What changed in this filing

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Item 1. Financial Statements

2022-08-10 compared with 2022-05-10 · 76 added, 44 removed, 434 unchanged (22% of the section changed)

32 unchanged sentences

Common stock 478,605 475,644

Accumulated other comprehensive loss ( 620 ) ( 468 )

Accumulated other comprehensive income (loss) 1,048 ( 468 )

Accumulated deficit ( 444,555 ) ( 434,955 )

5 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

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

2022 2021 2022 2021

Revenue, net $ 19,078 $ 14,051 $ 35,706 $ 23,321

9 unchanged sentences

Loss before income taxes ( 5,096 ) ( 4,275 ) ( 8,815 ) ( 12,133 )

Provision for income taxes 403 217

Provision (benefit) for income taxes ( 88 ) 107 315 324

Net loss ( 5,008 ) ( 4,382 ) ( 9,130 ) ( 12,457 )

6 unchanged sentences

(1) Includes:

Amortization of acquired intangible assets 72 245

Stock-based compensation 59 76 67 155

Amortization of acquired intangible assets — 218 72 463

(2) Includes stock-based compensation 647 610 1,230 1,191

6 unchanged sentences

(In thousands)

Three Months Ended March 31,

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

2022 2021 2022 2021

Net loss $ ( 5,008 ) $ ( 4,382 ) $ ( 9,130 ) $ ( 12,457 )

9 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

15 unchanged sentences

Cash flows from investing activities:

Purchases of property and equipment ( 540 ) ( 243 )

Purchases of licensed technology ( 957 ) —

Purchases of property and equipment ( 839 ) ( 393 )

Proceeds from sales and maturities of short-term marketable securities — 250

Net cash provided by (used in) investing activities ( 1,057 ) 7

Net cash used in investing activities ( 1,796 ) ( 143 )

Cash flows from financing activities:

8 unchanged sentences

Cash paid during the period for interest 101 69

Non-cash investing and financing activities:

Acquisitions of property and equipment and other

assets under extended payment terms $ 160 $ —

See accompanying notes to condensed consolidated financial statements.

15 unchanged sentences

Balance as of March 31, 2022 53,998,012 $ 476,910 $ ( 620 ) $ ( 439,547 ) $ 36,743

Stock issued under employee equity incentive plans 233,860 — — — —

Stock-based compensation expense — 1,695 — — 1,695

Foreign currency translation adjustment — — 1,668 — 1,668

Net loss attributable to Pixelworks, Inc.

— — — ( 5,008 ) ( 5,008 )

Balance as of June 30, 2022 54,231,872 $ 478,605 $ 1,048 $ ( 444,555 ) $ 35,098

Balance as of December 31, 2020 51,078,942 $ 467,957 $ 47 $ ( 415,134 ) $ 52,870

4 unchanged sentences

Balance as of March 31, 2021 52,212,421 $ 470,452 $ 47 $ ( 423,209 ) $ 47,290

Stock issued under employee equity incentive plans 140,143 — — — —

Stock-based compensation expense — 1,506 — — 1,506

Net loss attributable to Pixelworks, Inc.

— — — ( 4,382 ) ( 4,382 )

Balance as of June 30, 2021 52,352,564 $ 471,958 $ 47 $ ( 427,591 ) $ 44,414

See accompanying notes to condensed consolidated financial statements.

5 unchanged sentences

Pixelworks, Inc.

(together with our subsidiaries, the “Company”, “we”, “our” or “us”) is a leading provider of high-performance and power-efficient visual processing solutions that bridge the gap between video content formats and rapidly advancing display capabilities.

(together with our subsidiaries, the “Company”, "Pixelworks", “we”, “our” or “us”) is a leading provider of high-performance and power-efficient visual processing solutions that bridge the gap between video content formats and rapidly advancing display capabilities.

We develop and market semiconductor and software solutions that enable consistently high-quality, authentic viewing experiences in a wide variety of applications from cinema to smartphones.

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 March 31, 2022, we had an intellectual property portfolio of 334 patents related to the visual display of digital image data.

As of June 30, 2022, we had an intellectual property portfolio of 301 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.

14 unchanged sentences

Condensed Consolidated Financial Statements

The financial information included herein for the three months ended March 31, 2022 and 2021 is prepared in accordance with U.S.

The financial information included herein for the three and six months ended June 30, 2022 and 2021 is prepared in accordance with U.S.

generally accepted accounting principles ("U.S.

