What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-13 compared with 2024-03-13 · 150 added, 141 removed, 720 unchanged (29% of the section changed)

1 unchanged sentence

The following financial statements and reports are included in Item 8:

Reports of Independent Registered Public Accounting Firms (PCAOB IDS:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2024 and 2023

8 unchanged sentences

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Pixelworks, Inc.

and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Pixelworks, Inc.

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the two years ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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.

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

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

13 unchanged sentences

We evaluated the appropriateness of management’s approach and tested the completeness and accuracy of the underlying data.

• We evaluated the reasonableness of management’s significant assumptions related to future demand and market conditions considering current and past results, industry reports, and inquiries with management and employees outside of accounting function.

• We assessed management’s ability to forecast by comparing the actual results with the respective forecast for the same period.

3 unchanged sentences

March 13, 2025

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

PIXELWORKS, INC.

Portland, Oregon

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Pixelworks, Inc.

and its subsidiaries (the "Company") as of December 31, 2022, and the related consolidated statements of operations, comprehensive loss, shareholders' equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("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 the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

/s/ Armanino LLP

San Ramon, California

March 8, 2023

We began serving as the Company's auditor in 2020.

In 2023, we became the predecessor auditor.

PIXELWORKS, INC.

CONSOLIDATED BALANCE SHEETS

47 unchanged sentences

Selling, general and administrative (3) 20,697 23,467

Restructuring 1,608 —

Total operating expenses 53,642 54,345

Loss from operations ( 31,357 ) ( 28,636 )

Government subsidies received 1,100 —

Interest income and other, net 1,198 2,050

Total other income, net 2,298 2,050

Loss before income taxes ( 29,059 ) ( 26,586 )

Provision (benefit) for income taxes 357 ( 884 )

Provision for income taxes 478 357

Net loss ( 29,537 ) ( 26,943 )

Net (income) loss attributable to non-controlling interests and redeemable non-controlling interests 767 ( 797 )

Net loss attributable to non-controlling interests and redeemable non-controlling interests 818 767

Net loss attributable to Pixelworks, Inc.

5 unchanged sentences

Stock-based compensation $ 53 $ 89

Amortization of acquired intangible assets — 72

Restructuring 16 —

(2) Includes stock-based compensation 1,239 1,866

1 unchanged sentence

Stock-based compensation 2,666 2,841

Amortization of acquired intangible assets — 18

See accompanying notes to consolidated financial statements.

9 unchanged sentences

Comprehensive loss ( 28,222 ) ( 25,743 )

comprehensive (income) loss attributable to non-controlling interest and redeemable non-controlling interests 767 ( 797 )

comprehensive loss attributable to non-controlling interest and redeemable non-controlling interests 818 767

Total comprehensive loss attributable to Pixelworks, Inc.

12 unchanged sentences

Reversal of uncertain tax positions ( 81 ) ( 2 )

Amortization of acquired intangible assets — 90

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property and equipment ( 3,760 ) ( 3,832 )

Asset related government subsidies received 641 —

Purchases of licensed technology — ( 156 )

1 unchanged sentence

Cash flows from financing activities:

Net proceeds from issuance of equity interest to non-controlling interest 14,596 10,738

Payments on asset financings ( 1,308 ) ( 1,370 )

Proceeds from issuances of common stock under employee equity incentive plans 180 299

Net proceeds from issuance of equity interest to certain entities owned by employees — 1,407

Net cash provided by financing activities 13,525 11,075

Net proceeds from "at the market" equity offering 157 —

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

Net cash provided by (used in) financing activities ( 971 ) 13,525

Net decrease in cash and cash equivalents ( 23,897 ) ( 9,277 )

21 unchanged sentences

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

Net income attributable to non-controlling interest — — — — 171 171

Net loss attributable to non-controlling interest — — — — ( 624 ) ( 624 )

Other — — — — 6 6

Net loss attributable to Pixelworks, Inc.

1 unchanged sentence

Foreign pension adjustment, net of tax of $ 2

— — 34 — — 34

Balance as of December 31, 2023 57,126,680 $ 486,324 $ 3,378 $ ( 477,161 ) $ 24,257 $ 36,798

2 unchanged sentences

Foreign currency translation adjustment — — 1,207 — ( 389 ) 818

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

"At the market" equity offering 358,272 157 — — — 157

Net loss attributable to non-controlling interest — — — — ( 818 ) ( 818 )

Other — — — — 6 6

Net loss attributable to Pixelworks, Inc.

1 unchanged sentence

Foreign pension adjustment, net of tax of $ 27

— — 108 — — 108

Balance as of December 31, 2024 59,726,734 $ 490,619 $ 4,693 $ ( 505,880 ) $ 23,050 $ 12,482

8 unchanged sentences

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".

During 2021, we engaged in a strategic plan to re-align our Mobile and Home & Enterprise businesses to improve their focus on their Asia-centered customers and employee stakeholders.

During 2021, we engaged in a strategic plan to re-align our Mobile and Home & Enterprise businesses to improve their focus on their Asia-centered customers and employee stakeholders (the "Strategic Plan").

