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What changed in PIXELWORKS, INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PIXELWORKS, INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+136 added−135 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-13)

Top changes in PIXELWORKS, INC's 2024 10-K

136 paragraphs added · 135 removed · 114 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

26 edited+4 added−6 removed116 unchanged
Biggest changeThe 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”). There is no guarantee that PWSH will be approved for a Listing at any point in the future.
Biggest changeAs part of the Strategic Plan we intended to qualify PWSH to file an application for an initial public offering on the Shanghai Stock Exchange’s Science Technology Innovation Board, known as the STAR Market (such initial public offering on the STAR Market, the “Listing,” and such application, an "IPO application"), a lengthy process that involves several reviews by various government agencies of China, such as the Shanghai Stock Exchange (“SSE”) and the China Securities Regulatory Commission (“CSRC”).
Home theater projector systems can drive large-screen displays for content consumption where flat panel displays are either economically not viable or physically incompatible for use. Consistent with the trends of other consumer products, digital projectors are increasingly incorporating networking capabilities that enable the sharing of video and other content among multiple devices.
Home theater projector systems can drive large-screen displays for content consumption where flat panel displays are either economically not viable or physically incompatible for use. 7 Consistent with the trends of other consumer products, digital projectors are increasingly incorporating networking capabilities that enable the sharing of video and other content among multiple devices.
See "Risk Factors" in Part I, Item 1A, and "Note 10. Commitments and Contingencies" in Part II, Item 8 of this Annual Report on Form 10-K for information on various risks related to intellectual property. Environmental Matters Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time.
See "Risk Factors" in Part I, Item 1A, and "Note 11. Commitments and Contingencies" in Part II, Item 8 of this Annual Report on Form 10-K for information on various risks related to intellectual property. Environmental Matters Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time.
As prices for this capability inevitably come down, and further competition emerges, we believe this new category, along with the rollout of 5G networks, can strengthen the Mobile device market. 7 Home & Enterprise Our Home & Enterprise market category is composed of digital projection and video delivery devices and applications.
As prices for this capability inevitably come down, and further competition emerges, we believe this new category, along with the rollout of 5G networks, can strengthen the Mobile device market. Home & Enterprise Our Home & Enterprise market category is composed of digital projection and video delivery devices and applications.
Financial information regarding our domestic and foreign operations is presented in "Note 13. Segment Information" in Part II, Item 8 of this Annual Report on Form 10-K. Backlog Our sales are made pursuant to customer purchase orders for delivery of standard products.
Financial information regarding our domestic and foreign operations is presented in "Note 14. Segment Information" in Part II, Item 8 of this Annual Report on Form 10-K. Backlog Our sales are made pursuant to customer purchase orders for delivery of standard products.
No other end customer accounted for more than 10% of revenue in 2023 or 2022 or represented more than 10% of accounts receivable as of December 31, 2023 or 2022. 13 TrueCut Products The sales and marketing of our TrueCut products differs in approach from that of our IC products.
No other end customer accounted for more than 10% of revenue in 2024 or 2023 or represented more than 10% of accounts receivable as of December 31, 2024 or 2023. 13 TrueCut Products The sales and marketing of our TrueCut products differs in approach from that of our IC products.
Corporate Information Pixelworks was founded in 1997 and is incorporated under the laws of the state of Oregon. Our stock is traded on the Nasdaq Global Market under the symbol "PXLW".
Corporate Information Pixelworks was founded in 1997 and is incorporated under the laws of the state of Oregon. Our stock is traded on the Nasdaq Capital Market under the symbol "PXLW".
While a distributor's payment to us is not dependent upon the distributor’s ability to resell the product or to collect from the end customer, our distributors may provide longer payment terms to end customers than those we would offer. Sales to distributors accounted for 66% and 57% of revenue in 2023 and 2022 respectively.
While a distributor's payment to us is not dependent upon the distributor’s ability to resell the product or to collect from the end customer, our distributors may provide longer payment terms to end customers than those we would offer. Sales to distributors accounted for 47% and 66% of revenue in 2024 and 2023 respectively.
See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for information on various environmental risks. Employees As of December 31, 2023, we had a total of 239 employees, the majority of which were full-time, compared to 222 employees as of December 31, 2022.
See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for information on various environmental risks. Employees As of December 31, 2024, we had a total of 196 employees, the majority of which were full-time, compared to 239 employees as of December 31, 2023.
We have typically experienced higher revenue from the mobile market in the fourth quarter, and lower revenue in the first quarter, as mobile phone OEMs ramp production in advance of Chinese New Year. Geographic Distribution of Sales Sales outside the U.S. accounted for approximately 99.7% and 95.1% of revenue in 2023 and 2022 respectively.
We have typically experienced higher revenue from the mobile market in the fourth quarter, and lower revenue in the first quarter, as mobile phone OEMs ramp production in advance of Chinese New Year. Geographic Distribution of Sales Sales outside the U.S. accounted for approximately 98.3% and 99.7% of revenue in 2024 and 2023 respectively.
One of our distributors, Upstar Technology Limited represented more than 10% of revenue in each of 2023 and 2022, and accounted for more than 10% of accounts receivable as of December 31, 2023 and December 31, 2022.
One of our distributors, Upstar Technology Limited represented more than 10% of revenue in each of 2024 and 2023, and accounted for more than 10% of accounts receivable as of December 31, 2024 and December 31, 2023. One of our distributors, Tokyo Electron Device limited represented more than 10% of accounts receivable as of December 31, 2024.
The advanced PVR market in Japan is experiencing growth as products move from 2K to UHD/4K formats and support new broadcast technologies, like Advanced Digital Satellite Broadcast ("ADSB") in Japan. Cinema Our Cinema market category is composed of applications and services for content creation, remastering and video streaming for cinematic video.
The advanced PVR market in Japan is transitioning from 2K to UHD/4K formats and supports new broadcast technologies, like Advanced Digital Satellite Broadcast ("ADSB") in Japan. Cinema Our Cinema market category is composed of applications and services for content creation, remastering and video streaming for cinematic video.
