ThZeal - The Zeal

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Techpoint, Inc.

Condensed Consolidated Balance Sheets

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


	March 31,		December 31,
	2025		2024
Assets
Current assets:
Cash and cash equivalents	$	70,100	$	67,820
Short-term investments		—		4,520
Accounts receivable		393		487
Inventory, net		12,955		14,242
Prepaid expenses and other current assets		806		1,314
Total current assets		84,254		88,383
Property and equipment, net		404		433
Deferred tax assets		4,369		3,809
Right-of-use assets		876		985
Intangible assets, net		899		927
Goodwill		891		891
Other assets		170		166
Total assets	$	91,863	$	95,594
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	968	$	1,726
Accrued liabilities		2,779		2,614
Customer deposits		576		1,828
Lease liabilities		704		654
Dividend payable		—		4,655
Total current liabilities		5,027		11,477
Other liabilities		331		472
Total liabilities		5,358		11,949
Commitments and contingencies (Note 5)
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized as of March 31, 2025 and December 31, 2024; nil shares issued and outstanding as of March 31, 2025 and December 31, 2024		—		—
Common stock, par value $0.0001 per share - 75,000,000 shares authorized as of March 31, 2025 and December 31, 2024; 18,728,071 and 18,618,356 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		2		2
Additional paid-in capital		29,510		28,948
Accumulated other comprehensive income		—		1
Retained earnings		56,993		54,694
Total stockholders’ equity		86,505		83,645
Total liabilities and stockholders’ equity	$	91,863	$	95,594

See accompanying notes to condensed consolidated financial statements.

Techpoint, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

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


	Three Months Ended
	March 31,
	2025			2024
Revenue	$	16,250		$	16,311
Cost of revenue		7,866			7,515
Gross profit		8,384			8,796
Operating expenses
Research and development		1,792			2,084
Selling, general and administrative		2,510			2,520
Transaction-related expenses		2,110			—
Total operating expenses		6,412			4,604
Income from operations		1,972			4,192
Other income, net		651			773
Income before income taxes		2,623			4,965
Provision for income taxes		304			585
Net income	$	2,319		$	4,380
Net income per share:
Basic	$	0.12		$	0.24
Diluted	$	0.12		$	0.23
Weighted average shares outstanding used in computing net income per share
Basic		18,695,100			18,431,048
Diluted		19,273,723			18,927,227
Comprehensive income:
Net income	$	2,319		$	4,380
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on available-for-sale debt securities, net of tax benefit of $0.3 and tax expense of $1 for the three months ended March 31, 2025 and 2024, respectively		(1	)		4
Comprehensive income	$	2,318		$	4,384

See accompanying notes to condensed consolidated financial statements.

Techpoint, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts, unaudited)



	Common Stock					Additional			Accumulated Other					Total
	Shares			Amount		Paid-In Capital			Comprehensive income		Retained Earnings			Stockholders' Equity
Balances as of December 31, 2023		18,395,682		$	2	$	27,477		$	18	$	44,798		$	72,295
Other comprehensive income – gain on available-for-sale debt securities		—			—		—			4		—			4
Issuance of common stock upon exercise of stock options		13,000			—		57			—		—			57
Issuance of common stock upon vesting of restricted stock units		27,575			—		—			—		—			—
Shares repurchased for tax withholdings on vesting of restricted stock units		(3,807	)		—		(39	)		—		—			(39	)
Stock-based compensation		—			—		399			—					399
Cash dividend adjustments		—			—		—			—		(5	)		(5	)
Net income		—			—		—			—		4,380			4,380
Balances as of March 31, 2024		18,432,450		$	2	$	27,894		$	22	$	49,173		$	77,091



	Common Stock					Additional			Accumulated Other						Total
	Shares			Amount		Paid-In Capital			Comprehensive income (loss)			Retained Earnings			Stockholders' Equity
Balances as of December 31, 2024		18,618,356		$	2	$	28,948		$	1		$	54,694		$	83,645
Other comprehensive loss – unrealized loss on available-for-sale debt securities		—			—		—			(1	)		—			(1	)
Issuance of common stock upon exercise of stock options		85,251			—		238			—			—			238
Issuance of common stock upon vesting of restricted stock units		27,363			—		—			—			—			—
Shares repurchased for tax withholdings on vesting of restricted stock units		(2,899	)		—		(47	)		—			—			(47	)
Stock-based compensation		—			—		371			—			—			371
Cash dividend adjustments		—			—		—			—			(20	)		(20	)
Net income		—			—		—			—			2,319			2,319
Balances as of March 31, 2025		18,728,071		$	2	$	29,510		$	—		$	56,993		$	86,505

See accompanying notes to condensed consolidated financial statements.

