What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-03-13 compared with 2024-03-13 · 39 added, 44 removed, 539 unchanged (13% of the section changed)

64 unchanged sentences

Any of the foregoing would negatively affect our financial condition and results of operations.

From time to time, we may have the need to execute restructuring plans to make the operation of the Company more efficient.

From time to time, we may have the need to execute restructuring plans to make the operation of the Company more efficient, such as the February 2025 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.

18 unchanged sentences

Additionally, revenue attributable to our top five end customers represented 88% and 87% of revenue for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, we had three accounts that each represented 10% or more of accounts receivable.

As of December 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.

All of the orders included in our backlog are cancelable.

All of the orders included in our backlog are cancellable.

A reduction, delay or cancellation of orders from one or more of our significant customers, or a decision by one or more of our significant customers to select products manufactured by a competitor or to use its own internally-developed semiconductors, would significantly and negatively impact our revenue.

16 unchanged sentences

Any transactions, if consummated, may consume a material portion of our working capital or require the issuance of equity securities that may result in dilution to existing shareholders.

In addition, any proceeds received by PWSH, one of our Chinese subsidiaries, from the private placement of shares (including the transaction that closed in August of 2021) or in connection with the future potential listing of PWSH shares on the STAR Market in Shanghai, are subject to certain PRC laws and regulations that may make it difficult, if not impossible, to use such proceeds to fund those operations of Pixelworks that are not part of PWSH.

In addition, any proceeds received by PWSH, one of our Chinese subsidiaries, from the private placement of shares or in connection with the future potential listing of PWSH shares on the STAR Market in Shanghai, are subject to certain PRC laws and regulations that may make it difficult, if not impossible, to use such proceeds to fund those operations of Pixelworks that are not part of PWSH.

As a result, it is unlikely that funds raised or generated by PWSH will be readily distributable to Pixelworks.

33 unchanged sentences

Our Asian operations require significant management attention and resources, and we are subject to many risks associated with operations in Asia, including, but not limited to:

• outbreaks of health epidemics in China or other parts of Asia, such as the recent COVID-19 pandemic;

• the continued effect of health epidemics in China or other parts of Asia, such as the COVID-19 pandemic;

• difficulties in managing international distributors and manufacturers due to varying time zones, languages and business customs;

50 unchanged sentences

Our reported financial results may be materially and adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United Sates are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles.

Generally accepted accounting principles in the United Sates are subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles.

A change in these principles or interpretations could have a significant effect on our reported financial results and could materially and adversely affect the transactions completed before the announcement of a change.

2 unchanged sentences

If we are unable to maintain effective disclosure controls and internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports.

For example, in the second quarter of 2019, we identified a material weakness in our internal controls over financial reporting related to the review of aged liabilities for possible extinguishment due to the expiration of the statute of limitation, which was remediated as of December 31, 2019.

We have, in the past, and may, in the future, identify material weaknesses in our internal controls over financial reporting.

Additionally, if any new internal control procedures which may be adopted or our existing internal control procedures are deemed inadequate, or if we identify additional material weaknesses in our disclosure controls or internal controls over financial reporting in the future, we will be unable to assert that our internal controls are effective.

24 unchanged sentences

Continued compliance with regulatory and accounting requirements will be challenging and will require significant resources.

We spend a significant amount of management time and external resources to comply with changing laws, regulations and standards relating to corporate governance and public disclosure, including evolving SEC rules and regulations, Nasdaq Global Market rules, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002, which requires management’s annual review and evaluation of internal control over financial reporting.

Failure to comply with these laws and rules could lead to investigation by regulatory authorities, de-listing from the Nasdaq Global Market, or penalties imposed on us.

We spend a significant amount of management time and external resources to comply with changing laws, regulations and standards relating to corporate governance and public disclosure, including evolving SEC rules and regulations, Nasdaq Capital Market rules, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002, which requires management’s annual review and evaluation of internal control over financial reporting.

Failure to comply with these laws and rules could lead to investigation by regulatory authorities, de-listing from the Nasdaq Capital Market, or penalties imposed on us.

Regulations related to conflict minerals may adversely impact our business.

208 unchanged sentences

In addition, the Company faces certain liquidity risks from its operations in China.