Power is of primary importance, impacting form factor, cost, and performance. As these systems have added more functionality, new features have had to compete for battery life, internal bandwidth, and space. The addition of high-resolution and high refresh rate displays has further increased the burden on these resources.
As these systems have added more functionality, new features have had to compete for battery life, internal bandwidth, and space. The addition of high-resolution and high refresh rate displays has further increased the burden on these resources.
On occasion, we have also licensed our technology. 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. One of our Chinese subsidiaries, Pixelworks Semiconductor Technology (Shanghai) Co., Ltd. (or "PWSH"), now operates these businesses as a full profit-and-loss center underneath Pixelworks.
On occasion, we have also licensed our technology. 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.
Mobile Our Mobile market category is composed of smartphones and tablets. The user experience with mobile video and gaming is a key driver of growth in the smartphone and tablet market. Smartphones and tablets pose a number of unique challenges as mobile display systems. Digital video content is available in a wide range of resolutions and frame rates.
The user experience with mobile video and gaming is a key driver of growth in the smartphone and tablet market. Smartphones and tablets pose a number of unique challenges as mobile display systems. Digital video content is available in a wide range of resolutions and frame rates. Power is of primary importance, impacting form factor, cost, and performance.
Our auditor is Grant Thornton LLP, with headquarters in Chicago, Illinois. The Holding Foreign Companies Accountable Act, as amended by the Consolidated Appropriations Act, 2023, and related regulations, therefore do not apply to our Company. Key Markets We target three key markets with our products and services: Mobile, Home & Enterprise, and Cinema.
Our auditor is Grant Thornton LLP, with headquarters in Chicago, Illinois. The Holding Foreign Companies Accountable Act, as amended by the Consolidated Appropriations Act, 2023, and related regulations, therefore do not apply to our Company.
As of December 31, 2023, we held 280 patents and have 18 patent applications pending, compared to 291 patents and 17 patent applications pending as of December 31, 2022.
As of December 31, 2024, we held 261 patents and have 14 patent applications pending, compared to 280 patents and 18 patent applications pending as of December 31, 2023.
Sales to Guangdong OPPO Mobile Telecommunications Corporation, Ltd. accounted for more than 10% of revenue in each of 2023 and 2022. Sales to Vivo Communication Technology Co. Ltd. represented more than 10% of revenue in 2022. Vecima Networks represented more than 10% of accounts receivable as of December 31, 2022.
Sales to Seiko Epson Corporation represented more than 10% of revenue in each of 2024 and 2023, and accounted for more than 10% of accounts receivable as of December 31, 2024 and 2023. Sales to Guangdong OPPO Mobile Telecommunications Corporation, Ltd. accounted for more than 10% of revenue in each of 2024 and 2023.
Our research and development expenses were $30.9 million and $30.5 million in 2023 and 2022, respectively. During 2023 and 2022, we received reimbursements related to a co-development arrangement with a customer for costs incurred in connection with our development of an IC product.
Our research and development expenses were $31.3 million and $30.9 million in 2024 and 2023, respectively. During 2023, we received reimbursements related to a co-development arrangement with a customer for costs incurred in connection with our development of an IC product. As a result of the reimbursements, our overall research and development expense was reduced by $3.2 million in 2023.
Integrators are OEMs who build display devices based on specifications provided by branded suppliers. • Branded Manufacturers . Branded manufacturers are globally recognized manufacturers who develop display device specifications and manufacture, market and distribute display devices either directly or through resellers to end-users. • Branded Suppliers .
Branded manufacturers are globally recognized manufacturers who develop display device specifications and manufacture, market and distribute display devices either directly or through resellers to end-users. • Branded Suppliers . Branded suppliers are globally recognized suppliers who develop display device specifications and then source them from integrators, typically in Asia, and distribute them either directly or through resellers to end-users.
Pixelworks has an additional subsidiary in China (Frame Shadow Technology (Shanghai) Co., Ltd. (formerly called Mucheng Huai Management Consulting (Shanghai) Co., Ltd)) which is a research and development center for our TrueCut business.
Pixelworks has an additional subsidiary in China (Frame Shadow Technology (Shanghai) Co., Ltd. (formerly called Mucheng Huai Management Consulting (Shanghai) Co., Ltd)) which is a research and development center for our TrueCut business. This subsidiary does not operate under PWSH, but rather is owned by Pixelworks through our Oregon limited liability company, Pixelworks Semiconductor Technology Company, LLC.
In connection with this strategic plan, the Company and PWSH closed three separate financing transactions in 2021 and 2022, which are further described in "Note 14: Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees" and "Note 15: Non-Controlling Interest", which are incorporated by reference into this section.
(or "PWSH"), now operates these businesses as a full profit-and-loss center underneath Pixelworks. In connection with this Strategic Plan, the Company and PWSH closed three separate financing transactions in 2021 and 2022, which are further described in "Note 15: Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees" and "Note 16: Non-Controlling Interest", below.
The CSRC and the SSE may relax the standards, but there is no guarantee that this will happen in any particular time frame. Any listing of PWSH on the STAR Market will not change the status of PXLW as a U.S. public company.
There is no guarantee that PWSH will be approved for a Listing at any point in the future. The Listing of PWSH would not change the status of PXLW as a U.S. public company.
Direct Distribution Channels We have direct distributor relationships in Japan, China and Taiwan. • We have established direct relationships with companies that manufacture high-end display systems. Revenue through direct relationships accounted for 34% and 43% of total revenue in 2023 and 2022, respectively. We have direct relationships with companies falling into the following three classifications: • Integrators .
No other distributor accounted for more than 10% of revenue in 2024 and 2023 or represented more than 10% of accounts receivable as of December 31, 2024 or 2023. Direct Distribution Channels We have direct distributor relationships in Japan, China and Taiwan. • We have established direct relationships with companies that manufacture high-end display systems.
We believe that the Listing will have many benefits, including improved access to new capital markets and the funding of PWSH’s growth worldwide.
We continue to believe that the Listing could have many benefits, including improved access to new capital markets and the funding of PWSH’s growth worldwide, and thus remain prepared to re-engage with the various government agencies of China and our advisors involved in a Listing once those conditions and requirements sufficiently improve.
