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 September 30, 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

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

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

As of November 9, 2018, the registrant had 17,282,347 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)

	September 30,		December 31,
	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	24,846	$	21,536
Accounts receivable		348		93
Inventory		2,509		2,847
Prepaid expenses and other current assets		1,009		978
Total current assets		28,712		25,454
Property and equipment - net		452		325
Deferred tax assets		721		652
Other assets		213		161
Total assets	$	30,098	$	26,592
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,038	$	760
Accrued liabilities		974		573
Liability related to early exercised stock options		154		152
Customer deposits		197		6
Total current liabilities		2,363		1,491
Other liabilities		150		133
Total liabilities		2,513		1,624
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized    as of September 30, 2018 and December 31, 2017; nil shares issued and    outstanding as of September 30, 2018 and December 31, 2017		—		—
Common stock, par value $0.0001 per share - 75,000,000 shares    authorized as of September 30, 2018 and December 31, 2017; 17,074,636 and    16,752,171 shares issued and outstanding as of September 30, 2018 and    December 31, 2017, respectively		2		2
Additional paid-in-capital		18,959		17,580
Retained earnings		8,624		7,386
Total stockholders’ equity		27,585		24,968
Total liabilities and stockholders’ equity	$	30,098	$	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						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenue	$	8,667		$	8,112		$	22,190		$	23,381
Cost of revenue		4,220			3,427			10,513			9,749
Gross profit		4,447			4,685			11,677			13,632
Operating expenses
Research and development		1,704			1,156			5,493			3,817
Selling, general and administrative		1,899			1,541			5,092			4,126
Total operating expenses		3,603			2,697			10,585			7,943
Income from operations		844			1,988			1,092			5,689
Other income (expense)		(94	)		(59	)		130			(69	)
Income before income taxes		750			1,929			1,222			5,620
Income taxes		186			646			(16	)		1,923
Net income	$	564		$	1,283		$	1,238		$	3,697
Net income allocable to preferred stockholders	$	—		$	778		$	—		$	2,559
Net income allocable to common stockholders	$	564		$	505		$	1,238		$	1,138
Net income per share allocable to common stockholders:
Basic	$	0.03		$	0.09		$	0.07		$	0.25
Diluted	$	0.03		$	0.08		$	0.07		$	0.24
Weighted average shares outstanding in computing net income per    share allocable to common stockholders
Basic		17,045,689			5,827,662			16,936,898			4,515,414
Diluted		17,922,635			6,667,371			18,039,404			5,327,685

See accompanying notes to condensed consolidated financial statements.

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Techpoint, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

	Nine Months Ended
	September 30,
	2018			2017
Cash Flows From Operating Activities
Net income	$	1,238		$	3,697
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation and amortization		170			154
Stock-based compensation		1,014			733
Write-off of deferred costs		57			—
Write-off of long lived assets		—			9
Deferred income taxes		(69	)		(135	)
Changes in operating assets and liabilities:
Accounts receivable		(255	)		19
Inventory		338			(245	)
Prepaid expenses and other current assets		(31	)		(214	)
Other assets		(54	)		(7	)
Accounts payable		259			422
Accrued expenses		401			324
Customer deposits		191			(645	)
Other liabilities		17			41
Net cash provided by operating activities		3,276			4,153
Cash Flows From Investing Activities
Purchase of property and equipment		(276	)		(145	)
Net cash used in investing activities		(276	)		(145	)
Cash Flows From Financing Activities
Net proceeds from exercise of stock options		367			26
Payments of deferred costs		(57	)		(1,355	)
Proceeds from initial public offering, net of underwriter commission		—			8,139
Net cash provided by financing activities		310			6,810
Net increase in cash and cash equivalents		3,310			10,818
Cash and cash equivalents at beginning of period		21,536			10,006
Cash and cash equivalents at end of period	$	24,846		$	20,824
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	43		$	1,834
Supplemental Disclosure of Noncash Investing and Financing Information
Vesting of early exercised options	$	56		$	79
Property and equipment purchased but not yet paid	$	40		$	—
Conversion of preferred stock to common stock upon initial public offering	$	—		$	8,792
Unpaid deferred costs	$	—		$	741

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 original design manufacturers (“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 each significant customer, or distributor, and significant end-customer, revenue as a percentage of total revenue is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Customer
Customer A		70	%		79	%		76	%		73	%
End-Customer
End-Customer A (1)		59	%		59	%		62	%		60	%

(1) Sales to End-Customer A primarily occurred through Customer A

Recently Adopted Accounting Pronouncements

Stock Compensation Guidance. In June 2018, the FASB issued ASU No 2018-07, Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718 to include share-based payments issued to nonemployees for goods or services. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company early adopted this guidance on July 1, 2018 during the third quarter of fiscal 2018, which resulted in no 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 September 30, 2018 and Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2018.

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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. The new standard also requires lessees and lessors to disclose qualitative and quantitative information about their leases and significant judgements made in applying the standard. The Company is currently evaluating the potential impact of this standard on its condensed consolidated financial statements and related disclosures. Based on preliminary evaluations, the Company expects that all of its operating lease commitments will be subject to ASU 2016-02 and recognized as lease liabilities and right-of-use assets upon adoption. The Company anticipates that ASU 2016-02 will have a material impact on its condensed balance sheet since operating lease commitments as of September 30, 2018 were in excess of $1.0 million. However, ASU 2016-02 is not expected to have a material impact on our condensed consolidated statement of operations as expense treatment under Topic 842 is not materially different than current practices under Topic 840 – Leases. While early adoption is permitted, the Company plans to adopt this standard in the first quarter of fiscal 2019.

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

	September 30,		December 31,
	2018		2017
Work in process	$	1,376	$	1,214
Finished goods		1,133		1,633
Total inventory	$	2,509	$	2,847

Property and Equipment - Net

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

	September 30,			December 31,
	2018			2017
Computer equipment and software	$	980		$	687
Leasehold improvements		61			59
Furniture		30			30
Total property and equipment		1,071			776
Less: accumulated depreciation		(619	)		(451	)
Total property and equipment - net	$	452		$	325

The Company recorded $0.1 million and $0.1 million of depreciation expense for the three months ended September 30, 2018 and 2017, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2018 and 2017, respectively.

