10-Q

t

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 June 30, 2020

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Japanese Depositary Shares, each representing one Common Stock Share, Par Value $0.0001 Per Share	M-6697	Tokyo Stock Exchange (Mothers Market)

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 August 3, 2020, the registrant had 17,622,832 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 and Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	30
	Signatures	31

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Techpoint, Inc.

Condensed Consolidated Balance Sheets

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

	June 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	8,414	$	11,391
Short-term investments		12,351		9,475
Accounts receivable		7		107
Inventory		6,982		6,048
Prepaid expenses and other current assets		636		875
Total current assets		28,390		27,896
Property and equipment - net		611		535
Deferred tax assets		548		677
Right-of-use assets		817		1,058
Other assets		7,181		8,380
Total assets	$	37,547	$	38,546
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,188	$	1,535
Accrued liabilities		1,266		2,012
Liability related to early exercised stock options		42		67
Customer deposits		273		1,371
Lease liabilities		524		549
Total current liabilities		3,293		5,534
Other liabilities		438		632
Total liabilities		3,731		6,166
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized    as of June 30, 2020 and December 31, 2019; nil shares issued and    outstanding as of June 30, 2020 and December 31, 2019		—		—
Common stock, par value $0.0001 per share - 75,000,000 shares    authorized as of June 30, 2020 and December 31, 2019; 17,591,383 and    17,449,572 shares issued and outstanding as of June 30, 2020 and    December 31, 2019, respectively		2		2
Additional paid-in-capital		21,788		20,928
Accumulated other comprehensive income (loss)		79		(15	)
Retained earnings		11,947		11,465
Total stockholders’ equity		33,816		32,380
Total liabilities and stockholders’ equity	$	37,547	$	38,546

See accompanying notes to condensed consolidated financial statements.

1

Techpoint, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	7,098	$	7,175	$	14,609	$	12,196
Cost of revenue		3,210		3,402		6,584		5,988
Gross profit		3,888		3,773		8,025		6,208
Operating expenses
Research and development		1,683		1,600		3,921		3,076
Selling, general and administrative		1,766		1,828		3,632		3,497
Total operating expenses		3,449		3,428		7,553		6,573
Income (loss) from operations		439		345		472		(365	)
Other income (expense) - net		69		52		154		39
Income (loss) before income taxes		508		397		626		(326	)
Income tax provision (benefits)		119		62		144		(43	)
Net income (loss)	$	389	$	335	$	482	$	(283	)
Net income (loss) per share:
Basic	$	0.02	$	0.02	$	0.03	$	(0.02	)
Diluted	$	0.02	$	0.02	$	0.03	$	(0.02	)
Weighted average shares outstanding in computing net income (loss) per share
Basic		17,559,944		17,228,184		17,529,238		17,200,595
Diluted		17,827,617		17,814,303		17,869,065		17,200,595
Comprehensive income (loss):
Net income (loss)	$	389	$	335	$	482	$	(283	)
Other comprehensive income, net of tax:
Unrealized gain on available-for-sale debt securities		187		—		94		—
Comprehensive income (loss)	$	576	$	335	$	576	$	(283	)

See accompanying notes to condensed consolidated financial statements.

2

Techpoint, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts, unaudited)

	Common Stock
	Shares			Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Retained Earnings			Total Stockholders' Equity
Balances as of December 31, 2018		17,130,507		$	2	$	19,358		$	—	$	9,271		$	28,631
Issuance of common stock upon exercise of stock options and vesting of early exercised options		46,666			—		64			—		—			64
Issuance of common stock upon vesting of RSUs		14,200			—		—			—		—			—
Shares repurchased for tax withholdings on vesting of RSUs		(1,510	)		—		(7	)		—		—			(7	)
Stock-based compensation		—			—		336			—		—			336
Net loss		—			—		—			—		(618	)		(618	)
Balances as of March 31, 2019		17,189,863		$	2	$	19,751		$	—	$	8,653		$	28,406
Issuance of common stock upon exercise of stock options and vesting of early exercised options		38,000			—		36			—		—			36
Issuance of common stock upon vesting of RSUs		31,300			—		—			—		—			—
Shares repurchased for tax withholdings on vesting of RSUs		(3,553	)		—		(24	)		—		—			(24	)
Stock-based compensation		—			—		348			—		—			348
Net income		—			—		—			—		335			335
Balances as of June 30, 2019		17,255,610		$	2	$	20,111		$	—	$	8,988		$	29,101

3

Techpoint, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts, unaudited)

	Common Stock
	Shares			Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders' Equity
Balances as of December 31, 2019		17,449,572		$	2	$	20,928		$	(15	)	$	11,465	$	32,380
Other comprehensive loss - unrealized loss on available-for-sale debt securities		—			—		—			(93	)		—		(93	)
Issuance of common stock upon exercise of stock options and vesting of early exercised options		58,310			—		103			—			—		103
Issuance of common stock upon vesting of RSUs		21,425			—		—			—			—		—
Shares repurchased for tax withholdings on vesting of RSUs		(4,264	)		—		(28	)		—			—		(28	)
Stock-based compensation		—			—		390			—			—		390
Net income		—			—		—			—			93		93
Balances as of March 31, 2020		17,525,043		$	2	$	21,393		$	(108	)	$	11,558	$	32,845
Other comprehensive income - unrealized gain on available-for-sale debt securities		—			—		—			187			—		187
Issuance of common stock upon exercise of stock options and vesting of early exercised options		18,996			—		36			—			—		36
Issuance of common stock upon vesting of RSUs		52,425			—		—			—			—		—
Shares repurchased for tax withholdings on vesting of RSUs		(5,081	)		—		(20	)		—			—		(20	)
Stock-based compensation		—			—		379			—			—		379
Net Income		—			—		—			—			389		389
Balances as of June 30, 2020		17,591,383		$	2	$	21,788		$	79		$	11,947	$	33,816

See accompanying notes to condensed consolidated financial statements.

4

Techpoint, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

	Six Months Ended
	June 30,
	2020			2019
Cash Flows From Operating Activities
Net income (loss)	$	482		$	(283	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)    operating activities:
Depreciation and amortization		166			175
Stock-based compensation		769			684
Accretion of investment premium, net of amortization of discount		33			—
Inventory valuation adjustment		120			234
Deferred income taxes		104			(113	)
Noncash lease expense		331			314
Changes in operating assets and liabilities:
Accounts receivable		100			81
Inventory		(1,054	)		(1,808	)
Prepaid expenses and other current assets		279			(17	)
Other assets		1			(3	)
Accounts payable		(374	)		410
Accrued expenses		(718	)		59
Customer deposits		(1,098	)		1,057
Lease liabilities		(81	)		(155	)
Other liabilities		(228	)		(148	)
Net cash provided by (used in) operating activities		(1,168	)		487
Cash Flows From Investing Activities
Purchase of property and equipment		(242	)		(225	)
Purchase of debt securities		(5,133	)		—
Proceeds from maturities of debt securities		3,500			—
Net cash used in investing activities		(1,875	)		(225	)
Cash Flows From Financing Activities
Net proceeds from exercise of stock options		114			66
Payment for shares withheld for tax withholdings on vesting of restricted stock units		(48	)		(31	)
Net cash provided by financing activities		66			35
Net increase (decrease) in cash and cash equivalents		(2,977	)		297
Cash and cash equivalents at beginning of period		11,391			25,941
Cash and cash equivalents at end of period	$	8,414		$	26,238
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	39		$	13
Supplemental Disclosure of Noncash Investing and Financing Information
Property and equipment purchased but not yet paid	$	87		$	—
Vesting of early exercised options	$	25		$	34

See accompanying notes to condensed consolidated financial statements.

5

Techpoint, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization

Techpoint, Inc. (together with its wholly-owned subsidiaries, the “Company”, “we”, “us” and “our”) was originally incorporated in California in April 2012 and reincorporated in 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.

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, 2019 contained in our Annual Report on Form 10-K.

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. The Company accounts for revenue under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, the Company satisfies its performance obligations and primarily recognizes revenue upon shipment, at which time control of its products is transferred to its customers. The Company applies 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 markets. The Company generally requires advance payments from customers and records these advance payments, or contract liabilities, as customer deposits on its condensed consolidated balance sheet. Since the Company’s performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption practical expedient provided in ASC 606 and is therefore not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. 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 FOB (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.

6

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 of revenue 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.

COVID-19

In March 2020, the World Health Organization characterized a recent pandemic of respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. For example, employees at our headquarters located in San Jose, California, are currently subject to a shelter-in-place order from the state government. Our offices in Japan, China, South Korea and Taiwan have also been impacted by COVID-19 and have been subject to various measures implemented by local governments to reduce the spread of COVID-19. These measures may adversely impact our employees and operations and the operations of our end-customers (including our significant end-customers), distributors and suppliers, and may negatively impact our sales and marketing activities. For example, travel restrictions may prohibit our ability to conduct necessary face-to-face meetings with our customers. These measures by government authorities may remain in place for a significant period of time which could adversely affect our sales and marketing activities, product delivery schedule, and our business, financial condition and results of operations. The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Management is actively monitoring the impact of COVID-19 on the Company’s financial condition, liquidity, operations, customers, suppliers, industry, and workforce. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.

Credit Risk and Concentration of Customer and Supplier

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, and trade receivables. Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and investing in, 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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Customer
Customer A		49	%		54	%		45	%		58	%
Customer B		12	%	*				14	%	*
Customer C		10	%	*				10	%	*
End-Customer
End-Customer A (1)		27	%		40	%		31	%		38	%
End-Customer B (1)	*				15	%	*				19	%

* Less than 10%

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

The Company currently relies on Taiwan Semiconductor Manufacturing Company Limited and United Microelectronics Corporation (formerly Fujitsu Electronics America, Inc.) to produce substantially all of its semiconductors. Also, the Company relies on Advanced Semiconductor Engineering, Inc. and Sigurd Microelectronics Corporation to assemble, package and test substantially all of its products.

7

Recently Adopted Accounting Pronouncements

         In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which amends disclosure requirements for fair value measurements by requiring new disclosures, modifying existing requirements, and eliminating others. The amendments are the result of a broader disclosure project, which aims to improve the effectiveness of disclosures. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.  The Company has determined that the new standard had no material impact on its disclosures as of, and for the six months ended June 30, 2020.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.  It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in more timely recognition of credit losses. The guidance is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standard Update No. 2019-12, which simplifies the accounting for income taxes. The guidance in ASU No. 2019-12 is required for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2020, for public business entities, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

	June 30,		December 31,
	2020		2019
Work in process	$	2,941	$	2,529
Finished goods		4,041		3,519
Total inventory	$	6,982	$	6,048

Property and Equipment - Net

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

	June 30,			December 31,
	2020			2019
Computer equipment and software	$	1,640		$	1,405
Leasehold improvements		89			89
Furniture		36			30
Total property and equipment		1,765			1,524
Less: accumulated depreciation		(1,154	)		(989	)
Total property and equipment - net	$	611		$	535

The Company recorded $0.1 million and $0.1 million of depreciation expense for the three months ended June 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for six months ended June 30, 2020 and 2019, respectively.

8

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,		December 31,
	2020		2019
Payroll-related expenses	$	597	$	780
Engineering services		433		637
Taxes payable		73		72
Accrued warranty		68		194
Accrued inventory		46		283
Professional fees		16		31
Other		33		15
Total accrued liabilities	$	1,266	$	2,012

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 $0.3 million, $0.4 million and $1.4 million as of June 30, 2020, March 31, 2020 and December 31, 2019, respectively. The Company generally expects to recognize revenue from customer deposits during the three month period immediately following the balance sheet date. During the three months ended June 30, 2020, the Company recognized $0.4 million of revenue from the March 31, 2020 customer deposit balance. During the six months ended June 30, 2020, the Company recognized $1.4 million of revenue from the December 31, 2019 customer deposits balance.