Techpoint, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)


	Three Months Ended
	March 31,
	2025			2024
Cash Flows From Operating Activities
Net income	$	2,319		$	4,380
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		88			92
Stock-based compensation		371			399
Accretion of premium on available-for-sale investments		(6	)		(378	)
Gain on disposal of fixed asset		—			(132	)
Inventory valuation adjustment		502			50
Deferred income taxes		(560	)		(265	)
Noncash lease expense		167			178
Other		—			(58	)
Changes in operating assets and liabilities:
Accounts receivable		94			(5	)
Inventory		785			(1,603	)
Prepaid expenses and other current assets		508			130
Other assets		(4	)		38
Accounts payable		(787	)		(63	)
Accrued liabilities		166			1,029
Customer deposits		(1,252	)		(602	)
Lease liabilities		(8	)		(102	)
Other liabilities		(141	)		(89	)
Net cash provided by operating activities		2,242			2,999
Cash Flows From Investing Activities
Purchase of property and equipment		(3	)		(9	)
Purchase of debt securities		—			(21,177	)
Proceeds from maturities of debt securities		4,525			20,857
Net cash provided by (used in) investing activities		4,522			(329	)
Cash Flows From Financing Activities
Payment of dividends		(4,675	)		(4,603	)
Net proceeds from exercise of stock options		238			57
Payment for shares withheld for tax withholdings on vesting of restricted stock units		(47	)		(39	)
Net cash used in financing activities		(4,484	)		(4,585	)
Net increase (decrease) in cash and cash equivalents		2,280			(1,915	)
Cash and cash equivalents at beginning of period		67,820			13,671
Cash and cash equivalents at end of period	$	70,100		$	11,756

Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	901		$	36
Supplemental Disclosure of Noncash Investing and Financing Information
Right-of-use assets obtained in exchange for lease liabilities	$	58		$	58
Property and equipment purchased but not yet paid	$	29		$	—
Vendor credit received upon disposal of fixed asset	$	—		$	58

See accompanying notes to condensed consolidated financial statements.

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”) 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 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, net in the condensed consolidated statements of income and comprehensive income.

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, 2024 contained in the Company’s Annual Report on Form 10-K.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which 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 equipment manufacturers (“OEM”) and original design manufacturers (“ODM”), contract manufacturers, and design houses. The Company accounts for revenue under Accounting Standards Codification 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 revenue consists of sales of mixed-signal integrated circuits into the automotive and security surveillance 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 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 the Company's 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 the valuation of goodwill and net assets acquired via business combination. 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.

Certain Significant Risks and Uncertainties

The Company operates in a dynamic industry and can be affected by a variety of factors. For example, any of the following areas could have a negative effect on the Company in terms of its future financial position, results of operations or cash flows: the general state of the U.S., China and world economies; the highly cyclical nature of the industries the Company serves; successful and timely completion of product design efforts; trade restrictions by the United States against the Company's customers in China including recent new tariffs imposed on China and the retaliatory trade actions taken by China. See Part I, Item 2. "Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Overview;" the loss of any of its larger customers; restrictions on the Company's ability to sell to foreign customers due to additional new international trade laws, regulations and requirements; disruptions in the supply chain of components needed for its products; fundamental changes in the technology underlying the Company’s products; the hiring, training and retention of key employees; and new product design introductions by competitors.

The Company has been impacted by adverse macroeconomic and geopolitical conditions. These conditions include but are not limited to inflation, foreign currency fluctuations, tariffs, and supply chain challenges. Management continues to actively monitor the impact of these conditions on the Company’s financial condition, liquidity, operations, end-customers (including its significant end-customers), distributors, suppliers, industry, and workforce. The extent to which such events impact the Company’s business, prospects and results of operations will depend on future developments, which are highly uncertain. The Company has made estimates of the impact of these events within its financial statements and there may be changes to those estimates in future periods.

Concentration of Customer and Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, 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 was as follows:


	Three Months Ended
	March 31,
	2025			2024
Customers
Customer A		28	%		37	%
Customer B		13	%		11	%
Customer C		11	%	*
End-Customer
End-Customer A (1)		10	%		16	%

* Less than 10%

(1)

Sales to End-Customer A primarily occurred through Customer A.

Concentration of Supplier Risk

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, it relies on

Advanced Semiconductor Engineering, Inc., Sigurd Microelectronics Corporation, ATX Semiconductor (Shanghai) Co., Ltd, and Chizhou Hisemi Electronics Technology Co., Ltd to assemble, package and test substantially all of its semiconductors to satisfy substantially all of the Company’s production requirements. The failure of any subcontractor to fulfill the production requirements of the Company on a timely basis would adversely impact future results. Although there are other subcontractors that are capable of providing similar services, an unexpected change in either subcontractor would cause delays in the Company’s products and potentially result in a significant loss of revenue.

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance improves the transparency and usefulness of income tax information provided to investors primarily through enhanced disclosures about the income tax rate reconciliation and disaggregation of income taxes paid. This guidance is effective for the Company’s annual periods beginning January 1, 2025, and permits application on either a prospective or retrospective basis. The Company has adopted the ASU as of January 1, 2025 and is evaluating the transition method but has not yet determined whether the new disclosure requirements will be applied prospectively or retrospectively in its annual financial statements. The adoption of ASU 2023-09 did not have an impact on the Company’s interim financial position, results of operations, or cash flows.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. This guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance is effective for the Company’s annual periods beginning January 1, 2024, and will is effective for interim periods within fiscal years beginning January 1, 2025. The Company adopted this guidance on December 31, 2024. The adoption only impacted its disclosure and has no material impact on the Company’s condensed consolidated financial statements as of and for the quarter ended March 31, 2025.

2. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):


	March 31,		December 31,
	2025		2024
Work in process	$	8,981	$	9,107
Finished goods		3,974		5,135
Total inventory	$	12,955	$	14,242

Property and Equipment, net

Property and equipment, net consist of the following (in thousands):


	March 31,			December 31,
	2025			2024
Computer equipment and software	$	2,797		$	2,766
Leasehold improvements		91			91
Furniture		38			38
Total property and equipment		2,926			2,895
Less: accumulated depreciation		(2,522	)		(2,462	)
Total property and equipment, net	$	404		$	433

The Company recorded $0.1 million of depreciation expense for each of the three months ended March 31, 2025 and 2024.

Goodwill and Intangible assets, net

Goodwill is tested for impairment annually as of December 31 or more frequently on a reporting unit basis when events or changes in circumstances indicate that impairment may have occurred. The Company did not identify any events or circumstances indicating impairment of goodwill has been incurred for the three months ended March 31, 2025.

Changes in the carrying amount of goodwill for the three months ended March 31, 2025 are as follows (in thousands):


	Total
Goodwill at December 31, 2024	$	891
Adjustments		—
Goodwill at March 31, 2025	$	891

Intangible assets, except goodwill consist of the following (in thousands):


	March 31,
	2025
Acquired intellectual property	$	1,090
Less: accumulated amortization		(191	)
Total finite-lived intangible assets, net	$	899

The amortization expenses of intangible assets were $27,000 for each of the three months ended March 31, 2025 and 2024, respectively.

Acquired intellectual property is amortized over 10 years of its useful life. As of March 31, 2025, expected amortization expense for the unamortized intangible assets for the next five years and thereafter is as follows (in thousands):


Year Ending December 31,	Amount
Remainder of 2025	$	82
2026		109
2027		109
2028		109
2029		109
Thereafter		381
Total	$	899

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	March 31,		December 31,
	2025		2024
Payroll-related expenses	$	1,321	$	1,058
Taxes payable		663		161
Engineering service		234		158
Accrued warranty		175		153
Professional fees		233		355
Accrued inventory		118		415
Security for the indemnification obligations (1)		—		300
Other		35		14
Total accrued liabilities	$	2,779	$	2,614

(1)

In July 2023, the Company acquired certain assets of Broadvis Corporation; $0.3 million was retained by the Company at closing as security for the indemnification obligations of Broadvis Corporation, which were released in February 2025.

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 $0.6 million and $1.8 million as of March 31, 2025 and December 31, 2024, respectively. The Company generally expects to recognize revenue from customer deposits during the three month interim period immediately following the balance sheet date. During the three months ended March 31, 2025 and 2024, the Company recognized $1.8 million of revenue from the December 31, 2024 customer deposits balance and $1.4 million of revenue from the December 31, 2023 customer deposits balance, respectively.

3. Fair Value Measurements of Financial Instruments

Summary of Financial Instruments

All of the Company's investments in available-for-sale securities have matured as of March 31, 2025. On January 15, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ASMedia Technology Inc., a Taiwanese corporation (“Parent”), and Apex Merger Sub Inc., a Delaware corporation (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger (the “Surviving Corporation”) and becoming a wholly owned subsidiary of Parent (the "Proposed Transaction"). Consummation of the Merger is subject to the satisfaction or waiver of certain customary closing conditions. See Part I Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Proposed Transaction”. Under the Merger Agreement, the Company is prohibited from issuing or selling any debt securities or rights to acquire debt securities prior to the closing of the Merger, subject to certain exceptions.

The following is a summary of the Company's financial instruments (in thousands) as of December 31, 2024:



	December 31, 2024
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Values
Available-for-sale securities:
Treasury bills	$	4,019	$	1	$	—	$	4,020
Corporate bonds		500		—		—		500
Total available-for-sale securities	$	4,519	$	1	$	—	$	4,520
Reported in:
Cash and cash equivalents							$	—
Short-term investments								4,520
Long-term investments								—
Total available-for-sale securities							$	4,520

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



	March 31, 2025				December 31, 2024
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	—	$	—	$	4,519	$	4,520
Due between one to two years		—		—		—		—
	$	—	$	—	$	4,519	$	4,520

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 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 March 31, 2025.

There were no sales of available-for-sale securities for the three months ended March 31, 2025 and 2024.

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 the Company 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. Valuations are based on unadjusted quoted prices in active markets that the Company has the ability to access for identical, unrestricted assets and do not involve any meaningful degree of judgment.

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.

The following table sets forth the Company’s financial instruments that were measured at fair value by level within the fair value hierarchy (in thousands) as of :


	Fair Value Measurement at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
As of December 31, 2024
Financial assets - available-for-sale securities
Treasury bills	$	—	$	4,020	$	4,020
Corporate bonds		500		—		500
Total financial assets - available-for-sale securities	$	500	$	4,020	$	4,520

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 automotive and security surveillance markets.

