10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

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

For the quarterly period ended March 31, 2017

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: 001-37582

ADESTO TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	16-1755067
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Adesto Technologies Corporation

3600 Peterson Way

Santa Clara, CA 95054

(408) 400-0578

(Address and telephone number of Registrant’s executive offices)

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

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

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

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

Emerging growth company ☒

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Class		Outstanding at May 9, 2017
Common Stock, $0.0001 par value per share		15,838,638 shares

Explanatory Note

This Amendment No. 1 to the Adesto Technologies Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which was originally filed with the Securities and Exchange Commission on May 15, 2017 (the “Original Filing”), is being filed to correct an inadvertent error in Exhibit 31.1 and Exhibit 31.2. No other change to the previously filed certifications is intended to be made by the filing of this Form 10-Q/A, and this Form 10-Q/A does not amend, update or change any other items or disclosures contained in the Original Filing. This Amendment No. 1 to the Form 10-Q continues to speak as of the date of the Original Filing and does not reflect any events that occurred at any subsequent date.  

ADESTO TECHNOLOGIES CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

INDEX

	PART I: FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	4
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	4
	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016	5
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2017 and 2016	6
	Unaudited Condensed Consolidated Statements of Cash Flows for three months ended March 31, 2017 and 2016	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
	PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 1B.	Unresolved Staff Comments	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51
Exhibit Index		52

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

ADESTO TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	March 31,			December 31,
	2017			2016
	(unaudited)			(1)
Assets
Current assets:
Cash and cash equivalents	$	17,497		$	19,719
Accounts receivable, net		6,062			6,111
Inventories		4,296			5,182
Prepaid expenses		659			462
Other current assets		102			105
Total current assets		28,616			31,579
Property and equipment, net		6,473			5,962
Intangible assets, net		8,015			8,324
Other non-current assets		375			296
Goodwill		22			22
Total assets	$	43,501		$	46,183
Liabilities, Convertible Preferred Stock and Stockholders' Equity
Current liabilities:
Accounts payable	$	5,611		$	5,167
Accrued compensation and benefits		1,786			1,599
Accrued expenses and other current liabilities		2,200			2,176
Term loan, current		6,476			6,466
Total current liabilities		16,073			15,408
Line of credit		1,898			1,807
Term loan		8,153			9,775
Deferred rent, non-current		2,725			2,826
Deferred tax liability, non-current		2			2
Total liabilities		28,851			29,818
Commitments and contingencies (See Note 7)
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized as of March 31, 2017 and December 31, 2016; no shares issued and outstanding as of March 31, 2017 and December 31, 2016		—			—
Common stock, $0.0001 par value, 100,000,000 shares authorized; 15,733,709 and 15,494,308 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively		2			2
Additional paid-in capital		111,831			110,749
Accumulated other comprehensive loss		(252	)		(230	)
Accumulated deficit		(96,931	)		(94,156	)
Total stockholders' equity		14,650			16,365
Total liabilities and stockholders' equity	$	43,501		$	46,183
(1) The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

See accompanying Notes to Condensed Consolidated Financial Statements.

4

ADESTO TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended March 31,
	2017			2016
Revenue, net	$	11,307		$	10,176
Cost of revenue		5,753			5,180
Gross profit		5,554			4,996
Operating expenses:
Research and development		3,372			3,937
Sales and marketing		2,600			2,603
General and administrative		2,135			1,708
Gain from settlement with former foundry supplier		-			(1,962	)
Total operating expenses		8,107			6,286
Loss from operations		(2,553	)		(1,290	)
Other income (expense):
Interest expense, net		(213	)		(258	)
Other income (expense), net		18			22
Total other income (expense), net		(195	)		(236	)
Loss before provision for  income taxes		(2,748	)		(1,526	)
Provision for  income taxes		27			14
Net loss	$	(2,775	)		(1,540	)
Net loss per share
Basic and diluted	$	(0.18	)	$	(0.10	)
Weighted average number of shares used in computing net loss per share
Basic and diluted		15,642,286			14,974,718

See accompanying Notes to Condensed Consolidated Financial Statements.

5

ADESTO TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2017			2016
Net loss	$	(2,775	)	$	(1,540	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment		(22	)		(13	)
Comprehensive loss, net of tax	$	(2,797	)	$	(1,553	)

See accompanying Notes to Condensed Consolidated Financial Statements.

6

ADESTO TECHNOLOGIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net loss	$	(2,775	)	$	(1,540	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		824			809
Depreciation and amortization		304			230
Amortization of intangible assets		309			309
Amortization of debt discount		24			118
Gain from settlement with former foundry supplier		—			(1,962	)
Changes in assets and liabilities:
Accounts receivable		49			1,119
Inventories		886			(1,211	)
Prepaid expenses and other current assets		(194	)		137
Other non-current assets		(79	)		—
Accounts payable		225			(684	)
Accrued compensation and benefits		187			354
Accrued expenses and other current liabilities		24			270
Deferred rent		(101	)		—
Net cash used in operating activities		(317	)		(2,051	)
Cash flows from investing activities:
Acquisition of property and equipment		(605	)		(350	)
Net cash used in investing activities		(605	)		(350	)
Cash flows from financing activities:
Proceeds from issuance of common stock	258				—
Payments on revolving line of credit		(11,283	)		—
Proceeds from revolving line of credit		11,374			—
Payments on term loan		(1,636	)		(1,500	)
Net cash used in financing activities		(1,287	)		(1,500	)
Effect of exchange rates on cash and equivalents		(13	)		(18	)
Net decrease in cash and cash equivalents		(2,222	)		(3,919	)
Cash and cash equivalents - beginning of period		19,719			23,089
Cash and cash equivalents - end of period	$	17,497		$	19,170
Supplemental disclosures of other cash flow information:
Cash paid for interest expense	$	199		$	272
Supplemental disclosures of non-cash investing information:
Purchase of property and equipment included in accounts payable	$	219		$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

7

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies.

Organization and Nature of Operations.

Adesto Technologies Corporation (together with its subsidiaries; “Adesto”, “we”, “our”, “us” or the “Company”) was incorporated in the state of California in January 2006 and reincorporated in Delaware in October 2015. We are a leading provider of application-specific and ultra-low power non-volatile memory (“NVM”) products. Our corporate headquarters are located in Santa Clara, California.

On September 28, 2012, we purchased certain flash memory product assets from Atmel Corporation and our financial results include the operating results of those assets from the date of acquisition.

Basis of Presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP to complete annual financial statements. In the opinion of our management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, for any other interim period or for any other future year.

The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures required by U.S. GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 23, 2017.

The consolidated financial statements include the results of our operations, and the operations of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

There have been no material changes to our significant accounting policies described in Note 1, Organization and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2016 that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.

Use of Estimates.

The preparation of consolidated financial statements in conformity U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate those estimates, including those related to allowances for doubtful accounts, reserves for sales, warranty accrual, inventory write-downs, valuation of long-lived assets, including property and equipment and identifiable intangible assets and goodwill, loss on purchase commitments, valuation of deferred taxes and contingencies. In addition, we use assumptions when employing the Black-Scholes option-pricing model to calculate the fair value of stock options granted. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results could differ from these estimates.

Revenue Recognition and Accounts Receivable Allowances.

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, transfer of title occurs, and the collectibility of the resulting receivable is reasonably assured. Due to the historical immaterial level of product returns under warranty, we do not record a reserve for estimated returns under warranty at the time of revenue recognition.

8

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Generally, we meet product sale revenue recognition conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, we estimate and record provisions for future returns and other charges against revenue at the time of shipment, consistent with the terms of sale. We sell products to distributors at the price listed in our distributor price book. At the time of sale, we record a sales reserve for ship from stock and debits (“SSDs”), stock rotation rights and any special programs approved by management. We offset the sales reserve against recorded revenues, producing the revenue amount reported in our consolidated statements of operations.

The market price for our products can differ significantly from the book price at which we sold the product to the distributor. When the market price of a particular distributor’s sales opportunity to their customers would result in low or negative margins for the distributor, as compared to our original book price, we negotiate SSDs with the distributor. Management analyzes our SSD history to develop current SSD rates that form the basis of the SSD revenue reserve recorded each period. We obtain the historical SSD rates from the distributor’s records and our internal records.

We typically grant payment terms of between 30 and 60 days to our customers. Our customers generally pay within those terms. Distributors are invoiced for shipments at listed book price. When the distributors pay the invoice, they may claim debits for SSDs previously authorized by us when appropriate. Once claimed, we process the requests against prior authorizations and adjust reserves previously established for that customer.

The revenue we record for sales to our distributors is net of estimated provisions for these programs. Determining net revenue requires significant judgments and estimates on our part. We base our estimates on historical experience rates, the levels of inventory held by our distributors, current trends and other related factors. Because of the inherent nature of estimates, there is a risk actual amounts may differ materially from our estimates. Our consolidated financial condition and operating results depend on our ability to make reliable estimates. We believe that such estimates are reasonable.

We also monitor collectibility of accounts receivable primarily through review of our accounts receivable aging. When facts and circumstances indicate the collection of specific amounts or from specific customers is at risk, we assess the impact on amounts recorded for bad debts and, if necessary, record a charge in the period such determination is made. As of March 31, 2017 and December 31, 2016, there was no allowance for doubtful accounts.

Product Warranty.

Our products are sold with a limited warranty for a period of one year, warranting that the product conforms to specifications and is free from material defects in design, materials and workmanship. To date, we have had insignificant returns of any defective production parts. During the year ended December 31, 2015, we recorded $250,000 for a specific potential warranty claim. As of March 31, 2017 and December 31, 2016, approximately $41,000 has been incurred relating to this potential warranty claim. As of March 31, 2017 and December 31, 2016, the warranty accrual was $209,000, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Foreign Currency Translation.

The functional currency of our foreign subsidiaries is the local currency. In consolidation, we translate assets and liabilities at exchange rates in effect at the consolidated balance sheet date. We translate revenue and expense accounts at the average exchange rates during the period in which the transaction takes place. Net losses from foreign currency translation of assets and liabilities were $22,000 and $13,000 for the three months ended March 31, 2017 and 2016, respectively, and are included in the cumulative translation adjustment component of accumulated other comprehensive loss, net of tax, a component of stockholders’ equity. Net gains arising from transactions denominated in currencies other than the functional currency were $13,000 and $22,000 for the three months ended March 31, 2017 and 2016, respectively and are included in other income (expense), net in the condensed consolidated statements of operations.

Concentration of Risk.

Our products are primarily manufactured, assembled and tested by third-party foundries and other contractors in Asia and we are heavily dependent on a single foundry in Taiwan for the manufacture of wafers and a single contractor in the Philippines for assembly and testing of our products. We do not have long-term agreements with either of these suppliers. A significant disruption in the operations of these parties would adversely impact the production of our products for a substantial period of time, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

9

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivables. We place substantially all of our cash and cash equivalents on deposit with a reputable, high credit quality financial institution in the United States of America. We believe that the bank that holds substantially all of our cash and cash equivalents is financially sound and, accordingly, subject to minimal credit risk. Deposits held with the bank may exceed the amount of insurance provided on such deposits.

We generally do not require collateral or other security in support of accounts receivable. We periodically review the need for an allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. As a result of our favorable collection experience and customer concentration, there was no allowance for doubtful accounts as of March 31, 2017 and December 31, 2016.

Customer concentrations as a percentage of revenue were as follows:

	Three Months Ended March 31,
	2017			2016
Customer A		18	%		16	%
Customer B		11	%		11	%
Customer C		11	%		14	%

Customer concentrations as a percentage of gross accounts receivable were as follows:

	March 31,			March 31,
	2017			2016
Customer A		21	%		15	%
Customer B		16	%		12	%
Customer C		11	%		17	%

Recent Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers, creating Accounting Standards Codification (“ASC”) Topic 606. Upon adoption, this topic supersedes the existing guidance under ASC 605 and aims to simplify the number of requirements to follow for revenue recognition and make revenue recognition more comparable across various entities, industries, jurisdictions and capital markets. There are five core principles: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Additional considerations under this update include: accounting for costs to obtain or fulfill a contract with a customer and additional quantitative and qualitative disclosures. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, amending ASC 330. Upon adoption, this topic supersedes the existing guidance under ASC 330 and aims to simplify the subsequent measurement of inventory. Currently, inventory can be measured at the lower of cost or market, which could result in several potential outcomes, as market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. The major amendments would be as follows: 1. Inventory should be measured at the lower of cost or net realizable value. 2. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. 3. The amendment does not apply to inventory measured under LIFO or the retail inventory method. 4. The amendment does apply to all other inventory, which includes inventory measured via FIFO or average cost. We adopted this guidance effective January 1, 2017 and it did not have a significant impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, Topic 842. This ASU requires lease assets and lease liabilities arising from leases, including operating leases, to be recognized on the balance sheet, ASU 2016-02 will become effective for us on January 1, 2019. We are currently evaluating the impact of this guidance on our consolidated financial statements.

10

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation, ASC Topic 718: Improvements to Employee Share-Based Payment Accounting. Under this ASU, several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. We adopted this guidance effective January 1, 2017. We elected to continue to account for forfeitures on an estimated basis. We have elected to present the condensed consolidated statements of cash flows on a prospective transition method and no prior periods have been adjusted.

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, Topic 606. The ASU, among other things: (1) clarifies the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permits an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specifies that the measurement date for noncash consideration is contract inception; (4)  provides a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, ASC Topic 230.  This ASU is a clarification of how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  This update provides guidance on eight identified issues: 1) debt prepayment or extinguishment costs, 2) settlement of zero-coupon debt, 3) contingent consideration for payments, 4) proceeds from settlement of insurance claims, 5) proceeds from settlement of corporate-owned life insurance policies, 6) distributions from equity method investees, 7) beneficial interests in securitization transactions, and 8) separately identifiable cash flows. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.  An entity that elects early adoption must adopt all of the amendments in the same period. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset upon transfer other than inventory, eliminating the current recognition exception. Prior to this ASU, GAAP prohibited the recognition of current and deferred income taxes for the intra-entity asset transfers until the asset was sold to an outside party. For public business entities, the amendments in the ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted and should be applied on a modified retrospective basis though a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in the update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU will become effective for public business entities on December 15, 2017. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). The objective of this ASU is to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill

11

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this update are effective for a public business entity that is a U.S. Securities and Exchange Commission filer for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendments should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements

Note 2. Balance Sheet Components.

Accounts Receivable, Net.

Accounts receivable, net consisted of the following (in thousands):

	March 31,			December 31,
	2017			2016
Accounts receivable	$	8,907		$	8,800
Allowance for SSDs, price protection, rights of return and other activities		(2,845	)		(2,689	)
Total accounts receivable, net	$	6,062		$	6,111

Inventories.

Inventories consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Raw materials	$	302	$	212
Work-in-process		3,014		3,793
Finished goods		980		1,177
Total inventories	$	4,296	$	5,182

For the three months ended March 31, 2017 and 2016, we realized a benefit of $0.4 million and $0.1 million, respectively, from the sales of previously reserved products. Inventory write-downs were primarily associated with products built in excess of customer demand which resulted in excess inventory levels, legacy products for which no demand exists and lower of cost or market write-downs associated with CBRAM products for which costs exceeded market value.  

Property and Equipment, Net.

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

	March 31,			December 31,
	2017			2016
Machinery and equipment	$	7,957		$	7,351
Furniture and fixtures		83			77
Leasehold improvements		4,252			4,252
Computer software		674			668
Construction in progress		1,304			1,098
Property and equipment, at cost		14,270			13,446
Accumulated depreciation and amortization		(7,797	)		(7,484	)
Property and equipment, net	$	6,473		$	5,962

The Company incurs costs for the fabrication of masks used by its foundry partners to manufacture its products. Beginning the first fiscal quarter of 2017, the Company capitalizes mask costs that are expected to be utilized in production manufacturing as the

12

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Company’s product development process has become more predictable and thus supports capitalization of the mask. The capitalized mask costs begin depreciating to cost of revenue once the products go into production. Depreciation is straight lined over a three year period which is the expected useful life of the mask. Previously mask sets were expensed to research and development.

Depreciation and amortization expense of property and equipment for the three months ended March 31, 2017 and 2016 was $0.3 million and $0.2 million, respectively.

Accrued Expenses and Other Current Liabilities.

Accrued expenses and other current liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Accrued sales commission payable	$	260	$	366
Accrued manufacturing expenses		168		149
Deferred rent		396		388
Liabilities to certain customers		696		663
Product warranty		209		209
Other accrued liabilities		471		401
Total accrued expenses and other current liabilities	$	2,200	$	2,176

Note 3. Fair Value Measurements.

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure 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 when measuring fair value. 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. Quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3. Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.

13

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Financial assets measured at fair value on a recurring basis were as follows:

	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
		(in thousands)
As of March 31, 2017
Assets:
Money market funds		$	14,781	$	—	$	—	$	14,781
As of December 31, 2016
Assets:
Money market funds		$	16,540	$	—	$	—	$	16,540

As of March 31, 2017 and December 31, 2016, we had no financial liabilities measured at fair value on a recurring basis.

Note 4. Intangible Assets, net.

In 2012, in connection with our purchase of the serial flash memory product line assets from Atmel Corporation, we recorded $16.4 million of intangible assets.

Intangible assets, net were as follows (in thousands):

	March 31, 2017
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	4,282	$	1,927	$	2,355
Customer relationships		9,011		3,378		5,633
Customer backlog		2,779		2,779		—
Non-compete agreement		282		255		27
Total intangible assets subject to amortization	$	16,354	$	8,339	$	8,015

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	4,282	$	1,820	$	2,462
Customer relationships		9,011		3,191		5,820
Customer backlog		2,779		2,779		—
Non-compete agreement		282		240		42
Total intangible assets subject to amortization	$	16,354	$	8,030	$	8,324

We recorded amortization expense related to the acquisition-related intangible assets as follows (in thousands):

	Three Months Ended March 31,
	2017		2016
Operating expense category:
Research and development	$	122	$	121
Sales and marketing		187		188
Total	$	309	$	309

14

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The estimated future amortization expense of acquisition-related intangible assets subject to amortization after March 31, 2017 is as follows (in thousands):

Year Ended December 31,
2017 (remaining 9 months)	$	913
2018		1,179
2019		1,179
2020		1,179
2021		1,179
Thereafter		2,386
Total	$	8,015

Note 5. Borrowings.

Opus Bank Term Loan.

In April 2015, we entered into a three-year $15.0 million credit agreement, or the term loan facility. The agreement provided for a senior secured term loan facility, in an aggregate principal amount of up to $15.0 million to be used for general corporate purposes including working capital, to repay certain indebtedness and for capital expenditures and other expenses. Interest accrued on outstanding borrowings at a rate equal to (a) the higher of (i) the prime rate (as publicly announced from time to time by the Wall Street Journal) and (ii) 3.25% plus (b) (i) 1.00% if our cash equivalents are greater than 125% of the outstanding principal of our borrowings under the term loan facility, or (ii) 2.00% if our cash and cash equivalents are less than or equal to 125% of such borrowings. Indebtedness we incurred under this agreement was collateralized by substantially all of our assets and the agreement contained financial covenants requiring us to maintain a monthly asset coverage ratio after September 30, 2015 of not less than 1.10 to 1.00, and quarterly adjusted EBITDA (measured on a trailing three-month basis) of $1 through September 30, 2016 and increasing to higher levels thereafter. Under the agreement, the quarterly EBITDA covenant was not applicable if the asset coverage ratio is met at all times during any particular quarter. The agreement contained customary affirmative and negative covenants, including covenants that limited or restricted our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, merge or consolidate and make acquisitions. Upon an occurrence of an event of default, we could have been required to pay interest on all outstanding obligations under the agreement at a rate of 5% above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement.   

Borrowings of $14.0 million under this facility were repaid in full in July 2016.

In connection with the term loan facility, Opus Bank received a warrant to purchase 31,897 shares of Series E convertible preferred stock. Upon the completion of our IPO on October 30, 2015 the preferred stock warrants were converted into 315,282 of our common stock warrants. In addition, we paid financing costs of $0.1 million. The financing costs and the value of the warrant, $1.0 million, were recorded as a debt discount and were being amortized over the life of the agreement. Amortization of debt discount was $0.1 million for the three months ended March 31, 2016 and $0.2 million and $0.4 million for the years ended December 31, 2016 and 2015, respectively. In connection with the repayment of this facility, the remaining unamortized debt discount of $0.4 million was recorded as interest expense in the consolidated statements of operations.    

Western Alliance Bank Term Loan.

On July 7, 2016, the Company entered into a business financing agreement (“Credit Facility”) with Western Alliance Bank. The Credit Facility provides for (i) a term loan of up to $18.0 million and (ii) a revolving credit line advance in the aggregate amount of the lower of (x) $2.0 million and (y) 80% of certain of the Company’s receivables. The term loan made pursuant to the Credit Facility bears interest at a rate per annum equal to the greater of the prime rate or 3.5%, plus 0.75% (4.75% on March 31, 2017), and matures in June 2019.  The line of credit bears interest at a rate per annual equal to the greater of the prime rate or 3.5% plus 0.50% (4.5% on March 31, 2017), and matures in July 2018.The Company made interest-only payments on the term loan from July 2016 through September 2016 and will make interest payments and principal payments in 33 equal monthly installments starting October 2016. Indebtedness we incur under this agreement is collateralized by substantially all assets of the Company and any domestic subsidiaries, subject to certain customary exceptions. The Company paid a facility fee of $150,000 as well as a $25,000 diligence fee upon entry into the Credit Facility and an additional $10,000 is due on July 7, 2017. These fees have been recorded as a debt discount and are

15

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

being amortized over the life of the agreement. During the three months ended March 31, 2017, amortization of debt discount was $24,000 and the unamortized debt discount was $99,000 as of March 31, 2017.    

The Credit Facility contains customary representations and warranties and affirmative and negative covenants. Among other negative covenants, the Company may not permit the ratio of the balance of unrestricted cash deposited at the financial institution to the total amounts owed with respect to the term loan to be less than 1.15 to 1.00. Upon an occurrence of an event of default, we could be required to pay interest on all outstanding obligations under the agreement at a rate of 5% above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement. As of March 31, 2017, we were in compliance with all financial covenants and restrictions.

Outstanding borrowings consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Term loan, current	$	6,476	$	6,466
Term loan, non-current		8,153		9,775
Line of credit		1,898		1,807
Total	$	16,527	$	18,048

Future repayments on outstanding borrowings (excluding unamortized discount of $99,000 as of March 31, 2017) are as follows (in thousands):

Year ending December 31,
2017 (remaining 9 months)	$	4,909
2018		8,444
2019		3,273
	$	16,626

Interest expense incurred under our borrowings was $223,000 and $258,000 for the three months ended March 31, 2017 and 2016, respectively.  

Note 6. Segment Information.

We operate in one business segment, application-specific and feature-rich, ultra-low power NVM products. Our chief decision-maker, the President and Chief Executive Officer, evaluates our performance based on company-wide consolidated results. Revenue is evaluated based on product category and by geographic region.

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

	Three Months Ended March 31,
	2017		2016
United States	$	2,809	$	1,710
Rest of Americas		61		204
Europe		1,868		1,544
Asia Pacific		6,471		6,598
Rest of world		98		120
Total	$	11,307	$	10,176

16

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

	March 31,		December 31,
	2017		2016
United States	$	6,036	$	5,489
Asia Pacific		436		472
Europe		1		1
Total property and equipment, net	$	6,473	$	5,962

Note 7. Commitments and Contingencies.

Operating Leases.

The Company leases office facilities under various non-cancelable operating lease agreements. Certain lease agreements contain free or escalating rent payment provisions. The Company recognizes rent expense under such leases on a straight-line basis over the term of the lease with the difference between the expense and the payments recorded as deferred rent on the consolidated balance sheets. Any reimbursements by the landlord for tenant improvements are considered lease incentives, the balance of which is recorded as a lease incentive obligation within deferred rent on the consolidated balance sheets, and amortized as a reduction of rent expense over the life of the lease. Lease renewal periods are considered on a lease-by-lease basis in determining the lease term.

On November 2, 2015, the Company extended the lease for its headquarters by six months to July 2016 by entering into that certain Amendment to Commercial Sublease (“Amendment”), dated November 2, 2015, between the Company and eGain Corporation. The Amendment provides for a base rent during the extension period of $47,000 per month. Subsequently, we extended the lease to August 31, 2016.

Additionally, on November 2, 2015, the Company entered into a lease with Peterson Ridge LLC pursuant to which the Company leased a new headquarters facility, consisting of an aggregate of approximately 34,000 square feet of space in Santa Clara, California. The initial term of the lease commenced on November 2, 2015 and is scheduled to end on July 31, 2023 and may be extended, at the Company’s option, for an additional five-year period following the initial lease term.

Pursuant to the lease, monthly base rental payments due under the lease are expected to be approximately $93,000 per month between August 1, 2016 and February 27, 2017, with annual increases of approximately 3% thereafter. The Company must also pay for certain other operating costs under the lease, including operating expenses, taxes, assessments, insurance, utilities, securities and property management fees. Peterson Ridge LLC is obligated to reimburse the Company for up to approximately $2.5 million of the Company’s out-of-pocket costs associated with any tenant improvements, as defined in the lease. The Company was reimbursed for this amount during the year ended December 31, 2016. As of March 31, 2017, the Company recorded a lease incentive obligation of $2.3 million in deferred rent on the condensed consolidated balance sheet.