One of our Chinese subsidiaries, Pixelworks Semiconductor Technology (Shanghai) Co., Ltd.

9 unchanged sentences

This subsidiary does not operate under PWSH, but rather is owned by Pixelworks through our Oregon limited liability company, Pixelworks Semiconductor Technology Company, LLC.

We continue to prepare PWSH to file an application for an initial public offering of PWSH shares on the Shanghai Stock Exchange’s Science Technology Innovation Board, known as the STAR Market (the “Listing”) once market conditions in China are supportive.

We believe that the Listing will have many benefits, including improved access to new capital markets and the funding of PWSH’s growth worldwide.

More than a majority of our operations are in China, but our executive officers and all of our directors but one are located in the United States (he resides in Singapore).

We are neither a PRC operating company nor do we conduct our operations in China through the use of variable interest entities.

We continue to believe that an initial public offering of PWSH shares on the Shanghai Stock Exchange’s Science Technology Innovation Board, known as the STAR Market (the “Listing”) will have many benefits, including improved access to new capital markets and the funding of PWSH’s growth worldwide.

The process of going public on the STAR Market is lengthy and includes several periods of review by various government agencies of the People’s Republic of China (“PRC”), such as the Shanghai Stock Exchange (“SSE”) and the China Securities Regulatory Commission (“CSRC”).

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 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.

2 unchanged sentences

public company.

More than a majority of our operations are in China, but our executive officers and all of our directors but one are located in the United States (and he resides in Singapore).

We are neither a PRC operating company nor do we conduct our operations in China through the use of variable interest entities.

Pixelworks continues to work with Morgan Stanley as financial advisor to assist with reviewing potential alternative strategic options specific to inbound interest in the Pixelworks Shanghai subsidiary.

Our consolidated financial statements include the accounts of Pixelworks and its subsidiaries.

5 unchanged sentences

The preparation of consolidated financial statements in conformity with U.S.

generally accepted accounting principles ("U.S.

GAAP requires us to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes.

Our significant estimates and judgments include those related to revenue recognition, valuation of excess and obsolete inventory, lives and recoverability of equipment and other long-lived assets, valuation of goodwill, stock-based compensation and income taxes.

Our significant estimates and judgments include those related to revenue recognition, valuation of excess and obsolete inventory, useful lives and recoverability of equipment and other long-lived assets, valuation of goodwill, valuation of share-based payments, income taxes, litigation and other contingencies.

The actual results experienced could differ materially from our estimates.

8 unchanged sentences

We determine the allowance based on historical experience and current economic conditions, among other factors.

Allowances for doubtful accounts were not material as of December 31, 2023 or December 31, 2022.

Allowances for credit losses were not material as of December 31, 2024 or December 31, 2023.

We adopted ASC 326 using a modified retrospective approach which requires a cumulative effect adjustment as of the beginning of the reporting period in which the guidance is adopted.

27 unchanged sentences

An entity has an unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the quantitative goodwill impairment test.

We performed a qualitative assessment during the fourth quarter of 2023 and concluded that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

We performed a qualitative assessment as of November 30, 2024 and concluded that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

As a result, we concluded that a quantitative impairment test was not required and that goodwill was not impaired.

40 unchanged sentences

The amendments do not change the existing guidance on how a public entity identifies and determines its reportable segments.

ASU 2023-07 will become effective for us in the year ending December 31, 2024, and early adoption is permitted.

The Company adopted ASU 2023-07 during the year ended December 31, 2024.

The requirements of this ASU are disclosure-related and did not have an impact on the Company’s consolidated financial position and results of operations.

See "Note 14.

Segment Information", for the updated segment disclosures as a result of adopting this ASU.

In December 2023, the FASB issued ASU No.

2023-09, Improvements To Income Tax Disclosures ("ASU 2023-09"), which includes new and updated income tax disclosures, including disaggregation of information in the rate reconciliation and income taxes paid.

ASU 2023-09 will become effective for us in the year ending December 31, 2026.

We are evaluating the impact that the adoption of ASU 2023-09 will have on our financial position, results of operations and cash flows.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures ("ASU 2024-03"), requiring disclosures of certain additional expense information on an annual and interim basis, including, among other items, the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each income statement expense caption, as applicable.

ASU 2024-03 will become effective for us in the year ending December 31, 2028.

We are evaluating the impact that the adoption of ASU 2024-03 will have on our financial position, results of operations and cash flows.

BALANCE SHEET COMPONENTS

11 unchanged sentences

Equipment, furniture and fixtures $ 10,642 $ 10,118

Software 5,613 6,739

Tooling 7,335 5,081

Software 6,291 5,613

Leasehold improvements 1,714 1,707

12 unchanged sentences

Accrued liabilities and current portion of long-term liabilities consist of the following:

Accrued payroll and related liabilities $ 4,286 $ 3,632

Operating lease liability, current $ 2,036 $ 2,381

Accrued payroll and related liabilities 1,937 4,286

Current portion of accrued liabilities for asset financings 1,156 1,124

Accrued costs related to restructuring 191 —

Other accrued expenses 1,261 1,901

11 unchanged sentences

Cash equivalents:

Money market funds $ 950 $ — $ — $ 950

Certificates of deposit $ 5,029 $ — $ — $ 5,029

Money market funds 204 — — 204

As of December 31, 2023:

Cash equivalents:

Money market funds $ 18,836 $ — $ — $ 18,836

Certificates of deposit $ 10,000 $ — $ — 10,000

Money market funds 950 — — 950

We primarily use the market approach to determine the fair value of our financial instruments.

