PIXELWORKS, INC

Previous wording

On January 6, 2026 (the “Closing Date”), the Company completed the previously announced sale (the “Sale”) of all of the shares of common stock of Pixelworks Semiconductor Technology (Shanghai) Co., Ltd. (“PWSH”) held by Pixelworks Semiconductor Technology Company, LLC, a wholly owned subsidiary of the Company (“Pixelworks LLC”), to Tiansui Xinyuan Technology (Shanghai) Co., Ltd. (the “Buyer”). The terms of the Sale were set forth in a Purchase Agreement dated as of October 15, 2025 (the “Purchase Agreement”), among the Company, PWSH, Pixelworks LLC, all other shareholders of PWSH except VeriSilicon Microelectronics (Shanghai) Co., Ltd. (each, a “Selling Shareholder"), and the Buyer. Each Selling Shareholder and VeriSilicon Microelectronics (Shanghai) Co., Ltd. (collectively, the “Minority Shareholders”) and Pixelworks LLC also entered into Support Agreements (the “Support Agreements”), and Pixelworks LLC, PWSH and each of the Minority Shareholders entered into a Termination and Release Agreement (the “Release Agreement”), in each case dated October 14, 2025. On the Closing Date: (i) Pixelworks LLC transferred to the Minority Shareholders shares of PWSH capital stock representing a total of approximately 29% of the total outstanding shares of PWSH capital stock; (ii) the Selling Shareholders sold and transferred all of their PWSH shares to the Buyer; (iii) Pixelworks LLC sold and transferred its remaining shares of PWSH capital stock, representing approximately 49% of the total outstanding shares of PWSH capital stock, to the Buyer; and (iv) the Buyer paid the Company approximately RMB 357 million, or approximately $51.0 million in U.S. dollars, net of transaction costs and withholding taxes paid in China. The remaining transaction expenses incurred by the Company in connection with the Sale, not including compensation that has been paid to the Company’s executive officers and other employees, totaled approximately $1.0 million in U.S. dollars. Additionally, approximately RMB 8.7 million, or approximately $1.2 million in U.S. dollars, which was being held in an escrow account was released to the Company on March 31, 2026 due to the resolution of a tax matter in China.

Current wording

On January 6, 2026 (the “Closing Date”), the Company completed the previously announced sale (the “Sale”) of all of the shares of common stock of Pixelworks Semiconductor Technology (Shanghai) Co., Ltd. (“PWSH”) held by Pixelworks Semiconductor Technology Company, LLC, a wholly owned subsidiary of the Company (“Pixelworks LLC”), to Tiansui Xinyuan Technology (Shanghai) Co., Ltd. (the “Buyer”). The terms of the Sale were set forth in a Purchase Agreement dated as of October 15, 2025 (the “Purchase Agreement”), among the Company, PWSH, Pixelworks LLC, all other shareholders of PWSH except VeriSilicon Microelectronics (Shanghai) Co., Ltd. (each, a “Selling Shareholder"), and the Buyer. Each Selling Shareholder and VeriSilicon Microelectronics (Shanghai) Co., Ltd. (collectively, the “Minority Shareholders”) and Pixelworks LLC also entered into Support Agreements (the “Support Agreements”), and Pixelworks LLC, PWSH and each of the Minority Shareholders entered into a Termination and Release Agreement (the “Release Agreement”), in each case dated October 14, 2025. On the Closing Date: (i) Pixelworks LLC transferred to the Minority Shareholders shares of PWSH capital stock representing a total of approximately 29% of the total outstanding shares of PWSH capital stock; (ii) the Selling Shareholders sold and transferred all of their PWSH shares to the Buyer; (iii) Pixelworks LLC sold and transferred its remaining shares of PWSH capital stock, representing approximately 49% of the total outstanding shares of PWSH capital stock, to the Buyer; and (iv) the Buyer paid the Company approximately RMB 357,000, or approximately $51,000 in U.S. dollars, net of transaction costs and withholding taxes paid in China. The remaining transaction expenses incurred by the Company in connection with the Sale, not including compensation that has been paid to the Company’s executive officers and other employees, totaled approximately $1,000 in U.S. dollars. Additionally, approximately RMB 8,700, or approximately $1,200 in U.S. dollars, which was being held in an escrow account was released to the Company on March 31, 2026 due to the resolution of a tax matter in China.

