Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies Description of Business Violin Memory, Inc. (the “Company”) was incorporated in the State of Delaware on March 9, 2005 under the name Violin Technologies, Inc. The Company re-incorporated as Violin Memory, Inc. in the State of Delaware on April 11, 2007. The Company is a developer and supplier of persistent memory-based storage systems that are designed to bring storage performance in line with high-speed applications, servers and networks. These all-flash arrays are specifically designed at each level of the system architecture, starting with memory and optimized through the array, to leverage the inherent capabilities of flash memory. In February 2015, the Company introduced the Flash Storage Platform, a vertically integrated design of software, firmware and hardware that delivers performance, resiliency and availability at the same cost as legacy enterprise-class primary storage. The Flash Storage Platform runs the Company’s Concerto OS 7, a single operating system with integrated data protection, in-line block de-duplication and compression, stretch metro cluster and LUN mirroring as well as its suite of other Enterprise Data Services. The Company sells its products through its direct sales force, resellers and other channel partners. The Company operates as a single operating segment. The Company has incurred significant operating losses and negative cash flows from operations since its inception and believes that it will continue to incur losses and negative cash flows from operations in fiscal year 2017. As of April 30, 2016, the Company had an accumulated deficit of approximately $582.8 million and cash, cash equivalents and short-term investments of $44.2 million. During the year ended January 31, 2016, the Company incurred a net loss of $99.1 million and negative cash flows from operations of $78.6 million. During the three months ended April 30, 2016, the Company incurred a net loss of $22.1 million and negative cash flows from operations of $18.7 million. Management’s plans include reducing expenditures, expanding the Company’s customer base and increasing revenues, improving gross margins and seeking additional debt or equity financing. In March 2016, the Company announced a restructuring plan focused on aligning its expense structure with revenue expectations. In connection with the restructuring plan, the Company reduced headcount. The Company anticipates these actions to result in a significant reduction of its quarterly operating expenses and cash burn rate. There is no assurance that the Company will be successful in generating sufficient revenues, increasing gross margins or reducing operating costs. In addition, further capital may not be available on terms acceptable to the Company, if at all. Failure to generate sufficient revenues, increase gross margins, control or reduce operating costs or to raise sufficient funds may require the Company to modify, delay or abandon some of its plans and investments, which could have a material adverse effect on the Company’s business, operating results and financial condition and the Company’s ability to achieve its intended business objectives. Basis of Presentation and Consolidation The accompanying condensed consolidated balance sheets and the condensed consolidated statements of operations, comprehensive loss and cash flows are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, in the opinion of management, the financial statements include all the normal and recurring adjustments that are necessary to fairly present the results of the interim periods presented. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2016, filed with the SEC on April 6, 2016. The results of operations for the three months ended April 30, 2016 are not necessarily indicative of the results to be expected for any subsequent interim period, the year ending January 31, 2017 or any other future period. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its significant estimates, including those related to estimated selling prices for elements sold in multiple-element revenue arrangements, product warranty, determination of the fair value of stock options, carrying values of inventories, liabilities for unrecognized tax benefits and deferred income tax asset valuation allowances. The Company also uses estimates in determining the useful lives of property and equipment and intangible assets as well as in its provision for doubtful accounts. Actual results could differ from those estimates. Summary of Significant Accounting Policies The Company’s significant accounting policies have been described in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2016 filed with the SEC on April 6, 2016. There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on the Company’s condensed consolidated financial statements and related notes. Recent Accounting Pronouncements There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company’s consolidated financial statements, from those disclosed in the Company’s 2016 Annual Report on Form 10-K, except for the following: In March 2016, the Financial Accounting Standards Board (the “FASB”) issued an accounting standard to simplify employee shared-based payment accounting. The standard update is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years, and early adoption is permitted in any interim or annual period. If early adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Early adoption requires the adoption of all the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. The Company is currently evaluating the impact of adopting this update on its consolidated financial statements. In February 2016, the FASB issued an accounting standard to amend lease accounting requirements and requires entities to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The new standard will require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard update is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, and early adoption is permitted. The standard is to be applied using a modified retrospective approach and includes a number of optional practical expedients that entities may elect to apply. The Company is currently evaluating the impact of adopting this update on its consolidated financial statements and expects that most of its operating lease commitments will be subject to the standard update and recognized as operating lease liabilities and right-of-use assets upon the adoption. In January 2016, the FASB issued an accounting standard to enhance the reporting model for financial instruments by amending certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard update is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. Early application to financial statements of fiscal years or interim periods that have not yet been issued is permitted by presenting separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the Company elected to measure the liability at fair value in accordance with the fair value option for financial instruments, otherwise, early adoption is not permitted. The standard is to be applied with a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements. |