10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2018

OR

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

For the transition period from _______ to _______

Commission File Number: 000-55843

Techpoint, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	80-0806545
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2550 N. First Street, #550

San Jose, CA 95131 USA

(408) 324-0588

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of May 11, 2018, the registrant had 17,148,935 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 6.	Exhibits	25
	Signatures	26

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Techpoint, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts, unaudited)

	March 31,		December 31,
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	24,324	$	21,536
Accounts receivable		65		93
Inventory		1,791		2,847
Prepaid expenses and other current assets		873		978
Total current assets		27,053		25,454
Property and equipment - net		329		325
Deferred tax assets		822		652
Other assets		168		161
Total assets	$	28,372	$	26,592
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,095	$	760
Accrued liabilities		1,019		573
Liability related to early exercised stock options		132		152
Customer deposits		138		6
Total current liabilities		2,384		1,491
Other liabilities		139		133
Total liabilities		2,523		1,624
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized    as of March 31, 2018 and December 31, 2017; nil shares issued and    outstanding as of March 31, 2018 and December 31, 2017		—		—
Common stock, par value $0.0001 per share - 75,000,000 shares    authorized as of March 31, 2018 and December 31, 2017; 16,884,012 and    16,752,171 shares issued and outstanding as of March 31, 2018 and    December 31, 2017, respectively		2		2
Additional paid-in-capital		17,988		17,580
Retained earnings		7,859		7,386
Total stockholders’ equity		25,849		24,968
Total liabilities and stockholders’ equity	$	28,372	$	26,592

See accompanying notes to condensed consolidated financial statements.

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Techpoint, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts, unaudited)

	Three Months Ended
	March 31,
	2018			2017
Revenue	$	7,053		$	7,230
Cost of revenue		3,285			2,952
Gross profit		3,768			4,278
Operating expenses
Research and development		2,211			1,465
Selling, general and administrative		1,621			1,227
Total operating expenses		3,832			2,692
Income (loss) from operations		(64	)		1,586
Other income (expense)		389			(8	)
Income before income taxes		325			1,578
Income taxes		(148	)		539
Net income	$	473		$	1,039
Net income allocable to preferred stockholders	$	—		$	768
Net income allocable to common stockholders	$	473		$	271
Net income per share allocable to common stockholders:
Basic	$	0.03		$	0.07
Diluted	$	0.03		$	0.07
Weighted average shares outstanding in computing net income per    share allocable to common stockholders
Basic		16,823,851			3,785,022
Diluted		18,177,605			4,643,976

See accompanying notes to condensed consolidated financial statements.

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Techpoint, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

	Three Months Ended
	March 31,
	2018			2017
Cash Flows From Operating Activities
Net income	$	473		$	1,039
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation and amortization		51			50
Stock-based compensation		270			128
Write-off of long lived assets		—			9
Deferred income taxes		(170	)		(64	)
Changes in operating assets and liabilities:
Accounts receivable		28			(18	)
Inventory		1,056			727
Prepaid expenses and other current assets		105			38
Other assets		(8	)		(2	)
Accounts payable		356			88
Accrued expenses		446			741
Customer deposits		132			(337	)
Other liabilities		6			31
Net cash provided by operating activities		2,745			2,430
Cash Flows From Investing Activities
Purchase of property and equipment		(75	)		(86	)
Net cash used in investing activities		(75	)		(86	)
Cash Flows From Financing Activities
Net proceeds from exercise of stock options		118			—
Payments of deferred offering costs		—			(214	)
Net cash provided by (used in) financing activities		118			(214	)
Net increase in cash and cash equivalents		2,788			2,130
Cash and cash equivalents at beginning of period		21,536			10,006
Cash and cash equivalents at end of period	$	24,324		$	12,136
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	20		$	27
Supplemental Disclosure of Noncash Investing and Financing    Information
Vesting of early exercised options	$	20		$	36
Unpaid deferred offering costs	$	—		$	305
Property and equipment purchased but not yet paid	$	—		$	9

See accompanying notes to condensed consolidated financial statements.

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Techpoint, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization

Techpoint, Inc. and its wholly-owned subsidiaries (the “Company”) was originally incorporated in California in April 2012 and reincorporated into Delaware in July 2017. The Company is a fabless semiconductor company that designs, markets and sells mixed-signal integrated circuits for multiple video applications in the security surveillance and automotive markets. The Company is headquartered in San Jose, California.

Initial Public Offering

On September 29, 2017, the Company completed its initial public offering (“IPO”) of Japanese depositary shares (“JDSs”).  In connection with the IPO, the Company sold 1,520,000 JDSs, represented by 1,520,000 shares of the Company’s common stock at a price to the public of $5.85 per share for net proceeds of $8.1 million, after deducting underwriting discounts and commissions of $0.7 million. Additionally, offering costs incurred by the Company totaled $3.0 million. Prior to the closing of the Company’s IPO, all outstanding shares of its preferred stock converted to common stock on a one-to-one basis.

On October 25, 2017, the managing underwriter of our IPO elected to purchase an additional 228,000 JDSs, represented by 228,000 shares of common stock, pursuant to the underwriters’ over-allotment option. We subsequently completed the sale at the IPO price of $5.85 per share and received net proceeds of $1.2 million, after deducting underwriter discounts and commissions of $0.1 million.

Basis of Consolidation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated. The functional currency of each of the Company’s subsidiaries is the U.S. dollar. Foreign currency gains or losses are recorded as other income (expense) in the Condensed Consolidated Statements of Operations.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2017 contained in our Annual Report on Form 10-K filed with the SEC on March 14, 2018.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which only include normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods and are not necessarily indicative of the results to be expected for the full fiscal year or for any other future annual or interim periods.

Revenue Recognition

The Company principally sells its products to distributors who, in turn, sell to ODMs, contract manufacturers and design houses. We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, or ASC 606, Revenue from Contracts with Customers. We satisfy our performance obligations and recognize revenue upon shipment, at which time control of our products is transferred to our customers.  We apply the following five-step model for recognizing revenue from contracts with customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the performance obligation is satisfied.

Product revenues consist of sales of mixed-signal integrated circuits into the security surveillance and automotive camera markets. The Company generally requires advance payments from customers and records these advance payments, or contract liabilities, as Customer Deposits on our Condensed Consolidated Balance Sheet. The Company provides product assurance warranty only and does not offer warranties to be purchased separately. The Company does not offer variable consideration or other significant payment terms and allocates the transaction price to each distinct product based on a relative standalone selling price. Revenue is recognized when control of the product is transferred to our customers, upon shipment, at which time the performance obligation is satisfied. The Company’s shipping terms are primarily free on board shipping point, whereby legal title, risks and rewards of

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ownership, and physical possession are transferred to the customer upon shipment. Substantially all of the Company’s customers pay in advance of shipment, and no stock rotation, price protection or return rights are offered.

Use of Management’s Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts ofrevenue and expenses during the reporting period. Significant estimates included in the condensed consolidated financial statements include inventory valuation, valuation allowance for recorded deferred tax assets, and stock based compensation. These estimates are based upon information available as of the date of the condensed consolidated financial statements. Actual results could differ materially from those estimates.

Concentration of Customer and Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Risks associated with cash and cash equivalents are mitigated by banking with creditworthy institutions. The Company generally requires advance payments from customers. The Company also performs credit evaluations of its customers and provides credit to certain customers in the normal course of business. The Company has not incurred bad debt write-offs during any of the periods presented.

For the three months ended March 31, 2018 and 2017, one customer, a distributor, accounted for 84% and 83% of revenue, respectively. Additionally, for the three months ended March 31, 2018 and 2017, one of our end-customers accounted for 67% and 57% of revenue, respectively, which primarily occurred through this distributor. No other customers or end-customers accounted for 10% or greater of our revenue in the three months ended March 31, 2018 and 2017, respectively.

Recently Adopted Accounting Pronouncements

Stock Compensation Guidance. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09 (Topic 718), Stock Compensation – Improvements to Employee Share-Based Payment Accounting, which simplified the accounting for share based payment transactions, including the income tax consequences, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 became effective beginning the first quarter of fiscal 2017. The Company adopted the guidance in the first quarter of fiscal 2017, which resulted in no material impacts on its financial position, results of operations, or cash flows, and expects the primary impact of this standard to be the income tax effects of awards recognized in the income statement when the awards are vested or settled. The potential tax impacts remain unknown until the award vest or settlement date.

Inventory Measurement Guidance. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, amending ASC Topic 330 – Inventory (“ASC 330”).  Upon adoption, this topic supersedes the existing guidance under ASC 330 and aims to simplify the subsequent measurement of inventory. Prior to adoption, inventory could be measured at the lower of cost or market, which could result in several potential outcomes, as market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. The major amendments were as follows: 1. Inventory should be measured at the lower of cost or net realizable value. 2. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. 3. The amendment does not apply to inventory measured under LIFO or the retail inventory method. 4. The amendment does apply to all other inventory, which includes inventory measured via FIFO or average cost. ASU 2015-11 became effective for periods beginning after December 15, 2016 (including interim reporting periods within those fiscal years), or the first quarter of fiscal 2017. The Company adopted this guidance in the first quarter of fiscal 2017, which resulted in no material impact on its condensed consolidated financial statements.

Revenue Recognition Guidance. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, creating ASC 606. Upon adoption, this topic supersedes the existing guidance under ASC Topic 605 – Revenue Recognition and aims to simplify the number of requirements to follow for revenue recognition and make revenue recognition more comparable across various entities, industries, jurisdictions and capital markets. There are 5 core principles: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Additional considerations under this update include: accounting for costs to obtain or fulfill a contract with a customer and additional quantitative and qualitative disclosures. ASU 2014-09 became effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter 2018, and allows for retrospective or modified retrospective application. The Company adopted this guidance in the first quarter of fiscal 2018 under the modified retrospective approach as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning

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after January 1, 2018 are reported under the new standard, while comparative financial information has not been adjusted and continues to be reported in accordance with the previous standard. There was no cumulative impact to adopting the new standard on the Company’s condensed consolidated financial statements. Additionally, the adoption has no impact on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2018 and Condensed Consolidated Statement of Operations for the three months ended March 31, 2018.

Recently Issued Accounting Pronouncements Not Yet Adopted

Lease Guidance. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases with terms in excess of one year on their balance sheet as a right-of-use asset and a lease liability at the commencement date. The new standard also simplifies the accounting for sale and leaseback transactions. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods therein and must be adopted using a modified retrospective method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company plans to adopt this standard in the first quarter of fiscal 2019 and is currently evaluating the potential impact of this standard on its condensed consolidated financial statements.

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

	March 31,		December 31,
	2018		2017
Work in process	$	979	$	1,214
Finished goods		812		1,633
Total inventory	$	1,791	$	2,847

Property and Equipment - Net

Property and equipment consists of the following (in thousands):

	March 31,			December 31,
	2018			2017
Computer equipment	$	741		$	687
Leasehold improvements		59			59
Furniture		30			30
Total property and equipment		830			776
Less: accumulated depreciation		(501	)		(451	)
Total property and equipment - net	$	329		$	325

The Company recorded $0.1 million and $0.1 million of depreciation expense for the three months ended March 31, 2018 and 2017, respectively.

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Accrued Liabilities

Accured liabilities consist of the following (in thousands):

	March 31,		December 31,
	2018		2017
Engineering services	$	486	$	131
Payroll-related expenses		348		291
Professional fees		67		23
Accrued warranty		62		73
Taxes payable		35		37
Other		21		18
Total accrued liabilities	$	1,019	$	573

Customer Deposits

Customer deposits represent payments received in advance of shipments and fluctuate depending on timing of customer pre-payments and product shipment. Customer deposits were $0.1 million and $6,000 as of March 31, 2018 and December 31, 2017, respectively. The Company generally expects to recognize revenue from customer deposits during the three month interim period immediately following the balance sheet date. During the three months ended March 31, 2018, the Company recognized revenue of $6,000 from the December 31, 2017 customer deposits balance.

3. Fair Value Measurements

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Financial assets measured at fair value on a recurring basis were as follows (in thousands):

	Fair Value Measurement at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of March 31, 2018
Assets:
Money market funds	$	6,957	$	—	$	—	$	6,957
As of December 31, 2017
Assets:
Money market funds	$	6,951	$	—	$	—	$	6,951

As of March 31, 2018 and December 31, 2017, money market funds are classified as Level 1 because they are valued using quoted market prices and are included in cash and cash equivalents.

