: Asia-Pacific (APAC); North America; and 31 Table of Contents Europe, Middle East and Africa (EMEA).
Cash Flows From Financing Activities During the year ended December 31, 2022, cash used in financing activities was $1.5 million, which primarily consisted of $2.4 million in payments on long-term debt offset by $0.9 million in proceeds from stock option exercises and purchases of shares under our employee stock purchase plan. 36 Table of Contents During the year ended December 31, 2021, cash used in financing activities was $1.5 million, which primarily consisted of $3.4 million in payments on long-term debt offset by $1.9 million in proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.
During the year ended December 31, 2022, cash used in financing activities was $1.5 million, which primarily consisted of $2.4 million in payments on long-term debt offset by $0.9 million in proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.
There were no patent sales during the year ended December 31, 2022.
There were no patent sales during the year ended December 31, 2023.
The amended Line of Credit allows for a maximum draw of $5.0 million, subject to a formula borrowing base, has a two-year term and bears interest at a floating rate equal to the Wall Street Journal (WSJ) prime rate plus 1.5%, per annum, subject to a floor of 4.75%. As of December 31, 2022, the interest rate was 9.00%.
The amended Line of Credit allowed for a maximum draw of $5.0 million, subject to a formula borrowing base, has a two-year term and bears interest at a floating rate equal to the Wall Street Journal (WSJ) prime rate plus 1.5%, per annum, subject to a floor of 4.75%.
Sales and marketing expenses increased by $0.4 million, or 9.2%, from $4.5 million during the year ended December 31, 2021, to $4.9 million during the year ended December 31, 2022. The increase was primarily due to an increase in variable compensation costs.
Sales and marketing expenses increased by $0.4 million, or 8.6%, from $4.9 million during the year ended December 31, 2022, to $5.3 million during the year ended December 31, 2023. The increase was primarily due to an increase in variable compensation costs and contract labor.
The warrant expires on July 6, 2023. The warrant is classified as a liability and recorded at fair value within other liabilities in our balance sheet. Due to the put right, the warrant is subject to fair value remeasurement at each subsequent reporting date until the exercise or expiration of the warrant.
The warrants were set to expire on July 6, 2023. The warrant was classified as a liability and recorded at fair 35 Table of Contents value within other liabilities in our balance sheet. Due to the put right, the warrant was subject to fair value remeasurement at each subsequent reporting date until the exercise or expiration of the warrant.
During the year ended December 31, 2021, cash provided by operating activities was $9.4 million, which primarily consisted of net income of $4.3 million, adjusted by non-cash charges of $5.0 million and a change of $4,000 in our net operating assets and liabilities.
During the year ended December 31, 2022, cash provided by operating activities was $9.5 million, which primarily consisted of net income of $6.1 million, adjusted by non-cash charges of $5.3 million and a decrease of $1.9 million in our net operating assets and liabilities.
Personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation, are among the most significant component of each of our operating expense categories. 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ 2022 2021 Amount % ​ ​ (Dollars in thousands) Research and development ​ $ 11,108 ​ $ 12,628 ​ $ (1,520) (12.0) % Research and development as a % of revenue ​ ​ 19 % ​ 23 % ​ ​ ​ ​ ​ ​ Research and Development Expenses.
Personnel-related expenses, including salaries, benefits, bonuses, and stock-based compensation, are among the most significant component of each of our operating expense categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2023 2022 Amount % ​ ​ (Dollars in thousands) Research and development ​ $ 11,776 ​ $ 11,108 ​ $ 668 6.0 % Research and development as a % of revenue ​ ​ 19 % ​ 19 % ​ ​ ​ ​ ​ ​ Research and Development Expenses.
As of December 31, 2022, the interest rate was 6.75%. A final payment of 7% of the original principal amount of the 2019 Term Loan must be made when the 2019 Term Loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or otherwise.