End customers include customers who purchase directly from us as well as customers who purchase products indirectly through distributors. Sales to Seiko Epson Corporation represented more than 10% of revenue in each of 2023 and 2022, and accounted for more than 10% of accounts receivable as of December 31, 2023 and 2022.
End Customers Revenue attributable to our top five end customers together represented 88% and 87% of revenue in 2024 and 2023, respectively. End customers include customers who purchase directly from us as well as customers who purchase products indirectly through distributors.
Removed
This subsidiary does not operate under PWSH, but rather is owned by Pixelworks through our Oregon limited liability company, Pixelworks Semiconductor Technology Company, LLC. 6 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.
Added
The market conditions and regulatory requirements continue to not be conducive to a successful listing by PWSH.
Removed
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.
Added
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. 6 Key Markets We target three key markets with our products and services: Mobile, Home & Enterprise, and Cinema. Mobile Our Mobile market category is composed of smartphones and tablets.
Removed
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.
Added
Revenue through direct relationships accounted for 53% and 34% of total revenue in 2024 and 2023, respectively. We have direct relationships with companies falling into the following three classifications: • Integrators . Integrators are OEMs who build display devices based on specifications provided by branded suppliers. • Branded Manufacturers .
Removed
Another distributor, Tokyo Electron Device Ltd. accounted for more than 10% of revenue in 2022 and more than 10% of accounts receivable as of December 31, 2022. No other distributor accounted for more than 10% of revenue in 2023 and 2022 or represented more than 10% of accounts receivable as of December 31, 2023 or 2022.
Added
There were no reductions to research and development expense related to co-development arrangements in 2024.
Removed
Branded suppliers are globally recognized suppliers who develop display device specifications and then source them from integrators, typically in Asia, and distribute them either directly or through resellers to end-users. End Customers Revenue attributable to our top five end customers together represented 87% and 76% of revenue in 2023 and 2022, respectively.
Removed
As a result of the reimbursements, our overall research and development expense was reduced by $3.2 million and $4.3 million in 2023 and 2022, respectively.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

40 edited+8 added−11 removed285 unchanged
Biggest changeAdditionally, 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).
Biggest changePursuant 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%).
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.
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 Capital Market.
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.
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; • difficulties in managing international distributors and manufacturers due to varying time zones, languages and business customs; • compliance with U.S. laws affecting operations outside of the U.S., such as the Foreign Corrupt Practices Act; • reduced or limited protection of our IP, particularly in software, which is more prone to design piracy; • difficulties in collecting outstanding accounts receivable balances; • changes in tax rates, tax laws and the interpretation of those laws; • difficulties regarding timing and availability of export and import licenses; • ensuring that we obtain complete and accurate information from our Asian operations to make proper disclosures in the United States; • political and economic instability and tensions, including tensions between China and each of the U.S., Taiwan and Japan; • difficulties in maintaining sales representatives outside of the U.S. that are knowledgeable about our industry and products; • changes in the regulatory environment in China, Japan and Taiwan that may significantly impact purchases of our products by our customers or our customers’ sales of their own products; • imposition of new tariffs, quotas, trade barriers and similar trade restrictions on our sales; • varying employment and labor laws; and • greater vulnerability to infrastructure and labor disruptions than in established markets.
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: • 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; • compliance with U.S. laws affecting operations outside of the U.S., such as the Foreign Corrupt Practices Act; • reduced or limited protection of our IP, particularly in software, which is more prone to design piracy; • difficulties in collecting outstanding accounts receivable balances; • changes in tax rates, tax laws and the interpretation of those laws; • difficulties regarding timing and availability of export and import licenses; • ensuring that we obtain complete and accurate information from our Asian operations to make proper disclosures in the United States; • political and economic instability and tensions, including tensions between China and each of the U.S., Taiwan and Japan; • difficulties in maintaining sales representatives outside of the U.S. that are knowledgeable about our industry and products; • changes in the regulatory environment in China, Japan and Taiwan that may significantly impact purchases of our products by our customers or our customers’ sales of their own products; • imposition of new tariffs, quotas, trade barriers and similar trade restrictions on our sales; • varying employment and labor laws; and • greater vulnerability to infrastructure and labor disruptions than in established markets.
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.
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, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles.
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.
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.
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.
Investors should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 2023, including our consolidated financial statements and related notes, and our other filings made from time to time with the SEC.
Investors should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 2024, including our consolidated financial statements and related notes, and our other filings made from time to time with the SEC.
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.
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 Capital Market could lead to increased volatility, as some investors seek to arbitrage price differences.
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. 24 Regulations related to conflict minerals may adversely impact our business.
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. 24 Regulations related to conflict minerals may adversely impact our business.
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 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. PWSH is not currently profitable under China GAAP standards.
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.
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 Capital Market.
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.
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 Capital Market.
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.
Similarly, the Listing application may be denied or delayed by the SSE in its discretion. 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.
From time to time, we may have the need to execute restructuring plans to make the operation of the Company more efficient. 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.
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.
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.
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 represented 48% and 29% of revenue for the years ended December 31, 2023 and 2022, respectively.
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 represented 30% and 48% of revenue for the years ended December 31, 2024 and 2023, respectively.
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.
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 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.
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 Listing Rules, we must maintain a minimum price of $1.00 per share for continued listing on Nasdaq.
Many of our customers are located in Japan, China, or Taiwan. Sales outside the U.S. accounted for approximately 99.7% and 95.1% of revenue for the years ended December 31, 2023 and 2022, respectively. We anticipate that sales outside the U.S. will continue to account for a substantial portion of our revenue in future periods.
Many of our customers are located in Japan, China, or Taiwan. Sales outside the U.S. accounted for approximately 98.3% and 99.7% of revenue for the years ended December 31, 2024 and 2023, respectively. We anticipate that sales outside the U.S. will continue to account for a substantial portion of our revenue in future periods.
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 December 31, 2023, we held 280 patents and had 18 patent applications pending for protection of our significant technologies.
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 December 31, 2024, we held 261 patents and had 14 patent applications pending for protection of our significant technologies.