1 unchanged sentence

We have currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with U.S.

RESTRUCTURING

In June 2024, we executed a restructuring plan to make the operation of the Company more efficient (the "Plan").

The Plan included an approximately 16 % reduction in workforce, primarily in the areas of operations, research and development, sales, marketing and administration.

Total restructuring expense included in our consolidated statements of operations for the years ended December 31, 2024 and 2023 is comprised of the following:

Year ended December 31,

Employee severance and benefits

Total restructuring expense

Included in cost of revenue

Included in operating expenses

The following is a rollforward of the accrued liabilities related to restructuring for the year ended December 31, 2024:

Balance as of December 31, 2023 Expensed Payments

Balance as of

December 31, 2024

Employee severance and benefits

$ — $ 1,624 $ ( 1,433 ) $ 191

Total accrued costs related to restructuring

$ — $ 1,624 $ ( 1,433 ) $ 191

We determine if an arrangement is a lease at inception.

21 unchanged sentences

Total operating lease liabilities $ 3,486

As of December 31, 2023, the Company had no operating lease liabilities that had not commenced.

As of December 31, 2024, we had $ 234 in 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.

34 unchanged sentences

Year ended December 31,

Mobile market $ 29,416 $ 21,160

Home & Enterprise market $ 28,624 $ 29,187

Mobile market 13,667 29,416

Total IC sales $ 42,291 $ 58,603

8 unchanged sentences

The Company has elected the practical expedient of not accounting for significant financing components if the period between revenue recognition and when the customer pays for the product or service is one year or less.

The aggregate amount of the transaction price allocated to unsatisfied performance obligations with an original expected duration of greater than one year is $ 110 , which we expect to recognize ratably over the next 11 months.

The aggregate amount of the transaction price allocated to unsatisfied performance obligations with an original expected duration of greater than one year is zero .

The following table presents the contract assets and contract liabilities recorded on the consolidated balance sheets as of December 31, 2024, 2023 and 2022:

10 unchanged sentences

Interest income $ 1,267 $ 1,950

Other income 125 80

Government subsidies received $ 1,100 $ —

Interest expense ( 69 ) ( 25 )

Other income — 125

Total interest income and other, net $ 2,298 $ 2,050

The increase in interest income in 2023 compared to 2022 is due to increased interest earned on our cash and cash equivalents balance due to the increase in the interest rate available throughout the full year in 2023 compared to the full year in 2022.

The increase in interest income and other, net in 2024 compared to 2023 is due to an increase in government subsidies received, partially offset by a decrease in interest earned on our cash and cash equivalents balance due to the decrease in our cash and cash equivalents balance in 2024 compared to 2023.

Additional information on the government subsides received is provided in "Note 17:

Government Grants", which is incorporated by reference into this section.

RESEARCH AND DEVELOPMENT

4 unchanged sentences

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

We recognized offsets to research and development expense of $ 3,243 and $ 4,338 during the years ended December 31, 2023 and 2022, respectively.

We recognized offsets to research and development expense of $ 3,243 during the year ended December 31, 2023.

There were no reductions to research and development expense related to co-development arrangements for the year ended December 31, 2024.

Current and Deferred Income Tax Expense

10 unchanged sentences

Federal 72 292

Foreign 9 792

Total deferred 101 301

6 unchanged sentences

Change in valuation allowance ( 30 ) ( 43 )

Tax contingencies, net of reversals — 13

Corporate restructuring — ( 11 )

Expiration of tax attributes ( 7 ) ( 5 )

Permanent items 19 ( 2 )

Research and development credits 1 4

Research and development credits and deductions 14 20

Stock-based compensation ( 1 ) ( 3 )

Adjustment to deferred balances ( 2 ) 18

Other 1 ( 1 )

Effective income tax rate ( 2 ) % ( 1 ) %

17 unchanged sentences

Net deferred tax assets $ 12 $ 140

We continue to record a full valuation allowance against our U.S.

Canada and China net deferred tax assets as of December 31, 2023 and 2022, as it is not more likely than not that we will realize a benefit from these assets in a future period.

We continue to record a full valuation allowance against our U.S., Canada and China net deferred tax assets as of December 31, 2024 and 2023, as it is not more likely than not that we will realize a benefit from these assets in a future period.

During the fourth quarter of 2024, we established a valuation allowance against the carryforwards of our California LLC in connection with closing this entity.

We have not provided a valuation allowance against our other net deferred tax assets as we have concluded it is more likely than not that we will realize a benefit from these assets in a future period because our subsidiaries in these jurisdictions are cost-plus taxpayers.

The net valuation allowance increased $ 11,034 for the year ended December 31, 2023 and decreased $ 4,431 for the year ended December 31, 2022.