2 unchanged sentences

The financial information as of December 31, 2021 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2021, included in Item 8 of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 9, 2022, and should be read in conjunction with such consolidated financial statements.

The results of operations for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2022.

The results of operations for the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2022.

Recent Accounting Pronouncements

20 unchanged sentences

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

Three Months Ended

Six Months Ended

Balance at beginning of period $ 36 $ 41

23 unchanged sentences

Developed technology and customer relationships were fully amortized as of March 31, 2022, tradename was fully amortized as of March 31, 2019 and backlog was fully amortized as of September 30, 2018.

Amortization expense for intangible assets was $ 90 for the three months ended March 31, 2022, $ 72 was included in cost of revenue and $ 18 was included in selling, general and administrative for the three months ended March 31, 2022, in the condensed consolidated statements of operations.

Amortization expense for intangible assets was $ 0 and $ 90 for the three and six months ended June 30, 2022, respectively, $ 0 and $ 72 were included in cost of revenue for the three and six months ended June 30, 2022, respectively, and $ 0 and $ 18 were included in selling, general and administrative for the three and six months ended June 30, 2022, respectively, in the condensed consolidated statements of operations.

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 three months ended March 31, 2022.

There were no such triggering events requiring a goodwill impairment assessment during the six months ended June 30, 2022.

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

4 unchanged sentences

Operating lease liabilities, current 2,104 2,439

Deferred research and development reimbursement 855 1,838

Current portion of accrued liabilities for asset financings 688 1,077

2 unchanged sentences

Deferred revenue 205 50

Deferred research and development reimbursement — 1,838

Other 4,040 4,049

6 unchanged sentences

The change in deferred revenue is as follows:

Three Months Ended

Six Months Ended

Deferred revenue:

9 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 March 31, 2022 and December 31, 2021:

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, 2022 and December 31, 2021:

Level 1 Level 2 Level 3 Total

As of March 31, 2022:

As of June 30, 2022:

Cash equivalents:

14 unchanged sentences

We have operating leases for office buildings and one vehicle.

Our leases have remaining lease terms of one year to six years .

Our leases have remaining lease terms of one year to five years .

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Operating lease cost:

Three Months Ended

$ 668 $ 586 $ 1,345 $ 1,286

Six Months Ended

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

3 unchanged sentences

Weighted average discount rate 5.02 % 4.91 %

Future minimum lease payments under non-cancellable leases as of March 31, 2022 were as follows:

Future minimum lease payments under non-cancellable leases as of June 30, 2022 were as follows:

Operating Lease Payments

Nine months ending December 31, 2022 $ 1,939

Six months ending December 31, 2022 $ 1,421

Years ending December 31:

3 unchanged sentences

Total operating lease liabilities $ 4,143

As of March 31, 2022, we had no operating lease liabilities that had not commenced.

As of June 30, 2022, we 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.

25 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 months ended March 31, 2022 and 2021:

Three Months Ended

The following table provides information about disaggregated revenue based on the preceding categories for the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

IC sales $ 18,694 $ 13,055 $ 35,149 $ 21,692

12 unchanged sentences

Interest income and other, consists of the following:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Interest income $ 94 $ 4 $ 224 $ 9

8 unchanged sentences

As amounts become due and payable, they are offset against research and development expense on a pro rata basis.

During the first quarter of 2022 and the first quarter of 2021, we recognized offsets to research and development expense of $ 983 and zero , respectively.

We recognized offsets to research and development expense of $ 855 and $ 1,838 during the three and six months ended June 30, 2022, respectively.

The provision for income taxes during the 2022 and 2021 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 $ 121 and $ 2 during the first three months of 2022 and 2021, respectively.

We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $ 121 and $ 2 during the first six months of 2022 and 2021, 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 and China, as we believe that it is more likely than not that we will realize a benefit from those assets.

As of March 31, 2022 and December 31, 2021, the amount of our uncertain tax positions was a liability of $ 2,380 and $ 2,493 , respectively, as well as a contra deferred tax asset of $ 1,384 and $ 1,254 , respectively.

As of June 30, 2022 and December 31, 2021, the amount of our uncertain tax positions was a liability of $ 2,275 and $ 2,493 , respectively, as well as a contra deferred tax asset of $ 1,384 and $ 1,254 , 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

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

$ ( 5,008 ) $ ( 4,382 ) $ ( 9,130 ) $ ( 12,457 )

Net income attributable to redeemable non-controlling interest — — ( 470 ) —

Net income attributable to certain entities owned by employees — —

Net loss attributable to Pixelworks Inc.

- for purposes of earnings per share calculation $ ( 4,592 ) $ ( 8,075 )

$ ( 5,008 ) $ ( 4,382 ) $ ( 9,600 ) $ ( 12,457 )

Weighted average shares outstanding - basic and diluted 54,120 52,283 53,901 51,980

2 unchanged sentences

Basic and diluted earnings (loss) per share was computed by dividing the net income (loss) by the weighted-average number of common shares outstanding for the period.

The numerator adjustments include an allocation of PWSH income to the redeemable non-controlling interests (which consists of adjusting the interest to its redemption value based on the terms provided in the Supplemental Agreement and Side Letter (defined in Note 13 below)) and the employee owned entities.

The equity interest associated with the employee-owned entities are considered participating securities at PWSH and will be allocated income, however, they are not required to fund losses, and therefore, no allocations of losses will be made to the employee owned entities in periods of loss at PWSH.

The numerator adjustments include, when applicable, an allocation of PWSH income to the redeemable non-controlling interests (which consists of adjusting the interest to its redemption value based on the terms provided in the Supplemental Agreement and Side Letter (defined in Note 13 below)) and the employee-owned entities.

The equity interests associated with the employee-owned entities are considered participating securities at PWSH and will be allocated income, however, they are not required to fund losses, and therefore, no allocations of losses will be made to the employee-owned entities in periods of loss at PWSH.

Potentially dilutive common shares from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units, and the assumed issuance of common stock under the employee stock purchase plan.

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

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Employee equity incentive plans 4,457 4,039 4,131 3,958

5 unchanged sentences

Revenue by geographic region, is as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Japan $ 9,298 $ 7,415 $ 16,696 $ 10,959

2 unchanged sentences

United States 230 417 1,088 1,183

Europe — 71 77 71

Korea — — — 17

$ 19,078 $ 14,051 $ 35,706 $ 23,321

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

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Distributors:

32 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 September 30, 2021, 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 June 30, 2022, 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 March 31, 2022, $ 513 is included in accrued liabilities and current portion of long-term liabilities in our condensed consolidated balance sheets.

As of June 30, 2022, $ 441 is included in accrued liabilities and current portion of long-term liabilities in our condensed consolidated balance sheets.

REDEEMABLE NON-CONTROLLING INTEREST AND EQUITY INTEREST OF PWSH SOLD TO EMPLOYEES

1 unchanged sentence

The ESOP entities do not qualify as Employee Share Ownership Programs under IRC 4975(e)(7), but function as a qualified ESOP and hold an equity ownership in trust for employees.

Under the Capital Increase Agreement, during the third quarter of 2021, the Investors invested approximately $ 30,844 in exchange for a redeemable non-controlling equity interest of 10.45 % of PWSH and the ESOP entities invested approximately $ 9,670 in exchange for a redeemable non-controlling equity interest representing 4.68 % of PWSH, which includes a discount of 30 % from the valuation paid by the Investors.

Under the Capital Increase Agreement, during 2021, the Investors invested approximately $ 30,844 in exchange for a redeemable non-controlling equity interest of 10.45 % of PWSH and the ESOP entities invested approximately $ 12,329 in exchange for a redeemable non-controlling equity interest representing 5.95 % of PWSH, which includes a discount of 30 % from the valuation paid by the Investors.

The agreement further provided that the Capital Contributors have a liquidation preference in PWSH, a right to co-sell their interest in PWSH along with the Company on the same terms and conditions as the Company, a right to participate on a pro rata basis in any future financing rounds of PWSH, and the Company’s agreement while it remains an owner of PWSH and for two (2) years thereafter to not compete with the business of PWSH, nor solicit or otherwise cause any of PWSH’s core employees or customers to end their relationship with PWSH.

26 unchanged sentences

public company.

The components of the change in redeemable non-controlling interests for the three months ended March 31, 2022 are presented in the following table (in thousands):

The components of the change in redeemable non-controlling interests for the six months ended June 30, 2022 are presented in the following table (in thousands):

Carrying Value of Redeemable NCI as of January 1, 2022

1 unchanged sentence

Effect of foreign currency translation attributable to redeemable non-controlling interest ( 1,516 )

Carrying Value of Redeemable NCI as of March 31, 2022

Carrying Value of Redeemable NCI as of June 30, 2022

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