Shareholders' Equity

12 Months Ended

Dec. 31, 2020

Stockholders' Equity Note [Abstract]

SHAREHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001 per share. The Board of Directors is authorized to fix or alter the rights, preferences, privileges and restrictions granted to, or imposed on, each series of preferred stock. There were no shares of preferred stock issued as of December 31, 2020 and 2019.

Common Stock

The Company is authorized to issue 250,000,000 shares of common stock with a par value of $0.001 per share. Shareholders of common stock have unlimited voting rights and are entitled to receive the net assets of the Company upon dissolution, subject to the rights of the preferred shareholders, if any.

Equity Offering

On December 14, 2020, we completed the sale of 4,900,000 shares of common stock in an underwritten registered offering. On December 16, 2020, an additional 735,000 shares were issued pursuant to the 30-day over-allotment option exercised by the underwriter. With the over-allotment shares, a total of 5,635,000 shares of common stock were sold in the offering at a price to the public of $2.45 per share. Net proceeds to the Company, after deducting underwriting discounts, commissions, and other expenses, were approximately $12,743.

Private Placement Investment

On December 7, 2020, we completed a private placement of 724,288 shares of common stock to a certain accredited investor at a purchase price of $2.071 per share. On December 15, 2020, we completed a private placement of 2,475,712 shares of common stock to a certain accredited investor at a purchase price of $2.071. Net proceeds to the Company, after deducting commissions and other expenses, were approximately $6,210.

At the Market Offering

On June 5, 2020, we entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen"), pursuant to which we may issue and sell shares of the Company's common stock, par value $0.001 per share, having an aggregate offering price of up to $25,000, from time to time, through an "at the market" equity offering program under which Cowen will act as sales agent. Under the Sales Agreement, Cowen may sell the shares by methods deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions on the Nasdaq Global Market or on any other existing trading market for the common stock or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company. We pay Cowen a commission equal to three percent (3.0%) of the gross sales proceeds of any common stock sold through Cowen under the Sales Agreement. The Sales Agreement may be terminated by us upon prior notice to Cowen or by Cowen upon prior notice to us, or at any time under certain circumstances, including but not limited to the occurrence of a material adverse change in the Company. We are not obligated to sell any shares under the Sales Agreement.

During the year ended December 31, 2020, we sold an aggregate of 1,747,466 shares of our common stock under this at the market offering, resulting in aggregate net proceeds to us of approximately $4,429.

Employee Equity Incentive Plans

On May 23, 2006, our shareholders approved the adoption of the Pixelworks, Inc. 2006 Stock Incentive Plan (the "2006 Plan"). The 2006 Plan has since been amended on certain occasions, most recently on May 15, 2020 when our shareholders approved an increase to the total number of authorized shares to 19,683,333 shares. As of December 31, 2020, 1,566,811 shares were available for grant under the 2006 Plan.

Stock Options

The contractual life of newly issued stock option awards is six years. Our new hire vesting schedule provides that each option becomes exercisable at a rate of 25% on the first anniversary date of the grant and 2.083% on the last day of every month thereafter for a total of 36 additional increments. Our merit vesting schedule provides that merit-type awards become exercisable monthly over a period of three years.

The following is a summary of stock option activity:


	Number of shares	Weighted average exercise price
Options outstanding as of December 31, 2019:	533,484	$	2.87
Granted	234,000	2.00
Exercised	(25,563)	2.74
Canceled and forfeited	(4,896)	3.98
Expired	(17,958)	5.16
Options outstanding as of December 31, 2020:	719,067	$	2.53

The following table summarizes information about options outstanding as of December 31, 2020:


	Options Outstanding				Options Exercisable
Range of exercise prices	Number outstanding as of December 31, 2020	Weighted average remaining contractual life	Weighted average exercise price		Number exercisable as of December 31, 2020	Weighted average exercise price
$2.00 - $2.00	237,500	5.79	$	2.00	3,500	$	2.00
2.46 - 2.46	350,000	1.01	2.46		350,000	2.46
2.79- 6.05	131,567	2.59	3.67		105,150	3.54

$2.00 - $6.05	719,067	2.88	$	2.53	458,650	$	2.70

During the years ended December 31, 2020 and 2019 the total intrinsic value of options exercised was $28 and $256, respectively, for which no income tax benefit has been recorded because a full valuation allowance has been provided for our U.S. deferred tax assets. As of December 31, 2020, options outstanding had a total intrinsic value of $323.

Options outstanding that have vested and are expected to vest as of December 31, 2020 are as follows:


	Number of shares	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Vested	458,650	$	2.70	1.30	$	131
Expected to vest	244,024	2.22		5.64	180
Total	702,674	$	2.54	2.81	$	311

Restricted Stock

The 2006 Plan provides for the issuance of restricted stock, including restricted stock units. During the years ended December 31, 2020 and 2019 we granted 2,137,317 and 1,917,514 shares, respectively, of restricted stock with a weighted average grant date fair value of $3.42 and $3.81 per share, respectively.

The following is a summary of restricted stock activity:


	Number of shares	Weighted average grant date fair value
Unvested at December 31, 2019:	3,112,426	$	4.06
Granted	2,137,817	3.42
Vested	(1,834,406)	3.93
Canceled	(239,232)	4.28
Unvested at December 31, 2020:	3,176,605	$	3.68
Expected to vest after December 31, 2020	2,947,031	$	3.68

Employee Stock Purchase Plans

On May 18, 2010, our shareholders approved the adoption of the 2010 Pixelworks, Inc. Employee Stock Purchase Plan (the "ESPP") for U.S. employees and for certain foreign subsidiary employees. The ESPP provides for separate offering periods commencing on February 1 and August 1, with the first offering period beginning August 1, 2010. Each offering period continues for a period of 18 months with purchases every six months. Each eligible employee may purchase up to 3,000 shares of stock on each purchase date, with a maximum annual purchase amount of $25. The purchase price is equal to 85% of the lesser of the fair market value of the shares on the offering date or on the purchase date. On May 15, 2020 the ESPP was amended when our shareholders approved an increase to the total number of shares of common stock reserved for issuance to 3,300,000. During the years ended December 31, 2020 and 2019, we issued 202,019 and 194,361 shares, respectively for proceeds of $529 and $519, respectively, under the ESPP.

Stock-Based Compensation Expense

The fair value of stock-based compensation was determined using the Black-Scholes option pricing model and the following weighted average assumptions:


	Year Ended December 31,
	2020		2019
Stock Option Plans:
Risk free interest rate	2.00	%	2.47	%
Expected dividend yield	0	%	0	%
Expected term (in years)	3.75		5.00
Volatility	64	%	66	%
Employee Stock Purchase Plan:
Risk free interest rate	0.79	%	2.05	%
Expected dividend yield	0	%	0	%
Expected term (in years)	1.05		1.05
Volatility	65	%	65	%

The weighted average fair value of options granted during the years ended December 31, 2020 and 2019 was $0.93 and $2.23, respectively. The risk free interest rate is estimated using an average of treasury bill interest rates. The expected dividend yield is zero as we have not paid any dividends to date and do not expect to pay dividends in the future. Expected volatility is estimated based on the historical volatility of our common stock over the expected term as this represents our best estimate of future volatility. The contractual life of newly issued stock options is six years, and we have elected to use the "simplified method" to estimate expected term. Under the simplified method, an option's expected term is calculated as the average of its vesting period and original contractual life. The expected term of ESPP purchase rights is based on the estimated weighted average time to purchase.

As of December 31, 2020, unrecognized stock-based compensation expense is $5,391, which is expected to be recognized as stock-based compensation expense over a weighted average period of 1.09 years.