The net valuation allowance increased $ 8,946 and $ 11,034 for the years ended December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024, we had federal, state and foreign net operating loss carryforwards of $ 155,630 , $ 17,402 and $ 133,215 respectively, which will begin to expire in 2025 with $ 31,705 of our federal net operating loss carryforward lasting indefinitely.

5 unchanged sentences

We are not indefinitely reinvested in the earnings of our subsidiaries in China TrueCut, Japan and Taiwan and have accrued tax on the future repatriation of cash for jurisdictions where withholding taxes would apply .

The Tax Cuts and Jobs Act ("TCJA") was enacted on December 22, 2017.

Included in the TCJA is the requirement to capitalize and amortize research and experimental expenditures starting with the first tax year after December 31, 2021.

The required capitalization and amortization of these costs resulted in an increase to our taxable income before utilization of our operating loss carryforward.

The capitalization did not have a significant impact to our income tax expense or benefit in the years ended December 31, 2023 and 2022.

Uncertain Tax Positions

17 unchanged sentences

During both the years ended December 31, 2024 and 2023, we recognized $ 11 of interest and penalties in income tax expense in our consolidated statements of operations.

During the year ended December 31, 2022, one of our Chinese subsidiaries, PWSH settled a portion of the outstanding intercompany debt with the US parent, Pixelworks, Inc.

The portion that was not able to be settled was forgiven and was recognized as taxable income in China.

We previously accrued for a long term liability in the event that the full amount of the intercompany debt would be recognized as taxable income in China.

The related uncertain tax position was reversed as a part of the settlement of the intercompany debt.

We file income tax returns in the U.S.

3 unchanged sentences

If the uncertain tax positions we have accrued for are sustained by the taxing authorities in our favor, the reduction of the liability will reduce our effective tax rate.

We reasonably expect reductions in unrecognized tax benefits of approximately $ 81 within the next twelve months due to the expiration of statutes of limitation in federal, state, and foreign jurisdictions, $ 3 of which is expected to impact our effective tax rate.

We reasonably expect reductions in unrecognized tax benefits of approximately $ 260 within the next twelve months due to the expiration of statutes of limitation in federal, state, and foreign jurisdictions.

We are no longer subject to U.S.

3 unchanged sentences

In January 2024, we were notified that our 2019 and 2020 Canada income tax returns have been selected for audit by the Canadian tax authorities.

We have not received any proposed assessments associated with the audit and do not expect any material impacts to our financial statements as a result of the audit.

Our 2022 US income tax returns were also selected for audit by the Internal Revenue Service.

We have not received any proposed assessments associated with the audits and do not expect any material impacts to our financial statements as a result of the audits.

We were not subject to, nor have we received any notice of, income tax examinations in any other jurisdiction as of December 31, 2024.

19 unchanged sentences

As part of the TPC agreement, ViXS was provided funding to assist in research and development expenses of which a portion was later required to be repaid because the conditions for repayment were met.

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

$ 66 and $ 308 are included in accrued liabilities and current portion of long-term liabilities in our consolidated balance sheet as of December 31, 2023 and 2022, respectively.

The scheduled payments were made on a quarterly basis and ended in January 2024.

Contract Manufacturers

16 unchanged sentences

Net loss $ ( 29,537 ) $ ( 26,943 )

Net (income) loss attributable to non-controlling interests and redeemable non-controlling interests 767 ( 797 )

Net income attributable to certain entities owned by employees — ( 89 )

Net loss attributable to non-controlling interests and redeemable non-controlling interests 818 767

Net loss attributable to Pixelworks Inc.

19 unchanged sentences

At the Market Offering

On June 5, 2020, we entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen"), pursuant to which we may issue and sell shares of the Company's common stock, par value $ 0.001 per share, having an aggregate offering price of up to $ 25,000 , from time to time, through an "at the market" equity offering program under which Cowen will act as sales agent.

Under the Sales Agreement, Cowen may sell the shares by methods deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions on the Nasdaq Global Market or on any other existing trading market for the common stock or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company.

We pay Cowen a commission equal to three percent ( 3.0 %) of the gross sales proceeds of any common stock sold through Cowen under the Sales Agreement.

The Sales Agreement may be terminated by us upon prior notice to Cowen or by Cowen upon prior notice to us, or at any time under certain circumstances, including but not limited to the occurrence of a material adverse change in the Company.

On November 14, 2024, we entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”), pursuant to which we may issue and sell shares of the Company’s common stock, par value $ 0.001 per share, having an aggregate offering price of up to $ 10,000 , from time to time, through an “at the market” equity offering program under which Roth will act as sales agent (the "2024 ATM Program").

Under the Sales Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made.

Subject to the terms and conditions of the Sales Agreement, Roth may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made through Nasdaq or on any other existing trading market for our common stock.

We pay Roth a commission equal to two and a half percent ( 2.5 %) of the gross sales proceeds of any common stock sold through Roth under the Sales Agreement.

The Sales Agreement may be terminated by us upon prior notice to Roth or by Roth upon prior notice to us, or at any time under certain circumstances, including but not limited to the occurrence of a material adverse change in the Company.

We are not obligated to sell any shares under the Sales Agreement.

