What changed in this filing

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Item 1A. Risk Factors

2023-08-08 compared with 2023-05-09 · 23 added, 27 removed, 576 unchanged (8% of the section changed)

5 unchanged sentences

Risks Related to COVID-19 and the Global Economy

The continued uncertain global economic environment and volatility in global credit, banking and financial markets could materially and adversely affect our business and results of operations.

The state of the global economy continues to be uncertain.

Additionally, recent high-profile bank failures have caused general uncertainty and concern regarding the liquidity adequacy of the banking industry.

As a result of these conditions, we or our manufacturers, vendors and customers might experience deterioration of our or their businesses, cash flow shortages and difficulty obtaining financing, which could result in interruptions or delays in the performance of any contracts, reductions and delays in customer purchases, delays in or the inability of the Company or our customers to obtain financing or of our customers to purchase our products, and bankruptcy of customers.

Furthermore, the constraints in the capital and credit markets may limit our ability to access the capital we need when we need it, on favorable terms or otherwise, or limit the ability of our customers to meet their liquidity needs, which could result in an impairment of their ability to make timely payments to us and reduce their demand for our products, adversely impacting our results of operations and cash flows.

This environment has also made it difficult for us to accurately forecast and plan future business activities.

The ongoing effects of the COVID-19 pandemic have disrupted and may continue to disrupt our business or the business of our customers or suppliers, and as such, may adversely affect our financial condition.

Our business, the businesses of our customers, and the businesses of our suppliers have been affected by the effects of the COVID-19 pandemic and the related governmental, business and community responses to it.

Our business, the businesses of our customers, and the businesses of our suppliers have been affected and may continue to be affected by the effects of the COVID-19 pandemic and the related governmental, business and community responses to it.

Additionally, the economies and financial markets of many countries have been impacted by the pandemic, and the longevity and significance of the resulting economic impact is currently unknown.

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For example, beginning in March 2022 and lasting through December 2022, various cities in China imposed lockdowns in response to China’s “zero-COVID” policy, leading to weaker consumer demand which has had, and we anticipate may continue to have, an adverse impact on China’s economy, on our customers and on our business.

For example, demand in our Mobile market was down during the second half of 2022, which we believe was largely attributable to the imposed lockdowns in China.

More recently, China announced a relaxation of its “zero-COVID” policies, which increases the risk of large outbreaks of COVID-19 in China, which could have an adverse impact on China’s economy, on our customers and on our business.

The spread of COVID-19 has caused us to modify our business practices from time-to-time, including implementing work-from-home policies and limiting travel by our employees.

Our Shanghai and Shenzhen offices have been alternating between full in-person staffing and remote staffing as local ordinances continue to change in response to new outbreaks.

Outbreaks and various strict actions by the Chinese government in response have impacted and are expected to continue to impact the ability of our sales team in China to make in-person sales calls to current and potential customers at the same volume as they did prior to the outbreak of the pandemic.

While China has relaxed its "zero-COVID" policies, the risk of an outbreak is now higher, which could also require us to change our practices and disrupt our business.

Our offices and supply chain partners in Taiwan, and our offices in Japan and North America are fully operational.

For example, demand in our Mobile market was down during the second half of 2022 and the first quarter of 2023, which we believe was largely attributable to the imposed lockdowns in China.

The spread of COVID-19 may still cause us to modify our business practices from time-to-time, including implementing work-from-home policies and limiting travel by our employees.

Currently all of our offices are operating at full capacity and without restrictions, but new outbreaks and various strict actions mandated in response by the local governments with jurisdiction over those offices may require us to reinstate more strict rules, impacting for example the ability of our sales team in China to make in-person sales calls to current and potential customers at the same volume as they did prior to the outbreak of the pandemic.

The Company has taken in the past and may continue to take in the future, certain mitigation measures.

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For example, the Company experienced some mild supply chain disruption in the first quarter of 2022.

The future impact of the pandemic on our business, as well as the business of our suppliers and customers, and the additional measures that may be needed in response to it, including any new cost-saving measures, will depend on many factors beyond our control and knowledge.

Our supply chain partners are currently fully operational.

The future impact of the COVID-19 pandemic, as well as any new pandemic that may arise, on our business, as well as the business of our suppliers and customers, and the additional measures that may be needed in response to it, including any new cost-saving measures, will depend on many factors beyond our control and knowledge.

We will continually monitor the situation to determine what actions may be necessary or appropriate to address the impact of the pandemic, which may include actions mandated or recommended by federal, state or local authorities.

The continued uncertain global economic environment and volatility in global credit, banking and financial markets could materially and adversely affect our business and results of operations.

The state of the global economy continues to be uncertain.

Additionally, recent high-profile bank failures have caused general uncertainty and concern regarding the liquidity adequacy of the banking industry.

Furthermore, the constraints in the capital and credit markets, may limit our ability to access the capital we need when we need it, on favorable terms or otherwise, or limit the ability of our customers to meet their liquidity needs, which could result in an impairment of their ability to make timely payments to us and reduce their demand for our products, adversely impacting our results of operations and cash flows.

