What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-10 · 102 added, 81 removed, 487 unchanged (27% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

2020 December 31,

35 unchanged sentences

(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

12 unchanged sentences

Loss before income taxes ( 8,165 ) ( 2,374 ) ( 19,833 ) ( 4,050 )

Provision for income taxes 107 231 283 639

Provision (benefit) for income taxes ( 26 ) ( 68 ) 257 571

Net loss $ ( 8,139 ) $ ( 2,306 ) $ ( 20,090 ) $ ( 4,621 )

3 unchanged sentences

Amortization of acquired intangible assets 298 298 894 894

Restructuring 166 — 166 —

Stock-based compensation 117 89 345 267

8 unchanged sentences

(In thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

1 unchanged sentence

Other comprehensive loss:

Unrealized gain on available-for-sale securities 7 3 1 7

Unrealized gain (loss) on available-for-sale securities ( 2 ) ( 1 ) ( 1 ) 6

Total comprehensive loss $ ( 8,141 ) $ ( 2,307 ) $ ( 20,091 ) $ ( 4,615 )

3 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net loss $ ( 20,090 ) $ ( 4,621 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation 5,915 4,852

14 unchanged sentences

Income taxes payable ( 41 ) 93

Net cash provided by (used in) operating activities 166 ( 2,256 )

Net cash used in operating activities ( 3,231 ) ( 2,952 )

Cash flows from investing activities:

Proceeds from sales and maturities of short-term marketable securities 7,748 8,150

Purchases of short-term marketable securities ( 1,500 ) ( 6,045 )

Purchases of property and equipment ( 2,376 ) ( 2,232 )

Proceeds from sale of patents — 4,250

Purchases of short-term marketable securities ( 1,500 ) ( 8,679 )

Purchases of licensed technology ( 152 ) ( 521 )

Proceeds from sale of patents — 4,250

Payment associated with sale of patents — ( 345 )

4 unchanged sentences

Proceeds from Paycheck Protection Program loan 796 —

Proceeds from issuance of common stock under employee equity incentive plans 337 315

Payments on asset financings ( 675 ) ( 589 )

Proceeds from issuance of common stock under employee equity incentive plans 600 570

Net cash provided by (used in) financing activities 8,316 ( 19 )

30 unchanged sentences

Balance as of June 30, 2020 40,220,491 $ 442,998 $ 13 $ ( 400,556 ) $ 42,455

"At the market" equity offering 570,989 1,167 1,167

Stock issued under employee equity incentive plans 745,878 263 — — 263

Stock-based compensation expense — 1,850 — — 1,850

Unrealized loss on available for sale securities — — ( 2 ) — ( 2 )

Net loss — — — ( 8,139 ) ( 8,139 )

Balance as of September 30, 2020 41,537,358 $ 446,278 $ 11 $ ( 408,695 ) $ 37,594

Balance as of December 31, 2018 36,937,458 $ 428,903 $ 15 $ ( 379,528 ) $ 49,390

9 unchanged sentences

Balance as of June 30, 2019 37,833,791 $ 432,572 $ 22 $ ( 381,843 ) $ 50,751

Stock issued under employee equity incentive plans 487,820 255 — — 255

Stock-based compensation expense — 1,498 — — 1,498

Unrealized loss on available for sale securities — — ( 1 ) — ( 1 )

Net loss — — — ( 2,306 ) ( 2,306 )

Balance as of September 30, 2019 38,321,611 $ 434,325 $ 21 $ ( 384,149 ) $ 50,197

See accompanying notes to condensed consolidated financial statements.

7 unchanged sentences

Our primary target markets include Mobile (smartphone, gaming and tablet), Home Entertainment (TV, personal video recorder ("PVR"), over-the-air ("OTA") and projector), Content (creation, remastering and delivery), and Business & Education (projector).

As of June 30, 2020, we had an intellectual property portfolio of 345 patents related to the visual display of digital image data.

As of September 30, 2020, we had an intellectual property portfolio of 344 patents related to the visual display of digital image data.