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Accrued Liabilities

Accured liabilities consist of the following (in thousands):

	September 30,		December 31,
	2018		2017
Engineering services	$	407	$	131
Payroll-related expenses		359		291
Professional fees		86		23
Accrued warranty		66		73
Taxes payable		22		37
Other		34		18
Total accrued liabilities	$	974	$	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 $0.2 million, $29,000, and $6,000 as of September 30, 2018, June 30, 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 September 30, 2018, the Company recognized $29,000 of revenue from the June 30, 2018 customer deposits balance. During the nine months ended September 30, 2018, the Company recognized $6,000 of revenue 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 September 30, 2018
Assets:
Money market funds	$	6,969	$	—	$	—	$	6,969
As of December 31, 2017
Assets:
Money market funds	$	6,951	$	—	$	—	$	6,951

As of September 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
China	$	6,992	$	6,968	$	18,175	$	19,806
South Korea		705		705		2,018		2,156
Taiwan		589		277		933		650
Japan		370		150		1,047		714
Other		11		12		17		55
Total revenue	$	8,667	$	8,112	$	22,190	$	23,381

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Security surveillance	$	7,083	$	7,388	$	18,622	$	21,415
Automotive		1,584		724		3,568		1,966
Total revenue	$	8,667	$	8,112	$	22,190	$	23,381

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):

	September 30,		December 31,
	2018		2017
Taiwan	$	288	$	205
United States		81		92
Japan		73		16
China		5		9
South Korea		5		3
Total property and equipment - net	$	452	$	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 September 30, 2018, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2018 (remaining three months)	$	135
2019		694
2020		201
Total	$	1,030

Rent expense under operating leases was $0.2 million and $0.1 million for the three months ended September 30, 2018 and 2017, respectively, and $0.5 million and $0.4 million for the nine months ended September 30, 2018 and 2017, respectively.

Purchase Commitments

As of September 30, 2018, the Company had purchase commitments with its third-party suppliers through fiscal year 2021. Future minimum payments under purchase commitments are $0.1 million, $0.1 million, $0.1 million and $0.1 million for the year ending December 31, 2018, 2019, 2020 and 2021, 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 September 30, 2018 and December 31, 2017. The shares of preferred stock issued and outstanding was nil as of September 30, 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 September 30, 2018 and December 31, 2017. As of September 30, 2018, the shares of common stock issued and outstanding were 17,074,636 excluding 182,507 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:

	September 30,
	2018
Outstanding stock awards		1,369,602
Shares available for future issuance under the 2017 Stock Incentive Plan		4,516,810
Total common stock reserved for future issuances		5,886,412

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.

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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		(156,000	)
Canceled		57,501
As of September 30, 2018		4,516,810

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 common stock and additional paid in capital as the repurchase right lapses.

For the three months ended September 30, 2018, the Company issued 3,167 unvested shares of common stock upon early exercise for total exercise proceeds of $1,000. There were no options early exercised for the three months ended September 30, 2017. The Company did not repurchase any shares of unvested common stock related to early exercised stock options during the three months ended September 30, 2018 and 2017.

For the nine months ended September 30, 2018 and 2017, the Company issued 27,333 and 37,167 unvested shares of common stock upon early exercise, respectively, for total exercise proceeds of $0.1 million and $26,000, respectively, and repurchased 6,834 and 45,666 shares of unvested common stock related to early exercised options at the original purchase price.

As of September 30, 2018 and December 31, 2017, 182,507 and 289,334 shares, respectively, held by employees and nonemployees were subject to repurchase at an aggregate price of $0.2 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)		(322,465	)	$	1.13
Canceled (2)		(57,501	)	$	1.62
As of September 30, 2018		1,193,602		$	1.97		7.8	$	11,066
Options vested and expected to vest as of September 30, 2018		1,193,602		$	1.97		7.8	$	11,066
Options vested and exercisable as of September 30, 2018		377,155		$	1.75		7.5	$	3,579

(1) Includes vesting of early-exercised options.

(2) Includes repurchases of unvested early-exercised options.

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The stock options outstanding and exercisable by exercise price at September 30, 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
$	0.16		70,000		5.3	$	0.16		66,081	$	0.16
$	0.37		231,255		6.6	$	0.37		62,663	$	0.37
$	0.97		159,084		7.5	$	0.97		42,075	$	0.97
$	2.51		196,761		7.9	$	2.51		60,851	$	2.51
$	2.89		52,000		8.4	$	2.89		14,250	$	2.89
$	2.93		347,002		8.6	$	2.93		100,820	$	2.93
$	3.18		137,500		8.8	$	3.18		30,415	$	3.18
			1,193,602		7.8	$	1.97		377,155	$	1.75

The aggregate intrinsic value of options exercised for the nine months ended September 30, 2018 and 2017 was $2.8 million and $0.4 million, respectively.Options granted generally vest over a five-year period and generally are exercisable up to 10 years.

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		156,000	$	11.73
Released		—	$	—
Canceled		—	$	—
As of September 30, 2018		176,000	$	12.61

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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	28	$	9	$	46	$	22
Research and development		111		110		231		187
Selling, general and administrative		412		324		737		524
Total	$	551	$	443	$	1,014	$	733

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

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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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Numerator:
Basic:
Net income	$	564	$	1,283	$	1,238	$	3,697
Net income allocable to preferred stockholders		—		778		—		2,559
Net income allocable to common stockholders	$	564	$	505	$	1,238	$	1,138
Diluted:
Net income	$	564	$	1,283	$	1,238	$	3,697
Net income allocable to preferred stockholders		—		737		—		2,425
Net income allocable to common stockholders	$	564	$	546	$	1,238	$	1,272
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic    net income per share allocable to common stockholders		17,045,689		5,827,662		16,936,898		4,515,414
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)		876,946		839,709		1,102,506		812,271
Weighted-average shares used in computing diluted net    income per common share allocable to common stockholders		17,922,635		6,667,371		18,039,404		5,327,685
Net income per common share:
Basic	$	0.03	$	0.09	$	0.07	$	0.25
Diluted	$	0.03	$	0.08	$	0.07	$	0.24

(1) Including early-exercised options.

The potentially dilutive securities outstanding for the three months ended September 30, 2018 and 2017 and the nine months ended September 30, 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 50,000; 3,000; 91,000; and 123,000 shares, respectively, related to stock awards.

10. Income Taxes

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Domestic	$	708	$	1,891	$	1,089	$	5,535
Foreign		42		38		133		85
Income before income taxes	$	750	$	1,929	$	1,222	$	5,620

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
United States	$	171	$	633	$	(44	)	$	1,894
Foreign		15		13		28			29
Provision for income taxes	$	186	$	646	$	(16	)	$	1,923

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. Topic 740 – Income Taxes (“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 September 30, 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 September 30, 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 4K or 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.

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 85 million integrated circuits. Our revenue has decreased 5% to $22.2 million for the nine months ended September 30, 2018 from $23.4 million for the nine months ended September 30, 2017. We recorded net income of $1.2 million and $3.7 million for the nine months ended September 30, 2018 and 2017, respectively. The security surveillance market accounted for a majority of our revenue in the nine months ended September 30, 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 $3.6 million and $2.0 million of revenue on sales into the automotive market in the nine months ended September 30, 2018 and 2017, respectively.