3. Fair Value Measurements of Financial Instruments

Summary of Financial Instruments

The following is a summary of financial instruments (in thousands):

	June 30,
	2020
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	5,111	$	—	$	—		$	5,111
Commercial paper		1,249		1		—			1,250
Corporate bonds		17,971		106		(3	)		18,074
Total available-for-sale securities	$	24,331	$	107	$	(3	)	$	24,435
Reported in:
Cash and cash equivalents								$	5,111
Short-term investments									12,351
Other assets									6,973
Total available-for-sale securities								$	24,435

9

	December 31,
	2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	2,027	$	—	$	—		$	2,027
Commercial paper		6,965		—		(3	)		6,962
Corporate bonds		12,943		1		(13	)		12,931
Total available-for-sale securities	$	21,935	$	1	$	(16	)	$	21,920
Reported in:
Cash and cash equivalents								$	4,275
Short-term investments									9,475
Other assets									8,170
Total available-for-sale securities								$	21,920

The contractual maturities of available-for-sale securities are presented in the following table (in thousands):

	June 30,
	2020
	Amortized Cost Basis		Estimated Fair Value
Due in one year or less	$	17,428	$	17,462
Due between one to two years		6,903		6,973
	$	24,331	$	24,435

The Company had 2 investments in unrealized loss positions as of June 30, 2020. The investments have been in unrealized loss positions for less than twelve months. The total fair value of such investments is $2.5 million with unrealized losses of $3,000 for the six months ended June 30, 2020. There were no material gross unrealized losses from available-for-sale securities and no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the six months ended June 30, 2020.

For investments in available-for-sale debt securities that have unrealized losses, the Company evaluates (i) whether it has the intention to sell any of these investments and (ii) whether it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. Based on this evaluation, the Company determined that there were no other-than-temporary impairments associated with investments as of June 30, 2020.

There were no sales of available-for-sale securities for the six months ended June 30, 2020 and 2019.

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.

10

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 June 30, 2020
Financial assets - available-for-sales securities
Money market funds	$	5,111	$	—	$	—	$	5,111
Commercial paper		—		1,250		—		1,250
Corporate bonds		—		18,074		—		18,074
Total financial assets - available-for-sales securities	$	5,111	$	19,324	$	—	$	24,435
As of December 31, 2019
Financial assets - available-for-sales securities
Money market funds	$	2,027	$	—	$	—	$	2,027
Commercial paper		—		6,962		—		6,962
Corporate bonds		—		12,931		—		12,931
Total financial assets - available-for-sales securities	$	2,027	$	19,893	$	—	$	21,920

The Company classifies money market funds in Level 1 since the financial assets consist of securities for which quoted prices are available in an active market.

In addition, the Company classifies corporate bonds and commercial paper in Level 2 since the financial assets use observable inputs including quoted prices in active markets for similar assets or liabilities. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents, short-term investments and long-term investments. The pricing service uses inputs from multiple industry standard data providers or other third party sources and applies various acceptable methodologies.

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 making operating decisions and assessing financial performance on a regular basis. Accordingly, the Company considers itself to be one reportable segment, which is comprised of one operating segment - 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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
China	$	4,521	$	4,689	$	8,867	$	8,185
Taiwan		1,433		1,285		2,958		1,893
South Korea		951		860		2,308		1,551
Japan		116		334		310		555
Other		77		7		166		12
Total revenue	$	7,098	$	7,175	$	14,609	$	12,196

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Security surveillance	$	3,510	$	4,322	$	7,463	$	7,812
Automotive		3,588		2,853		7,146		4,384
Total revenue	$	7,098	$	7,175	$	14,609	$	12,196

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):

	June 30,		December 31,
	2020		2019
Taiwan	$	516	$	409
United States		39		49
Japan		36		54
China		12		19
South Korea		8		4
Total property and equipment - net	$	611	$	535

5. Commitments and Contingencies

Operating leases

The Company determines if an arrangement contains a lease at inception. The Company leases facilities under non-cancellable lease agreements expiring through fiscal year 2022. The Company’s agreements do not include variable lease payments or any restrictions or covenants imposed by the leases. As the rate implicit in each lease agreement is not readily determinable, the Company’s incremental borrowing rate was used as the discount rate. The Company’s right-of-use assets and lease liabilities have been adjusted for initial direct costs and prepaid rent but do not reflect any options to extend or terminate its lease agreements, any residual value guarantees, or any leases that have yet to be commenced.

As of June 30, 2020 and December 31, 2019, the right-of-use assets and lease liabilities related to operating leases were as follows (in thousands):

	June 30,		December 31,
	2020		2019
Right-of-use assets	$	817	$	1,058
Lease liabilities － Current	$	524	$	549
Lease liabilities － Non-Current		309		518
Total lease liabilities	$	833	$	1,067

Rent expense under operating leases was $0.2 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively. Rent expense under operating leases was $0.4 million and $0.3 million for six months ended June 30, 2020 and 2019, respectively.

The rent expense recognized from short-term leases were $6,000 and $6,000 for the three months ended June 30, 2020 and 2019, respectively. The rent expense recognized from short-term leases were $12,000 and $12,000 for six months ended June 30, 2020 and 2019, respectively.

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The following tables summarize the Company’s lease costs and weighted-average assumptions used in determining its right-of-use assets and lease liabilities (in thousands):

	Six Months Ended			Six Months Ended
	June 30, 2020			June 30, 2019
Operating lease cost (1)	$	360		$	331
Cash paid for operating leases (2)	$	353		$	345
Right-of-use assets obtained in exchange for operating lease liabilities (3)	$	90		$	839
Weighted average remaining term for operating leases	1.55 years			0.88 years
Weighted average discount rate for operating leases		6.0	%		6.0	%

(1) Operating lease cost for the three months ended June 30, 2020 and 2019 were $0.2 million and $0.2 million, respectively.

(2) Cash paid for operating leases for the three months ended June 30, 2020 and 2019 were $0.2 million and $0.2 million, respectively.

(3) During the six months ended June 30, 2020, the Company modified two existing operating leases. Neither lease modification was treated as a separate contract as no additional right-of-use asset was granted. During the six months ended June 30, 2019, there were no new leases that commenced. The balance represents the right-of-use assets recognized upon adoption of ASC 842.

As of June 30, 2020, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2020 (remaining six months)	$	298
2021		509
2022		65
Total		872
Less effects of discounting		(39	)
Lease liabilities recognized	$	833

Purchase Commitments

As of June 30, 2020, the Company had purchase commitments with its third-party suppliers through fiscal year 2022. Future minimum payments under purchase commitments are $0.1 million for the remaining six months ending December 31, 2020, and $0.2 million and $49,000 for the year ending December 31, 2021 and 2022, 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 its 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 June 30, 2020 and December 31, 2019. The shares of preferred stock issued and outstanding was nil as of June 30, 2020 and December 31, 2019.

Common Stock

The Company was authorized to issue 75,000,000 shares of common stock with $0.0001 par value per share as of June 30, 2020 and December 31, 2019. As of June 30, 2020, the shares of common stock issued and outstanding were 17,591,383 excluding 24,421 legally issued shares subject to repurchases related to the early exercise of options to purchase common stock. As of December 31, 2019, the shares of common stock issued and outstanding were 17,449,572 excluding 51,006 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:

	June 30,
	2020
Outstanding stock awards		1,233,078
Shares available for future issuance under the 2017 Stock Incentive Plan		5,527,245
Total common stock reserved for future issuances		6,760,323

7. Stock Option Plan

Stock Incentive Plan

In April 2012, the Company adopted a 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 non-statutory 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 a 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 are added to the 2017 Plan. The number of shares available for issuance under the 2017 Plan is 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 the Company’s 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 2020 was 700,023 shares. The 2017 Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of non-statutory stock options to employees, non-employee directors, advisors and consultants. The 2017 Plan also provides for the grants of restricted stock, stock appreciation rights, 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, 2019		4,847,877
Authorized		700,023
Granted		(30,000	)
Canceled		9,345
As of June 30, 2020		5,527,245

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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 a liability related to early exercised stock options and reclassified to common stock and additional paid in capital as the repurchase right lapses.

For the six months ended June 30, 2020 and 2019, there were no options early exercised. In addition, the Company did not repurchase any shares of unvested common stock related to early exercised stock options during the period.

As of June 30, 2020 and December 31, 2019, 24,421 and 51,006 shares, respectively, held by employees were subject to repurchase at an aggregate price of $42,000 and $0.1 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, 2019		850,334		$	2.30	$	6.80	$	3,587
Granted		—			—
Exercised (1)		(77,306	)		1.80
Canceled		—			—
As of June 30, 2020		773,028			2.35		6.4		1,828
Options vested and expected to vest as of June 30, 2020		773,028			2.35		6.4		1,828
Options vested and exercisable as of June 30, 2020		508,763			2.19		6.2		1,285

(1)     Includes vesting of early-exercised options.

The stock options outstanding and exercisable by exercise price at June 30, 2020 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		32,850		3.6	$	0.16		32,850	$	0.16
	0.37		63,169		5.0		0.37		59,165		0.37
	0.97		86,901		5.7		0.97		59,249		0.97
	2.51		122,652		6.2		2.51		77,084		2.51
	2.89		46,000		6.7		2.89		27,500		2.89
	2.93		315,256		6.9		2.93		194,800		2.93
	3.18		106,200		7.1		3.18		58,115		3.18
			773,028		6.4		2.35		508,763		2.19

The aggregate intrinsic value of options exercised for the six months ended June 30, 2020 and 2019 was $0.2 million and $0.2 million, respectively. The Company has various vesting agreements with its employees. Options granted generally vest over a five-year period and generally are exercisable for up to 10 years.

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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, 2019		503,900		$	8.48
Granted		30,000			4.63
Released		(64,505	)		7.63
Canceled		(9,345	)		8.45
As of June 30, 2020		460,050			8.35

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	34	$	28	$	67	$	54
Research and development		133		123		268		246
Selling, general and administrative		212		197		434		384
Total	$	379	$	348	$	769	$	684

9. Net Income (Loss) 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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Numerator:
Basic:
Net income (loss)	$	389	$	335	$	482	$	(283	)
Diluted:
Net income (loss)	$	389	$	335	$	482	$	(283	)
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic    net income (loss) per share		17,559,944		17,228,184		17,529,238		17,200,595
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)		267,673		586,119		339,827		—
Weighted-average shares used in computing diluted net    income (loss) per share		17,827,617		17,814,303		17,869,065		17,200,595
Net income (loss) per share:
Basic	$	0.02	$	0.02	$	0.03	$	(0.02	)
Diluted	$	0.02	$	0.02	$	0.03	$	(0.02	)

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(1)     Includes early-exercised options.

For a net loss period, basic net loss per share and diluted net loss per share are the same as the effect of potential shares is antidilutive and therefore excluded. The potentially dilutive securities outstanding for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019 that were excluded from the computation of diluted net income (loss) per share for the period presented as the effect would have been antidilutive was 922,000, 404,000, 750,000 and 1,009,000 shares, respectively.

10. Income Taxes

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Domestic	$	443	$	343	$	509	$	(438	)
Foreign		65		54		117		112
Income (loss) before income taxes	$	508	$	397	$	626	$	(326	)

The components of the income tax provision (benefits) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
United States	$	106	$	55	$	124	$	(59	)
Foreign		13		7		20		16
Income tax provision (benefits)	$	119	$	62	$	144	$	(43	)

As of June 30, 2020, 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 June 30, 2020, the Company had approximately $0.3 million of unrecognized tax benefits of which $0.2 million was netted against deferred tax assets with a full valuation allowance. If these amounts are recognized, there will be a tax benefits of $0.1 million against the Company’s effective tax rate.

The CARES Act did not have a material impact on our tax provision for the six months ended June 30, 2020. We continue to examine the elements of the CARES Act and the impact that it may have on our future business.

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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 “anticipate”, “believe,” “continue,” “could,” “design,” “estimate,” “intend,” “may,” “plan,” “project,” “will,” 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 the following:

• 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;

• our ability to form and expand partnerships with technology partners and consulting partners;

• our ability to maintain, protect and enhance our intellectual property;

• our ability to successfully defend litigation brought against us;

• new product releases and timing;

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

• the effect of the COVID-19 pandemic on our business and the success of any measures we have taken or may take in the future in response thereto;

• laws and regulations applicable to our business, including export restrictions and measures taken by government authorities in response to the COVID-19 pandemic;

• our liquidity and working capital requirements; and

• our expectations regarding future expenses and investments.

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. 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, 2019. 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.

We have obtained or are in the process of obtaining registered trademarks for Techpoint and HD-TVI. This Quarterly Report on Form 10-Q contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our

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rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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 markets.