A final payment of 7% of the original principal amount of the 2019 Term Loan was to be made when the 2019 Term Loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or otherwise.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ 2022 2021 ​ ​ (In thousands) Cash provided by operating activities ​ $ 9,493 ​ $ 9,359 Cash used in investing activities ​ (2,586) ​ (1,030) Cash used in financing activities ​ (1,521) ​ (1,519) ​ Cash Flows From Operating Activities During the year ended December 31, 2022, cash provided by operating activities was $9.5 million, which primarily consisted of net income of $6.1 million, adjusted by non-cash charges of $5.3 million and a decrease of $1.9 million in our net operating assets and liabilities.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 ​ ​ (In thousands) Cash provided by operating activities ​ $ 13,128 ​ $ 9,493 Cash used in investing activities ​ (1,385) ​ (2,586) Cash used in financing activities ​ (1,592) ​ (1,521) ​ Cash Flows From Operating Activities During the year ended December 31, 2023, cash provided by operating activities was $13.1 million, which consisted of net income of $9.1 million, non-cash charges of $6.4 million and changes in net operating assets and liabilities of $2.3 million.
Research and development expenses decreased by $1.5 million, or 12.0%, from $12.6 million during the year ended December 31, 2021, to $11.1 million during the year ended December 31, 2022.
Research and development expenses increased by $0.7 million, or 6.0%, from $11.1 million during the year ended December 31, 2022, to $11.8 million during the year ended December 31, 2023.
We also entered into a contractual agreement with a customer during the year ended December 31, 2021 for the development of a RAD-Hard product, consisting of a technology license, a design license agreement and development contract and a separate contractual agreement with a customer during the year ended December 31, 2022 for the development of a strategic radiation hardened field programmable gate array product, consisting of a technology license to provide design and development services under the contractual agreement.
We also have entered into multiple contractual agreements with customers for the development of a RAD-Hard product, consisting of a technology license, a design license agreement and development contract and for the development of a strategic radiation hardened field programmable gate array product, consisting of a technology license to provide design and development services under the contractual agreements.
General and administrative expenses increased by $0.8 million, or 7.2%, from $10.9 million during the year ended December 31, 2021, to $11.7 million during the year ended December 31, 2022.
General and administrative expenses increased by $2.6 million, or 21.8%, from $11.7 million during the year ended December 31, 2022, to $14.3 million during the year ended December 31, 2023.
We recognize sales of products in discrete unit form at a point in time, revenue related to licensing agreements when we have delivered control of the technology, revenue related to royalty agreements in the period in which sales generated from products sold using our technology occurs, sales of backend foundry services over time, and design services to third parties either at a point in time or over time, depending on the nature of the services.
We recognize sales of products in discrete unit form at a point in time, revenue related to licensing agreements when we have delivered control of the technology, revenue related to royalty agreements in the period in which sales generated from products sold using our technology occurs, sales of backend foundry services over time, and design services to third parties either at a point in time or over time, depending on the nature of the services. 36 Table of Contents Product Revenue For products sold in their discrete form, we either sell our products directly to OEMs, ODMs, contract manufacturers (CMs), or through a network of distributors, who in turn sell to those customers.
Under these covenants, we are prohibited from paying cash dividends with respect to our capital stock. We were in compliance with all covenants at December 31, 2022.
Under these covenants, we were prohibited from paying cash dividends with respect to our capital stock.
Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2022 2021 Amount % ​ ​ (Dollars in thousands) Interest expense ​ $ 274 ​ $ 547 ​ $ (273) (49.9) % ​ Interest expense decreased by $0.3 million, or 49.9%, from $0.5 million during the year ended December 31, 2021, to $0.3 million during the year ended December 31, 2022.
Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2023 2022 Amount % ​ ​ (Dollars in thousands) Interest expense ​ $ 63 ​ $ 274 ​ $ (211) (77.0) % ​ Interest expense decreased by $0.2 million, or 77.0%, from $0.3 million during the year ended December 31, 2022, to $0.1 million during the year ended December 31, 2023.
We believe our cash and cash equivalents, coupled with the amount available under our credit facility and our anticipated growth and sales levels are sufficient to meet our anticipated capital requirements in the next 12 months.
We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the next 12 months.
Accordingly, we determined the licenses were not distinct within the context of the contract and combined the license with other performance obligations. ​ As a result, we are recognizing revenue related to the performance obligations over time using the input method based on costs incurred to date relative to the total expected costs of the contract over the performance obligation period. ​ 39 Table of Contents Patents In an effort to monetize on our intellectual property, we may sell patents to customers.