We sell our products to distributors that fulfill third-party orders for our products. We also sell directly to ODMs. In the nine months ended September 30, 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 three months to 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. Our research and development expense was $1.7 million and $1.2 million for the three months ended September 30, 2018 and 2017, respectively, and $5.5 million and $3.8 million for the nine months ended September 30, 2018 and 2017, respectively. We expect that our research and development expenses will increase significantly in the future as we pursue additional opportunities. As of September 30, 2018, we had 71 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. While we expect the composition of our end-customers to change over time, our business and operating results depends on our ability to continually target new and retain existing end-customers that make large orders. In the nine months ended September 30, 2018 and 2017, Hikvision, the largest security surveillance manufacturer in China and one of our end-customers, accounted for 62% and 60% of our revenue, respectively. Although large customers can help us increase our revenue and improve our results of operations, reliance on large customers is a risk to our business. For example, the U.S. Senate’s recent passage of the 2019 National Defense Authorization Act (“NDAA”) could adversely impact our business with Hikvision because the NDAA includes a provision barring U.S. government agencies from purchasing video surveillance products from certain Chinese manufacturers, including Hikvision. Although this does not prohibit commercial sales of video surveillance products by Hikvision in the U.S., which we understand is the predominant business Hikvision does in the U.S with video surveillance products that incorporate our products, the impact of these new regulations and the uncertainty of U.S. and China trade relations may adversely impact our business in the future with Hikvision and other significant customers.

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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 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 pay in advance of shipment, and no stock rotation, price protection or return rights are offered.

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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, 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, professional fees and facility costs. 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 and development tax credits, non-deductible stock-based compensation, international tax reform provisions, and tax benefits from stock-option exercises and dispositions.

Results of Operations

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenue	$	8,667		$	8,112		$	22,190		$	23,381
Cost of revenue (1)		4,220			3,427			10,513			9,749
Gross profit		4,447			4,685			11,677			13,632
Operating expenses: (1)
Research and development		1,704			1,156			5,493			3,817
Selling, general and administrative		1,899			1,541			5,092			4,126
Total operating expenses		3,603			2,697			10,585			7,943
Income from operations		844			1,988			1,092			5,689
Other income (expense)		(94	)		(59	)		130			(69	)
Income before income taxes		750			1,929			1,222			5,620
Income taxes		186			646			(16	)		1,923
Net income	$	564		$	1,283		$	1,238		$	3,697

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	28	$	9	$	46	$	22
Research and development		111		110		231		187
Selling, general and administrative		412		324		737		524
Total	$	551	$	443	$	1,014	$	733

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						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenue		100	%		100	%		100	%		100	%
Cost of revenue		49			42			47			42
Gross profit		51			58			53			58
Operating expenses:
Research and development		19			14			25			16
Selling, general and administrative		22			19			23			18
Total operating expenses		41			33			48			34
Income from operations		10			25			5			24
Other income (expense)		(1	)		(1	)		1			—
Income before income taxes		9			24			6			24
Income taxes		2			8			—			8
Net income		7	%		16	%		6	%		16	%

Comparison of the Three and Nine Months Ended September 30, 2018 and September 30, 2017

Revenue

	Three Months Ended September 30,				Change					Nine Months Ended September 30,				Change
	2018		2017		Amount		%			2018		2017		Amount			%
	(dollars in thousands)
Revenue	$	8,667	$	8,112	$	555		7	%	$	22,190	$	23,381	$	(1,191	)		(5	)%

Revenue increased $0.6 million, or 7%, for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017. This increase was primarily due to a 42% increase in volume of shipments as a result of increased demand for our HD-TVI receivers in the automotive market and integrated HD-TVI transmitters and Image Signal Processor products in the security surveillance market, partially offset by a 25% decrease in overall average selling price due to change in product mix.

Revenue decreased $1.2 million, or 5%, for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017. This decrease was primarily due to a 22% decrease in overall average selling price due to change in product mix offset by a 22% increase in volume of shipments as a result of increased demand for our HD-TVI receivers in the automotive market and integrated HD-TVI transmitters and Image Signal Processor products in the security surveillance market.

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Revenue by geographic region

The table below sets forth the major components of the change in revenue by geographic region for the three and nine months ended September 30, 2018 and September 30, 2017:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
China		81	%		86	%		82	%		85	%
South Korea		8			9			9			9
Taiwan		7			3			4			3
Japan		4			2			5			3
Other		—			—			—			—
Total revenue		100	%		100	%		100	%		100	%

Cost of revenue and gross margin

	Three Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	2018			2017			Amount		%			2018			2017			Amount		%
	(dollars in thousands)
Cost of revenue	$	4,220		$	3,427		$	793		23	%	$	10,513		$	9,749		$	764		8	%
Gross margin		51	%		58	%							53	%		58	%

Cost of revenue increased by $0.8 million, or 23%, while gross margin decreased to 51% from 58% for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017. Cost of revenue increased due to a 42% increase in volume of shipments offset by changes in product mix, which had a negative impact on gross margin.

Cost of revenue increased by $0.8 million while gross margin decreased to 53% from 58% for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017. Cost of revenue increased due to a 22% increase in volume of shipments, offset by a $0.2 million decrease in inventory write downs and changes in product mix, which had a negative impact on gross margin.

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 September 30,				Change					Nine Months Ended September 30,				Change
	2018		2017		Amount		%			2018		2017		Amount		%
	(dollars in thousands)
Research and development	$	1,704	$	1,156	$	548		47	%	$	5,493	$	3,817	$	1,676		44	%

Research and development expenses increased $0.5 million, or 47%, for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 primarily due to a $0.4 million increase in tape-out expenses and a $0.1 million increase in personnel costs due to a 10% increase in headcount as a result of expanding operations.

Research and development expenses increased $1.7 million, or 44% for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 primarily due to a $1.0 million increase in tape-out expenses, a $0.3 million increase in product development costs relating to design, prototype, and software expenses and a $0.3 million increase in personnel costs due to a 18% increase in headcount as a result of expanding operations.

20

Selling, general and administrative expense

	Three Months Ended September 30,				Change					Nine Months Ended September 30,				Change
	2018		2017		Amount		%			2018		2017		Amount		%
	(dollars in thousands)
Selling, general and administrative	$	1,899	$	1,541	$	358		23	%	$	5,092	$	4,126	$	966		23	%

Selling, general and administrative expenses increased $0.4 million, or 23%, for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 primarily due to a $0.2 million increase in professional service fees and a $0.1 million increase in stock-based compensation expense.  

Selling, general and administrative expenses increased $1.0 million, or 23%, for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 primarily due to a $0.4 million increase in professional service fees, a $0.2 million increase in personnel costs due to a 13% increase in headcount as a result of expanding operations, a $0.2 million increase in stock-based compensation expense, and a $0.1 million increase in equity management software expense.

Other income and expense

	Three Months Ended September 30,						Change						Nine Months Ended September 30,					Change
	2018			2017			Amount			%			2018		2017			Amount		%
	(dollars in thousands)
Other income (expense)	$	(94	)	$	(59	)	$	(35	)		59	%	$	130	$	(69	)	$	199		(288	)%

Other expense of $0.1 million for the three months ended September 30, 2018 and other income of $0.1 million for the nine months ended September 30, 2018 was driven by foreign currency exchange transactions and foreign currency fluctuations as a result of an increase in our cash balance from IPO proceeds received in Japanese Yen in September 2017.