There was no activity under this at the market offering during the years ended December 31, 2023 and December 31, 2022.

During the year ended December 31, 2024, we sold an aggregate of 358,272 shares of our common stock under the 2024 ATM Program, resulting in aggregate net proceeds to us of approximately $ 157 , and gross proceeds of approximately $ 285 , and paid Roth commissions and fees and other expenses of approximately $ 128 .

Employee Equity Incentive Plans

11 unchanged sentences

391,000 $ 2.28

Exercised — —

Canceled and forfeited — —

Expired ( 14,625 ) 5.30

50 unchanged sentences

Year Ended December 31,

Stock Option Plans:

Risk free interest rate 0 % 3.08 %

Expected dividend yield 0 % 0 %

Expected term (in years) 0.00 5.00

Volatility — % 71 %

Employee Stock Purchase Plan:

3 unchanged sentences

Volatility 76 % 85 %

There were no options granted during the year ended December 31, 2023.

The weighted average fair value of options granted during the year ended December 31, 2022 was $ 1.19 .

There were no options granted during the years ended December 31, 2024 and December 31, 2023.

The risk free interest rate is estimated using an average of treasury bill interest rates.

13 unchanged sentences

The chief operating decision maker, or CODM, is our CEO.

Our CODM evaluates financial performance and allocates resources using financial information reported on a company-wide basis.

The Cinema market does not contribute material revenue and is therefore being included in this one segment.

The CODM assesses performance for the operating segment and decides how to allocate resources based on net income (loss) that is also reported on the Consolidated Statement of Operations.

The CODM regularly reviews the Consolidated Statements of Operations and a disaggregation of operating expenses, of which the significant expenses are related to employee base compensation.

Employee base compensation included in operating expenses was $ 21,292 and $ 21,646 for the years ending December 31, 2024 and December 31, 2023, respectively.

Other segment items include outside services, depreciation and amortization, non-recurring engineering expense, accounting and legal fees, and other expenses.

Other segment items included in operating expenses was $ 32,350 and $ 32,699 for the years ending December 31, 2024 and December 31, 2023.

The CODM does not regularly review segment assets to make decisions regarding the allocation of resources, and as such the Company has not included assets.

Geographic Information

1 unchanged sentence

Year Ended December 31,

China $ 33,624 $ 25,570

Japan $ 25,821 $ 24,083

China 15,937 33,624

Taiwan 729 1,813

6 unchanged sentences

Distributor A 30 % 48 %

Distributor B 8 % 17 %

End Customers:

2 unchanged sentences

End customer B 19 % 34 %

End customer C — % 14 %

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

Each of the following accounts represented 10% or more of total accounts receivable in at least one of the periods presented:

Account W 46 % 31 %

Account X 41 % 46 %

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

During 2021, Pixelworks and PWSH entered into a capital increase agreement (the "Capital Increase Agreement") with certain private equity and strategic investors based in China (collectively, the “Investors”) and certain entities which collectively are owned by approximately 75 % of the employees of PWSH and its subsidiaries (collectively, the “ESOP”) (together, the “Investors” and the “ESOP” are referred to below as the “Capital Contributors”).

On August 9, 2021, Pixelworks and PWSH entered into a capital increase agreement (the "August 2021 Capital Increase Agreement") with certain private equity and strategic investors based in China (collectively, the “Investors”) and certain entities which collectively are owned by approximately 75 % of the employees of PWSH and its subsidiaries (collectively, the “ESOP”) (together, the “Investors” and the “ESOP” are referred to below as the “Capital Contributors”).

The ESOP entities do not qualify as Employee Share Ownership Programs under IRC 4975(e)(7), but do qualify as employee share ownership plans qualified under the laws of China, under which the employees hold a pro rata share of an ESOP partnership entity that then holds an equity ownership in trust for employees.

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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 Pixelworks on the same terms and conditions as Pixelworks, a right to participate on a pro rata basis in any future financing rounds of PWSH, and Pixelworks’ 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.

These rights all expire upon initial public offering on the STAR Market.

Prior to entering into a certain supplemental agreement, each Investor had the option to require PWSH to redeem the entire equity interest held by such Investor, at the original purchase price paid plus 3 % annual interest, if PWSH did not consummate an initial public offering on the STAR Market on or before June 30, 2024.

These rights all expire upon the consumation of an initial public offering of PWSH shares on the STAR Market.

Prior to entering into a certain Supplemental Agreement (as defined below), each Investor had the right to require PWSH to redeem the entire equity interest held by such Investor, at the original purchase price paid plus 3 % annual interest, if PWSH did not consummate an initial public offering on the STAR Market (the "Listing") on or before June 30, 2024.

Based on this contingency, the initial carrying amount of the redeemable non-controlling interests was recorded at fair value on the date of issuance of PWSH equity interests, net of issuance costs and presented in temporary equity on the consolidated balance sheets.

Until the interest that was to accrue on the redeemable non-controlling interest was deleted with the Supplemental Agreement, the Company had elected to accrete changes in the redemption value of the redeemable non-controlling interests from the issuance date through the earliest redemption date of June 30, 2024 using the interest method (as the non-controlling interest was probable of becoming redeemable upon the passage of time for the original issuance price plus 3 % annual interest).