Rent expense under operating leases was $0.2 million and $0.5 million for three months ended March 31, 2017 and 2016, respectively.

	Total		Remaining 2017		2018		2019		2020		2021		Thereafter
	(in thousands)
Operating leases	$	7,923	$	879	$	1,177	$	1,213	$	1,249	$	1,287	$	2,118

Purchase Commitments.

As of March 31, 2017, we had purchase commitments with our third-party foundries of $3.0 million due within one year, $0.8 million for a licensing and development agreement, and $7.9 million in conjunction with an agreement with TowerJazz Panasonic Semiconductor Company.

Litigation.

Although we are not currently subject to any litigation, and no litigation is currently threatened against us, we may be subject to legal proceedings, claims and litigation, including intellectual property litigation, arising in the ordinary course of business. Such matters

17

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

are subject to many uncertainties and outcomes and are not predictable with assurance. We accrue amounts that we believe are adequate to address any liabilities related to legal proceedings and other loss contingencies that we believe will result in a probable loss that is reasonably estimable.

Indemnification.

During the normal course of business, we may make certain indemnities, commitments and guarantees which may include intellectual property indemnities to certain of our customers in connection with the sales of our products and indemnities for liabilities associated with the infringement of other parties’ technology based upon our products. Our 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, we indemnify our officers, directors and certain key employees while they are serving in good faith in such capacities.

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

Note 8. Common Stock, Common Stock Warrants and Stock Option Plan.

Common Stock.

We are authorized to issue 100,000,000 shares of common stock with $0.0001 par value per share as of March 31, 2017 and December 31, 2016.  Each holder of common stock is entitled to one vote per share. As of March 31, 2017, no dividends have been declared by the Board of Directors, however, the holders of common stock are also entitled to receive dividends, when and if declared by our Board of Directors.

Common Stock Reserved for Future Issuance.

As of March 31, 2017 and December 31, 2016, we had reserved shares of common stock for future issuances as follows:

	March 31,		December 31,
	2017		2016
Warrants to purchase common stock		404,136		411,514
Stock option plan:
Options outstanding		1,414,526		991,895
Restricted stock units outstanding		410,664		490,954
Shares available for future grants/RSU grants		1,364,466		1,275,685
Shares available for ESPP		335,381		231,355
Total		3,929,173		3,401,403

Common Stock Warrants.

The following common stock warrants were outstanding as of March 31, 2017 and December 31, 2016 and were the result of a conversion of preferred stock warrants upon the completion of our initial public offering (“IPO”) on October 30, 2015.

Total amount of securities issuable under the outstanding warrants		Exercise Price		Issuance Date	Expiration Date
	74,141	$	31.35	2012-2013	2019
	329,995	$	2.38	2014-2015	2022-2024
	404,136

18

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Common stock warrants are exercisable at the option of the holder any time after the date of issuance into shares of our common stock. The aggregate amount of shares of common stock that would be issued is determined by dividing the exercisable price by the conversion price applicable on the date of conversion multiplied by the number of warrants exercised.

Employee Benefit Plans.

2007 Equity Incentive Plan.

In 2007, our Board of Directors and shareholders approved the 2007 Equity Incentive Plan (the “2007 Plan”) under which 272,727 shares of common stock were reserved and available for the issuance of stock options and restricted stock to eligible participants. The 2007 Plan was subsequently amended to increase the number of shares of common stock reserved for issuance under the 2007 Plan to 787,878 and during the year ended December 31, 2015, the number of shares reserved for issuance under the 2007 Plan was increased to 2,651,515. Options and restricted stock awards were granted at a price per share not less than the 85% of the fair value at the date of grant or award, respectively. Restricted stock awarded to persons controlling more than 10% of our stock were granted at a price per share not less than the 100% of the fair value at the date of the award. Options that were granted to new employees generally vest over a four-year period with 25% vesting at the end of one year and the remaining to vest monthly thereafter, while options that were granted to existing employees generally vest over a four-year period. Options granted generally are exercisable up to 10 years from the date of grant. As of October 26, 2015, no shares were available for grant under the 2007 Plan and all outstanding options would continue to be governed and remain outstanding in accordance with their existing terms under the 2007 Plan. In addition, any shares subject to outstanding awards under the 2007 Plan that are issuable upon the exercise of options that expire or become unexercisable for any reason without having been exercised in full will be available for future grant and issuance under the 2015 Plan (as defined below).

2015 Equity Incentive Plan.

In September 2015, our Board of Directors adopted, and in October 2015 our stockholders approved, our 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan became effective on the date immediately prior to the date of our IPO. As a result, 1,813,272 shares of common stock previously reserved but unissued under the 2007 Plan on the effective date of the 2015 Equity Incentive Plan became reserved for issuance under our 2015 Equity Incentive Plan, and we ceased granting awards under our 2007 Plan. The number of shares reserved for issuance under our 2015 Equity Incentive Plan will increase automatically on the first day of January of each of 2016 through 2025 by the number of shares equal to 4% of the total outstanding shares of our common stock as of the immediately preceding December 31. However, our Board of Directors may reduce the amount of the increase in any particular year.

Our 2015 Equity Incentive Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units (“RSU’s”), performance awards and stock bonuses. No person will be eligible to receive more than 2,000,000 shares in any calendar year under our 2015 Equity Incentive Plan other than a new employee of ours, who will be eligible to receive no more than 4,000,000 shares under the plan in the calendar year in which the employee commences employment. The aggregate number of shares of our common stock that may be subject to awards granted to any one non-employee director pursuant to the 2015 Equity Incentive Plan in any calendar year shall not exceed 300,000. Our 2015 Equity Incentive Plan provides that no more than 25,000,000 shares will be issued as incentive stock options.

2015 Employee Stock Purchase Plan

In September 2015, our Board of Directors adopted, and in October 2015 our stockholders approved, our 2015 Employee Stock Purchase Plan (“ESPP”). The 2015 Employee Stock Purchase Plan became effective on the date of our IPO. We reserved 150,000 shares of our common stock for issuance under our 2015 Employee Stock Purchase Plan. The number of shares reserved for issuance under our 2015 Employee Stock Purchase Plan will increase automatically on the first day of January following the first offering date by the number of shares equal to 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 (rounded to the nearest whole share). However, our Board of Directors may reduce the amount of the increase in any particular year. The aggregate number of shares issued over the term of our 2015 Employee Stock Purchase Plan will not exceed 2,250,000 shares of our common stock.

Under our 2015 Employee Stock Purchase Plan, eligible employees will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Eligible employees will be able to select a rate of payroll deduction up to 15% of their base cash compensation. The purchase price for shares of our common stock purchased under our 2015 Employee Stock Purchase Plan will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering

19

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

period and (ii) the last trading day of each purchase period in the applicable offering period. Except for the first offering period, each offering period will run for no more than six months, with purchases occurring every six months. The first offering period began upon the effective date of our IPO and was originally set to end on June 30, 2016. On May 25, 2016, the Board of Directors extended the initial offering period to July 31, 2016. Subsequent purchase periods will be 6 months in duration beginning on August 1, 2016. On July 29, 2016, we issued 68,392 shares of common stock in conjunction with the end date of the initial purchase window. On January 31, 2017, we issued 50,917 shares of common stock in conjunction with the end date of the most recent purchase window.

No participant will have the right to purchase shares of our common stock in an amount that has a fair market value greater than $25,000, determined as of the first day of the applicable purchase period, for each calendar year in which that right is outstanding. In addition, no participant will be permitted to purchase more than 2,500 shares during any one purchase period or a lesser amount as determined by our compensation committee.

Our 2015 Employee Stock Purchase Plan will continue until the earlier to occur of its termination by our Board of Directors, the issuance of all shares reserved for issuance under it or the tenth anniversary of its effective date.

A summary of stock option and restricted stock units activity under the 2007 Plan and the 2015 Equity Incentive Plan is as follows:

	Stock Options
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(aggregate intrinsic value in thousands)
Outstanding as of December 31, 2015		796,356		$	2.49		6.5	$	4,157
Granted		230,200			3.38
Exercised		(13,112	)		1.80
Canceled		(21,549	)		3.73
Outstanding as of December 31, 2016		991,895			2.68		6.3	$	161
Granted		508,630			3.56
Exercised		(79,750	)		1.30
Canceled		(6,249	)		3.68
Outstanding as of March 31, 2017		1,414,526		$	3.07		7.7	$	1,844
Options vested and expected to vest as of March 31, 2017		1,361,842		$	3.05		7.6	$	1,810
Options vested and exercisable as of March 31, 2017		696,428		$	2.45		5.8	$	1,339

	Restricted stock units
	Shares			Weighted- Average Grant Date      Fair Value		Weighted- Average Remaining Contractual Term (Years)		Aggregrate Intrinsic Value
	(aggregate intrinsic value in thousands)
Outstanding as of December 31, 2015		874,508		$	5.95		1.8	$	6,742
Granted		69,414			4.82	—		—
Released		(438,086	)		5.95	—		—
Forfeited/expired		(14,882	)		5.70	—		—
Outstanding as of December 31, 2016		490,954		$	5.80		0.5	$	908
Granted		40,000			3.60
Released		(108,900	)		5.95
Forfeited/expired		(11,390	)		5.99
Outstanding as of March 31, 2017		410,664		$	5.54		0.4	$	1,704

20

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 9. Stock-based Compensation.

We record stock-based compensation based on fair value as of the grant date using the Black-Scholes option-pricing model. We recognize such costs as compensation expense on a straight-line basis over the employee’s requisite service period, which is generally four years. Our valuation assumptions are as follows:

Fair value of common stock. Prior to our IPO in October 2015, we estimated the fair value of our common stock using various valuation methodologies, including valuation analyses performed by third-party valuation firms. After the IPO, we used the publicly quoted price as the fair value of our common stock.

Risk-free interest rate. We base the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent expected term of the options for each option group.

Expected term. The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term assumption is based on the simplified method in which the expected term is equal to the average of the stock-based award’s weighted-average vesting period and its contractual term. We expect to continue using the simplified method until sufficient information about historical behavior is available.

Volatility. We determine volatility based on the historical stock volatilities of a group of publicly listed guideline companies over a period equal to the expected terms of the options, as we do not have sufficient trading history to determine the volatility of our common stock.

Dividend yield. We have never declared or paid any cash dividend and do not currently plan to pay a cash dividend in the foreseeable future. Consequently, we used an expected dividend yield of zero.

The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to determine fair value of stock options:

	Three Months Ended March 31,
	2017			2016
Volatility		86	%		-
Expected dividend yield		-			-
Risk-free rate		2.20	%		-
Expected term (in years)		6			-

The weighted-average grant date fair value of the options granted under the 2015 Equity Incentive Plan as calculated using the Black-Scholes option-pricing model was $2.59 per share for the three months ended March 31, 2017.

The following table presents the effects of stock-based compensation for stock options, RSU’s, and ESPP (in thousands):

	Three Months Ended March 31,
	2017		2016
Cost of revenue	$	21	$	18
Research and development		255		255
Sales and marketing		167		169
General and administrative		381		367
Total	$	824	$	809

Stock-based compensation expense capitalized to inventories was not material during the three months ended March 31, 2017 and 2016.

We did not realize any income tax benefit from stock option exercises in any of the periods presented due to recurring losses and valuation allowances.

21

ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of March 31, 2017, the total unrecognized compensation cost related to stock options, net of estimated forfeitures, was approximately $1.7 million, and this amount is expected to be recognized over a weighted-average period of approximately 3.2 years.

As of March 31, 2017, the total unrecognized compensation cost related to RSU’s and ESPP was $1.7 million and $51,000, respectively, and these amounts are expected to be recognized over 0.8 years and 0.3 years, respectively.

Note 10. Income Taxes.

We recorded an income tax provision of $27,000 and $14,000 for the three months ended March 31, 2017 and 2016, respectively. The income tax provision is comprised of estimates of current taxes due in domestic and foreign jurisdictions. The income tax provision reflects tax expense associated with state income tax, foreign taxes, uncertain tax positions and tax expense related to the recording of a deferred tax liability that results from the amortization for income tax purposes of acquisition-related goodwill. The decrease in the tax provision between 2017 and 2016is primarily due to a decrease in foreign taxes and deferred tax expense associated with our deferred tax liability.

As of March 31, 2017, our deferred tax assets are fully offset by a valuation allowance except in those jurisdictions where it is determined that a valuation allowance is not required. Accounting for income taxes provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based on the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against our net U.S. deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period that such determination is made.

We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. We do not anticipate a material change in the total amount or composition of its unrecognized tax benefits within 12 months of March 31, 2017.

We file federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. Due to our net operating loss and credit carryforwards, our income tax returns generally remain subject to examination by federal, state and international authorities.

Note 11. Net Loss Per Share.

The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended March 31,
	2017		2016
Shares not used in computing net loss per share as considered anti-dilutive:
Preferred stock		—		—
Stock options		1,414,526		793,416
Preferred stock warrants		—		—
Common stock warrants		404,136		411,514
Restricted stock units		410,664		902,990
		2,229,326		2,107,920

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ADESTO TECHNOLOGIES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 12. Related Party Transactions.

The Company purchases certain wafers from Altis Semiconductor S.N.C., which was acquired by X-FAB Silicon Foundries in 2016, who is a shareholder of the Company. We made no payments during the three months ended March 31, 2017 and $314,000 during the year ended December 31, 2016. As of March 31, 2017 and December 31, 2016, invoices totaling $195,000 and $195,000, respectively, were included within accounts payable on the condensed consolidated balance sheets.

Note 13. Subsequent Events.

None

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

Forward-looking statements and factors that may affect future results

The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally relate to future events or to our future financial or operating performance. You can generally identify forward-looking statements because they contain words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intend,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions. We have based these forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. Except as required by law, we do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including those that we discuss in Risk Factors, set forth in Part II, Item 1A, of this Quarterly Report on Form 10-Q. We encourage you to read that section carefully.

The following is a discussion and analysis of our financial condition and results of operations and should be read together with our condensed consolidated financial statements and related notes to condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes to audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. In this Quarterly Report, unless otherwise specified or the context otherwise requires, “Adesto,” “we,” “us,” and “our” refer to Adesto Technologies Corporation and its consolidated subsidiaries.

Overview

We are a leading provider of application-specific and ultra-low power non-volatile memory, or NVM, products. We optimize our NVM products for Internet of Things, or IoT, applications including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets. We combine our NVM design capabilities with proprietary intellectual property and differentiated technology platforms to deliver high-performance products that dramatically reduce the overall energy consumption of our customers’ systems and extend battery life. Our products feature embedded intelligence in a small form factor and high reliability.

Our revenue is derived from the sale of our NVM products, primarily our standard serial flash memory products, which represented substantially all of our revenue for the three months ended March 31, 2017. On September 28, 2012, we purchased certain flash memory product assets from Atmel Corporation, or Atmel. The products we acquired as part of the acquisition were approaching the end of their life cycle and experiencing annual revenue declines. While we provide support for these products, we have not invested further in their research and development. Revenue from these legacy products have declined to $71,000 from $0.3 million for the three months ended March 31, 2017 and 2016, respectively and we expect no material revenue from these products in the future. Since the acquisition, we have invested in developing new products that are better suited for low-power, high-growth applications, accelerated development of select products and introduced new products based on the acquired technology. In 2013, we introduced the first of our next-generation DataFlash and Fusion Flash products, which have similar functionality to our legacy products, but also offer enhanced features such as ultra-deep power down and wide supply voltage range operation. Revenue from our next-generation NVM products were $11.2 million and $9.9 million for the three months ended March 31, 2017 and 2016, respectively. We had been exclusively developing products based on Conductive Bridging RAM, or CBRAM, technology prior to the acquisition of assets from Atmel. Since then, we have continued to invest our resources into developing and enhancing our families of CBRAM-based products, although revenue associated with these products has not been material to date. We have made and continue to make these upfront investments because we believe that the introduction of any fundamentally new semiconductor technology must necessarily go through a lengthy customer evaluation process and several cycles of improvement in the field before it can be widely adopted or generate material revenue.

For the three months ended March 31, 2017, our products were sold to more than 500 end customers. In general, we work directly with our customers to have our NVM devices designed into and qualified for their products. Although we maintain direct sales, support and development relationships with our customers, once our products are designed into a customer’s product, we sell a majority of our products to those customers through distributors. We generated 75% and 72% of our revenue from distributors during the three months ended March 31, 2017 and 2016, respectively. Sales to three distributors generated approximately 40% and 41% of our revenue during the three months ended March 31, 2017 and 2016, respectively. Additionally, we derived approximately 75% and

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83% of our revenue internationally during the three months ended March 31, 2017 and 2016, respectively, the majority of which was recognized in the Asia Pacific, or APAC, region. Revenue by geography is recognized based on the region to which our products are sold, and not to where the end products are shipped.

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 by required to operate manufacturing facilities of our own.

Factors Affecting Our Performance

Product adoption in new markets and applications. We optimize our products to meet the technical requirements of the emerging IoT market. The growth in the IoT market is dependent on many factors, most of which are outside of our control. Should the IoT market not develop or develop more slowly, our financial results could be adversely affected.

Ability to attract and retain customers that make large orders. In 2016, our products were sold to more than 500 end customers, of which approximately 20 generated more than half our revenue. One end customer accounted for 10% or more of our revenue in 2016 and 2015 and the first three months of 2017. No end customer accounted for 10% or more of our revenue in 2014. While we expect the composition of our customers to change over time, our business and operating results will depend on our ability to continually target new and retain existing customers that make large orders, particularly those in growth markets which are less dependent on macroeconomic conditions.

Design wins with new and existing customers. We believe our solutions significantly improve the performance and potentially lower the system cost of our customers’ designs, particularly if we are part of the early design phase. Accordingly, we work closely with our customers and targeted prospects 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 a customer has tested our product, verified that our product meets its requirements and qualified our NVM device for their products. The number of our design wins has grown from 65 in 2014 to 135 in 2015 and to 296 in 2016, including 63, 125 and 294 design wins for new products, respectively. The revenue that we generate, if any, from each design win can vary significantly. Our long-term sales expectations are based on forecasts from customers, internal estimates of 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. We had 96 new design wins during the first three months of 2017.

Pricing, product cost and gross marginsof 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.

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 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 adding additional sales and field applications personnel in APAC to further broaden our support and coverage of our existing customer base, in addition to developing new 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 internationally, our business and results will become further subject to the risks and challenges of international operations, including higher operating expenses and the impact of legal and regulatory developments outside the United States.

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Components of Our Results of Operations

Revenue

We derive substantially all of our revenue through the sale of our NVM products to OEMs and ODMs, primarily through distributors. We generated 75% and 72% of our revenue from distributors during the three months ended March 31, 2017 and 2016, respectively. We recognize revenue from product sales when persuasive evidence of an arrangement exists and all other revenue recognition criteria are met. We sell the majority of our products to distributors and generally recognize revenue when we ship the product directly to the distributors since title and risk of loss transfers at that time.

Because our distributors market and sell their products worldwide, our revenue by geographic location is not necessarily indicative of where our customers’ product sales and design win activity occur, but rather of where their manufacturing operations occur.

Cost of Revenue and Gross Margin

Cost of revenue primarily consists of costs paid to our third-party manufacturers for wafer fabrication, assembly and testing of our NVM products, write-downs of inventory for excess and obsolete inventories including write-downs of inventory for products based on CBRAM technology and accruals for future losses on CBRAM wafer purchase commitments to the extent our costs exceed the market price for such products. To a lesser extent, cost of revenue also includes depreciation of test equipment and expenses relating to manufacturing support activities, including personnel-related costs, logistics and quality assurance and shipping.

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. We expect our gross margin to fluctuate over time depending on the factors described above.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing and general and administrative expense. Personnel-related costs, including salaries, benefits, bonuses and stock-based compensation, are the most significant component of each of our operating expense categories. In addition, in the near term we expect to hire additional personnel, primarily in our selling and marketing functions, and increase research and development expenditures, such as prototype wafers, associated with the implementation of our CBRAM technology in a manufacturing facility in Asia. Accordingly, we expect our operating expenses to increase in absolute dollars as we invest in these initiatives.

Research and Development. Our research and development expenses consist primarily of personnel-related costs for the design and development of our products and technologies. Additional research and development expenses include product prototypes, mask costs, external test and characterization expenses, depreciation, amortization of design tool software licenses, amortization of acquisition-related intangible assets and allocated overhead expenses. We also incur costs related to outsourced research and development activities and joint venture activities. We expect research and development expenses to increase in absolute dollars for the foreseeable future as we continue to improve our product features, increase our portfolio of solutions and implement our CBRAM manufacturing technology in a new manufacturing facility.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel-related costs for our sales, business development, marketing, and applications engineering activities, third-party sales representative commissions, promotional and other marketing expenses, amortization of acquisition-related intangible assets and travel expenses. We expect sales and marketing expenses to increase in absolute dollars for the foreseeable future as we continue to expand our direct sales teams, primarily in the Asia Pacific Region, and increase our marketing activities.

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

Other Income (Expense), Net

Other income (expense), net is comprised of interest income (expense) and other income (expense). Interest expense consists of interest on our outstanding debt. Other expense, net consists primarily of the change in fair value of our preferred stock warrant

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liability and foreign exchange gains or losses. Our foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

Prior to our IPO, we classified our preferred stock warrants as a liability on our consolidated balance sheets and recorded changes in fair value at each balance sheet date with the corresponding change recorded as other income (expense). We recorded a final adjustment to the fair value of the warrants as of the closing of our initial public offering on October 30, 2015 and the warrants will no longer be subject to fair value accounting thereafter due to their conversion into warrants to purchase common stock.

Provision for Income Taxes

Provision for income taxes consists primarily of U.S. federal and state income taxes in the United States and income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets, including net operating loss carryforwards, and tax credits related primarily to research and development. We expect to maintain this full valuation allowance for the foreseeable future.

Comparison of the Three Months Ended March 31, 2017 and 2016 (in thousands, except percentage data):

Revenue

	Three Months Ended March 31,				Change
	2017		2016		$		%
Revenue		11,307		10,176		1,131		11	%

	Three Months Ended March 31,
	2017			2016
Revenue by geography:
United States		25	%		17	%
Europe		17	%		15	%
Asia Pacific		57	%		65	%
Rest of world		1	%		3	%

Revenue increased by $1.1 million, or 11%, during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. This increase was due primarily to a 30% increase in unit shipments across our Fusion Flash, Bios Flash and Data Flash products.

Cost of Revenue and Gross Margin

	Three Months Ended March 31,						Change
	2017			2016			$		%
Cost of revenue	$	5,753		$	5,180		$	573		11	%
Gross Profit		5,554			4,996			558		11	%
Gross Margin		49	%		49	%

Cost of revenue increased by $0.6 million, or 11%, during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. This increase was due primarily to increased unit shipments offset by a decrease in inventory writedowns.

Gross margin was unchanged during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016.

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Operating Expenses

	Three Months Ended March 31,					Change
	2017		2016			$			%
Operating expenses:
Research and development	$	3,372	$	3,937		$	(565	)		(14	)%
Sales and marketing		2,600		2,603			(3	)		—
General and administrative		2,135		1,708			427			25
Gain from settlement with former foundry supplier		-		(1,962	)		1,962			100	%
Total operating expenses	$	8,107	$	6,286		$	1,821			29	%

Research and Development. Research and development expense decreased by $0.6 million, or 14%, during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. This decrease was due primarily to a $0.2 million decrease in materials cost, a $0.2 million decrease in outside services, and a $0.2 million decrease in allocated facilities costs.

Sales and Marketing. There was virtually no change in sales and marketing expense during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016.

General and Administrative. General and administrative expenses increased $0.4 million, or 25%, during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. This increase was due primarily to a $0.3 million increase in personnel-related costs.

Gain from settlement with a former foundry supplier. During the three months ended March 31, 2016, we recognized a non-cash gain of $2.0 million resulting from settlement of a disputed liability with a former foundry supplier. We did not recognize a similar gain or loss during the three months ended March 31, 2017.

Other Income (Expense), Net

	Three Months Ended March 31,						Change
	2017			2016			$			%
Interest expense, net	$	(213	)		(258	)	$	45			17	%
Other income (expense), net		18			22			(4	)		(18	)
Total other income (expense), net	$	(195	)	$	(236	)	$	41			(17	)%

Interest expense, net decreased by approximately $45,000 during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016, due to a decrease in our net borrowings of $1.5 million.

Other income (expense), net decreased by approximately $4,000 during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016.

Provision for Income Taxes

	Three Months Ended March 31,				Change
	2017		2016		$		%
Provision for income taxes	$	27	$	14	$	13		93	%

Provision for income taxes increased by $13,000 during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. The decrease was due primarily to a reduction in benefits related to our foreign subsidiaries as well as a reduction in benefits related to deferred taxes in the United States.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily with gross proceeds from the sale of an aggregate of $78.5 million of convertible preferred stock, $22.5 million of term debt associated with the acquisition of the certain flash memory product assets from Atmel Corporation, and net proceeds from our initial public offering on October 30, 2015 of $22.1 million and aggregate borrowings

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under our current term loan and line of credit facility of $16.6 million. Our principal source of liquidity as of March 31, 2017 consisted of cash and cash equivalents of $17.5 million. We did not have any borrowing capacity available under our term loan as of March 31, 2017. We had approximately $0.1 million of additional borrowing capacity under our line of credit as of March 31, 2017. Our outstanding borrowings under this credit facility as of March 31, 2017 were $16.6 million. Substantially all of our cash and cash equivalents are held in the United States.

