Significant Agreements	9 Months Ended
Sep. 30, 2018
Significant Agreements
Significant Agreements	9. Significant Agreements GLOBALFOUNDRIES, Inc. Joint Development Agreement On October 17, 2014, the Company entered into a Joint Development Agreement (JDA) with GF, for the joint development of the Company’s Spin Transfer Torque MRAM (STT-MRAM) technology. The term of the agreement is the later of four years from the effective date or until the completion, termination or expiration of the last statement of work entered into pursuant to the JDA. The JDA also states that the specific terms and conditions for the production and supply of the developed STT-MRAM technology would be pursuant to a separate manufacturing agreement entered into between the parties. In October 2018, the Company entered into the Third Amendment to the JDA with GF (Note 11), which extended the term of the JDA until December 2019. Under the JDA, each party licenses its relevant intellectual property to the other party. For certain jointly developed works, the parties have agreed to follow an invention allocation procedure to determine ownership. In addition, GF possesses the exclusive right to manufacture the Company’s discrete and embedded STT-MRAM devices developed pursuant to the agreement until the earlier of three years after the qualification of the MRAM device for a particular technology node or four years after the completion of the relevant statement of work under which the device was developed. For the same exclusivity period associated with the relevant device, GF agreed not to license intellectual property developed in connection with the JDA to named competitors of the Company. Generally, unless otherwise specified in the agreement or a statement of work, the Company and GF share project costs, which do not include personnel or production qualification costs, equally under the JDA. If GF manufactures, sells or transfers to customers wafers containing production quantified STT-MRAM devices that utilize certain design information, GF will be required to pay the Company a royalty. The term of the agreement is four years and is extended until the completion of any development work, if later. The Company incurred project costs, recognized as research and development expense, of $1.6 million and $850,000 for the three months ended September 30, 2018 and 2017 respectively, and $5.9 million and $4.1 million for the nine months ended September 30, 2018 and 2017 respectively. The Company entered into a Statement of Work (SOW) and an Amendment to the SOW, under the JDA with GF effective August 2016 and June 2018, respectively. The Company was eligible to receive milestone payments from SOW and its Amendment for an aggregate of $1.6 million and $1.0 million, respectively. The Amendment was accounted for as a separate contract rather than a modification of the SOW, as the Company had completed its performance obligations under the SOW as of December 31, 2017. The Company recognized revenue from GF of $300,000 in the three months ended September 30, 2018. There was no revenue recognized from GF for the three months ended September 30, 2017. The Company recognized revenue from GF of $800,000 and $1.2 million in the nine months ended September 30, 2018 and 2017, respectively. On October 21, 2014, GF participated, along with other investors, in the Company’s Series B redeemable convertible preferred stock financing and purchased 192,307 shares at $26.00 per share. Contemporaneously, the Company sold 461,538 shares of its common stock to GF at a discounted price of $0.00026 per share. The common shares vest upon the achievement of a goal as set forth in the Statement of Work #1 (the SOW) under the JDA. The unvested common shares are subject to repurchase by the Company, if the JDA is terminated for any reason, for a one-year period after such termination, at a price that is the lower of the original price paid by GF or the fair value of the Company’s common stock as of the date of repurchase. The Company has determined that the issuance of these shares of common stock to GF represents compensation for services to be provided under the JDA. Accordingly, the shares are accounted for similar to a stock award granted to a non-employee of the Company and are remeasured to their fair value as they vest. A total of 211,538 shares of common stock became vested on August 21, 2016, the designated Initial Measurement Date. The remaining shares vest on a monthly basis thereafter. Subsequent to the Initial Measurement Date through September 30, 2018, an additional 211,538 shares of common stock became vested. As of September 30, 2018, there were 9,615 shares unvested that were subject to repurchase. The Company recognized non-cash compensation expense of $247,000 and $508,000 during the three months ended September 30, 2018 and 2017, respectively, and $709,000 and $1.2 million during the nine months ended September 30, 2018 and 2017, respectively, in research and development expense related to the vesting of the shares of common stock. The Company recognizes compensation expense based on the estimated fair value of the common stock at each reporting period, which was $7.68 and $7.50 per share as of September 30, 2018 and December 31, 2017, respectively. Silterra Malaysia Sdn. Bhd. Joint Collaboration Agreement In September 2018, the Company entered into a Joint Collaboration Agreement (JCA) with Silterra Malaysia Sdn. Bhd. (Silterra), and another third party. The JCA will create additional manufacturing capacity for the Company’s Toggle MRAM products. Initial production is expected to start in 2020. Under the JCA the Company will pay non-recurring engineering costs of $1.0 million. During the three and nine months ended September 30, 2018, the Company paid $0.5 million of JCA costs. License Agreement In March 2018, the Company entered into a global cross-license agreement with a customer pursuant to which the Company granted a worldwide, non-exclusive, non-transferable, irrevocable, royalty-bearing license under the Company’s patents to use, sell, import and export the Company’s products. Under the cross-license agreement, the Company received a non-refundable license fee and is entitled to quarterly royalty payments based upon low single digits of the average selling price of products covered under the license agreement. The license was transferred to the customer and the Company recognized the non-refundable license fee during the nine months ended September 30, 2018. The cross-license agreement will remain in effect until the licensed patents have expired, been abandoned, or ruled invalid.