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. In addition, PWSH may, in the future, become profitable.
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.
If we are not profitable in the future, we may be unable to continue our operations. We have incurred operating losses each fiscal year since 2010 and have an accumulated deficit of $477.0 million as of December 31, 2023.
If we are not profitable in the future, we may be unable to continue our operations. We have incurred operating losses each fiscal year since 2010 and have an accumulated deficit of $505.9 million as of December 31, 2024.
Additionally, revenue attributable to our top five end customers represented 87% and 76% of revenue for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had two accounts that each represented 10% or more of accounts receivable.
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.
During the fiscal years ended December 31, 2022 and December 31, 2023, an aggregate of $8.6 million in cash was transferred from the Company to PWSH, and $14.2 million from PWSH to the Company as part of such settlements.
During the fiscal years ended December 31, 2023 and December 31, 2024, an aggregate of $7.2 million in cash was transferred from the Company to PWSH, and $8.4 million from PWSH to the Company as part of such settlements.
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.
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. We have, in the past, and may, in the future, identify material weaknesses in our internal controls over financial reporting.
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.
As of December 31, 2023, we had two accounts that each represented 10% or more of accounts receivable. All of the orders included in our backlog are cancellable.
Further, for continued listing on the Nasdaq Global Market we must have at least 400 total shareholders. 36 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.
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; or (iii) a 36 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 net operating loss carryforwards may be limited or they may expire before utilization. As of December 31, 2023, we had federal, state and foreign net operating loss carryforwards of approximately $154.5 million, $16.3 million, and $89.0 million, respectively, which will begin to expire in 2024.
Our net operating loss carryforwards may be limited or they may expire before utilization. As of December 31, 2024, we had federal, state and foreign net operating loss carryforwards of approximately $155.6 million, $17.4 million, and $133.2 million, respectively, which will begin to expire in 2025.
Our distributors, integrators and customers may cancel or defer purchase orders at any time, but we must order wafer inventory from our contract manufacturers three to four months in advance.
Our sales are generally made on the basis of customer purchase orders rather than long-term purchase commitments. Our distributors, integrators and customers may cancel or defer purchase orders at any time, but we must order wafer inventory from our contract manufacturers three to four months in advance.
If we are unable to do so, or if our auditors are unable to attest to the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline. 23 As we have limited insurance coverage, any incurred liability resulting from uncovered claims could adversely affect our financial condition and results of operations .
If we are unable to do so, or if our auditors are unable to attest to the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.
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.
As of December 31, 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.
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.
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.
Selling to distributors and OEMs that build display devices based on specifications provided by branded suppliers, also referred to as integrators, reduces our ability to forecast sales accurately and increases the complexity of our business. Our sales are generally made on the basis of customer purchase orders rather than long-term purchase commitments.
Our dependence on selling to distributors and integrators increases the complexity of managing our supply chain and may result in excess inventory or inventory shortages. Selling to distributors and OEMs that build display devices based on specifications provided by branded suppliers, also referred to as integrators, reduces our ability to forecast sales accurately and increases the complexity of our business.
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. Additionally, any new equity securities issued by us could have rights, preferences or privileges senior to those of our common stock.
Additionally, any new equity securities issued by us could have rights, preferences or privileges senior to those of our common stock.
Our insurance policies may not be adequate to fully offset losses from covered incidents, and we do not have coverage for certain losses. For example, we do not have earthquake insurance related to our Asian operations because adequate coverage is not offered at economically justifiable rates.
For example, we do not have earthquake insurance related to our Asian operations because adequate coverage is not offered at economically justifiable rates. If our insurance coverage is inadequate to protect us against catastrophic losses, any uncovered losses could adversely affect our financial condition and results of operations.
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.
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.
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.
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.
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.
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.
Removed
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.
Added
As we have limited insurance coverage, any incurred liability resulting from uncovered claims could adversely affect our financial condition and results of operations . 23 Our insurance policies may not be adequate to fully offset losses from covered incidents, and we do not have coverage for certain losses.
Removed
If our insurance coverage is inadequate to protect us against catastrophic losses, any uncovered losses could adversely affect our financial condition and results of operations. Our dependence on selling to distributors and integrators increases the complexity of managing our supply chain and may result in excess inventory or inventory shortages.
Added
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.
Removed
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%).
Added
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.
Removed
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.
Added
We would be required to use cash to effect these repurchases, which in turn would negatively impact our cash position and plans for growth.
Removed
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.
Added
Our common stock price is currently and may in the future be below the minimum bid price for continued listing on Nasdaq.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Removed
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.
Removed
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAdditionally, on at least an annual basis, the audit committee reviews and discusses with management our policies and programs with respect to the audit committee’s oversight of cybersecurity threats, which enable the audit committee’s effective oversight of our overall cybersecurity risk and compliance posture. The audit committee regularly reports to the board of directors on these matters.
Biggest changeAdditionally, on at least an annual basis, the audit committee reviews and discusses with management our policies and programs with respect to the audit committee’s oversight of cybersecurity threats, which enable the audit committee’s effecting oversight of our overall cybersecurity risk and compliance posture. The audit committee regularly reports to the board of directors on these matters.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, our major facilities consisted of the following: Location Function(s) Square Feet Utilized Lease Expiration China Engineering; sales; customer support; administration 46,000 Various dates through August 2026 Toronto Engineering; administration 12,000 March 2027 California Administration; engineering; sales 10,000 September 2024 Taiwan Customer support; sales; operations; engineering 16,000 Various dates through May 2025 Oregon Administration 5,000 December 2024 Japan Sales; customer support 3,000 January 2025
Biggest changeAs of December 31, 2024, our major facilities consisted of the following: Location Function(s) Square Feet Utilized Lease Expiration China Engineering; sales; customer support; administration 46,000 Various dates through August 2026 Toronto Engineering; administration 12,000 March 2027 California Administration; engineering; sales 6,000 February 2028 Taiwan Customer support; sales; operations; engineering 16,000 Various dates through November 2026 Oregon Administration 5,000 December 2026 Japan Sales; customer support 3,000 January 2025

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 8, 2024, there were 115 shareholders of record of our common stock and the last per share sales price of the common stock on that date was $2.80.