Provision for income taxes

	Three Months Ended September 30,				Change						Nine Months Ended September 30,					Change
	2018		2017		Amount			%			2018			2017		Amount			%
	(dollars in thousands)
Income taxes	$	186	$	646	$	(460	)		(71	)%	$	(16	)	$	1,923	$	(1,939	)		(101	)%

The provision for income taxes decreased $0.5 million, or 71%, for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 and $1.9 million, or 101%, for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017 primarily due to a decrease in taxable income, tax benefits from stock-option exercises and dispositions, and a reduction in the corporate tax rate to 21% as a result of tax law changes during December 2017.

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 September 30, 2018 were $24.8 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

21

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 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):

	Nine Months Ended
	September 30,
	2018			2017
Net cash provided by operating activities	$	3,276		$	4,153
Net cash used in investing activities		(276	)		(145	)
Net cash provided by financing activities		310			6,810
Net increase in cash and cash equivalents	$	3,310		$	10,818

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 nine months ended September 30, 2018, net cash provided by operating activities was $3.3 million, primarily due to net income of $1.2 million, non-cash charges of $1.2 million primarily driven by stock-based compensation, depreciation and amortization offset by deferred income taxes, and cash inflow provided by the change in net operating assets and liabilities of $0.9 million. The cash inflow provided by the change in net operating assets and liabilities was primarily due to a $0.4 million cash inflow in accrued expenses due to timing of services performed, a $0.3 million cash inflow in inventory due to product sales in excess of units on hand and manufactured during the period, a $0.3 million cash inflow in accounts payable due to timing of vendor payments, a $0.2 million cash inflow in customer deposits due to timing of customer pre-payments, offset by $0.3 million cash outflow in accounts receivable due to timing of customer collections.

During the nine months ended September 30, 2017, net cash provided by operating activities was $4.2 million, primarily due to net income of $3.7 million, non-cash charges of $0.8 million primarily driven by stock-based compensation, depreciation and amortization and deferred income taxes, and cash outflow provided by the change in net operating assets and liabilities of $0.3 million. The cash outflow provided by the change in net operating assets and liabilities was primarily due to a $0.6 million cash outflow in customer deposits due to timing of customer pre-payments offset by a $0.4 million cash inflow in accounts payable due to timing of vendor payment.

Investing Activities

During the nine months ended September 30, 2018 and 2017, cash used in investing activities was $0.3 million and $0.1 million, respectively, due to purchases of property and equipment.

Financing Activities

During the nine months ended September 30, 2018, cash provided by financing activities was $0.3 million primarily due to net proceeds from the exercise of stock options. During the nine months ended September 30, 2017, cash provided by financing activities was $6.8 million due to IPO proceeds received offset by payments for deferred offering costs.

22

Contractual Obligations

We are required to make future payments under certain operating leases. Our outstanding contractual obligations as of September 30, 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	$	1,030	$	648	$	382	$	—	$	—
Purchase commitments		355		155		200		—		—
Total	$	1,385	$	803	$	582	$	—	$	—

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 September 30, 2018 and 2017 and nine months ended September 30, 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 September 30, 2018 and 2017 and nine months ended September 30, 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

23

September 30, 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.

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 September 30, 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.

Except for the risk factor set forth below, 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 and in “Part II, Item 1A, Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 filed with the SEC on August 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

24

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.

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
10.1	Separation Agreement and Release, dated September 20, 2018, by and between Techpoint, Inc. and Yukiko Tegarden. (incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K on September 27, 2018)
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: November 14, 2018	By:	/s/ Stephen Wong
		Stephen Wong
		Interim Chief Financial Officer (Principal Financial and Accounting Officer)
Date: November 14, 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: November 14, 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, Stephen Wong, 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: November 14, 2018	By:	/s/ Stephen Wong
		Stephen Wong
		Interim 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 September 30, 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: November 14, 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 September 30, 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: November 14, 2018	By:	/s/ Stephen Wong
		Stephen Wong
		Interim Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 09, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
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 Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Common Stock, Shares Outstanding		17,282,347

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 24,846	$ 21,536
Accounts receivable	348	93
Inventory	2,509	2,847
Prepaid expenses and other current assets	1,009	978
Total current assets	28,712	25,454
Property and equipment - net	452	325
Deferred tax assets	721	652
Other assets	213	161
Total assets	30,098	26,592
Current liabilities:
Accounts payable	1,038	760
Accrued liabilities	974	573
Liability related to early exercised stock options	154	152
Customer deposits	197	6
Total current liabilities	2,363	1,491
Other liabilities	150	133
Total liabilities	2,513	1,624
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized as of September 30, 2018 and December 31, 2017; nil shares issued and outstanding as of September 30, 2018 and December 31, 2017
Common stock, par value $0.0001 per share - 75,000,000 shares authorized as of September 30, 2018 and December 31, 2017; 17,074,636 and 16,752,171 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	2	2
Additional paid-in-capital	18,959	17,580
Retained earnings	8,624	7,386
Total stockholders’ equity	27,585	24,968
Total liabilities and stockholders’ equity	$ 30,098	$ 26,592

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
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	$ 0.0001	$ 0.0001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	17,074,636	16,752,171
Common stock, shares outstanding	17,074,636	16,752,171

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenue	$ 8,667	$ 8,112	$ 22,190	$ 23,381
Cost of revenue	4,220	3,427	10,513	9,749
Gross profit	4,447	4,685	11,677	13,632
Operating expenses
Research and development	1,704	1,156	5,493	3,817
Selling, general and administrative	1,899	1,541	5,092	4,126
Total operating expenses	3,603	2,697	10,585	7,943
Income from operations	844	1,988	1,092	5,689
Other income (expense)	(94)	(59)	130	(69)
Income before income taxes	750	1,929	1,222	5,620
Income taxes	186	646	(16)	1,923
Net income	564	1,283	1,238	3,697
Net income allocable to preferred stockholders		778		2,559
Net income allocable to common stockholders	$ 564	$ 505	$ 1,238	$ 1,138
Net income per share allocable to common stockholders:
Basic	$ 0.03	$ 0.09	$ 0.07	$ 0.25
Diluted	$ 0.03	$ 0.08	$ 0.07	$ 0.24
Weighted average shares outstanding in computing net income per share allocable to common stockholders
Basic	17,045,689	5,827,662	16,936,898	4,515,414
Diluted	17,922,635	6,667,371	18,039,404	5,327,685

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flows From Operating Activities
Net income	$ 1,238	$ 3,697
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	170	154
Stock-based compensation	1,014	733
Write-off of deferred costs	57
Write-off of long lived assets		9
Deferred income taxes	(69)	(135)
Changes in operating assets and liabilities:
Accounts receivable	(255)	19
Inventory	338	(245)
Prepaid expenses and other current assets	(31)	(214)
Other assets	(54)	(7)
Accounts payable	259	422
Accrued expenses	401	324
Customer deposits	191	(645)
Other liabilities	17	41
Net cash provided by operating activities	3,276	4,153
Cash Flows From Investing Activities
Purchase of property and equipment	(276)	(145)
Net cash used in investing activities	(276)	(145)
Cash Flows From Financing Activities
Net proceeds from exercise of stock options	367	26
Payments of deferred costs	(57)	(1,355)
Proceeds from initial public offering, net of underwriter commission		8,139
Net cash provided by financing activities	310	6,810
Net increase in cash and cash equivalents	3,310	10,818
Cash and cash equivalents at beginning of period	21,536	10,006
Cash and cash equivalents at end of period	24,846	20,824
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	43	1,834
Supplemental Disclosure of Noncash Investing and Financing Information
Vesting of early exercised options	56	79
Property and equipment purchased but not yet paid	$ 40
Conversion of preferred stock to common stock upon initial public offering		8,792
Unpaid deferred costs		$ 741