We believe our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs over 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. 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 additional debt financing obtained by us in the future could also involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, if we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing 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.

The following table summarizes our cash flows for the periods indicated:

	Three Months Ended March 31,
	2017			2016
Cash flows used in operating activities	$	(317	)	$	(2,051	)
Cash flows used in investing activities		(605	)		(350	)
Cash flows used in financing activities		(1,287	)		(1,500	)

Cash Flows from 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 increases in sales and timing of collections. Our primary uses of cash from operating activities have been for personnel costs and investments in research and development and sales and marketing. Net cash used in operating activities for the periods presented consisted of net losses adjusted for certain noncash items and changes in working capital. Within changes in working capital, changes in accounts receivable, inventory and accounts payable generally account for the largest adjustments, as we typically use more cash to fund accounts receivable and build inventory as our business grows. Increases in accounts payable typically provides more cash as we do more business with our contract foundries and other third parties, depending on the timing of payments.

During the three months ended March 31, 2017, cash used in operating activities was approximately $0.3 million and was due primarily to a net loss of $2.8 million, partially offset by non-cash charges of $0.8 million related to stock-based compensation expense, $0.3 million related to depreciation and amortization, $0.3 million related to amortization of intangible assets, and an increase in our net assets and liabilities of $1.0 million. The increase in assets and liabilities is due primarily to a decrease in accounts receivable and inventories of $0.9 million, an increase in accounts payable, accrued compensation and accrued expenses of $0.4 million partially offset by a decrease in deferred rent of $0.3 million and an increase in prepaid expenses and other assets of $0.3 million.

During the three months ended March 31, 2016, cash used in operating activities was $2.1 million, primarily from a net loss of $1.5 million and the impact of a $2.0 million non-cash gain resulting from a settlement with a former foundry supplier partially offset by non-cash charges of $0.8 million related to stock based compensation expense and $0.6 million related to depreciation and amortization.

Cash Flows from Investing Activities

Our investing activities consist primarily of purchases of property and equipment. We expect to continue to make significant capital expenditures to support continued growth of our business. During the three months ended March 31, 2017 and 2016, cash used in investing activities was $0.6 million and $0.4 million, respectively, due to purchases of equipment and leasehold improvements related to our new headquarters facility in Santa Clara, CA.

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Cash Flows from Financing Activities

During the three months ended March 31, 2017, cash used in financing activities was $1.3 million and was due primarily to repayments of borrowings of our term loan of $1.6 million, offset in part by proceeds from the issuance of common stock of $0.3 million.

During the three months ended March 31, 2016, cash used in financing activities was $1.5 million due to principal payments on outstanding loan obligations.

Off Balance Sheet Arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often 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 purpose.

Credit Facility

In July 2016, we entered into a business financing agreement (“Credit Facility”) with a financial institution. The Credit Facility, as amended, provides for (i) a term loan of up to $18.0 million and (ii) a revolving credit line advance in the aggregate amount of the lower of (x) $2.0 million and (y) 80% of certain of our receivables. The term loan made pursuant to the Credit Facility bears interest at a rate per annum equal to the greater of the prime rate and 3.5%, plus 0.75%, and matures in June 2019. The line of credit bears interest at a rate per annual equal to the greater of the prime rate or 3.5% plus 0.50%, and matures in July 2018. We will make interest-only payments on the term loan from July 2016 through September 2016 and will make principal and interest payments in 33 equal monthly installments starting October 2016. Indebtedness we incur under this agreement is collateralized by substantially all of our assets, subject to certain customary exceptions. We paid a facility fee of $150,000 as well as a $25,000 diligence fee upon entry into the Credit Facility and an additional $10,000 is due on July 7, 2017. The Credit Facility, as amended, contains customary representations and warranties and affirmative and negative covenants. Among other negative covenants, we may not (i) permit the ratio of the balance of unrestricted cash deposited at the financial institution, plus eligible receivables, net of reserve to the total amounts owed with respect to advances under the revolving credit line to be less than 1.50 for 1.00 and (ii) permit cash held at the financial institution in a deposit account to be less than 100% of the term loan outstanding. Upon an occurrence of an event of default, we could be required to pay interest on all outstanding obligations under the agreement at a rate of 5% above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement. As of December 31, 2016, we were not in compliance with the financial covenants to maintain the maximum daily liquidity ratio, as defined in the agreement, during the months of August, September, October and November 2016. On February 13, 2017, the bank waived the Company’s default as of December 31, 2016 under the Credit Facility. As of March 31, 2017, we were in compliance with all financial covenants and restrictions.

The Credit Facility replaced our three-year $15.0 million credit agreement. On July 7, 2016, we terminated this credit agreement. In connection with termination and new borrowings under the new Credit Facility (as defined above), we paid off all outstanding borrowings, accrued interest, and fees under the term loan facility.

Contractual Obligations and Commitments

The following is a summary of our contractual obligations and commitments as of March 31, 2017:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1 – 3 Years		4 – 5 Years		More than 5 Years
	(in thousands)
Operating leases (1)	$	7,923	$	879	$	2,390	$	2,536	$	2,118
Inventory-related commitments (2)		2,978		2,978	—		—		—
Financing arrangements (3)		16,626		4,909		11,717		—	—
Joint Development and Manufacturing Agreement (4)		7,850		1,850		6,000	—		—
Licensing and Development Agreement (5)		750		750		—	—		—
Total contractual cash obligations	$	36,127	$	11,366	$	20,107	$	2,536	$	2,118

(1) Operating leases primarily relate to our leases of office space with terms expiring through July 31, 2023.

(2) Represents outstanding purchase orders for wafer commitments that we have placed with our suppliers as of March 31, 2017.

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(3) Financing arrangements represent debt maturities under our term loan and line of credit.

(4) Represents our commitments under the CBRAM Joint Development and Manufacturing Agreement executed on February 18, 2016 with TowerJazz Panasonic Semiconductor Company.

(5) Represents our commitments under the Licensing and Development Agreement executed on April 21, 2016 with Semitech Semiconductor Pty, Ltd.

As of March 31, 2017, we had a liability of $11,000 for uncertain tax positions.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include foreign exchange rate and interest rate sensitivities as follows:

Foreign Currency Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.

The majority of our revenue is denominated in U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and to a lesser extent in Europe, Middle East and Africa, or EMEA, and APAC. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have a material impact on our historical consolidated financial statements.

We have not hedged exposures denominated in foreign currencies or used any other derivative financial instruments. Although we transact the substantial majority of our business in U.S. dollars, future fluctuations in the value of the U.S. dollar may affect the competitiveness of our products and thus may impact our results of operations and cash flows.

Interest Rate Sensitivity

We had cash and cash equivalents of $17.5 million as of March 31, 2017, consisting of bank deposits and money market funds. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. We also had total outstanding gross debt of $16.6 million offset by an unamortized debt discount of approximately $0.1 million as of March 31, 2017. The outstanding debt relates to a new term loan and line of credit described in section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Credit Facility”.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. Our exposure to interest rates relates to the change in the amounts of interest we must pay on our variable rate borrowings. A hypothetical 10% increase in our borrowing rates would not have a material impact on interest expense on our principal balances as of March 31, 2017.

Item 4. Controls and Procedures.

(a) Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining our disclosure controls and procedures. Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2017. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2017.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of the CEO and CFO, our management conducted an assessment of the effectiveness of internal control over financial reporting based upon the framework in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management concluded that the Company’s internal control over financial reporting was

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effective as of March 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.

(c) Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our CEO and CFO, conducted an evaluation of our “internal control over financial reporting” as defined in Exchange Act Rule 13a-15(f) to determine whether any changes in our internal controls over financial reporting occurred during the three months ended March 31, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there have been no such changes during the three months ended March 31, 2017.

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PART II: OTHER INFORMATION

ITEM 1. Legal Proceedings

We are not currently a party to any legal proceedings which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, operating results, financial condition or cash flows. We may, from time to time, become involved in legal proceedings arising in the ordinary course of our business and as our business grows, we may become a party to an increasing number of legal proceedings.

ITEM 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock. Our business, operating results, financial condition, or prospects could be materially and adversely affected by any of these risks and uncertainties. If any of these risks actually occurs, the trading price of our common stock could decline and you might lose all or part of your investment. Our business, operating results, financial performance, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risks Related to Our Business and Our Industry

We have a history of losses which may continue in the future, and we cannot be certain that we will achieve or sustain profitability.

We have incurred net losses since our inception. We incurred net losses of $11.6 million, $8.4 million, and $8.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. As of March 31, 2017, we had an accumulated deficit of $96.9 million. We expect to incur significant expenses related to the continued development and expansion of our business, including in connection with our efforts to pursue opportunities in emerging IoT markets, develop and improve upon our products and technology, maintain and enhance our research and development and sales and marketing activities and hire additional personnel. Further, revenue may not grow or revenue may decline for a number of possible reasons, many of which are outside our control, including a decline in demand for our products, increased competition, business conditions that adversely affect the semiconductor memory industry, including reduced demand for products in the end markets that we serve, or our failure to capitalize on growth opportunities. If we fail to generate sufficient revenue to support our operations, we may not be able to achieve or sustain profitability.

We may be unable to match production with customer demand for a variety of reasons including our inability to accurately forecast customer demand or the capacity constraints of contract manufacturers, which could adversely affect our operating results.

We make planning and spending decisions, including determining production levels, production schedules, component procurement commitments, personnel needs and other resource requirements, based on our estimates of product demand and customer requirements. Our products are typically purchased pursuant to individual purchase orders. While our customers may provide us with their demand forecasts, they are not contractually committed to buy any quantity of products beyond purchase orders. Furthermore, many of our customers may increase, decrease, cancel or delay purchase orders already in place without significant penalty. The short-term nature of commitments by our customers and the possibility of unexpected changes in demand for their products reduce our ability to accurately estimate future customer requirements. On occasion, customers may require rapid increases in production, which can strain our resources, necessitate more onerous procurement commitments and reduce our gross margin. If we overestimate customer demand, we may purchase products that we may not be able to sell, which could result in decreases in our prices or write-downs of unsold inventory. Conversely, if we underestimate customer demand or if sufficient manufacturing capacity was unavailable, we would lose sales opportunities and could lose market share or damage our customer relationships. The rapid pace of innovation in our industry could also render significant portions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpected expenses or write-downs of inventory values that could adversely affect our business, operating results and financial condition.

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Our quarterly operating results or other operating metrics may fluctuate significantly, which could cause the trading price of our common stock to decline.

Our quarterly operating results and other operating metrics have fluctuated in the past and may continue to fluctuate from quarter to quarter. We expect that this trend will continue as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:

• the receipt, reduction, delay or cancellation of orders by large customers;

• the gain or loss of significant customers and distributors;

• the timing and success of our launch of new or enhanced products and those of our competitors;

• market acceptance of our products and our customers’ products;

• the level of growth or decline in the IoT market;

• the timing and extent of research and development and sales and marketing expenditures;

• the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

• changes in our product mix;

• our ability to reduce the manufacturing costs of our products;

• competitive pressures resulting in lower than expected average selling prices;

• fluctuations in sales by and inventory levels of OEMs and ODMs who incorporate our memory products in their products;

• cyclical and seasonal fluctuations in our markets;

• fluctuations in the manufacturing yields of our third-party contract manufacturers;

• events that impact the availability of production capacity at our third-party subcontractors and other interruptions in the supply chain including due to geopolitical events, natural disasters, materials shortages, bankruptcy or other causes;

• supply constraints for and changes in the cost of the other components incorporated into our customers’ products;

• the timing of expenses related to the acquisition of technologies or businesses;

• product rates of return or price concessions in excess of those expected or forecasted;

• costs associated with the repair and replacement of defective products;

• unexpected inventory write-downs or write-offs;

• costs associated with litigation over intellectual property rights and other litigation;

• the length and unpredictability of the purchasing and budgeting cycles of our customers;

• loss of key personnel or the inability to attract qualified engineers; and

• geopolitical events, such as war, threat of war or terrorist actions, or the occurrence of natural disasters.

Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our operating results.

The semiconductor memory industry is highly cyclical and our markets may experience significant cyclical fluctuations in demand as a result of changing economic conditions, budgeting and buying patterns of customers and others factors. As a result of these and other factors affecting demand for our products and our results of operations in any given period, the results of any prior quarterly or annual periods should not be relied upon as indicative of our future revenue or operating performance. Fluctuations in our revenue and operating results could also cause our stock price to decline.

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We rely on third parties to manufacture, package, assemble and test the semiconductor components comprising our products, which exposes us to a number of risks, including reduced control over manufacturing and delivery timing and potential exposure to price fluctuations, which could result in a loss of revenue or reduced profitability.

As a fabless semiconductor company, we outsource the manufacturing, packaging, assembly and testing of our semiconductor components to third-party foundries and assembly and testing service providers. We use two foundries, United Microelectronics Corporation in Taiwan and XMC in Wuhan, China, for the production of our flash memory products and a single foundry, Altis Semiconductor S.N.C. in France (acquired by X-FAB Silicon Foundries in 2016), for our Mavriq and Moneta products. Our primary assembly and testing contractor in 2016 was Amkor Technology, Inc. in Taiwan, Korea and the Philippines. Our wafer probing is performed by King Yuan Electronics Co., Ltd. in Taiwan.

Relying on third-party manufacturing, assembly and testing presents a number of risks, including but not limited to:

• capacity and materials shortages during periods of high demand;

• reduced control over delivery schedules, inventories and quality;

• the unavailability of, or potential delays in obtaining access to, key process technologies;

• the inability to achieve required production or test capacity and acceptable yields on a timely basis;

• misappropriation of our intellectual property;

• the third parties’ ability to perform its obligations due to bankruptcy or other financial constraints;

• limited warranties on wafers or products supplied to us; and

• potential increases in prices.

Any of the foregoing risks may affect our ability to meet customer demand. For example, a former silicon wafer supplier suddenly declared bankruptcy in December 2013 and abruptly shut down its foundry. As a result, we were unable to fulfill a portion of our customers’ orders in 2014 while we transitioned wafer production to a new foundry. Based on the average selling prices then in effect for those wafers, we estimate that the potential loss of revenue exceeded $10.0 million.

We currently do not have long-term supply contracts with our third-party contract manufacturers for our DataFlash and Fusion Flash products, including United Microelectronics Corporation and Amkor Technology, Inc. Therefore, they are not obligated to perform services or supply components to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. During periods of high demand and tight inventories, our third-party foundries and assembly and testing contractors may allocate capacity to the production of other companies’ components while reducing deliveries to us, or significantly raise their prices. In particular, they may allocate capacity to other customers that are larger and better financed than us or that have long-term agreements, decreasing the capacity available to us. Shortages of capacity available to us may be caused by the actions of their other, large customers that may be difficult to predict, such as major product launches. If we need other foundries or assembly and test contractors because of increased demand, or if we are unable to obtain timely and adequate deliveries from our providers, we might not be able to cost-effectively and quickly retain other vendors to satisfy our requirements. Because the lead-time needed to establish a relationship with a new third-party supplier could be several quarters, there is no readily available alternative source of supply for any specific component. In addition, the time and expense to qualify a new foundry could result in additional expense, diversion of resources or lost sales, any of which would negatively impact our financial results.

In the event that we expand production of a component to include a new contract manufacturer, it may take approximately 18 to 24 months to allow a transition from our current foundry or assembly services provider to the new provider. We may experience difficulty migrating production to a new contract manufacturer and, consequently, may experience reduced yields, delays in component deliveries and increased research and development expense. The inability by us or our third-party manufacturers to effectively and efficiently transition our technology to their infrastructure may adversely affect our operating results and our gross margin. There can be no assurance that we will be able to find suitable replacements for our third-party contract manufacturers.

If any of our current or future foundry partners or assembly and test subcontractors significantly increases the costs of wafers or other materials, interrupts or reduces our supply, including for reasons outside of their control, or if any of our relationships with our suppliers is terminated, our operating results could be adversely affected. Such occurrences could also damage our customer relationships, result in lost revenue, cause a loss in market share or damage our reputation.

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The market for semiconductor memory products is characterized by declines in average selling prices, which we expect to continue, and which could negatively affect our revenue and margins.

Our customers expect the average selling price of our products to decrease year-over-year and we expect this trend to continue. When such pricing declines occur, we may not be able to mitigate the effects by selling more or higher margin units, or by reducing our manufacturing costs. In such circumstances, our operating results could be materially and adversely affected. Our legacy and new flash memory products have experienced declining average selling prices over their life cycle. The rate of decline may be affected by a number of factors, including relative supply and demand, the level of competition, production costs and technological changes. As a result of the decreasing average selling prices of our products following their launch, our ability to increase or maintain our margins depends on our ability to introduce new or enhanced products with higher average selling prices and to reduce our per-unit cost of sales and our operating costs. We may not be able to reduce our costs as rapidly as companies that operate their own manufacturing, assembly and testing facilities, and our costs may even increase because we do not operate our own manufacturing, assembly or testing facilities, which could also reduce our gross margins. In addition, our new or enhanced products may not be as successful or enjoy as high margins as we expect. If we are unable to offset any reductions in average selling prices by introducing new products with higher average selling prices or reducing our costs, our revenue and margins will be negatively affected and may decrease.

The semiconductor memory market is highly cyclical and has experienced severe downturns in the past, generally as a result of wide fluctuations in supply and demand, constant and rapid technological change, continuous new product introductions and price erosion. During downturns, periods of intense competition, or the presence of oversupply in the industry, the selling prices for our products may decline at a high rate over relatively short time periods as compared to historical rates of decline. We are unable to predict selling prices for any future periods and may experience unanticipated, sharp declines in selling prices for our products.

Our prospects for growth depends on the growth and development of the emerging IoT industry, and if the market does not develop as we expect, our business prospects may be harmed.

Our products are increasingly being utilized in IoT edge devices. The IoT industry is nascent and is characterized by rapidly changing technologies, devices and connectivity requirements, evolving industry standards and changing customer demands. The continued development of IoT depends in part on significant growth in the number of connected devices. Such growth is affected by various factors, including the continued growth in the use of mobile operator networks and the Internet to connect an increasing number and variety of devices, price reductions for key hardware and software components, innovation of other components of the IoT nodes toward low-power formats, and the continued development of IoT standards and protocols. Without these continued developments, IoT might not gain widespread market acceptance and our business could suffer. Security and privacy concerns, evolving business practices and consumer preferences may also slow the growth and development of IoT. Because our revenue growth ultimately depends upon the success of IoT, our business may suffer as a result of slowing or declining growth in IoT adoption. Even if the IoT industry does develop, we may not be well positioned or able to penetrate and capitalize on this new market. As a result of these factors, the future revenue and income potential of our business is uncertain.

The markets for our products are evolving, and changing market conditions, such as the introduction of new technologies or changes in customer preferences, may negatively affect demand for our products. If we fail to properly anticipate or respond to changing market conditions, our business prospects and results of operations will suffer.

The NVM industry is subject to constant and rapid changes in technology, frequent new product introductions, short product life cycles, rapid product obsolescence and evolving technical standards. New technologies may be introduced that make the current technologies on which our products are based less competitive or obsolete or require us to make changes to our technology that could be expensive and time consuming to implement. Due to the evolving nature of our markets, our future success depends on our ability to accurately anticipate and respond to changes in industry standards, technological requirements, customer and consumer preferences and other market conditions. Our technologies could become obsolete sooner than we expect because of faster than anticipated, or unanticipated, changes in one or more of the industry standards and technological requirements. We may be unable to develop and introduce new or enhanced technologies that satisfy customer requirements and achieve market acceptance in a timely manner or at all, succeed in commercializing the technologies on which we have focused our research and development expenditures to develop, and anticipate new industry standards and technological changes. If we fail to adapt successfully to technological changes or fail to obtain access to important new technologies, we may be unable to retain customers or attract new customers. Any decrease in demand for our products, or the need for low-power products in general, due to the emergence of competing technologies, changes in customer preferences and requirements or other factors, could adversely affect our business, results of operations and prospects.

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We must continuously develop new and enhanced products, and if we are unable to successfully market our new and enhanced products for which we incur significant expenses to develop, our results of operations and financial condition will be materially adversely affected.

In order to compete effectively in our markets, we must continually design, develop and introduce new and improved products with improved features in a cost-effective manner in response to changing technologies and market demand. This requires us to devote substantial financial and other resources to research and development. We have developed and are continuing to develop next-generation products, such as our Moneta and EcoXip products, which we expect to be one of the drivers of our revenue growth in the future. However, we may not succeed in developing and marketing these new and enhanced products. We also face the risk that customers may not value or be willing to bear the cost of incorporating our new and enhanced products into their products, particularly if they believe their customers are satisfied with current solutions. Regardless of the improved features or superior performance of our new and enhanced products, customers may be unwilling to adopt our solutions due to design or pricing constraints, or because they do not want to rely on a single or limited supply source. Because of the extensive time and resources that we invest in developing new and enhanced products, if we are unable to sell customers new generations of our products, our revenue could decline and our business, financial condition, results of operations and cash flows would be negatively affected. For example, we generated limited revenue from sales of our Mavriq products to date. While we expect revenue from our Mavriq products to grow, we may not be able to materially increase our revenue from this product family. Similarly, any of our more recently-introduced products or product families based on CBRAM or floating gate architecture, such as Moneta and EcoXip, may not achieve market acceptance and contribute significantly to our revenue. If we are unable to successfully develop and market our new and enhanced products that we have incurred significant expenses developing, our results of operations and financial condition will be materially and adversely affected.

Our success and future revenue depend on our ability to secure design wins and on our customers’ ability to successfully sell the products that incorporate our solutions. Securing design wins is a lengthy, expensive and competitive process, and may not result in actual orders and sales, which could cause our revenue to decline.

We sell to customers that incorporate our NVM into their products. A design win occurs after a customer has tested our product, verified that it meets the customer’s requirements, qualified our solutions for their products and placed an order for the purchase of our products. Our customers may need several months to years to test, evaluate and adopt our product and additional time to begin volume production of the product that incorporates our solution. Due to this generally lengthy design cycle, we may experience significant delays from the time we increase our operating expenses and make investments in our products to the time that we generate revenue from sales of these products. Moreover, even if a customer selects our solution, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or efforts by our customer to market and sell its product may not be successful. We may not generate any revenue from design wins after incurring the associated costs, which would cause our business and operating results to suffer.

If a current or prospective customer designs a competitor’s solution into its product, it becomes significantly more difficult for us to sell our solutions to that customer because changing suppliers involves significant time, cost, effort and risk for the customer even if our solutions remain compatible with their product design. If current or prospective customers do not include our solutions in their products and we fail to achieve a sufficient number of design wins, our results of operations and business may be harmed.

We rely on our relationships with OEMs and ODMs to enhance our solutions and market position, and our failure to continue to develop or maintain such relationships in the future would harm our ability to remain competitive.

We develop our products for leading OEMs and ODMs that serve a variety of end markets and are developing devices for wearables, sensors, Bluetooth 4.0 and other IoT applications. For each application, manufacturers create products that incorporate specialized semiconductor technology, which makers of memory products use as the basis for their products. These manufacturers set the specifications for many of the key components to be used on each generation of their products and, in the case of memory components, generally qualify only a few vendors to provide memory components for their products. As each new generation of their products is released, vendors are validated in a similar fashion. We must work closely with semiconductor manufacturers to ensure our products become qualified for use in their products. As a result, maintaining close relationships with leading product manufacturers that are developing devices for wearables, Bluetooth 4.0 and other IoT applications is crucial to the long-term success of our business. We could lose these relationships for a variety of reasons, including our failure to qualify as a vendor, our failure to demonstrate the value of our new solutions, declines in product quality, or if OEMs or ODMs seek to work with vendors with broader product suites, greater production capacity or greater financial resources. If our relationships with key industry participants were to deteriorate or if our solutions were not qualified by our customers, our market position and revenue could be materially and adversely affected.

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Changes to industry standards and technical requirements relevant to our products and markets could adversely affect our business, results of operations and prospects.

Our products are only a part of larger electronic systems. All products incorporated into these systems must comply with various industry standards and technical requirements created by regulatory bodies or industry participants in order to operate efficiently together. Industry standards and technical requirements in our markets are evolving and may change significantly over time. For our products, the industry standards are developed by the Joint Electron Device Engineering Council, an industry trade organization. In addition, large industry-leading semiconductor and electronics companies play a significant role in developing standards and technical requirements for the product ecosystems within which our products can be used. Our customers also may design certain specifications and other technical requirements specific to their products and solutions. These technical requirements may change as the customer introduces new or enhanced products and solutions.

Our ability to compete in the future will depend on our ability to identify and comply with evolving industry standards and technical requirements. The emergence of new industry standards and technical requirements could render our products incompatible with products developed by other suppliers or make it difficult for our products to meet the requirements of certain of our customers in consumer, industrial, IoT and other markets. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards and requirements. If our products are not in compliance with prevailing industry standards and technical requirements for a significant period of time, we could miss opportunities to achieve crucial design wins, our revenue may decline and we may incur significant expenses to redesign our products to meet the relevant standards, which could adversely affect our business, results of operations and prospects.