We focus our research and development efforts on developing video algorithms that improve quality, and architectures that reduce system power, cost, bandwidth and increase overall system performance and device functionality.

3 unchanged sentences

Condensed Consolidated Financial Statements

The financial information included herein for the three and six month periods ended June 30, 2020 and 2019 is prepared in accordance with U.S.

The financial information included herein for the three and nine month periods ended September 30, 2020 and 2019 is prepared in accordance with U.S.

generally accepted accounting principles ("U.S.

GAAP") and is unaudited.

Such information reflects all adjustments, consisting of only normal recurring adjustments, except as discussed below, that are, in the opinion of management, necessary for a fair presentation of the Company's condensed consolidated financial statements for these interim periods.

Such information reflects all adjustments, consisting of only normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the Company's condensed consolidated financial statements for these interim periods.

The financial information as of December 31, 2019 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2019, included in Item 8 of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2020, and should be read in conjunction with such consolidated financial statements.

The results of operations for the three month and six month periods ended June 30, 2020 and 2019 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2020.

The results of operations for the three month and nine month periods ended September 30, 2020 and 2019 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2020.

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No.

In December 2019, the Financial Accounting Starndards Board ("FASB") issued Accounting Standards Update No.

2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12").

21 unchanged sentences

Accounts receivable consists of the following:

September 30,

2020 December 31,

3 unchanged sentences

The following is the change in our allowance for doubtful accounts:

Six Months Ended

Nine Months Ended

September 30,

Balance at beginning of period $ 23 $ 21

Additions charged 11 24

Additions charged (reductions credited) 4 36

Balance at end of period $ 27 $ 57

1 unchanged sentence

Inventories consist of the following:

September 30,

2020 December 31,

3 unchanged sentences

Property and Equipment, Net

Property and equipment consists of the following:

Property and equipment, net consists of the following:

September 30,

2020 December 31,

5 unchanged sentences

Acquired intangible assets resulting from this transaction were assigned to Pixelworks, Inc., and consist of the following:

September 30,

2020 December 31,

6 unchanged sentences

Backlog was fully amortized as of September 30, 2018 and tradename was fully amortized as of March 31, 2019.

Amortization expense for intangible assets was $ 374 and $ 748 for the three and six months ended June 30, 2020, respectively, $ 298 and $ 596 were included in cost of revenue for the three and six months ended June 30, 2020, respectively, and $ 76 and $ 152 were included in selling, general and administrative for the three and six months ended June 30, 2020, respectively, in the condensed consolidated statements of operations.

As of June 30, 2020, future estimated amortization expense is as follows:

Six months ending December 31:

Amortization expense for intangible assets was $ 374 and $ 1,122 for the three and nine months ended September 30, 2020, respectively, $ 298 and $ 894 were included in cost of revenue for the three and nine months ended September 30, 2020, respectively, and $ 76 and $ 228 were included in selling, general and administrative for the three and nine months ended September 30, 2020, respectively, in the condensed consolidated statements of operations.

As of September 30, 2020, future estimated amortization expense is as follows:

Three months ending December 31:

Years ending December 31:

1 unchanged sentence

Conditions that would trigger an impairment assessment include, but are not limited to, past, current, or expected cash flow or operating losses associated with the asset.

There were no such triggering events requiring an impairment assessment of other intangible assets during the six months ended June 30, 2020.

There were no such triggering events requiring an impairment assessment of other intangible assets during the nine months ended September 30, 2020.

Goodwill resulted from the Acquisition, whereby we recorded goodwill of $ 18,407 .

2 unchanged sentences

Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in our business climate or a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continued losses or adverse changes in legal factors, regulation or business environment.

There were no such triggering events requiring a goodwill impairment assessment during the six months ended June 30, 2020.

There were no such triggering events requiring a goodwill impairment assessment during the nine months ended September 30, 2020.

We perform our annual impairment assessment for goodwill on November 30 of each year.