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Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 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 original design manufacturers (“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 each significant customer, or distributor, and significant end-customer, revenue as a percentage of total revenue is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Customer
Customer A		70	%		79	%		76	%		73	%
End-Customer
End-Customer A (1)		59	%		59	%		62	%		60	%

(1) Sales to End-Customer A primarily occurred through Customer A

Recently Adopted Accounting Pronouncements

Stock Compensation Guidance. In June 2018, the FASB issued ASU No 2018-07, Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718 to include share-based payments issued to nonemployees for goods or services. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company early adopted this guidance on July 1, 2018 during the third quarter of fiscal 2018, which resulted in no 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 September 30, 2018 and Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 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. The new standard also requires lessees and lessors to disclose qualitative and quantitative information about their leases and significant judgements made in applying the standard. The Company is currently evaluating the potential impact of this standard on its condensed consolidated financial statements and related disclosures. Based on preliminary evaluations, the Company expects that all of its operating lease commitments will be subject to ASU 2016-02 and recognized as lease liabilities and right-of-use assets upon adoption. The Company anticipates that ASU 2016-02 will have a material impact on its condensed balance sheet since operating lease commitments as of September 30, 2018 were in excess of $1.0 million. However, ASU 2016-02 is not expected to have a material impact on our condensed consolidated statement of operations as expense treatment under Topic 842 is not materially different than current practices under Topic 840 – Leases. While early adoption is permitted, the Company plans to adopt this standard in the first quarter of fiscal 2019.

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Balance Sheet Components

9 Months Ended

Sep. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

	September 30,		December 31,
	2018		2017
Work in process	$	1,376	$	1,214
Finished goods		1,133		1,633
Total inventory	$	2,509	$	2,847

Property and Equipment - Net

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

	September 30,			December 31,
	2018			2017
Computer equipment and software	$	980		$	687
Leasehold improvements		61			59
Furniture		30			30
Total property and equipment		1,071			776
Less: accumulated depreciation		(619	)		(451	)
Total property and equipment - net	$	452		$	325

The Company recorded $0.1 million and $0.1 million of depreciation expense for the three months ended September 30, 2018 and 2017, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2018 and 2017, respectively.

Accrued Liabilities

Accured liabilities consist of the following (in thousands):

	September 30,		December 31,
	2018		2017
Engineering services	$	407	$	131
Payroll-related expenses		359		291
Professional fees		86		23
Accrued warranty		66		73
Taxes payable		22		37
Other		34		18
Total accrued liabilities	$	974	$	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 $0.2 million, $29,000, and $6,000 as of September 30, 2018, June 30, 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 September 30, 2018, the Company recognized $29,000 of revenue from the June 30, 2018 customer deposits balance. During the nine months ended September 30, 2018, the Company recognized $6,000 of revenue from the December 31, 2017 customer deposits balance.

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Fair Value Measurements

9 Months Ended

Sep. 30, 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 September 30, 2018
Assets:
Money market funds	$	6,969	$	—	$	—	$	6,969
As of December 31, 2017
Assets:
Money market funds	$	6,951	$	—	$	—	$	6,951

As of September 30, 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

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
China	$	6,992	$	6,968	$	18,175	$	19,806
South Korea		705		705		2,018		2,156
Taiwan		589		277		933		650
Japan		370		150		1,047		714
Other		11		12		17		55
Total revenue	$	8,667	$	8,112	$	22,190	$	23,381

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Security surveillance	$	7,083	$	7,388	$	18,622	$	21,415
Automotive		1,584		724		3,568		1,966
Total revenue	$	8,667	$	8,112	$	22,190	$	23,381

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):

	September 30,		December 31,
	2018		2017
Taiwan	$	288	$	205
United States		81		92
Japan		73		16
China		5		9
South Korea		5		3
Total property and equipment - net	$	452	$	325

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Commitments and Contingencies

9 Months Ended

Sep. 30, 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 September 30, 2018, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2018 (remaining three months)	$	135
2019		694
2020		201
Total	$	1,030

Rent expense under operating leases was $0.2 million and $0.1 million for the three months ended September 30, 2018 and 2017, respectively, and $0.5 million and $0.4 million for the nine months ended September 30, 2018 and 2017, respectively.

Purchase Commitments

As of September 30, 2018, the Company had purchase commitments with its third-party suppliers through fiscal year 2021. Future minimum payments under purchase commitments are $0.1 million, $0.1 million, $0.1 million and $0.1 million for the year ending December 31, 2018, 2019, 2020 and 2021, 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

9 Months Ended

Sep. 30, 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 September 30, 2018 and December 31, 2017. The shares of preferred stock issued and outstanding was nil as of September 30, 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 September 30, 2018 and December 31, 2017. As of September 30, 2018, the shares of common stock issued and outstanding were 17,074,636 excluding 182,507 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:

	September 30,
	2018
Outstanding stock awards		1,369,602
Shares available for future issuance under the 2017 Stock Incentive Plan		4,516,810
Total common stock reserved for future issuances		5,886,412

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Stock Option Plan

9 Months Ended

Sep. 30, 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’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		(156,000	)
Canceled		57,501
As of September 30, 2018		4,516,810

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 common stock and additional paid in capital as the repurchase right lapses.

For the three months ended September 30, 2018, the Company issued 3,167 unvested shares of common stock upon early exercise for total exercise proceeds of $1,000. There were no options early exercised for the three months ended September 30, 2017. The Company did not repurchase any shares of unvested common stock related to early exercised stock options during the three months ended September 30, 2018 and 2017.

For the nine months ended September 30, 2018 and 2017, the Company issued 27,333 and 37,167 unvested shares of common stock upon early exercise, respectively, for total exercise proceeds of $0.1 million and $26,000, respectively, and repurchased 6,834 and 45,666 shares of unvested common stock related to early exercised options at the original purchase price.

As of September 30, 2018 and December 31, 2017, 182,507 and 289,334 shares, respectively, held by employees and nonemployees were subject to repurchase at an aggregate price of $0.2 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)		(322,465	)	$	1.13
Canceled (2)		(57,501	)	$	1.62
As of September 30, 2018		1,193,602		$	1.97		7.8	$	11,066
Options vested and expected to vest as of September 30, 2018		1,193,602		$	1.97		7.8	$	11,066
Options vested and exercisable as of September 30, 2018		377,155		$	1.75		7.5	$	3,579

(1) Includes vesting of early-exercised options.

(2) Includes repurchases of unvested early-exercised options.