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


	Three Months Ended
	March 31,
	2025		2024
China	$	11,203	$	12,227
Taiwan		2,895		2,340
South Korea		1,227		1,161
Japan		501		192
Other		424		391
Total revenue	$	16,250	$	16,311

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


	Three Months Ended
	March 31,
	2025		2024
Automotive	$	13,377	$	12,481
Security surveillance		2,873		3,830
Total revenue	$	16,250	$	16,311

Long-lived assets per geographic region are as follows (in thousands):


	March 31,		December 31,
	2025		2024
Taiwan	$	253	$	260
China		77		89
United States		963		998
South Korea		9		11
Japan		1		2
Total long-lived assets - net	$	1,303	$	1,360

Significant expenses are as follows (in thousands):


	Three Months Ended
	March 31,
	2025		2024
Expenses:
Employee Compensation (1)	$	1,775	$	1,829
Stock Based Compensation		343		369
Research & Engineering Expenses		540		744
Professional Fees (2)		1,877		379

(1) The amounts do not include stock-based compensation under cost of goods sold.

(2) Consists of corporate legal, tax and audit fees. The amount for the three months ended March 31, 2025 includes $1.5 million in legal fees in connection with the Merger.

5. Commitments and Contingencies

Operating leases

The Company’s leases are recorded as operating lease right-of-use assets and operating leases liabilities. The Company determines if an arrangement contains a lease at inception. The Company leases facilities under non-cancelable lease agreements expiring through fiscal year 2026. The Company’s lease agreements do not include variable lease payments or any restrictions or covenants. 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 not yet commenced.

The right-of-use assets and lease liabilities related to operating leases are as follows (in thousands):


	March 31,		December 31,
	2025		2024
Right-of-use assets	$	876	$	985

Lease liabilities—Current	$	704	$	654
Lease liabilities—Non-Current		181		332
Total lease liabilities	$	885	$	986

Rent expense under operating leases was $0.2 million for each of the three months ended March 31, 2025 and 2024. The rent expense recognized from short-term leases was $6,000 for each of the three months ended March 31, 2025 and 2024.

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


	Three Months Ended			Three Months Ended
	March 31, 2025			March 31, 2024
Operating lease cost	$	189		$	200
Cash paid for operating leases	$	214		$	219
Right-of-use assets obtained in exchange for operating lease liabilities (1)	$	58		$	58
Weighted average remaining term for operating leases		1.25			1.85
Weighted average discount rate for operating leases		8.1	%		8.1	%

(1) During the three months ended March 31, 2025, the Company extended the term of its lease in Taiwan. This lease was treated as a modification but not as a separate contract, as no additional right-of-use was granted. This lease modification was accounted for as a non-cash change in existing lease liabilities and right-of-use assets.

During the three months ended March 31, 2024, the Company extended the term of its lease in Taiwan. This lease was treated as a modification but not as a separate contract, as no additional right-of-use was granted. This lease modification was accounted for as a non-cash change in existing lease liabilities and right-of-use assets.

As of March 31, 2025, the aggregate future minimum lease payments under non-cancelable operating leases has consisted of the following (in thousands):


Year Ending December 31,	Amount
2025 (remaining nine months)	$	586
2026		359
Total		945
Less effects of discounting		(60	)
Total lease liabilities	$	885

Purchase Commitments

As of March 31, 2025, the Company had purchase commitments with its third-party suppliers through fiscal year 2027. Future minimum payments under purchase commitments are $0.9 million for the remaining months in 2025, $0.5 million and $0.1 million for 2026 and 2027, respectively.

Litigation

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 the outcomes 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 if reasonably estimable.

Indemnification

During the normal course of business, the Company may make certain indemnities, commitments and guarantees which may include intellectual property indemnities to certain of the Company's customers in connection with the sales of the Company’s products and indemnities for liabilities associated with the infringement of other parties’ technology based upon the Company’s products. The Company’s exposure under these indemnification provisions is generally limited to the total amount paid by a customer under the agreement. However, certain agreements include indemnification provisions that could potentially expose the Company to losses in excess of the amount received under the agreement. In addition, the Company has agreed to indemnify 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.

6. Stockholders’ Equity

Preferred Stock

The Company was authorized to issue 5,000,000 shares of preferred stock with $0.0001 par value per share as of March 31, 2025 and December 31, 2024. The shares of preferred stock issued and outstanding were nil as of March 31, 2025 and December 31, 2024.

Common Stock

The Company was authorized to issue 75,000,000 shares of common stock with $0.0001 par value per share as of March 31, 2025 and December 31, 2024. As of March 31, 2025, the shares of common stock issued and outstanding totaled 18,728,071. As of December 31, 2024, the shares of common stock issued and outstanding were 18,618,356.

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



	March 31, 2025
Outstanding stock awards		827,230
Shares available for future issuance under the 2017 Stock Incentive Plan		6,949,433
Total common stock reserved for future issuances		7,776,663

Dividend

On December 17, 2024, the Company announced a cash dividend of an aggregate of $0.50 per share for fiscal year 2024, payable in two equal installments of $0.25 per share. The first installment of the dividend has been accrued as of December 31, 2024 in the amount of $4.7 million and is payable to stockholders of record as of the close of business on January 31, 2025. The payment date for the first installment on its shares of common stock (including common stock underlying JDS) was February 14, 2025. The second installment of the dividend was not accrued as of December 31, 2024 because it was anticipated to be paid in the third fiscal quarter of 2025 and the declaration of the second installment is subject to the board of directors' approval and in compliance with applicable law. The Company’s board of directors reserves the right to cancel dividend payments prior to the applicable payment date in its discretion.