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

We derive our revenue from sales of our mixed-signal integrated circuits into the security surveillance and automotive markets. We began shipping our products in 2013 and to date, we have sold over 153 million integrated circuits. Our revenue was $14.6 million and $12.2 million for the six months ended June 30, 2020 and 2019, respectively. Historically, we have derived a significant majority of our revenue from the security surveillance market. However, recently the mix of our revenue has changed. The security surveillance market accounted for a 51% and 64% of our revenue in the six months ended June 30, 2020 and fiscal year 2019, respectively.  Meanwhile, the automotive market accounted for a 49% and 36% of our revenue in the six months ended June 30, 2020 and fiscal year 2019, respectively. We recognized $7.5 million and $7.8 million of revenue on sales into the security surveillance market for the six months ended June 30, 2020 and 2019, respectively. In addition, we recognized $7.1 million and $4.4 million of revenue on sales into the automotive market for the six months ended June 30, 2020 and 2019, respectively. We recorded net income of $0.5 million and net loss of $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

We sell our products to distributors that fulfill third-party orders for our products. We also sell directly to ODMs. For the six months ended June 30, 2020 and 2019, 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 twenty-four 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 market. Due to the length of our product development and sales cycle, the majority of our revenue for any period is likely to be weighted toward products introduced for sale in the prior one or two years. As a result, our present revenue is not necessarily representative of future sales because our future sales are likely to be comprised of a different mix of products, some of which are now in the development stage.

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

We have made significant investments in research and development in order to develop our products to attract and retain end-customers. Our research and development expense was $1.7 million and $1.6 million for the three months ended June 30, 2020 and 2019, respectively and $3.9 million and $3.1 million for the six months ended June 30, 2020 and 2019, respectively. Our research and development expenses can vary from period-to-period and can be significantly impacted by the number of tape-outs and new products that we initiate in any given period. As of June 30, 2020, we had 79 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.

Effective October 9, 2019, the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) added Hikvision, a customer that represented 27% and 40% of our revenue for the three months ended June 30, 2020 and 2019, respectively and 31% and 38% of our revenue for the six months ended June 30, 2020 and 2019, respectively, to the BIS Entity List with a license requirement for all items subject to the Export Administration Regulations (“EAR”).  The BIS Entity List is a published list of the names of certain foreign persons, including businesses, research institutions, government and private organizations and individuals, that are subject to

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specific governmental license requirements for the export, reexport and/or transfer of specified items.  These license requirements could make it more difficult to ship, or in some cases, prevent the shipment of products to certain foreign persons named on the BIS Entity List.

We have taken action to confirm whether our products are subject to the EAR.  We have retained the continuous assistance of outside experts and, following the above announcement by BIS, performed a comprehensive review of our products and manufacturing operations.  Based on that review, we have concluded that our products are not subject to the EAR. Therefore, our products may continue to be shipped to Hikvision without a U.S. export license, even though Hikvision appears on the BIS Entity List.

The above conclusions are as of the date of filing of this Quarterly Report on Form 10-Q.  It is possible that changes in U.S. regulations or policies in the future may impose restrictions, including the imposition of license requirements or even a full or partial prohibition, on our sale of products to Hikvision.

Key Factors Affecting Our Results of Operations

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

COVID-19 Pandemic. In December 2019, a respiratory illness caused by a novel coronavirus disease (“COVID-19”) was reported in Wuhan, Hubei Province, China, and in March, 2020, the World Health Organization characterized COVID-19 as a pandemic. The full impact of the COVID-19 pandemic continues to evolve as of the date of this Quarterly Report on Form 10-Q. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of COVID-19 on our financial condition, liquidity, operations, suppliers, industry, and workforce. This includes monitoring the results from new information that may emerge concerning COVID-19 and any actions taken to contain or treat COVID-19, as well as the economic impact on our customers and markets.  We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

The COVID-19 pandemic will have an impact on our business, that of our customers and suppliers and how we execute our business in 2020. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. For example, employees at our headquarters located in San Jose, California, have been subject to a shelter-in-place order from the state government since March 2020. Our offices in Japan, China, South Korea and Taiwan have also been impacted by COVID-19 and have been subject to various measures implemented by local governments to reduce the spread of COVID-19. These measures may adversely impact our employees and operations and the operations of our end-customers (including our significant end-customers), distributors and suppliers, and may negatively impact our sales and marketing activities. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect our sales and marketing activities, product delivery schedule, and our business, financial condition and results of operations.  Despite these limitations, we have been able to secure products from our suppliers and fulfill our customers’ purchase orders during the six months ended June 30, 2020.

Our security surveillance market has been and is expected to continue to be affected by the weakness in the end markets in North and South Americas, the Middle East, and India due to the impact of COVID-19 pandemic in those markets. While there have been impacts to our security surveillance revenues we believe this will be partially mitigated by revenues in the automotive market due to demand increase associated with the usual seasonal production cycle in the automotive industry in the second half of the year and multiple new design-wins going into production that we obtained from automotive manufacturers prior to the COVID-19 pandemic. 

In the future, we plan to take several actions to address the potential COVID-19 disruption to our operations, which include the following priorities and actions:

Health and Safety

• The health and well-being of our employees, customers and supply partners is our top priority.

• We have implemented strict measures to ensure and maintain safety, including working remotely where possible and social distancing.

• We are closely monitoring rapidly evolving conditions and adhering to local, state and federal guidelines.

Business Continuity

• We have implemented and continue to adjust comprehensive business continuity plans in response to COVID-19 to ensure that we are able to deliver for our customers and continue to work toward profitability.

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• We are working closely with our supply partners globally to maintain adequate inventory levels, as our suppliers continue to support the health and safety of their employees.

• We are working to ensure demand continuity for our products among us, our supply partners, our manufacturers and our customers or their contract manufacturing partners around the world.  

Financial Structure

• We believe our balance sheet and liquidity position provide the flexibility needed to support our operations during this pandemic.

• We have taken and will continue to take precautionary steps, as required, to maintain our financial position including, but not limited to, managing operating expenses prudently, deferring non-essential costs.

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 depend on our ability to continually target new and retain existing end-customers that make large orders. For the six months ended June 30, 2020 and 2019, Hikvision, the largest security surveillance manufacturer in China and one of our end-customers, accounted for 31% and 38% 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, Section 889 of the 2019 National Defense Authorization Act (“NDAA”) could adversely impact our business with Hikvision. Section 889(a)(1)(A) went into effect on August 13, 2019 and prohibits U.S. Government agencies from procuring or obtaining equipment or services that use covered telecommunications equipment or services as a substantial or essential component or critical technology, including certain video surveillance products or telecommunications equipment and services produced or provided by Hikvision.  On July 14, 2020, the U.S. Government issued an interim final rule that implements Section 889(a)(1)(B) effective as of August 13, 2020.  This rule prohibits the U.S. Government from entering into contracts with persons who use covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system, which again includes certain Hikvision video surveillance products. Although Section 889 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.

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 including with respect to cars sold in the United States after May 2018. 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.

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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. Revenue is recognized in accordance with ASC 606 after we (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) satisfy the performance obligation when control is transferred to the customer.

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 new product developments 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, foreign derived intangible income deduction, non-deductible stock-based compensation, international tax reform provisions, and tax benefits from stock-option exercises and dispositions.

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Results of Operations

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	7,098	$	7,175	$	14,609	$	12,196
Cost of revenue (1)		3,210		3,402		6,584		5,988
Gross profit		3,888		3,773		8,025		6,208
Operating expenses: (1)
Research and development		1,683		1,600		3,921		3,076
Selling, general and administrative		1,766		1,828		3,632		3,497
Total operating expenses		3,449		3,428		7,553		6,573
Income (loss) from operations		439		345		472		(365	)
Other income (expense) - net		69		52		154		39
Income (loss) before income taxes		508		397		626		(326	)
Income tax provision (benefits)		119		62		144		(43	)
Net income (loss)	$	389	$	335	$	482	$	(283	)

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	34	$	28	$	67	$	54
Research and development		133		123		268		246
Selling, general and administrative		212		197		434		384
Total	$	379	$	348	$	769	$	684

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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Revenue		100	%		100	%		100	%		100	%
Cost of revenue		45			47			45			49
Gross profit		55			53			55			51
Operating expenses:
Research and development		24			22			27			25
Selling, general and administrative		25			26			25			29
Total operating expenses		49			48			52			54
Income (loss) from operations		6			5			3			(3	)
Other income (expense) - net		1			1			1			—
Income (loss) before income taxes		7			6			4			(3	)
Income tax provision (benefits)		2			1			1			—
Net income (loss)		5	%		5	%		3	%		(3	)%

Comparison of the Three and Six Months Ended June 30, 2020 and June 30, 2019

Revenue

	Three Months Ended June 30,				Change						Six Months Ended June 30,				Change
	2020		2019		Amount			%			2020		2019		Amount		%
	(dollars in thousands)
Revenue	$	7,098	$	7,175	$	(77	)		(1	)%	$	14,609	$	12,196	$	2,413		20	%

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Revenue decreased $0.1 million, or 1%, for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. This was mainly due to a $0.8 million decrease in security surveillance market revenue as a result of a 23% decrease in volume of shipment. This decrease was partially offset by a $0.7 million increase in automotive market revenue due to a 77% increase in volume of shipments offset by a decrease in average selling price attributable to product mix.

Revenue increased $2.4 million, or 20%, for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. This was mainly due to a $2.8 million increase in automotive market revenue due to a 117% increase in volume of shipments offset by a decrease in average selling price attributable to product mix. This increase was partially offset by a $0.3 million decrease in security surveillance camera market revenue driven by a 5% decrease in volume of shipments.

Recently, our security surveillance market has been negatively affected by the weakness in the end markets in North and South Americas, the Middle East, and India due to the impact of COVID-19 in those markets.

We have determined that pricing of our products remains stable in our target markets.  Fluctuation in our overall average selling price is directly attributable to changes in product mix given the natural pricing variation of the products in our portfolio. When the product mix shifts towards the higher priced products in our portfolio, the average selling price will be higher than when the product mix shifts towards the lower price point products.

Revenue by geographic region

The table below sets forth the major components of the change in revenue by geographic region for the three and six months ended June 30, 2020 and June 30, 2019:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
China		64	%		65	%		61	%		66	%
Taiwan		20			18			20			16
South Korea		13			12			16			13
Japan		2			5			2			5
Other		1			—			1			—
Total		100	%		100	%		100	%		100	%

Cost of revenue and gross margin

	Three Months Ended June 30,						Change						Six Months Ended June 30,						Change
	2020			2019			Amount			%			2020			2019			Amount		%
	(dollars in thousands)
Cost of revenue	$	3,210		$	3,402		$	(192	)		(6	)%	$	6,584		$	5,988		$	596		10	%
Gross margin		55	%		53	%								55	%		51	%

Cost of revenue decreased by $0.2 million, or 6%, and gross margin increased from 53% to 55% for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. Cost of revenue decreased due to a $0.2 million decrease in period costs as a result of the net utilization of previously reserved inventory and a reduction in warranty exposure. This decrease in reserves positively impacted gross margin.

Cost of revenue increased by $0.6 million, or 10%, and gross margin increased from 51% to 55% for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. Cost of revenue increased due to a 31% of increase in volume of shipments. This increase was partially offset by a $0.5 million decrease due to a decrease in inventory write-down, increased utilization of previously reserved inventory, and a reduction in warranty exposure. Gross margin was positively impacted by the increase in volume of shipments and product mix.

We expect gross margins to fluctuate in future periods due to changes in product mix, average unit selling prices, manufacturing costs, adjustments to inventory valuation, if any, and end market product demand.

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Research and development expense

	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
	2020		2019		Amount		%			2020		2019		Amount		%
	(dollars in thousands)
Research and development	$	1,683	$	1,600	$	83		5	%	$	3,921	$	3,076	$	845		27	%

Research and development expenses increased $0.1 million, or 5%, for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 primarily due to a $0.1 million increase in external design fees and software costs.

Research and development expenses increased $0.8 million, or 27%, for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 primarily due to a $0.8 million increase in tape-out expenses associated with the development of new products.

Selling, general and administrative expense

	Three Months Ended June 30,				Change						Six Months Ended June 30,				Change
	2020		2019		Amount			%			2020		2019		Amount		%
	(dollars in thousands)
Selling, general and administrative	$	1,766	$	1,828	$	(62	)		(3	)%	$	3,632	$	3,497	$	135		4	%

Selling, general and administrative expenses decreased $0.1 million, or 3%, for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 mainly due to a $0.1 million decrease in marketing activities due to lower trade show costs. This decrease was partially offset by a $0.1 million increase in personnel costs due to an increase in headcount as a result of expanding operations.