The stock options outstanding and exercisable by exercise price at September 30, 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
$	0.16		70,000		5.3	$	0.16		66,081	$	0.16
$	0.37		231,255		6.6	$	0.37		62,663	$	0.37
$	0.97		159,084		7.5	$	0.97		42,075	$	0.97
$	2.51		196,761		7.9	$	2.51		60,851	$	2.51
$	2.89		52,000		8.4	$	2.89		14,250	$	2.89
$	2.93		347,002		8.6	$	2.93		100,820	$	2.93
$	3.18		137,500		8.8	$	3.18		30,415	$	3.18
			1,193,602		7.8	$	1.97		377,155	$	1.75

The aggregate intrinsic value of options exercised for the nine months ended September 30, 2018 and 2017 was $2.8 million and $0.4 million, respectively.Options granted generally vest over a five-year period and generally are exercisable up to 10 years.

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		156,000	$	11.73
Released		—	$	—
Canceled		—	$	—
As of September 30, 2018		176,000	$	12.61

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

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	28	$	9	$	46	$	22
Research and development		111		110		231		187
Selling, general and administrative		412		324		737		524
Total	$	551	$	443	$	1,014	$	733

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Net Income Per Share

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Numerator:
Basic:
Net income	$	564	$	1,283	$	1,238	$	3,697
Net income allocable to preferred stockholders		—		778		—		2,559
Net income allocable to common stockholders	$	564	$	505	$	1,238	$	1,138
Diluted:
Net income	$	564	$	1,283	$	1,238	$	3,697
Net income allocable to preferred stockholders		—		737		—		2,425
Net income allocable to common stockholders	$	564	$	546	$	1,238	$	1,272
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic    net income per share allocable to common stockholders		17,045,689		5,827,662		16,936,898		4,515,414
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)		876,946		839,709		1,102,506		812,271
Weighted-average shares used in computing diluted net    income per common share allocable to common stockholders		17,922,635		6,667,371		18,039,404		5,327,685
Net income per common share:
Basic	$	0.03	$	0.09	$	0.07	$	0.25
Diluted	$	0.03	$	0.08	$	0.07	$	0.24

(1) Including early-exercised options.

The potentially dilutive securities outstanding for the three months ended September 30, 2018 and 2017 and the nine months ended September 30, 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 50,000; 3,000; 91,000; and 123,000 shares, respectively, related to stock awards.

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Income Taxes

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Domestic	$	708	$	1,891	$	1,089	$	5,535
Foreign		42		38		133		85
Income before income taxes	$	750	$	1,929	$	1,222	$	5,620

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
United States	$	171	$	633	$	(44	)	$	1,894
Foreign		15		13		28			29
Provision for income taxes	$	186	$	646	$	(16	)	$	1,923

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. Topic 740 – Income Taxes (“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 September 30, 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 September 30, 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)

9 Months Ended

Sep. 30, 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 original design manufacturers (“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 each significant customer, or distributor, and significant end-customer, revenue as a percentage of total revenue is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Customer
Customer A		70	%		79	%		76	%		73	%
End-Customer
End-Customer A (1)		59	%		59	%		62	%		60	%

(1) Sales to End-Customer A primarily occurred through Customer A

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Stock Compensation Guidance. In June 2018, the FASB issued ASU No 2018-07, Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718 to include share-based payments issued to nonemployees for goods or services. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company early adopted this guidance on July 1, 2018 during the third quarter of fiscal 2018, which resulted in no 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 September 30, 2018 and Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 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. The new standard also requires lessees and lessors to disclose qualitative and quantitative information about their leases and significant judgements made in applying the standard. The Company is currently evaluating the potential impact of this standard on its condensed consolidated financial statements and related disclosures. Based on preliminary evaluations, the Company expects that all of its operating lease commitments will be subject to ASU 2016-02 and recognized as lease liabilities and right-of-use assets upon adoption. The Company anticipates that ASU 2016-02 will have a material impact on its condensed balance sheet since operating lease commitments as of September 30, 2018 were in excess of $1.0 million. However, ASU 2016-02 is not expected to have a material impact on our condensed consolidated statement of operations as expense treatment under Topic 842 is not materially different than current practices under Topic 840 – Leases. While early adoption is permitted, the Company plans to adopt this standard in the first quarter of fiscal 2019.

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Organization and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Summary of Revenue as Percentage of Total Revenue for Each Significant Customer, or Distributor, and Significant End-Customer

For each significant customer, or distributor, and significant end-customer, revenue as a percentage of total revenue is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Customer
Customer A		70	%		79	%		76	%		73	%
End-Customer
End-Customer A (1)		59	%		59	%		62	%		60	%

(1) Sales to End-Customer A primarily occurred through Customer A

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Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2018

Balance Sheet Related Disclosures [Abstract]

Components of Inventory

Inventory consists of the following (in thousands):

	September 30,		December 31,
	2018		2017
Work in process	$	1,376	$	1,214
Finished goods		1,133		1,633
Total inventory	$	2,509	$	2,847

Components of Property and Equipment - Net

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

	September 30,			December 31,
	2018			2017
Computer equipment and software	$	980		$	687
Leasehold improvements		61			59
Furniture		30			30
Total property and equipment		1,071			776
Less: accumulated depreciation		(619	)		(451	)
Total property and equipment - net	$	452		$	325

Components of Accrued Liabilities

Accured liabilities consist of the following (in thousands):

	September 30,		December 31,
	2018		2017
Engineering services	$	407	$	131
Payroll-related expenses		359		291
Professional fees		86		23
Accrued warranty		66		73
Taxes payable		22		37
Other		34		18
Total accrued liabilities	$	974	$	573

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2018
Assets:
Money market funds	$	6,969	$	—	$	—	$	6,969
As of December 31, 2017
Assets:
Money market funds	$	6,951	$	—	$	—	$	6,951

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Segment Information (Tables)

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
China	$	6,992	$	6,968	$	18,175	$	19,806
South Korea		705		705		2,018		2,156
Taiwan		589		277		933		650
Japan		370		150		1,047		714
Other		11		12		17		55
Total revenue	$	8,667	$	8,112	$	22,190	$	23,381

Schedule of Revenue by Principal Products Lines

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Security surveillance	$	7,083	$	7,388	$	18,622	$	21,415
Automotive		1,584		724		3,568		1,966
Total revenue	$	8,667	$	8,112	$	22,190	$	23,381

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):

	September 30,		December 31,
	2018		2017
Taiwan	$	288	$	205
United States		81		92
Japan		73		16
China		5		9
South Korea		5		3
Total property and equipment - net	$	452	$	325

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Schedule of Aggregate Future Minimum Lease Payments Under Operating Leases

As of September 30, 2018, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2018 (remaining three months)	$	135
2019		694
2020		201
Total	$	1,030

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 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:

	September 30,
	2018
Outstanding stock awards		1,369,602
Shares available for future issuance under the 2017 Stock Incentive Plan		4,516,810
Total common stock reserved for future issuances		5,886,412

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Stock Option Plan (Tables)

9 Months Ended

Sep. 30, 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		(156,000	)
Canceled		57,501
As of September 30, 2018		4,516,810

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)		(322,465	)	$	1.13
Canceled (2)		(57,501	)	$	1.62
As of September 30, 2018		1,193,602		$	1.97		7.8	$	11,066
Options vested and expected to vest as of September 30, 2018		1,193,602		$	1.97		7.8	$	11,066
Options vested and exercisable as of September 30, 2018		377,155		$	1.75		7.5	$	3,579

(1) Includes vesting of early-exercised options.