PWSH has, in the past, and may decide in the future, to sell shares of its stock, such as in a private placement similar to that which closed in August 2021, in an initial public offering on a stock exchange located in China, such as the STAR Market, or otherwise.

PWSH has, in the past, and may decide in the future, to sell shares of its stock, such as in a private placement, in an initial public offering on a stock exchange located in China, such as the STAR Market, or otherwise.

In addition, PWSH may, in the future, become profitable.

18 unchanged sentences

The PRC government at times will exercise significant oversight and discretion over the conduct of business in the PRC and may intervene or influence business operations as the government deems appropriate to further regulatory, political and societal goals.

Our Chinese subsidiaries are required to obtain certain permits and licenses from certain PRC government agencies to operate businesses in China, such as business licenses from the SAMR, registrations with PRC tax authorities, filings with PRC customs for carrying out export and import business activities and registrations with China’s State Administration of Foreign Exchange (SAFE) for the ability to receive funds from offshore entities and transfer funds to offshore entities.

Our Chinese subsidiaries are required to obtain certain permits and licenses from certain PRC government agencies to operate businesses in China, such as business licenses from the State Administration for Market Regulation ("SAMR"), registrations with PRC tax authorities, filings with PRC customs for carrying out export and import business activities and registrations with China’s State Administration of Foreign Exchange (SAFE) for the ability to receive funds from offshore entities and transfer funds to offshore entities.

The Company has determined, in consultation with its general counsel, that we are not currently required to obtain permissions or approvals from the CAC.

4 unchanged sentences

While we do not believe we are subject to these regulatory actions or statements, as we have not implemented the kind of monopolistic behavior that is the target of these rules, and our business does not involve large-scale collection of user data, implicate cybersecurity, or involve any other type of restricted industry, and therefore these regulatory actions and statements do not impact our ability to conduct our business, accept foreign investments into PWSH, or list our PWSH shares on the STAR Market, there is no guarantee that the PRC government will refrain from releasing regulations or policies regarding the Company’s industry that could adversely affect our business, financial condition, results of operations or ability to list PWSH shares on the STAR Market.

If we are unable to negotiate for an extension or cancellation, we may be required to re-purchase the shares of PWSH held by those investors who elect for repurchase under the provisions of the August 2021 Capital Increase Agreement or the agreements governing the employee-owned entities known as “ESOPs,” which would materially and adversely impact our cash position.

Pursuant to the August 2021 Capital Increase Agreement and the agreements governing the five employee-owned entities that have invested in PWSH (each an “ESOP”), if PWSH has not consummated an initial public offering of its shares on a China financial market prior to a certain date (for the private equity and strategic investors (collectively, the "Investors"), June 30, 2024, and for the ESOPs, December 31, 2024), the Investors and the ESOPs each have an independent right to elect to have their shares repurchased 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%).

PWSH has not consummated the Listing as of December 31, 2024.

Therefore, if we are unable to negotiate an extension or cancellation of these provisions, following those deadlines one or more of the respective purchasers may elect to require a repurchase.

We would be required to use cash to effect these repurchases, which in turn would negatively impact our cash position and plans for growth.

If we are unable to implement our strategy to expand our PRC operations, including the positioning of PWSH to qualify and seek an initial public offering on the STAR Market, our ability to access capital, customers, and talent in China could suffer, which in turn may materially and adversely affect our worldwide growth and revenue potential.

In August 2021, we announced our Strategic Plan to transform PWSH into a profit center for our Mobile and Home & Enterprise businesses to improve our access to capital, customers, and talent in China.

As part of this strategic plan, we intend to qualify PWSH to file an application for an initial public offering on the STAR Market to further improve our access to capital markets and to fund growth.

As part of this Strategic Plan, we have intended to qualify PWSH to file an IPO application to further improve our access to capital markets and to fund growth.

We may not be successful in the implementation of our Strategic Plan, and we may not be able to complete the Listing for a number of reasons, including those related to the risks we face associated with our operations in China as detailed separately above, many of which are outside our control.

1 unchanged sentence

Similarly, the Listing application may be denied or delayed by the SSE in its discretion.

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 (“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 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%).

As noted above, various elements in the Listing process are outside our control or may be subject to conditions that are unacceptable to us, and if we fail to obtain the Listing, the provisions of the Capital Increase Agreement would require a use of cash for purposes not otherwise planned for, which in turn would negatively impact our plans for growth and our cash position.