Accordingly, we determined the 37 Table of Contents licenses were not distinct within the context of the contract and combined the license with other performance obligations. ​ As a result, we are recognizing revenue related to the performance obligations over time using the input method based on costs incurred to date relative to the total expected costs of the contract over the performance obligation period. ​ Inventory We record inventories at the lower of cost, determined on a first-in, first-out basis or net realizable value.
Our revenue by region for the periods indicated was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 APAC ​ $ 35,631 ​ $ 32,327 North America ​ ​ 14,533 ​ ​ 15,813 EMEA ​ ​ 9,821 ​ ​ 7,006 Total revenue ​ $ 59,985 ​ $ 55,146 33 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ ​ 2022 2021 Amount % ​ ​ ​ (Dollars in thousands) ​ Product sales ​ $ 55,032 ​ $ 43,931 ​ $ 11,101 25.3 % Licensing, royalty, patent, and other revenue ​ 4,953 ​ 11,215 ​ (6,262) (55.8) % Total revenue ​ $ 59,985 ​ $ 55,146 ​ $ 4,839 8.8 % ​ Total revenue increased by $4.9 million, or 8.8%, from $55.1 million during the year ended December 31, 2021, to $60.0 million during the year ended December 31, 2022.
Our revenue by region for the periods indicated was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 APAC ​ $ 33,096 ​ $ 35,631 North America ​ ​ 15,922 ​ ​ 14,533 EMEA ​ ​ 14,747 ​ ​ 9,821 Total revenue ​ $ 63,765 ​ $ 59,985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ ​ 2023 2022 Amount % ​ ​ ​ (Dollars in thousands) ​ Product sales ​ $ 53,123 ​ $ 55,032 ​ $ (1,909) (3.5) % Licensing, royalty, patent, and other revenue ​ 10,642 ​ 4,953 ​ 5,689 114.9 % Total revenue ​ $ 63,765 ​ $ 59,985 ​ $ 3,780 6.3 % ​ Total revenue increased by $3.8 million, or 6.3%, from $60.0 million during the year ended December 31, 2022, to $63.8 million during the year ended December 31, 2023.
Cost of Sales and Gross Margin ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2022 2021 Amount % ​ ​ (Dollars in thousands) Cost of sales ​ $ 25,112 ​ $ 21,045 ​ $ 4,067 19.3 % Cost of licensing, royalty, patent, and other revenue ​ ​ 928 ​ ​ 1,029 ​ ​ (101) ​ (9.8) % Total cost of sales ​ $ 26,040 ​ $ 22,074 ​ $ 3,966 ​ 18.0 % Gross margin ​ ​ 56.6 % 60.0 % ​ * ​ * ​ ​ Cost of product sales increased by $4.1 million, or 19.3%, from $21.0 million during the year ended December 31, 2021, to $25.1 million during the year ended December 31, 2022.
Cost of Sales and Gross Margin ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2023 2022 Amount % ​ ​ (Dollars in thousands) Cost of sales ​ $ 24,693 ​ $ 25,112 ​ $ (419) (1.7) % Cost of licensing, royalty, patent, and other revenue ​ ​ 1,827 ​ ​ 928 ​ ​ 899 ​ 96.9 % Total cost of sales ​ $ 26,520 ​ $ 26,040 ​ $ 480 ​ 1.8 % Gross margin ​ ​ 58.4 % 56.6 % ​ * ​ * ​ ​ Cost of product sales decreased by $0.4 million, or 1.7%, from $25.1 million during the year ended December 31, 2022, to $24.7 million during the year ended December 31, 2023.
The increase was primarily due to increases in expenses related to profit sharing and professional service fees. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ 2022 2021 Amount % ​ ​ (Dollars in thousands) Sales and marketing ​ $ 4,869 ​ $ 4,460 ​ $ 409 9.2 % Sales and marketing as a % of revenue ​ ​ 8 % ​ 8 % ​ ​ ​ ​ ​ ​ Sales and Marketing Expenses.
The increase was primarily due to increases in professional service costs, share-based compensation, and depreciation. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2023 2022 Amount % ​ ​ (Dollars in thousands) Sales and marketing ​ $ 5,288 ​ $ 4,869 ​ $ 419 8.6 % Sales and marketing as a % of revenue ​ ​ 8 % ​ 8 % ​ ​ ​ ​ ​ ​ Sales and Marketing Expenses.