(2) Includes repurchases of unvested early-exercised options.

Summary of Stock Options Outstanding and Exercisable by Exercise Price

The stock options outstanding and exercisable by exercise price at September 30, 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
$	0.16		70,000		5.3	$	0.16		66,081	$	0.16
$	0.37		231,255		6.6	$	0.37		62,663	$	0.37
$	0.97		159,084		7.5	$	0.97		42,075	$	0.97
$	2.51		196,761		7.9	$	2.51		60,851	$	2.51
$	2.89		52,000		8.4	$	2.89		14,250	$	2.89
$	2.93		347,002		8.6	$	2.93		100,820	$	2.93
$	3.18		137,500		8.8	$	3.18		30,415	$	3.18
			1,193,602		7.8	$	1.97		377,155	$	1.75

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		156,000	$	11.73
Released		—	$	—
Canceled		—	$	—
As of September 30, 2018		176,000	$	12.61

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	28	$	9	$	46	$	22
Research and development		111		110		231		187
Selling, general and administrative		412		324		737		524
Total	$	551	$	443	$	1,014	$	733

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Numerator:
Basic:
Net income	$	564	$	1,283	$	1,238	$	3,697
Net income allocable to preferred stockholders		—		778		—		2,559
Net income allocable to common stockholders	$	564	$	505	$	1,238	$	1,138
Diluted:
Net income	$	564	$	1,283	$	1,238	$	3,697
Net income allocable to preferred stockholders		—		737		—		2,425
Net income allocable to common stockholders	$	564	$	546	$	1,238	$	1,272
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic    net income per share allocable to common stockholders		17,045,689		5,827,662		16,936,898		4,515,414
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)		876,946		839,709		1,102,506		812,271
Weighted-average shares used in computing diluted net    income per common share allocable to common stockholders		17,922,635		6,667,371		18,039,404		5,327,685
Net income per common share:
Basic	$	0.03	$	0.09	$	0.07	$	0.25
Diluted	$	0.03	$	0.08	$	0.07	$	0.24

(1) Including early-exercised options.

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 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				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Domestic	$	708	$	1,891	$	1,089	$	5,535
Foreign		42		38		133		85
Income before income taxes	$	750	$	1,929	$	1,222	$	5,620

Schedule of Components of Provision For Income Taxes

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018			2017
United States	$	171	$	633	$	(44	)	$	1,894
Foreign		15		13		28			29
Provision for income taxes	$	186	$	646	$	(16	)	$	1,923

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Organization and Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands			9 Months Ended
	Oct. 25, 2017	Sep. 29, 2017	Sep. 30, 2018	Sep. 30, 2017
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Net proceeds from initial public offering				$ 8,139
ASU 2016-02
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Operating lease commitments excess amount			$ 1,000
Initial Public Offering
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Initial public offering, price per share		$ 5.85
Net proceeds from initial public offering		$ 8,100
Underwriting discounts and commissions		700
Offering costs		$ 3,000
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		1,520,000
Initial public offering, price per share	$ 5.85
Net proceeds from initial public offering	$ 1,200
Underwriting discounts and commissions	$ 100
Additional Shares of Common Stock Issued	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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Organization and Summary of Significant Accounting Policies - Summary of Revenue as Percentage of Total Revenue for Each Significant Customer, or Distributor, and Significant End-Customer (Details) - Sales Revenue, Net - Customer Concentration Risk	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Customer A
Product Information [Line Items]
Concentration risk, percentage	70.00%	79.00%	76.00%	73.00%
End-Customer A
Product Information [Line Items]
Concentration risk, percentage	59.00%	59.00%	62.00%	60.00%

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Balance Sheet Components - Components of Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]
Work in process	$ 1,376	$ 1,214
Finished goods	1,133	1,633
Total inventory	$ 2,509	$ 2,847

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Balance Sheet Components - Components of Property and Equipment - Net (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 1,071	$ 776
Less: accumulated depreciation	(619)	(451)
Total property and equipment - net	452	325
Computer Equipment and Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	980	687
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	61	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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]
Depreciation expense	$ 100,000	$ 100,000	$ 200,000	$ 200,000
Payments received in advance of shipments	0.2		0.2		$ 29,000	$ 6,000
Company recognized revenue	$ 29,000		$ 6,000

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Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]
Engineering services	$ 407	$ 131
Payroll-related expenses	359	291
Professional fees	86	23
Accrued warranty	66	73
Taxes payable	22	37
Other	34	18
Total accrued liabilities	$ 974	$ 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	Sep. 30, 2018	Dec. 31, 2017
Assets:
Money market funds	$ 6,969	$ 6,951
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Money market funds	$ 6,969	$ 6,951

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Segment Information - Additional Information (Details)	9 Months Ended
	Sep. 30, 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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 8,667	$ 8,112	$ 22,190	$ 23,381
China
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	6,992	6,968	18,175	19,806
South Korea
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	705	705	2,018	2,156
Taiwan
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	589	277	933	650
Japan
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	370	150	1,047	714
Other
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 11	$ 12	$ 17	$ 55

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Segment Information - Schedule of Revenue by Principal Product Lines (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	$ 8,667	$ 8,112	$ 22,190	$ 23,381
Security Surveillance
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	7,083	7,388	18,622	21,415
Automotive
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	$ 1,584	$ 724	$ 3,568	$ 1,966

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Segment Information - Schedule of Net Long-Lived Assets by Geographic Region (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	$ 452	$ 325
Taiwan
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	288	205
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	81	92
Japan
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	73	16
China
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	5	9
South Korea
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	$ 5	$ 3

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Commitments and Contingencies - Additional Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) Litigation	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Litigation	Sep. 30, 2017 USD ($)
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	$ 0.2	$ 0.1	$ 0.5	$ 0.4
Future minimum payments under purchase commitments for year ending December 31, 2018	0.1		0.1
Future minimum payments under purchase commitments for year ending December 31, 2019	0.1		0.1
Future minimum payments under purchase commitments for year ending December 31, 2020	0.1		0.1
Future minimum payments under purchase commitments for year ending December 31, 2021	$ 0.1		$ 0.1
Number of litigation | Litigation	0		0

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Commitments and Contingencies - Schedule of Aggregate Future Minimum Lease Payments Under Operating Leases (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2018 (remaining three months)	$ 135
2019	694
2020	201
Total	$ 1,030

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Stockholders' Equity - Additional Information (Details) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Equity [Abstract]
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
Common stock shares authorized	75,000,000	75,000,000
Common stock par value	$ 0.0001	$ 0.0001
Common stock shares issued	17,074,636	16,752,171
Common stock shares outstanding	17,074,636	16,752,171
Common stock issued subject to repurchase related to early exercise of options	182,507	289,334