Selling, general and administrative expenses increased $0.1 million, or 4%, for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 primarily due to a $0.2 million increase in personnel costs due to an increase in headcount as a result of expanding operations, partially offset by a $0.2 million decrease in marketing activities due to lower trade show costs and the lower travel expenses.

Other income and expense

	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
	2020		2019		Amount		%			2020		2019		Amount		%
	(dollars in thousands)
Other income (expense) - net	$	69	$	52	$	17		33	%	$	154	$	39	$	115		295	%

Other income increased $17,000, or 33%, for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019 primarily due to a $0.1 million increase in other income due to the net interest income from investments, partially offset by the change from foreign currency exchange transactions and foreign currency fluctuations.

Other income increased $0.1 million, or 295%, for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 primarily due to a $0.1 million increase in other income due to the net interest income from investments, partially offset by the change from foreign currency exchange transactions and foreign currency fluctuations.

Income tax provision and benefits

	Three Months Ended June 30,				Change					Six Months Ended June 30,					Change
	2020		2019		Amount		%			2020		2019			Amount		%
	(dollars in thousands)
Income tax provision (benefits)	$	119	$	62	$	57		92	%	$	144	$	(43	)	$	187		(435	)%

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The income tax provision increased $0.1 million, or 92%, for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019, primarily due to an increase in income before tax and the increase in the effective tax rate due to fewer discrete tax benefits.

The income tax provision was $0.1 million for the six months ended June 30, 2020, and the income tax benefit was $43,000 million for the six months ended June 30, 2019. The change was primarily due to the position of income and loss before tax for the six months ended June 30, 2020 and 2019, respectively, and the increase in the effective tax rate due to fewer discrete tax benefits.

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, cash equivalents, and short-term investments as of June 30, 2020 were $20.8 million. We believe our existing cash, cash equivalents, short-term investments, and cash we expect to generate from operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, the introduction of new and enhanced products and our costs to implement new manufacturing technologies or potentially acquire and integrate other companies or assets. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership, 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):

	Six Months Ended
	June 30,
	2020			2019
Net cash provided by (used in) operating activities	$	(1,168	)	$	487
Net cash used in investing activities		(1,875	)		(225	)
Net cash provided by financing activities		66			35
Net increase (decrease) in cash and cash equivalents	$	(2,977	)	$	297

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 six months ended June 30, 2020, net cash used in operating activities was $1.2 million, primarily due to net income of $0.5 million and non-cash charges of $1.5 million primarily driven by stock-based compensation, depreciation and amortization, and noncash lease expense, offset by net cash outflow used in operating assets and liabilities of $3.2 million. The net cash outflow used in operating assets and liabilities was primarily due to a $1.1 million cash outflow in customer deposit due to timing of customer pre-payments, a $1.1 million cash outflow in inventory as units manufactured during the period and on hand were in excess of product sales during the period to support future demand, a $0.7 million cash outflow in accrued expenses due to timing of service performed, and a $0.4 million cash outflow in accounts payable due to timing of vendor payments.

During the six months ended June 30, 2019, net cash provided by operating activities was $0.5 million, primarily due to $0.3 million of net loss, non-cash charges of $1.3 million primarily driven by stock-based compensation, depreciation and amortization, inventory valuation adjustment and noncash lease expense, and cash outflow used in the change in net operating assets and liabilities of $0.5 million. The cash outflow used in the change in net operating assets and liabilities was primarily due to a $1.8 million cash

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outflow in inventory as units manufactured during the period and on hand were in excess of product sales during the period and a $0.2 million cash outflow in lease liabilities due to timing of lease payments, partially offset by a $1.1 million cash inflow in customer deposits due to timing of customer pre-payments and a $0.4 million cash inflow in accounts payable due to timing of customer collections.

Investing Activities

During the six months ended June 30, 2020, cash used in investing activities was $1.9 million, primarily due to $5.1 million cash outflow used to purchase debt securities and a $0.2 million cash outflow due to purchases of property and equipment, partially offset by a $3.5 million cash inflow due to proceeds from maturities of debt securities.

During the six months ended June 30, 2019, cash used in investing activities was $0.2 million due to purchases of property and equipment.

Financing Activities

During the six months ended June 30, 2020 and 2019, cash provided by financing activities was $0.1 million and $35,000, respectively, primarily due to net proceeds from the exercise of stock options, partially offset by payments for shares withheld for tax withholdings on vesting of restricted stock units, respectively.

Contractual Obligations

Our outstanding contractual obligations as of June 30, 2020 are summarized in the following table:

			Payments Due by Period
	Total		Less than 1 year		1 to 3 years		More than 3 years
			(in thousands)
Purchase commitments		440		294		146		—

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 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 June 30, 2020 and 2019 and the six months ended June 30, 2020 and 2019. 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

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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 June 30, 2020 and 2019 and the six months ended June 30, 2020 and 2019 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 net of other income (expense) on our Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

Interest rates

Our exposure to market risk for changes in interest rates relates primarily to our cash, cash equivalents and investments. Our cash, cash equivalents and investments consist primarily of cash, money market funds, corporate notes and bonds, and commercial paper.  The primary objectives of our investment activities are the preservation of capital, the maintenance of liquidity, and capturing a market rate of return.  We seek to minimize risk by investing cash in excess of our operating needs in high-quality instruments issued by highly creditworthy financial institutions. We do not enter into investments for trading or speculative purposes. Due to the nature of these instruments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Decreases in interest rates, however, would reduce future interest income.

With the amount of cash, cash equivalents and investments that we maintained at June 30, 2020, 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 cash and cash equivalents or the fair value of our investment portfolio.

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 Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. 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 June 30, 2020 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, 2019. 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.

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We face risks related to health epidemics, including the COVID-19 pandemic, which could have a material adverse effect on our business, financial condition and results of operations.

We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the recent pandemic of respiratory illness caused by a novel coronavirus known as COVID-19, which the World Health Organization characterized as a pandemic in March 2020. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. For example, employees at our headquarters located in San Jose, California, have been subject to a shelter-in-place order from the state government since March 2020. Our offices in Japan, China, South Korea and Taiwan have also been impacted by COVID-19 and have been subject to various measures implemented by local governments to reduce the spread of COVID-19. These measures may adversely impact our employees and operations and the operations of our end-customers (including our significant end-customers), distributors and suppliers, and may negatively impact our sales and marketing activities. For example, travel restrictions may prohibit our ability to conduct necessary face-to-face meetings with our customers. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect the progress of our research and development projects, our sales and marketing activities, product delivery schedule, and our business, financial condition and results of operations.

The spread of COVID-19 has caused us to modify our business practices (including restriction on employee travel, mandating that all non-essential personnel in our headquarters to work from home, temporary closures of our offices, and cancellation of physical participation in sales activities, meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, end-customers, distributors and suppliers. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of our workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, our operations will be adversely impacted.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. The COVID-19 pandemic could cause fluctuations in foreign currency markets, impact the availability of future borrowings, increase the cost of borrowings, increase credit risks of our customers, disrupt supply and limit the ability of third party suppliers’, manufacturers’ and subcontractors’ ability to manufacture our products in time. We may also experience an increase in the cost of materials used to our products. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, as well as reduced spending by businesses and end-customers, could have a material adverse effect on the demand for our products. In addition, under difficult economic conditions, potential end-customers may seek to reduce discretionary spending by forgoing products that incorporate our solutions or our customers may seek to reduce spending by choosing alternative products. Because a significant portion of our revenue is concentrated in Asia, decreased demand for our products in Asia could have a disproportionately negative impact on our business and financial results. Currently, our customers in Asia are experiencing weakness in their end-markets in North and South Americas, the Middle East, and India due to the COVID-19 pandemic.

There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of COVID-19’s impact on our business, our operations, or the global economy as a whole. However, the effects could have a material impact on our results of operations, and we will continue to monitor the situation closely.

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

None.

29

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Description
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a).
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a).
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	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* 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 Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of 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.

30

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: August 7, 2020	By:	/s/ Mark Voll
		Mark Voll
		Chief Financial Officer and Vice President of Administrations and Secretary (Principal Financial and Accounting Officer)
Date: August 7, 2020	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

31

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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: August 7, 2020	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

1

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, Mark Voll, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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: August 7, 2020	By:	/s/ Mark Voll
		Mark Voll
		Chief Financial Officerand Vice President of Administrations (Principal Financial and Accounting Officer)

1

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 June 30, 2020 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: August 7, 2020	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

1

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 June 30, 2020 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: August 7, 2020	By:	/s/ Mark Voll
		Mark Voll
		Chief Financial Officer and Vice President of Administrations (Principal Financial and Accounting Officer)

1

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 03, 2020
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Registrant Name	Techpoint, Inc.
Entity Central Index Key	0001556898
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	000-55843
Entity Tax Identification Number	80-0806545
Entity Address, Address Line One	2550 N. First Street
Entity Address, Address Line Two	#550
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95131
Entity Address, Country	US
City Area Code	408
Local Phone Number	324-0588
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false
Common Stock, Par Value
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		17,622,832
Trading Symbol	0001556898
Title of 12(b) Security	Common Stock Share, Par Value $0.0001 Per Share
Japanese Depositary Shares | Japan Exchange Group
Document Information [Line Items]
Trading Symbol	0001556898
Title of 12(b) Security	Japanese Depositary Shares, each representing one

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 8,414	$ 11,391
Short-term investments	12,351	9,475
Accounts receivable	7	107
Inventory	6,982	6,048
Prepaid expenses and other current assets	636	875
Total current assets	28,390	27,896
Property and equipment - net	611	535
Deferred tax assets	548	677
Right-of-use assets	817	1,058
Other assets	7,181	8,380
Total assets	37,547	38,546
Current liabilities:
Accounts payable	1,188	1,535
Accrued liabilities	1,266	2,012
Liability related to early exercised stock options	42	67
Customer deposits	273	1,371
Lease liabilities	524	549
Total current liabilities	3,293	5,534
Other liabilities	438	632
Total liabilities	3,731	6,166
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized as of June 30, 2020 and December 31, 2019; nil shares issued and outstanding as of June 30, 2020 and December 31, 2019
Common stock, par value $0.0001 per share - 75,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 17,591,383 and 17,449,572 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	2	2
Additional paid-in-capital	21,788	20,928
Accumulated other comprehensive income (loss)	79	(15)
Retained earnings	11,947	11,465
Total stockholders’ equity	33,816	32,380
Total liabilities and stockholders’ equity	$ 37,547	$ 38,546

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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	17,591,383	17,449,572
Common stock, shares outstanding	17,591,383	17,449,572

XML

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]
Revenue	$ 7,098	$ 7,175	$ 14,609	$ 12,196
Cost of revenue	3,210	3,402	6,584	5,988
Gross profit	3,888	3,773	8,025	6,208
Operating expenses
Research and development	1,683	1,600	3,921	3,076
Selling, general and administrative	1,766	1,828	3,632	3,497
Total operating expenses	3,449	3,428	7,553	6,573
Income (loss) from operations	439	345	472	(365)
Other income (expense) - net	69	52	154	39
Income (loss) before income taxes	508	397	626	(326)
Income tax provision (benefits)	119	62	144	(43)
Net income (loss)	$ 389	$ 335	$ 482	$ (283)
Net income (loss) per share:
Basic	$ 0.02	$ 0.02	$ 0.03	$ (0.02)
Diluted	$ 0.02	$ 0.02	$ 0.03	$ (0.02)
Weighted average shares outstanding in computing net income (loss) per share
Basic	17,559,944	17,228,184	17,529,238	17,200,595
Diluted	17,827,617	17,814,303	17,869,065	17,200,595
Comprehensive income (loss):
Net income (loss)	$ 389	$ 335	$ 482	$ (283)
Other comprehensive income, net of tax:
Unrealized gain on available-for-sale debt securities	187		94
Comprehensive income (loss)	$ 576	$ 335	$ 576	$ (283)