The non-cash charges primarily consisted of stock-based compensation of $3.2 million, depreciation and amortization of $1.5 million, and non-cash interest expense of $0.3 million.
The non-cash charges primarily consisted of stock-based compensation of $5.0 million, depreciation and amortization of $1.2 million, and a loss on prepayment and termination of our 2019 credit facility of $0.2 million.
The increase was due to an increase in product sales and price increases from suppliers, partially offset by increased yields on toggle products. Cost of licensing, royalty, patent, and other revenue decreased by $0.1 million, or 9.8%, from $1.0 million during the year ended December 31, 2021, to $0.9 million during the year ended December 31, 2022.
The decrease was primarily due to a reduction in product sales compared to the prior year. Cost of licensing, royalty, patent, and other revenue increased by $0.9 million, or 96.9%, from $0.9 million during the year ended December 31, 2022, to $1.8 million during the year ended December 31, 2023.
The following table presents a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Adjusted EBITDA reconciliation: ​ ​ Net income ​ $ 6,129 ​ $ 4,343 Depreciation and amortization ​ 982 ​ 1,455 Stock-based compensation expense ​ 4,408 ​ 3,227 Interest expense ​ 274 ​ 547 Income tax expense ​ ​ 14 ​ ​ 4 Adjusted EBITDA ​ $ 11,807 ​ $ 9,576 ​ Design wins .
The following table presents a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Adjusted EBITDA reconciliation: ​ ​ Net income ​ $ 9,052 ​ $ 6,129 Depreciation and amortization ​ 1,205 ​ 982 Stock-based compensation expense ​ 5,005 ​ 4,408 Interest expense ​ 63 ​ 274 Income tax (benefit) expense ​ ​ (16) ​ ​ 14 Adjusted EBITDA ​ $ 15,309 ​ $ 11,807 ​ Our Adjusted EBITDA for the year ended December 31, 2023 includes a one-time employee retention tax credit received of $2.0 million in the second quarter of 2023.
New design wins in each successive quarter of 2022 were 61, 49, 48, and 52, respectively, compared to 40, 37, 40, and 64 in each successive quarter of 2021, respectively. ​ Effect of the COVID-19 Pandemic on our Business The COVID-19 outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, “shelter-in-place,” “stay-at-home,” total lock-down orders, business limitations or shutdowns and similar orders.
New design wins in each successive quarter of 2023 were 66, 62, 37, and 52, respectively, compared to 61, 49, 48, and 52 in each successive quarter of 2022, respectively. ​ Effect of COVID-19 on our Business The COVID-19 outbreak resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19.
Any resulting change in the fair value of the warrant will be recorded as other (expense) income, net in our statements of income and comprehensive income.
Any resulting change in the fair value of the warrant was to be recorded as other income, net, in our statements of income and comprehensive income. The other income recognized for the years ended 2023 and 2022 related to the change in fair value of the warrant has been minimal and immaterial to the financial statements.
As of December 31, 2022, we do not believe that it is probable that the clause will be triggered within the next 12 months. ​ The amortization of the debt issuance costs and accretion of the debt discount is included in interest expense within the statement of income and comprehensive income and included in non-cash interest expense within the statements of cash flows. ​ For additional information about the 2019 Credit Facility, see Note 6 in the accompanying Notes to Financial Statements in Part II, Item 8 of this Form 10-K. ​ Critical Accounting Policies and Significant Judgements and Estimates ​ Our financial statements have been prepared in accordance with U.S.
For additional information about the 2019 Credit Facility, see Note 6 in the accompanying Notes to Financial Statements in Part II, Item 8 of this Form 10-K. ​ Critical Accounting Policies and Significant Judgements and Estimates ​ Our financial statements have been prepared in accordance with U.S. GAAP.
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 the COVID-19 pandemic on our business, results of operations and financial condition will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the emergence and severity of its variants, the actions to contain the virus or treat its impact, such as the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to use them, general economic factors, such as increased inflation, supply chain restraints, labor supply issues, and how quickly and to what extent normal economic and operating conditions can resume.
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.