9. Significant Agreements

GLOBALFOUNDRIES, Inc. Joint Development Agreement

On October 17, 2014, the Company entered into a Joint Development Agreement (JDA) with GF, for the joint development of the Company’s Spin Transfer Torque MRAM (STT-MRAM) technology. The term of the agreement is the later of four years from the effective date or until the completion, termination or expiration of the last statement of work entered into pursuant to the JDA. The JDA also states that the specific terms and conditions for the production and supply of the developed STT-MRAM technology would be pursuant to a separate manufacturing agreement entered into between the parties. In October 2018, the Company entered into the Third Amendment to the JDA with GF (Note 11), which extended the term of the JDA until December 2019.

Under the JDA, each party licenses its relevant intellectual property to the other party. For certain jointly developed works, the parties have agreed to follow an invention allocation procedure to determine ownership. In addition, GF possesses the exclusive right to manufacture the Company’s discrete and embedded STT-MRAM devices developed pursuant to the agreement until the earlier of three years after the qualification of the MRAM device for a particular technology node or four years after the completion of the relevant statement of work under which the device was developed. For the same exclusivity period associated with the relevant device, GF agreed not to license intellectual property developed in connection with the JDA to named competitors of the Company.

Generally, unless otherwise specified in the agreement or a statement of work, the Company and GF share project costs, which do not include personnel or production qualification costs, equally under the JDA. If GF manufactures, sells or transfers to customers wafers containing production quantified STT-MRAM devices that utilize certain design information, GF will be required to pay the Company a royalty. The term of the agreement is four years and is extended until the completion of any development work, if later.

The Company incurred project costs, recognized as research and development expense, of $1.6 million and $850,000 for the three months ended September 30, 2018 and 2017 respectively, and $5.9 million and $4.1 million for the nine months ended September 30, 2018 and 2017 respectively. The Company entered into a Statement of Work (SOW) and an Amendment to the SOW, under the JDA with GF effective August 2016 and June 2018, respectively. The Company was eligible to receive milestone payments from SOW and its Amendment for an aggregate of $1.6 million and $1.0 million, respectively. The Amendment was accounted for as a separate contract rather than a modification of the SOW, as the Company had completed its performance obligations under the SOW as of December 31, 2017. The Company recognized revenue from GF of $300,000 in the three months ended September 30, 2018. There was no revenue recognized from GF for the three months ended September 30, 2017. The Company recognized revenue from GF of $800,000 and $1.2 million in the nine months ended September 30, 2018 and 2017, respectively.

On October 21, 2014, GF participated, along with other investors, in the Company’s Series B redeemable convertible preferred stock financing and purchased 192,307 shares at $26.00 per share. Contemporaneously, the Company sold 461,538 shares of its common stock to GF at a discounted price of $0.00026 per share. The common shares vest upon the achievement of a goal as set forth in the Statement of Work #1 (the SOW) under the JDA. The unvested common shares are subject to repurchase by the Company, if the JDA is terminated for any reason, for a one-year period after such termination, at a price that is the lower of the original price paid by GF or the fair value of the Company’s common stock as of the date of repurchase. The Company has determined that the issuance of these shares of common stock to GF represents compensation for services to be provided under the JDA. Accordingly, the shares are accounted for similar to a stock award granted to a non-employee of the Company and are remeasured to their fair value as they vest. A total of 211,538 shares of common stock became vested on August 21, 2016, the designated Initial Measurement Date. The remaining shares vest on a monthly basis thereafter. Subsequent to the Initial Measurement Date through September 30, 2018, an additional 211,538 shares of common stock became vested. As of September 30, 2018, there were 9,615 shares unvested that were subject to repurchase.

The Company recognized non-cash compensation expense of $247,000 and $508,000 during the three months ended September 30, 2018 and 2017, respectively, and $709,000 and $1.2 million during the nine months ended September 30, 2018 and 2017, respectively, in research and development expense related to the vesting of the shares of common stock. The Company recognizes compensation expense based on the estimated fair value of the common stock at each reporting period, which was $7.68 and $7.50 per share as of September 30, 2018 and December 31, 2017, respectively.

Silterra Malaysia Sdn. Bhd. Joint Collaboration Agreement

In September 2018, the Company entered into a Joint Collaboration Agreement (JCA) with Silterra Malaysia Sdn. Bhd. (Silterra), and another third party. The JCA will create additional manufacturing capacity for the Company’s Toggle MRAM products. Initial production is expected to start in 2020. Under the JCA the Company will pay non-recurring engineering costs of $1.0 million. During the three and nine months ended September 30, 2018, the Company paid $0.5 million of JCA costs.

License Agreement

In March 2018, the Company entered into a global cross-license agreement with a customer pursuant to which the Company granted a worldwide, non-exclusive, non-transferable, irrevocable, royalty-bearing license under the Company’s patents to use, sell, import and export the Company’s products. Under the cross-license agreement, the Company received a non-refundable license fee and is entitled to quarterly royalty payments based upon low single digits of the average selling price of products covered under the license agreement. The license was transferred to the customer and the Company recognized the non-refundable license fee during the nine months ended September 30, 2018. The cross-license agreement will remain in effect until the licensed patents have expired, been abandoned, or ruled invalid.