Biggest changeAs of March 7, 2025, there were 108 shareholders of record of our common stock and the last per share sales price of the common stock on that date was $0.67.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Registrant’s Common Equity and Related Stockholder Matters Our common stock is listed for trading on the Nasdaq Global Market under the symbol "PXLW". Our stock began trading on May 19, 2000.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Registrant’s Common Equity and Related Stockholder Matters Our common stock is listed for trading on the Nasdaq Capital Market under the symbol "PXLW". Our stock began trading on May 19, 2000.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

44 edited+10 added−4 removed39 unchanged
Biggest changeSelling, general and administrative expense was as follows (in thousands): Year ended December 31, 2023 v. 2022 2023 2022 $ change % change Selling, general and administrative $ 23,467 $ 22,177 $ 1,290 6 % Selling, general and administrative expense increased $1.3 million, or 6%, from 2022 to 2023 due to the following factors: • Compensation expense increased $0.8 million due to an increased management bonus accrual and one time reversal of a payroll tax accrual in 2022. • Accounting and other professional fees increased $0.5 million primarily due to fees incurred related to our strategic plan with our subsidiary, PWSH. 44 Interest income and other, net Interest income and other, net, consisted of the following (in thousands): Year ended December 31, 2023 2022 Interest income $ 1,950 $ 670 Other income 125 80 Interest expense (25) (50) Total interest income and other, net $ 2,050 $ 700 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.
Biggest changeSelling, general and administrative expense was as follows (in thousands): Year ended December 31, 2024 v. 2023 2024 2023 $ change % change Selling, general and administrative $ 20,697 $ 23,467 $ (2,770) (12) % Selling, general and administrative expense decreased $2.8 million, or 12%, from 2023 to 2024 due to the following factors: • Compensation expense decreased $1.1 million primarily due to decreased headcount associated with our June 2024 restructuring plan and a decreased management bonus accrual. • Accounting and other professional fees decreased $1.7 million primarily due to a decrease in fees incurred related to our strategic plan with our subsidiary, PWSH. 44 Restructurings In June 2024, we executed a restructuring plan to make the operation of the Company more efficient (the "Plan").
There is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity which, in turn, may have an adverse effect on our results of operations, financial position and cash flows. From time to time, we evaluate acquisitions of businesses, products or technologies that complement our business.
There is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity which, in turn, may have an adverse effect on our financial position, results of operations and cash flows. From time to time, we evaluate acquisitions of businesses, products or technologies that complement our business.
We were the first company to integrate motion estimation / motion compensation technology ("MEMC") as a mobile-optimized solution for smartphones. In 2019, we introduced our Hollywood award-winning TrueCut® video platform, the industry’s first motion grading technology that allows fine tuning of motion appearance in cinematic content.
We were the first company to integrate motion estimation / motion compensation technology ("MEMC") as a mobile-optimized solution for smartphones. In 2019, we introduced our Hollywood award-winning TrueCut Motion TM video platform, the industry’s first motion grading technology that allows fine tuning of motion appearance in cinematic content.
Pixelworks’ gross profit margin is subject to variability based on changes in revenue levels, product mix, average selling prices, startup costs, amortization related to acquired developed technology and the timing and execution of manufacturing ramps as well as other factors. 43 Research and development Research and development expense includes compensation and related costs for personnel, development-related expenses including non-recurring engineering and fees for outside services, depreciation and amortization, expensed equipment, facilities and information technology expense allocations and travel and related expenses.
Pixelworks’ gross profit margin is subject to variability based on changes in revenue levels, product mix, average selling prices, startup costs and the timing and execution of manufacturing ramps as well as other factors. 43 Research and development Research and development expense includes compensation and related costs for personnel, development-related expenses including non-recurring engineering and fees for outside services, depreciation and amortization, expensed equipment, facilities and information technology expense allocations and travel and related expenses.
We have entered into a Capital Increase Agreement pursuant to which PWSH, one of our Chinese subsidiaries, received net proceeds from the sale of its securities pursuant thereto in an amount of 99.0 million RMB ($14.6 million USD). Additional information is provided in "Note 15: Non-Controlling Interest", which is incorporated by reference into this section.
We have entered into a Capital Increase Agreement pursuant to which PWSH, one of our Chinese subsidiaries, received net proceeds from the sale of its securities pursuant thereto in an amount of 99.0 million RMB ($14.6 million USD). Additional information is provided in "Note 16: Non-Controlling Interest", which is incorporated by reference into this section.
If actual market conditions are less favorable than those we projected at the time the inventory was written down, additional inventory write-downs may be required. Inventory valuation is re-evaluated on a quarterly basis. 47 Goodwill. Goodwill is not amortized, rather tested, at least annually, for impairment at a reporting unit level.
If actual market conditions are less favorable than those we projected at the time the inventory was written down, additional inventory write-downs may be required. Inventory valuation is re-evaluated on a quarterly basis. 48 Goodwill. Goodwill is not amortized, rather tested, at least annually, for impairment at a reporting unit level.
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.
Equity Transfer Agreement We have entered into an Equity Transfer Agreement pursuant to which we received net proceeds of $10.7 million in exchange for a 2.73% equity interest in PWSH. Additional information is provided in "Note 15: Non-Controlling Interest", which is incorporated by reference into this section.
Equity Transfer Agreement We have entered into an Equity Transfer Agreement pursuant to which we received net proceeds of $10.7 million in exchange for a 2.73% equity interest in PWSH. Additional information is provided in "Note 16: Non-Controlling Interest", which is incorporated by reference into this section.
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. As a result, we concluded that a quantitative impairment test was not required and that goodwill was not impaired. Item 7A.
We performed a qualitative assessment during the fourth quarter of 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. Item 7A.
We have typically experienced higher revenue from the mobile market in the fourth quarter, and lower revenue in the first quarter, as mobile phone OEMs ramp production in advance of Chinese New Year. 42 Results of Operations For the year ended December 31, 2023 compared with year ended December 31, 2022.