The amended 2019 Term Loan has a term of 46 months, and a 16-month interest-only period followed by 30 months of equal principal payments of $200,000 per month, plus accrued interest. The 2019 Term Loan bears interest at a floating rate equal to the WSJ prime rate minus 0.75%, subject to a floor of 3.75%.
The Line of Credit was set to mature on August 5, 2023. The amended 2019 Term Loan provided for a $6.0 million term loan. The amended 2019 Term Loan had a term of 46 months, and a 16-month interest-only period followed by 30 months of equal principal payments of $200,000 per month, plus accrued interest.
The decrease was primarily due to higher expenses in 2021 relating to the development of our 28 nm product that started production in 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ 2022 2021 Amount % ​ ​ (Dollars in thousands) General and administrative ​ $ 11,741 ​ $ 10,949 ​ $ 792 7.2 % General and administrative as a % of revenue ​ ​ 20 % ​ 20 % ​ ​ ​ ​ ​ ​ General and Administrative Expenses.
The increase was primarily due to higher expenses relating to the development and enhancement of our new xSPI family of STT-MRAM products and increases in share-based compensation. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ 2023 2022 Amount % ​ ​ (Dollars in thousands) General and administrative ​ $ 14,296 ​ $ 11,741 ​ $ 2,555 21.8 % General and administrative as a % of revenue ​ ​ 22 % ​ 20 % ​ ​ ​ ​ ​ ​ General and Administrative Expenses.
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.
Overall, our business remained operational in the midst of COVID-19. The United States Government has declared that it was no longer treating COVID-19 as a pandemic. Since our business is 30 Table of Contents dependent on a global supply chain, we expect to continue to navigate the impact of COVID-19, particularly in some Asian countries.
The change in our net operating assets and liabilities was primarily due to an increase of $1.7 million of accrued liabilities and an increase in deferred revenue of $0.8 million related to timing of RAD-Hard licensing revenue recognition.
The change in our net operating assets and liabilities was primarily due to an increase in accounts receivable of $0.9 million due to timing of cash receipts for outstanding balances, an increase in inventory of $1.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of $0.4 million, an increase in other assets of $0.2 million, an increase in accounts payable of $0.5 million, an increase in accrued liabilities of $0.8 million, and a decrease in deferred revenue of $0.5 million.
Cash Flows From Investing Activities Cash used in investing activities during the years ended December 31, 2022 and 2021 was $2.6 million and $1.0 million, respectively, which consisted of capital expenditures primarily for the purchase of manufacturing equipment and purchased software.
During the year ended December 31, 2022, cash used in investing activities was $2.6 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment and purchased software offset by a nominal amount in proceeds received on the sale of property and equipment. ​ Cash Flows From Financing Activities During the year ended December 31, 2023, cash used in financing activities was $1.6 million, which primarily consisted of $2.8 million of payments to pay off our 2019 Credit Facility offset by $1.2 million in proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.
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. Licensing, royalty, patent, and other revenue decreased by $6.3 million, from $11.2 million during the year ended December 31, 2021 to $5.0 million during the year ended December 31, 2022.
Licensing, royalty, patent, and other revenue is a highly variable revenue item characterized by a small number of transactions annually with revenue based on size and terms of each transaction. We estimate royalty revenue earned throughout the year, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year.
Other Income (Expense), Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ ​ 2022 2021 Amount % ​ ​ ​ (Dollars in thousands) Other income (expense), net ​ $ 190 ​ $ (141) ​ $ 331 (234.8) % ​ Other income (expense), net changed by $0.3 million, or 234.8%, from $0.1 million of expense during the year ended December 31, 2021 to $0.2 million of income during the year ended December 31, 2022.
The decrease was due to having no outstanding balance under our 2019 Credit Facility as we paid off the outstanding balance in full in March 2023, resulting in no interest incurred during the remainder of 2023 after the outstanding balance was paid in full. 33 Table of Contents Other Income, Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ Change ​ ​ 2023 2022 Amount % ​ ​ ​ (Dollars in thousands) Other income, net ​ $ 3,214 ​ $ 190 ​ $ 3,024 1,591.6 % ​ Other income, net changed by $3.0 million, from $0.2 million of expense during the year ended December 31, 2022, to $3.2 million of income during the year ended December 31, 2023.
These were offset by an increase of $0.6 million in accounts payable due to timing of invoice due dates and a $0.2 million increase in lease liabilities.