On March 24, 2022, Pixelworks and PWSH entered into a supplemental agreement to the Capital Increase Agreement (the “Supplemental Agreement”) with the Capital Contributors.

On March 24, 2022, Pixelworks and PWSH entered into a supplemental agreement to the August 2021 Capital Increase Agreement (the “Supplemental Agreement”) with the Capital Contributors.

The Supplemental Agreement, among other things, deletes the interest that was to accrue in connection with the redemption option, and adds a provision that will suspend the redemption option on the date PWSH files its initial public offering listing documents pending the approval of such documents by the applicable authorities.

The suspension ends if PWSH withdraws the listing application or such application is finally rejected, at which point the redemption option will once again become effective with a deadline of the later of the date of the withdrawal/rejection and June 30, 2024.

Given the current uncertain economic environment of China and its impact on the suitability of seeking a Listing at this present time, PWSH is engaged in and intends to continue discussions with the Investors regarding an extension or removal of this redemption option.

In connection with the Supplemental Agreement, on March 24, 2022, Pixelworks and the Capital Contributors entered into a side letter to the Capital Increase Agreement (the “Side Letter”) which provides that, in the event of a change in control of Pixelworks, Pixelworks shall ensure that the definitive agreement related to such transaction includes a post-closing repurchase covenant that requires the successor entity in such transaction to repurchase all of PWSH’s equity held by a Capital Contributor at the original subscription price plus 20 % upon the request of the Capital Contributor within 60 days after (a) the change in control;

Given the current uncertain economic environment of China and its impact on the suitability of seeking a Listing at this present time, we are engaged in and intend to continue discussions with the Capital Contributors regarding an extension or removal of this redemption option.

In connection with the Supplemental Agreement, on March 24, 2022, Pixelworks and the Capital Contributors entered into a side letter to the August 2021 Capital Increase Agreement (the “Side Letter”) which provides that, in the event of a change in control of Pixelworks, Pixelworks shall ensure that the definitive agreement related to such transaction includes a post-closing repurchase covenant that requires the successor entity in such transaction to repurchase all of PWSH’s equity held by a Capital Contributor at the original subscription price plus 20 % upon the request of the Capital Contributor within 60 days after (a) the change in control;

or (b) if PWSH fails to consummate its initial public offering by June 30, 2024, because Pixelworks decides against pursuing the offering.

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The Investors will continue to hold PWSH equity and be considered as a redeemable non-controlling interest, however, the redeemable non-controlling interest is only probable of becoming redeemable upon the passage of time for its original issuance price.

Therefore, until the redemption feature expires, we will only allocate profits to the redeemable non-controlling interest and continue to recognize the non-controlling interest at an amount at least equal to its redemption value.

Therefore, until the redemption feature expires, or has been exercised, we will only allocate profits to the redeemable non-controlling interest and continue to recognize the non-controlling interest at an amount at least equal to its redemption value.

Because the redeemable non-controlling interest is denominated in RMB, it will be revalued to USD at the end of each reporting period, with the changes in carrying value attributable to foreign currency being reflected within accumulated other comprehensive income on the consolidated balance sheets.

Each of the ESOP entities has the option to require a repurchase of the entire equity interest held by such ESOP entities at the original purchase price paid plus 5 % annual interest, if PWSH does not achieve its Listing on or before December 31, 2024.

Because the ESOP entities are owned by employees of PWSH and its subsidiaries and employees are required to render service until either the initial public offering on the STAR Market or repurchase date, the equity interest owned by the ESOP entities will be accounted for under ASC 718 (Compensation - Stock Compensation).

On December 26, 2024, a representative for one of the Investors (Qingdao Beyond Zhixin Venture Investment Partnership (Limited Partnership)) delivered to Pixelworks a written request for a redemption under the Supplemental Agreement.

Pixelworks responded to this request on December 31, 2024, asserting that the redemption option is currently suspended due to the impact of the COVID-19 pandemic and the decision of the relevant Chinese authorities to prevent PWSH from completing the filing of its application for an IPO in late 2023 despite PWSH being qualified to do so.

Per Articles 6.1 and 10.1 of the Capital Increase Agreement, the option is suspended until such time as PWSH is no longer prevented from pursuing its application, or the parties should negotiate some other economically equivalent adjustment to the agreement.

No other Investor has provided Pixelworks with a written notice of election.

The process of enforcing and collecting on the proper exercise of the repurchase option by a Capital Contributor would be lengthy, ultimately requiring enforcement against a US-based Pixelworks entity.

If PWSH does not consummate a Listing on or before December 31, 2024, each of the five ESOP entities (including the 2022 ESOP) holds a right to have their PWSH shares repurchased at the original purchase price paid plus 5 % annual interest.

The Supplemental Agreement does not remove or amend this provision.

Because the ESOP entities are owned by employees of PWSH and its subsidiaries and employees are required to render service until either the initial public offering on the STAR Market or repurchase date, the equity interest owned by the ESOP entities is accounted for under ASC 718 (Compensation - Stock Compensation).