On December 15, 2023, the Company announced a cash dividend of an aggregate of $0.50 per share for fiscal year 2024, payable in two equal installments of $0.25 per share. The first installment of the dividend was paid during the first fiscal quarter of 2024 to stockholders of record as of the close of business on January 31, 2024. The second installment of the dividend was paid in July 2024 to stockholders of record as of the close of business on June 28, 2024. The aggregate amount of the two dividend payments in 2024 was $9.2 million.

7. Equity Incentive Plans

Stock Incentive Plans

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

The 2012 Plan was superseded by the 2017 Stock Incentive 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 initial public offering. 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 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.

On November 6, 2024, the Company's board of directors determined not to increase the number of shares of the Company’s common stock authorized for issuance under its 2017 Plan for fiscal year 2025, which would have been otherwise subject to a four percent (4%) annual increase on January 1, 2025.

The Company’s stock award activity under the 2017 Plan is summarized as follows:


	Awards Available for Grant
As of December 31, 2024		6,949,409
Authorized		—
Granted		(10,000	)
Canceled		10,024
As of March 31, 2025		6,949,433

Stock Options

The Company’s stock option activity under the 2017 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, 2024		389,781		$	2.82		2.3	$	1,741
Granted		—			—
Exercised		(85,251	)		2.80
Canceled		—
As of March 31, 2025		304,530			2.83		2.1		4,455
Options vested and exercisable as of March 31, 2025		304,530			2.83		2.1		4,455

The stock options outstanding and exercisable by exercise price as of March 31, 2025 are as follows:


		Options Outstanding, Vested and Exercisable
Exercise Price		Number Outstanding		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price
$	0.37		10,000		0.3	$	0.37
	2.51		27,530		1.4		2.51
	2.89		30,000		1.9		2.89
	2.93		208,500		2.2		2.93
	3.18		28,500		2.4		3.18
			304,530		2.1		2.83

The aggregate intrinsic value of options exercised for the three months ended March 31, 2025 and 2024 was $1.2 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 under the 2017 Plan is summarized as follows:


	Units Issued and Outstanding			Weighted-Average Grant Date Fair Value
As of December 31, 2024		547,188		$	7.78
Granted		10,000			8.04
Released, net		(24,464	)		8.38
Canceled		(10,024	)		7.51
As of March 31, 2025		522,700			7.77

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

8. Stock-Based Compensation

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


	Three Months Ended
	March 31,
	2025		2024
Cost of revenue	$	28	$	30
Research and development		145		150
Selling, general and administrative		198		219
Total	$	371	$	399

9. Net Income Per Share

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


	Three Months Ended
	March 31,
	2025		2024
Numerator:
Basic and Diluted:
Net income	$	2,319	$	4,380
Denominator:
Basic shares:
Weighted-average shares outstanding used in computing basic net income per share		18,695,100		18,431,048
Diluted shares:
Effect of potentially dilutive securities:
Stock options and restricted stock units		578,623		496,179
Weighted-average shares used in computing diluted net income per share		19,273,723		18,927,227
Net income per share:
Basic	$	0.12	$	0.24
Diluted	$	0.12	$	0.23

The potentially dilutive shares of common stock outstanding for the three months ended March 31, 2025 and 2024 that were excluded from the computation of diluted net income per share as the effect would have been antidilutive, was approximately 5,000 and 73,000 shares, respectively.

10. Provision for Income Taxes

The company utilizes the ASC 740-270 (formerly known as FIN18) approach to account for income taxes in interim periods.

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


	Three Months Ended
	March 31,
	2025		2024
Domestic	$	2,677	$	4,903
Foreign		155		62
Income before income taxes	$	2,832	$	4,965

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


	Three Months Ended
	March 31,
	2025		2024
United States	$	282	$	577
Foreign		22		8
Provision for income taxes	$	304	$	585

On April 1, 2007, the Company adopted FASB Interpretation No. 48 ("FIN 48", now codified in ASC 740-10), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold, measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. Under FIN 48, the Company is required to recognize in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The Company policy is to record interest and penalties related to unrecognized tax benefits in income tax expense.

As of March 31, 2025, there was no material increase in the liability for unrecognized tax benefits nor accrued interest and penalties related to uncertain tax positions.

At March 31, 2025, the Company had approximately $0.5 million of unrecognized tax benefits of which $0.3 million was netted against deferred tax assets with a full valuation allowance. If these amounts are recognized, there will be a tax benefit of $0.2 million against the Company’s effective tax rate.

The Company files income tax returns in the U.S. federal, California, and foreign jurisdictions with varying statutes of limitations. The Company is generally no longer subject to tax examinations for years prior to 2021 for federal purposes and 2019 for state purposes, except in certain limited circumstances. In California, the Company's net operating loss (“NOL”) and credit carryforwards from all years may be subject to adjustment for four years for California following the year in which utilized. Since the Company has California NOLs carryforwards from 2012 which remain subject to adjustment for four years following the year in which it is utilized, tax years 2012 through 2023 may remain open for state audit. The Company does not anticipate that any potential tax adjustments will have a significant impact on its financial position or results of operations.