We have typically experienced higher revenue from the mobile market in the fourth quarter, and lower revenue in the first quarter, as mobile phone OEMs ramp production in advance of Chinese New Year. 42 Results of Operations For the year ended December 31, 2024 compared with year ended December 31, 2023.
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. We are not obligated to sell any shares 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.
Under the co-development agreement, $5.8 million was payable by the customer within 60 days of the date of the agreement and three additional payments of $2.5 million, $1.9 million and $1.3 million are each payable upon completion of certain development milestones. As amounts become due and payable, they are offset against research and development expense on a pro rata basis.
Under the co-development agreement, $5.8 million was payable by the customer within 60 days of the date of the agreement and three additional payments of $2.5 million, $1.9 million and $1.3 million are each payable upon completion of certain development milestones. As amounts became due and payable, they were offset against research and development expense on a pro rata basis.
Additional information is provided in "Note 14: Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees", which is incorporated by reference into this section.
Additional information is provided in "Note 15: Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees", which is incorporated by reference into this section.
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 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 initial public offering. PWSH is not currently profitable under China GAAP standards.
As of December 31, 2023, we have available federal, state and foreign research and experimentation tax credit carryforwards of approximately $5.7 million, $5.4 million and $21.9 million respectively. The federal tax credits will begin expiring in 2024 while the state and foreign tax credits have an indefinite life.
As of December 31, 2024, we have available federal, state and foreign research and experimentation tax credit carryforwards of approximately $4.7 million, $5.5 million and $21.1 million respectively. The federal tax credits will begin expiring in 2025 while the state and foreign tax credits have an indefinite life.
Sales outside the U.S. accounted for approximately 99.7% and 95.1% of revenue in 2023 and 2022, respectively. Our integrators, branded manufacturers and branded suppliers incorporate our products into systems that are sold worldwide. The majority of our revenue to date has been denominated in U.S. dollars.
Sales outside the U.S. accounted for approximately 98.3% and 99.7% of revenue in 2024 and 2023, respectively. Our integrators, branded manufacturers and branded suppliers incorporate our products into systems that are sold worldwide. The majority of our revenue to date has been denominated in U.S. dollars.
Provision (benefit) for income taxes The benefit for income taxes was as follows (in thousands): Year ended December 31, 2023 2022 Provision (benefit) for income taxes $ 357 $ (884) The income tax expense of $0.4 million recorded for the year ended December 31, 2023 is primarily composed of tax expense of $0.1 million for our profitable cost-plus jurisdictions and deferred tax expense of approximately $0.3 million.
Provision for income taxes The benefit for income taxes was as follows (in thousands): Year ended December 31, 2024 2023 Provision for income taxes $ 478 $ 357 The income tax expense of $0.5 million recorded for the year ended December 31, 2024 is primarily composed of tax expense of $0.4 million for our profitable cost-plus jurisdictions and deferred tax expense of approximately $0.1 million.
In addition, our Canadian subsidiary has unclaimed scientific and experimental expenditures to be carried forward and applied against future income in Canada of approximately $120.5 million.
In addition, our Canadian subsidiary has unclaimed scientific and experimental expenditures to be carried forward and applied against future income in Canada of approximately $121.3 million.
As of December 31, 2023, our cash and cash equivalents balance consisted of $36.5 million in cash and $1.0 million in cash equivalents held in U.S. dollar denominated money market funds and $10.0 million held in U.S. dollar denominated certificates of deposit. Our investment policy requires that our portfolio maintains a weighted average maturity of less than 12 months.
As of December 31, 2024, our cash and cash equivalents balance consisted of $18.4 million in cash and $0.2 million in cash equivalents held in U.S. dollar denominated money market funds and $5.0 million held in U.S. dollar denominated certificates of deposit. Our investment policy requires that our portfolio maintains a weighted average maturity of less than 12 months.
An ownership change is generally defined as a greater than 50% increase in equity ownership by 5% shareholders in any three-year period. 45 Liquidity and Capital Resources Cash and cash equivalents Total cash and cash equivalents decreased $9.3 million from $56.8 million at December 31, 2022 to $47.5 million at December 31, 2023.
An ownership change is generally defined as a greater than 50% increase in equity ownership by 5% shareholders in any three-year period. 46 Liquidity and Capital Resources Cash and cash equivalents Total cash and cash equivalents decreased $23.9 million from $47.5 million at December 31, 2023 to $23.6 million at December 31, 2024.
Revenue recorded in 2023 consisted of $58.6 million in revenue from the sale of integrated circuits ("IC") products and $1.1 million in revenue related to engineering services, license revenue and other. Revenue recorded in 2022 consisted of $68.2 million in revenue from the sale of IC products and $1.9 million in revenue related to engineering services, license revenue and other.
Revenue recorded in 2024 consisted of $42.3 million in revenue from the sale of integrated circuits ("IC") products and $0.9 million in revenue related to engineering services, license revenue and other. Revenue recorded in 2023 consisted of $58.6 million in revenue from the sale of IC products and $1.1 million in revenue related to engineering services, license revenue and other.
Our investment policy is reviewed at least annually by our Audit Committee. Accounts receivable, net Accounts receivable, net increased to $10.1 million at December 31, 2023 from $10.0 million at December 31, 2022. Average number of days sales outstanding increased to 56 days at December 31, 2023 from 54 days at December 31, 2022.
Our investment policy is reviewed at least annually by our Audit Committee. Accounts receivable, net Accounts receivable, net decreased to $5.8 million at December 31, 2024 from $10.1 million at December 31, 2023. Average number of days sales outstanding decreased to 48 days at December 31, 2024 from 56 days at December 31, 2023.
On August 2, 2017, we acquired ViXS Systems Inc., a corporation organized in Canada ("ViXS"). Historically, significant portions of our revenue have been generated by sales to a relatively small number of end customers and distributors. We sell our products worldwide through a direct sales force, distributors and manufacturers’ representatives. We sell to distributors in China, Japan and Taiwan.
Historically, significant portions of our revenue have been generated by sales to a relatively small number of end customers and distributors. We sell our products worldwide through a direct sales force, distributors and manufacturers’ representatives. We sell to distributors in China, Japan and Taiwan.