If sales of our customers’ products decline or if their products do not achieve market acceptance, our business and operating results could be adversely affected.

Our revenue depends on our customers’ ability to commercialize their products successfully. The markets for our customers’ products are extremely competitive and are characterized by rapid technological change. Competition in our customers’ markets is based on a variety of factors including price, performance, product quality, marketing and distribution capability, customer support, name recognition and financial strength. As a result of rapid technological change, the markets for our customers’ products are characterized by frequent product introductions, short product life cycles, fluctuating demand and increasing product capabilities. As a result, our customers’ products may not achieve market success or may become obsolete. We cannot assure you that our customers will dedicate the resources necessary to promote and commercialize their products, successfully execute their business strategies for such products, or be able to manufacture such products in quantities sufficient to meet demand or cost-effectively manufacture products at a high volume. Our customers do not have contracts with us that require them to manufacture, distribute or sell any products. Moreover, our customers may develop internally, or in collaboration with our competitors, technology that they may utilize instead of the technology available to them through us. Our customers’ failure to achieve market success for their products, including as a result of general declines in our customers’ markets or industries, could negatively affect their willingness to utilize our products, which may result in a decrease in our revenue and negatively affect our business and operating results.

Our revenue also depends on the timely introduction, quality and market acceptance of our customers’ products that incorporate our solutions. Our customers’ products are often very complex and subject to design complexities that may result in design flaws, as well as potential defects, errors and bugs. We have in the past been subject to delays and project cancellations as a result of design flaws in the products developed by our customers. For example, in 2014, flaws in one of our customer’s products that were unrelated to our memory solutions generated negative publicity for our customer and delayed the product’s release until it could be redesigned. In the past, we have also been subject to delays and project cancellations as a result of changing market requirements, such as the customer adding a new feature, or because a customer’s product fails their end customer’s evaluation or field trial. Customer products may also be delayed due to issues with other vendors of theirs. We incur significant design and development costs in connection with designing our solutions for customers’ products. If our customers discover design flaws, defects, errors or bugs in their products, or if they experience changing market requirements, failed evaluations or field trials, or issues with other vendors, they may delay, change or cancel a project. If we have already incurred significant development costs, we may not be able to recoup those costs, which in turn would adversely affect our business and financial results.

We face competition and expect competition to increase in the future. If we fail to compete effectively, our revenue growth and results of operations will be materially and adversely affected.

The global semiconductor market in general, and the semiconductor memory market in particular, are highly competitive. We expect competition to increase and intensify as other semiconductor companies enter our markets, many of which have greater financial and other resources with which to pursue technology development, product design, manufacturing, marketing and sales and distribution of their products. Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue and operating results. Currently, our competitors range from

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large, international companies offering a wide range of semiconductor products to companies specializing in other alternative, specialized emerging memory technologies. Our primary competitors include Macronix International Co. Ltd., Microchip Technology Inc., Micron Technology, Inc., Cypress Semiconductor Corporation, STMicroelectronics NV and Winbond Electronics Corp. In addition, as the IoT market opportunity grows, we expect new entrants will enter these markets and existing competitors, including leading semiconductor companies, may make significant investments to compete more effectively against our products. These competitors could develop technologies or architectures that make our products or technologies obsolete.

Our ability to compete successfully depends on factors both within and outside of our control, including:

• the functionality and performance of our products and those of our competitors;

• our relationships with our customers and other industry participants;

• prices of our products and prices of our competitors’ products;

• our ability to develop innovative products;

• our ability to retain high-level talent, including our management team and engineers; and

• the actions of our competitors, including merger and acquisition activity, launches of new products and other actions that could change the competitive landscape.

Competition could result in pricing pressure, reduced revenue and profitability and loss of market share, any of which could materially and adversely affect our business, results of operations and prospects. In the event of a market downturn, competition in the markets in which we operate may intensify as our customers reduce their purchase orders. Our competitors that are significantly larger and have greater financial, technical, marketing, distribution, customer support and other resources or more established market recognition than us may be better positioned to accept lower prices and withstand adverse economic or market conditions.

Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer.

Prior to selecting and purchasing our products, our customers typically require that our products undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability. This qualification process may continue for several months or years. However, obtaining the requisite qualifications for a memory product does not assure any sales of the product. Even after successful qualification and sales of a product to a customer, a subsequent revision in our third-party contractors’ manufacturing process or our selection of a new contract manufacturer may require a new qualification process, which may result in delays and excess or obsolete inventory. After our products are qualified and selected, it can and often does take several months or more before the customer commences volume production of systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, to qualify our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of those products may be precluded or delayed, which may impede our growth and harm our business.

Our costs may increase substantially if our third-party manufacturing contractors do not achieve satisfactory product yields or quality.

The fabrication process is extremely complicated and small changes in design, specifications or materials can result in material decreases in product yields or even the suspension of production. From time to time, the third-party foundries that we contract to manufacture our products may experience manufacturing defects and reduced manufacturing yields related to errors or problems in their manufacturing processes or the interrelationship of their processes with our designs. In some cases, our third-party foundries may not be able to detect these defects early in the fabrication process or determine the cause of such defects in a timely manner.

Generally, in pricing our products, we assume that manufacturing yields will continue to improve, even as the complexity of our products increases. Once our products are initially qualified with our third-party foundries, minimum acceptable yields are established. We are responsible for the costs of the units if the actual yield is above the minimum. If actual yields are below the minimum we are not required to purchase the units. Typically, minimum acceptable yields for our new products are generally lower at first and gradually improve as we achieve full production. Unacceptably low product yields or other product manufacturing problems could substantially increase overall production time and costs and adversely impact our operating results. Product yield losses will increase our costs and reduce our gross margin. In addition to significantly harming our results of operations and cash flow, poor yields may delay shipment of our products and harm our relationships with existing and potential customers.

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The complexity of our products may lead to errors, defects and bugs, which could negatively impact our reputation with customers and result in liability.

Products as complex as ours may contain errors, defects and bugs when first introduced to customers or as new versions are released. Our products have in the past experienced such errors, defects and bugs. Delivery of products with production defects or reliability, quality or compatibility problems could significantly delay or hinder market acceptance of the products or result in a costly recall and could damage our reputation and adversely affect our ability to retain existing customers and attract new customers. Errors, defects or bugs could cause problems with the functionality of our products, resulting in interruptions, delays or cessation of sales of these products to our customers. We may also be required to make significant expenditures of capital and resources to resolve such problems. We cannot assure you that problems will not be found in new products, both before and after commencement of commercial production, despite testing by us, our suppliers or our customers. Any such problems could result in:

• delays in development, manufacture and roll-out of new products;

• additional development costs;

• loss of, or delays in, market acceptance;

• diversion of technical and other resources from our other development efforts;

• claims for damages by our customers or others against us; and

• loss of credibility with our current and prospective customers.

Any such event could have a material adverse effect on our business, financial condition and results of operations.

We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available from our third-party foundries. As a result, we periodically evaluate the benefits of migrating our solutions to other technologies in order to improve performance and reduce costs. These ongoing efforts require us from time to time to modify the manufacturing processes for our products and to redesign some products, which in turn may result in delays in product deliveries. We may face difficulties, delays and increased expense as we transition our products to new processes, and potentially to new foundries. We will depend on our third-party foundries as we transition to new processes. We cannot assure you that our third-party foundries will be able to effectively manage such transitions or that we will be able to maintain our relationship with our third-party foundries or develop relationships with new third-party foundries. If we or any of our third-party foundries experience significant delays in transitioning to new processes or fail to efficiently implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased expenses, any of which could harm our relationships with our customers and our operating results.

As smaller line width geometry manufacturing processes become more prevalent, we intend to move our future products to increasingly smaller geometries in order to reduce costs while integrating greater levels of functionality into our products. This transition will require us and our third-party foundries to migrate to new designs and manufacturing processes for smaller geometry products. We may not be able to achieve smaller geometries with higher levels of design integration or to deliver new integrated products on a timely basis. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies to reduce our costs and increase performance. We are dependent on our relationships with our third-party foundries to transition to smaller geometry processes successfully. We cannot assure you that our third-party foundries will be able to effectively manage any such transition. If we or our third-party foundries experience significant delays in any such transition or fail to implement a transition, our business, financial condition and results of operations could be materially harmed.

If we fail to retain qualified finance personnel and strengthen our financial reporting systems and infrastructure, we may not be able to timely and accurately report our financial results or comply with the requirements of being a public company, including compliance with the Sarbanes-Oxley Act and SEC reporting requirements.

Our ability to timely and accurately report our financial results or comply with the requirements of being a public company depends on our maintaining adequate numbers of accounting and finance staff with technical accounting, SEC reporting and Sarbanes-Oxley Act compliance expertise. Any inability to recruit or retain qualified accounting and finance staff would have an adverse impact on our ability to accurately and timely prepare our financial statements. We may be unable to hire qualified professionals with requisite technical and public company experience when and as needed. In addition, new employees will require time and training to learn our business and operating processes and procedures. If our finance and accounting organization is unable for any reason to respond adequately to the increased demands from being a public company, the quality and timeliness of our financial reporting may suffer, which could result in the identification of material weaknesses in our internal controls. Any consequences resulting from

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inaccuracies or delays in our reported financial statements could cause the trading price of our common stock to decline and could harm our business, operating results and financial condition.

If we fail to strengthen our financial reporting systems, infrastructure and internal control over financial reporting to meet the demands placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial results timely and accurately and prevent fraud. We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404.

A breach of our security systems may damage our reputation and adversely affect our business.

Our security systems are designed to protect our customers’, suppliers’ and employees’ confidential information, as well as maintain the physical security of our facilities. We also rely on a number of third-party “cloud-based” service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some finance functions, and we are, of necessity, dependent on the security systems of these providers. Any security breaches or other unauthorized access by third parties to the systems of our cloud-based service providers or the existence of computer viruses in their data or software could expose us to a risk of information loss and misappropriation of confidential information. Accidental or willful security breaches or other unauthorized access by third parties to our information systems or facilities, or the existence of computer viruses in our data or software, could expose us to a risk of information loss and misappropriation of proprietary and confidential information belonging to us, our customers or our suppliers. Any theft or misuse of this information could result in, among other things, unfavorable publicity, damage to our reputation, difficulty in marketing our products, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of this information, any of which could have a material adverse effect on our business, financial condition, our reputation, and our relationships with our customers and partners. Since the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

Failure to protect our intellectual property could substantially harm our business.

Our success and ability to compete depend in part upon our ability to protect our intellectual property. We rely on a combination of intellectual property rights, including patents, mask work protection, copyrights, trademarks, trade secrets and know-how, in the United States and other jurisdictions. The steps we take to protect our intellectual property rights may not be adequate, particularly in foreign jurisdictions such as China. Any patents we hold may not adequately protect our intellectual property rights or our products against competitors, and third parties may challenge the scope, validity or enforceability of our issued patents. In addition, other parties may independently develop similar or competing technologies designed around any patents or patent applications that we hold. Some of our products and technologies are not covered by any patent or patent application, as we do not believe patent protection of these products and technologies is critical to our business strategy at this time. A failure to timely seek patent protection on products or technologies generally precludes us from seeking future patent protection on these products or technologies.

In addition to patents, we also rely on contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement security measures designed to protect our trade secrets and know-how. However, we cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our customers, suppliers, distributors, employees or consultants will not assert rights to intellectual property or damages arising out of such contracts.

We may initiate claims against third parties to protect our intellectual property rights if we are unable to resolve matters satisfactorily through negotiation. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management. It could also result in the impairment or loss of portions of our intellectual property, as an adverse decision could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. Our failure to secure, protect and enforce our intellectual property rights could materially harm our business.

We may face claims of intellectual property infringement, which could be time-consuming, costly to defend or settle, result in the loss of significant rights, harm our relationships with our customers and distributors, or otherwise materially adversely affect our business, financial condition and results of operations.

The semiconductor memory industry is characterized by companies that hold patents and other intellectual property rights and that vigorously pursue, protect and enforce intellectual property rights. These companies include patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may provide little or no deterrence.

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From time to time, third parties may assert against us and our customers’ patent and other intellectual property rights to technologies that are important to our business.

Claims that our products, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel. We may also be obligated to indemnify our customers or business partners in connection with any such litigation, which could result in increased costs. Infringement claims also could harm our relationships with our customers or distributors and might deter future customers from doing business with us. If any such proceedings result in an adverse outcome, we could be required to:

• cease the manufacture, use or sale of the infringing products, processes or technology;

• pay substantial damages for infringement;

• expend significant resources to develop non-infringing products, processes or technology, which may not be successful;

• license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

• cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or

• pay substantial damages to our customers to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.

Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations. Furthermore, our exposure to the foregoing risks may also be increased as a result of acquisitions of other companies or technologies. For example, we may have a lower level of visibility into the development process with respect to intellectual property or the care taken to safeguard against infringement risks with respect to the acquired company or technology. In addition, third parties may make infringement and similar or related claims after we have acquired technology that had not been asserted prior to the acquisition.

We rely upon third-party licensed technology to develop our products. If licenses of third-party technology are inadequate, our ability to develop and commercialize our products or product enhancements could be negatively impacted.

Our products incorporate technology licensed from third parties. In connection with our acquisition of certain flash memory assets from Atmel Corporation in 2012, we obtained a perpetual license to Atmel’s flash memory technology. In addition, a component of our CBRAM technology is licensed from Axon Technology Corp. While we believe these licenses enable us to develop our products and pursue our current product strategies, these licenses may not provide us with the benefits we expect from them. From time to time, we may be required to license additional technology from third parties to develop our products or product enhancements. However, these third-party licenses may not be available to us on commercially reasonable terms or at all. Our inability to obtain third-party licenses necessary to develop products and product enhancements could require us to obtain substitute technology at a greater cost or of lower quality or performance standards or delay product development. Any of these results may limit our ability to develop new products, which could harm our business, financial condition and results of operations.

Our success depends on our ability to attract and retain key employees, and our failure to do so could harm our ability to grow our business and execute our business strategies.

Our success depends on our ability to attract and retain our key employees, including our management team and experienced engineers. Competition for personnel in the semiconductor technology field is intense, and the availability of suitable and qualified candidates is limited. We compete to attract and retain qualified research and development personnel with other semiconductor companies, universities and research institutions, particularly those in the San Francisco Bay Area where our headquarters is located. The members of our management and key employees are at-will employees. If we lose the services of any key senior management member or employee, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new personnel, which could severely impact our business and prospects. The loss of the services of one or more of our key employees, especially our key engineers, or our inability to attract and retain qualified engineers, could harm our business, financial condition and results of operations.

We may not be able to effectively manage our growth, and we may need to incur significant expenditures to address the additional operational and control requirements of our growth, either of which could harm our business and operating results.

We expect to increase headcount and the overall size of our operations to support our growth. To effectively manage our growth, we must continue to expand our operational, engineering and financial systems, procedures and controls and to improve our

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accounting and other internal management systems. This may require substantial managerial and financial resources, and our efforts in this regard may not be successful. Our current systems, procedures and controls may not be adequate to support our future operations. If we fail to adequately manage our growth, or to improve our operational, financial and management information systems, or fail to effectively motivate or manage our new and future employees, the quality of our products and the management of our operations could suffer, which could adversely affect our operating results.

We have expanded in the past and may continue to expand in the future through acquisitions of, or investments in, other companies, each of which may divert our management’s attention, result in additional dilution to stockholders or use resources that are necessary to operate our business.

In the past, we have grown our business through acquisitions and we may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our business, enhance our technical capabilities or otherwise offer growth opportunities. For example, in September 2012, we purchased certain flash memory product assets from Atmel Corporation, which brought us a large customer base for products, a world-wide sales and distribution network and products and technology to further broaden our technology platform offerings. Such acquisitions or investments could create risks for us, including:

• difficulties in assimilating acquired personnel, operations and technologies or realizing synergies expected in connection with an acquisition, particularly with acquisitions of companies with large and widespread operations, complex products or that operate in markets in which we historically have had limited experience;

• unanticipated costs or liabilities, including possible litigation, associated with the acquisition;

• incurrence of acquisition-related costs;

• diversion of management’s attention from other business concerns;

• use of resources that are needed in other parts of our business; and

• use of substantial portions of our available cash to consummate an acquisition.

A significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill, which must be assessed for impairment at least annually. If such acquisitions do not yield expected returns, we may be required to take charges to our earnings based on this impairment assessment process, which could harm our results of operations.

We may be unable to complete acquisitions at all or on commercially reasonable terms, which could limit our future growth. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of additional debt, which could adversely affect our operating results and result in a decline in our stock price and further restrict our ability to pursue business opportunities, including potential acquisitions. In addition, if an acquired business fails to meet our expectations, our operating results may suffer and our stock price could decline.

We have operations outside of the United States and intend to expand our international operations, which exposes us to significant risks.

We have limited operations in Europe and Asia. We intend to expand our operations in Asia. The success of our business depends, in large part, on our ability to operate successfully from geographically disparate locations and to further expand our international operations and sales. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that are different from those we face in the United States. We cannot be sure that further international expansion will be successful. In addition, we face risks in doing business internationally that could expose us to reduced demand for our products, lower prices for our products or other adverse effects on our operating results. Among the risks we believe are most likely to affect us are:

• difficulties, inefficiencies and costs associated with staffing and managing foreign operations;

• longer and more difficult customer qualification and credit checks;

• greater difficulty collecting accounts receivable and longer payment cycles;

• the need for various local approvals to operate in some countries;

• difficulties in entering some foreign markets without larger-scale local operations;

• compliance with local laws and regulations;

• unexpected changes in regulatory requirements, including the elimination of tax holidays;

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• reduced protection for intellectual property rights in some countries;

• adverse tax consequences as a result of repatriating cash generated from foreign operations to the United States;

• adverse tax consequences, including potential additional tax exposure if we are deemed to have established a permanent establishment outside of the United States;

• the effectiveness of our policies and procedures designed to ensure compliance with the Foreign Corrupt Practices Act of 1977 and similar regulations;

• fluctuations in currency exchange rates, which could increase the prices of our products to customers outside of the United States, increase the expenses of our international operations by reducing the purchasing power of the U.S. dollar and expose us to foreign currency exchange rate risk if, in the future, we denominate our international sales in currencies other than the U.S. dollar;

• new and different sources of competition; and

• political and economic instability, and terrorism.

Our failure to manage any of these risks successfully could harm our operations and reduce our revenue.

In order to comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and if we fail to comply with environmental regulations we could be subject to substantial fines or be required to have our suppliers alter their processes.

The semiconductor memory industry is subject to a variety of international, federal, state and local governmental regulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic or other hazardous substances. Failure to comply with environmental regulations could subject us to civil or criminal sanctions and property damage or personal injury claims. Compliance with current or future environmental laws and regulations could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business. In response to environmental concerns, some customers and government agencies impose requirements for the elimination of hazardous substances, such as lead (which is widely used in soldering connections in the process of semiconductor packaging and assembly), from electronic equipment. For example, the European Union, or EU, adopted its Restriction on Hazardous Substance Directive which prohibits, with specified exceptions, the sale in the EU market of new electrical and electronic equipment containing more than agreed levels of lead or other hazardous materials and China has enacted similar regulations. Environmental laws and regulations such as these could become more stringent over time, causing a need to redesign technologies, imposing greater compliance costs and increasing risks and penalties associated with violations, which could seriously harm our business.

The issuance of new accounting standards or future interpretations of existing accounting standards could adversely affect our operating results.

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP. A change in those principles could have a significant effect on our reported results and might affect our reporting of transactions completed before a change is announced. GAAP is issued and subject to interpretation by the Financial Accounting Standards Board, the SEC and various other bodies formed to promulgate and interpret accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. The issuance of new accounting standards or future interpretations of existing accounting standards, or changes in our business practices or estimates, could result in future changes in our revenue recognition or other accounting policies that could have a material adverse effect on our results of operations.

Some of our facilities and the facilities of our suppliers are located near known earthquake fault zones, and the occurrence of an earthquake or other catastrophic disaster could damage our facilities, which could cause us to curtail our operations.

Our principal offices, and our contract manufacturers’ and suppliers’ facilities in Asia, are located near known earthquake fault zones and, therefore, are vulnerable to damage from earthquakes. We are also vulnerable to damage from other types of disasters, such as power loss, fire, floods and similar events. If any such disaster were to occur, our ability to operate our business could be seriously impaired. In addition, we may not have adequate insurance to cover our losses resulting from disasters or other similar significant business interruptions. Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition.

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We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

We have funded our operations since inception through equity financings, our borrowing arrangements and our initial public offering in October 2015. We have incurred net losses and negative cash flows from operating activities since our inception, and we expect we will continue to incur operating and net losses and negative cash flows from operations for the foreseeable future. We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. In the future, we may require additional capital to fund our ongoing operations, respond to business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities, but we may not be able to timely secure additional debt or equity financing or raise additional capital in the public market on favorable terms or at all.

Our current credit facility limits our ability to incur indebtedness, and these restrictions are subject to a number of qualifications and exceptions subject to the consent of our lender. Any additional 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.

If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

Provisions of our debt agreements may restrict our ability to pursue our business strategies.

Borrowings under our $18 million term loan facility and $2 million line of credit are collateralized by substantially all of our assets. Our credit facility restricts our ability to, among other things:

• dispose of or sell assets;

• consolidate or merge with other entities;

• incur additional indebtedness;

• create liens on our assets;

• pay dividends;

• make investments;

• enter into transactions with affiliates; and

• redeem subordinated indebtedness.

These restrictions are subject to certain exceptions. In addition, our credit facility, as amended, requires us to comply with certain financial covenants. The operating and financial restrictions and covenants in the credit facility, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet those covenants. A breach of any of these covenants could result in a default under the credit facility (as it did during the months of August, September, October and November, 2016), which could cause, among other things (unless such default is waived by the lender), all or a portion of the outstanding indebtedness thereunder to become immediately due and payable and subject to an increase by 5% of the interest rate charged during the period of the unremedied breach. In addition, the lender would be able to sell or lease our assets in satisfaction of our outstanding indebtedness.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs, to offset future taxable income, and tax credits to offset tax. In addition, although we do not expect to undergo an ownership change, we may experience an ownership change in the future, and our ability to utilize our NOLs and tax credits could be further limited by Section 382 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our net operating losses and tax credits could also be impaired under state laws. As a result, we might not be able to utilize a material portion of our state NOLs and tax credits.

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If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. If and when we no longer meet the definition of an “emerging growth company” as defined by the JOBS Act, we would be required under Section 404 of the Sarbanes-Oxley Act to evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the applicable fiscal year, provide a management report on our internal control over financial reporting, which must be attested to by our independent registered public accounting firm. If we have one or more material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing our internal control over financial reporting required to comply with this obligation, which process will be time consuming, costly and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to determine that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected, and we could become subject to investigations by the NASDAQ Stock Market, the SEC or other regulatory authorities, which could require additional financial and management resources.

Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply chain more complex and may result in damage to our reputation with customers.

Pursuant to the Dodd-Frank Act, the SEC has adopted requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or not these products are manufactured by third parties. These requirements will require companies to diligence, disclose and report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. The implementation of these requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of our products, and affect our costs and relationships with customers, distributors and suppliers as we must obtain additional information from them to ensure our compliance with the disclosure requirement. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the due diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers who require that all of the components of our products are certified as conflict mineral free and these customers may discontinue, or materially reduce, purchases of our products, which could result in a material adverse effect on our results of operations and our financial condition may be adversely affected.

Risks Related to Ownership of Our Common Stock

The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.

The market price of our common stock has been, and will likely continue to be, volatile. Since shares of our common stock were sold in our initial public offering in October 2015 at a price of $5.00 per share, our stock price has fluctuated significantly. In addition to the factors discussed in this Quarterly Report on Form 10-Q, the market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

• overall performance of the equity markets in general, in our industry or in the markets we address;

• our operating performance and the performance of other similar companies;

• changes in the estimates of our results of operations that we provide to the public, our failure to meet these projected results or changes in recommendations by securities analysts that elect to follow our common stock;

• announcements of technological innovations, new products or enhancements to products, acquisitions, strategic alliances or significant agreements by us or by our competitors;

• announcements of new business partners, on the termination of existing business partner arrangements or changes to our relationships with such business partners;

• recruitment or departure of key personnel;

• announcements of litigation or claims against us;

• changes in legal requirements relating to our business;

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• the economy as a whole, market conditions in our industry, and the industries of our customers and end customers;

• trading activity by our principal stockholders;

• the expiration of contractual lock-up or market standoff agreements; and

• sales of shares of our common stock by us or our stockholders.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.

The trading market for our common stock rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. If few analysts cover our company, the price and trading volume of our stock could suffer. If one or more of the analysts who cover us downgrade our stock, or publish unfavorable research about our business, our stock price would likely decline rapidly. If one or more of these analysts cease coverage of our company or fail to publish regularly, we could lose visibility in the market, which in turn could cause our stock price to decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. In addition, our ability to pay cash dividends on our capital stock is restricted by the terms of our term loan facility and is likely to be restricted by any future debt financing arrangement. Any return to stockholders will therefore be limited to increases in the price of our common stock, if any.

Provisions in our amended and restated certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management.