Previous wording

On June 6, 2025, the Company effected a one-for-twelve reverse stock split of the Company’s common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every twelve shares of the Company's Common Stock issued or outstanding were automatically reclassified into one new share of common stock. Proportionate adjustments were also made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, as well as to the number of shares issuable under the Company’s equity incentive plans and certain existing agreements. The Reverse Stock Split did not decrease the number of authorized shares of common stock or otherwise affect the par value of the common stock. No fractional shares were issued in connection with the Reverse Stock Split. Shareholders who would have otherwise been entitled to receive fractional shares were entitled to have their fractional shares rounded up to the next whole number share quantity. All shares of the Company’s common stock, per-share data and related information included in the accompanying consolidated financial statements have been retroactively adjusted as though the Reverse Stock Split had been effected prior to all periods presented.

Current wording

Split did not decrease the number of authorized shares of common stock or otherwise affect the par value of the common stock. No fractional shares were issued in connection with the Reverse Stock Split. Shareholders who would have otherwise been entitled to receive fractional shares were entitled to have their fractional shares rounded up to the next whole number share quantity. All shares of the Company’s common stock, per-share data and related information included in the accompanying consolidated financial statements have been retroactively adjusted as though the Reverse Stock Split had been effected prior to all periods presented.

Previous wording

Net revenue for the three months ended March 31, 2026 and 2025, was as follows (dollars in thousands):

Current wording

Net revenue for the three and six months ended June 30, 2026 and 2025, was as follows (dollars in thousands):

Previous wording

Revenue of $0.4 million recorded in the first quarter of 2026 was related to the category of services. We did not record revenue in the first quarter of 2025 related to our continuing operations.

Current wording

Revenue recorded in the three and six months ended June 30, 2026 and 2025 was related to the category of services.

Previous wording

Cost of revenue and gross profit for the three months ended March 31, 2026 and 2025, were as follows (dollars in thousands):

Current wording

Cost of revenue and gross profit for the three and six months ended June 30, 2026 and 2025, were as follows (dollars in thousands):

Previous wording

Cost of revenue of $0.2 million recorded in the first quarter of 2026 was primarily related to remastering services performed in connection with the associated service revenue. Cost of revenue recorded in the first quarter of 2025 was immaterial.

Current wording

Cost of revenue recorded in the three and six months ended June 30, 2026 and 2025 was primarily related to remastering services performed in connection with the associated service revenue

Previous wording

Research and development expense for the three months ended March 31, 2026 and 2025, was as follows (dollars in thousands):

Current wording

Research and development expense for the three and six months ended June 30, 2026 and 2025, was as follows (dollars in thousands):

Previous wording

Selling, general and administrative expense for the three months ended March 31, 2026 and 2025, was as follows (dollars in thousands):

Current wording

Selling, general and administrative expense for the three and six months ended June 30, 2026 and 2025, was as follows (dollars in thousands):

Previous wording

Restructuring expense for the three month periods ended March 31, 2026 and 2025, was as follows (dollars in thousands):

Current wording

Restructuring expense for the three and six month periods ended June 30, 2026 and 2025, was as follows (dollars in thousands):

Previous wording

During the three months ended March 31, 2026, we recorded $1.9 million in restructuring expense related to the 2026 Plan, which primarily consisted of costs associated with employee severance and benefits. During the three months ended March 31, 2025, we did not record any restructuring expense. We expect to incur $0.1 million in additional restructuring charges related to the 2026 Plan.

Current wording

During the three months ended June 30, 2026, we recorded $94 in restructuring expense related to the 2026 Plan, which primarily consisted of costs associated with dissolving an entity that was no longer necessary after the Sale. During the three months ended June 30, 2025, we did not record any restructuring expense. During the six months ended June 30, 2026, we recorded $2,089 in restructuring expense related to the 2026 Plan, which primarily consisted of costs associated with employee severance and benefits. During the six months ended June 30, 2025, we did not record any restructuring expense. We do not expect to incur any additional restructuring charges related to the 2026 Plan.