The initial carrying amount of the investment has been recorded as a long-term deposit liability on the consolidated balance sheets as the initial public offering cannot be considered probable at this time.

We will recognize the periodic interest component of the award as compensation expense and accrete the long-term deposit liability to its redemption value as of December 31, 2024.

Because the long-term deposit liability is denominated in RMB and is considered a monetary liability as defined in ASC 255 (Changing Prices), it will be revalued to USD at the end of each reporting period, with the changes in carrying value recorded as foreign currency gain/loss in our consolidated statements of operations.

The Supplemental Agreement does not remove the obligation to repurchase the ESOP interests if PWSH fails to consummate an initial public offering by December 31, 2024 along with the 5 % annual simple interest.

On December 21, 2022, the Company and its subsidiary, PWSH, entered into a capital increase agreement (the “CIA”) with Jing Xin Ying (Shanghai) Management Consulting Partnership (Limited Partnership), an entity owned by certain of the employees of PWSH (the “ESOP”).

We recognize the periodic interest component of the award as compensation expense and accrete the long-term deposit liability to its redemption value as of December 31, 2024.

Because the long-term deposit liability is denominated in RMB and is considered a monetary liability as defined in ASC 255 (Changing Prices), it is revalued to USD at the end of each reporting period, with the changes in carrying value recorded as foreign currency gain/loss in our consolidated statements of operations.

Given the current uncertain economic environment of China and its impact on the suitability of seeking a Listing at this present time, we are engaged in and intend to continue discussions with the ESOP holders regarding an extension or removal of this redemption option.

On December 21, 2022, the Company and its subsidiary, PWSH, entered into a capital increase agreement (the “December 2022 Capital Increase Agreement”) with Jing Xin Ying (Shanghai) Management Consulting Partnership (Limited Partnership), an entity owned by certain of the employees of PWSH (the “2022 ESOP”).

The 2022 ESOP invested approximately $ 1,407 in exchange for an equity interest in PWSH of 0.54 %, based on a pre-money valuation of PWSH of RMB 1,750,000 ($ 251,256 USD), which includes a discount of 50 %.

The CIA provides that if there is a change in control of PWSH that closes prior to its filing an application for the Listing, each capital contributor would be entitled to a minimum return of 10 % on the price they paid for their respective equity interest, payable by the Company in cash at the close of the change in control transaction, with such right terminating automatically upon the filing by PWSH of the Listing.

The ESOP has a redemption right that is identical to that held by the other ESOP investors from the financing round that closed in 2021:

if the Listing is not consummated prior December 31, 2024, the 2022 ESOP may elect to require a repurchase of its respective equity interest for a price equal to the initial purchase price paid plus annual simple interest at a rate of 5 %.

The 2022 ESOP holds a redemption right that is identical to that held by the other ESOPs, as described in the paragraph immediately above.

The December 2022 Capital Increase Agreement provides that if there is a change in control of PWSH that closes prior to its filing an application for the Listing, each capital contributor would be entitled to a minimum return of 10% on the price they paid for their respective equity interest, payable by the Company in cash at the close of the change in control transaction, with such right terminating automatically upon the filing by PWSH of the Listing.

The process of going public on the STAR Market includes several periods of review and is therefore a lengthy process.

There can be no assurances that PWSH will complete the Listing by June 30, 2024, or at all.

In the event Pixelworks is required to redeem the entire equity interest held by the Investors or the ESOP entities, we may be required to seek additional capital in order to redeem their PWSH shares and there would be no assurances that such capital would be available on terms acceptable to us, if at all.

Any redemptions could have a material adverse effect on our business, financial condition and results of operations.

The listing of PWSH on China's STAR Market will not change our status as a U.S.

There can be no assurances that PWSH will ever be able to complete the Listing.

If Pixelworks is unsuccessful in negotiating for an extension or cancellation of the redemption rights described above, and the Investor or ESOP holding such a right elects for redemption, we may be required to seek additional capital and there would be no assurances that such capital would be available on terms acceptable to us, if at all.

Any redemptions would have a material adverse effect on our business, financial condition and results of operations.

Any listing of PWSH on China's STAR Market would not change our status as a U.S.

public company.

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Carrying Value of Redeemable NCI as of January 1, 2024

Net loss attributable to redeemable non-controlling interest ( 143 )

Effect of foreign currency translation attributable to redeemable non-controlling interest ( 818 )

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Under this agreement, the Purchasers agreed to pay to the Company, subject to customary closing conditions, a total of 87,500 RMB, approximately $ 10,738 (net of issuance costs) at closing, in exchange for a 2.74 % equity interest in PWSH.

The Company incurred costs related to the sale of equity in PWSH of $ 275 paid to a third party for assisting in the transaction close as well as 8,408 RMB to fulfill Chinese withholding tax requirements.

The Company incurred costs related to the sale of equity in PWSH of $ 275 paid

to a third party for assisting in the transaction close as well as 8,408 RMB to fulfill Chinese withholding tax requirements.

Both of these costs are direct and incremental and related to the sale of equity in PWSH and as such will be included as costs that reduce proceeds and carrying amount of the NCI in the Company’s balance sheet.