Delaware corporate law and our amended and restated certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in control of our company or changes in our board of directors that the stockholders of our company may deem advantageous. Among other things, these provisions:

• establish a classified board of directors so that not all members of our board are elected at one time;

• provide that directors may be removed only “for cause” and only with the approval of stockholders representing 66 2/3 percent of our outstanding common stock;

• require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws;

• authorize the issuance of “blank check” preferred stock that our board could issue to increase the number of outstanding shares and to discourage a takeover attempt;

• eliminate the ability of our stockholders to call special meetings of stockholders;

• prohibit stockholder action by written consent, which means that all stockholder actions will be required to be taken at a meeting of our stockholders;

• provide that our board of directors is expressly authorized to make, alter or repeal our bylaws; and

• establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any

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“interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

(a) Sales of Unregistered Securities

None.

(b) Use of Proceeds from Public Offering of Common Stock

On October 30, 2015, we completed our initial public offering in which we sold 5,000,000 shares of common stock at a price to the public of $5.00 per share. On November 4, 2015, we completed the sale of an additional 192,184 shares of common stock pursuant to the underwriters’ over-allotment option. The aggregate offering price for shares sold by us in the offering was approximately $26.0 million. The offer of up to 5,750,000 shares in the initial public offering, for a proposed maximum aggregate offering price of $28.75 million, were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-206940) that was declared effective by the Securities and Exchange Commission on October 26, 2015.

Needham & Company, LLC, Oppenheimer & Co. Inc. and Roth Capital Partners, LLC were the underwriters for the offering. Following the sale of 5,192,184 shares in connection with the closing of the initial public offering and the sale of the shares subject to the over-allotment option, the offering terminated. We raised approximately $22.1 million in net proceeds after deducting underwriting discounts and commissions of approximately $1.8 million and other offering expenses of approximately $2.0 million. As of March 31, 2017, we had used approximately $14.0 million of the estimated aggregate net proceeds from our initial public offering: to fund working capital and general corporate requirements in the ordinary course of business. The foregoing amounts represent our best estimate of our use of proceeds for the period indicated. No such payments were made, whether directly or indirectly to our directors or officers or their associates, holders of 10% or more of any class of our equity securities or to our affiliates.  We intend to use the net proceeds from the initial public offering for additional working capital and other general corporate purposes, including research and development activities, sales and marketing activities and capital expenditures, to enhance existing and develop new products and product families, expand our manufacturing capabilities or fund our growth.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. Exhibits

Number	Description
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(c) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(c) and 15d-14(a)-, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+	Certification of Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

+ This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or Exchange Act, or otherwise subject to the liability of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused Amendment No. 1 to this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Adesto Technologies Corporation
Dated: June 19, 2017	By:	/s/ Ron Shelton
		Ron Shelton Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Number	Description
10.1	First Business Financing Modification Agreement, dated as of December 30, 2016, between the Registrant and Western Alliance Bank.(1)
10.2	Offer Letter, dated November 26, 2014, by and between the Registrant and Tom Spade.
10.3	Form of executive officer performance-based restricted stock units award agreement.
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(c) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(c) and 15d-14(a)-, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+	Certification of Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Exhibit 10.1 is incorporated by reference to Exhibit 10.10 filed with the Registrant's annual report on Form 10-K, filed with the Commission on March 24, 2017

+ This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or Exchange Act, or otherwise subject to the liability of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act of 1934.

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EX-10.2

Exhibit 10.2

November 26, 2014

Mr. Tom Spade

14910 Sky Lane

Los Gatos, CA 95032

Re:Offer of Employment by Adesto Technologies Corporation

Dear Tom:

I am very pleased to confirm our offer to you of employment with Adesto Technologies Corporation (“the Company”).  You will initially report to Narbeh Derhacobian and your position will have the title of Vice President of World Wide Sales.  The terms of our offer and the benefits currently provided by the Company are as follows:

1. Start Date. Your expected 1^st day of employment with the Company is December 8^th, 2014.

2. Starting Salary. Your starting base salary of will be Two Hundred and Forty Thousand ($240,000) Dollars per year. In the event that the Company completes an initial public offering, your base salary will be adjusted to Two Hundred and Seventy Thousand ($270,000) Dollars per year.

3. Options. We will recommend to the Board of Directors of the Company that you be granted the opportunity to purchase up to One Million Three Hundred and Forty Four Thousand (1,344,000) shares of Common Stock of the Company under our 2007 Equity Incentive/Option Plan (the “Plan”) at the fair market value of the Company’s Common Stock, as determined by the Board of Directors on the date the Board approves such grant. The shares you will be given the opportunity to purchase will vest at the rate of twenty five percent (25%) at the end of your first anniversary with the Company, and an additional two and one twelfth of a percent (2.0833%) per month thereafter, so long as you remain employed by the Company. Additionally, 50% of the unvested options will be vested immediately following either your termination without-cause by the Company or a change-in­control event of the Company. However, the grant of such options by the Company is subject to the Board’s approval and this promise to recommend such approval is not a promise of compensation and is not intended to create any obligation on the part of the Company. Further details on the Plan and any specific option grant to you will be provided upon approval of such grant by the Company’s Board of Directors.

4. Sales Bonus Structure.  You will be entitled to receive a cash and equity bonus structure based on mutually agreed upon goals with the CEO and the Company Board of Directors. The structure for the cash components of this bonus is outlined in Table 1 of this offer letter. The structure for the equity bonus is also outlined in Table 1 and is geared towards meeting specific goals for Q1’2015 and Q2’2015. Further, the equity component of the bonus is only applicable so long as the company has not completed an initial public offering.

5. Vacation/PTO/Sick-Leave. You will be entitled to 120 hours of PTO during every calendar year for the first five years of employment and earn an additional 8 hours PTO for each subsequent year of employment, up to a maximum of 160 hours. The amount of PTO available

to you can be accrued and carried over from one year to the next, but in no circumstance shall it exceed 200 hours unless determined otherwise by the Company Compensation Committee.

6. Confidentiality. As an employee of the Company, you will have access to certain confidential information of the Company and you may, during the course of your employment, develop certain information or inventions that will be the property of the Company. To protect the interests of the Company, you will need to sign the Company’s standard “Employee Invention Assignment and Confidentiality Agreement” as a condition of your employment. We wish to impress upon you that we do not want you to, and we hereby direct you not to, bring with you any confidential or proprietary material of any former employer or to violate any other obligations you may have to any former employer. During the period that you render services to the Company, you agree to not engage in any employment, business or activity that is in any way competitive with the business or proposed business of the Company. You will disclose to the Company in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with the Company. You will not assist any other person or organization in competing with the Company or in preparing to engage in competition with the business or proposed business of the Company. You represent that your signing of this offer letter, agreement(s) concerning stock options granted to you, if any, under the Plan (as defined above) and the Company’s Employee Invention Assignment and Confidentiality Agreement and your commencement of employment with the Company will not violate any agreement currently in place between yourself and current or past employers.

7. Employment with TriNet.  Our benefits, payroll, and other human resource management services are provided through TriNet Employer Group, Inc., a professional employer organization. As a result of ADESTO TECHNOLOGIES’ arrangement with TriNet, TriNet will be considered your employer of record for these purposes and your managers here at ADESTO TECHNOLOGIES will be responsible for directing your work, reviewing your performance, setting your schedule, and otherwise directing your work at ADESTO TECHNOLOGIES.

8. At Will Employment. While we look forward to a long and profitable relationship, should you decide to accept our offer, you will be an at-will employee of the Company, which means the employment relationship can be terminated by either you or the Company for any reason, at any time, with or without prior notice and with or without cause. Any statements or representations to the contrary (and, indeed, any statements contradicting any provision in this letter) should be regarded by you as ineffective. Further, your participation in any stock option or benefit program is not to be regarded as assuring you of continuing employment for any particular period of time.  Any modification or change in your at will employment status may only occur by way of a written employment agreement signed by you and the Chief Executive Officer of the Company.

9. Authorization to Work. Please note that because of employer regulations adopted in the Immigration Reform and Control Act of 1986, within three (3) business days of starting your new position you will need to present documentation demonstrating that you have authorization to work in the United States. If you have questions about this requirement, which applies to U.S. citizens and non-U.S. citizens alike, you may contact our personnel office.

10. Arbitration. You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment with the Company. This agreement to arbitrate applies to claims including, but by no means limited to, claims of discrimination, harassment, unpaid wages, breach of contract (express or implied), wrongful termination, torts, claims for stock or stock options, as well as claims based upon any federal, state or local

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ordinance, statute, regulation or constitutional provision, including, but not limited to, the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and 42 U.S.C. § 1981, and any and all state or local laws prohibiting discrimination or regulating any terms or conditions of employment (“Arbitrable Claims”). Arbitration shall be the exclusive method by which to resolve Arbitrable Claims, except that each party may, at its, his or her option, seek injunctive relief in a court of competent jurisdiction related to the improper use, disclosure or misappropriation of a party’s proprietary, confidential or trade secret information. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO SUCH CLAIMS.Arbitrable Claims do not include, and this Agreement does not apply to or otherwise restrict, administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the Employee’s ability to file such claims (including the Equal Employment Opportunity Commission and the National Labor Relations Board). Otherwise, the parties agree that arbitration shall be the exclusive remedy for administrative claims. The arbitration shall be conducted through the American Arbitration Association, before a single neutral arbitrator, in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based.

11. Background Check. This offer is contingent upon a successful employment verification of criminal, education, and employment background. This offer can be rescinded based upon data received in the verification. You will also agree that the Company reserves the right to do a background check anytime during your full time employment with the Company.

12. Acceptance. This offer will remain open until August 10, 2011. If you decide to accept our offer, and I hope you will, please sign the enclosed copy of this letter in the space indicated and return it to me. Your signature will acknowledge that you have read and understood and agreed to the terms and conditions of this offer letter and the attached documents, if any. Should you have anything else that you wish to discuss, please do not hesitate to contact us.

We are very excited and absolutely look forward to the opportunity to welcome you to Adesto Technologies Corporation.

Very truly yours,

Narbeh Derhacobian, President and CEO

Date:

I have read and understood this offer letter and hereby acknowledge, accept and agree to the terms as set forth above and further acknowledge that no other commitments were made to me as part of my employment offer except as specifically set forth herein.

Date signed: Dec 1, 2014

Name: TOM SPADE

Signature: /s/Tom Spade

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Exhibit 10.2

Table 1

CASH COMP

			Pre IPO	Post IPO
		Base	$240,000	$270,000
		Annual Bonus Base	$150,000	$180,000
55%	Revenue	Lower than 85% Target	$-	$-
		85% to 90% Target	$41,250	$49,500
		90% to 99% Target	$66,000	$79,200
		100% Target	$82,500	$99,000
		101% to 110% Target	$86,625	$103,950
		111% or higher	$99,000	$118,800
30%	Design Wins	Lower than 85% Target	$-	$-
		85% to 90% Target	$22,500	$27,000
		90% to 99% Target	$36,000	$43,200
		100% Plan	$45,000	$54,000
		101% to 110% Target	$47,250	$56,700
		110% Plan or higher	$49,500	$59,400
15%	MBO		$22,500	$27,000
Assumes meeting MBO->		Total Comp Minimum	$262,500	$297,000
		Total Comp (15% Below)	$326,250	$373,500
		Total Comp (10% Below)	$364,500	$419,400
		Total Comp (Meet Plan)	$390,000	$450,000
		Total Comp (Max)	$411,000	$475,200

Equity COMP

			Pre IPO
		Base	1,344,000
Additional Equity Pre IPO and Std Vesting	Q1’2015	Hit 100% Revenue Target	153,600
		Hit 105% Revenue Target	172,800
		Hit 110% Revenue Target	288,000
	Q2’2015	Hit 100% Revenue Target	153,600
		Hit 105% Revenue Target	172,800
		Hit 110% Revenue Target	288,000

EX-10.3

Exhibit 10.3

NOTICE OF PERFORMANCE- BASED

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

GRANT NUMBER:  

Unless otherwise defined herein, the terms defined in the Adesto Technologies Corporation (the “Company”) 2015 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Restricted Stock Unit Award (this “Notice”) and the attached Restricted Stock Unit Agreement (the “Agreement”).You have been granted an award of Performance-Based Restricted Stock Units (the “RSUs”) under the Plan subject to the terms and conditions of the Plan, this Notice and the Agreement.

Name:

Address:

Number of RSUs: [MAXIMUM NUMBER]

Date of Grant: [DATE]

Vesting Commencement Date: N/A

Expiration Date: The earlier to occur of: (a) the settlement of all vested RSUs granted hereunder, and (b) the tenth anniversary of the Date of Grant.  The RSUs expire earlier if your Service terminates earlier, as described in the Agreement.

Vesting Schedule: Subject to the limitations set forth in this Notice, the Plan and the Agreement, the RSUs will vest in accordance with the schedule set forth on Exhibit A.

Additional Terms: ☐If this box is checked, the additional terms and conditions set forth on Attachment 1 hereto (as executed by the Company) are applicable and are incorporated herein by reference.  No document need be attached as Attachment 1 if the box is not checked.

You acknowledge that the vesting of the RSUs pursuant to this Notice is earned only by continuing Service.  By accepting the RSUs, you and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, this Notice and the Agreement.  By accepting the RSUs, you consent to electronic delivery as set forth in the Agreement.

PARTICIPANT: Signature: Print Name: ADESTO TECHNOLOGIES CORPORATION: By: Name: Its:

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PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

ADESTO TECHNOLOGIES CORPORATION

2015 EQUITY INCENTIVE PLAN

You have been granted Performance-Based Restricted Stock Units (“RSUs”) by Adesto Technologies Corporation (the “Company”) under the 2015 Equity Incentive Plan (the “Plan”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Award (the “Notice”) and this Restricted Stock Unit Agreement (this “Agreement”).

1.Settlement.  Settlement of RSUs shall be made in the same calendar year as the applicable date of vesting under the Vesting Schedule set forth in the Notice; provided, however, that if the vesting date under the Vesting Schedule set forth in the Notice is in December, then settlement of any RSUs that vest in December shall be within 30 days of vesting.  Settlement of RSUs shall be in Shares.  Settlement means the delivery to you of the Shares vested under an RSU. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Agreement.

2.No Stockholder Rights.  Unless and until such time as Shares are issued in settlement of vested RSUs, you shall have no ownership of the Shares allocated to the RSUs and shall have no right to dividends or to vote such Shares.

3.Dividend Equivalents.  Dividends, if any (whether in cash or Shares), shall not be credited to you.

4.No Transfer.  RSUs may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.  

5.Termination.  If your Service terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights you have to such RSUs shall immediately terminate, without payment of any consideration to you.  Your Service will be considered terminated as of the date you are no longer providing Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any) and will not, subject to the laws applicable to your RSUs, be extended by any notice period mandated under local employment laws (e.g., Service would not include a period of “garden leave” or similar period). In case of any dispute as to whether your termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

6.Tax Consequences.  You acknowledge that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and you should consult a tax adviser regarding your tax obligations prior to such settlement or disposition in the jurisdiction where you are subject to tax.

7.Withholding Taxes and Stock Withholding.  Regardless of any action the Company or your actual employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends and (2) do not commit to structure the terms of the award or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items.  You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

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Prior to the settlement of your RSUs, you shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or the Employer.  In this regard, you authorize the Company and/or the Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or the Employer. With the Company’s consent, these arrangements may also include, if permissible under local law, (a) withholding Shares that otherwise would be issued to you when yourRSUs are settled, provided that the Company only withholds the amount of Shares necessary to satisfy the minimum statutory withholding amount, (b) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sales by this authorization), (c) your payment by cash, cheque, wire transfer, bank draft or money order payable to the Company, or (d) any other arrangement approved by the Company; all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if you are a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) shall establish the method of withholding from alternatives (a)-(d) above, and the Committee shall establish the method prior to the Tax-Related Items withholding event. The Fair Market Value of these Shares, determined as of the effective date when taxes otherwise would have been withheld in cash, will be applied as a credit against the withholding taxes.

Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including maximum applicable rates, in which case you will receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or the vesting and settlement of the RSUs that cannot be satisfied by the means previously described.  Finally, you acknowledge that the Company has no obligation to deliver Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.

8.Acknowledgement.  The Company and you agree that the RSUs are granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference).  You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions, and (iii) hereby accept the RSUs subject to all of the terms and conditions set forth in this Agreement and those set forth in the Plan and the Notice.  You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.

9.Entire Agreement; Enforcement of Rights.  This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

10.Compliance with Laws and Regulations.  The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock (“Common Stock”) may be listed or quoted at the time of such issuance or transfer, which

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compliance the Company shall, in its absolute discretion, deem necessary or advisable.  You understand that the Company is under no obligation to register or qualify the Common Stock with any state, federal or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares.  Further, you agree that the Companyshall have unilateral authority to amend the Plan and this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares.  Finally, the Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.

11.No Advice Regarding Grant.  The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares.  You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

12.Governing Law; Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms.  This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.  For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in Santa Clara County or the federal courts of the United States for the Northern District of California and no other courts.

13.No Rights as Employee, Director or Consultant.  You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship.  Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.

14.Consent to Electronic Delivery of All Plan Documents and Disclosures.  By your acceptance of the RSUs, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the RSUs. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail. Finally, you understand that you are not required to consent to electronic delivery.

15.Imposition of Other Requirements.  The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the

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Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

16.Code Section 409A.  For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations thereunder (“Section 409A”).  Notwithstanding anything else provided herein, to the extent any payments provided under this Agreement in connection with your termination of employment constitute deferred compensation subject to Section 409A, and you are deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from your separation from service from the Company or (ii) the date of your death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to you including, without limitation, the additional tax for which you would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral.  To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A.  Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

17.Award Subject to Company Clawback or Recoupment.  The RSUs shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to your RSUs.

BY ACCEPTING THE RSUs, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

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EXHIBIT A

VESTING SCHEDULE TO PERFORMANCE-BASED RESTRICTED STOCK UNIT

Subject to the satisfaction of the condition set forth next paragraph, upon certification by the Compensation Committee at the end of the Performance Period (which certification shall occur not later than the first regularly-scheduled meeting of the Committee during the calendar quarter immediately following the end of the Performance Period) that the Closing Average Price for the Performance Period is at or above the Price Threshold, then 100% of the Shares subject to this RSU award shall be earned (the “Earned Shares”) and (i) 20% of the Earned Shares shall vest upon such certification by the Compensation Committee and (ii) 10% of the Earned Shares shall vest on June 30, 2018 and at the end of each of the next seven quarters thereafter until all of the Earned Shares have completed vested, subject to the Participant’s Service on each such vesting date. If the Closing Average Price for the Performance Period is less than the Price Threshold, then all shares subject to this RSU award shall be forfeited.

Notwithstanding the foregoing, no Shares will be earned under this RSU award unless the Company’s revenue, gross profit and EBITDA are each at least equal to a threshold dollar amount established for each financial measure by the Compensation Committee and communicated to the Participant in connection herewith (each a “Milestone” and collectively the “Milestones”).  For the avoidance of doubt, if the Company fails to at least meet a single Milestone, then no Shares will be earned under this RSU award even if the other two Milestones are met or surpassed; the amount of the Earned Shares, if any, will be based on achievement of the Price Threshold as set forth above only if all of the Milestones are met or surpassed.  

For purposes of this RSU award, the definitions below shall apply. If not otherwise defined in this Exhibit A, in the Notice or the Agreement, then such term shall have the meaning ascribed to it in the Plan.

“Closing Average Price” means the average closing price per share of Company Common Stock for the 30 consecutive trading days prior to and including March 30, 2018.

“Nasdaq Index Adjusted Target Price” means the product of the Target Price multiplied by the cumulative appreciation or depreciation of the Nasdaq Composite Index as measured by dividing the index value on March 30, 2018 by the index value on March 31, 2017 (rounded down to the nearest tenth of a percentage point).  For example, if the Nasdaq Composite Index is 5,800 on March 31, 2017 and 6,100 on March 30, 2018, the Nasdaq Index Adjusted Price would be equal to the Target Price multiplied by 105.1% (i.e., 6,100 divided by 5,800).      

“Performance Period” means the period from April 1, 2017 to March 31, 2018.

“Price Threshold” means the greater of the Target Price and the Nasdaq Index Adjusted Target Price.

“Target Price” means a price per share of Company Common Stock established by the Compensation Committee and communicated to the Participant in connection herewith.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

RULE 13A-14(A)/15D-14(A) OF THE SECURITIES EXCHANGE ACT

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

I, Narbeh Derhacobian, certify that:

1. I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of Adesto Technologies Corporation;

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: June 19, 2017	By:	/s/ Narbeh Derhacobian
		Narbeh Derhacobian
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

RULE 13A-14(A)/15D-14(A) OF THE SECURITIES EXCHANGE ACT

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

I, Ron Shelton, certify that:

1. I have reviewed this Amendment No. 1 to the Quarterly Report on Form 10-Q of Adesto Technologies Corporation;

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: June 19, 2017	By:	/s/ Ron Shelton
		Ron Shelton
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Narbeh Derhacobian, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• the Amendment No. 1 to the Quarterly Report of Adesto Technologies Corporation on Form 10-Q for the quarter ended March 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Adesto Technologies Corporation.

Date:    June 19, 2017
	By: /s/ Narbeh Derhacobian
	Narbeh Derhacobian
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Ron Shelton, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• the Amendment No. 1 to the Quarterly Report of Adesto Technologies Corporation on Form 10-Q for the quarter ended March 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Adesto Technologies Corporation.

Date:    June 19, 2017
	By: /s/ Ron Shelton                                                                               Ron Shelton
	Chief Financial Officer
	(Principal Financial Officer)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 09, 2017
Document And Entity Information [Abstract]
Document Type	10-Q/A
Amendment Flag	true
Amendment Description	This Amendment No. 1 to the Adesto Technologies Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which was originally filed with the Securities and Exchange Commission on May 15, 2017 (the “Original Filing”), is being filed to correct an inadvertent error in Exhibit 31.1 and Exhibit 31.2. No other change to the previously filed certifications is intended to be made by the filing of this Form 10-Q/A, and this Form 10-Q/A does not amend, update or change any other items or disclosures contained in the Original Filing. This Amendment No. 1 to the Form 10-Q continues to speak as of the date of the Original Filing and does not reflect any events that occurred at any subsequent date.
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Trading Symbol	IOTS
Entity Registrant Name	ADESTO TECHNOLOGIES CORP
Entity Central Index Key	0001395848
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		15,838,638

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	[1]
Current assets:
Cash and cash equivalents	$ 17,497	$ 19,719
Accounts receivable, net	6,062	6,111
Inventories	4,296	5,182
Prepaid expenses	659	462
Other current assets	102	105
Total current assets	28,616	31,579
Property and equipment, net	6,473	5,962
Intangible assets, net	8,015	8,324
Other non-current assets	375	296
Goodwill	22	22
Total assets	43,501	46,183
Current liabilities:
Accounts payable	5,611	5,167
Accrued compensation and benefits	1,786	1,599
Accrued expenses and other current liabilities	2,200	2,176
Term loan, current	6,476	6,466
Total current liabilities	16,073	15,408
Line of credit	1,898	1,807
Term loan	8,153	9,775
Deferred rent, non-current	2,725	2,826
Deferred tax liability, non-current	2	2
Total liabilities	28,851	29,818
Commitments and contingencies (See Note 7)
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized as of March 31, 2017 and December 31, 2016; no shares issued and outstanding as of March 31, 2017 and December 31, 2016
Common stock, $0.0001 par value, 100,000,000 shares authorized; 15,733,709 and 15,494,308 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively	2	2
Additional paid-in capital	111,831	110,749
Accumulated other comprehensive loss	(252)	(230)
Accumulated deficit	(96,931)	(94,156)
Total stockholders' equity	14,650	16,365
Total liabilities and stockholders' equity	$ 43,501	$ 46,183

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016	[1]
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	100,000,000	100,000,000
Common stock, shares issued	15,733,709	15,494,308
Common stock, shares outstanding	15,733,709	15,494,308

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Revenue, net	$ 11,307	$ 10,176
Cost of revenue	5,753	5,180
Gross profit	5,554	4,996
Operating expenses:
Research and development	3,372	3,937
Sales and marketing	2,600	2,603
General and administrative	2,135	1,708
Gain from settlement with former foundry supplier		(1,962)
Total operating expenses	8,107	6,286
Loss from operations	(2,553)	(1,290)
Other income (expense):
Interest expense, net	(213)	(258)
Other income (expense), net	18	22
Total other income (expense), net	(195)	(236)
Loss before provision for income taxes	(2,748)	(1,526)
Provision for income taxes	27	14
Net loss	$ (2,775)	$ (1,540)
Net loss per share
Basic and diluted	$ (0.18)	$ (0.10)
Weighted average number of shares used in computing net loss per share
Basic and diluted	15,642,286	14,974,718

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Condensed Consolidated Statements of Comprehensive Loss - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (2,775,000)	$ (1,540,000)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	(22,000)	(13,000)
Comprehensive loss, net of tax	$ (2,797,000)	$ (1,553,000)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017		Mar. 31, 2016
Cash flows from operating activities:
Net loss	$ (2,775)		$ (1,540)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	824		809
Depreciation and amortization	304		230
Amortization of intangible assets	309		309
Amortization of debt discount	24		118
Gain from settlement with former foundry supplier			(1,962)
Changes in assets and liabilities:
Accounts receivable	49		1,119
Inventories	886		(1,211)
Prepaid expenses and other current assets	(194)		137
Other non-current assets	(79)
Accounts payable	225		(684)
Accrued compensation and benefits	187		354
Accrued expenses and other current liabilities	24		270
Deferred rent	(101)
Net cash used in operating activities	(317)		(2,051)
Cash flows from investing activities:
Acquisition of property and equipment	(605)		(350)
Net cash used in investing activities	(605)		(350)
Cash flows from financing activities:
Proceeds from issuance of common stock	258
Payments on revolving line of credit	(11,283)
Proceeds from revolving line of credit	11,374
Payments on term loan	(1,636)		(1,500)
Net cash used in financing activities	(1,287)		(1,500)
Effect of exchange rates on cash and equivalents	(13)		(18)
Net decrease in cash and cash equivalents	(2,222)		(3,919)
Cash and cash equivalents - beginning of period	19,719	[1]	23,089
Cash and cash equivalents - end of period	17,497		19,170
Supplemental disclosures of other cash flow information:
Cash paid for interest expense	199		$ 272
Supplemental disclosures of non-cash investing information:
Purchase of property and equipment included in accounts payable	$ 219

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

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Organization and Summary of Significant Accounting Policies.