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4. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker, the chief executive officer, reviews financial information presented on a consolidated basis for purposes of regularly making operating decisions and assessing financial performance. Accordingly, the Company considers itself to be in one reportable segment, which is comprised of one operating segment relating to the designing, marketing and selling of mixed-signal integrated circuits for the security surveillance and automotive markets.

Product revenue from customers is designated based on the geographic region to which the product is delivered. Revenue by geographic region was as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
China	$	6,089	$	6,113
South Korea		502		589
Taiwan		192		200
Other		270		328
Total revenue	$	7,053	$	7,230

Revenue by principal product lines were as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Security surveillance	$	6,288	$	6,724
Automotive		765		506
Total revenue	$	7,053	$	7,230

Long-lived assets are attributed to the geographic region where they are located. Net long-lived assets by geographic region were as follows (in thousands):

	March 31,		December 31,
	2018		2017
Taiwan	$	223	$	205
United States		80		92
Japan		17		16
China		7		9
South Korea		2		3
Total property and equipment - net	$	329	$	325

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5. Commitments and Contingencies

Operating leases

The Company leases facilities under non-cancellable lease agreements expiring through fiscal year 2020.

As of March 31, 2018, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2018 (remaining nine months)	$	359
2019		543
2020		70
Total	$	972

Rent expense under operating leases was $0.1 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively.

Purchase Commitments

As of March 31, 2018, the Company had purchase commitments with its third-party suppliers through fiscal year 2018. Future minimum payments under purchase commitments are $0.2 million and $40,000 for the year ending December 31, 2018 and 2019, respectively.

Litigation

Although the Company is not currently subject to any litigation, and no litigation is currently threatened against it, the Company may be subject to legal proceedings, claims and litigation, including intellectual property litigation, arising in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. The Company accrues amounts that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss that is reasonably estimable.

Indemnification

During the normal course of business, the Company may make certain indemnities, commitments and guarantees which may include intellectual property indemnities to certain of the Company’s customers in connection with the sales of the Company’s products and indemnities for liabilities associated with the infringement of other parties’ technology based upon the Company’s products. The Company’s exposure under these indemnification provisions is generally limited to the total amount paid by a customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in such capacities.

The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying condensed consolidated balance sheets. Where necessary, the Company accrues for losses for any known contingent liabilities, including those that may arise from indemnification provisions, when future payment is probable.

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6. Stockholders’ Equity

Preferred Stock

The Company was authorized to issue 5,000,000 shares of preferred stock with a $0.0001 par value per share as of March 31, 2018 and December 31, 2017. The shares of preferred stock issued and outstanding was nil as of March 31, 2018 and December 31, 2017.

Common Stock

The Company was authorized to issue 75,000,000 shares of common stock with $0.0001 par value per share as of March 31, 2018 and December 31, 2017. As of March 31, 2018, the shares of common stock issued and outstanding were 16,884,012 excluding 240,341 legally issued shares subject to repurchase related to the early exercise of options to purchase common stock. As of December 31, 2017, the shares of common stock issued and outstanding were 16,752,171 excluding 289,334 legally issued shares subject to repurchase related to the early exercise of options to purchase common stock.

The Company has reserved the following number of shares of common stock for future issuances:

	March 31,
	2018
Outstanding stock awards		1,490,053
Shares available for future issuance under the 2017 Stock Incentive Plan		4,586,476
Total common stock reserved for future issuances		6,076,529

7. Stock Option Plan

Stock Incentive Plan

In April 2012, the Company adopted the 2012 Stock Option Plan (“2012 Plan”). The 2012 Plan provides for the granting of stock-based awards to employees, directors, and consultants under terms and provisions established by the Company’s board of directors. Under the terms of the 2012 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Company’s board of directors. The terms of options granted under the 2012 Plan may not exceed ten years.

The 2012 Plan was superseded by the 2017 Stock Option Plan (“2017 Plan”). Any outstanding awards under the 2012 Plan will continue to be governed by the terms of the 2012 Plan.

In August 2017, the Company adopted the 2017 Plan. The Company’s stockholders approved the 2017 Plan in September 2017 and it became effective immediately prior to the closing of the Company’s IPO. In connection with the adoption of the 2017 Plan, no additional awards and no shares of common stock remain available for future issuance under the 2012 Plan and shares reserved but not issued under the 2012 Plan as of the effective date of the 2017 Plan were included in the number of shares reserved for issuance under the 2017 Plan. In addition, shares subject to awards under the 2012 Plan that are forfeited or terminated will be added to the 2017 Plan. The number of shares available for issuance under the 2017 Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2018 and ending on (and including) January 1, 2027, in an amount equal to the lesser of (1) 4% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (2) another amount determined by the Company’s board of directors.  The automatic increase in the number of shares available for issuance under the 2017 plan for the fiscal year 2018 was 681,660 shares. The 2017 Plan provides for the granting of incentive stock options, or ISOs, within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of nonstatutory stock options, or NSOs, to employees, non-employee directors, advisors and consultants. The 2017 Plan also provides for the grants of restricted stock, stock appreciation rights, or SARs, stock unit and cash-based awards to employees, non-employee directors, advisors and consultants.

The Company has various vesting agreements with employees. Options granted generally vest over a five-year period and generally are exercisable up to 10 years.

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The Company’s stock award activity under the stock incentive plan is summarized as follows:

	Awards Available for Grant
As of December 31, 2017		3,933,649
Authorized		681,660
Granted		(33,000	)
Canceled		4,167
As of March 31, 2018		4,586,476

Early Exercise of Stock Options

Certain employees and directors have exercised option grants prior to vesting. The unvested shares are subject to a repurchase right held by the Company at the original purchase price. The proceeds initially are recorded as liability related to early exercised stock options and reclassified to additional paid in capital as the repurchase right lapses. There were no options early exercised for the three months ended March 31, 2018 and 2017. The Company did not repurchase any shares of unvested common stock related to early exercised stock options during the three months ended March 31, 2018 and 2017. As of March 31, 2018 and December 31, 2017, 240,341 and 289,334 shares, respectively, held by employees and nonemployees were subject to repurchase at an aggregate price of $0.1 million and $0.2 million, respectively.

Stock Options

The Company’s stock option activity under the stock incentive plan is summarized as follows:

	Options Issued and Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
As of December 31, 2017		1,573,568		$	1.78		8.4	$	24,556
Granted		—		$	—
Exercised (1)		(132,348	)	$	1.05
Canceled		(4,167	)	$	0.97
As of March 31, 2018		1,437,053		$	1.85		8.2	$	24,348
Options vested and expected to vest as of March 31, 2018		1,437,053		$	1.85		8.2	$	24,348
Options vested and exercisable as of March 31, 2018		338,372		$	1.55		7.8	$	5,835

(1) Includes vesting of early-exercised options.

The stock options outstanding and exercisable by exercise price at March 31, 2018, are as follows:

		Options Outstanding						Options Vested and Exercisable
Exercise Price		Number Outstanding		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
$	0.10		6,667		5.3	$	0.10		—	$	—
$	0.16		98,500		5.8	$	0.16		59,583	$	0.16
$	0.37		292,834		7.1	$	0.37		67,500	$	0.37
$	0.97		225,416		8.0	$	0.97		50,428	$	0.97
$	2.51		236,219		8.4	$	2.51		75,469	$	2.51
$	2.89		52,000		8.9	$	2.89		8,750	$	2.89
$	2.93		370,417		9.1	$	2.93		65,392	$	2.93
$	3.18		155,000		9.3	$	3.18		11,250	$	3.18
			1,437,053		8.2	$	1.85		338,372	$	1.55

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The aggregate intrinsic value of options exercised for the three months ended March 31, 2018 was $1.3 million. There were no options exercised for the three months ended March 31, 2017.

Restricted Stock Units

The Company’s restricted stock units activity is summarized as follows:

	Units Issued and Outstanding		Weighted-Average Grant Date Fair Value
As of December 31, 2017		20,000	$	19.42
Granted		33,000	$	16.23
Released		—	$	—
Canceled		—	$	—
As of March 31, 2018		53,000	$	17.43

Restricted stock units are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Restricted stock unit awards generally vest over a five-year period and are subject to the grantee’s continued service with the Company.

8. Stock-Based Compensation

The following table summarizes the distribution of stock-based compensation expense (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Cost of revenue	$	9	$	5
Research and development		87		31
Selling, general and administrative		174		92
Total	$	270	$	128

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9. Net Income Per Share

For the periods presented prior to the Company’s IPO, basic and diluted net income per common share are presented in conformity with the two-class method required for participating securities. Prior to the closing of the Company’s IPO, all 10,742,500 outstanding shares of its Series Seed, Series A, and Series B convertible preferred shares, which were participating securities, were converted to common stock on a one-to-one basis.  

The following table presents the calculation of basic and diluted net income per share (amounts in thousands, except per share data):

	Three Months Ended
	March 31,
	2018		2017
Numerator:
Basic:
Net income	$	473	$	1,039
Net income allocable to preferred stockholders		—		768
Net income allocable to common stockholders		473		271
Diluted:
Net income		473		1,039
Net income allocable to preferred stockholders		—		725
Net income allocable to common stockholders		473		314
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic net income     per share allocable to common stockholders		16,823,851		3,785,022
Diluted shares:
Effect of potentially dilutive securities:
Stock options (1)		1,353,754		858,954
Weighted-average shares used in computing diluted net income    per common share allocable to common stockholders		18,177,605		4,643,976
Net income per common share:
Basic	$	0.03	$	0.07
Diluted	$	0.03	$	0.07

(1) Including early-exercised options.

The potentially dilutive securities outstanding as of March 31, 2018 and 2017 that were excluded from the computation of diluted net income per common share for the periods presented as their effect would have been antidilutive were 32,000 and 67,000 shares, respectively, related to stock options.

10. Income Taxes

The components of income before income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Domestic	$	270	$	1,558
Foreign		55		20
Income before income taxes	$	325	$	1,578

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The components of the provision for income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2018			2017
United States	$	(158	)	$	532
Foreign		10			7
Provision for income taxes	$	(148	)	$	539

Tax Reform H.R.1, originally known as the Tax Cuts and Jobs Act (“Act”), was enacted on December 22, 2017. The Act contains several key provisions that may have significant financial statement effects including the remeasurement of deferred taxes and the recognition of liabilities for taxes on mandatory repatriation and certain other foreign income. The Act reduces the corporate tax rate to 21%, effective January 1, 2018. ASC 740 requires companies to recognize the effect of tax law changes in the period of enactment, the effects must be recognized by companies’ December 2017 financial statements, even though the effective date for most provisions is January 1, 2018. For the year ended December 31, 2017, the Act resulted in a reduction to net deferred tax assets of $0.3 million and recorded liabilities for taxes on mandatory repatriation of foreign income and taxes on other foreign income from foreign subsidiaries of approximately $35,000 of which $34,000 can be offset with a foreign tax credit.

Subsequent to the enactment of the Act, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 ("SAB 118"). SAB 118 addresses the application of ASC 740 in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act and permits the recording of provisional amounts relating to the impact of the Act during a measurement period which is not to extend beyond one year from the Act enactment date.

As of March 31, 2018, there was no material increase in the liability for unrecognized tax benefits nor any accrued interest and penalties related to uncertain tax positions.

Additionally, as of March 31, 2018, the Company had approximately $0.3 million of unrecognized tax benefits of which $0.1 million was netted against deferred tax assets with a full valuation allowance. If these amounts are recognized, there will be a tax benefit of $0.1 million against the Company's effective tax rate.

The Company’s federal, state, and foreign tax returns may be subject to examination by the tax authorities for fiscal years ended from 2014 to 2017.

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

Information Regarding Forward-Looking Statements

This Quarterly Report on Form10-Q includes forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “plan,” “project,” “intend,” “expect” or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” in this Quarterly Report on Form 10-Q. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

• our future financial performance, including our revenue, cost of sales and operating expenses;

• our market opportunity and our ability to effectively manage or sustain our growth;

• our ability to attract and retain end-customers in our current or future target markets;

• our ability to continue to develop new technologies and obtain and maintain intellectual property rights protecting such technologies;

• new product releases and timing;

• anticipated trends, key factors and challenges in our business and the competition that we face;

• our liquidity and working capital requirements; and

• our expectations regarding future expenses and investments.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. We disclaim any duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q, except as required by law.