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,” “expect,” or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including 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 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;

•

the terms of the Proposed Transaction, including expected timing of closing of the Proposed Transaction and deregistration of shares;

•

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 health epidemics 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 the impact of restrictions imposed by trade regulations and tariffs;

•

the impact of global shortages in manufacturing capacities;

•

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 do not intend to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q, except as required by law.

The following discussion and analysis should be read together with our unaudited condensed consolidated financial statements and the related notes that appear in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes that appear in our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion contains forward-looking statements based upon current expectations, assumptions, estimates and projections. These forward-looking statements involve risks and uncertainties. Our actual results may differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully described in “Risk Factors” in Part II, Item 1A or in other parts of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. A discussion of changes in our results from the year ended December 31,2024 has been omitted from this Quarterly Report on Form 10-Q and may be found in Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 5, 2025.

In this Quarterly Report on Form 10-Q, 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 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 automotive and security surveillance markets. Our integrated circuits are enabling the transition from standard definition (“SD”) video to high definition (“HD”) video in the automotive and security surveillance 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. 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 automotive and security surveillance markets. We began shipping our products in 2013 and to date, we have sold over 520 million integrated circuits. Our revenue was $16.3 million and $16.3 million for the three months ended March 31, 2025 and 2024, respectively. The automotive market accounted for 82% and 77% of our revenue for the three months ended March 31, 2025 and 2024, respectively. Meanwhile, the security surveillance market accounted for 18% and 23% of our revenue for the three months ended March 31, 2025 and 2024, respectively. We recognized $13.4 million and $12.5 million of revenue on sales into the automotive market for the three months ended March 31, 2025 and 2024, respectively. In addition, we recognized $2.9 million and $3.8 million of revenue on sales into the security surveillance market for the three months ended March 31, 2025 and 2024, respectively. We recorded net income of $2.5 million and $4.4 million for the three months ended March 31, 2025 and 2024, respectively.

We sell our products to distributors that fulfill third-party orders for our products. We also sell directly to original equipment manufacturers ("OEM") and original design manufacturers ("ODM"). For the three months ended March 31, 2025 and 2024, we derived substantially all of our revenue from products sold to distributors as compared to products sold to OEM and ODM 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, extending 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 one to three years for the automotive market and three to six months for the security surveillance 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. For the three months ended March 31, 2025 and 2024, our research and development expense was $1.8 million and $2.1 million, 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 March 31, 2025, we had 101 employees, 40 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 10% and 16% of our revenue for the three months ended March 31, 2025 and 2024, 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 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 EAR. We have retained the continuous assistance of outside advisors and, following Hikvision’s designation on the BIS Entity List, performed a comprehensive review of our products and manufacturing operations. Based on that review, we concluded that our products are not subject to 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.

On November 12, 2020, President Trump issued Executive Order 13959 on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies which prohibits any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any identified Communist Chinese military company, which included Hikvision. On June 3, 2021, President Biden issued Executive Order 14032 amending the prior Executive Order. As amended, Executive Order 13959 continues to prohibit certain transactions involving the purchase or sale of publicly traded securities of designated companies. Restrictions are applicable to certain entities designated as Chinese Military-Industrial Complex Companies who have been placed on the “CMIC List.” Hikvision was listed in the Annex to Executive Order 14032 and is currently on the CMIC List. However, Hikvision is not on the Specially Designated Nationals (SDN) List and the restrictions imposed by these Executive Orders are not expected to directly impact our business.

On November 11, 2021, President Biden signed into law the Secure Equipment Act of 2021, pursuant to which the U.S. Federal Communications Commission (“FCC”) adopted rules on November 11, 2022 clarifying that it will no longer review or approve any application for equipment authorization for equipment that is on the list of covered communications equipment or services published by the FCC under section 2(a) of the Secure and Trusted Communications Networks Act of 2019. Items on the FCC’s “covered list” include video surveillance and telecommunications equipment produced by Hikvision, to the extent it is used for the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes, including telecommunications or video surveillance services provided by such entity or using such equipment. The restrictions imposed by the FCC pursuant to the Secure Equipment Act of 2021 impact imports of certain Hikvision equipment into the United States by eliminating the ability of Hikvision to obtain FCC approval for its video surveillance and telecommunications equipment. In a pending rulemaking proceeding, the FCC is considering the adoption of new rules to revoke past authorization issued for Hikvision equipment, but the FCC actions taken to date are currently not expected to directly impact our business. This may or may not directly impact our revenue in the future. In the event there is an impact on our revenue, we believe that it would be gradual and limited in scope both because Hikvision continues to sell its currently approved products in the U.S. and because other manufacturers that incorporate our products could take market share from Hikvision in the U.S. We believe that our revenue would decrease only a few percentage points even if Hikvision’s business is fully impacted by the restrictions to be imposed by the FCC that limit Hikvision’s ability to import its future products into the U.S. Additionally, we plan to continue growing our revenue from new and existing customers, thus further limiting the impact of the restrictions to be imposed by the FCC that impact the importation of certain of Hikvision’s future products into the U.S.

From February to April 2025, through a series of tariff-related actions, the United States government has imposed additional tariffs on goods imported into the United States from numerous countries including China. Some nations including China countered with tariffs and other actions. Currently, while there are exemptions for a number of products, the tariffs on products imported into the United States from China are very high (145% or greater in the case of certain products). There is also an additional 10% tariff in place on goods imported to the United States from all countries (with limited exceptions). The previously announced higher tariffs rates on other countries are currently paused while the U.S. government negotiates regarding the tariffs and other trade barriers. Since the extent and duration of increased tariffs and the resulting impact on general economic conditions and on our business are uncertain, we cannot predict the long-term impact on our operations and financial results.