Further, 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.

The CSRC and the SSE have recently tightened the standards for the STAR Market and are currently advising companies that are not yet profitable under China generally accepted accounting principles, or China GAAP, standards against filing an IPO application in the present environment.

The Company believes this is in large part due to the current economic conditions in China and the recent performance of companies already listed on the STAR Market that were not profitable at the time of their IPO.

PWSH is not currently profitable under China GAAP standards.

The CSRC and the SSE may relax the standards, but there is no guarantee that this will happen in any particular time frame.

The Company continues to prepare our application so it is ready to file once the situation changes or PWSH achieves profitability under China GAAP standards, but there can be no assurances that the Listing will occur at all.

PWSH remains prepared to re-engage with its advisors and the PRC's government agencies to file an application once the situation changes or PWSH achieves profitability under China GAAP standards, but there can be no assurances that the Listing will occur at all.

In the interim, PWSH may require additional funding to augment its PRC operations, and we cannot give any assurance that such capital will be available on terms acceptable to us.

19 unchanged sentences

In addition, PWSH may engage in capital raising activities in the future that could further dilute Pixelworks’ ownership interest.

The STAR Market is relatively new, and as a result, it is difficult to predict the effect of the proposed Listing, which may in turn negatively affect the price of our common stock on the Nasdaq Global Market.

The CSRC initially launched the STAR Market in June 2019 and trading on that market began in July 2019.

No assurance can be given regarding the effect of the Listing on the market price of PWSH shares or on the price of our common stock on the Nasdaq Global Market.

No assurance can be given regarding the effect of the Listing on the market price of PWSH shares or on the price of our common stock on the Nasdaq Capital Market.

The market price of the PWSH shares and Pixelworks common stock may be volatile or may decline for reasons other than the risk and uncertainties described above, as the result of investor negativity or uncertainty with respect to the proposed Listing.

1 unchanged sentence

If PWSH completes the Listing, it will be subject to accounting, disclosure, and other regulatory requirements of the CSRC and the STAR Market.

At the same time, Pixelworks will remain subject to accounting, disclosure, and other regulatory requirements of the SEC and the Nasdaq Global Market.

At the same time, Pixelworks will remain subject to accounting, disclosure, and other regulatory requirements of the SEC and the Nasdaq Capital Market.

As a result, Pixelworks and PWSH periodically will disclose information simultaneously pursuant to differing laws and regulations.

1 unchanged sentence

Differing disclosures could lead to confusion or uncertainty among investors in the publicly traded shares of one or both companies.

Differences between the price of PWSH shares on the STAR Market and the price of Pixelworks common stock on Nasdaq Global Market could lead to increased volatility, as some investors seek to arbitrage price differences.

Differences between the price of PWSH shares on the STAR Market and the price of Pixelworks common stock on Nasdaq Capital Market could lead to increased volatility, as some investors seek to arbitrage price differences.

Additionally, news about PWSH may affect the price of Pixelworks’ common stock, and vice versa, creating additional uncertainty and volatility.

26 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.

For example, in December 2020, we completed a private placement of 3,200,000 shares of common stock to certain accredited investors at a purchase price of $2.071 per share.

The issuance and sale of the shares in the private placement had a dilutive impact on our existing shareholders.

Additionally, also in December 2020, we completed the sale of 4,900,000 shares of common stock in an underwritten registered offering and an additional 735,000 shares were issued pursuant to the 30-day over-allotment option exercised by the underwriter, at a price to the public of $2.45 per share.

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 December 31, 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 shareholders.

For example, as of December 31, 2024, pursuant to our 2024 ATM Program (as defined below), we sold an aggregate of 358,272 shares of our common stock.

The issuance and sale of additional shares of our common stock will have a dilutive impact on our existing shareholders.

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

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 or another offering could have the effect of depressing the market price of our common stock or increasing the volatility thereof.

Further, the issuance and sale of, or the perception that we may issue and sell, additional shares of common stock pursuant to an “at the market” equity offering program, a private placement or another offering 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.

2 unchanged sentences

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.

We may be unable to maintain compliance with Nasdaq Marketplace Rules which could cause our common stock to be delisted from the Nasdaq Global Market.

