GIGM GigaMedia Ltd

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15D-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May, 2024

Commission File Number: 000-30540

 

GIGAMEDIA LIMITED

8F, No.22, Lane 407, Section 2, Tiding Boulevard

Neihu District

Taipei, Taiwan (R.O.C.)

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

Form 20-F [ x ] Form 40-F [ ]

 

(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

 

Yes [ ] No [ x ]

 

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) :82- .)

 

GIGAMEDIA LIMITED is submitting under cover of Form 6-K:

1. GigaMedia Notice of Annual General Meeting of Shareholders and Proxy Statement (attached hereto as Exhibit 99.1)

 

2. GigaMedia Annual General Meeting of Shareholders Proxy Card (attached hereto as Exhibit 99.2)

 

3. GigaMedia 2023 Financial Statements Prepared in Accordance with U.S. GAAP (attached hereto as Exhibit 99.3)

 

4. GigaMedia 2023 Financial Statements Prepared in Accordance with Singapore GAAP (attached hereto as Exhibit 99.4)

 

 

 

 

 

 

 

 

 

 

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	GigaMedia Limited
	(Registrant)
Date: May 31, 2024	By: /s/ HUANG, CHENG-MING
	(Signature)
	Name: HUANG, CHENG-MING
	Title: Chief Executive Officer

 

 

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NOTICE OF THE TWENTY-FIFTH ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

 

 

GigaMedia Limited

Incorporated in the Republic of Singapore

Registration No.: 199905474H

 

 

REGISTERED OFFICE

80 Robinson Road, #02-00

Singapore 068898

 

 

NOTICE IS HEREBY GIVEN that the 25th annual general meeting of the shareholders of GigaMedia Limited (the “Company”) will be held on June 27, 2024 at 11 a.m. local time at 8F, No.22, Lane 407, Sec.2, Tiding Blvd., Neihu District, Taipei, Taiwan, R.O.C , for the following purposes:

 

AS ORDINARY AND SPECIAL BUSINESS

 

ORDINARY RESOLUTIONS:

 

To consider and, if thought fit, to pass, with or without modification, the following resolutions which will be proposed as Ordinary Resolutions:

 

 

RESOLVED that the Statement by the Directors, Auditor’s Report and Audited Financial Statements of the Company for the financial year ended December 31, 2023 are received and adopted.

(Resolution 1)

 

2. Approval of appointment of auditors

 

RESOLVED that Deloitte & Touche and Deloitte & Touche LLP be and are hereby appointed as the independent external auditors of the Company until the next Annual General Meeting and that the Directors be and are hereby authorized to fix their remuneration for the financial year ended December 31, 2024.

(Resolution 2)

 

 

RESOLVED that the remuneration of all of the Directors is hereby approved in an aggregate amount not exceeding US$350,000 in respect of their professional services to the Company until the conclusion of the next Annual General Meeting of the Company.

(Resolution 3)

 

 

 

RESOLVED that pursuant to Section 161 of the Companies Act 1967 of Singapore (“Companies Act”), authority be and is hereby given to the Directors of the Company to:

 

(1) (a) issue ordinary shares in the Company ("Shares") whether by way of rights, bonus or otherwise; and/or

 

(b) make or grant offers, agreements or options (collectively, "Instruments") that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into Shares, at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and

 

(2) notwithstanding that the authority conferred by this Resolution may have ceased to be in force, issue Shares pursuant to any Instrument made or granted by the Directors while this Resolution was in force; and

 

(3) unless varied or revoked by the Company in general meeting, such authority conferred on the Directors of the Company shall continue in force:

 

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(Resolution 4)

 

 

RESOLVED that:

 

(1) for the purposes of Sections 76C and 76E of the Companies Act, the exercise by the Directors of the Company of all the powers of the Company to purchase or otherwise acquire issued Shares not exceeding in aggregate the Maximum Limit (as hereafter defined), at such price or prices as may be determined by the Directors from time to time up to the Maximum Price (as hereafter defined), by way of market purchase(s) on The Nasdaq Stock Market (“Nasdaq”) or off-market purchase(s) on one or more equal access schemes as may be determined by the Directors as they see fit, which scheme(s) shall satisfy all the conditions of the Companies Act, and otherwise be in accordance with all other laws and regulations and rules of Nasdaq as may be applicable, be and is hereby authorized and approved generally and unconditionally (the “Share Purchase Mandate”);

 

(2) unless varied or revoked by the Company in a general meeting, the authority conferred on the Directors of the Company pursuant to the Share Purchase Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the date of the passing of this Resolution and expiring on the earlier of:

 

(a) the date on which the next Annual General Meeting of the Company is held; and

 

(b) the date by which the next Annual General Meeting of the Company is required by law to be held;

 

(3) in this Resolution:

 

