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Item 9A. Controls and Procedures

2021-03-10 compared with 2020-03-11 · 40 added, 69 removed, 182 unchanged (37% of the section changed)

3 unchanged sentences

Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

Remediation effort to address material weakness

As previously described in Item 9A of our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018, the Company implemented a remediation plan to address the material weakness discussed therein.

This included the implementation of a control over the process of reviewing significant aged liabilities with internal legal counsel for appropriate application of any statute of limitation.

We believe that our remediation efforts to establish controls surrounding aged liabilities are significant improvements to our processes and controls which address the material weakness.

The remediation process was complete as of December 31, 2019, when our enhanced control was operational for a sufficient period of time and tested, which enabled management to conclude that the enhanced control is operating effectively.

Management’s Report on Internal Control Over Financial Reporting

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All internal control systems, no matter how well designed, have inherent limitations.

Under the supervision and with the participation of our management, including our CEO and CFO, under the oversight of our Board of Directors, we evaluated the effectiveness of our internal control over financial reporting as of December 31, 2019, the last day of our fiscal year.

This evaluation was based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013 Framework).

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, under the oversight of our Board of Directors, we evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020, the last day of our fiscal year.

This evaluation was based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S.

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Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives.

The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by KPMG LLP, our independent registered public accounting firm, as stated in their report, which is presented below.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has not been audited by the Company’s independent registered public accounting firm.

Management’s report is not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

Besides the remediation of the material weakness described above, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Pixelworks, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Pixelworks, Inc.

and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements), and our report dated March 11, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Portland, Oregon

March 11, 2020

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

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The following financial statements are included in Item 8 Financial Statements and Supplementary Data:

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2020 and 2019

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All schedules have been omitted because the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required.

The exhibits are either filed with this report or incorporated by reference into this report.

The exhibits listed below are either filed with this report or incorporated by reference into this report.

2.1 Arrangement Agreement between Pixelworks, Inc.

and ViXS Systems Inc.

dated May 18, 2017 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on May 23, 2017).

dated May 18, 2017 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on May 23, 2017) (The "Arrangement Agreement").

2.2 Plan of Arrangement (Schedule A to the Arrangement Agreement), as approved by the Ontario Superior Court of Justice (Commercial List) (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on August 8, 2017).

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

Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Form of 10%, Subject to Adjustment, Amended and Restated Secured Convertible Debenture Due September 9, 2019 (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2017).

Form of 10%, Subject to Adjustment, Amended and Restated Secured Convertible Debenture Due January 12, 2020 (incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2017).

4.1 Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K filed on March 11, 2020).

10.1+ Form of Indemnity Agreement between Pixelworks, Inc.

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(incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K filed on March 4, 2015).

Summary of Pixelworks 2020 Non-Employee Director Compensation.

10.9+ Summary of Pixelworks 2020 Non-Employee Director Compensation (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K filed on March 11, 2020).

10.10+ Summary of Pixelworks 2019 Non-Employee Director Compensation.

4 unchanged sentences

Senior Management Bonus Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 31, 2009).

Offer letter dated June 22, 2007 between Pixelworks, Inc.

and Steven L.

Moore (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 9, 2007).

Change of Control Severance Agreement dated May 11, 2009 and effective April 1, 2009, by and between Pixelworks, Inc.

and Steven L.

Moore (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed March 10, 2010).

Amendment to the Amended and restated Change of Control Severance Agreement by and between Pixelworks, Inc.

and Steven Moore (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 24, 2012).

Amendment to the Amended and restated Change of Control Severance Agreement by and between Pixelworks, Inc.

and Steven Moore (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 23, 2014).

10.13+ Offer Letter with Todd A.

8 unchanged sentences

10.18+ Change of Control and Severance Agreement with Elias Nader (incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K filed with the SEC on September 16, 2019).

Transition Agreement with Steven Moore dated September 12, 2019 (incorporated by reference to Exhibit 10.3 of the Registrant's current report on Form 8-K filed with the SEC on September 16, 2019).+

Consulting Agreement with Steven Moore dated September 12, 2019 (incorporated by reference to Exhibit 10.4 of the Registrant's current report on Form 8-K filed with the SEC on September 16, 2019).+

10.19 Office Lease Agreement dated December 2005, by and between CA-The Concourse Limited Partnership and Pixelworks, Inc.

38 unchanged sentences

(incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed December 20, 2019).

10.35 Amendment No.

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

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

10.36 Amendment No.

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

and Silicon Valley Bank, dated December 14, 2020

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

10.38 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).

10.39 Amended and Restated Securities Purchase Agreement dated December 4, 2020, between the Company and the investors named therein.

10.40 Underwriting Agreement dated as of December 10, 2020 by and among the Company and Roth Capital Partners, LLC and Craig-Hallum Capital Group LLC, as representatives of the several Underwriters (incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed on December 10, 2020).

10.41+ Form of Addendum to Change of Control Agreement for Officers (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 23, 2014).

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(incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K filed on March 14, 2018).

23.1 Consent of Armanino LLP.

23.2 Consent of KPMG LLP.

8 unchanged sentences

Section 1350).

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

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 Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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PIXELWORKS, INC.

March 11, 2020

March 10, 2021 By:

President and Chief Executive Officer

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

President and Chief Executive Officer

(Principal Executive Officer)

Signature Title Date

DeBonis President and Chief Executive Officer

DeBonis (Principal Executive Officer)

March 10, 2021

Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)

Nader Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)

March 10, 2021

/s/ Richard L.

Chairman of the Board

March 11, 2020

/s/ Amy Bunszel

Sanquini Chairman of the Board

March 10, 2021

/s/ Amy Bunszel Director

Amy Bunszel March 10, 2021

Scott Gibson Director

March 10, 2021

/s/ Daniel J.

March 11, 2020

Heneghan Director

March 10, 2021

Tupman Director

Tupman March 10, 2021

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-K

Item 9A. Controls and Procedures