The net decrease was the result of $18.8 million used in operating activities, $4.0 million used for purchases of property and equipment and licensed technology and $1.4 million used for payments on other asset financings.
The net decrease was primarily the result of $19.8 million used in operating activities, $3.8 million used for purchases of property and equipment and $1.3 million used for payments on other asset financings.
On occasion, we have also licensed our technology. 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. One of our Chinese subsidiaries, Pixelworks Semiconductor Technology (Shanghai) Co., Ltd. (or "PWSH"), now operates these businesses as a full profit-and-loss center underneath Pixelworks.
On occasion, we have also licensed our technology. 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.
Cost of revenue and gross profit Cost of revenue and gross profit were as follows (in thousands): Year ended December 31, 2023 % of revenue 2022 % of revenue Direct product costs and related overhead 1 $ 33,599 56.3 % $ 34,070 48.6 % Inventory charges 2 280 0.5 82 0.1 Stock-based compensation 89 0.1 41 0.1 Amortization of acquired developed technology — 0.0 72 0.1 Total cost of revenue $ 33,968 56.9 % $ 34,265 48.8 % Gross profit $ 25,709 43.1 % $ 35,881 51.2 % 1 Includes purchased materials, assembly, test, labor, employee benefits and royalties. 2 Includes charges to reduce inventory to lower of cost or net realizable value and a benefit for sales of previously written down inventory.
Cost of revenue and gross profit Cost of revenue and gross profit were as follows (in thousands): Year ended December 31, 2024 % of revenue 2023 % of revenue Direct product costs and related overhead 1 $ 20,454 47.3 % $ 33,599 56.3 % Inventory charges 2 414 1.0 280 0.5 Stock-based compensation 53 0.1 89 0.1 Total cost of revenue $ 20,921 48.4 % $ 33,968 56.9 % Gross profit $ 22,285 51.6 % $ 25,709 43.1 % 1 Includes purchased materials, assembly, test, labor, employee benefits and royalties. 2 Includes charges to reduce inventory to lower of cost or net realizable value and a benefit for sales of previously written down inventory.
Capital resources 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 $25.0 million, from time to time, through an "at the market" equity offering program under which Cowen will act as sales agent.
Capital resources At the Market Offering 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 $10.0 million, from time to time, through an “at the market” equity offering program under which Roth will act as sales agent (the "2024 ATM Program").
Liquidity As of December 31, 2023, our cash and cash equivalents balance of $47.5 million was highly liquid. We currently anticipate that our existing working capital will be adequate to fund our operating, investing and financing needs for the twelve months following our 2023 fiscal year end and beyond.
Liquidity As of December 31, 2024, our cash and cash equivalents balance of $23.6 million was highly liquid. We anticipate that our existing working capital will be adequate to fund our operating, investing and financing needs for at least the next twelve months.
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.
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.
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).
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.
Revenue, net Net revenue was as follows (in thousands): Year ended December 31, 2023 v. 2022 2023 2022 $ change % change Revenue, net $ 59,677 $ 70,146 $ (10,469) (15) % Net revenue decreased $10.5 million, or 15%, from 2022 to 2023.
Revenue, net Net revenue was as follows (in thousands): Year ended December 31, 2024 v. 2023 2024 2023 $ change % change Revenue, net $ 43,206 $ 59,677 $ (16,471) (28) % Net revenue decreased $16.5 million, or 28%, from 2023 to 2024.
Revenue related to engineering services, license revenue and other decreased $0.9 million or 46% primarily due to a decrease in licensing revenue in the Mobile market. Revenue related to the Cinema market was not material in 2023 or 2022 and was therefore included in the engineering services, license revenue and other category within the Mobile market.
Revenue related to the Cinema market was not material in 2024 or 2023 and was therefore included in the engineering services, license revenue and other category within the Mobile market.
The net valuation allowance decreased $11.0 million for the year ended December 31, 2023 and decreased $4.4 million for the year ended December 31, 2022. As of December 31, 2023, we have federal, state and foreign net operating loss carryforwards of approximately $154.5 million, $16.3 million, and $89.0 million respectively, which will begin expiring in 2024.
The net valuation allowance increased $9.0 million and $11.0 million for the years ended December 31, 2024 and December 31, 2023, respectively. 45 As of December 31, 2024, we have federal, state and foreign net operating loss carryforwards of approximately $155.6 million, $17.4 million, and $133.2 million respectively, which will begin expiring in 2025.
In connection with this strategic plan, the Company and PWSH closed three separate financing transactions in 2021 and 2022, which are further described in "Note 14: Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees" and "Note 15: Non-Controlling Interest", which are incorporated by reference into this section.
(or "PWSH"), now operates these businesses as a full profit-and-loss center underneath Pixelworks. In connection with this Strategic Plan, the Company and PWSH closed three separate financing transactions in 2021 and 2022, which are further described in "Note 15: Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees" and "Note 16: Non-Controlling Interest".
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 us.
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.
Inventories Inventories increased to $4.0 million at December 31, 2023 from $1.8 million at December 31, 2022. Inventory turnover decreased to 8.6 at December 31, 2023 from 16.6 at December 31, 2022 primarily due to higher average inventory balances in 2023 compared to 2022. Inventory turnover is calculated based on annual operating results and average inventory balances during the year.
Inventory turnover decreased to 5.1 at December 31, 2024 from 8.6 at December 31, 2023 primarily due to lower cost of goods sold as a result of lower revenue in 2024 compared to 2023. Inventory turnover is calculated based on annual operating results and average inventory balances during the year.
We may pursue financing arrangements including the issuance of debt or equity securities or reduce expenditures, or both, to meet the Company’s cash requirements, including in the longer term.
If our cash is insufficient to meet our needs, including in the longer term, we may seek to raise capital by pursuing financing arrangements, including the issuance of debt or equity securities, or reducing expenditures, or both, to meet our cash requirements.
There was no activity under this at the market offering during the years ended December 31, 2023 and December 31, 2022. 46 Capital Increase Agreements We have entered into a Capital Increase Agreement pursuant to which PWSH, one of our Chinese subsidiaries, received net proceeds from the sale of its securities pursuant thereto in an amount of RMB 279.7 million ($42.3 million USD).