1 unchanged sentence

Accrued liabilities and current portion of long-term liabilities consist of the following:

September 30,

2020 December 31,

1 unchanged sentence

Operating lease liabilities, current 1,939 1,545

Accrued costs related to restructuring 1,132 66

Current portion of accrued liabilities for asset financings 880 483

2 unchanged sentences

Deferred revenue 10 146

Accrued costs related to restructuring — 66

Other 1,643 1,952

4 unchanged sentences

The change in deferred revenue is as follows:

Six Months Ended

Nine Months Ended

September 30,

Deferred revenue:

11 unchanged sentences

The occurrence of an event of default could result in the acceleration of our obligations under the Revolving Loan Agreement, as amended, and an increase to the applicable interest rate, and would permit the Bank to exercise remedies with respect to its security interest.

As of June 30, 2020, we were in compliance with all of the terms of the Revolving Loan Agreement, as amended.

As of June 30, 2020, short-term borrowings outstanding under the Revolving Line consisted of $ 4,329 .

The weighted-average interest rate on short-term borrowings outstanding as of June 30, 2020 was 3.5 %.

As of September 30, 2020, we were in compliance with all of the terms of the Revolving Loan Agreement, as amended.

As of September 30, 2020, short-term borrowings outstanding under the Revolving Line consisted of $ 3,954 .

The weighted-average interest rate on short-term borrowings outstanding as of September 30, 2020 was 3.5 %.

As of December 31, 2019, we had no outstanding borrowings under the Revolving Line.

8 unchanged sentences

The Loan is subject to forgiveness to the extent proceeds are used for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms and limitations of the PPP.

The Company intends to use the Loan amount for Qualifying Expenses and we intend to apply for forgiveness, however, no assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part.

The Company has used the Loan amount for Qualifying Expenses and we have applied for forgiveness, however, no assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part.

We have elected to account for the Loan as Debt under ASC 470.

6 unchanged sentences

We are not obligated to sell any shares under the Sales Agreement.

As of June 30, 2020 and during the three months ended June 30, 2020, we sold an aggregate of 803,528 shares of our common stock under this at the market offering, resulting in aggregate net proceeds to us of approximately $ 2,474 , and gross proceeds of approximately $ 2,812 , and paid Cowen commissions and fees of approximately $ 144 , and other expenses of $ 194 .

As of June 30, 2020, the remaining availability under the at the market offering is $ 22,188 .

During the nine months ended September 30, 2020, we sold an aggregate of 1,374,517 shares of our common stock under this at the market offering, resulting in aggregate net proceeds to us of approximately $ 3,641 , and gross proceeds of approximately $ 4,071 , and paid Cowen commissions and fees of approximately $ 172 , and other expenses of $ 258 .

As of September 30, 2020, the remaining availability under the at the market offering is $ 20,929 .

MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS

Marketable Securities

As of June 30, 2020 and December 31, 2019, all of our marketable securities are classified as available-for-sale, have contractual maturities of one year or less and consist of the following:

As of September 30, 2020 and December 31, 2019, all of our marketable securities are classified as available-for-sale, have contractual maturities of one year or less and consist of the following:

Cost Unrealized Gain (Loss) Fair Value

Short-term marketable securities:

As of June 30, 2020:

As of September 30, 2020:

Corporate debt securities $ 737 $ ( 2 ) $ 735

Commercial paper 250 — 250

$ 737 $ ( 2 ) $ 735

11 unchanged sentences

Valuations based on unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

The following table presents information about our assets measured at fair value on a recurring basis in the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019:

The following table presents information about our assets measured at fair value on a recurring basis in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019:

Level 1 Level 2 Level 3 Total

As of June 30, 2020:

As of September 30, 2020:

Cash equivalents:

2 unchanged sentences

Corporate debt securities — 735 — 735

Commercial paper — 250 — 250

As of December 31, 2019:

9 unchanged sentences

RESTRUCTURINGS

In January 2020, we executed a restructuring plan to make the operation of the Company more efficient (the "2020 Plan").

The 2020 Plan included an approximately 4 % reduction in workforce, primarily in the areas of research and development and sales.

In August 2020, we executed a restructuring plan to make the operation of the Company more efficient (the "August 2020 Plan").