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings
Beginning Balances at Dec. 31, 2018	$ 28,631	$ 2	$ 19,358		$ 9,271
Beginning Balances, Shares at Dec. 31, 2018		17,130,507
Issuance of common stock upon exercise of stock options and vesting of early exercised options	64		64
Issuance of common stock upon exercise of stock options and vesting of early exercised options, Shares		46,666
Issuance of common stock upon vesting of RSUs, Shares		14,200
Shares repurchased for tax withholdings on vesting of RSUs	(7)		(7)
Shares repurchased for tax withholdings on vesting of RSUs, Shares		(1,510)
Stock-based compensation	336		336
Net income (loss)	(618)				(618)
Ending Balances at Mar. 31, 2019	28,406	$ 2	19,751		8,653
Ending Balances, Shares at Mar. 31, 2019		17,189,863
Beginning Balances at Dec. 31, 2018	28,631	$ 2	19,358		9,271
Beginning Balances, Shares at Dec. 31, 2018		17,130,507
Net income (loss)	(283)
Ending Balances at Jun. 30, 2019	29,101	$ 2	20,111		8,988
Ending Balances, Shares at Jun. 30, 2019		17,255,610
Beginning Balances at Mar. 31, 2019	28,406	$ 2	19,751		8,653
Beginning Balances, Shares at Mar. 31, 2019		17,189,863
Issuance of common stock upon exercise of stock options and vesting of early exercised options	36		36
Issuance of common stock upon exercise of stock options and vesting of early exercised options, Shares		38,000
Issuance of common stock upon vesting of RSUs, Shares		31,300
Shares repurchased for tax withholdings on vesting of RSUs	(24)		(24)
Shares repurchased for tax withholdings on vesting of RSUs, Shares		(3,553)
Stock-based compensation	348		348
Net income (loss)	335				335
Ending Balances at Jun. 30, 2019	29,101	$ 2	20,111		8,988
Ending Balances, Shares at Jun. 30, 2019		17,255,610
Beginning Balances at Dec. 31, 2019	32,380	$ 2	20,928	$ (15)	11,465
Beginning Balances, Shares at Dec. 31, 2019		17,449,572
Other comprehensive (income) loss - unrealized gain (loss) on available-for-sale debt securities	(93)			(93)
Issuance of common stock upon exercise of stock options and vesting of early exercised options	103		103
Issuance of common stock upon exercise of stock options and vesting of early exercised options, Shares		58,310
Issuance of common stock upon vesting of RSUs, Shares		21,425
Shares repurchased for tax withholdings on vesting of RSUs	(28)		(28)
Shares repurchased for tax withholdings on vesting of RSUs, Shares		(4,264)
Stock-based compensation	390		390
Net income (loss)	93				93
Ending Balances at Mar. 31, 2020	32,845	$ 2	21,393	(108)	11,558
Ending Balances, Shares at Mar. 31, 2020		17,525,043
Beginning Balances at Dec. 31, 2019	32,380	$ 2	20,928	(15)	11,465
Beginning Balances, Shares at Dec. 31, 2019		17,449,572
Net income (loss)	482
Ending Balances at Jun. 30, 2020	33,816	$ 2	21,788	79	11,947
Ending Balances, Shares at Jun. 30, 2020		17,591,383
Beginning Balances at Mar. 31, 2020	32,845	$ 2	21,393	(108)	11,558
Beginning Balances, Shares at Mar. 31, 2020		17,525,043
Other comprehensive (income) loss - unrealized gain (loss) on available-for-sale debt securities	187			187
Issuance of common stock upon exercise of stock options and vesting of early exercised options	36		36
Issuance of common stock upon exercise of stock options and vesting of early exercised options, Shares		18,996
Issuance of common stock upon vesting of RSUs, Shares		52,425
Shares repurchased for tax withholdings on vesting of RSUs	(20)		(20)
Shares repurchased for tax withholdings on vesting of RSUs, Shares		(5,081)
Stock-based compensation	379		379
Net income (loss)	389				389
Ending Balances at Jun. 30, 2020	$ 33,816	$ 2	$ 21,788	$ 79	$ 11,947
Ending Balances, Shares at Jun. 30, 2020		17,591,383

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash Flows From Operating Activities
Net income (loss)	$ 482	$ (283)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	166	175
Stock-based compensation	769	684
Accretion of investment premium, net of amortization of discount	33
Inventory valuation adjustment	120	234
Deferred income taxes	104	(113)
Noncash lease expense	331	314
Changes in operating assets and liabilities:
Accounts receivable	100	81
Inventory	(1,054)	(1,808)
Prepaid expenses and other current assets	279	(17)
Other assets	1	(3)
Accounts payable	(374)	410
Accrued expenses	(718)	59
Customer deposits	(1,098)	1,057
Lease liabilities	(81)	(155)
Other liabilities	(228)	(148)
Net cash provided by (used in) operating activities	(1,168)	487
Cash Flows From Investing Activities
Purchase of property and equipment	(242)	(225)
Purchase of debt securities	(5,133)
Proceeds from maturities of debt securities	3,500
Net cash used in investing activities	(1,875)	(225)
Cash Flows From Financing Activities
Net proceeds from exercise of stock options	114	66
Payment for shares withheld for tax withholdings on vesting of restricted stock units	(48)	(31)
Net cash provided by financing activities	66	35
Net increase (decrease) in cash and cash equivalents	(2,977)	297
Cash and cash equivalents at beginning of period	11,391	25,941
Cash and cash equivalents at end of period	8,414	26,238
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	39	13
Supplemental Disclosure of Noncash Investing and Financing Information
Property and equipment purchased but not yet paid	87
Vesting of early exercised options	$ 25	$ 34

XML

Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

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. (together with its wholly-owned subsidiaries, the “Company”, “we”, “us” and “our”) was originally incorporated in California in April 2012 and reincorporated in 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.

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, 2019 contained in our Annual Report on Form 10-K.

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. The Company accounts for revenue under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, the Company satisfies its performance obligations and primarily recognizes revenue upon shipment, at which time control of its products is transferred to its customers. The Company applies 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 markets. The Company generally requires advance payments from customers and records these advance payments, or contract liabilities, as customer deposits on its condensed consolidated balance sheet. Since the Company’s performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption practical expedient provided in ASC 606 and is therefore not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. 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 FOB (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 of revenue 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.

COVID-19

In March 2020, the World Health Organization characterized a recent pandemic of respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. For example, employees at our headquarters located in San Jose, California, are currently subject to a shelter-in-place order from the state government. Our offices in Japan, China, South Korea and Taiwan have also been impacted by COVID-19 and have been subject to various measures implemented by local governments to reduce the spread of COVID-19. These measures may adversely impact our employees and operations and the operations of our end-customers (including our significant end-customers), distributors and suppliers, and may negatively impact our sales and marketing activities. For example, travel restrictions may prohibit our ability to conduct necessary face-to-face meetings with our customers. These measures by government authorities may remain in place for a significant period of time which could adversely affect our sales and marketing activities, product delivery schedule, and our business, financial condition and results of operations. The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Management is actively monitoring the impact of COVID-19 on the Company’s financial condition, liquidity, operations, customers, suppliers, industry, and workforce. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.

Credit Risk and Concentration of Customer and Supplier

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, and trade receivables. Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and investing in, 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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Customer
Customer A		49	%		54	%		45	%		58	%
Customer B		12	%	*				14	%	*
Customer C		10	%	*				10	%	*
End-Customer
End-Customer A (1)		27	%		40	%		31	%		38	%
End-Customer B (1)	*				15	%	*				19	%

* Less than 10%

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

The Company currently relies on Taiwan Semiconductor Manufacturing Company Limited and United Microelectronics Corporation (formerly Fujitsu Electronics America, Inc.) to produce substantially all of its semiconductors. Also, the Company relies on Advanced Semiconductor Engineering, Inc. and Sigurd Microelectronics Corporation to assemble, package and test substantially all of its products.

Recently Adopted Accounting Pronouncements

         In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which amends disclosure requirements for fair value measurements by requiring new disclosures, modifying existing requirements, and eliminating others. The amendments are the result of a broader disclosure project, which aims to improve the effectiveness of disclosures. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.  The Company has determined that the new standard had no material impact on its disclosures as of, and for the six months ended June 30, 2020.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.  It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in more timely recognition of credit losses. The guidance is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standard Update No. 2019-12, which simplifies the accounting for income taxes. The guidance in ASU No. 2019-12 is required for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2020, for public business entities, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.

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Balance Sheet Components

6 Months Ended

Jun. 30, 2020

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

	June 30,		December 31,
	2020		2019
Work in process	$	2,941	$	2,529
Finished goods		4,041		3,519
Total inventory	$	6,982	$	6,048

Property and Equipment - Net

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

	June 30,			December 31,
	2020			2019
Computer equipment and software	$	1,640		$	1,405
Leasehold improvements		89			89
Furniture		36			30
Total property and equipment		1,765			1,524
Less: accumulated depreciation		(1,154	)		(989	)
Total property and equipment - net	$	611		$	535

The Company recorded $0.1 million and $0.1 million of depreciation expense for the three months ended June 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for six months ended June 30, 2020 and 2019, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,		December 31,
	2020		2019
Payroll-related expenses	$	597	$	780
Engineering services		433		637
Taxes payable		73		72
Accrued warranty		68		194
Accrued inventory		46		283
Professional fees		16		31
Other		33		15
Total accrued liabilities	$	1,266	$	2,012

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 $0.3 million, $0.4 million and $1.4 million as of June 30, 2020, March 31, 2020 and December 31, 2019, respectively. The Company generally expects to recognize revenue from customer deposits during the three month period immediately following the balance sheet date. During the three months ended June 30, 2020, the Company recognized $0.4 million of revenue from the March 31, 2020 customer deposit balance. During the six months ended June 30, 2020, the Company recognized $1.4 million of revenue from the December 31, 2019 customer deposits balance.

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Fair Value Measurements of Financial Instruments

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements of Financial Instruments

Summary of Financial Instruments

The following is a summary of financial instruments (in thousands):

	June 30,
	2020
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	5,111	$	—	$	—		$	5,111
Commercial paper		1,249		1		—			1,250
Corporate bonds		17,971		106		(3	)		18,074
Total available-for-sale securities	$	24,331	$	107	$	(3	)	$	24,435
Reported in:
Cash and cash equivalents								$	5,111
Short-term investments									12,351
Other assets									6,973
Total available-for-sale securities								$	24,435

	December 31,
	2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	2,027	$	—	$	—		$	2,027
Commercial paper		6,965		—		(3	)		6,962
Corporate bonds		12,943		1		(13	)		12,931
Total available-for-sale securities	$	21,935	$	1	$	(16	)	$	21,920
Reported in:
Cash and cash equivalents								$	4,275
Short-term investments									9,475
Other assets									8,170
Total available-for-sale securities								$	21,920

The contractual maturities of available-for-sale securities are presented in the following table (in thousands):

	June 30,
	2020
	Amortized Cost Basis		Estimated Fair Value
Due in one year or less	$	17,428	$	17,462
Due between one to two years		6,903		6,973
	$	24,331	$	24,435

The Company had 2 investments in unrealized loss positions as of June 30, 2020. The investments have been in unrealized loss positions for less than twelve months. The total fair value of such investments is $2.5 million with unrealized losses of $3,000 for the six months ended June 30, 2020. There were no material gross unrealized losses from available-for-sale securities and no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the six months ended June 30, 2020.

For investments in available-for-sale debt securities that have unrealized losses, the Company evaluates (i) whether it has the intention to sell any of these investments and (ii) whether it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. Based on this evaluation, the Company determined that there were no other-than-temporary impairments associated with investments as of June 30, 2020.

There were no sales of available-for-sale securities for the six months ended June 30, 2020 and 2019.

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 June 30, 2020
Financial assets - available-for-sales securities
Money market funds	$	5,111	$	—	$	—	$	5,111
Commercial paper		—		1,250		—		1,250
Corporate bonds		—		18,074		—		18,074
Total financial assets - available-for-sales securities	$	5,111	$	19,324	$	—	$	24,435
As of December 31, 2019
Financial assets - available-for-sales securities
Money market funds	$	2,027	$	—	$	—	$	2,027
Commercial paper		—		6,962		—		6,962
Corporate bonds		—		12,931		—		12,931
Total financial assets - available-for-sales securities	$	2,027	$	19,893	$	—	$	21,920

The Company classifies money market funds in Level 1 since the financial assets consist of securities for which quoted prices are available in an active market.

In addition, the Company classifies corporate bonds and commercial paper in Level 2 since the financial assets use observable inputs including quoted prices in active markets for similar assets or liabilities. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents, short-term investments and long-term investments. The pricing service uses inputs from multiple industry standard data providers or other third party sources and applies various acceptable methodologies.