3 Months Ended

Mar. 31, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies.

Note 1. Organization and Summary of Significant Accounting Policies.

Organization and Nature of Operations.

Adesto Technologies Corporation (together with its subsidiaries; “Adesto”, “we”, “our”, “us” or the “Company”) was incorporated in the state of California in January 2006 and reincorporated in Delaware in October 2015. We are a leading provider of application-specific and ultra-low power non-volatile memory (“NVM”) products. Our corporate headquarters are located in Santa Clara, California.

On September 28, 2012, we purchased certain flash memory product assets from Atmel Corporation and our financial results include the operating results of those assets from the date of acquisition.

Basis of Presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP to complete annual financial statements. In the opinion of our management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, for any other interim period or for any other future year.

The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures required by U.S. GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 23, 2017.

The consolidated financial statements include the results of our operations, and the operations of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

There have been no material changes to our significant accounting policies described in Note 1, Organization and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2016 that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.

Use of Estimates.

The preparation of consolidated financial statements in conformity U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate those estimates, including those related to allowances for doubtful accounts, reserves for sales, warranty accrual, inventory write-downs, valuation of long-lived assets, including property and equipment and identifiable intangible assets and goodwill, loss on purchase commitments, valuation of deferred taxes and contingencies. In addition, we use assumptions when employing the Black-Scholes option-pricing model to calculate the fair value of stock options granted. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results could differ from these estimates.

Revenue Recognition and Accounts Receivable Allowances.

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, transfer of title occurs, and the collectibility of the resulting receivable is reasonably assured. Due to the historical immaterial level of product returns under warranty, we do not record a reserve for estimated returns under warranty at the time of revenue recognition.

Generally, we meet product sale revenue recognition conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, we estimate and record provisions for future returns and other charges against revenue at the time of shipment, consistent with the terms of sale. We sell products to distributors at the price listed in our distributor price book. At the time of sale, we record a sales reserve for ship from stock and debits (“SSDs”), stock rotation rights and any special programs approved by management. We offset the sales reserve against recorded revenues, producing the revenue amount reported in our consolidated statements of operations.

The market price for our products can differ significantly from the book price at which we sold the product to the distributor. When the market price of a particular distributor’s sales opportunity to their customers would result in low or negative margins for the distributor, as compared to our original book price, we negotiate SSDs with the distributor. Management analyzes our SSD history to develop current SSD rates that form the basis of the SSD revenue reserve recorded each period. We obtain the historical SSD rates from the distributor’s records and our internal records.

We typically grant payment terms of between 30 and 60 days to our customers. Our customers generally pay within those terms. Distributors are invoiced for shipments at listed book price. When the distributors pay the invoice, they may claim debits for SSDs previously authorized by us when appropriate. Once claimed, we process the requests against prior authorizations and adjust reserves previously established for that customer.

The revenue we record for sales to our distributors is net of estimated provisions for these programs. Determining net revenue requires significant judgments and estimates on our part. We base our estimates on historical experience rates, the levels of inventory held by our distributors, current trends and other related factors. Because of the inherent nature of estimates, there is a risk actual amounts may differ materially from our estimates. Our consolidated financial condition and operating results depend on our ability to make reliable estimates. We believe that such estimates are reasonable.

We also monitor collectibility of accounts receivable primarily through review of our accounts receivable aging. When facts and circumstances indicate the collection of specific amounts or from specific customers is at risk, we assess the impact on amounts recorded for bad debts and, if necessary, record a charge in the period such determination is made. As of March 31, 2017 and December 31, 2016, there was no allowance for doubtful accounts.

Product Warranty.

Our products are sold with a limited warranty for a period of one year, warranting that the product conforms to specifications and is free from material defects in design, materials and workmanship. To date, we have had insignificant returns of any defective production parts. During the year ended December 31, 2015, we recorded $250,000 for a specific potential warranty claim. As of March 31, 2017 and December 31, 2016, approximately $41,000 has been incurred relating to this potential warranty claim. As of March 31, 2017 and December 31, 2016, the warranty accrual was $209,000, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Foreign Currency Translation.

The functional currency of our foreign subsidiaries is the local currency. In consolidation, we translate assets and liabilities at exchange rates in effect at the consolidated balance sheet date. We translate revenue and expense accounts at the average exchange rates during the period in which the transaction takes place. Net losses from foreign currency translation of assets and liabilities were $22,000 and $13,000 for the three months ended March 31, 2017 and 2016, respectively, and are included in the cumulative translation adjustment component of accumulated other comprehensive loss, net of tax, a component of stockholders’ equity. Net gains arising from transactions denominated in currencies other than the functional currency were $13,000 and $22,000 for the three months ended March 31, 2017 and 2016, respectively and are included in other income (expense), net in the condensed consolidated statements of operations.

Concentration of Risk.

Our products are primarily manufactured, assembled and tested by third-party foundries and other contractors in Asia and we are heavily dependent on a single foundry in Taiwan for the manufacture of wafers and a single contractor in the Philippines for assembly and testing of our products. We do not have long-term agreements with either of these suppliers. A significant disruption in the operations of these parties would adversely impact the production of our products for a substantial period of time, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivables. We place substantially all of our cash and cash equivalents on deposit with a reputable, high credit quality financial institution in the United States of America. We believe that the bank that holds substantially all of our cash and cash equivalents is financially sound and, accordingly, subject to minimal credit risk. Deposits held with the bank may exceed the amount of insurance provided on such deposits.

We generally do not require collateral or other security in support of accounts receivable. We periodically review the need for an allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. As a result of our favorable collection experience and customer concentration, there was no allowance for doubtful accounts as of March 31, 2017 and December 31, 2016.

Customer concentrations as a percentage of revenue were as follows:

	Three Months Ended March 31,
	2017			2016
Customer A		18	%		16	%
Customer B		11	%		11	%
Customer C		11	%		14	%

Customer concentrations as a percentage of gross accounts receivable were as follows:

	March 31,			March 31,
	2017			2016
Customer A		21	%		15	%
Customer B		16	%		12	%
Customer C		11	%		17	%

Recent Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers, creating Accounting Standards Codification (“ASC”) Topic 606. Upon adoption, this topic supersedes the existing guidance under ASC 605 and aims to simplify the number of requirements to follow for revenue recognition and make revenue recognition more comparable across various entities, industries, jurisdictions and capital markets. There are five core principles: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Additional considerations under this update include: accounting for costs to obtain or fulfill a contract with a customer and additional quantitative and qualitative disclosures. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, amending ASC 330. Upon adoption, this topic supersedes the existing guidance under ASC 330 and aims to simplify the subsequent measurement of inventory. Currently, inventory can be measured at the lower of cost or market, which could result in several potential outcomes, as market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. The major amendments would be as follows: 1. Inventory should be measured at the lower of cost or net realizable value. 2. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. 3. The amendment does not apply to inventory measured under LIFO or the retail inventory method. 4. The amendment does apply to all other inventory, which includes inventory measured via FIFO or average cost. We adopted this guidance effective January 1, 2017 and it did not have a significant impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, Topic 842. This ASU requires lease assets and lease liabilities arising from leases, including operating leases, to be recognized on the balance sheet, ASU 2016-02 will become effective for us on January 1, 2019. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation, ASC Topic 718: Improvements to Employee Share-Based Payment Accounting. Under this ASU, several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. We adopted this guidance effective January 1, 2017. We elected to continue to account for forfeitures on an estimated basis. We have elected to present the condensed consolidated statements of cash flows on a prospective transition method and no prior periods have been adjusted.

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, Topic 606. The ASU, among other things: (1) clarifies the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permits an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specifies that the measurement date for noncash consideration is contract inception; (4)  provides a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, ASC Topic 230.  This ASU is a clarification of how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  This update provides guidance on eight identified issues: 1) debt prepayment or extinguishment costs, 2) settlement of zero-coupon debt, 3) contingent consideration for payments, 4) proceeds from settlement of insurance claims, 5) proceeds from settlement of corporate-owned life insurance policies, 6) distributions from equity method investees, 7) beneficial interests in securitization transactions, and 8) separately identifiable cash flows. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.  An entity that elects early adoption must adopt all of the amendments in the same period. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset upon transfer other than inventory, eliminating the current recognition exception. Prior to this ASU, GAAP prohibited the recognition of current and deferred income taxes for the intra-entity asset transfers until the asset was sold to an outside party. For public business entities, the amendments in the ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted and should be applied on a modified retrospective basis though a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in the update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU will become effective for public business entities on December 15, 2017. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). The objective of this ASU is to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this update are effective for a public business entity that is a U.S. Securities and Exchange Commission filer for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendments should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements

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Balance Sheet Components.

3 Months Ended

Mar. 31, 2017

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components.

Note 2. Balance Sheet Components.

Accounts Receivable, Net.

Accounts receivable, net consisted of the following (in thousands):

	March 31,			December 31,
	2017			2016
Accounts receivable	$	8,907		$	8,800
Allowance for SSDs, price protection, rights of return and other activities		(2,845	)		(2,689	)
Total accounts receivable, net	$	6,062		$	6,111

Inventories.

Inventories consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Raw materials	$	302	$	212
Work-in-process		3,014		3,793
Finished goods		980		1,177
Total inventories	$	4,296	$	5,182

For the three months ended March 31, 2017 and 2016, we realized a benefit of $0.4 million and $0.1 million, respectively, from the sales of previously reserved products. Inventory write-downs were primarily associated with products built in excess of customer demand which resulted in excess inventory levels, legacy products for which no demand exists and lower of cost or market write-downs associated with CBRAM products for which costs exceeded market value.  

Property and Equipment, Net.

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

	March 31,			December 31,
	2017			2016
Machinery and equipment	$	7,957		$	7,351
Furniture and fixtures		83			77
Leasehold improvements		4,252			4,252
Computer software		674			668
Construction in progress		1,304			1,098
Property and equipment, at cost		14,270			13,446
Accumulated depreciation and amortization		(7,797	)		(7,484	)
Property and equipment, net	$	6,473		$	5,962

The Company incurs costs for the fabrication of masks used by its foundry partners to manufacture its products. Beginning the first fiscal quarter of 2017, the Company capitalizes mask costs that are expected to be utilized in production manufacturing as the Company’s product development process has become more predictable and thus supports capitalization of the mask. The capitalized mask costs begin depreciating to cost of revenue once the products go into production. Depreciation is straight lined over a three year period which is the expected useful life of the mask. Previously mask sets were expensed to research and development.

Depreciation and amortization expense of property and equipment for the three months ended March 31, 2017 and 2016 was $0.3 million and $0.2 million, respectively.

Accrued Expenses and Other Current Liabilities.

Accrued expenses and other current liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Accrued sales commission payable	$	260	$	366
Accrued manufacturing expenses		168		149
Deferred rent		396		388
Liabilities to certain customers		696		663
Product warranty		209		209
Other accrued liabilities		471		401
Total accrued expenses and other current liabilities	$	2,200	$	2,176

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Fair Value Measurements.

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements.

Note 3. Fair Value Measurements.

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We measure 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 when measuring fair value. 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. Quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3. Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.

Financial assets measured at fair value on a recurring basis were as follows:

	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
		(in thousands)
As of March 31, 2017
Assets:
Money market funds		$	14,781	$	—	$	—	$	14,781
As of December 31, 2016
Assets:
Money market funds		$	16,540	$	—	$	—	$	16,540

As of March 31, 2017 and December 31, 2016, we had no financial liabilities measured at fair value on a recurring basis.

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Intangible Assets, net.

3 Months Ended

Mar. 31, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets, net.

Note 4. Intangible Assets, net.

In 2012, in connection with our purchase of the serial flash memory product line assets from Atmel Corporation, we recorded $16.4 million of intangible assets.

Intangible assets, net were as follows (in thousands):

	March 31, 2017
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	4,282	$	1,927	$	2,355
Customer relationships		9,011		3,378		5,633
Customer backlog		2,779		2,779		—
Non-compete agreement		282		255		27
Total intangible assets subject to amortization	$	16,354	$	8,339	$	8,015

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	4,282	$	1,820	$	2,462
Customer relationships		9,011		3,191		5,820
Customer backlog		2,779		2,779		—
Non-compete agreement		282		240		42
Total intangible assets subject to amortization	$	16,354	$	8,030	$	8,324

We recorded amortization expense related to the acquisition-related intangible assets as follows (in thousands):

	Three Months Ended March 31,
	2017		2016
Operating expense category:
Research and development	$	122	$	121
Sales and marketing		187		188
Total	$	309	$	309

The estimated future amortization expense of acquisition-related intangible assets subject to amortization after March 31, 2017 is as follows (in thousands):

Year Ended December 31,
2017 (remaining 9 months)	$	913
2018		1,179
2019		1,179
2020		1,179
2021		1,179
Thereafter		2,386
Total	$	8,015

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Borrowings.

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Borrowings.

Note 5. Borrowings.

Opus Bank Term Loan.

In April 2015, we entered into a three-year $15.0 million credit agreement, or the term loan facility. The agreement provided for a senior secured term loan facility, in an aggregate principal amount of up to $15.0 million to be used for general corporate purposes including working capital, to repay certain indebtedness and for capital expenditures and other expenses. Interest accrued on outstanding borrowings at a rate equal to (a) the higher of (i) the prime rate (as publicly announced from time to time by the Wall Street Journal) and (ii) 3.25% plus (b) (i) 1.00% if our cash equivalents are greater than 125% of the outstanding principal of our borrowings under the term loan facility, or (ii) 2.00% if our cash and cash equivalents are less than or equal to 125% of such borrowings. Indebtedness we incurred under this agreement was collateralized by substantially all of our assets and the agreement contained financial covenants requiring us to maintain a monthly asset coverage ratio after September 30, 2015 of not less than 1.10 to 1.00, and quarterly adjusted EBITDA (measured on a trailing three-month basis) of $1 through September 30, 2016 and increasing to higher levels thereafter. Under the agreement, the quarterly EBITDA covenant was not applicable if the asset coverage ratio is met at all times during any particular quarter. The agreement contained customary affirmative and negative covenants, including covenants that limited or restricted our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, merge or consolidate and make acquisitions. Upon an occurrence of an event of default, we could have been required to pay interest on all outstanding obligations under the agreement at a rate of 5% above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement.   

Borrowings of $14.0 million under this facility were repaid in full in July 2016.

In connection with the term loan facility, Opus Bank received a warrant to purchase 31,897 shares of Series E convertible preferred stock. Upon the completion of our IPO on October 30, 2015 the preferred stock warrants were converted into 315,282 of our common stock warrants. In addition, we paid financing costs of $0.1 million. The financing costs and the value of the warrant, $1.0 million, were recorded as a debt discount and were being amortized over the life of the agreement. Amortization of debt discount was $0.1 million for the three months ended March 31, 2016 and $0.2 million and $0.4 million for the years ended December 31, 2016 and 2015, respectively. In connection with the repayment of this facility, the remaining unamortized debt discount of $0.4 million was recorded as interest expense in the consolidated statements of operations.    

Western Alliance Bank Term Loan.

On July 7, 2016, the Company entered into a business financing agreement (“Credit Facility”) with Western Alliance Bank. The Credit Facility provides for (i) a term loan of up to $18.0 million and (ii) a revolving credit line advance in the aggregate amount of the lower of (x) $2.0 million and (y) 80% of certain of the Company’s receivables. The term loan made pursuant to the Credit Facility bears interest at a rate per annum equal to the greater of the prime rate or 3.5%, plus 0.75% (4.75% on March 31, 2017), and matures in June 2019.  The line of credit bears interest at a rate per annual equal to the greater of the prime rate or 3.5% plus 0.50% (4.5% on March 31, 2017), and matures in July 2018.The Company made interest-only payments on the term loan from July 2016 through September 2016 and will make interest payments and principal payments in 33 equal monthly installments starting October 2016. Indebtedness we incur under this agreement is collateralized by substantially all assets of the Company and any domestic subsidiaries, subject to certain customary exceptions. The Company paid a facility fee of $150,000 as well as a $25,000 diligence fee upon entry into the Credit Facility and an additional $10,000 is due on July 7, 2017. These fees have been recorded as a debt discount and are being amortized over the life of the agreement. During the three months ended March 31, 2017, amortization of debt discount was $24,000 and the unamortized debt discount was $99,000 as of March 31, 2017.    

The Credit Facility contains customary representations and warranties and affirmative and negative covenants. Among other negative covenants, the Company may not permit the ratio of the balance of unrestricted cash deposited at the financial institution to the total amounts owed with respect to the term loan to be less than 1.15 to 1.00. Upon an occurrence of an event of default, we could be required to pay interest on all outstanding obligations under the agreement at a rate of 5% above the otherwise applicable interest rate, and the lender may accelerate our obligations under the agreement. As of March 31, 2017, we were in compliance with all financial covenants and restrictions.

Outstanding borrowings consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Term loan, current	$	6,476	$	6,466
Term loan, non-current		8,153		9,775
Line of credit		1,898		1,807
Total	$	16,527	$	18,048

Future repayments on outstanding borrowings (excluding unamortized discount of $99,000 as of March 31, 2017) are as follows (in thousands):

Year ending December 31,
2017 (remaining 9 months)	$	4,909
2018		8,444
2019		3,273
	$	16,626

Interest expense incurred under our borrowings was $223,000 and $258,000 for the three months ended March 31, 2017 and 2016, respectively.  

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Segment Information.

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information.

Note 6. Segment Information.

We operate in one business segment, application-specific and feature-rich, ultra-low power NVM products. Our chief decision-maker, the President and Chief Executive Officer, evaluates our performance based on company-wide consolidated results. Revenue is evaluated based on product category and by geographic region.

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

	Three Months Ended March 31,
	2017		2016
United States	$	2,809	$	1,710
Rest of Americas		61		204
Europe		1,868		1,544
Asia Pacific		6,471		6,598
Rest of world		98		120
Total	$	11,307	$	10,176

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

	March 31,		December 31,
	2017		2016
United States	$	6,036	$	5,489
Asia Pacific		436		472
Europe		1		1
Total property and equipment, net	$	6,473	$	5,962

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Commitments and Contingencies.

3 Months Ended

Mar. 31, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies.

Note 7. Commitments and Contingencies.

Operating Leases.

The Company leases office facilities under various non-cancelable operating lease agreements. Certain lease agreements contain free or escalating rent payment provisions. The Company recognizes rent expense under such leases on a straight-line basis over the term of the lease with the difference between the expense and the payments recorded as deferred rent on the consolidated balance sheets. Any reimbursements by the landlord for tenant improvements are considered lease incentives, the balance of which is recorded as a lease incentive obligation within deferred rent on the consolidated balance sheets, and amortized as a reduction of rent expense over the life of the lease. Lease renewal periods are considered on a lease-by-lease basis in determining the lease term.

On November 2, 2015, the Company extended the lease for its headquarters by six months to July 2016 by entering into that certain Amendment to Commercial Sublease (“Amendment”), dated November 2, 2015, between the Company and eGain Corporation. The Amendment provides for a base rent during the extension period of $47,000 per month. Subsequently, we extended the lease to August 31, 2016.

Additionally, on November 2, 2015, the Company entered into a lease with Peterson Ridge LLC pursuant to which the Company leased a new headquarters facility, consisting of an aggregate of approximately 34,000 square feet of space in Santa Clara, California. The initial term of the lease commenced on November 2, 2015 and is scheduled to end on July 31, 2023 and may be extended, at the Company’s option, for an additional five-year period following the initial lease term.

Pursuant to the lease, monthly base rental payments due under the lease are expected to be approximately $93,000 per month between August 1, 2016 and February 27, 2017, with annual increases of approximately 3% thereafter. The Company must also pay for certain other operating costs under the lease, including operating expenses, taxes, assessments, insurance, utilities, securities and property management fees. Peterson Ridge LLC is obligated to reimburse the Company for up to approximately $2.5 million of the Company’s out-of-pocket costs associated with any tenant improvements, as defined in the lease. The Company was reimbursed for this amount during the year ended December 31, 2016. As of March 31, 2017, the Company recorded a lease incentive obligation of $2.3 million in deferred rent on the condensed consolidated balance sheet.

Rent expense under operating leases was $0.2 million and $0.5 million for three months ended March 31, 2017 and 2016, respectively.

	Total		Remaining 2017		2018		2019		2020		2021		Thereafter
	(in thousands)
Operating leases	$	7,923	$	879	$	1,177	$	1,213	$	1,249	$	1,287	$	2,118

Purchase Commitments.

As of March 31, 2017, we had purchase commitments with our third-party foundries of $3.0 million due within one year, $0.8 million for a licensing and development agreement, and $7.9 million in conjunction with an agreement with TowerJazz Panasonic Semiconductor Company.

Litigation.

Although we are not currently subject to any litigation, and no litigation is currently threatened against us, we 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. We accrue amounts that we believe are adequate to address any liabilities related to legal proceedings and other loss contingencies that we believe will result in a probable loss that is reasonably estimable.

Indemnification.

During the normal course of business, we may make certain indemnities, commitments and guarantees which may include intellectual property indemnities to certain of our customers in connection with the sales of our products and indemnities for liabilities associated with the infringement of other parties’ technology based upon our products. Our 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, we indemnify our officers, directors and certain key employees while they are serving in good faith in such capacities.

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

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Common Stock, Common Stock Warrants and Stock Option Plan.

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Common Stock, Common Stock Warrants and Stock Option Plan.

Note 8. Common Stock, Common Stock Warrants and Stock Option Plan.

Common Stock.

We are authorized to issue 100,000,000 shares of common stock with $0.0001 par value per share as of March 31, 2017 and December 31, 2016.  Each holder of common stock is entitled to one vote per share. As of March 31, 2017, no dividends have been declared by the Board of Directors, however, the holders of common stock are also entitled to receive dividends, when and if declared by our Board of Directors.

Common Stock Reserved for Future Issuance.

As of March 31, 2017 and December 31, 2016, we had reserved shares of common stock for future issuances as follows:

	March 31,		December 31,
	2017		2016
Warrants to purchase common stock		404,136		411,514
Stock option plan:
Options outstanding		1,414,526		991,895
Restricted stock units outstanding		410,664		490,954
Shares available for future grants/RSU grants		1,364,466		1,275,685
Shares available for ESPP		335,381		231,355
Total		3,929,173		3,401,403

Common Stock Warrants.

The following common stock warrants were outstanding as of March 31, 2017 and December 31, 2016 and were the result of a conversion of preferred stock warrants upon the completion of our initial public offering (“IPO”) on October 30, 2015.

Total amount of securities issuable under the outstanding warrants		Exercise Price		Issuance Date	Expiration Date
	74,141	$	31.35	2012-2013	2019
	329,995	$	2.38	2014-2015	2022-2024
	404,136

Common stock warrants are exercisable at the option of the holder any time after the date of issuance into shares of our common stock. The aggregate amount of shares of common stock that would be issued is determined by dividing the exercisable price by the conversion price applicable on the date of conversion multiplied by the number of warrants exercised.

Employee Benefit Plans.

2007 Equity Incentive Plan.

In 2007, our Board of Directors and shareholders approved the 2007 Equity Incentive Plan (the “2007 Plan”) under which 272,727 shares of common stock were reserved and available for the issuance of stock options and restricted stock to eligible participants. The 2007 Plan was subsequently amended to increase the number of shares of common stock reserved for issuance under the 2007 Plan to 787,878 and during the year ended December 31, 2015, the number of shares reserved for issuance under the 2007 Plan was increased to 2,651,515. Options and restricted stock awards were granted at a price per share not less than the 85% of the fair value at the date of grant or award, respectively. Restricted stock awarded to persons controlling more than 10% of our stock were granted at a price per share not less than the 100% of the fair value at the date of the award. Options that were granted to new employees generally vest over a four-year period with 25% vesting at the end of one year and the remaining to vest monthly thereafter, while options that were granted to existing employees generally vest over a four-year period. Options granted generally are exercisable up to 10 years from the date of grant. As of October 26, 2015, no shares were available for grant under the 2007 Plan and all outstanding options would continue to be governed and remain outstanding in accordance with their existing terms under the 2007 Plan. In addition, any shares subject to outstanding awards under the 2007 Plan that are issuable upon the exercise of options that expire or become unexercisable for any reason without having been exercised in full will be available for future grant and issuance under the 2015 Plan (as defined below).