General Background

The following discussion and analysis should be read together with our condensed consolidated financial statements and the notes to those statements that appear in this Quarterly Report on Form 10-Q and our consolidated financial statements and the notes to those statements that appear in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 14, 2018. This discussion contains forward-looking statements based on our current expectations, assumptions, estimates and projections. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully described in “Risk Factors” in this Quarterly Report on Form 10-Q.

In this Quarterly Report, unless otherwise specified or the context otherwise requires, “Techpoint,” “we,” “us,” and “our” refer to Techpoint, Inc. and its consolidated subsidiaries.

Overview

We are a fabless semiconductor company that designs, markets and sells mixed-signal integrated circuits for multiple video applications in the security surveillance and automotive markets. Our integrated circuits are enabling the transition from standard definition, or SD, video to high definition, or HD, video in the security surveillance and automotive industries. We target specific video applications that receive and process high definition analog video signals, including surveillance cameras, surveillance digital video recorders, or DVRs, as well as cameras in automobiles. We design application specific products that utilize our HD analog transmission technology and perform advanced digital video processing to facilitate the display, transmission and storage of video content. We believe designing our integrated circuits for specific applications allows us to better address varying end-customer requirements, fully leverage our technological capabilities and achieve greater share within our target markets.

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Our solutions take HD video signals from a camera and convert them into analog signals for reliable long distance transmission, then convert the HD analog signal into the appropriate format for video processing and display. Our HD analog technology operates at the same 1080p HD resolution as digital HD, but processes video in an HD analog format and transmits the video in this same analog format, thereby eliminating the need for any compression or decompression. Our integrated circuits are based on our proprietary architecture and mixed signal technologies that we believe provide high video quality, enable high levels of integration and are cost effective. Our integrated circuits are used by security surveillance manufacturers, such as Hikvision in China, IDIS in South Korea and AVTech in Taiwan. These three manufacturers are each a leading security surveillance manufacturer in its respective country and together accounted for 68% of our revenue in the three months ended March 31, 2018.

We derive our revenue from sales of our mixed-signal integrated circuits into the security surveillance and automotive camera markets. We began shipping our products in 2013 and to date, we have sold over 70 million integrated circuits. Our revenue has decreased 2% to $7.1 million for the three months ended March 31, 2018 from $7.2 million for the three months ended March 31, 2017. We recorded net income of $0.5 million and $1.0 million for the three months ended March 31, 2018 and 2017, respectively. The security surveillance market accounted for a majority of our revenue in the three months ended March 31, 2018 and 2017. We have secured design wins with major automotive equipment manufacturers to sell our solutions to them for automotive backup cameras. We recognized $0.8 million and $0.5 million of revenue on sales into the automotive market in the three months ended March 31, 2018 and 2017, respectively.

We sell our products to distributors that fulfill third-party orders for our products. We also sell directly to original design manufacturers, or ODMs. In the three months ended March 31, 2018 and 2017, we derived substantially all of our revenue from products sold to distributors as compared to products sold to ODMs directly.

We undertake significant product development efforts well in advance of a product’s release, and in advance of receiving purchase orders. Our product development efforts, which are focused on developing new designs with broad demand and potential for future derivative products, typically take from six to 24 months until production begins, depending on the product’s complexity. If we secure a design win, we believe the system designer is likely to continue to use the same or enhanced versions of our product across a number of their models, tending to extend the life cycles of our products. Conversely, if a competitor secures the design win, it may be difficult for us to sell into the end-customer’s application for an extended period. Our sales cycle typically ranges from three to six months for the security surveillance market and one to three years for the automotive industry. Due to the length of our product development and sales cycle, the majority of our revenue for any period is likely to be weighted toward products introduced for sale in the prior one or two years. As a result, our present revenue is not necessarily representative of future sales because our future sales are likely to be comprised of a different mix of products, some of which are now in the development stage.

We employ a fabless manufacturing strategy and use market-leading suppliers for all phases of the manufacturing process, including wafer fabrication, assembly, testing and packaging. This strategy significantly reduces the capital investment that would otherwise be required to operate manufacturing facilities of our own.

We have made significant investments in research and development in order to develop our products to attract and retain end-customers. For the three months ended March 31, 2018 and 2017, our research and development expense was $2.2 million and $1.5 million, respectively. We expect that our research and development expenses will increase significantly in the future as we pursue additional opportunities. As of March 31, 2018, we had 66 employees, 25 of whom are in research and development. Our headquarters are located in San Jose, California, with additional operations in Japan, Taiwan, China and South Korea.

Key Factors Affecting Our Results of Operations

The following are key factors that impact our results of operations:

Ability to attract and retain customers that make large orders. In the three months ended March 31, 2018, three of our end-customers accounted for 73% of our revenue, one of which, Hikvision, the largest security surveillance manufacturer in China, accounted for 67%. In the three months ended March 31, 2017, three of our end-customers accounted for 72% of our revenue, respectively, of which Hikvision accounted for 57%. While we expect the composition of our end-customers to change over time, our business and operating results will depend on our ability to continually target new and retain existing end-customers that make large orders.

Design wins with new and existing customers. We believe our products provide high-quality HD video with an attractive combination of characteristics, at a lower overall cost than competing solutions. In order to get our solutions designed into our end-customer’s products, we work with our end-customers and potential end-customers to understand their product roadmaps and strategies. We consider design wins to be critical to our future success. We define a design win as the successful completion of the evaluation stage, where an end-customer has tested our product, verified that our product meets its requirements and qualified our integrated circuits for

16

their products. We have secured design wins with major automotive manufacturers to sell our solutions to them for automotive backup cameras. The revenue that we generate, if any, from each design win can vary significantly. Our long-term sales expectations are based on forecasts from end-customers, internal estimates of end-customer demand factoring in expected time to market for end-customer products incorporating our solutions and associated revenue potential and internal estimates of overall demand based on historical trends.

Pricing, product cost and gross margins of our products. Our gross margin has been and will continue to be affected by a variety of factors, including the timing of changes in pricing, shipment volumes, new product introductions, changes in product mixes, changes in our purchase price of fabricated wafers and assembly and test service costs, manufacturing yields and inventory write downs, if any. In general, newly introduced products and products with higher performance and more features tend to be priced higher than older, more mature products. Average selling prices in the semiconductor industry typically decline as products mature. Consistent with this historical trend, we expect that the average selling prices of our products will decline as they mature. In the normal course of business, we will seek to offset the effect of declining average selling prices on existing products by reducing manufacturing costs and introducing new and higher value-added products. If we are unable to maintain overall average selling prices or offset any declines in average selling prices with realized savings on product costs, our gross margin will decline.

Product adoption and safety regulations in the automotive market. We have secured design wins with major automotive equipment manufacturers to sell our solutions to them for automotive backup cameras. Certain jurisdictions, including the United States, have passed laws and regulations requiring that all new cars sold after a certain date must contain back-up cameras. If these jurisdictions do not maintain and implement these rules, or if back-up cameras are not put into automobiles sold in other locations as well, or do so more slowly than we expect, our financial results could be adversely affected.

Investment in growth. We have invested, and intend to continue to invest, in expanding our operations, increasing our headcount, developing our products and differentiated technologies to support our growth and expanding our infrastructure. We expect our total operating expenses to increase significantly in the foreseeable future to meet our growth objectives. We plan to continue to invest in our sales and support operations throughout the world, with a particular focus in the near term of adding additional sales and field applications personnel in the Asia-Pacific region to further broaden our support and coverage of our existing end-customer base, in addition to developing new end-customer relationships and generating design wins. We also intend to continue to invest additional resources in research and development to support the development of our products and differentiated technologies. Any investments we make in our sales and marketing organization or research and development will occur in advance of experiencing any benefits from such investments, and the return on these investments may be lower than we expect. In addition, as we invest in expanding our operations into new areas internationally, our business and results will become further subject to the risks and challenges of operations in those locations, including potentially higher operating expenses and the impact of legal and regulatory developments.

Components of Condensed Consolidated Statements of Operations

Revenue

We derive substantially all of our revenue through the sale of our products to distributors who, in turn, sell to our end-customers, which consists of ODMs, contract manufacturers and design houses. We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. We satisfy our performance obligations and recognize revenue upon shipment, at which time control of our products is transferred to our customers. We apply the following five-step model for recognizing revenue from contracts with customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the performance obligation is satisfied.

Product revenues consist of sales of mixed-signal integrated circuits into the security surveillance and automotive camera markets. We generally require advance payments from customers and record these advance payments, or contract liabilities, as Customer Deposits on our Condensed Consolidated Balance Sheet. We provide product assurance warranty only and do not offer warranties to be purchased separately.We do not offer variable consideration or other significant payment terms and allocate transaction price to each distinct product based on a relative standalone selling price. Revenue is recognized when control of the product is transferred to our customers, upon shipment, at which time the performance obligation is satisfied. Our shipping terms are primarily free on board shipping point, whereby legal title, risks and rewards of ownership, and physical possession are transferred to the customer upon shipment. Substantially all of our customers paid in advance of shipment, and no stock rotation, price protection or return rights were offered.

Cost of revenue

Cost of revenue primarily consists of costs paid to our third-party manufacturers for wafer fabrication, assembly and testing of our products. To a lesser extent, cost of revenue also includes write-downs of inventory for excess and obsolete inventory,

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depreciation of test equipment, and expenses relating to manufacturing support activities, including personnel-related costs, logistics and quality assurance and shipping.

Research and Development Expenses

Research and development expenses consist primarily of compensation and associated costs of employees engaged in research and development, contractor costs, tape-out costs, development testing and evaluation costs, and depreciation expense. Before releasing new products, we incur charges for mask sets, prototype wafers and mask set revisions, which we refer to as tape-out costs. Tape-out costs cause our research and development expenses to fluctuate because they are not incurred uniformly every quarter. We expect our research and development costs to increase in absolute dollars in the future as we increase our investment in developing new products and headcount to support our development efforts.

Selling, General and Administrative Expenses

Selling expenses consist primarily of personnel-related costs for our sales, business development, marketing, and applications engineering activities, promotional and other marketing expenses, and travel expenses. We expect selling expenses to increase in absolute dollars for the foreseeable future as we continue to expand our sales teams and increase our marketing activities.

General and administrative expenses consist primarily of personnel-related costs, consulting expenses and professional fees. Professional fees principally consist of legal, audit, tax and accounting services. We expect general and administrative expenses to increase in absolute dollars for the foreseeable future as we hire additional personnel, make improvements to our infrastructure and incur significant additional costs for the compliance requirements of operating as a public company, including higher legal, insurance and accounting expenses, particularly with respect to operating as a U.S. company that is publicly traded in Japan.

Personnel-related costs, including salaries, benefits, bonuses and stock-based compensation, are the most significant component of each of selling expenses and general and administrative expenses.

Income Tax Provision

The provision for income taxes consists of our estimated federal, state and foreign income taxes based on our pre-tax income. Our provision differs from the federal statutory rate primarily due to the research tax credit, non-deductible stock-based compensation and international tax reform provisions.

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Results of Operations

The following table sets forth our condensed consolidated results of operations for the periods shown (in thousands):

	Three Months Ended
	March 31,
	2018			2017
Revenue	$	7,053		$	7,230
Cost of revenue (1)		3,285			2,952
Gross profit		3,768			4,278
Operating expenses: (1)
Research and development		2,211			1,465
Selling, general and administrative		1,621			1,227
Total operating expenses		3,832			2,692
Income (loss) from operations		(64	)		1,586
Other income (expense)		389			(8	)
Income before income taxes		325			1,578
Income taxes		(148	)		539
Net income	$	473		$	1,039

(1) Includes stock-based compensation expense as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Cost of revenue	$	9	$	5
Research and development		87		31
Selling, general and administrative		174		92
Total	$	270	$	128

The following table sets forth the condensed consolidated statements of operations data for each of the periods presented as a percentage of revenue:

	Three Months Ended
	March 31,
	2018			2017
Revenue		100	%		100	%
Cost of revenue		47			41
Gross profit		53			59
Operating expenses:
Research and development		31			20
Selling, general and administrative		23			17
Total operating expenses		54			37
Income (loss) from operations		(1	)		22
Other income (expense)		6			0
Income before income taxes		5			22
Income taxes		(2	)		7
Net income		7	%		15	%

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Comparison of the Three Months Ended March 31, 2018 and March 31, 2017

Revenue

	Three Months Ended March 31,				Change
	2018		2017		Amount			%
	(dollars in thousands)
Revenue	$	7,053	$	7,230	$	(177	)		(2	)%

Revenue decreased $0.2 million, or 2%, for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. This decrease was primarily due to a 16% decrease in overall average selling price due to change in product mix offset by a 16% increase in volume of shipments as a result of increased demand for our integrated HD-TVI transmitters and Image Signal Processor products in the security surveillance market for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017.