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Segment Information

6 Months Ended

Jun. 30, 2020

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 making operating decisions and assessing financial performance on a regular basis. Accordingly, the Company considers itself to be one reportable segment, which is comprised of one operating segment - 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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
China	$	4,521	$	4,689	$	8,867	$	8,185
Taiwan		1,433		1,285		2,958		1,893
South Korea		951		860		2,308		1,551
Japan		116		334		310		555
Other		77		7		166		12
Total revenue	$	7,098	$	7,175	$	14,609	$	12,196

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Security surveillance	$	3,510	$	4,322	$	7,463	$	7,812
Automotive		3,588		2,853		7,146		4,384
Total revenue	$	7,098	$	7,175	$	14,609	$	12,196

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):

	June 30,		December 31,
	2020		2019
Taiwan	$	516	$	409
United States		39		49
Japan		36		54
China		12		19
South Korea		8		4
Total property and equipment - net	$	611	$	535

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Operating leases

The Company determines if an arrangement contains a lease at inception. The Company leases facilities under non-cancellable lease agreements expiring through fiscal year 2022. The Company’s agreements do not include variable lease payments or any restrictions or covenants imposed by the leases. As the rate implicit in each lease agreement is not readily determinable, the Company’s incremental borrowing rate was used as the discount rate. The Company’s right-of-use assets and lease liabilities have been adjusted for initial direct costs and prepaid rent but do not reflect any options to extend or terminate its lease agreements, any residual value guarantees, or any leases that have yet to be commenced.

As of June 30, 2020 and December 31, 2019, the right-of-use assets and lease liabilities related to operating leases were as follows (in thousands):

	June 30,		December 31,
	2020		2019
Right-of-use assets	$	817	$	1,058
Lease liabilities － Current	$	524	$	549
Lease liabilities － Non-Current		309		518
Total lease liabilities	$	833	$	1,067

Rent expense under operating leases was $0.2 million and $0.2 million for the three months ended June 30, 2020 and 2019, respectively. Rent expense under operating leases was $0.4 million and $0.3 million for six months ended June 30, 2020 and 2019, respectively.

The rent expense recognized from short-term leases were $6,000 and $6,000 for the three months ended June 30, 2020 and 2019, respectively. The rent expense recognized from short-term leases were $12,000 and $12,000 for six months ended June 30, 2020 and 2019, respectively.

The following tables summarize the Company’s lease costs and weighted-average assumptions used in determining its right-of-use assets and lease liabilities (in thousands):

	Six Months Ended			Six Months Ended
	June 30, 2020			June 30, 2019
Operating lease cost (1)	$	360		$	331
Cash paid for operating leases (2)	$	353		$	345
Right-of-use assets obtained in exchange for operating lease liabilities (3)	$	90		$	839
Weighted average remaining term for operating leases	1.55 years			0.88 years
Weighted average discount rate for operating leases		6.0	%		6.0	%

(1) Operating lease cost for the three months ended June 30, 2020 and 2019 were $0.2 million and $0.2 million, respectively.

(2) Cash paid for operating leases for the three months ended June 30, 2020 and 2019 were $0.2 million and $0.2 million, respectively.

(3) During the six months ended June 30, 2020, the Company modified two existing operating leases. Neither lease modification was treated as a separate contract as no additional right-of-use asset was granted. During the six months ended June 30, 2019, there were no new leases that commenced. The balance represents the right-of-use assets recognized upon adoption of ASC 842.

As of June 30, 2020, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2020 (remaining six months)	$	298
2021		509
2022		65
Total		872
Less effects of discounting		(39	)
Lease liabilities recognized	$	833

Purchase Commitments

As of June 30, 2020, the Company had purchase commitments with its third-party suppliers through fiscal year 2022. Future minimum payments under purchase commitments are $0.1 million for the remaining six months ending December 31, 2020, and $0.2 million and $49,000 for the year ending December 31, 2021 and 2022, 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 its 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

6 Months Ended

Jun. 30, 2020

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 June 30, 2020 and December 31, 2019. The shares of preferred stock issued and outstanding was nil as of June 30, 2020 and December 31, 2019.

Common Stock

The Company was authorized to issue 75,000,000 shares of common stock with $0.0001 par value per share as of June 30, 2020 and December 31, 2019. As of June 30, 2020, the shares of common stock issued and outstanding were 17,591,383 excluding 24,421 legally issued shares subject to repurchases related to the early exercise of options to purchase common stock. As of December 31, 2019, the shares of common stock issued and outstanding were 17,449,572 excluding 51,006 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:

	June 30,
	2020
Outstanding stock awards		1,233,078
Shares available for future issuance under the 2017 Stock Incentive Plan		5,527,245
Total common stock reserved for future issuances		6,760,323

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Stock Option Plan

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Option Plan

7. Stock Option Plan

Stock Incentive Plan

In April 2012, the Company adopted a 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 non-statutory 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 a 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 are added to the 2017 Plan. The number of shares available for issuance under the 2017 Plan is 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 the Company’s 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 2020 was 700,023 shares. The 2017 Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to employees and the granting of non-statutory stock options to employees, non-employee directors, advisors and consultants. The 2017 Plan also provides for the grants of restricted stock, stock appreciation rights, 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, 2019		4,847,877
Authorized		700,023
Granted		(30,000	)
Canceled		9,345
As of June 30, 2020		5,527,245

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 a liability related to early exercised stock options and reclassified to common stock and additional paid in capital as the repurchase right lapses.

For the six months ended June 30, 2020 and 2019, there were no options early exercised. In addition, the Company did not repurchase any shares of unvested common stock related to early exercised stock options during the period.

As of June 30, 2020 and December 31, 2019, 24,421 and 51,006 shares, respectively, held by employees were subject to repurchase at an aggregate price of $42,000 and $0.1 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, 2019		850,334		$	2.30	$	6.80	$	3,587
Granted		—			—
Exercised (1)		(77,306	)		1.80
Canceled		—			—
As of June 30, 2020		773,028			2.35		6.4		1,828
Options vested and expected to vest as of June 30, 2020		773,028			2.35		6.4		1,828
Options vested and exercisable as of June 30, 2020		508,763			2.19		6.2		1,285

(1)     Includes vesting of early-exercised options.

The stock options outstanding and exercisable by exercise price at June 30, 2020 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		32,850		3.6	$	0.16		32,850	$	0.16
	0.37		63,169		5.0		0.37		59,165		0.37
	0.97		86,901		5.7		0.97		59,249		0.97
	2.51		122,652		6.2		2.51		77,084		2.51
	2.89		46,000		6.7		2.89		27,500		2.89
	2.93		315,256		6.9		2.93		194,800		2.93
	3.18		106,200		7.1		3.18		58,115		3.18
			773,028		6.4		2.35		508,763		2.19

The aggregate intrinsic value of options exercised for the six months ended June 30, 2020 and 2019 was $0.2 million and $0.2 million, respectively. The Company has various vesting agreements with its employees. Options granted generally vest over a five-year period and generally are exercisable for 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, 2019		503,900		$	8.48
Granted		30,000			4.63
Released		(64,505	)		7.63
Canceled		(9,345	)		8.45
As of June 30, 2020		460,050			8.35

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

6 Months Ended

Jun. 30, 2020

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	34	$	28	$	67	$	54
Research and development		133		123		268		246
Selling, general and administrative		212		197		434		384
Total	$	379	$	348	$	769	$	684

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

9. Net Income (Loss) 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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Numerator:
Basic:
Net income (loss)	$	389	$	335	$	482	$	(283	)
Diluted:
Net income (loss)	$	389	$	335	$	482	$	(283	)
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic    net income (loss) per share		17,559,944		17,228,184		17,529,238		17,200,595
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)		267,673		586,119		339,827		—
Weighted-average shares used in computing diluted net    income (loss) per share		17,827,617		17,814,303		17,869,065		17,200,595
Net income (loss) per share:
Basic	$	0.02	$	0.02	$	0.03	$	(0.02	)
Diluted	$	0.02	$	0.02	$	0.03	$	(0.02	)

(1)     Includes early-exercised options.

For a net loss period, basic net loss per share and diluted net loss per share are the same as the effect of potential shares is antidilutive and therefore excluded. The potentially dilutive securities outstanding for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019 that were excluded from the computation of diluted net income (loss) per share for the period presented as the effect would have been antidilutive was 922,000, 404,000, 750,000 and 1,009,000 shares, respectively.

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Domestic	$	443	$	343	$	509	$	(438	)
Foreign		65		54		117		112
Income (loss) before income taxes	$	508	$	397	$	626	$	(326	)

The components of the income tax provision (benefits) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
United States	$	106	$	55	$	124	$	(59	)
Foreign		13		7		20		16
Income tax provision (benefits)	$	119	$	62	$	144	$	(43	)

As of June 30, 2020, 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 June 30, 2020, the Company had approximately $0.3 million of unrecognized tax benefits of which $0.2 million was netted against deferred tax assets with a full valuation allowance. If these amounts are recognized, there will be a tax benefits of $0.1 million against the Company’s effective tax rate.

The CARES Act did not have a material impact on our tax provision for the six months ended June 30, 2020. We continue to examine the elements of the CARES Act and the impact that it may have on our future business.

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Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

Organization

Techpoint, Inc. (together with its wholly-owned subsidiaries, the “Company”, “we”, “us” and “our”) was originally incorporated in California in April 2012 and reincorporated in 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.

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, 2019 contained in our Annual Report on Form 10-K.

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. The Company accounts for revenue under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, the Company satisfies its performance obligations and primarily recognizes revenue upon shipment, at which time control of its products is transferred to its customers. The Company applies 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 markets. The Company generally requires advance payments from customers and records these advance payments, or contract liabilities, as customer deposits on its condensed consolidated balance sheet. Since the Company’s performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption practical expedient provided in ASC 606 and is therefore not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. 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 FOB (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 of revenue 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.

COVID-19

COVID-19

In March 2020, the World Health Organization characterized a recent pandemic of respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. For example, employees at our headquarters located in San Jose, California, are currently subject to a shelter-in-place order from the state government. Our offices in Japan, China, South Korea and Taiwan have also been impacted by COVID-19 and have been subject to various measures implemented by local governments to reduce the spread of COVID-19. These measures may adversely impact our employees and operations and the operations of our end-customers (including our significant end-customers), distributors and suppliers, and may negatively impact our sales and marketing activities. For example, travel restrictions may prohibit our ability to conduct necessary face-to-face meetings with our customers. These measures by government authorities may remain in place for a significant period of time which could adversely affect our sales and marketing activities, product delivery schedule, and our business, financial condition and results of operations. The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Management is actively monitoring the impact of COVID-19 on the Company’s financial condition, liquidity, operations, customers, suppliers, industry, and workforce. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.

Credit Risk and Concentration of Customer and Supplier

Credit Risk and Concentration of Customer and Supplier

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, and trade receivables. Risks associated with cash and cash equivalents, and investments are mitigated by banking with, and investing in, 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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Customer
Customer A		49	%		54	%		45	%		58	%
Customer B		12	%	*				14	%	*
Customer C		10	%	*				10	%	*
End-Customer
End-Customer A (1)		27	%		40	%		31	%		38	%
End-Customer B (1)	*				15	%	*				19	%

* Less than 10%

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

The Company currently relies on Taiwan Semiconductor Manufacturing Company Limited and United Microelectronics Corporation (formerly Fujitsu Electronics America, Inc.) to produce substantially all of its semiconductors. Also, the Company relies on Advanced Semiconductor Engineering, Inc. and Sigurd Microelectronics Corporation to assemble, package and test substantially all of its products.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

         In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which amends disclosure requirements for fair value measurements by requiring new disclosures, modifying existing requirements, and eliminating others. The amendments are the result of a broader disclosure project, which aims to improve the effectiveness of disclosures. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.  The Company has determined that the new standard had no material impact on its disclosures as of, and for the six months ended June 30, 2020.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.  It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in more timely recognition of credit losses. The guidance is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standard Update No. 2019-12, which simplifies the accounting for income taxes. The guidance in ASU No. 2019-12 is required for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2020, for public business entities, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.