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and (2) the Company would cause PWSH to give each Purchaser a right to participate on a pro rata basis in any future financing rounds of PWSH, which right also would expire on the filing of a Listing Application.

On December 21, 2022, the Company and its subsidiary, PWSH, entered into a capital increase agreement (the “CIA”) with certain private equity investors based in China who have agreed to pay a total of 99,000 RMB, approximately $ 14,596 (net of issuance costs) at closing, in exchange for an equity interest in PWSH of 2.76 %, based on a pre-money value of PWSH of 3,500,000 RMB, approximately $ 501,400 .

On December 21, 2022, the Company and its subsidiary, PWSH, entered into a capital increase agreement (the “December 2022 Capital Increase Agreement”) with certain private equity investors based in China who have agreed to pay a total of 99,000 RMB, approximately $ 14,596 (net of issuance costs) at closing, in exchange for an equity interest in PWSH of 2.76 %, based on a pre-money value of PWSH of 3,500,000 RMB, approximately $ 501,400 .

This transaction closed in February 2023.

The December 2022 Capital Increase Agreement provides that if there is a change in control of PWSH that closes prior to its filing an application for the Listing, each capital contributor would be entitled to a minimum return of 10 % on the price they paid for their respective equity interest, payable by the Company in cash at the close of the change in control transaction, with such right terminating automatically upon the filing by PWSH of the Listing.

When the Company’s relative ownership interest in PWSH changes, adjustments to non-controlling interest and paid-in capital, tax effected, will occur.

Because these changes in the ownership interest in PWSH do not result in a change of control, the transactions are accounted for as equity transactions under ASC Topic 810, (-Consolidations), which requires that any differences between the carrying value of the Company’s interest in PWSH and the fair value of the consideration received are recognized directly in equity and attributed to the controlling interest.

Because these changes in the ownership interest in PWSH do not result in a change of control, the transactions are accounted for as equity transactions under ASC 810 (Consolidations), which requires that any differences between the carrying value of the Company’s interest in PWSH and the fair value of the consideration received are recognized directly in equity and attributed to the controlling interest.

Additionally, there are no substantive profit-sharing arrangements that would cause distributions to be other than pro rata.

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Carrying Value of Permanent Equity Non-Controlling Interest as of January 1, 2024

Increase in additional paid-in capital 14,742

Net loss attributable to non-controlling interest ( 818 )

Closing and direct costs incurred ( 146 )

Effect of foreign currency translation attributable to non-controlling interest ( 389 )

Carrying Value of Permanent Equity Non-Controlling Interest as of December 31, 2024

GOVERNMENT GRANTS

We account for government assistance that is not subject to the scope of ASC 740 using a grant accounting model, by analogy to International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance, and recognize such grants when we have reasonable assurance that we will comply with the grant’s conditions and that the grant will be received.

Government grants whose primary condition is the purchase, construction, or acquisition of a long-lived asset are considered asset-based grants and are recognized as a reduction to such asset’s cost basis, which reduces future amortization or depreciation.

In the circumstances when the reasonable assurance of receiving the government grants is reached after the related long-lived assets are fully or partially amortized, the asset grant is pro-ratably allocated to the used life of the long-lived assets and recorded as a cumulative catch up to reduce the amortization or depreciation expense.

Other government grants not related to long-lived assets are considered income-based grants, which are recognized when the grant becomes receivable and are recognized as other income.

We recognize grants expected to be received directly from a government entity at their stated value.

Proceeds received from asset-based grants are presented as cash inflows from investing activities on the consolidated statements of cash flows, whereas proceeds received from income-based grants are presented as cash inflows from operating activities.

In December 2024, PWSH received approximately $ 1,754 cash subsidies from the Shanghai government to compensate the purchase of certain IPs, Electronic Design Automation (“EDA”) tools, as well as the incurred expenses in R&D and sales in accordance with the local government’s policy to support strategic emerging industry.

Under the terms and conditions of the funding policies, PWSH commits to operate the business in Zhangjiang Science City in Shanghai, and the place of registration and tax registration will not be moved out of Zhangjiang Science City within ten years from the date of signing the commitment

Additionally, PWSH promises that the independent intellectual property rights shall belong to PWSH which is operated in Zhangjiang Science City, and sales settlements are in Zhangjiang Science City.

The Company deferred $ 437 of subsidies as a reduction to related fixed assets’ cost basis, which reduces future depreciation and amortization.

$ 217 of subsidies was recognized as a reduction to depreciation and amortization expense.

The remaining cash subsidies of approximately $ 1,100 was recognized as other income in the consolidated statements of operations for the year ended December 31, 2024.

SUBSEQUENT EVENT

On February 25, 2025, the Board of Directors (the “Board”) of Pixelworks, Inc.

(the “Company”) approved a restructuring plan to make the operation of the Company more efficient and which would result in an approximately 6 % reduction in workforce, in the areas of operations, research and development, and marketing.

The Company expects the restructuring to be substantially complete by the end of the first quarter ending March 31, 2025 and expects to incur total estimated restructuring charges of approximately $ 400 related to employee severance and benefits.

The Company expects that these charges will largely be recorded in the first quarter of 2025.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data