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.

Proposed Transaction

On January 15, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ASMedia Technology

Inc., a Taiwanese corporation (“Parent”), and Apex Merger Sub Inc., a Delaware corporation (“Merger Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger (the “Surviving Corporation”) and becoming a wholly owned subsidiary of Parent (the “Proposed Transaction”). Under the Merger Agreement, at the effective time of the Merger (the “Effective Time”), subject to certain exceptions set forth in the Merger Agreement, each share of our common stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $20.00 per share in cash, without interest, subject to any withholding taxes, and all outstanding shares of capital stock of Merger Sub held immediately prior to the Effective Time will be converted into and become (in the aggregate) one share of newly and validly issued, fully paid and non-assessable shares of common stock of the Surviving Corporation and will constitute the only outstanding shares of capital stock of the Surviving Corporation as of immediately after the Effective Time.

Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including: (1) approval by our stockholders of the Merger Agreement and the transactions contemplated by the Merger Agreement, which was completed on May 2, 2025, (2) all required filings have been made and all required approvals obtained (or waiting periods expired or terminated) under applicable antitrust laws, if any, approval by the Committee on Foreign Investment in the United States (i.e., CFIUS) and approval by the Department of Investment Review, the Ministry of Economic Affairs of Taiwan, (3) the absence of any laws or orders by a governmental entity having jurisdiction over any party to the Merger Agreement that make illegal, enjoin, or prohibit consummation of the Merger or the transactions contemplated by the Merger Agreement and (4) the absence of any condition that would reasonably be expected to result in a material adverse effect on the business, results of operations, financial condition, or assets of the Company and its subsidiaries, taken as a whole, or a material adverse effect on the business, operations, financial condition or assets of the combined business of Parent, the Company and their respective subsidiaries, taken as a whole, as a condition of any required regulatory authorizations in clause (2) above or any governmental authorizations in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement or as a result of any law or orders by a governmental entity having jurisdiction over any party to the Merger Agreement.

Assuming the satisfaction of the conditions set forth in the Merger Agreement, we expect the Merger to close during the second quarter or early third quarter of 2025.

Key Factors Affecting Our Results of Operations

Macroeconomic and geopolitical conditions. We have been impacted by adverse macroeconomic and geopolitical conditions. These conditions include but are not limited to recent new tariffs, inflation, foreign currency fluctuations, tariff measures, and related supply chain challenges and disruptions caused by any of these events. Management continues to actively monitor the impact of these conditions on the Company’s financial condition, liquidity, operations, end-customers (including its significant end-customers), distributors, suppliers, industry, and workforce. The extent to which such events impact the Company’s business, prospects and results of operations will depend on future developments, which are highly uncertain. Therefore, we cannot currently predict their long-term impact on our operations and financial results.

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 three months ended March 31, 2025 and 2024, Hikvision, the largest security surveillance manufacturer in China and one of our end-customers, accounted for 10% and 16% 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 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 of Hikvision's 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, and increases due to tariffs. 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 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. In addition, imposition of significant new tariffs on goods imported into the U.S., have introduced uncertainty to our business and may increase the cost of our manufactured products and components sourced outside of the U.S., which would result in an increase in our cost of revenue and a reduction in our gross margin.

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 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.

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 costs.

Components of Condensed Consolidated Income Statements

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 OEM, ODM, contract manufacturers and design houses. Revenue is recognized 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 may cause our research and development costs to increase in absolute dollars in the future as we increase our investment in new product development 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 U.S. company that is publicly traded in Japan, including higher legal, insurance and accounting expenses. 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.

Provision for Income Taxes

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 capitalization under 26 U.S.C. § 174, foreign derived intangible income deduction, stock-based compensation and change in valuation allowance.

Results of Operations

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


	Three Months Ended
	March 31,
	2025		2024
Revenue	$	16,250	$	16,311
Cost of revenue (1)		7,866		7,515
Gross profit		8,384		8,796
Operating expenses: (1)
Research and development		1,792		2,084
Selling, general and administrative		2,510		2,520
Transaction-related expenses		2,110		—
Total operating expenses		6,412		4,604
Income from operations		1,972		4,192
Other income (expense), net		651		773
Income before income taxes		2,623		4,965
Provision for income taxes		304		585
Net income	$	2,319	$	4,380

(1)

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


	Three Months Ended
	March 31,
	2025		2024
Cost of revenue	$	28	$	30
Research and development		145		150
Selling, general and administrative		198		219
Total	$	371	$	399

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


	Three Months Ended
	March 31,
	2025			2024
Revenue		100	%		100	%
Cost of revenue		48			46
Gross profit		52			54
Operating expenses:
Research and development		11			13
Selling, general and administrative		15			15
Transaction-related expenses		13			—
Total operating expenses		39			28
Income from operations		12			26
Other income (expense), net		4			5
Income before income taxes		16			31
Provision for income taxes		2			4
Net income		14	%		27	%

Comparison of the Three Months ended March 31, 2025 and March 31, 2024

Revenue

The components of revenue are as follows (dollars in thousands):


	Three Months Ended March 31,				Change
	2025		2024		Amount			%
Automotive	$	13,377	$	12,481	$	896			7	%
Security surveillance		2,873		3,830		(957	)		(25	)%
Revenue	$	16,250	$	16,311	$	(61	)		(0	)%

Revenue decreased by $0.1 million, or 0.4%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This was primarily attributable to a $1.0 million decrease in security surveillance revenue as a result of a decrease in the volume of shipments, partially offset by an increase in average selling prices. Automotive market revenue increased by $0.9 million due to an increase in the volume of shipments, partially offset by a decrease in average selling price.