2015 Equity Incentive Plan.

In September 2015, our Board of Directors adopted, and in October 2015 our stockholders approved, our 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan became effective on the date immediately prior to the date of our IPO. As a result, 1,813,272 shares of common stock previously reserved but unissued under the 2007 Plan on the effective date of the 2015 Equity Incentive Plan became reserved for issuance under our 2015 Equity Incentive Plan, and we ceased granting awards under our 2007 Plan. The number of shares reserved for issuance under our 2015 Equity Incentive Plan will increase automatically on the first day of January of each of 2016 through 2025 by the number of shares equal to 4% of the total outstanding shares of our common stock as of the immediately preceding December 31. However, our Board of Directors may reduce the amount of the increase in any particular year.

Our 2015 Equity Incentive Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units (“RSU’s”), performance awards and stock bonuses. No person will be eligible to receive more than 2,000,000 shares in any calendar year under our 2015 Equity Incentive Plan other than a new employee of ours, who will be eligible to receive no more than 4,000,000 shares under the plan in the calendar year in which the employee commences employment. The aggregate number of shares of our common stock that may be subject to awards granted to any one non-employee director pursuant to the 2015 Equity Incentive Plan in any calendar year shall not exceed 300,000. Our 2015 Equity Incentive Plan provides that no more than 25,000,000 shares will be issued as incentive stock options.

2015 Employee Stock Purchase Plan

In September 2015, our Board of Directors adopted, and in October 2015 our stockholders approved, our 2015 Employee Stock Purchase Plan (“ESPP”). The 2015 Employee Stock Purchase Plan became effective on the date of our IPO. We reserved 150,000 shares of our common stock for issuance under our 2015 Employee Stock Purchase Plan. The number of shares reserved for issuance under our 2015 Employee Stock Purchase Plan will increase automatically on the first day of January following the first offering date by the number of shares equal to 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 (rounded to the nearest whole share). However, our Board of Directors may reduce the amount of the increase in any particular year. The aggregate number of shares issued over the term of our 2015 Employee Stock Purchase Plan will not exceed 2,250,000 shares of our common stock.

Under our 2015 Employee Stock Purchase Plan, eligible employees will be able to acquire shares of our common stock by accumulating funds through payroll deductions. Eligible employees will be able to select a rate of payroll deduction up to 15% of their base cash compensation. The purchase price for shares of our common stock purchased under our 2015 Employee Stock Purchase Plan will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the applicable offering period. Except for the first offering period, each offering period will run for no more than six months, with purchases occurring every six months. The first offering period began upon the effective date of our IPO and was originally set to end on June 30, 2016. On May 25, 2016, the Board of Directors extended the initial offering period to July 31, 2016. Subsequent purchase periods will be 6 months in duration beginning on August 1, 2016. On July 29, 2016, we issued 68,392 shares of common stock in conjunction with the end date of the initial purchase window. On January 31, 2017, we issued 50,917 shares of common stock in conjunction with the end date of the most recent purchase window.

No participant will have the right to purchase shares of our common stock in an amount that has a fair market value greater than $25,000, determined as of the first day of the applicable purchase period, for each calendar year in which that right is outstanding. In addition, no participant will be permitted to purchase more than 2,500 shares during any one purchase period or a lesser amount as determined by our compensation committee.

Our 2015 Employee Stock Purchase Plan will continue until the earlier to occur of its termination by our Board of Directors, the issuance of all shares reserved for issuance under it or the tenth anniversary of its effective date.

A summary of stock option and restricted stock units activity under the 2007 Plan and the 2015 Equity Incentive Plan is as follows:

	Stock Options
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(aggregate intrinsic value in thousands)
Outstanding as of December 31, 2015		796,356		$	2.49		6.5	$	4,157
Granted		230,200			3.38
Exercised		(13,112	)		1.80
Canceled		(21,549	)		3.73
Outstanding as of December 31, 2016		991,895			2.68		6.3	$	161
Granted		508,630			3.56
Exercised		(79,750	)		1.30
Canceled		(6,249	)		3.68
Outstanding as of March 31, 2017		1,414,526		$	3.07		7.7	$	1,844
Options vested and expected to vest as of March 31, 2017		1,361,842		$	3.05		7.6	$	1,810
Options vested and exercisable as of March 31, 2017		696,428		$	2.45		5.8	$	1,339

	Restricted stock units
	Shares			Weighted- Average Grant Date      Fair Value		Weighted- Average Remaining Contractual Term (Years)		Aggregrate Intrinsic Value
	(aggregate intrinsic value in thousands)
Outstanding as of December 31, 2015		874,508		$	5.95		1.8	$	6,742
Granted		69,414			4.82	—		—
Released		(438,086	)		5.95	—		—
Forfeited/expired		(14,882	)		5.70	—		—
Outstanding as of December 31, 2016		490,954		$	5.80		0.5	$	908
Granted		40,000			3.60
Released		(108,900	)		5.95
Forfeited/expired		(11,390	)		5.99
Outstanding as of March 31, 2017		410,664		$	5.54		0.4	$	1,704

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Stock-based Compensation.

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation.

Note 9. Stock-based Compensation.

We record stock-based compensation based on fair value as of the grant date using the Black-Scholes option-pricing model. We recognize such costs as compensation expense on a straight-line basis over the employee’s requisite service period, which is generally four years. Our valuation assumptions are as follows:

Fair value of common stock. Prior to our IPO in October 2015, we estimated the fair value of our common stock using various valuation methodologies, including valuation analyses performed by third-party valuation firms. After the IPO, we used the publicly quoted price as the fair value of our common stock.

Risk-free interest rate. We base the risk-free interest rate used in the Black-Scholes option-pricing model on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent expected term of the options for each option group.

Expected term. The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term assumption is based on the simplified method in which the expected term is equal to the average of the stock-based award’s weighted-average vesting period and its contractual term. We expect to continue using the simplified method until sufficient information about historical behavior is available.

Volatility. We determine volatility based on the historical stock volatilities of a group of publicly listed guideline companies over a period equal to the expected terms of the options, as we do not have sufficient trading history to determine the volatility of our common stock.

Dividend yield. We have never declared or paid any cash dividend and do not currently plan to pay a cash dividend in the foreseeable future. Consequently, we used an expected dividend yield of zero.

The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to determine fair value of stock options:

	Three Months Ended March 31,
	2017			2016
Volatility		86	%		-
Expected dividend yield		-			-
Risk-free rate		2.20	%		-
Expected term (in years)		6			-

The weighted-average grant date fair value of the options granted under the 2015 Equity Incentive Plan as calculated using the Black-Scholes option-pricing model was $2.59 per share for the three months ended March 31, 2017.

The following table presents the effects of stock-based compensation for stock options, RSU’s, and ESPP (in thousands):

	Three Months Ended March 31,
	2017		2016
Cost of revenue	$	21	$	18
Research and development		255		255
Sales and marketing		167		169
General and administrative		381		367
Total	$	824	$	809

Stock-based compensation expense capitalized to inventories was not material during the three months ended March 31, 2017 and 2016.

We did not realize any income tax benefit from stock option exercises in any of the periods presented due to recurring losses and valuation allowances.

As of March 31, 2017, the total unrecognized compensation cost related to stock options, net of estimated forfeitures, was approximately $1.7 million, and this amount is expected to be recognized over a weighted-average period of approximately 3.2 years.

As of March 31, 2017, the total unrecognized compensation cost related to RSU’s and ESPP was $1.7 million and $51,000, respectively, and these amounts are expected to be recognized over 0.8 years and 0.3 years, respectively.

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Income Taxes.

3 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes.

Note 10. Income Taxes.

We recorded an income tax provision of $27,000 and $14,000 for the three months ended March 31, 2017 and 2016, respectively. The income tax provision is comprised of estimates of current taxes due in domestic and foreign jurisdictions. The income tax provision reflects tax expense associated with state income tax, foreign taxes, uncertain tax positions and tax expense related to the recording of a deferred tax liability that results from the amortization for income tax purposes of acquisition-related goodwill. The decrease in the tax provision between 2017 and 2016is primarily due to a decrease in foreign taxes and deferred tax expense associated with our deferred tax liability.

As of March 31, 2017, our deferred tax assets are fully offset by a valuation allowance except in those jurisdictions where it is determined that a valuation allowance is not required. Accounting for income taxes provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based on the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against our net U.S. deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period that such determination is made.

We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have provided adequate reserves for our income tax uncertainties in all open tax years. We do not anticipate a material change in the total amount or composition of its unrecognized tax benefits within 12 months of March 31, 2017.

We file federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. Due to our net operating loss and credit carryforwards, our income tax returns generally remain subject to examination by federal, state and international authorities.

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Net Loss Per Share.

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Net Loss Per Share.

Note 11. Net Loss Per Share.

The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended March 31,
	2017		2016
Shares not used in computing net loss per share as considered anti-dilutive:
Preferred stock		—		—
Stock options		1,414,526		793,416
Preferred stock warrants		—		—
Common stock warrants		404,136		411,514
Restricted stock units		410,664		902,990
		2,229,326		2,107,920

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Related Party Transactions.

3 Months Ended

Mar. 31, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Note 12. Related Party Transactions.

The Company purchases certain wafers from Altis Semiconductor S.N.C., which was acquired by X-FAB Silicon Foundries in 2016, who is a shareholder of the Company. We made no payments during the three months ended March 31, 2017 and $314,000 during the year ended December 31, 2016. As of March 31, 2017 and December 31, 2016, invoices totaling $195,000 and $195,000, respectively, were included within accounts payable on the condensed consolidated balance sheets.

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Subsequent Events.

3 Months Ended

Mar. 31, 2017

Subsequent Events [Abstract]

Subsequent Events.

Note 13. Subsequent Events.

None

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Organization and Summary of Significant Accounting Policies. (Policies)

3 Months Ended

Mar. 31, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Nature of Operations.

Organization and Nature of Operations.

Adesto Technologies Corporation (together with its subsidiaries; “Adesto”, “we”, “our”, “us” or the “Company”) was incorporated in the state of California in January 2006 and reincorporated in Delaware in October 2015. We are a leading provider of application-specific and ultra-low power non-volatile memory (“NVM”) products. Our corporate headquarters are located in Santa Clara, California.

On September 28, 2012, we purchased certain flash memory product assets from Atmel Corporation and our financial results include the operating results of those assets from the date of acquisition.

Basis of Presentation.

Basis of Presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP to complete annual financial statements. In the opinion of our management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, for any other interim period or for any other future year.

The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures required by U.S. GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on March 23, 2017.

The consolidated financial statements include the results of our operations, and the operations of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

There have been no material changes to our significant accounting policies described in Note 1, Organization and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2016 that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.

Use of Estimates.

Use of Estimates.

The preparation of consolidated financial statements in conformity U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate those estimates, including those related to allowances for doubtful accounts, reserves for sales, warranty accrual, inventory write-downs, valuation of long-lived assets, including property and equipment and identifiable intangible assets and goodwill, loss on purchase commitments, valuation of deferred taxes and contingencies. In addition, we use assumptions when employing the Black-Scholes option-pricing model to calculate the fair value of stock options granted. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results could differ from these estimates.

Revenue Recognition and Accounts Receivable Allowances.

Revenue Recognition and Accounts Receivable Allowances.

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the selling price is fixed or determinable, transfer of title occurs, and the collectibility of the resulting receivable is reasonably assured. Due to the historical immaterial level of product returns under warranty, we do not record a reserve for estimated returns under warranty at the time of revenue recognition.

Generally, we meet product sale revenue recognition conditions upon shipment because, in most cases, title and risk of loss passes to the customer at that time. In addition, we estimate and record provisions for future returns and other charges against revenue at the time of shipment, consistent with the terms of sale. We sell products to distributors at the price listed in our distributor price book. At the time of sale, we record a sales reserve for ship from stock and debits (“SSDs”), stock rotation rights and any special programs approved by management. We offset the sales reserve against recorded revenues, producing the revenue amount reported in our consolidated statements of operations.

The market price for our products can differ significantly from the book price at which we sold the product to the distributor. When the market price of a particular distributor’s sales opportunity to their customers would result in low or negative margins for the distributor, as compared to our original book price, we negotiate SSDs with the distributor. Management analyzes our SSD history to develop current SSD rates that form the basis of the SSD revenue reserve recorded each period. We obtain the historical SSD rates from the distributor’s records and our internal records.

We typically grant payment terms of between 30 and 60 days to our customers. Our customers generally pay within those terms. Distributors are invoiced for shipments at listed book price. When the distributors pay the invoice, they may claim debits for SSDs previously authorized by us when appropriate. Once claimed, we process the requests against prior authorizations and adjust reserves previously established for that customer.

The revenue we record for sales to our distributors is net of estimated provisions for these programs. Determining net revenue requires significant judgments and estimates on our part. We base our estimates on historical experience rates, the levels of inventory held by our distributors, current trends and other related factors. Because of the inherent nature of estimates, there is a risk actual amounts may differ materially from our estimates. Our consolidated financial condition and operating results depend on our ability to make reliable estimates. We believe that such estimates are reasonable.

We also monitor collectibility of accounts receivable primarily through review of our accounts receivable aging. When facts and circumstances indicate the collection of specific amounts or from specific customers is at risk, we assess the impact on amounts recorded for bad debts and, if necessary, record a charge in the period such determination is made. As of March 31, 2017 and December 31, 2016, there was no allowance for doubtful accounts.

Product Warranty.

Product Warranty.

Our products are sold with a limited warranty for a period of one year, warranting that the product conforms to specifications and is free from material defects in design, materials and workmanship. To date, we have had insignificant returns of any defective production parts. During the year ended December 31, 2015, we recorded $250,000 for a specific potential warranty claim. As of March 31, 2017 and December 31, 2016, approximately $41,000 has been incurred relating to this potential warranty claim. As of March 31, 2017 and December 31, 2016, the warranty accrual was $209,000, and is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Foreign Currency Translation.

Foreign Currency Translation.

The functional currency of our foreign subsidiaries is the local currency. In consolidation, we translate assets and liabilities at exchange rates in effect at the consolidated balance sheet date. We translate revenue and expense accounts at the average exchange rates during the period in which the transaction takes place. Net losses from foreign currency translation of assets and liabilities were $22,000 and $13,000 for the three months ended March 31, 2017 and 2016, respectively, and are included in the cumulative translation adjustment component of accumulated other comprehensive loss, net of tax, a component of stockholders’ equity. Net gains arising from transactions denominated in currencies other than the functional currency were $13,000 and $22,000 for the three months ended March 31, 2017 and 2016, respectively and are included in other income (expense), net in the condensed consolidated statements of operations.

Concentration of Risk.

Concentration of Risk.

Our products are primarily manufactured, assembled and tested by third-party foundries and other contractors in Asia and we are heavily dependent on a single foundry in Taiwan for the manufacture of wafers and a single contractor in the Philippines for assembly and testing of our products. We do not have long-term agreements with either of these suppliers. A significant disruption in the operations of these parties would adversely impact the production of our products for a substantial period of time, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivables. We place substantially all of our cash and cash equivalents on deposit with a reputable, high credit quality financial institution in the United States of America. We believe that the bank that holds substantially all of our cash and cash equivalents is financially sound and, accordingly, subject to minimal credit risk. Deposits held with the bank may exceed the amount of insurance provided on such deposits.

We generally do not require collateral or other security in support of accounts receivable. We periodically review the need for an allowance for doubtful accounts by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. As a result of our favorable collection experience and customer concentration, there was no allowance for doubtful accounts as of March 31, 2017 and December 31, 2016.

Customer concentrations as a percentage of revenue were as follows:

	Three Months Ended March 31,
	2017			2016
Customer A		18	%		16	%
Customer B		11	%		11	%
Customer C		11	%		14	%

Customer concentrations as a percentage of gross accounts receivable were as follows:

	March 31,			March 31,
	2017			2016
Customer A		21	%		15	%
Customer B		16	%		12	%
Customer C		11	%		17	%

Recent Accounting Pronouncements.

Recent Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers, creating Accounting Standards Codification (“ASC”) Topic 606. Upon adoption, this topic supersedes the existing guidance under ASC 605 and aims to simplify the number of requirements to follow for revenue recognition and make revenue recognition more comparable across various entities, industries, jurisdictions and capital markets. There are five core principles: 1. Identify the contract(s) with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Additional considerations under this update include: accounting for costs to obtain or fulfill a contract with a customer and additional quantitative and qualitative disclosures. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, amending ASC 330. Upon adoption, this topic supersedes the existing guidance under ASC 330 and aims to simplify the subsequent measurement of inventory. Currently, inventory can be measured at the lower of cost or market, which could result in several potential outcomes, as market could be replacement cost, net realizable value or net realizable value less an approximately normal profit margin. The major amendments would be as follows: 1. Inventory should be measured at the lower of cost or net realizable value. 2. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. 3. The amendment does not apply to inventory measured under LIFO or the retail inventory method. 4. The amendment does apply to all other inventory, which includes inventory measured via FIFO or average cost. We adopted this guidance effective January 1, 2017 and it did not have a significant impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, Topic 842. This ASU requires lease assets and lease liabilities arising from leases, including operating leases, to be recognized on the balance sheet, ASU 2016-02 will become effective for us on January 1, 2019. We are currently evaluating the impact of this guidance on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation, ASC Topic 718: Improvements to Employee Share-Based Payment Accounting. Under this ASU, several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. We adopted this guidance effective January 1, 2017. We elected to continue to account for forfeitures on an estimated basis. We have elected to present the condensed consolidated statements of cash flows on a prospective transition method and no prior periods have been adjusted.

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, Topic 606. The ASU, among other things: (1) clarifies the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permits an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specifies that the measurement date for noncash consideration is contract inception; (4)  provides a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarifies that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, ASC Topic 230.  This ASU is a clarification of how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  This update provides guidance on eight identified issues: 1) debt prepayment or extinguishment costs, 2) settlement of zero-coupon debt, 3) contingent consideration for payments, 4) proceeds from settlement of insurance claims, 5) proceeds from settlement of corporate-owned life insurance policies, 6) distributions from equity method investees, 7) beneficial interests in securitization transactions, and 8) separately identifiable cash flows. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.  An entity that elects early adoption must adopt all of the amendments in the same period. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset upon transfer other than inventory, eliminating the current recognition exception. Prior to this ASU, GAAP prohibited the recognition of current and deferred income taxes for the intra-entity asset transfers until the asset was sold to an outside party. For public business entities, the amendments in the ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted and should be applied on a modified retrospective basis though a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in the update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU will become effective for public business entities on December 15, 2017. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). The objective of this ASU is to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this update are effective for a public business entity that is a U.S. Securities and Exchange Commission filer for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendments should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt this guidance effective for periods beginning after December 15, 2017 (including interim reporting periods within those periods), or the first quarter of 2018, and are currently evaluating the impact on our consolidated financial statements

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Organization and Summary of Significant Accounting Policies. (Tables)

3 Months Ended

Mar. 31, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Schedule of Customer Concentration as Percentage of Total Revenue and Gross Receivable

Customer concentrations as a percentage of revenue were as follows:

	Three Months Ended March 31,
	2017			2016
Customer A		18	%		16	%
Customer B		11	%		11	%
Customer C		11	%		14	%

Customer concentrations as a percentage of gross accounts receivable were as follows:

	March 31,			March 31,
	2017			2016
Customer A		21	%		15	%
Customer B		16	%		12	%
Customer C		11	%		17	%

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Balance Sheet Components. (Tables)

3 Months Ended

Mar. 31, 2017

Balance Sheet Related Disclosures [Abstract]

Components of Accounts Receivable, Net

Accounts receivable, net consisted of the following (in thousands):

	March 31,			December 31,
	2017			2016
Accounts receivable	$	8,907		$	8,800
Allowance for SSDs, price protection, rights of return and other activities		(2,845	)		(2,689	)
Total accounts receivable, net	$	6,062		$	6,111

Components of Inventories

Inventories consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Raw materials	$	302	$	212
Work-in-process		3,014		3,793
Finished goods		980		1,177
Total inventories	$	4,296	$	5,182

Components of Property and Equipment, Net

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

	March 31,			December 31,
	2017			2016
Machinery and equipment	$	7,957		$	7,351
Furniture and fixtures		83			77
Leasehold improvements		4,252			4,252
Computer software		674			668
Construction in progress		1,304			1,098
Property and equipment, at cost		14,270			13,446
Accumulated depreciation and amortization		(7,797	)		(7,484	)
Property and equipment, net	$	6,473		$	5,962

Components of Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities.

Accrued expenses and other current liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Accrued sales commission payable	$	260	$	366
Accrued manufacturing expenses		168		149
Deferred rent		396		388
Liabilities to certain customers		696		663
Product warranty		209		209
Other accrued liabilities		471		401
Total accrued expenses and other current liabilities	$	2,200	$	2,176

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Fair Value Measurements. (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets Measured on Recurring Basis

Financial assets measured at fair value on a recurring basis were as follows:

	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
		(in thousands)
As of March 31, 2017
Assets:
Money market funds		$	14,781	$	—	$	—	$	14,781
As of December 31, 2016
Assets:
Money market funds		$	16,540	$	—	$	—	$	16,540

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Intangible Assets, net. (Tables)

3 Months Ended

Mar. 31, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets, Net

Intangible assets, net were as follows (in thousands):

	March 31, 2017
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	4,282	$	1,927	$	2,355
Customer relationships		9,011		3,378		5,633
Customer backlog		2,779		2,779		—
Non-compete agreement		282		255		27
Total intangible assets subject to amortization	$	16,354	$	8,339	$	8,015

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	4,282	$	1,820	$	2,462
Customer relationships		9,011		3,191		5,820
Customer backlog		2,779		2,779		—
Non-compete agreement		282		240		42
Total intangible assets subject to amortization	$	16,354	$	8,030	$	8,324

Schedule of Amortization Expense of Intangible Assets

We recorded amortization expense related to the acquisition-related intangible assets as follows (in thousands):

	Three Months Ended March 31,
	2017		2016
Operating expense category:
Research and development	$	122	$	121
Sales and marketing		187		188
Total	$	309	$	309

Schedule of Finite-Lived Intangible Assets, Annual Expected Amortization Expense

The estimated future amortization expense of acquisition-related intangible assets subject to amortization after March 31, 2017 is as follows (in thousands):

Year Ended December 31,
2017 (remaining 9 months)	$	913
2018		1,179
2019		1,179
2020		1,179
2021		1,179
Thereafter		2,386
Total	$	8,015

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Borrowings. (Tables)

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of Outstanding Borrowings

Outstanding borrowings consisted of the following (in thousands):

	March 31,		December 31,
	2017		2016
Term loan, current	$	6,476	$	6,466
Term loan, non-current		8,153		9,775
Line of credit		1,898		1,807
Total	$	16,527	$	18,048

Schedule of Future Repayments Of Outstanding Borrowing

Future repayments on outstanding borrowings (excluding unamortized discount of $99,000 as of March 31, 2017) are as follows (in thousands):

Year ending December 31,
2017 (remaining 9 months)	$	4,909
2018		8,444
2019		3,273
	$	16,626

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Segment Information. (Tables)

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Schedule of Product Revenue from Customers Based on Geographic Region

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

	Three Months Ended March 31,
	2017		2016
United States	$	2,809	$	1,710
Rest of Americas		61		204
Europe		1,868		1,544
Asia Pacific		6,471		6,598
Rest of world		98		120
Total	$	11,307	$	10,176

Schedule of Long-Lived Assets by Geographic Region

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

	March 31,		December 31,
	2017		2016
United States	$	6,036	$	5,489
Asia Pacific		436		472
Europe		1		1
Total property and equipment, net	$	6,473	$	5,962

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Commitments and Contingencies. (Tables)

3 Months Ended

Mar. 31, 2017

Commitments And Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments Under Operating Leases

	Total		Remaining 2017		2018		2019		2020		2021		Thereafter
	(in thousands)
Operating leases	$	7,923	$	879	$	1,177	$	1,213	$	1,249	$	1,287	$	2,118

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Common Stock, Common Stock Warrants and Stock Option Plan. (Tables)

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Schedule of Stock Reserved for Future Issuance

As of March 31, 2017 and December 31, 2016, we had reserved shares of common stock for future issuances as follows:

	March 31,		December 31,
	2017		2016
Warrants to purchase common stock		404,136		411,514
Stock option plan:
Options outstanding		1,414,526		991,895
Restricted stock units outstanding		410,664		490,954
Shares available for future grants/RSU grants		1,364,466		1,275,685
Shares available for ESPP		335,381		231,355
Total		3,929,173		3,401,403

Summary of Outstanding Common Stock Warrants

The following common stock warrants were outstanding as of March 31, 2017 and December 31, 2016 and were the result of a conversion of preferred stock warrants upon the completion of our initial public offering (“IPO”) on October 30, 2015.