These were offset by an increase of $0.6 million in accounts payable due to timing of invoice due dates and a $0.2 million increase in lease liabilities. 34 Table of Contents Cash Flows From Investing Activities During the year ended December 31, 2023, cash used in investing activities was $1.4 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment offset by a nominal amount in proceeds received on the sale of property and equipment.
The decrease was due primarily to a decline in licensing costs. Our gross margin decreased from 60.0% during the year ended December 31, 2021, to 56.6% during the year ended December 31, 2022. Our gross margin decreased due to price increases from suppliers and lower licensing, royalty, patent, and other revenue.
Licensing, royalty, patent, and other revenue increased by $5.7 million, from $5.0 million during the year ended December 31, 2022, to $10.6 million during the year ended December 31, 2023.
Operating Expenses Our operating expenses consist of research and development, general and administrative and sales and marketing expenses.
Our gross margin increased by offsetting increased pricing from suppliers with increased yields on our toggle products and increased licensing revenue to offset the decrease in product sales. Operating Expenses Our operating expenses consist of research and development, general and administrative and sales and marketing expenses.
As of December 31, 2022, the effective interest rate under the 2019 Term Loan was 6.94% and the outstanding balance was $1.6 million.
In March 2023, the 2019 Credit Facility, consisting of our Term Loan and Line of Credit, was paid in full, and there was no outstanding balance as of December 31, 2023.
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More recently, new variants of COVID-19, such as the Omicron variant and its subvariants, that are significantly more contagious than previous strains have emerged. The spread of these new strains has caused many government authorities and businesses to reimplement the aforementioned measures to try to reduce the spread that had become less prevalent.
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We will continue to monitor the situation and take additional actions as warranted.
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While some of these restrictions have been lifted, the lingering impact of the COVID pandemic continues to create significant volatility throughout the 31 Table of Contents global economy, including supply chain constraints, labor supply issues and higher inflation.
Added
See “Risk Factors” in Part II, Item 1A of this report for additional risks we face due to COVID-19. ​ Results of Operations Below are factors we want to highlight for understanding our 2023 annual results and year over year comparison with proper historical perspective: ● The first half of 2023 was impacted by supply chain challenges that were overcome in the second half of the year as the industry reverted to pre-COVID-19 seasonal patterns. ● Our commitment to improving our manufacturing excellence enabled us to drive yield improvements within our internal and external foundries network to sustain and improve existing product margins.
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Accordingly, it is unclear at this point the full impact COVID-19 and its variants will have on the global economy and on our company. ​ Overall, our business remained operational in the midst of the COVID-19 pandemic.
Added
The increase was primarily driven by the increase in licensing, royalty, patent, and other revenue of $5.7 million due to revenue recognized under our RAD-Hard projects.
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However, as a result of the ongoing related responses from government authorities, our business, results of operations and financial condition have been, and continue to be, adversely impacted.
Added
This was offset by a decline in product sales due to volume shifts in customer demand of $1.9 million or 3.5%, from $55.0 million during the year ended December 31, 2022, to $53.1 million during the year ended December 31, 2023.
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For example, we have experienced electronics supply chain and demand disruptions from extended factory shutdowns, particularly in some Asian countries, which created unusual order patterns, and subsequently slowed Toggle MRAM demand, particularly from our industrial customers. We continue to see an impact as reflected in reduced demand from some customers and distributors.
Added
The increase was primarily due to an increase in licensing revenues of $5.5 million from our contractual agreements with customers for the development of RAD-Hard products, along with an increase of $0.7 million of other revenue related to a contractual arrangement with a customer for the development of reliability models for strategic radiation hardened toggle MRAM, offset in part by a decrease of $0.5 million in royalty revenue.
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While we are working closely with our manufacturing partners and suppliers to support demand for our products, the full impact on our demand from customers remains unknown.
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The increase was due to an increase in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects. 32 Table of Contents Our gross margin increased from 56.6% during the year ended December 31, 2022, to 58.4% during the year ended December 31, 2023.