Previous wording

The provision for income taxes during the 2026 and 2025 periods is primarily comprised of current and deferred tax expense in profitable cost-plus foreign jurisdictions, accruals for tax contingencies in foreign jurisdictions and benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation. We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $0.1 million and $0.3 million during the first three months of 2026 and 2025, respectively.

Current wording

The provision for income taxes during the three and six month periods ended June 30, 2026 and 2025 is primarily composed of current and deferred tax expense in profitable cost-plus foreign jurisdictions, accruals for tax contingencies in foreign jurisdictions and benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation. We recorded a benefit for the reversal of previously recorded foreign tax contingencies of $87 and $261 during the first six months of 2026 and 2025, respectively.

Previous wording

Net income (loss) from discontinued operations increased $90.4 million in the first quarter of 2026 compared to the first quarter of 2025. The increase was primarily driven by the $85.1 million gain on the Sale.

Current wording

Net income (loss) from discontinued operations increased $94,703 in the first half of 2026 compared to the first half of 2025. The increase was primarily driven by the $85,153 gain on the Sale compared to a loss of $9,550 in the 2025 period. The 2025 loss was largely due to $16,920 in operating expenses, partially offset by $7,125 in gross profit.

Previous wording

Total cash and cash equivalents increased approximately $46.6 million to $57.8 million at March 31, 2026 from $11.2 million at December 31, 2025. The net increase during the first three months of 2026 was primarily the result of $51.2 million in proceeds from the Sale, net of transaction costs, partially offset by $4.6 million used in operating activities.

Current wording

Total cash and cash equivalents increased approximately $41,645 to $52,888 at June 30, 2026 from $11,243 at December 31, 2025. The net increase during the first six months of 2026 was primarily the result of $51,261 in proceeds from the Sale, net of transaction costs, partially offset by $6,295 used in operating activities and $3,192 used to repurchase the Company's common stock.

Previous wording

As of March 31, 2026, our cash and cash equivalents balance consisted of $2.5 million in cash and $55.3 million in cash equivalents held in U.S. dollar denominated money market funds. Although we did not hold short- or long-term investments as of March 31, 2026, our investment policy requires that our portfolio maintain a weighted average maturity of less than 12 months. Additionally, no maturities can extend beyond 24 months and concentrations with individual securities are limited. At the time of purchase, the short-term credit rating must be rated at least A-2 / P-2 / F-2 by at least two Nationally Recognized Statistical Rating Organizations ("NRSROs") and securities of issuers with a long-term credit rating must be rated at least A or A3 by at least two NRSROs. Our investment policy is reviewed at least annually by our Audit Committee.

Current wording

As of June 30, 2026, our cash and cash equivalents balance consisted of $1,387 in cash and $51,501 in cash equivalents held in U.S. dollar denominated money market funds. Although we did not hold short- or long-term investments as of June 30, 2026, our investment policy as updated effective August 7, 2026, requires that our portfolio maintain a weighted average maturity of less than 12 months. Additionally, no maturities can extend beyond 24 months and concentrations with individual securities are limited. At the time of purchase, each investment must have a short-term credit rating under at least one of the Nationally Recognized Statistical Rating Organizations (“NRSROs”) at or above a minimum threshold set forth in the investment policy. Our investment policy is reviewed at least annually by our Audit Committee.

Previous wording

As of March 31, 2026, our cash and cash equivalents balance of $57.8 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. 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 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.

Current wording

As of June 30, 2026, our cash and cash equivalents balance of $52,888 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. 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 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.

Previous wording

Other than as set forth above, there were no material changes to our liquidity and capital resources during the three month period ended March 31, 2026 from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

Other than as set forth above, there were no material changes to our liquidity and capital resources during the six month period ended June 30, 2026 from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

There have been no material changes to these estimates, or the policies related to them during the three months ended March 31, 2026. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

There have been no material changes to these estimates, or the policies related to them during the six months ended June 30, 2026. For a full discussion of these estimates and policies, see “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.