The August 2020 Plan included an approximately 14 % reduction in workforce, primarily in the areas of operations, research and development, sales and marketing.

In January 2020, we executed a restructuring plan to make the operation of the Company more efficient (the "January 2020 Plan").

The January 2020 Plan included an approximately 4 % reduction in workforce, primarily in the areas of research and development and sales.

In June 2019, we executed a restructuring plan to make the operation of the Company more efficient (the "2019 Plan").

The 2019 Plan included an approximately 2 % reduction in workforce, primarily in the areas of sales and operations.

Total restructuring expense included in our statement of operations for the three and six month periods ended June 30, 2020 and 2019 is comprised of the following:

Three Months Ended Six Months Ended

June 30, June 30,

Total restructuring expense included in our statement of operations for the three and nine month periods ended September 30, 2020 and 2019 is comprised of the following:

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Cost of revenue — restructuring:

Employee severance and benefits

$ 166 $ — $ 166 $ —

Operating expenses — restructuring:

1 unchanged sentence

$ 1,430 $ — $ 2,022 $ 398

1,430 — 2,022 398

Total restructuring expense $ 1,596 $ — $ 2,188 $ 398

During the three months ended June 30, 2020, we did no t record any restructuring expense.

During the six months ended June 30, 2020 we recorded $ 592 in restructuring expense related to the 2020 Plan.

During the three and six months ended June 30, 2019, we recorded $ 398 in restructuring expense related to the 2019 Plan.

The following is a rollforward of the accrued liabilities related to restructuring for the six month period ended June 30, 2020:

During the three months ended September 30, 2020, we recorded $ 1,596 in restructuring expense related to the August 2020 Plan.

During the nine months ended September 30, 2020 we recorded $ 1,596 in restructuring expense related to the August 2020 Plan and $ 592 in restructuring expense related to the January 2020 Plan.

During the three months ended September 30, 2019, we did not record any restructuring expense.

During the nine months ended September 30, 2019, we recorded $ 398 in restructuring expense related to the 2019 Plan.

The following is a rollforward of the accrued liabilities related to restructuring for the nine month period ended September 30, 2020:

Balance as of December 31, 2019 Expensed Payments

Balance as of

June 30, 2020

September 30, 2020

Employee severance and benefits

33 unchanged sentences

Supplemental information related to lease expense and valuation of the ROU assets and lease liabilities was as follows:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

1 unchanged sentence

$ 702 $ 646 $ 2,024 $ 1,931

Six Months Ended

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

3 unchanged sentences

Weighted average discount rate 5.06 % 5.75 %

Future minimum lease payments under non-cancellable leases as of June 30, 2020 were as follows:

Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows:

Operating Lease Payments

Six months ending December 31, 2020 $ 1,148

Three months ending December 31, 2020 $ 520

Years ending December 31:

3 unchanged sentences

Total operating lease liabilities $ 7,243

As of June 30, 2020, the Company had no operating lease liabilities that had not commenced.

As of September 30, 2020, the Company had no operating lease liabilities that had not commenced.

Revenue is recognized when control of the promised good or service is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

23 unchanged sentences

Historically, such arrangements have not been material to our operating results.

The following table provides information about disaggregated revenue based on the preceding categories for the three and six months ended June 30, 2020 and 2019:

Three Months Ended Six Months Ended

June 30, June 30,

The following table provides information about disaggregated revenue based on the preceding categories for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

13 unchanged sentences

Interest income (expense) and other, consists of the following:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

4 unchanged sentences

The provision for income taxes during the 2020 and 2019 periods is primarily comprised of current and deferred tax expense in profitable cost-plus foreign jurisdictions, accruals for tax contingencies in foreign jurisdictions and benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation.

We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $ 10 and $ 31 during the first six months of 2020 and 2019, respectively.

We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $ 10 and $ 31 during the first nine months of 2020 and 2019, respectively.

As we do not believe that it is more likely than not that we will realize a benefit from our U.S.

3 unchanged sentences

We have not recorded a valuation allowance against our other foreign net deferred tax assets, with the exception of Canada, as we believe that it is more likely than not that we will realize a benefit from those assets.