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 $0.2 million. 47 Capital Increase Agreements We have entered into a Capital Increase Agreement pursuant to which PWSH, one of our Chinese subsidiaries, received net proceeds from the sale of its securities pursuant thereto in an amount of RMB 279.7 million ($42.3 million USD).
The income tax benefit of $0.9 million recorded for the year ended December 31, 2022 is primarily composed of $1.8 million of tax benefit for the reversal of tax contingencies in foreign jurisdictions, partially offset by tax expense of $0.3 million for our profitable cost-plus jurisdictions and deferred tax expense of approximately $0.6 million related to a change in the realizability of our Canadian deferred tax assets.
The income tax expense of $0.4 million recorded for the year ended December 31, 2023 is primarily composed of tax expense of $0.1 million for our profitable cost-plus jurisdictions and deferred tax expense of approximately $0.3 million.
Research and development expense was as follows (in thousands): Year ended December 31, 2023 v. 2022 2023 2022 $ change % change Research and development $ 30,878 $ 30,521 $ 357 1 % Research and development expense increased $0.4 million, or 1%, from 2022 to 2023 due to the following factors: • Compensation expense increased $1.0 million due to an increase in headcount and annual merit salary increases. • The credit recognized related to the co-development agreement decreased by $1.1 million in 2023 compared to the credit recognized in 2022. • These increases were partially offset by a $1.7 million decrease in non-recurring engineering expense due to the timing of development activities.
Research and development expense was as follows (in thousands): Year ended December 31, 2024 v. 2023 2024 2023 $ change % change Research and development $ 31,337 $ 30,878 $ 459 1 % Research and development expense increased $0.5 million, or 1%, from 2023 to 2024 due to the following factors: • A $3.2 million benefit related to the co-development agreement was recognized in 2023 compared to no benefit recognized in 2024. • Compensation expense decreased $1.6 million primarily due to decreased headcount associated with our June 2024 restructuring plan and a decreased management bonus accrual. • Non-recurring engineering expense decreased $1.1 million due to the timing of development activities.
We believe that the Listing will have many benefits, including improved access to new capital markets and the funding of PWSH’s growth worldwide.
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.
We recognized offsets to research and development expense of approximately $3.2 and $4.3 million during the years ended December 31, 2023 and 2022, respectively.
We did not recognize any offsets to research and development expense during the year ended December 31, 2024. We recognized an offset to research and development expense of approximately $3.2 million during the year ended December 31, 2023. All milestones under the co-development agreement were completed as of December 31, 2023.
We are neither a PRC operating company nor do we conduct our operations in China through the use of variable interest entities. 41 As of December 31, 2023, we had an intellectual property portfolio of 280 patents related to the visual display of digital image data.
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. 41 As of December 31, 2024, we had an intellectual property portfolio of 261 patents related to the visual display of digital image data.
Gross profit margin decreased to 43% in 2023 compared to 51% in 2022, primarily due to product mix. The decrease in sales into the Home & Enterprise market as well as the increase in sales into the Mobile market both unfavorably impacted gross profit margin. The decrease was also due to lower absorption of fixed overhead costs.
Gross profit margin increased to 52% in 2024 compared to 43% in 2023, primarily due to decreased unit sales into the Mobile market which generally have lower margins than products sold into the Home & Enterprise market, increased average selling prices ("ASP") on IC products sold into the Home & Enterprise market and decreased costs on Mobile products.
Removed
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.
Added
The decrease in IC revenue from 2023 compared to 2024 is due to the following factors: • Sales into the Mobile market decreased $15.7 million or 54%, primarily due to decreased units sold associated with a delayed transition to our latest generation mobile products. • Sales into the Home & Enterprise market decreased $0.6 million or 2% .
Removed
The decrease in IC revenue from 2022 compared to 2023 is due to the following factors: • Sales into the Home & Enterprise market decreased $17.8 million or 38%, primarily due to a decrease in customer demand resulting from customers absorbing inventory purchased with long lead times during the supply shortage in 2022, as well as implementing an end-of-life in 2022 on some of our legacy products sold into what we previously referred to as the Video Delivery market. • Sales into the Mobile market increased $8.3 million or 39%, primarily due to i ncreased average selling prices as our customers adopt and transition to our next generation mobile product.
Added
These factors which positively impacted margin were partially offset by reduced absorption due to reduced revenue and increased inventory charges.
Removed
As of December 31, 2022, we were no longer more-likely-than-not to realize our remaining Canadian deferred tax assets and have recorded a full valuation allowance.
Added
The Plan included an approximately 16% reduction in workforce, primarily in the areas of operations, research and development, sales, marketing and administration.
Removed
These decreases were partially offset by increases of $14.6 million received in net proceeds from our non-controlling interest and certain entities owned by employees and $0.3 million in proceeds from the issuances of common stock under our employee equity incentive plans.
Added
Restructuring expense was as follows (dollars in thousands): Year ended December 31, 2024 2023 Employee severance and benefits $ 1,624 $ — Total restructuring expense $ 1,624 $ — Included in cost of revenue $ 16 $ — Included in operating expenses 1,608 — During 2024, we recorded $1.6 million, in restructuring expense related to the Plan.
Added
During 2023, we did not record any restructuring expense. The Plan was complete in 2024 and we do not expect to incur any further expenses related to the Plan after 2024.
Added
Interest income and other, net Interest income and other, net, consisted of the following (in thousands): Year ended December 31, 2024 2023 Interest income $ 1,267 $ 1,950 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 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.
Added
Additional information on the government subsides received is provided in "Note 17: Government Grants", which is incorporated by reference into this section.
Added
During the fourth quarter of 2024, we established a valuation allowance against the carryforwards of our California LLC in connection with closing this entity.
Added
The decrease in accounts receivable was primarily due to the decrease in revenue in 2024 compared to 2023. Inventories Inventories increased to $4.2 million at December 31, 2024 from $4.0 million at December 31, 2023.
Added
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.

Other PXLW 10-K year-over-year comparisons