Revenue by geographic region

The table below sets forth the major components of the change in revenue by geographic region for the three months ended March 31, 2018 and 2017:

	Three Months Ended
	March 31,
	2018			2017
China		86	%		85	%
South Korea		7		8
Taiwan		3		2
Other		4		5
Total revenue		100	%		100	%

Cost of revenue and gross margin

	Three Months Ended March 31,						Change
	2018			2017			Amount		%
	(dollars in thousands)
Cost of revenue	$	3,285		$	2,952		$	333		11	%
Gross margin		53	%		59	%

Cost of revenue increased by $0.3 million, or 11%, while gross margin decreased to 53% from 59% for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. Cost of revenue increased due to a 16% increase in volume of shipments and changes in product mix, which had a negative impact on gross margin due to increased volumes of higher cost, lower margin products, which was partially offset by a decrease in inventory write downs of $0.1 million.

Gross margin fluctuations are due to changes in product mix and fluctuations in period costs. We expect gross margins to fluctuate in future periods due to changes in product mix, average unit selling prices, manufacturing costs, manufacturing yields, levels of inventory valuation, if any, and levels of product demand.

Research and development expense

	Three Months Ended March 31,				Change
	2018		2017		Amount		%
	(dollars in thousands)
Research and development	$	2,211	$	1,465	$	746		51	%

Research and development expenses increased $0.7 million, or 51%, for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017 primarily due to a $0.3 million increase in tape-out expenses, a $0.2 million increase in

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design, prototype, and software expenses relating to product development costs and a $0.2 million increase in personnel costs due to a 19% increase in headcount as a result of expanding operations.

Selling, general and administrative expense

	Three Months Ended March 31,				Change
	2018		2017		Amount		%
	(dollars in thousands)
Selling, general and administrative	$	1,621	$	1,227	$	394		32	%

Selling, general and administrative expenses increased $0.4 million, or 32%, for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017 primarily due to a $0.1 million increase in legal fees, a $0.1 million increase in stock-based compensation expense and a $0.1 million increase in personnel costs due to a 13% increase in headcount as a result of expanding operations.

Other income and expense

	Three Months Ended March 31,					Change
	2018		2017			Amount		%
	(dollars in thousands)
Other income (expense)	$	389	$	(8	)	$	397	(4,963)%

Other income of $0.4 million for the three months ended March 31, 2018 was driven by foreign currency exchange transactions and foreign currency fluctuations as a result of an increase in our cash balance as a result of IPO proceeds received in Japanese Yen in September 2017.

Provision for income taxes

	Three Months Ended March 31,					Change
	2018			2017		Amount			%
	(dollars in thousands)
Income taxes	$	(148	)	$	539	$	(687	)		(127	)%

The provision for income taxes decreased $0.7 million, or 127%, for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017 primarily due to a decrease in taxable income and tax benefits from stock-option exercises and dispositions.

Liquidity and Capital Resources

Our primary use of cash is to fund our operations as we continue to grow our business. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the changes in our outstanding accounts payable and accrued expenses.

Our cash and cash equivalents as of March 31, 2018 were $24.3 million. We believe our existing cash and cash equivalents, and cash we expect to generate from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced products and our costs to implement new manufacturing technologies or potentially acquire and integrate other companies or assets. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing

21

on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

A summary of operating, investing and financing activities are shown in the following table (in thousands):

	Three Months Ended
	March 31,
	2018			2017
Net cash provided by operating activities	$	2,745		$	2,430
Net cash used in investing activities		(75	)		(86	)
Net cash provided by (used in) financing activities		118			(214	)
Net increase in cash and cash equivalents	$	2,788		$	2,130

Operating Activities

Our primary source of cash from operating activities has been from cash collections from our customers. We expect cash inflows from operating activities to be affected by fluctuations in sales. Our primary uses of cash from operating activities have been for personnel costs and investments in research and development and sales and marketing.

During the three months ended March 31, 2018, net cash provided by operating activities was $2.7 million, primarily due to net income of $0.5 million, non-cash charges of $0.2 million primarily driven by stock-based compensation, depreciation and amortization offset by deferred income taxes, and cash inflows provided by changes in net operating assets and liabilities of $2.1 million. The cash inflows provided by the change in net operating assets and liabilities were primarily due to a $1.1 million cash inflow in inventory due to product sales in excess of units on hand and manufactured during the period, a $0.4 million cash inflow in accrued expenses, a $0.4 million cash inflow in accounts payable due to timing of vendor payments, a $0.1 million cash inflow in customer deposits due to timing of customer pre-payments, and a $0.1 million cash inflow in prepaid expenses and other current assets.

During the three months ended March 31, 2017, net cash provided by operating activities was $2.4 million, primarily due to net income of $1.0 million, non-cash charges of $0.1 million primarily driven by stock-based compensation, depreciation and amortization offset by deferred income taxes, and cash inflows provided by changes in net operating assets and liabilities of $1.3 million. The cash inflows provided by the change in net operating assets and liabilities were primarily due to a $0.7 million cash inflow in inventory due to product sales in excess of units on hand and manufactured during the period, a $0.7 million cash inflow in accrued expenses, offset by a $0.3 million cash outflow in customer deposits due to timing of customer pre-payments.

Investing Activities

During the three months ended March 31, 2018 and 2017, cash used in investing activities was $0.1 million and $0.1 million, respectively, due to purchases of property and equipment.

Financing Activities

During the three months ended March 31, 2018, cash provided by financing activities was $0.1 million due to net proceeds from the exercise of stock options. During the three months ended March 31, 2017, cash used by financing activities was $0.2 million due to payments for deferred offering costs.

Contractual Obligations

We are required to make future payments under certain operating leases. Our outstanding contractual obligations as of March 31, 2018 are summarized in the following table:

			Payments Due by Period
	Total		Less than 1 year		1 to 3 years		3-5 years		More than 5 years
			(in thousands)
Operating leases	$	972	$	494	$	478	$	—	$	—
Purchase commitments		191		151		40		—		—
Total	$	1,163	$	645	$	518	$	—	$	—

22

Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Off Balance Sheet Arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies, Significant Estimates and Judgments

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates, assumptions and judgments on an ongoing basis. Our estimates, assumptions and judgments are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our financial statements, which, in turn, could change the results from those reported. Please see Note 1 of Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of significant accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk from fluctuations in foreign currency exchange rates and interest rates, which may adversely affect our results of operations and financial condition. We seek to minimize these risks through regular operating activities. We do not purchase, hold or sell derivative financial instruments for trading or speculative purposes.

Foreign exchange rates

We transact business globally and are subject to risks associated with fluctuating foreign exchange rates. Substantially all of our revenue was derived from sales outside of the U.S. in the three months ended March 31, 2018 and 2017. This revenue is generated in U.S. dollars with sales through distributors worldwide. Our operating expenses are denominated in the currencies of the countries in which our subsidiaries are located, and may be subject to fluctuations due to changes in foreign currency exchange rates. To date, we have not entered into any hedging contracts, but may elect to do so in the future. A hypothetical increase or decrease of 10% in foreign exchange rates for the three months ended March 31, 2018 and 2017 would not have resulted in a significant increase or decrease in revenue or net income during that period.

The U.S. dollar is the functional currency for all of our foreign operations. Monetary assets and liabilities denominated in foreign currencies are remeasured into the functional currency of the subsidiary at the balance sheet date. The gains and losses from remeasurement of foreign currency denominated balances into the functional currency of the subsidiary are included in Other income (expense) on our Condensed Consolidated Statement of Operations.

Interest rates

Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents. We seek to minimize the risk to our cash and cash equivalents by investing cash in excess of our operating needs in short-term, high-quality instruments issued by highly creditworthy financial institutions. With the amount of cash and cash equivalents that we maintained at March 31, 2018, a hypothetical increase or decrease of one percentage point, or 100 basis points, in interest rates, would not have had a material effect on our financial statements.

23

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.  Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material legal proceedings that we believe to be material to our business or financial condition. From time to time we may become party to various litigation matters and subject to claims that arise in the ordinary course of business.

Item 1A. Risk Factors.

There have been no material changes to the previously disclosed risk factors discussed in Part 1 “Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 14, 2018. You should consider carefully these factors, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, before making an investment decision.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sale of Unregistered Securities

None.

Use of Proceeds from Public Offering of Common Stock

On September 29, 2017, we completed our IPO of JDSs in which we sold 1,520,000 JDSs, represented by 1,520,000 shares of the Company’s common stock at a price to the public of $5.85 per share for net proceeds of $8.1 million, after deducting underwriting discounts and commissions of $0.7 million.

On October 25, 2017, the managing underwriter of our IPO elected to purchase an additional 228,000 JDSs, represented by 228,000 shares of common stock, pursuant to the underwriters’ over-allotment option. We subsequently completed the sale at the IPO price of $5.85 per share and received net proceeds of $1.2 million, after deducting underwriter discounts and commissions of $0.1 million.

None of the expenses associated with our initial public offering were paid to directors, officers, persons owning 10% or more of any class of our equity securities, or to their associates, or to our affiliates. The JDSs and shares sold in the initial public offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-219992) that was declared effective by the Securities and Exchange Commission on September 19, 2017. Mizuho Securities Co., Ltd, Daiwa Securities Co. Ltd. and SBI Securities Co. Ltd. were the underwriters for the offering. Our shares commenced trading on the Mothers market of the Tokyo Stock Exchange on September 29, 2017.

24

There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the Securities and Exchange Commission on September 20, 2017 pursuant to Rule 424(b).

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Description
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 Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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 Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the registrant specifically incorporates it by reference.

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Techpoint, Inc.
Date: May 15, 2018	By:	/s/ Yukiko Tegarden
		Yukiko Tegarden
		Chief Financial Officer (Principal Financial and Accounting Officer)
Date: May 15, 2018	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

26

EX-31.1

Exhibit 31.1

PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fumihiro Kozato, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Techpoint, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2018	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER’S CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Yukiko Tegarden, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Techpoint, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2018	By:	/s/ Yukiko Tegarden
		Yukiko Tegarden
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

PRINCIPAL EXECUTIVE OFFICER’S CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Techpoint, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2018	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER’S CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Techpoint, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2018	By:	/s/ Yukiko Tegarden
		Yukiko Tegarden
		Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 11, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	0001556898
Entity Registrant Name	Techpoint, Inc.
Entity Central Index Key	0001556898
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		17,148,935

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 24,324	$ 21,536
Accounts receivable	65	93
Inventory	1,791	2,847
Prepaid expenses and other current assets	873	978
Total current assets	27,053	25,454
Property and equipment - net	329	325
Deferred tax assets	822	652
Other assets	168	161
Total assets	28,372	26,592
Current liabilities:
Accounts payable	1,095	760
Accrued liabilities	1,019	573
Liability related to early exercised stock options	132	152
Customer deposits	138	6
Total current liabilities	2,384	1,491
Other liabilities	139	133
Total liabilities	2,523	1,624
Commitments and contingencies (Note 5)
Stockholders’ equity
Additional paid-in-capital	17,988	17,580
Retained earnings	7,859	7,386
Total stockholders’ equity	25,849	24,968
Total liabilities and stockholders’ equity	28,372	26,592
Preferred Stock, Par Value
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized as of March 31, 2018 and December 31, 2017; nil shares issued and outstanding as of March 31, 2018 and December 31, 2017
Common Stock, Par Value
Stockholders’ equity
Common stock, par value $0.0001 per share - 75,000,000 shares authorized as of March 31, 2018 and December 31, 2017; 16,884,012 and 16,752,171 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	$ 2	$ 2

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	16,884,012	16,752,171
Common stock, shares outstanding	16,884,012	16,752,171
Preferred Stock, Par Value
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Stock, Par Value
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	16,884,012	16,752,171
Common stock, shares outstanding	16,884,012	16,752,171