Our product pricing increases or decreases in our target markets in response to our increased or decreased manufacturing costs. Additionally, fluctuations in our overall average selling price are directly attributable to changes in product mix given the natural pricing variation of the products in our portfolio and customer base. 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 revenue by geographic region as a percent of total revenue for the periods presented:


	Three Months Ended
	March 31,
	2025			2024
China		69	%		75	%
Taiwan		18			15
South Korea		8			7
Japan		3			1
Other		2			2
Total		100	%		100	%

Cost of revenue and gross margin (dollars in thousands)


	Three Months Ended March 31,						Change
	2025			2024			Amount		%
Cost of revenue	$	7,866		$	7,515		$	351		5	%
Gross margin		52	%		54	%

Cost of revenue increased by $0.4 million, or 5% for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, and gross margins decreased to 52% for the three months ended March 31, 2025 from 54% for the three months ended March 31, 2024, due to changes in product mix and average unit selling prices and higher reserve expenses.

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

Research and development expense (dollars in thousands)


	Three Months Ended March 31,				Change
	2025		2024		Amount			%
Research and development	$	1,792	$	2,084	$	(292	)		(14	)%

Research and development expenses decreased by $0.3 million, or 14% for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a $0.3 million decrease in tape-out expenses associated with the development of new products, partially offset by a $0.1 million increase in software costs.

Selling, general and administrative expense (dollars in thousands)


	Three Months Ended March 31,				Change
	2025		2024		Amount			%
Selling, general and administrative	$	2,510	$	2,520	$	(10	)		(0.4	)%

Selling, general and administrative expenses remained flat for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Transaction-related expenses (dollars in thousands)


	Three Months Ended March 31,				Change					Three Months Ended March 31,				Change
	2025		2024		Amount		%			2025		2024		Amount		%
Transaction-related expenses	$	2,110	$	-	$	2,110		100	%	$	2,110	$	-	$	2,110		100	%

During the three months ended March 31, 2025, we incurred $2.1 million of non-recurring transaction costs in connection with the Proposed Transaction. These costs primarily consisted of $1.5 million in legal fees and $0.6 million in investment banking advisory fees. There were no transaction-related expenses during the three months ended March 31, 2024.

Other income, net (dollars in thousands)


	Three Months Ended March 31,				Change
	2025		2024		Amount			%
Other income, net	$	651	$	773	$	(122	)		-16	%

Other income, net decreased by $0.1 million or 16% for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a $0.4 million decrease driven by reimbursement of fixed asset purchased and depreciated previously and a $0.1 million decrease in other income, partially offset by a $0.4 million increase in interest income.

Provision for income taxes (dollars in thousands)


	Three Months Ended March 31,				Change
	2025		2024		Amount			%
Provision for income taxes	$	304	$	585	$	(281	)		(48	)%

The provision for income taxes decreased by $0.3 million, or 48%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to a decrease in profit before taxes, unfavorable transaction cost adjustment and significant stock based compensation windfalls.

Liquidity and Capital Resources

Our primary use of cash is to fund our operations as we continue to grow our business. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the changes in our outstanding accounts payable and accrued expenses. Our cash and cash equivalents as of March 31, 2025 were $70.1 million. We believe our existing cash and cash equivalents, and cash we expect to generate from operations in the future will be sufficient to meet our anticipated cash needs for at least the next 12 months.

In 2021, our board of directors adopted a dividend policy to link dividend payments to business performance on an ongoing basis. During the three months ended March 31, 2025, cash used in financing activities consists primarily of $4.7 million in dividend payments to holders of our common stock (including common stock underlying JDS) under this adopted dividend policy.

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


			Payments Due by Period
	Total		Less than 1 year		1 to 3 years		More than 3 years
Purchase commitments	$	1,517		1,194		323		—
Operating leases		945		758		187		—


Exhibit Number		Description

2.1+		Agreement and Plan of Merger, dated as of January 15, 2025, by and among ASMedia Technology Inc., a Taiwanese corporation, Apex Merger Sub Inc., a Delaware corporation, and Techpoint, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed January 15, 2025.

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 with Embedded Linkbase Documents

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	Techpoint, Inc.

Date: May 15, 2025	By:	/s/ Fumihiro Kozato
		Fumihiro Kozato
		President and Chief Executive Officer (Principal Executive Officer)

Date: May 15, 2025	By:	/s/ Michelle P. Ho
		Michelle P. Ho
		Interim Chief Financial Officer (Principal Financial Officer)


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


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


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income and Comprehensive Income	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
	SIGNATURES	31