“Average Closing Price” means the average of the closing prices of a Share for the five consecutive trading days on which the Shares are traded on Nasdaq immediately preceding the date of market purchase by the Company or the date of making the offer pursuant to an equal access scheme, which price shall be adjusted in accordance with the listing rules of Nasdaq for any corporate action that occurs after the relevant five day period;

 

“Maximum Limit” means that number of issued Shares representing 10% of the total number of issued Shares as at the date of the passing of this Resolution (excluding any Shares that are held as treasury shares as at that date); and

 

“Maximum Price” means the purchase price (excluding brokerage, commission, applicable goods and services tax and other related expenses) that shall not exceed 105% of the Average Closing Price; and

 

(Resolution 5)

 

 

 

 

 

 

 

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NOTES:

 

1. Shareholders are cordially invited to attend the Twenty- Fifth Annual General Meeting in person. Whether or not you plan to be at the Twenty- Fifth Annual General Meeting, you are urged to return your proxy. A shareholder entitled to attend and vote is entitled to appoint one or more proxies to attend and to vote instead of him.

 

2. Shareholders wishing to vote by proxy should complete the attached form.

 

3. The proxy form of an individual shareholder shall be signed either by the shareholder personally or by his attorney. The proxy form of a corporate shareholder shall be given either under its common seal or signed on its behalf by an attorney or a duly authorized officer of the corporate shareholder.

 

4. A proxy need not be a shareholder of the Company.

 

5. The proxy form (and if relevant, the original power of attorney, or other authority under which it is signed or a notarially certified copy of such power or authority) must be deposited at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, or the office of the Company, 8F, No. 22, Lane 407, Section 2, Tiding Boulevard, Taipei 114, Taiwan R.O.C., not less than 48 hours before the time for holding the Twenty- Fifth Annual General Meeting, that is by no later than 11 p.m. June 24, 2024 (New York time), or 11 a.m. June 25, 2024 (Taipei time), failing which the proxy shall not be treated as valid.

 

6. Electronic Delivery of Future Proxy Materials. Shareholders can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the internet. To sign up for electronic delivery, please follow the instructions below relating to “Electronic Delivery of Future Proxy Materials” and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

 

7. Only shareholders of record at the close of business on Nasdaq Stock Market (New York), on April 26, 2024 are entitled to notice of and to vote at the Twenty- Fifth Annual General Meeting, or any adjournment or postponement of the Twenty- Fifth Annual General Meeting. If you have sold or transferred the Shares you hold in the Company to another person (the “Purchaser” or “Transferee”) after April 26, 2024 and prior to the Twenty- Fifth Annual General Meeting, you should immediately forward this Notice and the attached proxy statement and proxy card to the Purchaser or Transferee of such Shares, or to the bank, broker, or agent through whom the sale of such Shares was effected, for onward transmission to the Purchaser or Transferee.

 

8. The Company intends to use internal sources of funds or external borrowings or a combination of both to finance the Company’s purchase or acquisition of Shares pursuant to the Share Purchase Mandate. The Directors do not propose to exercise the Share Purchase Mandate to such extent that it would materially and adversely affect the financial position of the Company and its subsidiaries. The amount of financing required for the Company to purchase or acquire its Shares, and the impact on the Company’s financial position, cannot be ascertained as at the date of this Notice as this will depend on the number of Shares purchased or acquired, the price at which such Shares were purchased or acquired and whether the Shares purchased or acquired would be held in treasury or cancelled.

 

 

 

 

 

 

 

 

BY ORDER OF THE BOARD

 

 

 

 

/s/ Cheng-Ming Huang

………………………………………..

Cheng-Ming Huang (aka James Huang)

Chairman of the Board and Chief Executive Officer

 

 

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TABLE OF CONTENTS

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

PROXY STATEMENT

Questions and Answers about the Annual Meeting and Voting

Proposal 1

Proposal 2

Proposal 3

Proposal 4

Proposal 5

Other Matters

Proxy Solicitation

 

 

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GigaMedia Limited

Incorporated in the Republic of Singapore

Registration No.: 199905474H

 

 

REGISTERED OFFICE

80 Robinson Road, #02-00

Singapore 068898

 

 

PROXY STATEMENT

 

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

 

Why Did I Receive This Proxy Statement?

 

We sent you this proxy statement and the enclosed proxy card because the Company’s Board of Directors is soliciting your proxy to be used at the Company’s annual meeting of shareholders on June 27, 2024 at 8F, No.22, Lane 407, Sec.2, Tiding Blvd., Neihu District, Taipei, Taiwan, R.O.C., or at any adjournment or postponement of the meeting.

 

 

Who Can Vote?

You are entitled to vote if you owned the Shares on the record date (“Record Date”), which is the close of business on Nasdaq Stock Market (New York), on April 26, 2024. Each Share that you own entitles you to one vote.

 

 

How Many Shares of Voting Stock Are Outstanding?

 

On the Record Date, there were 11,052,235 Shares outstanding. The Shares are our only class of voting stock.