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Revenue	$ 7,053	$ 7,230
Cost of revenue	3,285	2,952
Gross profit	3,768	4,278
Operating expenses
Research and development	2,211	1,465
Selling, general and administrative	1,621	1,227
Total operating expenses	3,832	2,692
Income (loss) from operations	(64)	1,586
Other income (expense)	389	(8)
Income before income taxes	325	1,578
Income taxes	(148)	539
Net income	473	1,039
Net income allocable to preferred stockholders		768
Net income allocable to common stockholders	$ 473	$ 271
Net income per share allocable to common stockholders:
Basic	$ 0.03	$ 0.07
Diluted	$ 0.03	$ 0.07
Weighted average shares outstanding in computing net income per share allocable to common stockholders
Basic	16,823,851	3,785,022
Diluted	18,177,605	4,643,976

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash Flows From Operating Activities
Net income	$ 473	$ 1,039
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	51	50
Stock-based compensation	270	128
Write-off of long lived assets		9
Deferred income taxes	(170)	(64)
Changes in operating assets and liabilities:
Accounts receivable	28	(18)
Inventory	1,056	727
Prepaid expenses and other current assets	105	38
Other assets	(8)	(2)
Accounts payable	356	88
Accrued expenses	446	741
Customer deposits	132	(337)
Other liabilities	6	31
Net cash provided by operating activities	2,745	2,430
Cash Flows From Investing Activities
Purchase of property and equipment	(75)	(86)
Net cash used in investing activities	(75)	(86)
Cash Flows From Financing Activities
Net proceeds from exercise of stock options	118
Payments of deferred offering costs		(214)
Net cash provided by (used in) financing activities	118	(214)
Net increase in cash and cash equivalents	2,788	2,130
Cash and cash equivalents at beginning of period	21,536	10,006
Cash and cash equivalents at end of period	24,324	12,136
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	20	27
Supplemental Disclosure of Noncash Investing and Financing Information
Vesting of early exercised options	$ 20	36
Unpaid deferred offering costs		305
Property and equipment purchased but not yet paid		$ 9

XML

Organization and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

Organization

Techpoint, Inc. and its wholly-owned subsidiaries (the “Company”) was originally incorporated in California in April 2012 and reincorporated into Delaware in July 2017. The Company is a fabless semiconductor company that designs, markets and sells mixed-signal integrated circuits for multiple video applications in the security surveillance and automotive markets. The Company is headquartered in San Jose, California.

Initial Public Offering

On September 29, 2017, the Company completed its initial public offering (“IPO”) of Japanese depositary shares (“JDSs”).  In connection with the IPO, the Company sold 1,520,000 JDSs, represented by 1,520,000 shares of the Company’s common stock at a price to the public of $5.85 per share for net proceeds of $8.1 million, after deducting underwriting discounts and commissions of $0.7 million. Additionally, offering costs incurred by the Company totaled $3.0 million. Prior to the closing of the Company’s IPO, all outstanding shares of its preferred stock converted to common stock on a one-to-one basis.

On October 25, 2017, the managing underwriter of our IPO elected to purchase an additional 228,000 JDSs, represented by 228,000 shares of common stock, pursuant to the underwriters’ over-allotment option. We subsequently completed the sale at the IPO price of $5.85 per share and received net proceeds of $1.2 million, after deducting underwriter discounts and commissions of $0.1 million.

Basis of Consolidation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated. The functional currency of each of the Company’s subsidiaries is the U.S. dollar. Foreign currency gains or losses are recorded as other income (expense) in the Condensed Consolidated Statements of Operations.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2017 contained in our Annual Report on Form 10-K filed with the SEC on March 14, 2018.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which only include normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods and are not necessarily indicative of the results to be expected for the full fiscal year or for any other future annual or interim periods.

Revenue Recognition

The Company principally sells its products to distributors who, in turn, sell to ODMs, contract manufacturers and design houses. We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, or ASC 606, Revenue from Contracts with Customers. We satisfy our performance obligations and recognize revenue upon shipment, at which time control of our products is transferred to our customers.  We apply the following five-step model for recognizing revenue from contracts with customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the performance obligation is satisfied.

Product revenues consist of sales of mixed-signal integrated circuits into the security surveillance and automotive camera markets. The Company generally requires advance payments from customers and records these advance payments, or contract liabilities, as Customer Deposits on our Condensed Consolidated Balance Sheet. The Company provides product assurance warranty only and does not offer warranties to be purchased separately. The Company does not offer variable consideration or other significant payment terms and allocates the transaction price to each distinct product based on a relative standalone selling price. Revenue is recognized when control of the product is transferred to our customers, upon shipment, at which time the performance obligation is satisfied. The Company’s shipping terms are primarily free on board shipping point, whereby legal title, risks and rewards of ownership, and physical possession are transferred to the customer upon shipment. Substantially all of the Company’s customers pay in advance of shipment, and no stock rotation, price protection or return rights are offered.

Use of Management’s Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts ofrevenue and expenses during the reporting period. Significant estimates included in the condensed consolidated financial statements include inventory valuation, valuation allowance for recorded deferred tax assets, and stock based compensation. These estimates are based upon information available as of the date of the condensed consolidated financial statements. Actual results could differ materially from those estimates.

Concentration of Customer and Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Risks associated with cash and cash equivalents are mitigated by banking with creditworthy institutions. The Company generally requires advance payments from customers. The Company also performs credit evaluations of its customers and provides credit to certain customers in the normal course of business. The Company has not incurred bad debt write-offs during any of the periods presented.

For the three months ended March 31, 2018 and 2017, one customer, a distributor, accounted for 84% and 83% of revenue, respectively. Additionally, for the three months ended March 31, 2018 and 2017, one of our end-customers accounted for 67% and 57% of revenue, respectively, which primarily occurred through this distributor. No other customers or end-customers accounted for 10% or greater of our revenue in the three months ended March 31, 2018 and 2017, respectively.

Recently Adopted Accounting Pronouncements

Stock Compensation Guidance. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09 (Topic 718), Stock Compensation – Improvements to Employee Share-Based Payment Accounting, which simplified the accounting for share based payment transactions, including the income tax consequences, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 became effective beginning the first quarter of fiscal 2017. The Company adopted the guidance in the first quarter of fiscal 2017, which resulted in no material impacts on its financial position, results of operations, or cash flows, and expects the primary impact of this standard to be the income tax effects of awards recognized in the income statement when the awards are vested or settled. The potential tax impacts remain unknown until the award vest or settlement date.

Inventory Measurement Guidance. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, amending ASC Topic 330 – Inventory (“ASC 330”).  Upon adoption, this topic supersedes the existing guidance under ASC 330 and aims to simplify the subsequent measurement of inventory. Prior to adoption, inventory could be measured at the lower of cost or market, which could result in several potential outcomes, as market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. The major amendments were as follows: 1. Inventory should be measured at the lower of cost or net realizable value. 2. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. 3. The amendment does not apply to inventory measured under LIFO or the retail inventory method. 4. The amendment does apply to all other inventory, which includes inventory measured via FIFO or average cost. ASU 2015-11 became effective for periods beginning after December 15, 2016 (including interim reporting periods within those fiscal years), or the first quarter of fiscal 2017. The Company adopted this guidance in the first quarter of fiscal 2017, which resulted in no material impact on its condensed consolidated financial statements.

Revenue Recognition Guidance. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, creating ASC 606. Upon adoption, this topic supersedes the existing guidance under ASC Topic 605 – Revenue Recognition and aims to simplify the number of requirements to follow for revenue recognition and make revenue recognition more comparable across various entities, industries, jurisdictions and capital markets. There are 5 core principles: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Additional considerations under this update include: accounting for costs to obtain or fulfill a contract with a customer and additional quantitative and qualitative disclosures. ASU 2014-09 became effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter 2018, and allows for retrospective or modified retrospective application. The Company adopted this guidance in the first quarter of fiscal 2018 under the modified retrospective approach as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning after January 1, 2018 are reported under the new standard, while comparative financial information has not been adjusted and continues to be reported in accordance with the previous standard. There was no cumulative impact to adopting the new standard on the Company’s condensed consolidated financial statements. Additionally, the adoption has no impact on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2018 and Condensed Consolidated Statement of Operations for the three months ended March 31, 2018.

Recently Issued Accounting Pronouncements Not Yet Adopted

Lease Guidance. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases with terms in excess of one year on their balance sheet as a right-of-use asset and a lease liability at the commencement date. The new standard also simplifies the accounting for sale and leaseback transactions. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods therein and must be adopted using a modified retrospective method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company plans to adopt this standard in the first quarter of fiscal 2019 and is currently evaluating the potential impact of this standard on its condensed consolidated financial statements.

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Balance Sheet Components

3 Months Ended

Mar. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

	March 31,		December 31,
	2018		2017
Work in process	$	979	$	1,214
Finished goods		812		1,633
Total inventory	$	1,791	$	2,847

Property and Equipment - Net

Property and equipment consists of the following (in thousands):

	March 31,			December 31,
	2018			2017
Computer equipment	$	741		$	687
Leasehold improvements		59			59
Furniture		30			30
Total property and equipment		830			776
Less: accumulated depreciation		(501	)		(451	)
Total property and equipment - net	$	329		$	325

The Company recorded $0.1 million and $0.1 million of depreciation expense for the three months ended March 31, 2018 and 2017, respectively.

Accrued Liabilities

Accured liabilities consist of the following (in thousands):

	March 31,		December 31,
	2018		2017
Engineering services	$	486	$	131
Payroll-related expenses		348		291
Professional fees		67		23
Accrued warranty		62		73
Taxes payable		35		37
Other		21		18
Total accrued liabilities	$	1,019	$	573

Customer Deposits

Customer deposits represent payments received in advance of shipments and fluctuate depending on timing of customer pre-payments and product shipment. Customer deposits were $0.1 million and $6,000 as of March 31, 2018 and December 31, 2017, respectively. The Company generally expects to recognize revenue from customer deposits during the three month interim period immediately following the balance sheet date. During the three months ended March 31, 2018, the Company recognized revenue of $6,000 from the December 31, 2017 customer deposits balance.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Financial assets measured at fair value on a recurring basis were as follows (in thousands):

	Fair Value Measurement at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of March 31, 2018
Assets:
Money market funds	$	6,957	$	—	$	—	$	6,957
As of December 31, 2017
Assets:
Money market funds	$	6,951	$	—	$	—	$	6,951

As of March 31, 2018 and December 31, 2017, money market funds are classified as Level 1 because they are valued using quoted market prices and are included in cash and cash equivalents.

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Segment Information

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Segment Information

4. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker, the chief executive officer, reviews financial information presented on a consolidated basis for purposes of regularly making operating decisions and assessing financial performance. Accordingly, the Company considers itself to be in one reportable segment, which is comprised of one operating segment relating to the designing, marketing and selling of mixed-signal integrated circuits for the security surveillance and automotive markets.

Product revenue from customers is designated based on the geographic region to which the product is delivered. Revenue by geographic region was as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
China	$	6,089	$	6,113
South Korea		502		589
Taiwan		192		200
Other		270		328
Total revenue	$	7,053	$	7,230

Revenue by principal product lines were as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Security surveillance	$	6,288	$	6,724
Automotive		765		506
Total revenue	$	7,053	$	7,230

Long-lived assets are attributed to the geographic region where they are located. Net long-lived assets by geographic region were as follows (in thousands):

	March 31,		December 31,
	2018		2017
Taiwan	$	223	$	205
United States		80		92
Japan		17		16
China		7		9
South Korea		2		3
Total property and equipment - net	$	329	$	325

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Operating leases

The Company leases facilities under non-cancellable lease agreements expiring through fiscal year 2020.

As of March 31, 2018, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2018 (remaining nine months)	$	359
2019		543
2020		70
Total	$	972

Rent expense under operating leases was $0.1 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively.

Purchase Commitments

As of March 31, 2018, the Company had purchase commitments with its third-party suppliers through fiscal year 2018. Future minimum payments under purchase commitments are $0.2 million and $40,000 for the year ending December 31, 2018 and 2019, respectively.

Litigation

Although the Company is not currently subject to any litigation, and no litigation is currently threatened against it, the Company may be subject to legal proceedings, claims and litigation, including intellectual property litigation, arising in the ordinary course of business. Such matters are subject to many uncertainties and outcomes and are not predictable with assurance. The Company accrues amounts that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss that is reasonably estimable.

Indemnification

During the normal course of business, the Company may make certain indemnities, commitments and guarantees which may include intellectual property indemnities to certain of the Company’s customers in connection with the sales of the Company’s products and indemnities for liabilities associated with the infringement of other parties’ technology based upon the Company’s products. The Company’s exposure under these indemnification provisions is generally limited to the total amount paid by a customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose us to losses in excess of the amount received under the agreement. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in such capacities.

