What changed in this filing

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Item 1A. Risk Factors

2020-11-06 compared with 2020-08-10 · 28 added, 30 removed, 538 unchanged (10% of the section changed)

9 unchanged sentences

A significant economic downturn could materially and adversely affect our end customers, and thus could negatively impact demand for our products and our operating results.

Many state governments in the U.S.

have issued “shelter in place” or “stay at home” orders that generally require residents remain in their homes, subject to certain exceptions for essential services.

For example, in California, where our corporate headquarters are, a “stay at home” order is currently in effect that requires our employees to work from home until further notice.

Additionally, our employees in Japan and in the rest of North America are working from home under similar orders from local governments.

The continuing impact of these, and similar orders may adversely impact the efficiency and effectiveness of our organization, as well as the operations of our suppliers and customers.

In response to the COVID-19 pandemic, many state governments in the U.S., including California where our corporate headquarters are, issued restrictive orders, including “shelter in place” or “stay at home” orders, that restricted its residents from leaving their homes or returning to work.

At Pixelworks, our offices in Japan and North America are currently operating in office and remotely.

The potential future impact of any “stay at home” orders or other similar COVID-related restraints on movement, may adversely impact the efficiency and effectiveness of our organization, as well as the operations of our suppliers and customers.

We face additional risks and challenges related to having a portion of our workforce working from home, including added pressure on our IT systems and the security of our network, and new challenges as our team adjusts to online collaboration.

Additionally, our sales team may not be able to make sales calls to current and potential customers at the same volume as they did prior to the stay at home orders as they juggle varying competing interests.

Also, our ability to make in-person sales calls may be affected in areas with stay at home orders in place, which may, in turn, affect our revenues.

Additionally, our sales team may not be able to make sales calls to current and potential customers at the same volume as they did prior to the outbreak of the pandemic as they juggle varying competing interests.

Also, our ability to make in-person sales calls may be affected in areas with stay at home orders or other restrictions in place, which may, in turn, affect our revenues.

The outbreak of COVID-19 may put additional pressures on our supply chain, including temporary or long-term disruption or delays.

63 unchanged sentences

In each of 2020, 2019 and 2018, we executed restructuring plans to make the operation of the Company more efficient.

While these restructuring plans were complete as of June 30, 2020, we may not be able to implement future restructuring programs as planned, and we may need to take additional measures to fulfill the objectives of our restructuring.

We may not be able to implement our restructuring programs as planned, and we may need to take additional measures to fulfill the objectives of our restructuring.

The anticipated expenses associated with our restructuring programs may differ from or exceed our expectations, and we might not be able to realize the full amount of estimated savings from the restructuring programs, in a timely manner, or at all.

13 unchanged sentences

The display manufacturing market is highly concentrated and we are, and will continue to be, dependent on a limited number of customers and distributors for a substantial portion of our revenue.

Sales to our top distributor represented 29%, 28% and 34% of revenue for the six months ended June 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

Sales to our top distributor represented 28%, 28% and 34% of revenue for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

If any of our distributors ceases to do business with us, it may be difficult for us to find adequate replacements, and even if we do, it may take some time.

The loss of any of our top distributors could negatively affect our results of operations.

Additionally, revenue attributable to our top five end customers represented 61%, 77% and 82% of revenue for the six months ended June 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

As of June 30, 2020 we had two accounts that each represented 10% or more of accounts receivable.

Additionally, revenue attributable to our top five end customers represented 61%, 77% and 82% of revenue for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

As of September 30, 2020 we had two accounts that each represented 10% or more of accounts receivable.

As of December 31, 2019, we had three accounts that each represented 10% or more of accounts receivable.

18 unchanged sentences

The Revolving Loan Agreement provides a secured working capital-based revolving line of credit (the "Revolving Line") in an aggregate amount of up to the lesser of (i) $10.0 million or (ii) $2.5 million plus 80% of eligible domestic accounts receivable and certain foreign accounts receivable of both Pixelworks and ViXS Systems, Inc., subject to certain limitations on the amount of accounts receivables attributable to ViXS.

As of September 30, 2020 short-term borrowings outstanding under the Revolving Line consisted of $4.0 million.

The Revolving Line has a maturity date of December 27, 2020.

4 unchanged sentences

This facility contains various conditions, covenants and representations with which we must be in compliance in order to borrow funds.

We cannot assure you that we will be in compliance with these conditions, covenants and representations when we may need to borrow funds under this facility, nor can we assure you that the bank will consent to such borrowings, in which case we may need to seek alternative sources of funding, which may not be available quickly or which may be available only on less favorable terms.

We cannot assure you that we will be in compliance with these conditions, covenants and representations when we may need to borrow additional funds under this facility, nor can we assure you that the bank will consent to such borrowings, in which case we may need to seek alternative sources of funding, which may not be available quickly or which may be available only on less favorable terms.

Our inability to raise the necessary funding in the event we need it could negatively affect our business.

19 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 intends 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 has applied for forgiveness, however, no assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part.

If forgiveness is not granted, the PPP Loan, in whole or in part, will need to be repaid by the Company, which could have an adverse effect on our future cash flows and financial position.

Additionally, the Note contains customary events of default relating to, among other things, payment defaults or breaches of the terms of the Note.

In the event of the occurrence of an event of default, the Lender may require immediate repayment of all amounts outstanding under the Note, which may have an adverse effect on our future cash flows and financial position.