This environment has also made it difficult for us to accurately forecast and plan future business activities.

Company Specific Risks

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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 for the first three months of 2023 represented 30% of revenue.

Sales to our top distributor for the first six months of 2023 represented 41% of revenue.

Sales to our top distributor for the years ended December 31, 2022 and 2021 represented 29% and 27% of revenue, respectively.

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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 87%, 76% and 76% of revenue for the three months ended March 31, 2023 and the years ended December 31, 2022 and 2021, respectively.

As of March 31, 2023, we had two accounts that each represented 10% or more of accounts receivable.

As of December 31, 2022, we had four accounts that each represented 10% or more of accounts receivable.

Additionally, revenue attributable to our top five end customers represented 85%, 76% and 76% of revenue for the six months ended June 30, 2023 and the years ended December 31, 2022 and 2021, respectively.

As of June 30, 2023 and December 31, 2022 we had four accounts that each represented 10% or more of accounts receivable.

All of the orders included in our backlog are cancellable.

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Sales outside the U.S.

accounted for approximately 99%, 95% and 97% of revenue for the three months ended March 31, 2023 and the years ended December 31, 2022 and 2021, respectively.

accounted for approximately 100%, 95% and 97% of revenue for the six months ended June 30, 2023 and the years ended December 31, 2022 and 2021, respectively.

We anticipate that sales outside the U.S.

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We compete with specialized and diversified electronics and semiconductor companies that offer display processors or scaling components including:

Actions Microelectronics Co., Ltd., ARM Holdings PLC, Dolby Laboratories, Inc., Egis Technology Inc., Hisilicon Technologies Co., Ltd., i-Chips Technology Inc., Lattice Semiconductor Corporation, MediaTek Inc., Novatek Microelectronics Corp., NVIDIA Corporation, Qualcomm Incorporated, Realtek Semiconductor Corp., Renesas Electronics America Inc., Socionext Inc., Solomon Systech (International) Ltd., STMicroelectronics N.V., Sunplus Technology Co., Ltd., Synaptics Incorporated, Texas Instruments Incorporated, Unisoc Communications, Inc., and other companies.

Potential and current competitors may include diversified semiconductor manufacturers and the semiconductor divisions or affiliates of some of our customers, including:

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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 March 31, 2023, we held 286 patents and had 18 patent applications pending for protection of our significant technologies.

As of June 30, 2023, we held 280 patents and had 18 patent applications pending for protection of our significant technologies.

Competitors in both the U.S.

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Further, the COVID‑19 outbreak, the tensions between the United States and China, or other geopolitical forces, including war, could negatively impact our currently planned projects and investments in the PRC, including the Listing.

Additionally, pursuant to our August 2021 Capital Increase Agreement and the agreements for the employee-owned entities that have invested in PWSH (the “ESOP”), PWSH agreed to attempt to complete all requirements to qualify for a Listing such that the Listing is consummated prior to a certain date (for the private equity and strategic investors ("Investors"), June 30, 2024, and for the employee-owned entities (“ESOP”), December 31, 2024).

If PWSH has not consummated the Listing before those dates, or if it seriously violates certain other restructuring actions required by the Capital Increase Agreement such that a Listing by such dates becomes impossible, the respective purchasers may elect to require that we repurchase the purchaser’s respective equity interest for a price equal to the initial purchase price paid by the purchaser (and for the ESOP, plus annual simple interest at a rate of 5%).

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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 $25.0 million from time to time through Cowen and Company, LLC, as our agent.

Through March 31, 2023, we sold an aggregate of 1,808,484 shares of our common stock under this at the market offering.

Through June 30, 2023, we sold an aggregate of 1,808,484 shares of our common stock under this at the market offering.

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

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Under the Nasdaq Marketplace Rules our common stock must maintain a minimum price of $1.00 per share for continued inclusion on the Nasdaq Global Market.

Our stock price was $1.37 on March 20, 2023, and we cannot guarantee that our stock price will remain at or above $1.00 per share.

Our stock price was $1.37 on May 4, 2023, and we cannot guarantee that our stock price will remain at or above $1.00 per share.

If the price drops below $1.00 per share, our stock could become subject to delisting, and we may seek shareholder approval for a reverse stock split, which in turn could produce adverse effects and may not result in a long-term or permanent increase in the price of our common stock.

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or (iii) a minimum of $10.0 million in shareholders' equity, at least 750,000 publicly held shares, at least $5.0 million in market value of publicly held shares and at least two registered and active market makers.

As of March 31, 2023, we were in compliance with these listing requirements.

As of June 30, 2023, we were in compliance with these listing requirements.

Our stock price is volatile and we believe that we continue to remain susceptible to the market value of our listed securities and/or the market value of our publicly held securities falling below $50.0 million and $5.0 million, respectively.

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PIXELWORKS, INC.

May 9, 2023 /s/ Haley F.

August 8, 2023 /s/ Haley F.

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