The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying condensed consolidated balance sheets. Where necessary, the Company accrues for losses for any known contingent liabilities, including those that may arise from indemnification provisions, when future payment is probable.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Stockholders' Equity

6. Stockholders’ Equity

Preferred Stock

The Company was authorized to issue 5,000,000 shares of preferred stock with a $0.0001 par value per share as of March 31, 2018 and December 31, 2017. The shares of preferred stock issued and outstanding was nil as of March 31, 2018 and December 31, 2017.

Common Stock

The Company was authorized to issue 75,000,000 shares of common stock with $0.0001 par value per share as of March 31, 2018 and December 31, 2017. As of March 31, 2018, the shares of common stock issued and outstanding were 16,884,012 excluding 240,341 legally issued shares subject to repurchase related to the early exercise of options to purchase common stock. As of December 31, 2017, the shares of common stock issued and outstanding were 16,752,171 excluding 289,334 legally issued shares subject to repurchase related to the early exercise of options to purchase common stock.

The Company has reserved the following number of shares of common stock for future issuances:

	March 31,
	2018
Outstanding stock awards		1,490,053
Shares available for future issuance under the 2017 Stock Incentive Plan		4,586,476
Total common stock reserved for future issuances		6,076,529

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Stock Option Plan

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Option Plan

7. Stock Option Plan

Stock Incentive Plan

In April 2012, the Company adopted the 2012 Stock Option Plan (“2012 Plan”). The 2012 Plan provides for the granting of stock-based awards to employees, directors, and consultants under terms and provisions established by the Company’s board of directors. Under the terms of the 2012 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Company’s board of directors. The terms of options granted under the 2012 Plan may not exceed ten years.

The 2012 Plan was superseded by the 2017 Stock Option Plan (“2017 Plan”). Any outstanding awards under the 2012 Plan will continue to be governed by the terms of the 2012 Plan.

In August 2017, the Company adopted the 2017 Plan. The Company’s stockholders approved the 2017 Plan in September 2017 and it became effective immediately prior to the closing of the Company’s IPO. In connection with the adoption of the 2017 Plan, no additional awards and no shares of common stock remain available for future issuance under the 2012 Plan and shares reserved but not issued under the 2012 Plan as of the effective date of the 2017 Plan were included in the number of shares reserved for issuance under the 2017 Plan. In addition, shares subject to awards under the 2012 Plan that are forfeited or terminated will be added to the 2017 Plan. The number of shares available for issuance under the 2017 Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2018 and ending on (and including) January 1, 2027, in an amount equal to the lesser of (1) 4% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (2) another amount determined by the Company’s board of directors.  The automatic increase in the number of shares available for issuance under the 2017 plan for the fiscal year 2018 was 681,660 shares. The 2017 Plan provides for the granting of incentive stock options, or ISOs, within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of nonstatutory stock options, or NSOs, to employees, non-employee directors, advisors and consultants. The 2017 Plan also provides for the grants of restricted stock, stock appreciation rights, or SARs, stock unit and cash-based awards to employees, non-employee directors, advisors and consultants.

The Company has various vesting agreements with employees. Options granted generally vest over a five-year period and generally are exercisable up to 10 years.

The Company’s stock award activity under the stock incentive plan is summarized as follows:

	Awards Available for Grant
As of December 31, 2017		3,933,649
Authorized		681,660
Granted		(33,000	)
Canceled		4,167
As of March 31, 2018		4,586,476

Early Exercise of Stock Options

Certain employees and directors have exercised option grants prior to vesting. The unvested shares are subject to a repurchase right held by the Company at the original purchase price. The proceeds initially are recorded as liability related to early exercised stock options and reclassified to additional paid in capital as the repurchase right lapses. There were no options early exercised for the three months ended March 31, 2018 and 2017. The Company did not repurchase any shares of unvested common stock related to early exercised stock options during the three months ended March 31, 2018 and 2017. As of March 31, 2018 and December 31, 2017, 240,341 and 289,334 shares, respectively, held by employees and nonemployees were subject to repurchase at an aggregate price of $0.1 million and $0.2 million, respectively.

Stock Options

The Company’s stock option activity under the stock incentive plan is summarized as follows:

	Options Issued and Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
As of December 31, 2017		1,573,568		$	1.78		8.4	$	24,556
Granted		—		$	—
Exercised (1)		(132,348	)	$	1.05
Canceled		(4,167	)	$	0.97
As of March 31, 2018		1,437,053		$	1.85		8.2	$	24,348
Options vested and expected to vest as of March 31, 2018		1,437,053		$	1.85		8.2	$	24,348
Options vested and exercisable as of March 31, 2018		338,372		$	1.55		7.8	$	5,835

(1) Includes vesting of early-exercised options.

The stock options outstanding and exercisable by exercise price at March 31, 2018, are as follows:

		Options Outstanding						Options Vested and Exercisable
Exercise Price		Number Outstanding		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
$	0.10		6,667		5.3	$	0.10		—	$	—
$	0.16		98,500		5.8	$	0.16		59,583	$	0.16
$	0.37		292,834		7.1	$	0.37		67,500	$	0.37
$	0.97		225,416		8.0	$	0.97		50,428	$	0.97
$	2.51		236,219		8.4	$	2.51		75,469	$	2.51
$	2.89		52,000		8.9	$	2.89		8,750	$	2.89
$	2.93		370,417		9.1	$	2.93		65,392	$	2.93
$	3.18		155,000		9.3	$	3.18		11,250	$	3.18
			1,437,053		8.2	$	1.85		338,372	$	1.55

The aggregate intrinsic value of options exercised for the three months ended March 31, 2018 was $1.3 million. There were no options exercised for the three months ended March 31, 2017.

Restricted Stock Units

The Company’s restricted stock units activity is summarized as follows:

	Units Issued and Outstanding		Weighted-Average Grant Date Fair Value
As of December 31, 2017		20,000	$	19.42
Granted		33,000	$	16.23
Released		—	$	—
Canceled		—	$	—
As of March 31, 2018		53,000	$	17.43

Restricted stock units are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Restricted stock unit awards generally vest over a five-year period and are subject to the grantee’s continued service with the Company.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

8. Stock-Based Compensation

The following table summarizes the distribution of stock-based compensation expense (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Cost of revenue	$	9	$	5
Research and development		87		31
Selling, general and administrative		174		92
Total	$	270	$	128

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Net Income Per Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Net Income Per Share

9. Net Income Per Share

For the periods presented prior to the Company’s IPO, basic and diluted net income per common share are presented in conformity with the two-class method required for participating securities. Prior to the closing of the Company’s IPO, all 10,742,500 outstanding shares of its Series Seed, Series A, and Series B convertible preferred shares, which were participating securities, were converted to common stock on a one-to-one basis.   

The following table presents the calculation of basic and diluted net income per share (amounts in thousands, except per share data):

	Three Months Ended
	March 31,
	2018		2017
Numerator:
Basic:
Net income	$	473	$	1,039
Net income allocable to preferred stockholders		—		768
Net income allocable to common stockholders		473		271
Diluted:
Net income		473		1,039
Net income allocable to preferred stockholders		—		725
Net income allocable to common stockholders		473		314
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic net income     per share allocable to common stockholders		16,823,851		3,785,022
Diluted shares:
Effect of potentially dilutive securities:
Stock options (1)		1,353,754		858,954
Weighted-average shares used in computing diluted net income    per common share allocable to common stockholders		18,177,605		4,643,976
Net income per common share:
Basic	$	0.03	$	0.07
Diluted	$	0.03	$	0.07

(1) Including early-exercised options.

The potentially dilutive securities outstanding as of March 31, 2018 and 2017 that were excluded from the computation of diluted net income per common share for the periods presented as their effect would have been antidilutive were 32,000 and 67,000 shares, respectively, related to stock options.

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The components of income before income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Domestic	$	270	$	1,558
Foreign		55		20
Income before income taxes	$	325	$	1,578

The components of the provision for income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2018			2017
United States	$	(158	)	$	532
Foreign		10			7
Provision for income taxes	$	(148	)	$	539

Tax Reform H.R.1, originally known as the Tax Cuts and Jobs Act (“Act”), was enacted on December 22, 2017. The Act contains several key provisions that may have significant financial statement effects including the remeasurement of deferred taxes and the recognition of liabilities for taxes on mandatory repatriation and certain other foreign income. The Act reduces the corporate tax rate to 21%, effective January 1, 2018. ASC 740 requires companies to recognize the effect of tax law changes in the period of enactment, the effects must be recognized by companies’ December 2017 financial statements, even though the effective date for most provisions is January 1, 2018. For the year ended December 31, 2017, the Act resulted in a reduction to net deferred tax assets of $0.3 million and recorded liabilities for taxes on mandatory repatriation of foreign income and taxes on other foreign income from foreign subsidiaries of approximately $35,000 of which $34,000 can be offset with a foreign tax credit.

Subsequent to the enactment of the Act, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 ("SAB 118"). SAB 118 addresses the application of ASC 740 in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act and permits the recording of provisional amounts relating to the impact of the Act during a measurement period which is not to extend beyond one year from the Act enactment date.

As of March 31, 2018, there was no material increase in the liability for unrecognized tax benefits nor any accrued interest and penalties related to uncertain tax positions.

Additionally, as of March 31, 2018, the Company had approximately $0.3 million of unrecognized tax benefits of which $0.1 million was netted against deferred tax assets with a full valuation allowance. If these amounts are recognized, there will be a tax benefit of $0.1 million against the Company's effective tax rate.

The Company’s federal, state, and foreign tax returns may be subject to examination by the tax authorities for fiscal years ended from 2014 to 2017.

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Organization and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

Organization

Techpoint, Inc. and its wholly-owned subsidiaries (the “Company”) was originally incorporated in California in April 2012 and reincorporated into Delaware in July 2017. The Company is a fabless semiconductor company that designs, markets and sells mixed-signal integrated circuits for multiple video applications in the security surveillance and automotive markets. The Company is headquartered in San Jose, California.

Initial Public Offering

Initial Public Offering

On September 29, 2017, the Company completed its initial public offering (“IPO”) of Japanese depositary shares (“JDSs”).  In connection with the IPO, the Company sold 1,520,000 JDSs, represented by 1,520,000 shares of the Company’s common stock at a price to the public of $5.85 per share for net proceeds of $8.1 million, after deducting underwriting discounts and commissions of $0.7 million. Additionally, offering costs incurred by the Company totaled $3.0 million. Prior to the closing of the Company’s IPO, all outstanding shares of its preferred stock converted to common stock on a one-to-one basis.

On October 25, 2017, the managing underwriter of our IPO elected to purchase an additional 228,000 JDSs, represented by 228,000 shares of common stock, pursuant to the underwriters’ over-allotment option. We subsequently completed the sale at the IPO price of $5.85 per share and received net proceeds of $1.2 million, after deducting underwriter discounts and commissions of $0.1 million.

Basis of Consolidation and Significant Accounting Policies

Basis of Consolidation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated. The functional currency of each of the Company’s subsidiaries is the U.S. dollar. Foreign currency gains or losses are recorded as other income (expense) in the Condensed Consolidated Statements of Operations.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2017 contained in our Annual Report on Form 10-K filed with the SEC on March 14, 2018.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which only include normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods and are not necessarily indicative of the results to be expected for the full fiscal year or for any other future annual or interim periods.

Revenue Recognition

Revenue Recognition

The Company principally sells its products to distributors who, in turn, sell to ODMs, contract manufacturers and design houses. We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, or ASC 606, Revenue from Contracts with Customers. We satisfy our performance obligations and recognize revenue upon shipment, at which time control of our products is transferred to our customers.  We apply the following five-step model for recognizing revenue from contracts with customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when the performance obligation is satisfied.

Product revenues consist of sales of mixed-signal integrated circuits into the security surveillance and automotive camera markets. The Company generally requires advance payments from customers and records these advance payments, or contract liabilities, as Customer Deposits on our Condensed Consolidated Balance Sheet. The Company provides product assurance warranty only and does not offer warranties to be purchased separately. The Company does not offer variable consideration or other significant payment terms and allocates the transaction price to each distinct product based on a relative standalone selling price. Revenue is recognized when control of the product is transferred to our customers, upon shipment, at which time the performance obligation is satisfied. The Company’s shipping terms are primarily free on board shipping point, whereby legal title, risks and rewards of ownership, and physical possession are transferred to the customer upon shipment. Substantially all of the Company’s customers pay in advance of shipment, and no stock rotation, price protection or return rights are offered.