As of June 30, 2020 and December 31, 2019, the amount of our uncertain tax positions was a liability of $ 1,537 and $ 1,554 , respectively, as well as a contra deferred tax asset of $ 1,244 and $ 1,100 , respectively.

As of September 30, 2020 and December 31, 2019, the amount of our uncertain tax positions was a liability of $ 1,601 and $ 1,554 , respectively, as well as a contra deferred tax asset of $ 1,254 and $ 1,100 , respectively.

A number of years may elapse before an uncertain tax position is resolved by settlement or statute of limitation.

5 unchanged sentences

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

3 unchanged sentences

The following shares were excluded from the calculation of diluted net loss per share as their effect would have been anti-dilutive (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

7 unchanged sentences

Revenue by geographic region, is as follows:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

2 unchanged sentences

United States 384 694 2,483 2,031

Europe 185 71 190 104

Taiwan 161 380 899 899

Korea 275 15 308 108

Taiwan 120 667 1,019 1,565

Europe 70 — 260 104

$ 8,190 $ 18,057 $ 31,217 $ 52,732

1 unchanged sentence

The percentage of revenue attributable to our distributors, top five end customers, and individual distributors or end customers that represented 10% or more of revenue in at least one of the periods presented, is as follows:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

6 unchanged sentences

End customer B 10 % 12 % 6 % 14 %

End customer C 13 % 7 % 5 % 5 %

End customer D 11 % 9 % 6 % 6 %

End customer E 10 % 12 % 5 % 14 %

1 End customers include customers who purchase directly from us, as well as customers who purchase our products indirectly through distributors.

The following accounts represented 10% or more of total accounts receivable in at least one of the periods presented:

September 30,

2020 December 31,

20 unchanged sentences

It is not possible for us to predict the maximum potential amount of future payments or indemnification costs under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement.

We have not made any payments under these agreements in the past, and as of March 31, 2020, we have not incurred any material liabilities arising from these indemnification obligations.

We have not made any payments under these agreements in the past, and as of September 30, 2020, we have not incurred any material liabilities arising from these indemnification obligations.

In the future, however, such obligations could materially impact our results of operations.

7 unchanged sentences

The scheduled payments are made on a quarterly basis and end in January 2024.

As of June 30, 2020, $ 463 is included in accrued liabilities and current portion of long-term liabilities in our condensed consolidated balance sheets and $ 339 is included in long-term liabilities, net of current portion in our condensed consolidated balance sheets.

SUBSEQUENT EVENTS

On August 7, 2020, the Board of Directors (the “Board”) of the Company approved a restructuring plan to make the operation of the Company more efficient and which would result in an approximat ely 14 % reduction in workforce, primarily in the areas of operations, research and development, sales, and marketing.

The Board believes adoption of this restructuring plan will help streamline the Company’s operations and workforce, and more appropriately align the Company’s operating expenses with current revenue levels.

The Company expects the restructuring to be substantially completed by the end of the third quarter ending September 30, 2020 and expects to incur total estimated restructuring charges of approximately $ 1,500 related to employee severance and benefits.

The Company expects that these charges will largely be recorded in the third quarter of 2020.

As a result of the restructuring, the Company expects to realize annualized savings of approximately $ 3,200 .

As of September 30, 2020, $ 474 is included in accrued liabilities and current portion of long-term liabilities in our condensed consolidated balance sheets and $ 302 is included in long-term liabilities, net of current portion in our condensed consolidated balance sheets.

SUBSEQUENT EVENT

On October 19, 2020, we entered into a Securities Purchase Agreement with MTM-Xinhe Investment Limited, a British Virgin Islands company (the “Investor”), pursuant to which we agreed to issue and sell in a private placement 3,200,000 shares of the our common stock, par value $ 0.001 per share, to the Investor at a purchase price of $ 2.071 per share, for gross proceeds to us of approximately $ 6,600 (the “Private Placement”).

Subject to the fulfillment of certain conditions, the Private Placement is expected to close in November 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements