What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 80 added, 45 removed, 489 unchanged (20% of the section changed)

42 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Revenue, net $ 13,605 $ 19,078 $ 23,571 $ 35,706

9 unchanged sentences

Loss before income taxes ( 6,018 ) ( 5,096 ) ( 15,718 ) ( 8,815 )

Provision for income taxes 34 403

Provision (benefit) for income taxes 126 ( 88 ) 160 315

Net loss ( 6,144 ) ( 5,008 ) ( 15,878 ) ( 9,130 )

16 unchanged sentences

(In thousands)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net loss $ ( 6,144 ) $ ( 5,008 ) $ ( 15,878 ) $ ( 9,130 )

9 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Reversal of uncertain tax positions ( 2 ) ( 121 )

Deferred income tax expense (benefit) — 364

Deferred income tax expense — 374

Amortization of acquired intangible assets — 90

15 unchanged sentences

Proceeds from issuance of common stock under employee equity incentive plans 156 217

Net cash provided by financing activities 14,530 ( 150 )

Net increase (decrease) in cash and cash equivalents 6,020 ( 6,425 )

Net cash provided by (used in) financing activities 14,206 ( 408 )

Net decrease in cash and cash equivalents ( 2,344 ) ( 12,019 )

Cash and cash equivalents, beginning of period 56,821 61,587

1 unchanged sentence

Supplemental disclosure of cash flow information:

Cash paid during the period for income taxes, net of refunds received $ 187 $ 131

Cash paid during the period for interest 76 101

Cash paid for income taxes, net of refunds received 146 108

Non-cash investing and financing activities:

16 unchanged sentences

Net proceeds from issuance of equity interest to non-controlling interest — — — — 14,596 14,596

Net income attributable to non-controlling interest — — — — ( 338 ) ( 338 )

Net loss attributable to non-controlling interest — — — — ( 338 ) ( 338 )

Net loss attributable to Pixelworks, Inc.

1 unchanged sentence

Balance as of March 31, 2023 55,719,725 $ 482,551 $ 1,845 $ ( 460,381 ) $ 25,134 $ 49,149

Stock issued under employee equity incentive plans 396,703 — — — — —

Stock-based compensation expense — 1,259 — — — 1,259

Foreign currency translation adjustment — — 2,353 — ( 776 ) 1,577

Net loss attributable to non-controlling interest — — — — ( 107 ) ( 107 )

Net loss attributable to Pixelworks, Inc.

— — — ( 6,037 ) — ( 6,037 )

Balance as of June 30, 2023 56,116,428 $ 483,810 $ 4,198 $ ( 466,418 ) $ 24,251 $ 45,841

Balance as of December 31, 2021 53,367,136 $ 475,644 $ ( 468 ) $ ( 434,955 ) $ — $ 40,221

5 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

See accompanying notes to condensed consolidated financial statements.

6 unchanged sentences

We define our primary target markets as Mobile (smartphone and tablet), Home & Enterprise (projectors, personal video recorders ("PVR"), and over-the-air ("OTA") streaming devices), and Cinema (creation, remastering, and delivery of digital video content).

Previously we classified our primary target markets as Mobile, Projector, Video Delivery and Cinema, but have since aggregated the Projector and Video Delivery categories into one called "Home & Enterprise".

Pixelworks has been a pioneer in visual processing technology for over 20 years.

3 unchanged sentences

In 2019, we introduced our Hollywood award-winning TrueCut® video platform, the industry’s first motion grading technology that allows fine tuning of motion appearance in cinematic content.

As of March 31, 2023, we had an intellectual property portfolio of 286 patents related to the visual display of digital image data.

As of June 30, 2023, we had an intellectual property portfolio of 280 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.

23 unchanged sentences

Condensed Consolidated Financial Statements

The financial information included herein for the three months ended March 31, 2023 and 2022 is prepared in accordance with U.S.

The financial information included herein for the three and six months ended June 30, 2023 and 2022 is prepared in accordance with U.S.

generally accepted accounting principles ("U.S.

2 unchanged sentences

The financial information as of December 31, 2022 is derived from our audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2022, included in Item 8 of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 8, 2023, and should be read in conjunction with such consolidated financial statements.

The results of operations for the three months ended March 31, 2023 and 2022 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2023.

The results of operations for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results expected for future periods or for the entire fiscal year ending December 31, 2023.

Recent Accounting Pronouncements

1 unchanged sentence

Summary of Significant Accounting Policies" in Part II, Item 8 of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 8, 2023.

We did not adopt any new accounting pronouncements during the three months ended March 31, 2023.

We did not adopt any new accounting pronouncements during the three months ended June 30, 2023.

Use of Estimates

14 unchanged sentences

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

Three Months Ended

Six Months Ended

Balance at beginning of period $ 77 $ 36

27 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, 2023.

There were no such triggering events requiring a goodwill impairment assessment during the six months ended June 30, 2023.

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

15 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, 2023 and December 31, 2022:

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, 2023 and December 31, 2022:

Level 1 Level 2 Level 3 Total

As of March 31, 2023:

As of June 30, 2023:

Cash equivalents:

16 unchanged sentences

We have operating leases for office buildings and one vehicle.

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

Our leases have remaining lease terms of one year to four 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,

2023 2022 2023 2022

Operating lease cost:

Three Months Ended

$ 643 $ 668 $ 1,259 $ 1,345

Six Months Ended

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

3 unchanged sentences

Weighted average discount rate 6.83 % 5.02 %

Future minimum lease payments under non-cancellable leases as of March 31, 2023 were as follows:

Future minimum lease payments under non-cancellable leases as of June 30, 2023 were as follows:

Operating Lease Payments

Nine months ending December 31, 2023 $ 1,656

Six months ending December 31, 2023 $ 1,199

Years ending December 31:

3 unchanged sentences

Total operating lease liabilities $ 5,770

As of March 31, 2023, we had $ 2,726 in operating lease liabilities that had not commenced.

As of June 30, 2023, 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.

27 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, with IC sales disaggregated further into net revenue from external customers for each group of similar products, for the three months ended March 31, 2023 and 2022:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

IC sales $ 13,535 $ 18,694 $ 23,215 $ 35,149

2 unchanged sentences

IC sales by end market:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Mobile market $ 6,858 $ 7,209 $ 9,921 $ 12,780

10 unchanged sentences

There is no amount of transaction price allocated to unsatisfied performance obligations with an original expected duration of greater than one year.

Revenue related to the Cinema market was not material during the three months ended March 31, 2023 and 2022, and was therefore included in the engineering, services, license revenue and other category within the Mobile market.

Revenue related to the Cinema market was not material during the three and six months ended June 30, 2023 and 2022, and was therefore included in the engineering, services, license revenue and other category within the Mobile market.

INTEREST INCOME AND OTHER, NET

Interest income and other, consists of the following:

Three Months Ended

Interest income and other, net, consists of the following:

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Interest income $ 480 $ 94 $ 987 $ 224

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 2023 and the first quarter of 2022, we recognized offsets to research and development expense of zero and $ 983 , respectively.

We recognized offsets to research and development expense of $ 1,900 and $ 855 , during the three months ended June 30, 2023 and 2022, respectively and $ 1,900 and $ 1,838 during the six months ended June 30, 2023 and 2022, respectively.

The provision for income taxes during the 2023 and 2022 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 $ 2 and $ 121 during the first three months of 2023 and 2022, respectively.

We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $ 2 and $ 121 during the first six months of 2023 and 2022, 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, 2023 and December 31, 2022, the amount of our uncertain tax positions was a liability of $ 379 and $ 1,643 , respectively, as well as a contra deferred tax asset of $ 1,470 and $ 1,353 , respectively.

As of June 30, 2023 and December 31, 2022, the amount of our uncertain tax positions was a liability of $ 382 and $ 1,643 , respectively, as well as a contra deferred tax asset of $ 1,470 and $ 1,353 , 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,

2023 2022 2023 2022

$ ( 6,144 ) $ ( 5,008 ) $ ( 15,878 ) $ ( 9,130 )

Net (income) loss attributable to redeemable non-controlling interest 107 — 445 ( 470 )

9 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

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Employee equity incentive plans 4,427 4,457 3,986 4,131

9 unchanged sentences

Revenue by geographic region, is as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Japan $ 5,122 $ 9,298 $ 10,681 $ 16,696

2 unchanged sentences

United States 49 230 109 1,088

Europe — — — 77

$ 13,605 $ 19,078 $ 23,571 $ 35,706

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,

2023 2022 2023 2022

Distributors:

8 unchanged sentences

End customer D 9 % — % 11 % — %

End customer E — % 13 % — % 22 %

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

1 unchanged sentence

2023 December 31,

Account V 42 % 27 %

Account W 27 % 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, 2023, 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, 2023, 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.

2 unchanged sentences

Although we currently believe that resolving such matters, individually or in the aggregate, will not have a material adverse effect on our financial position, our results of operations, or our cash flows, these matters are subject to inherent uncertainties and our view of these matters may change in the future.

Other Contractual Obligation

Other Contractual Obligations

As part of the Acquisition, we acquired debt associated with an agreement with the Government of Canada called Technology Partnerships Canada ("TPC").

2 unchanged sentences

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

As of March 31, 2023, $ 249 is included in accrued liabilities and current portion of long-term liabilities in our condensed consolidated balance sheets.

As of June 30, 2023, $ 193 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

35 unchanged sentences

public company.

The components of the change in redeemable non-controlling interests for the three months ended March 31, 2023 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, 2023 are presented in the following table (in thousands):

Carrying Value of Redeemable Non-Controlling Interest as of January 1, 2023

Effect of foreign currency translation attributable to redeemable non-controlling interest ( 1,211 )

Carrying Value of Redeemable Non-Controlling Interest as of March 31, 2023

Carrying Value of Redeemable Non-Controlling Interest as of June 30, 2023

NON-CONTROLLING INTEREST

16 unchanged sentences

Increase in additional paid-in capital 14,742

Net income (loss) attributable to non-controlling interest ( 338 )

Net loss attributable to non-controlling interest ( 445 )

Closing and direct costs incurred ( 146 )

Effect of foreign currency translation attributable to non-controlling interest ( 809 )

Carrying Value of Permanent Equity Non-Controlling Interest as of March 31, 2023

Carrying Value of Permanent Equity Non-Controlling Interest as of June 30, 2023

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