Use of Management's Estimates

Use of Management’s Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts ofrevenue and expenses during the reporting period. Significant estimates included in the condensed consolidated financial statements include inventory valuation, valuation allowance for recorded deferred tax assets, and stock based compensation. These estimates are based upon information available as of the date of the condensed consolidated financial statements. Actual results could differ materially from those estimates.

Concentration of Customer and Credit Risk

Concentration of Customer and Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Risks associated with cash and cash equivalents are mitigated by banking with creditworthy institutions. The Company generally requires advance payments from customers. The Company also performs credit evaluations of its customers and provides credit to certain customers in the normal course of business. The Company has not incurred bad debt write-offs during any of the periods presented.

For the three months ended March 31, 2018 and 2017, one customer, a distributor, accounted for 84% and 83% of revenue, respectively. Additionally, for the three months ended March 31, 2018 and 2017, one of our end-customers accounted for 67% and 57% of revenue, respectively, which primarily occurred through this distributor. No other customers or end-customers accounted for 10% or greater of our revenue in the three months ended March 31, 2018 and 2017, respectively.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Stock Compensation Guidance. In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09 (Topic 718), Stock Compensation – Improvements to Employee Share-Based Payment Accounting, which simplified the accounting for share based payment transactions, including the income tax consequences, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. ASU 2016-09 became effective beginning the first quarter of fiscal 2017. The Company adopted the guidance in the first quarter of fiscal 2017, which resulted in no material impacts on its financial position, results of operations, or cash flows, and expects the primary impact of this standard to be the income tax effects of awards recognized in the income statement when the awards are vested or settled. The potential tax impacts remain unknown until the award vest or settlement date.

Inventory Measurement Guidance. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, amending ASC Topic 330 – Inventory (“ASC 330”).  Upon adoption, this topic supersedes the existing guidance under ASC 330 and aims to simplify the subsequent measurement of inventory. Prior to adoption, inventory could be measured at the lower of cost or market, which could result in several potential outcomes, as market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. The major amendments were as follows: 1. Inventory should be measured at the lower of cost or net realizable value. 2. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. 3. The amendment does not apply to inventory measured under LIFO or the retail inventory method. 4. The amendment does apply to all other inventory, which includes inventory measured via FIFO or average cost. ASU 2015-11 became effective for periods beginning after December 15, 2016 (including interim reporting periods within those fiscal years), or the first quarter of fiscal 2017. The Company adopted this guidance in the first quarter of fiscal 2017, which resulted in no material impact on its condensed consolidated financial statements.

Revenue Recognition Guidance. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, creating ASC 606. Upon adoption, this topic supersedes the existing guidance under ASC Topic 605 – Revenue Recognition and aims to simplify the number of requirements to follow for revenue recognition and make revenue recognition more comparable across various entities, industries, jurisdictions and capital markets. There are 5 core principles: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Additional considerations under this update include: accounting for costs to obtain or fulfill a contract with a customer and additional quantitative and qualitative disclosures. ASU 2014-09 became effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter 2018, and allows for retrospective or modified retrospective application. The Company adopted this guidance in the first quarter of fiscal 2018 under the modified retrospective approach as applied to customer contracts that were not completed as of January 1, 2018. As a result, financial information for reporting periods beginning after January 1, 2018 are reported under the new standard, while comparative financial information has not been adjusted and continues to be reported in accordance with the previous standard. There was no cumulative impact to adopting the new standard on the Company’s condensed consolidated financial statements. Additionally, the adoption has no impact on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2018 and Condensed Consolidated Statement of Operations for the three months ended March 31, 2018.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

Lease Guidance. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases with terms in excess of one year on their balance sheet as a right-of-use asset and a lease liability at the commencement date. The new standard also simplifies the accounting for sale and leaseback transactions. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods therein and must be adopted using a modified retrospective method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company plans to adopt this standard in the first quarter of fiscal 2019 and is currently evaluating the potential impact of this standard on its condensed consolidated financial statements.

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Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Components of Inventory

Inventory consists of the following (in thousands):

	March 31,		December 31,
	2018		2017
Work in process	$	979	$	1,214
Finished goods		812		1,633
Total inventory	$	1,791	$	2,847

Components of Property and Equipment - Net

Property and equipment consists of the following (in thousands):

	March 31,			December 31,
	2018			2017
Computer equipment	$	741		$	687
Leasehold improvements		59			59
Furniture		30			30
Total property and equipment		830			776
Less: accumulated depreciation		(501	)		(451	)
Total property and equipment - net	$	329		$	325

Components of Accrued Liabilities

Accured liabilities consist of the following (in thousands):

	March 31,		December 31,
	2018		2017
Engineering services	$	486	$	131
Payroll-related expenses		348		291
Professional fees		67		23
Accrued warranty		62		73
Taxes payable		35		37
Other		21		18
Total accrued liabilities	$	1,019	$	573

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of Financial Assets Measured at Fair Value on Recurring Basis

Financial assets measured at fair value on a recurring basis were as follows (in thousands):

	Fair Value Measurement at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of March 31, 2018
Assets:
Money market funds	$	6,957	$	—	$	—	$	6,957
As of December 31, 2017
Assets:
Money market funds	$	6,951	$	—	$	—	$	6,951

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of Product Revenue from Customer by Geographic Region

Product revenue from customers is designated based on the geographic region to which the product is delivered. Revenue by geographic region was as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
China	$	6,089	$	6,113
South Korea		502		589
Taiwan		192		200
Other		270		328
Total revenue	$	7,053	$	7,230

Schedule of Revenue by Principal Products Lines

Revenue by principal product lines were as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Security surveillance	$	6,288	$	6,724
Automotive		765		506
Total revenue	$	7,053	$	7,230

Schedule of Net Long-lived Assets by Geographic Region

Long-lived assets are attributed to the geographic region where they are located. Net long-lived assets by geographic region were as follows (in thousands):

	March 31,		December 31,
	2018		2017
Taiwan	$	223	$	205
United States		80		92
Japan		17		16
China		7		9
South Korea		2		3
Total property and equipment - net	$	329	$	325

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Commitments And Contingencies Disclosure [Abstract]

Schedule of Aggregate Future Minimum Lease Payments Under Operating Leases

As of March 31, 2018, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2018 (remaining nine months)	$	359
2019		543
2020		70
Total	$	972

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of Number of Shares of Common Stock Reserved for Future Issuances

The Company has reserved the following number of shares of common stock for future issuances:

	March 31,
	2018
Outstanding stock awards		1,490,053
Shares available for future issuance under the 2017 Stock Incentive Plan		4,586,476
Total common stock reserved for future issuances		6,076,529

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Stock Option Plan (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Award and Option Activity Under Stock Incentive Plan

The Company’s stock award activity under the stock incentive plan is summarized as follows:

	Awards Available for Grant
As of December 31, 2017		3,933,649
Authorized		681,660
Granted		(33,000	)
Canceled		4,167
As of March 31, 2018		4,586,476

The Company’s stock option activity under the stock incentive plan is summarized as follows:

	Options Issued and Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
As of December 31, 2017		1,573,568		$	1.78		8.4	$	24,556
Granted		—		$	—
Exercised (1)		(132,348	)	$	1.05
Canceled		(4,167	)	$	0.97
As of March 31, 2018		1,437,053		$	1.85		8.2	$	24,348
Options vested and expected to vest as of March 31, 2018		1,437,053		$	1.85		8.2	$	24,348
Options vested and exercisable as of March 31, 2018		338,372		$	1.55		7.8	$	5,835

(1) Includes vesting of early-exercised options.

Summary of Stock Options Outstanding and Exercisable by Exercise Price

The stock options outstanding and exercisable by exercise price at March 31, 2018, are as follows:

		Options Outstanding						Options Vested and Exercisable
Exercise Price		Number Outstanding		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
$	0.10		6,667		5.3	$	0.10		—	$	—
$	0.16		98,500		5.8	$	0.16		59,583	$	0.16
$	0.37		292,834		7.1	$	0.37		67,500	$	0.37
$	0.97		225,416		8.0	$	0.97		50,428	$	0.97
$	2.51		236,219		8.4	$	2.51		75,469	$	2.51
$	2.89		52,000		8.9	$	2.89		8,750	$	2.89
$	2.93		370,417		9.1	$	2.93		65,392	$	2.93
$	3.18		155,000		9.3	$	3.18		11,250	$	3.18
			1,437,053		8.2	$	1.85		338,372	$	1.55

Summary of Restricted Stock Units Activity

The Company’s restricted stock units activity is summarized as follows:

	Units Issued and Outstanding		Weighted-Average Grant Date Fair Value
As of December 31, 2017		20,000	$	19.42
Granted		33,000	$	16.23
Released		—	$	—
Canceled		—	$	—
As of March 31, 2018		53,000	$	17.43

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Distribution of Stock-Based Compensation Expense

The following table summarizes the distribution of stock-based compensation expense (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Cost of revenue	$	9	$	5
Research and development		87		31
Selling, general and administrative		174		92
Total	$	270	$	128

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Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Share

The following table presents the calculation of basic and diluted net income per share (amounts in thousands, except per share data):

	Three Months Ended
	March 31,
	2018		2017
Numerator:
Basic:
Net income	$	473	$	1,039
Net income allocable to preferred stockholders		—		768
Net income allocable to common stockholders		473		271
Diluted:
Net income		473		1,039
Net income allocable to preferred stockholders		—		725
Net income allocable to common stockholders		473		314
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic net income     per share allocable to common stockholders		16,823,851		3,785,022
Diluted shares:
Effect of potentially dilutive securities:
Stock options (1)		1,353,754		858,954
Weighted-average shares used in computing diluted net income    per common share allocable to common stockholders		18,177,605		4,643,976
Net income per common share:
Basic	$	0.03	$	0.07
Diluted	$	0.03	$	0.07

(1) Including early-exercised options.

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Schedule of Components of Income Before Income Taxes

The components of income before income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2018		2017
Domestic	$	270	$	1,558
Foreign		55		20
Income before income taxes	$	325	$	1,578

Schedule of Components of Provision For Income Taxes

The components of the provision for income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2018			2017
United States	$	(158	)	$	532
Foreign		10			7
Provision for income taxes	$	(148	)	$	539

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Organization and Summary of Significant Accounting Policies - Additional Information (Details) $ / shares in Units, $ in Millions			3 Months Ended
	Oct. 25, 2017 USD ($) $ / shares shares	Sep. 29, 2017 USD ($) $ / shares shares	Mar. 31, 2018 Customer	Mar. 31, 2017 Customer
Customer and Distributor | Sales Revenue, Net | Customer Concentration Risk
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Concentration risk, percentage			84.00%	83.00%
Number of major customers comprising more than ten percent of revenues | Customer			1	1
End Customers | Sales Revenue, Net | Customer Concentration Risk
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Concentration risk, percentage			67.00%	57.00%
Number of major customers comprising more than ten percent of revenues | Customer			1	1
Initial Public Offering
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Initial public offering, price per share | $ / shares		$ 5.85
Net proceeds from initial public offering		$ 8.1
Underwriting discounts and commissions		0.7
Offering costs		$ 3.0
Preferred stock, conversion basis			one-to-one basis
Japanese Depositary Shares | Initial Public Offering
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Initial public offering, shares of common stock sold | shares		1,520,000
Initial public offering, price per share | $ / shares	$ 5.85
Net proceeds from initial public offering	$ 1.2
Underwriting discounts and commissions	$ 0.1
Additional Shares of Common Stock Issued | shares	228,000
California
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Company original incorporation date of incorporation			2012-04
Company Incorporation place			California
Delaware
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Company Incorporation place			Delaware
Company reincorporation incorporation date of incorporation			2017-07

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Balance Sheet Components - Components of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]
Work in process	$ 979	$ 1,214
Finished goods	812	1,633
Total inventory	$ 1,791	$ 2,847

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Balance Sheet Components - Components of Property and Equipment - Net (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 830	$ 776
Less: accumulated depreciation	(501)	(451)
Total property and equipment - net	329	325
Computer Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	741	687
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	59	59
Furniture
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 30	$ 30

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Balance Sheet Components - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]
Depreciation expense	$ 100,000	$ 100,000
Payments received in advance of shipments	100,000		$ 6,000
Company recognized revenue	$ 6,000