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Management is thus planning for a broad range of possible demand outcomes in an effort to ensure the success of our business under a variety of end market conditions. ​ The emergence of potential new variants of COVID-19, and the prevalence of cases of infection globally adds additional uncertainty and could result in further impacts to our business and operations, including those discussed above and in “Risk Factors” in Part II, Item 1A of this report. ​ Recently, the United States Government declared that it was no longer treating COVID-19 as a pandemic.
Added
The increase was primarily due to the employee retention tax credit received during the second quarter of 2023 of $2.0 million, along with an increase in interest income earned on the money market cash account as a result of increased cash balances and increasing interest rates, offset by a loss on prepayment and termination of our 2019 Credit Facility.
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Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends.
Added
Liquidity and Capital Resources As of December 31, 2023, we had $36.9 million of cash and cash equivalents, compared to $26.8 million as of December 31, 2022. As of December 31, 2023, we have no outstanding debt as we paid off our 2019 Credit Facility in full in March 2023.
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Product sales increased by $11.1 million or 25.3%, from $43.9 million to $55.0 million. The increase was primarily driven by a higher volume of toggle units produced and sold, along with average sales price increases to offset supplier increases.
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The 2019 Term Loan incurred interest at a floating rate equal to the WSJ prime rate minus 0.75%, subject to a floor of 3.75%.
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The decrease was primarily due to the intellectual property monetization deal to sell five patents to a customer for a total contract value of $5.3 million in 2021, along with a decrease in license revenues from a contractual agreement with a customer for the development of a RAD-Hard product, consisting of a technology license, a design license agreement and development contract entered into during the year ended December 31, 2021.
Added
These warrants were extinguished as of December 31, 2023. ​ Collateral for the 2019 Credit Facility included all of our assets except for intellectual property.
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The decrease was due to lower outstanding balances under the credit facility during the year resulting in less interest incurred.
Added
We paid an early termination and prepayment fee of $170,000, which was recorded within other income, net, within the statements of income and comprehensive income for the year ended December 31, 2023. We were in compliance with all covenants throughout the 2019 Credit Facility payoff date in March 2023.
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The increase was primarily due to interest income earned on the money market cash account. 35 Table of Contents Liquidity and Capital Resources As of December 31, 2022, we had $26.8 million of cash and cash equivalents, compared to $21.4 million as of December 31, 2021.
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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.
Removed
These were offset by a decrease of $0.7 million in inventory, an increase of $0.5 million in prepaid expenses and other current assets, an increase of $0.6 million in accounts receivable due to increased sales volume and timing of cash receipts for outstanding balances, a decrease of $0.6 million in accounts payable due to the increased cash flow and increased efforts on timely payments, a decrease of $0.2 million in lease liabilities, and an increase of $11,000 in other assets.
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Currently, $4.0 million remains available under the Line of Credit, subject to borrowing base availability. As of December 31, 2022, the effective interest rate under the Line of Credit was 9.36% and the outstanding balance was $1.0 million. The Line of Credit was set to mature on August 5, 2022.
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The third amendment entered into on July 22, 2022, extended the maturity date of the Line of Credit to August 5, 2023. ​ The amended 2019 Term Loan provides for a $6.0 million term loan.
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The other (expense) income recognized for the years ended 2022 and 2021 related to the change in fair value of the warrant has been minimal and immaterial to the financial statements. ​ Additionally, in conjunction with entering into the first amendment to the 2019 Credit Facility, on July 15, 2020, we issued an additional warrant to SVB to purchase 21,500 shares of our common stock at an exercise price of $0.01 per share, which was to expire on July 15, 2025.
Removed
The warrant was classified as equity and was recorded as a debt discount that was amortized to interest expense using the effective interest method.
Removed
The fair value of the warrant was $152,000 on the date of issuance using the Black-Scholes option-pricing model. ​ 37 Table of Contents On July 22, 2021, SVB elected to exercise the warrant associated with the first amendment to the 2019 Credit Facility, which resulted in a net cashless exercise of the warrant and the issuance of 21,463 shares of our common stock. ​ Collateral for the 2019 Credit Facility includes all of our assets except for intellectual property.
Removed
Product Revenue For products sold in their discrete form, we either sell our products directly to OEMs, ODMs, contract manufacturers (CMs), or through a network of distributors, who in turn sell to those customers.
Removed
The performance obligations are satisfied at the point in time at which the customer obtains control of the patents.

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