We may be unable to regain compliance with Nasdaq Listing Rules, which could cause our common stock to be delisted from the Nasdaq Capital Market.

This could result in the lack of a market for our common stock, cause a decrease in the value of our common stock, and adversely affect our business, financial condition and results of operations.

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 $2.91 on March 8, 2024 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.

Further, for continued listing on the Nasdaq Global Market we must have at least 400 total shareholders.

In addition to the minimum $1.00 per share and 400 total shareholders requirements, the Nasdaq Global Market has other continued listing requirements, and we must meet all of the criteria under at least one of the following three standards:

(i) a minimum of $50.0 million in total asset value and $50.0 million in revenues in the latest fiscal year or in two of the last three fiscal years, at least 1.1 million publicly held shares, at least $15.0 million in market value of publicly held shares and at least four registered and active market makers (as such term is defined by the Nasdaq Marketplace Rules);

(ii) a minimum of $50.0 million in market value of listed securities, at least 1.1 million publicly held shares, at least $15.0 million in market value of publicly held shares and at least four registered and active market makers;

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 December 31, 2023, we were in compliance with these listing requirements.

Under the Nasdaq Listing Rules, we must maintain a minimum price of $1.00 per share for continued listing on Nasdaq.

Our common stock price is currently and may in the future be below the minimum bid price for continued listing on Nasdaq.

On September 11, 2024, we received a letter (the “Bid Price Deficiency Notice”) from the listing qualifications department staff of Nasdaq indicating that we were not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”) because our common stock failed to maintain a minimum closing bid price of $1.00 per share for 30 consecutive business days, and we had until March 10, 2025 to regain compliance with the Bid Price Requirement.

On February 27, 2025 we submitted an application to transfer to the Nasdaq Capital Market, which was approved and effective as of March 11, 2025.

In connection with this transfer, we provided a written notice to Nasdaq that we intend to cure the Bid Price Requirement during our second compliance period, including by effective a reverse stock split if necessary.

As a result, we have until September 6, 2025 to regain compliance with the Bid Price Requirement, which requires the closing bid price of our common stock to be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to September 6, 2025.

In addition to the minimum $1.00 per share continued listing requirements, the Nasdaq Capital Market has other continued listing requirements, including the requirement that we have at least 300 total shareholders, and we must meet all of the criteria under at least one of the following three standards:

(i) a minimum of $500,000 in net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years), at least 500,000 publicly held shares, at least $1.0 million in market value of publicly held shares and at least two registered and active market makers (as such term is defined by the Nasdaq Listing Rules);

(ii) a minimum of $35.0 million in market value of listed securities, at least 500,000 publicly held shares, at least $1.0 million in market value of publicly held shares and at least two registered and active market makers;

minimum of $2.5 million in shareholders' equity, at least 500,000 publicly held shares, at least $1.0 million in market value of publicly held shares and at least two registered and active market makers.

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 $35.0 million and $1.0 million, respectively.

Accordingly, we cannot assure you that we will be able to continue to comply with Nasdaq Global Market’s listing requirements.

Should we be unable to remain in compliance with these requirements, our stock could become subject to delisting.

If our common stock is delisted, trading of the stock will most likely take place on an over-the-counter market established for unlisted securities.

An investor is likely to find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors may not buy or sell our common stock due to difficulty in accessing over-the-counter markets, or due to policies preventing them from trading in securities not listed on a national exchange or other reasons.

For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations by limiting our ability to attract and retain qualified executives and employees and limiting our ability to raise capital.

Accordingly, we cannot assure you that we will be able to regain compliance with the Bid Price Requirement or continue to comply with the Nasdaq Capital Market’s other continued listing requirements.

If our common stock is delisted, it would likely have an adverse effect on the liquidity of our common stock, decrease the market price of our common stock, result in the potential loss of confidence by investors, suppliers, customers, and employees, and fewer business development opportunities, and adversely affect our ability to obtain financing for our continuing operations.

The anti-takeover provisions of Oregon law and in our articles of incorporation could adversely affect the rights of the holders of our common stock, including by preventing a sale or takeover of us at a price or prices favorable to the holders of our common stock.

10 unchanged sentences

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 1A. Risk Factors