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Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]
Engineering services	$ 486	$ 131
Payroll-related expenses	348	291
Professional fees	67	23
Accrued warranty	62	73
Taxes payable	35	37
Other	21	18
Total accrued liabilities	$ 1,019	$ 573

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Fair Value Measurements - Schedule of Financial Assets Measured at Fair Value on Recurring Basis (Details) - Fair Value Measurements Recurring - Money Market Funds - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets:
Money market funds	$ 6,957	$ 6,951
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Money market funds	$ 6,957	$ 6,951

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Segment Information - Additional Information (Details)	3 Months Ended
	Mar. 31, 2018 Segment
Segment Reporting [Abstract]
Number of reportable segments	1
Number of operating segments	1

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Segment Information - Schedule of Product Revenue from Customers by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 7,053	$ 7,230
China
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	6,089	6,113
South Korea
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	502	589
Taiwan
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	192	200
Other
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 270	$ 328

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Segment Information - Schedule of Revenue by Principal Product Lines (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	$ 7,053	$ 7,230
Security Surveillance
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	6,288	6,724
Automotive
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	$ 765	$ 506

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Segment Information - Schedule of Net Long-Lived Assets by Geographic Region (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	$ 329	$ 325
Taiwan
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	223	205
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	80	92
Japan
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	17	16
China
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	7	9
South Korea
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	$ 2	$ 3

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Commitments and Contingencies - Additional Information (Details)	3 Months Ended
	Mar. 31, 2018 USD ($) Litigation	Mar. 31, 2017 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Non-cancellable operating lease agreements, expiration description	non-cancellable lease agreements expiring through fiscal year 2020.
Rent expense under operating leases	$ 100,000	$ 100,000
Future minimum payments under purchase commitments for year ending December 31, 2018	200,000
Future minimum payments under purchase commitments for year ending December 31, 2019	$ 40,000
Number of litigation | Litigation	0

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Commitments and Contingencies - Schedule of Aggregate Future Minimum Lease Payments Under Operating Leases (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2018 (remaining nine months)	$ 359
2019	543
2020	70
Total	$ 972

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Stockholders' Equity - Additional Information (Details) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Class Of Stock [Line Items]
Common stock shares authorized	75,000,000	75,000,000
Common stock par value	$ 0.0001	$ 0.0001
Common stock shares issued	16,884,012	16,752,171
Common stock shares outstanding	16,884,012	16,752,171
Common stock issued subject to repurchase related to early exercise of options	240,341	289,334
Preferred Stock, Par Value
Class Of Stock [Line Items]
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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Stockholders' Equity - Schedule of Number of Shares of Common Stock Reserved for Future Issuances (Details)	Mar. 31, 2018 shares
Class Of Stock [Line Items]
Common stock reserved for future issuances	6,076,529
Outstanding Stock Awards
Class Of Stock [Line Items]
Common stock reserved for future issuances	1,490,053
Shares Available for Future Issuance under 2017 Stock Incentive Plan
Class Of Stock [Line Items]
Common stock reserved for future issuances	4,586,476

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Stock Option Plan - Additional Information (Details)	1 Months Ended		3 Months Ended		12 Months Ended
	Sep. 30, 2017 shares	Apr. 30, 2012	Mar. 31, 2018 USD ($) shares	Mar. 31, 2017 USD ($) shares	Dec. 31, 2018 shares	Dec. 31, 2017 USD ($) shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for future issuances			6,076,529
Automatic increase in number of shares available for issuance under the stock option plan			681,660
Number of options early exercised			0	0
Number of shares of unvested common stock repurchased			0	0
Number of shares subject to repurchase			240,341			289,334
Aggregate price of shares held subject to repurchase | $			$ 100,000			$ 200,000
Share-based compensation arrangement by share-based payment award, aggregate intrinsic value of options exercised | $			$ 1,300,000	$ 0
Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options vesting period			5 years
Share-based compensation arrangement by share-based payment award, stock awards conversion ratio			1
2012 Stock Option Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options vesting term of award			The 2012 Plan provides for the granting of stock-based awards to employees, directors, and consultants under terms and provisions established by the Company’s board of directors. Under the terms of the 2012 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Company’s board of directors. The terms of options granted under the 2012 Plan may not exceed ten years.
Share-based compensation arrangement by share-based payment award, additional awards	0
Common stock reserved for future issuances	0
2012 Stock Option Plan | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, percentage of voting rights of all classes of stock to be owned by employees to determine stock options exercise price on grant date		10.00%
Share-based compensation arrangement by share-based payment award, exercise prices percentage of fair market of common stock on grant date		110.00%
2012 Stock Option Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Options exercisable period		10 years
Two Thousand Seventeen Stock Option Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options vesting term of award			Options granted generally vest over a five-year period and generally are exercisable up to 10 years.
Share based compensation arrangement by share based payment award number of shares authorized increment description			The number of shares available for issuance under the 2017 Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2018 and ending on (and including) January 1, 2027, in an amount equal to the lesser of (1) 4% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (2) another amount determined by the Company’s board of directors.
Automatic increase in number of shares authorized under stock option plan, start date			Jan. 01, 2018
Automatic increase in number of shares authorized under stock option plan, end date			Jan. 01, 2027
Share-based compensation arrangement by share-based payment award, options vesting period	5 years
Two Thousand Seventeen Stock Option Plan | Scenario Forecast
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Automatic increase in number of shares available for issuance under the stock option plan					681,660
Two Thousand Seventeen Stock Option Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Options exercisable period	10 years
Share-based compensation arrangement by share-based payment award, percentage of annual increase in number of shares authorized of outstanding shares of common stock	4.00%

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Stock Option Plan - Summary of Stock Awards and Option Activity Under Stock Incentive Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Awards Available for Grant, Beginning balance	3,933,649
Awards Available for Grant, Authorized	681,660
Awards Available for Grant, Granted	(33,000)
Awards Available for Grant, Canceled	4,167
Awards Available for Grant, Ending balance	4,586,476	3,933,649
Options Issued and Outstanding, Beginning balance	1,573,568
Options Issued and Outstanding, Exercised	(132,348)
Options Issued and Outstanding, Canceled	(4,167)
Options Issued and Outstanding, Ending balance	1,437,053	1,573,568
Options Issued and Outstanding, Options vested and expected to vest	1,437,053
Options Issued and Outstanding, Options vested and exercisable	338,372
Weighted Average Exercise Price, Beginning balance	$ 1.78
Weighted Average Exercise Price, Exercised	1.05
Weighted Average Exercise Price, Canceled	0.97
Weighted Average Exercise Price, Ending balance	1.85	$ 1.78
Weighted Average Exercise Price, Options vested and expected to vest	1.85
Weighted Average Exercise Price, Options vested and exercisable	$ 1.55
Weighted-Average Remaining Contractual Term	8 years 2 months 12 days	8 years 4 months 24 days
Weighted-Average Remaining Contractual Term, Options vested and expected to vest	8 years 2 months 12 days
Weighted-Average Remaining Contractual Term, Options vested and exercisable	7 years 9 months 18 days
Aggregate Intrinsic Value	$ 24,348	$ 24,556
Aggregate Intrinsic Value, Options vested and expected to vest	24,348
Aggregate Intrinsic Value, Options vested and exercisable	$ 5,835

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Stock Option Plan - Summary of Stock Options Outstanding and Exercisable by Exercise Price (Details) - $ / shares	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options Outstanding, Number Outstanding	1,437,053
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	8 years 2 months 12 days
Options Outstanding, Weighted-Average Exercise Price	$ 1.85	$ 1.78
Options Vested and Exercisable, Number Exercisable	338,372
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 1.55
Exercise Price 0.10
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 0.10
Options Outstanding, Number Outstanding	6,667
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	5 years 3 months 18 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.10
Exercise Price 0.16
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 0.16
Options Outstanding, Number Outstanding	98,500
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	5 years 9 months 18 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.16
Options Vested and Exercisable, Number Exercisable	59,583
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 0.16
Exercise Price 0.37
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 0.37
Options Outstanding, Number Outstanding	292,834
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	7 years 1 month 6 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.37
Options Vested and Exercisable, Number Exercisable	67,500
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 0.37
Exercise Price 0.97
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 0.97
Options Outstanding, Number Outstanding	225,416
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	8 years
Options Outstanding, Weighted-Average Exercise Price	$ 0.97
Options Vested and Exercisable, Number Exercisable	50,428
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 0.97
Exercise Price 2.51
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 2.51
Options Outstanding, Number Outstanding	236,219
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	8 years 4 months 24 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.51
Options Vested and Exercisable, Number Exercisable	75,469
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 2.51
Exercise Price 2.89
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 2.89
Options Outstanding, Number Outstanding	52,000
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	8 years 10 months 24 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.89
Options Vested and Exercisable, Number Exercisable	8,750
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 2.89
Exercise Price 2.93
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 2.93
Options Outstanding, Number Outstanding	370,417
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	9 years 1 month 6 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.93
Options Vested and Exercisable, Number Exercisable	65,392
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 2.93
Exercise Price 3.18
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 3.18
Options Outstanding, Number Outstanding	155,000
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	9 years 3 months 18 days
Options Outstanding, Weighted-Average Exercise Price	$ 3.18
Options Vested and Exercisable, Number Exercisable	11,250
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 3.18

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Stock Option Plan - Summary of Restricted Stock Units Activity (Details) - Restricted Stock Units	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units Issued and Outstanding, Beginning balance | shares	20,000
Units Issued and Outstanding, Granted | shares	33,000
Units Issued and Outstanding, Ending balance | shares	53,000
Weighted-Average Grant Date Fair Value, Beginning balance | $ / shares	$ 19.42
Weighted-Average Grant Date Fair Value, Granted | $ / shares	16.23
Weighted-Average Grant Date Fair Value, Ending balance | $ / shares	$ 17.43

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Stock-Based Compensation - Distribution of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share Based Compensation Expense [Line Items]
Stock-based compensation	$ 270	$ 128
Cost of Revenue
Share Based Compensation Expense [Line Items]
Stock-based compensation	9	5
Research and Development
Share Based Compensation Expense [Line Items]
Stock-based compensation	87	31
Selling, General and Administrative
Share Based Compensation Expense [Line Items]
Stock-based compensation	$ 174	$ 92

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Net Income Per Share - Additional Information (Details)	3 Months Ended
	Mar. 31, 2018 shares	Mar. 31, 2017 shares
Earnings Per Share [Abstract]
Convertible preferred stock, terms of conversion	Prior to the closing of the Company’s IPO, all 10,742,500 outstanding shares of its Series Seed, Series A, and Series B convertible preferred shares, which were participating securities, were converted to common stock on a one-to-one basis.
Preferred stock convertible conversion ratio	1
Common stock issued for conversion of preferred shares	10,742,500
Antidilutive securities excluded from computation of earnings per share amount	32,000	67,000

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Net Income Per Share - Computation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Basic:
Net income	$ 473	$ 1,039
Net income allocable to preferred stockholders		768
Net income allocable to common stockholders	473	271
Diluted:
Net income	473	1,039
Net income allocable to preferred stockholders		725
Net income allocable to common stockholders	$ 473	$ 314
Denominator:
Weighted-average shares outstanding in computing basic net income per share allocable to common stockholders	16,823,851	3,785,022
Effect of potentially dilutive securities:
Stock options	1,353,754	858,954
Weighted-average shares used in computing diluted net income per common share allocable to common stockholders	18,177,605	4,643,976
Net income per common share:
Basic	$ 0.03	$ 0.07
Diluted	$ 0.03	$ 0.07

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Income Taxes - Schedule of Components of Income Before Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Domestic	$ 270	$ 1,558
Foreign	55	20
Income before income taxes	$ 325	$ 1,578

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Income Taxes - Schedule of Components of Provision For Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
United States	$ (158)	$ 532
Foreign	10	7
Provision for income taxes	$ (148)	$ 539

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Income Tax [Line Items]
Corporate tax rate, percentage	21.00%
Decrease in net deferred tax assets		$ 300,000
Liabilities for repatriation of foreign income and taxes		35,000
Foreign income from foreign subsidiaries offset with foreign tax credit.		$ 34,000
Unrecognized tax benefits	$ 300,000
Deferred tax assets with valuation allowance	100,000
Unrecognized tax benefit against effective tax rate	$ 100,000
Earliest Tax Year
Income Tax [Line Items]
Examination by tax authorities	2014
Latest Tax Year
Income Tax [Line Items]
Examination by tax authorities	2017