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Stockholders' Equity - Schedule of Number of Shares of Common Stock Reserved for Future Issuances (Details)	Sep. 30, 2018 shares
Class Of Stock [Line Items]
Common stock reserved for future issuances	5,886,412
Outstanding Stock Awards
Class Of Stock [Line Items]
Common stock reserved for future issuances	1,369,602
Shares Available for Future Issuance under 2017 Stock Incentive Plan
Class Of Stock [Line Items]
Common stock reserved for future issuances	4,516,810

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Stock Option Plan - Additional Information (Details) $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017 shares	Apr. 30, 2012	Sep. 30, 2018 USD ($) shares	Sep. 30, 2017 shares	Sep. 30, 2018 USD ($) shares	Sep. 30, 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			5,886,412		5,886,412
Automatic increase in number of shares available for issuance under the stock option plan					681,660
Number of options early exercised			3,167	0	27,333	37,167
Proceeds from unvested shares of common stock issued | $			$ 1,000		$ 100	$ 26,000
Number of shares of unvested common stock repurchased			0	0	6,834	45,666
Number of shares subject to repurchase			182,507		182,507			289,334
Aggregate price of shares held subject to repurchase | $			$ 200		$ 200			$ 200
Share-based compensation arrangement by share-based payment award, aggregate intrinsic value of options exercised | $					$ 2,800	$ 400
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			0		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	9 Months Ended	12 Months Ended
	Sep. 30, 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	(156,000)
Awards Available for Grant, Canceled	57,501
Awards Available for Grant, Ending balance	4,516,810	3,933,649
Options Issued and Outstanding, Beginning balance	1,573,568
Options Issued and Outstanding, Exercised	(322,465)
Options Issued and Outstanding, Canceled	(57,501)
Options Issued and Outstanding, Ending balance	1,193,602	1,573,568
Options Issued and Outstanding, Options vested and expected to vest	1,193,602
Options Issued and Outstanding, Options vested and exercisable	377,155
Weighted Average Exercise Price, Beginning balance	$ 1.78
Weighted Average Exercise Price, Exercised	1.13
Weighted Average Exercise Price, Canceled	1.62
Weighted Average Exercise Price, Ending balance	1.97	$ 1.78
Weighted Average Exercise Price, Options vested and expected to vest	1.97
Weighted Average Exercise Price, Options vested and exercisable	$ 1.75
Weighted-Average Remaining Contractual Term	7 years 9 months 18 days	8 years 4 months 24 days
Weighted-Average Remaining Contractual Term, Options vested and expected to vest	7 years 9 months 18 days
Weighted-Average Remaining Contractual Term, Options vested and exercisable	7 years 6 months
Aggregate Intrinsic Value	$ 11,066	$ 24,556
Aggregate Intrinsic Value, Options vested and expected to vest	11,066
Aggregate Intrinsic Value, Options vested and exercisable	$ 3,579

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Stock Option Plan - Summary of Stock Options Outstanding and Exercisable by Exercise Price (Details) - $ / shares	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options Outstanding, Number Outstanding	1,193,602
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	7 years 9 months 18 days
Options Outstanding, Weighted-Average Exercise Price	$ 1.97	$ 1.78
Options Vested and Exercisable, Number Exercisable	377,155
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 1.75
Exercise Price 0.16
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 0.16
Options Outstanding, Number Outstanding	70,000
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	5 years 3 months 18 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.16
Options Vested and Exercisable, Number Exercisable	66,081
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	231,255
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	6 years 7 months 6 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.37
Options Vested and Exercisable, Number Exercisable	62,663
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	159,084
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	7 years 6 months
Options Outstanding, Weighted-Average Exercise Price	$ 0.97
Options Vested and Exercisable, Number Exercisable	42,075
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	196,761
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	7 years 10 months 24 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.51
Options Vested and Exercisable, Number Exercisable	60,851
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 4 months 24 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.89
Options Vested and Exercisable, Number Exercisable	14,250
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	347,002
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	8 years 7 months 6 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.93
Options Vested and Exercisable, Number Exercisable	100,820
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	137,500
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	8 years 9 months 18 days
Options Outstanding, Weighted-Average Exercise Price	$ 3.18
Options Vested and Exercisable, Number Exercisable	30,415
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	9 Months Ended
	Sep. 30, 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	156,000
Units Issued and Outstanding, Ending balance | shares	176,000
Weighted-Average Grant Date Fair Value, Beginning balance | $ / shares	$ 19.42
Weighted-Average Grant Date Fair Value, Granted | $ / shares	11.73
Weighted-Average Grant Date Fair Value, Ending balance | $ / shares	$ 12.61

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Stock-Based Compensation - Distribution of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share Based Compensation Expense [Line Items]
Stock-based compensation	$ 551	$ 443	$ 1,014	$ 733
Cost of Revenue
Share Based Compensation Expense [Line Items]
Stock-based compensation	28	9	46	22
Research and Development
Share Based Compensation Expense [Line Items]
Stock-based compensation	111	110	231	187
Selling, General and Administrative
Share Based Compensation Expense [Line Items]
Stock-based compensation	$ 412	$ 324	$ 737	$ 524

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Net Income Per Share - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 shares	Sep. 30, 2017 shares	Sep. 30, 2018 shares	Sep. 30, 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		10,742,500
Antidilutive securities excluded from computation of earnings per share amount	50,000	3,000	91,000	123,000

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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		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Basic:
Net income	$ 564	$ 1,283	$ 1,238	$ 3,697
Net income allocable to preferred stockholders		778		2,559
Net income allocable to common stockholders	564	505	1,238	1,138
Diluted:
Net income	564	1,283	1,238	3,697
Net income allocable to preferred stockholders		737		2,425
Net income allocable to common stockholders	$ 564	$ 546	$ 1,238	$ 1,272
Denominator:
Weighted-average shares outstanding in computing basic net income per share allocable to common stockholders	17,045,689	5,827,662	16,936,898	4,515,414
Effect of potentially dilutive securities:
Stock awards	876,946	839,709	1,102,506	812,271
Weighted-average shares used in computing diluted net income per common share allocable to common stockholders	17,922,635	6,667,371	18,039,404	5,327,685
Net income per common share:
Basic	$ 0.03	$ 0.09	$ 0.07	$ 0.25
Diluted	$ 0.03	$ 0.08	$ 0.07	$ 0.24

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Income Taxes - Schedule of Components of Income Before Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Domestic	$ 708	$ 1,891	$ 1,089	$ 5,535
Foreign	42	38	133	85
Income before income taxes	$ 750	$ 1,929	$ 1,222	$ 5,620

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Income Taxes - Schedule of Components of Provision For Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
United States	$ 171	$ 633	$ (44)	$ 1,894
Foreign	15	13	28	29
Provision for income taxes	$ 186	$ 646	$ (16)	$ 1,923

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Income Taxes - Additional Information (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 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