Total amount of securities issuable under the outstanding warrants		Exercise Price		Issuance Date	Expiration Date
	74,141	$	31.35	2012-2013	2019
	329,995	$	2.38	2014-2015	2022-2024
	404,136

Summary of Stock Option Activity

A summary of stock option and restricted stock units activity under the 2007 Plan and the 2015 Equity Incentive Plan is as follows:

	Stock Options
	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(aggregate intrinsic value in thousands)
Outstanding as of December 31, 2015		796,356		$	2.49		6.5	$	4,157
Granted		230,200			3.38
Exercised		(13,112	)		1.80
Canceled		(21,549	)		3.73
Outstanding as of December 31, 2016		991,895			2.68		6.3	$	161
Granted		508,630			3.56
Exercised		(79,750	)		1.30
Canceled		(6,249	)		3.68
Outstanding as of March 31, 2017		1,414,526		$	3.07		7.7	$	1,844
Options vested and expected to vest as of March 31, 2017		1,361,842		$	3.05		7.6	$	1,810
Options vested and exercisable as of March 31, 2017		696,428		$	2.45		5.8	$	1,339

Summary of Restricted Stock Units Activity

A summary of stock option and restricted stock units activity under the 2007 Plan and the 2015 Equity Incentive Plan is as follows:

	Restricted stock units
	Shares			Weighted- Average Grant Date      Fair Value		Weighted- Average Remaining Contractual Term (Years)		Aggregrate Intrinsic Value
	(aggregate intrinsic value in thousands)
Outstanding as of December 31, 2015		874,508		$	5.95		1.8	$	6,742
Granted		69,414			4.82	—		—
Released		(438,086	)		5.95	—		—
Forfeited/expired		(14,882	)		5.70	—		—
Outstanding as of December 31, 2016		490,954		$	5.80		0.5	$	908
Granted		40,000			3.60
Released		(108,900	)		5.95
Forfeited/expired		(11,390	)		5.99
Outstanding as of March 31, 2017		410,664		$	5.54		0.4	$	1,704

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Stock-based Compensation. (Tables)

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Weighted-Average Assumptions Used in Black-Scholes Option-Pricing Model to Determine Fair Value of Stock Options

The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to determine fair value of stock options:

	Three Months Ended March 31,
	2017			2016
Volatility		86	%		-
Expected dividend yield		-			-
Risk-free rate		2.20	%		-
Expected term (in years)		6			-

Schedule of Effects of Stock-Based Compensation for Stock Options, RSU’s and ESPP

The following table presents the effects of stock-based compensation for stock options, RSU’s, and ESPP (in thousands):

	Three Months Ended March 31,
	2017		2016
Cost of revenue	$	21	$	18
Research and development		255		255
Sales and marketing		167		169
General and administrative		381		367
Total	$	824	$	809

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Net Loss Per Share. (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	Three Months Ended March 31,
	2017		2016
Shares not used in computing net loss per share as considered anti-dilutive:
Preferred stock		—		—
Stock options		1,414,526		793,416
Preferred stock warrants		—		—
Common stock warrants		404,136		411,514
Restricted stock units		410,664		902,990
		2,229,326		2,107,920

XML

Organization and Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2016
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Date of Acquisition	Sep. 28, 2012
Allowance for doubtful accounts	$ 0			$ 0
Product warranty claim recorded			$ 250,000
Product warranty claim incurred	$ 41,000			41,000
Product warranty period	Our products are sold with a limited warranty for a period of one year, warranting that the product conforms to specifications and is free from material defects in design, materials and workmanship.
Product warranty accrual	$ 209,000			$ 209,000
Foreign currency translation adjustment	(22,000)	$ (13,000)
Net gains arising from transactions denominated in currencies other than the functional currency	$ 13,000	$ 22,000

XML

Organization and Summary of Significant Accounting Policies - Schedule of Customer Concentration as Percentage of Total Revenue and Gross Receivable (Detail) - Customer Concentration Risk [Member]	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Sales Revenue, Net [Member] | Customer A [Member]
Concentration Risk [Line Items]
Concentration risk percentage	18.00%	16.00%
Sales Revenue, Net [Member] | Customer B [Member]
Concentration Risk [Line Items]
Concentration risk percentage	11.00%	11.00%
Sales Revenue, Net [Member] | Customer C [Member]
Concentration Risk [Line Items]
Concentration risk percentage	11.00%	14.00%
Accounts Receivable [Member] | Customer A [Member]
Concentration Risk [Line Items]
Concentration risk percentage	21.00%	15.00%
Accounts Receivable [Member] | Customer B [Member]
Concentration Risk [Line Items]
Concentration risk percentage	16.00%	12.00%
Accounts Receivable [Member] | Customer C [Member]
Concentration Risk [Line Items]
Concentration risk percentage	11.00%	17.00%

XML

Balance Sheet Components - Components of Accounts Receivable, Net (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Receivables [Abstract]
Accounts receivable	$ 8,907	$ 8,800
Allowance for SSDs, price protection, rights of return and other activities	(2,845)	(2,689)
Total accounts receivable, net	$ 6,062	$ 6,111	[1]

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Balance Sheet Components - Components of Inventories (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials	$ 302	$ 212
Work-in-process	3,014	3,793
Finished goods	980	1,177
Total inventories	$ 4,296	$ 5,182	[1]

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Balance Sheet Components - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Property Plant And Equipment [Line Items]
Realized benefit from sales of previously reserved products	$ 0.4	$ 0.1
Depreciation and amortization	$ 0.3	$ 0.2
Masks [Member]
Property Plant And Equipment [Line Items]
Estimated useful life	3 years

XML

Balance Sheet Components - Components of Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Property Plant And Equipment [Line Items]
Property and equipment, at cost	$ 14,270	$ 13,446
Accumulated depreciation and amortization	(7,797)	(7,484)
Property and equipment, net	6,473	5,962	[1]
Machinery and Equipment [Member]
Property Plant And Equipment [Line Items]
Property and equipment, at cost	7,957	7,351
Furniture and Fixtures [Member]
Property Plant And Equipment [Line Items]
Property and equipment, at cost	83	77
Leasehold Improvements [Member]
Property Plant And Equipment [Line Items]
Property and equipment, at cost	4,252	4,252
Computer Software [Member]
Property Plant And Equipment [Line Items]
Property and equipment, at cost	674	668
Construction in Progress [Member]
Property Plant And Equipment [Line Items]
Property and equipment, at cost	$ 1,304	$ 1,098

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Balance Sheet Components - Components of Accrued Expenses and Other Current Liabilities (Detail) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Payables And Accruals [Abstract]
Accrued sales commission payable	$ 260,000	$ 366,000
Accrued manufacturing expenses	168,000	149,000
Deferred rent	396,000	388,000
Liabilities to certain customers	696,000	663,000
Product warranty	209,000	209,000
Other accrued liabilities	471,000	401,000
Total accrued expenses and other current liabilities	$ 2,200,000	$ 2,176,000	[1]

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Fair Value Measurements - Financial Assets Measured at Fair Value (Detail) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Money market funds	$ 14,781	$ 16,540
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Money market funds	$ 14,781	$ 16,540

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Fair Value Disclosures [Abstract]
Financial liabilities, fair value at recurring basis	$ 0	$ 0

XML

Intangible Assets, net - Additional Information (Detail) $ in Millions	Sep. 30, 2012 USD ($)
Finite Lived Intangible Assets Net [Abstract]
Finite-lived intangible assets	$ 16.4

XML

Intangible Assets, net - Schedule of Intangible Assets, Net (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 16,354	$ 16,354
Accumulated amortization	8,339	8,030
Net carrying amount	8,015	8,324	[1]
Developed Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	4,282	4,282
Accumulated amortization	1,927	1,820
Net carrying amount	2,355	2,462
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	9,011	9,011
Accumulated amortization	3,378	3,191
Net carrying amount	5,633	5,820
Customer Backlog [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	2,779	2,779
Accumulated amortization	2,779	2,779
Non-compete Agreement [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	282	282
Accumulated amortization	255	240
Net carrying amount	$ 27	$ 42

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Intangible Assets, net - Schedule of Amortization Expense of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Amortization expense, acquisition related intangible assets	$ 309	$ 309
Research and Development [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense, acquisition related intangible assets	122	121
Sales and Marketing [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense, acquisition related intangible assets	$ 187	$ 188

XML

Intangible Assets, net - Schedule of Finite-Lived Intangible Assets, Annual Expected Amortization Expense (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	[1]
Finite Lived Intangible Assets Future Amortization Expense [Abstract]
2017 (remaining 9 months)	$ 913
2018	1,179
2019	1,179
2020	1,179
2021	1,179
Thereafter	2,386
Net carrying amount	$ 8,015	$ 8,324

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Borrowings - Additional Information (Detail) - USD ($)		1 Months Ended		3 Months Ended		12 Months Ended
	Jul. 07, 2016	Jul. 31, 2016	Apr. 30, 2015	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Oct. 30, 2015
Debt Instrument [Line Items]
Amortization of debt discount				$ 24,000	$ 118,000
Interest expense				$ 223,000	258,000
Opus Bank Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, agreement period				3 years
Line of credit facility, maximum borrowing capacity				$ 15,000,000
Debt instrument, description of variable rate basis				(a) the higher of (i) the prime rate (as publicly announced from time to time by the Wall Street Journal) and (ii) 3.25% plus (b) (i) 1.00% if our cash equivalents are greater than 125% of the outstanding principal of our borrowings under the term loan facility, or (ii) 2.00% if our cash and cash equivalents are less than or equal to 125% of such borrowings.
Debt instrument, variable rate			3.25%
Debt service coverage ratio, after September 30, 2015			110.00%
Quarterly adjusted EBITDA			$ 1
Repayment amount of borrowing capacity		$ 14,000,000
Issuance of warrants to purchase preferred stock shares			31,897
Payment for financing costs			$ 100,000
Unamortized debt discount			$ 1,000,000	$ 400,000
Amortization of debt discount					$ 100,000	$ 200,000	$ 400,000
Opus Bank Term Loan [Member] | IPO [Member]
Debt Instrument [Line Items]
Issuance of warrants to purchase preferred stock shares								315,282
Opus Bank Term Loan [Member] | If our cash and cash equivalents are greater than 125% of the outstanding principal of our borrowings under the new term loan facility [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate			1.00%
Opus Bank Term Loan [Member] | If our cash and cash equivalents are less than or equal to 125% of such borrowings [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate			2.00%
Opus Bank Term Loan [Member] | Upon an occurrence of an event of default [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate			5.00%
Western Alliance Bank Term Loan [Member]
Debt Instrument [Line Items]
Unamortized debt discount				99,000
Amortization of debt discount				$ 24,000
Debt Instrument, fee amount	$ 150,000
Debt Instrument additional fee liability	10,000
Debt instrument diligence fee	25,000
Western Alliance Bank Term Loan [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 18,000,000
Debt instrument, description of variable rate basis				The term loan made pursuant to the Credit Facility bears interest at a rate per annum equal to the greater of the prime rate or 3.5%, plus 0.75% (4.75% on March 31, 2017), and matures in June 2019
Debt instrument, prime rate, minimum	3.50%			4.75%
Borrowings mature date	Jun. 30, 2019
Debt instrument, description of payment terms				The Company made interest-only payments on the term loan from July 2016 through September 2016 and will make interest payments and principal payments in 33 equal monthly installments starting October 2016.
Additional interest rate above the applicable rate in the event of default	5.00%
Western Alliance Bank Term Loan [Member] | Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Unrestricted cash deposit to indebtedness ratio	115.00%
Western Alliance Bank Term Loan [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 2,000,000
Debt instrument, description of variable rate basis				The line of credit bears interest at a rate per annual equal to the greater of the prime rate or 3.5% plus 0.50% (4.5% on March 31, 2017), and matures in July 2018.
Debt instrument, prime rate, minimum	3.50%			4.50%
Borrowings mature date	Jul. 31, 2018
Western Alliance Bank Term Loan [Member] | Revolving Credit Facility [Member] | Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity as a percentage of eligible accounts receivable	80.00%
Western Alliance Bank Term Loan [Member] | Prime Rate [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	0.75%
Western Alliance Bank Term Loan [Member] | Prime Rate [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	0.50%

XML

Borrowings - Schedule of Outstanding Borrowings (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Term loan, current	$ 6,476	$ 6,466	[1]
Term loan	8,153	9,775	[1]
Line of credit	1,898	1,807	[1]
Total	$ 16,527	$ 18,048

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Borrowings - Schedule of Future Repayments of Outstanding Borrowing (Detail) $ in Thousands	Mar. 31, 2017 USD ($)
Long Term Debt By Maturity [Abstract]
2017 (remaining 9 months)	$ 4,909
2018	8,444
2019	3,273
Borrowing outstanding prior to accounting for debt discount	$ 16,626

XML

Segment Information - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017 Segment
Segment Reporting [Abstract]
Number of business segment	1

XML

Segment Information - Schedule of Revenue by Geographic Region (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 11,307	$ 10,176
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	2,809	1,710
Rest of Americas [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	61	204
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	1,868	1,544
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	6,471	6,598
Rest of World [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 98	$ 120

XML

Segment Information - Long-Lived Assets by Geographic Region (Detail) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Total property and equipment, net	$ 6,473	$ 5,962	[1]
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total property and equipment, net	6,036	5,489
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total property and equipment, net	436	472
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total property and equipment, net	$ 1	$ 1

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Commitments and Contingencies - Additional Information (Detail)		3 Months Ended
	Nov. 02, 2015 USD ($) ft²	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Commitment And Contingencies [Line Items]
Rent expense under operating leases		$ 200,000	$ 500,000
Supply Commitment [Member]
Commitment And Contingencies [Line Items]
Purchase commitments		3,000,000
Purchase commitment for licensing and development agreement		$ 800,000
Purchase commitments due period		1 year
TowerJazz Panasonic Semiconductor Company [Member] | Supply Commitment [Member]
Commitment And Contingencies [Line Items]
Purchase commitments		$ 7,900,000
Lease Agreements [Member]
Commitment And Contingencies [Line Items]
Base monthly rent during the extension period	$ 93,000
Annual increase of monthly rent after February 27, 2017	3.00%
Lease incentive obligation		$ 2,300,000
eGain Corporation [Member] | Lease Agreements [Member]
Commitment And Contingencies [Line Items]
Lease extension term	6 months
Base monthly rent during the extension period	$ 47,000
Lease Expiration Date	Aug. 31, 2016
Peterson Ridge LLC [Member] | Lease Agreements [Member]
Commitment And Contingencies [Line Items]
Lease Expiration Date	Jul. 31, 2023
Additional area leased | ft²	34,000
Optional Lease Extension Term	5 years
Peterson Ridge LLC [Member] | Lease Agreements [Member] | Maximum [Member]
Commitment And Contingencies [Line Items]
Reimbursement for out-of-pocket costs associated with any tenant improvements	$ 2,500,000

XML

Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Operating Leases (Detail) $ in Thousands	Mar. 31, 2017 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Total	$ 7,923
Remaining 2017	879
2018	1,177
2019	1,213
2020	1,249
2021	1,287
Thereafter	$ 2,118

XML

Common Stock, Common Stock Warrants and Stock Option Plan - Additional Information (Detail) - USD ($)					1 Months Ended	3 Months Ended
	Jan. 31, 2017	Jul. 29, 2016	May 25, 2016	Dec. 31, 2007	Sep. 30, 2015	Mar. 31, 2017	Dec. 31, 2016		Oct. 26, 2015
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Common stock, shares authorized						100,000,000	100,000,000	[1]
Common stock, no par value
Common stock, par value						$ 0.0001	$ 0.0001	[1]
Voting right common stock holder						Each holder of common stock is entitled to one vote per share.
Common stock, dividends declared						$ 0
Shares of common stock reserved and available for the issuance						3,929,173	3,401,403
Maximum fair market value, that would permit employee to purchase common stock under plan						$ 25,000
2007 Plan [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Shares of common stock reserved and available for the issuance of stock options and restricted stock to eligible participants				272,727
Shares of common stock reserved and available for the issuance of stock options and restricted stock to eligible participants				787,878		2,651,515
Vesting period						4 years
Option exercisable period after grant date						10 years
Number of shares available for grant									0
2007 Plan [Member] | Minimum [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Share based compensation arrangement by share based payment grants as percentage of fair value						85.00%
2007 Plan [Member] | Persons controlling more than 10% of Company's stock [Member] | Restricted Stock [Member] | Minimum [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Share based compensation arrangement by share based payment grants as percentage of fair value						100.00%
2007 Plan [Member] | New Employee [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Vesting period						4 years
Percentage of performance based awards allowed to vest within year						25.00%
2015 Equity Incentive Plan [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Shares of common stock reserved and available for the issuance					1,813,272
Percentage threshold of outstanding shares increased annually under the plan					4.00%
Stock option grants description						The number of shares reserved for issuance under our 2015 Equity Incentive Plan will increase automatically on the first day of January of each of 2016 through 2025 by the number of shares equal to 4% of the total outstanding shares of our common stock as of the immediately preceding December 31.
Common stock shares authorized for issuance						25,000,000
2015 Equity Incentive Plan [Member] | New Employee [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Common stock shares authorized for issuance						4,000,000
2015 Equity Incentive Plan [Member] | Existing Employee [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Common stock shares authorized for issuance						2,000,000
2015 Equity Incentive Plan [Member] | Non Employee Director [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Common stock shares authorized for issuance						300,000
2015 Employee Stock Purchase Plan [Member]
Common Stock Options Restricted Stock Warrants And Changes In Capitalization [Line Items]
Shares of common stock reserved and available for the issuance					150,000
Percentage threshold of outstanding shares increased annually under the plan					1.00%
Stock option grants description						The number of shares reserved for issuance under our 2015 Employee Stock Purchase Plan will increase automatically on the first day of January following the first offering date by the number of shares equal to 1% of the total outstanding shares of our common stock as of the immediately preceding December 31 (rounded to the nearest whole share).
Common stock shares authorized for issuance					2,250,000
Options to purchase shares of common stock, discount percentage						15.00%
Percentage of fair market value of common stock						85.00%
Extended initial offering date			Jul. 31, 2016
Shares issued in conjunction with the end date of initial purchase	50,917	68,392

[1] The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements as of that date.

XML

Common Stock, Common Stock Warrants and Stock Option Plan - Schedule of Stock Reserved for Future Issuance (Detail) - shares	Mar. 31, 2017	Dec. 31, 2016
Common Stock And Warrant Liability [Line Items]
Common stock, capital shares reserved for future issuance	3,929,173	3,401,403
Warrants To Purchase Common Stock [Member]
Common Stock And Warrant Liability [Line Items]
Common stock, capital shares reserved for future issuance	404,136	411,514
Stock Options Outstanding [Member]
Common Stock And Warrant Liability [Line Items]
Common stock, capital shares reserved for future issuance	1,414,526	991,895
Restricted Stock Units Outstanding [Member]
Common Stock And Warrant Liability [Line Items]
Common stock, capital shares reserved for future issuance	410,664	490,954
Shares Available For Future Grants/RSU Grants [Member]
Common Stock And Warrant Liability [Line Items]
Common stock, capital shares reserved for future issuance	1,364,466	1,275,685
ESPP [Member]
Common Stock And Warrant Liability [Line Items]
Common stock, capital shares reserved for future issuance	335,381	231,355

XML

Common Stock, Common Stock Warrants and Stock Option Plan - Outstanding Common Stock Warrants (Detail) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Common Stock Warrants One [Member]
Class of Warrant or Right [Line Items]
Total amount of securities issuable under the outstanding warrants	74,141	74,141
Exercise Price	$ 31.35	$ 31.35
Expiration Date	2019	2019
Common Stock Warrants One [Member] | Minimum [Member]
Class of Warrant or Right [Line Items]
Issuance Date	2012	2012
Common Stock Warrants One [Member] | Maximum [Member]
Class of Warrant or Right [Line Items]
Issuance Date	2013	2013
Common Stock Warrants Two [Member]
Class of Warrant or Right [Line Items]
Total amount of securities issuable under the outstanding warrants	329,995	329,995
Exercise Price	$ 2.38	$ 2.38
Common Stock Warrants Two [Member] | Minimum [Member]
Class of Warrant or Right [Line Items]
Issuance Date	2014	2014
Expiration Date	2022	2022
Common Stock Warrants Two [Member] | Maximum [Member]
Class of Warrant or Right [Line Items]
Issuance Date	2015	2015
Expiration Date	2024	2024
Common Stock Warrants [Member]
Class of Warrant or Right [Line Items]
Total amount of securities issuable under the outstanding warrants	404,136	404,136

XML

Common Stock, Common Stock Warrants and Stock Option Activity Under 2007 Plan And 2015 Equity Incentive Plan (Detail) - Stock Options [Member] - Two Thousand Seven And Two Thousand Fifteen Equity Incentive Plan [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares
Outstanding, beginning of period	991,895	796,356
Granted	508,630	230,200
Exercised	(79,750)	(13,112)
Canceled	(6,249)	(21,549)
Outstanding, end of period	1,414,526	991,895	796,356
Options vested and expected to vest, end of period	1,361,842
Options vested and exercisable, end of period	696,428
Weighted Average Exercise Price
Outstanding, beginning of period	$ 2.68	$ 2.49
Granted	3.56	3.38
Exercised	1.30	1.80
Canceled	3.68	3.73
Outstanding, end of period	3.07	$ 2.68	$ 2.49
Options vested and expected to vest, end of period	3.05
Options vested and exercisable, end of period	$ 2.45
Weighted Average Remaining Contractual Term (Years)
Outstanding, Weighted Average Remaining Contractual Term (Years)	7 years 8 months 12 days	6 years 3 months 18 days	6 years 6 months
Options vested and expected to vest	7 years 7 months 6 days
Options vested and exercisable	5 years 9 months 18 days
Aggregate Intrinsic Value
Outstanding, Aggregate Intrinsic Value	$ 1,844	$ 161	$ 4,157
Options vested and expected to vest as of March 31, 2017	1,810
Options vested and exercisable as of March 31, 2017	$ 1,339

XML

Common Stock, Common Stock Warrants and Stock Option Plan - Summary of Restricted Stock Units Activity (Detail) - Restricted Stock Units (RSUs) [Member] - Two Thousand Seven And Two Thousand Fifteen Equity Incentive Plan [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares
Outstanding, beginning of period	490,954	874,508
Granted	40,000	69,414
Released	(108,900)	(438,086)
Forfeited/expired	(11,390)	(14,882)
Outstanding, end of period	410,664	490,954	874,508
Weighted Average Grant Date Fair Value
Outstanding, beginning of period	$ 5.80	$ 5.95
Granted	3.60	4.82
Released	5.95	5.95
Forfeited/expired	5.99	5.70
Outstanding, end of period	$ 5.54	$ 5.80	$ 5.95
Weighted Average Remaining Contractual Term (Years)
Outstanding, Weighted Average Remaining Contractual Term (Years)	4 months 24 days	6 months	1 year 9 months 18 days
Aggregate Intrinsic Value
Outstanding, Aggregate Intrinsic Value	$ 1,704	$ 908	$ 6,742

XML

Stock-based Compensation - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2017 USD ($) $ / shares
Share Based Compensation Expense [Line Items]
Employee's requisite service period	4 years
Expected dividend yield	$ 0
Unrecognized compensation cost	$ 1,700,000
Expected to be recognized over a weighted-average period	3 years 2 months 12 days
Restricted Stock Units (RSUs) [Member]
Share Based Compensation Expense [Line Items]
Unrecognized compensation cost	$ 1,700,000
Expected to be recognized over a weighted-average period	9 months 18 days
ESPP [Member]
Share Based Compensation Expense [Line Items]
Unrecognized compensation cost	$ 51,000
Expected to be recognized over a weighted-average period	3 months 18 days
2015 Equity Incentive Plan [Member]
Share Based Compensation Expense [Line Items]
Weighted-average grant date fair value of options granted | $ / shares	$ 2.59

XML

Stock-based Compensation - Summary of Weighted-Average Assumptions Used in Black-Scholes Option-Pricing Model to Determine Fair Value of Stock Options (Detail)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Volatility	86.00%
Expected dividend yield	0.00%	0.00%
Risk-free rate	2.20%
Expected term (in years)	6 years

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Stock-based Compensation - Schedule of Effects of Stock-Based Compensation for Stock Options, RSU's and ESPP (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share Based Compensation Expense [Line Items]
Stock-based compensation expense	$ 824	$ 809
Stock Options, RSU’s And ESPP [Member] | Cost of Revenue [Member]
Share Based Compensation Expense [Line Items]
Stock-based compensation expense	21	18
Stock Options, RSU’s And ESPP [Member] | Research and Development [Member]
Share Based Compensation Expense [Line Items]
Stock-based compensation expense	255	255
Stock Options, RSU’s And ESPP [Member] | Sales and Marketing [Member]
Share Based Compensation Expense [Line Items]
Stock-based compensation expense	167	169
Stock Options, RSU’s And ESPP [Member] | General and Administrative [Member]
Share Based Compensation Expense [Line Items]
Stock-based compensation expense	$ 381	$ 367

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 27	$ 14

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Net Loss Per Share - Schedule of Outstanding Common Stock Equivalents Excluded From Computation of Diluted Net Loss Per Share (Detail) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,229,326	2,107,920
Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,414,526	793,416
Common Stock Warrants [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	404,136	411,514
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	410,664	902,990

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Related Party Transactions - Additional Information (Detail) - Altis Semiconductor S.N.C [Member] - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Related Party Transaction [Line Items]
Payments to related party	$ 0	$ 314,000
Accounts payable to related party	$ 195,000	$ 195,000