We license our intellectual property, which exposes us to risks of infringement or misappropriation, and may cause fluctuations in our operating results.

20 unchanged sentences

Sales outside the U.S.

accounted for approximately 91%, 95% and 98% of revenue for the six months ended June 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

accounted for approximately 92%, 95% and 98% of revenue for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

We anticipate that sales outside the U.S.

38 unchanged sentences

and China is uncertain, and any changes in policy as a result may adversely affect our business.

For example, if China were to take action against the United States in response to actual or perceived political or economic threats or changes in policy, such as the detainment of Americans traveling on business, our operations could be adversely affected.

Additionally, our Chinese subsidiary is considered a foreign-invested enterprise and is subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to foreign-invested enterprises.

210 unchanged sentences

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods, to help protect our proprietary technologies.

As of June 30, 2020, we held 345 patents and had 12 patent applications pending for protection of our significant technologies.

As of September 30, 2020, we held 344 patents and had 12 patent applications pending for protection of our significant technologies.

Competitors in both the U.S.

64 unchanged sentences

If this financing is obtained through the issuance of equity securities, debt convertible into equity securities, options or warrants to acquire equity securities or similar instruments or securities, our existing shareholders will experience dilution in their ownership percentage upon the issuance, conversion or exercise of such securities and such dilution could be significant.

New equity securities issued by us could have rights, preferences or privileges senior to those of our common stock.

For example, on October 19, 2020, we entered into a Securities Purchase Agreement with MTM-Xinhe Investment Limited, a British Virgin Islands company pursuant to which we agreed to issue and sell in a private placement 3,200,000 shares of common stock at a purchase price of $2.071 per share, for gross proceeds of approximately $6.6 million (the “Private Placement”).

The issuance and sale of the shares in the Private Placement will have a dilutive impact on our existing stockholders.

Additionally, any new equity securities issued by us could have rights, preferences or privileges senior to those of our common stock.

Additionally, pursuant to our “at the market” equity offering program, we may sell shares of our common stock having aggregate sales proceeds of up to $25 million from time to time through Cowen and Company, LLC, as our agent.

As of June 30, 2020, we had issued and sold 803,528 shares of our common stock pursuant to our “at the market” equity offering program, resulting in net proceeds to us of approximately $2.5 million.

As of September 30, 2020, we had issued and sold 1,374,517 shares of our common stock pursuant to our “at the market” equity offering program, resulting in net proceeds to us of approximately $3.6 million.

Shares of our common stock having a value of approximately $20.9 million remain available for sale under this program.

The issuance and sale of additional shares of our common stock pursuant to our “at the market” equity offering program will have a dilutive impact on our existing stockholders.

Further, the issuance and sale of, or the perception that we may issue and sell, additional shares of common stock pursuant to our “at the market” equity offering program could have the effect of depressing the market price of our common stock or increasing the volatility thereof.

In addition, any such issuance by us or sales of our securities by our security holders, including by any of our affiliates, or the perception that such issuances or sales could occur, could negatively impact the market price of our securities.

For example, a number of shareholders own significant blocks of our common stock, and we have issued approximately 3.7 million shares of our common stock to the former holders of ViXS, such shares which were freely tradeable upon issuance.

If one or more of these large shareholders were to sell large portions of their holdings in a relatively short time, or if the former holders of ViXS were to collectively sell large portions of the stock issued as consideration in the Acquisition in a relatively short time, for liquidity or other reasons, the prevailing market price of our common stock could be negatively affected.

Further, the issuance and sale of, or the perception that we may issue and sell, additional shares of common stock pursuant to our “at the market” equity offering program or an additional private placement could have the effect of depressing the market price of our common stock or increasing the volatility thereof.

Any issuance by us or sales of our securities by our security holders, including by any of our affiliates, or the perception that such issuances or sales could occur, could negatively impact the market price of our securities.

For example, a number of shareholders own significant blocks of our common stock.

If one or more of these large shareholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing market price of our common stock could be negatively affected.

This could result in further potential dilution to our existing shareholders and the impairment of our ability to raise capital through the sale of equity, debt or other securities.

9 unchanged sentences

or (iii) a minimum of $10.0 million in shareholders' equity, at least 750,000 publicly held shares and at least $5 million in market value of publicly held shares.

As of December 31, 2019, we were in compliance with these listing requirements.

As of September 20, 2020, we were in compliance with these listing requirements.

However, as recently as June 30, 2017, our total asset value was less than $50.0 million.

22 unchanged sentences

(incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K filed on March 10, 2010).

10.1 Amendment No.

9 to the Loan and Security Agreement, between Pixelworks, Inc.

and Silicon Valley Bank, dated April 17, 2020 (incorporated by reference to E xhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on May 8, 2020).

10.2 Promissory Note between the Company and Silicon Valley Bank dated April 25, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2020).

10.3 Sales Agreement, dated June 5, 2020, between Pixelworks, Inc.

and Cowen and Company, LLC.

(incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on June 5, 2020).

10.1 Securities Purchase Agreement dated October 19, 2020, between the Company and the investor named therein (incorporated by reference to Exhibit 10.1 to the Company's Current Report on form 8-K filed on October 22, 2020).

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.

15 unchanged sentences

PIXELWORKS, INC.

August 10, 2020 /s/ Elias N.

November 6, 2020 /s/ Elias N.

Vice President and Chief Financial Officer,

1 unchanged sentence

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 1A. Risk Factors