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Organization and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

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						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Customer
Customer A		49	%		54	%		45	%		58	%
Customer B		12	%	*				14	%	*
Customer C		10	%	*				10	%	*
End-Customer
End-Customer A (1)		27	%		40	%		31	%		38	%
End-Customer B (1)	*				15	%	*				19	%

* Less than 10%

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

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2020

Balance Sheet Related Disclosures [Abstract]

Components of Inventory

Inventory consists of the following (in thousands):

	June 30,		December 31,
	2020		2019
Work in process	$	2,941	$	2,529
Finished goods		4,041		3,519
Total inventory	$	6,982	$	6,048

Components of Property and Equipment - Net

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

	June 30,			December 31,
	2020			2019
Computer equipment and software	$	1,640		$	1,405
Leasehold improvements		89			89
Furniture		36			30
Total property and equipment		1,765			1,524
Less: accumulated depreciation		(1,154	)		(989	)
Total property and equipment - net	$	611		$	535

Components of Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	June 30,		December 31,
	2020		2019
Payroll-related expenses	$	597	$	780
Engineering services		433		637
Taxes payable		73		72
Accrued warranty		68		194
Accrued inventory		46		283
Professional fees		16		31
Other		33		15
Total accrued liabilities	$	1,266	$	2,012

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Fair Value Measurements of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Summary of Financial Instruments

Summary of Financial Instruments

The following is a summary of financial instruments (in thousands):

	June 30,
	2020
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	5,111	$	—	$	—		$	5,111
Commercial paper		1,249		1		—			1,250
Corporate bonds		17,971		106		(3	)		18,074
Total available-for-sale securities	$	24,331	$	107	$	(3	)	$	24,435
Reported in:
Cash and cash equivalents								$	5,111
Short-term investments									12,351
Other assets									6,973
Total available-for-sale securities								$	24,435

	December 31,
	2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	2,027	$	—	$	—		$	2,027
Commercial paper		6,965		—		(3	)		6,962
Corporate bonds		12,943		1		(13	)		12,931
Total available-for-sale securities	$	21,935	$	1	$	(16	)	$	21,920
Reported in:
Cash and cash equivalents								$	4,275
Short-term investments									9,475
Other assets									8,170
Total available-for-sale securities								$	21,920

Summary of Contractual Maturities of Available-for-sale Securities

The contractual maturities of available-for-sale securities are presented in the following table (in thousands):

	June 30,
	2020
	Amortized Cost Basis		Estimated Fair Value
Due in one year or less	$	17,428	$	17,462
Due between one to two years		6,903		6,973
	$	24,331	$	24,435

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 June 30, 2020
Financial assets - available-for-sales securities
Money market funds	$	5,111	$	—	$	—	$	5,111
Commercial paper		—		1,250		—		1,250
Corporate bonds		—		18,074		—		18,074
Total financial assets - available-for-sales securities	$	5,111	$	19,324	$	—	$	24,435
As of December 31, 2019
Financial assets - available-for-sales securities
Money market funds	$	2,027	$	—	$	—	$	2,027
Commercial paper		—		6,962		—		6,962
Corporate bonds		—		12,931		—		12,931
Total financial assets - available-for-sales securities	$	2,027	$	19,893	$	—	$	21,920

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2020

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
China	$	4,521	$	4,689	$	8,867	$	8,185
Taiwan		1,433		1,285		2,958		1,893
South Korea		951		860		2,308		1,551
Japan		116		334		310		555
Other		77		7		166		12
Total revenue	$	7,098	$	7,175	$	14,609	$	12,196

Schedule of Revenue by Principal Products Lines

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Security surveillance	$	3,510	$	4,322	$	7,463	$	7,812
Automotive		3,588		2,853		7,146		4,384
Total revenue	$	7,098	$	7,175	$	14,609	$	12,196

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):

	June 30,		December 31,
	2020		2019
Taiwan	$	516	$	409
United States		39		49
Japan		36		54
China		12		19
South Korea		8		4
Total property and equipment - net	$	611	$	535

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Summary of Right of Use Asset and Lease Liabilities Related to Operating Leases

As of June 30, 2020 and December 31, 2019, the right-of-use assets and lease liabilities related to operating leases were as follows (in thousands):

	June 30,		December 31,
	2020		2019
Right-of-use assets	$	817	$	1,058
Lease liabilities － Current	$	524	$	549
Lease liabilities － Non-Current		309		518
Total lease liabilities	$	833	$	1,067

Schedule of Lease Costs and Weighted-Average Assumptions Used in Determining its Right-of-Use Assets and Lease Liabilities

The following tables summarize the Company’s lease costs and weighted-average assumptions used in determining its right-of-use assets and lease liabilities (in thousands):

	Six Months Ended			Six Months Ended
	June 30, 2020			June 30, 2019
Operating lease cost (1)	$	360		$	331
Cash paid for operating leases (2)	$	353		$	345
Right-of-use assets obtained in exchange for operating lease liabilities (3)	$	90		$	839
Weighted average remaining term for operating leases	1.55 years			0.88 years
Weighted average discount rate for operating leases		6.0	%		6.0	%

(1) Operating lease cost for the three months ended June 30, 2020 and 2019 were $0.2 million and $0.2 million, respectively.

(2) Cash paid for operating leases for the three months ended June 30, 2020 and 2019 were $0.2 million and $0.2 million, respectively.

(3) During the six months ended June 30, 2020, the Company modified two existing operating leases. Neither lease modification was treated as a separate contract as no additional right-of-use asset was granted. During the six months ended June 30, 2019, there were no new leases that commenced. The balance represents the right-of-use assets recognized upon adoption of ASC 842.

Schedule of Aggregate Future Minimum Lease Payments Under Operating Leases

As of June 30, 2020, the aggregate future minimum lease payments under operating leases consist of the following (in thousands):

Year Ending December 31,	Amount
2020 (remaining six months)	$	298
2021		509
2022		65
Total		872
Less effects of discounting		(39	)
Lease liabilities recognized	$	833

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

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:

	June 30,
	2020
Outstanding stock awards		1,233,078
Shares available for future issuance under the 2017 Stock Incentive Plan		5,527,245
Total common stock reserved for future issuances		6,760,323

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Stock Option Plan (Tables)

6 Months Ended

Jun. 30, 2020

Summary of Stock Options Outstanding and Exercisable by Exercise Price

The stock options outstanding and exercisable by exercise price at June 30, 2020 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		32,850		3.6	$	0.16		32,850	$	0.16
	0.37		63,169		5.0		0.37		59,165		0.37
	0.97		86,901		5.7		0.97		59,249		0.97
	2.51		122,652		6.2		2.51		77,084		2.51
	2.89		46,000		6.7		2.89		27,500		2.89
	2.93		315,256		6.9		2.93		194,800		2.93
	3.18		106,200		7.1		3.18		58,115		3.18
			773,028		6.4		2.35		508,763		2.19

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, 2019		503,900		$	8.48
Granted		30,000			4.63
Released		(64,505	)		7.63
Canceled		(9,345	)		8.45
As of June 30, 2020		460,050			8.35

2012 Stock Option Plan

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, 2019		4,847,877
Authorized		700,023
Granted		(30,000	)
Canceled		9,345
As of June 30, 2020		5,527,245

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, 2019		850,334		$	2.30	$	6.80	$	3,587
Granted		—			—
Exercised (1)		(77,306	)		1.80
Canceled		—			—
As of June 30, 2020		773,028			2.35		6.4		1,828
Options vested and expected to vest as of June 30, 2020		773,028			2.35		6.4		1,828
Options vested and exercisable as of June 30, 2020		508,763			2.19		6.2		1,285

(1)     Includes vesting of early-exercised options.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	34	$	28	$	67	$	54
Research and development		133		123		268		246
Selling, general and administrative		212		197		434		384
Total	$	379	$	348	$	769	$	684

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Net Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2020

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Numerator:
Basic:
Net income (loss)	$	389	$	335	$	482	$	(283	)
Diluted:
Net income (loss)	$	389	$	335	$	482	$	(283	)
Denominator:
Basic shares:
Weighted-average shares outstanding in computing basic    net income (loss) per share		17,559,944		17,228,184		17,529,238		17,200,595
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)		267,673		586,119		339,827		—
Weighted-average shares used in computing diluted net    income (loss) per share		17,827,617		17,814,303		17,869,065		17,200,595
Net income (loss) per share:
Basic	$	0.02	$	0.02	$	0.03	$	(0.02	)
Diluted	$	0.02	$	0.02	$	0.03	$	(0.02	)

(1)     Includes early-exercised options.

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2020

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				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Domestic	$	443	$	343	$	509	$	(438	)
Foreign		65		54		117		112
Income (loss) before income taxes	$	508	$	397	$	626	$	(326	)

Schedule of Components of Income Tax Provision (Benefits)

The components of the income tax provision (benefits) are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
United States	$	106	$	55	$	124	$	(59	)
Foreign		13		7		20		16
Income tax provision (benefits)	$	119	$	62	$	144	$	(43	)

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Organization and Summary of Significant Accounting Policies - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Company Incorporation place	DE
California
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Company original incorporation date of incorporation	2012-04
Company Incorporation place	CA
Delaware
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Company Incorporation place	DE
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		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Customer A
Product Information [Line Items]
Concentration risk, percentage	49.00%	54.00%	45.00%	58.00%
Customer B
Product Information [Line Items]
Concentration risk, percentage	12.00%		14.00%
Customer C
Product Information [Line Items]
Concentration risk, percentage	10.00%		10.00%
End-Customer A
Product Information [Line Items]
Concentration risk, percentage	27.00%	40.00%	31.00%	38.00%
End-Customer B
Product Information [Line Items]
Concentration risk, percentage		15.00%		19.00%

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Balance Sheet Components - Components of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Work in process	$ 2,941	$ 2,529
Finished goods	4,041	3,519
Total inventory	$ 6,982	$ 6,048

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Balance Sheet Components - Components of Property and Equipment - Net (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 1,765	$ 1,524
Less: accumulated depreciation	(1,154)	(989)
Total property and equipment - net	611	535
Computer Equipment and Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,640	1,405
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	89	89
Furniture
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 36	$ 30

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Balance Sheet Components - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Mar. 31, 2020	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Depreciation expense	$ 100	$ 100	$ 200	$ 200
Payments received in advance of shipments	273		273		$ 400	$ 1,371
Company recognized revenue	$ 400		$ 1,400

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Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Payroll-related expenses	$ 597	$ 780
Engineering services	433	637
Taxes payable	73	72
Accrued warranty	68	194
Accrued inventory	46	283
Professional fees	16	31
Other	33	15
Total accrued liabilities	$ 1,266	$ 2,012

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Fair Value Measurements of Financial Instruments - Summary of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 24,331	$ 21,935
Gross Unrealized Gain	107	1
Gross Unrealized Loss	(3)	(16)
Estimated Fair Values	24,435	21,920
Money Market Funds
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	5,111	2,027
Estimated Fair Values	5,111	2,027
Commercial Paper
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	1,249	6,965
Gross Unrealized Gain	1
Gross Unrealized Loss		(3)
Estimated Fair Values	1,250	6,962
Corporate Bonds
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	17,971	12,943
Gross Unrealized Gain	106	1
Gross Unrealized Loss	(3)	(13)
Estimated Fair Values	18,074	12,931
Cash and Cash Equivalents
Schedule Of Available For Sale Securities [Line Items]
Estimated Fair Values	5,111	4,275
Short-term Investments
Schedule Of Available For Sale Securities [Line Items]
Estimated Fair Values	12,351	9,475
Other Assets
Schedule Of Available For Sale Securities [Line Items]
Estimated Fair Values	$ 6,973	$ 8,170

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Fair Value Measurements of Financial Instruments - Summary of Contractual Maturities of Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Available For Sale Securities [Abstract]
Amortized Cost, Due in one year or less	$ 17,428
Amortized Cost, Due between one to two years	6,903
Amortized Cost	24,331	$ 21,935
Estimated Fair Value, Due in one year or less	17,462
Estimated Fair Value, Due between one to two years	6,973
Estimated Fair Value	$ 24,435	$ 21,920

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Fair Value Measurements of Financial Instruments - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 USD ($) Investment	Jun. 30, 2019 USD ($)
Available For Sale Securities [Abstract]
Number of investments in unrealized loss positions | Investment	2
Fair value of investments	$ 2,500,000
Unrealized losses on investments	3,000
Other-than-temporary impairments associated with investments	0
Sales of available-for-sale securities	$ 0	$ 0

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Fair Value Measurements of Financial Instruments - Schedule of Financial Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	$ 24,435	$ 21,920
Money Market Funds
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	5,111	2,027
Commercial Paper
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	1,250	6,962
Corporate Bonds
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	18,074	12,931
Fair Value Measurements Recurring
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	24,435	21,920
Fair Value Measurements Recurring | Money Market Funds
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	5,111	2,027
Fair Value Measurements Recurring | Commercial Paper
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	1,250	6,962
Fair Value Measurements Recurring | Corporate Bonds
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	18,074	12,931
Fair Value Measurements Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	5,111	2,027
Fair Value Measurements Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money Market Funds
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	5,111	2,027
Fair Value Measurements Recurring | Significant Other Observable Inputs (Level 2)
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	19,324	19,893
Fair Value Measurements Recurring | Significant Other Observable Inputs (Level 2) | Commercial Paper
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	1,250	6,962
Fair Value Measurements Recurring | Significant Other Observable Inputs (Level 2) | Corporate Bonds
Financial assets - available-for-sales securities
Total financial assets - available-for-sales securities	$ 18,074	$ 12,931

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Segment Information - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 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		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 7,098	$ 7,175	$ 14,609	$ 12,196
China
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	4,521	4,689	8,867	8,185
Taiwan
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	1,433	1,285	2,958	1,893
South Korea
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	951	860	2,308	1,551
Japan
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	116	334	310	555
Other
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 77	$ 7	$ 166	$ 12

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Segment Information - Schedule of Revenue by Principal Product Lines (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	$ 7,098	$ 7,175	$ 14,609	$ 12,196
Security Surveillance
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	3,510	4,322	7,463	7,812
Automotive
Entity Wide Information Revenue From External Customer [Line Items]
Revenue	$ 3,588	$ 2,853	$ 7,146	$ 4,384

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Segment Information - Schedule of Net Long-Lived Assets by Geographic Region (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	$ 611	$ 535
Taiwan
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	516	409
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	39	49
Japan
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	36	54
China
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	12	19
South Korea
Revenues From External Customers And Long Lived Assets [Line Items]
Property and equipment - net	$ 8	$ 4

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Commitments and Contingencies - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) Litigation	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Litigation	Jun. 30, 2019 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Non-cancellable operating lease agreements, expiration description			non-cancellable lease agreements expiring through fiscal year 2022.
Rent expense under operating leases	$ 200,000	$ 200,000	$ 400,000	$ 300,000
Rent expense recognized from short-term leases	6,000,000	$ 6,000,000	12,000,000	$ 12,000,000
Future minimum payments under purchase commitments for year ending December 31, 2020	100,000		100,000
Future minimum payments under purchase commitments for year ending December 31, 2021	200,000		200,000
Future minimum payments under purchase commitments for year ending December 31, 2022	$ 49,000		$ 49,000
Number of litigation | Litigation	0		0

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Commitments and Contingencies - Summary of Right of Use Asset and Lease Liabilities Related to Operating Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Assets And Liabilities Lessee [Abstract]
Right-of-use assets	$ 817	$ 1,058
Lease liabilities － Current	524	549
Lease liabilities － Non-Current	309	518
Total lease liabilities	$ 833	$ 1,067

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Commitments and Contingencies - Schedule of Lease Costs and Weighted-Average Assumptions Used in Determining its Right-of-Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Commitments And Contingencies Disclosure [Abstract]
Operating lease cost	$ 200	$ 200	$ 360	$ 331
Cash paid for operating leases	$ 200	$ 200	353	345
Right-of-use assets obtained in exchange for operating lease liabilities			$ 90	$ 839
Weighted average remaining term for operating leases	1 year 6 months 18 days	10 months 17 days	1 year 6 months 18 days	10 months 17 days
Weighted average discount rate for operating leases	6.00%	6.00%	6.00%	6.00%

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Commitments and Contingencies - Schedule of Lease Costs and Weighted-Average Assumptions Used in Determining its Right-of-Use Assets and Lease Liabilities (Parenthetical) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Lease	Jun. 30, 2019 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Operating lease cost	$ 200,000	$ 200,000	$ 360,000	$ 331,000
Cash paid for operating leases	$ 200,000	$ 200,000	$ 353,000	345,000
Number of modified existing operating lease | Lease			2
New leases commenced during the period				$ 0

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Commitments and Contingencies - Schedule of Aggregate Future Minimum Lease Payments Under Operating Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]
2020 (remaining six months)	$ 298
2021	509
2022	65
Total	872
Less effects of discounting	(39)
Lease liabilities recognized	$ 833	$ 1,067

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Stockholders' Equity - Additional Information (Details) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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	17,591,383	17,449,572
Common stock shares outstanding	17,591,383	17,449,572
Common stock issued subject to repurchase related to early exercise of options	24,421	51,006

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Stockholders' Equity - Schedule of Number of Shares of Common Stock Reserved for Future Issuances (Details)	Jun. 30, 2020 shares
Class Of Stock [Line Items]
Common stock reserved for future issuances	6,760,323
Outstanding Stock Awards
Class Of Stock [Line Items]
Common stock reserved for future issuances	1,233,078
Shares Available for Future Issuance under 2017 Stock Incentive Plan
Class Of Stock [Line Items]
Common stock reserved for future issuances	5,527,245

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Stock Option Plan - Additional Information (Details)	1 Months Ended		6 Months Ended		12 Months Ended
	Sep. 30, 2017 shares	Apr. 30, 2012	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019 USD ($) shares	Dec. 31, 2020 shares	Dec. 31, 2019 USD ($) shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, additional awards			700,023
Common stock reserved for future issuances			6,760,323
Number of options early exercised			0	0
Number of shares of unvested common stock repurchased			0	0
Number of shares subject to repurchase			24,421			51,006
Aggregate price of shares held subject to repurchase | $			$ 42,000			$ 100,000
Share-based compensation arrangement by share-based payment award, aggregate intrinsic value of options exercised | $			$ 200,000	$ 200,000
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 non-statutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Company’s board of directors. The terms of options granted under the 2012 Plan may not exceed ten years.
Share-based compensation arrangement by share-based payment award, additional awards	0
Common stock reserved for future issuances	0
2012 Stock Option Plan | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, percentage of voting rights of all classes of stock to be owned by employees to determine stock options exercise price on grant date		10.00%
Share-based compensation arrangement by share-based payment award, exercise prices percentage of fair market of common stock on grant date		110.00%
2012 Stock Option Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Options exercisable period		10 years
Two Thousand Seventeen Stock Option Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options vesting term of award			Options granted generally vest over a five-year period and generally are exercisable for 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 is 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 the Company’s 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					700,023
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	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Awards Available for Grant, Beginning balance	4,847,877
Awards Available for Grant, Authorized	700,023
Awards Available for Grant, Granted	(30,000)
Awards Available for Grant, Canceled	9,345
Awards Available for Grant, Ending balance	5,527,245	4,847,877
Options Issued and Outstanding, Beginning balance	850,334
Options Issued and Outstanding, Exercised	(77,306)
Options Issued and Outstanding, Ending balance	773,028	850,334
Options Issued and Outstanding, Options vested and expected to vest	773,028
Options Issued and Outstanding, Options vested and exercisable	508,763
Weighted Average Exercise Price, Beginning balance	$ 2.30
Weighted Average Exercise Price, Exercised	1.80
Weighted Average Exercise Price, Ending balance	2.35	$ 2.30
Weighted Average Exercise Price, Options vested and expected to vest	2.35
Weighted Average Exercise Price, Options vested and exercisable	$ 2.19
Weighted-Average Remaining Contractual Term	6 years 4 months 24 days	6 years 9 months 18 days
Weighted-Average Remaining Contractual Term, Options vested and expected to vest	6 years 4 months 24 days
Weighted-Average Remaining Contractual Term, Options vested and exercisable	6 years 2 months 12 days
Aggregate Intrinsic Value	$ 1,828	$ 3,587
Aggregate Intrinsic Value, Options vested and expected to vest	1,828
Aggregate Intrinsic Value, Options vested and exercisable	$ 1,285

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Stock Option Plan - Summary of Stock Options Outstanding and Exercisable by Exercise Price (Details) - $ / shares	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options Outstanding, Number Outstanding	773,028
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	6 years 4 months 24 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.35	$ 2.30
Options Vested and Exercisable, Number Exercisable	508,763
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 2.19
Exercise Price 0.16
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 0.16
Options Outstanding, Number Outstanding	32,850
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	3 years 7 months 6 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.16
Options Vested and Exercisable, Number Exercisable	32,850
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	63,169
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	5 years
Options Outstanding, Weighted-Average Exercise Price	$ 0.37
Options Vested and Exercisable, Number Exercisable	59,165
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	86,901
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	5 years 8 months 12 days
Options Outstanding, Weighted-Average Exercise Price	$ 0.97
Options Vested and Exercisable, Number Exercisable	59,249
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	122,652
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	6 years 2 months 12 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.51
Options Vested and Exercisable, Number Exercisable	77,084
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	46,000
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	6 years 8 months 12 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.89
Options Vested and Exercisable, Number Exercisable	27,500
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	315,256
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	6 years 10 months 24 days
Options Outstanding, Weighted-Average Exercise Price	$ 2.93
Options Vested and Exercisable, Number Exercisable	194,800
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	106,200
Options Outstanding, Weighted-Average Remaining Contractual Life (Years)	7 years 1 month 6 days
Options Outstanding, Weighted-Average Exercise Price	$ 3.18
Options Vested and Exercisable, Number Exercisable	58,115
Options Vested and Exercisable, Weighted-Average Exercise Price	$ 3.18

XML

Stock Option Plan - Summary of Restricted Stock Units Activity (Details) - Restricted Stock Units	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units Issued and Outstanding, Beginning balance | shares	503,900
Units Issued and Outstanding, Granted | shares	30,000
Units Issued and Outstanding, Released | shares	(64,505)
Units Issued and Outstanding, Canceled | shares	(9,345)
Units Issued and Outstanding, Ending balance | shares	460,050
Weighted-Average Grant Date Fair Value, Beginning balance | $ / shares	$ 8.48
Weighted-Average Grant Date Fair Value, Granted | $ / shares	4.63
Weighted-Average Grant Date Fair Value, Released | $ / shares	7.63
Weighted-Average Grant Date Fair Value, Canceled | $ / shares	8.45
Weighted-Average Grant Date Fair Value, Ending balance | $ / shares	$ 8.35

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Stock-Based Compensation - Distribution of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share Based Compensation Expense [Line Items]
Stock-based compensation	$ 379	$ 348	$ 769	$ 684
Cost of Revenue
Share Based Compensation Expense [Line Items]
Stock-based compensation	34	28	67	54
Research and Development
Share Based Compensation Expense [Line Items]
Stock-based compensation	133	123	268	246
Selling, General and Administrative
Share Based Compensation Expense [Line Items]
Stock-based compensation	$ 212	$ 197	$ 434	$ 384

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Net Income (Loss) Per Share - Computation of Basic and Diluted Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Basic:
Net income (loss)	$ 389	$ 93	$ 335	$ (618)	$ 482	$ (283)
Diluted:
Net income (loss)	$ 389	$ 93	$ 335	$ (618)	$ 482	$ (283)
Denominator:
Weighted-average shares outstanding in computing basic net income (loss) per share	17,559,944		17,228,184		17,529,238	17,200,595
Effect of potentially dilutive securities:
Stock awards	267,673		586,119		339,827
Weighted-average shares used in computing diluted net income (loss) per share	17,827,617		17,814,303		17,869,065	17,200,595
Net income (loss) per share:
Basic	$ 0.02		$ 0.02		$ 0.03	$ (0.02)
Diluted	$ 0.02		$ 0.02		$ 0.03	$ (0.02)

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Net Income (Loss) Per Share - Additional Information (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share amount	922,000	404,000	750,000	1,009,000

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Income Taxes - Schedule of Components of Income Before Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Domestic	$ 443	$ 343	$ 509	$ (438)
Foreign	65	54	117	112
Income (loss) before income taxes	$ 508	$ 397	$ 626	$ (326)

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Income Taxes - Schedule of Components of Income Tax Provision (Benefits) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Tax Disclosure [Abstract]
United States	$ 106	$ 55	$ 124	$ (59)
Foreign	13	7	20	16
Income tax provision (benefits)	$ 119	$ 62	$ 144	$ (43)

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Income Taxes - Additional Information (Details) $ in Millions	Jun. 30, 2020 USD ($)
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 0.3
Unrecognized tax benefits netted against deferred tax assets valuation allowance	0.2
Unrecognized tax benefits against effective tax rate	$ 0.1