 

 

What May I Vote On?

 

1. Adoption of Audited Financial Statements

 

2. Approval of Appointment of Auditors

 

3. Approval of Directors’ Remuneration

 

4. Approval for Authority to Allot and Issue Shares

 

5. Approval for Share Purchase Mandate

 

 

Other Business

 

 

How Do I Vote?

 

To vote by proxy, you should complete, sign and date the enclosed proxy card and return it promptly in the prepaid envelope provided.

 

 

How Do I Request Electronic Delivery of Future Proxy Materials?

 

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the internet. To sign up for electronic delivery, please go to www.proxyvote.com to indicate that you agree to receive or access proxy materials electronically in future years.

 

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May I Revoke My Proxy?

 

Your proxy may be revoked prior to its exercise by appropriate notice to us.

 

 

If I Plan To Attend The Meeting, Should I Still Vote By Proxy?

 

Whether you plan to attend the meeting or not, we urge you to vote by proxy. Returning the proxy card will not affect your right to attend the meeting, and your proxy will not be used if you are personally present at the meeting and inform the Secretary in writing prior to the voting that you wish to vote your Shares in person.

 

 

How Will My Proxy Get Voted?

 

If you properly fill in your proxy card and send it to us, your proxy holder (the individual named on your proxy card) will vote your Shares as you have directed. If you sign the proxy card but do not make specific choices, the proxy holder will vote your Shares as recommended by the Board of Directors and our management.

 

 

How Will Voting On Any Other Business Be Conducted?

 

Although we do not know of any business to be considered at the meeting other than the proposals described in this proxy statement, if any other business is presented at the meeting, your returned proxy gives authority to the proxy holder to vote on these matters in his discretion.

 

 

 

 

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Proposal 1. ADOPTION OF AUDITED FINANCIAL STATEMENTS

 

The Company seeks shareholders’ adoption of the audited financial statements of the Company (the “Audited Financial Statements”), which have been prepared under Financial Reporting Standards in Singapore (“FRSs”) , in respect of the financial year ended December 31, 2023. Along with the Audited Financial Statements, the Company seeks Shareholders’ adoption of the Statement by the Directors and Auditor’s Report of the Company in respect of the same financial year.

 

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the Twenty- Fifth Annual General Meeting of the Company (the “AGM”).

 

The Board of Directors of the Company (the “Board of Directors”) recommends a vote FOR this proposal.

 

 

Proposal 2. APPROVAL OF APPOINTMENT OF AUDITORS

 

The Company seeks Shareholders’ approval for the appointment of Deloitte & Touche and Deloitte & Touche LLP as the independent external auditors of the Company to hold such office until the conclusion of the next Annual General Meeting of the Company. The Board of Directors also seeks shareholders’ approval to authorize the Board of Directors to fix the remuneration for Deloitte & Touche and Deloitte & Touche LLP in respect of their services to the Company for the financial year ended December 31, 2024.

 

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

 

The Board of Directors recommends a vote FOR this proposal.

 

 

Proposal 3. APPROVAL OF DIRECTORS’ REMUNERATION

 

The Company seeks shareholders’ approval on the remuneration of all of the Directors in an aggregate amount not exceeding US$350,000 in respect of their professional services to the Company until the conclusion of the next Annual General Meeting of the Company.

 

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

 

The Company’s management recommends a vote FOR this proposal.

 

 

Proposal 4. APPROVAL FOR AUTHORITY TO ALLOT AND ISSUE SHARES

 

The Company is incorporated in Singapore. Under the Companies Act 1967 of Singapore (the “Companies Act”), the Directors may exercise any power of the Company to issue new Shares only with the prior approval of the shareholders of the Company at a general meeting. Such approval, if granted, is effective from the date of the general meeting at which the approval was given until the date on which the next Annual General Meeting of the Company is held or is required by law to be held, whichever is earlier.

 

Shareholders’ approval is sought to give Directors authority to allot and issue new Shares and other instruments convertible into Shares during the period from the Twenty- Fifth Annual General Meeting to the earlier of the next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held.

 

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

 

The Board of Directors recommends a vote FOR this proposal.

 

 

Proposal 5. APPROVAL FOR SHARE PURCHASE MANDATE

 

The approval of the Share Purchase Mandate authorizing the Company to purchase or acquire its Shares would give the Company the flexibility to undertake Share purchases or acquisitions at any time, subject to market conditions, during the period when the Share Purchase Mandate is in force.

 

In managing the business of the Company and its subsidiaries (collectively, the “Group”), the Company’s management strives to increase shareholders’ value by improving, inter alia, the return on equity of the Group. A Share purchase by the Company is one of the ways through which the return on equity of the Group may be enhanced.

 

A Share purchase is also an available option for the Company to return surplus cash that is in excess of the financial and possible investment needs of the Group to its shareholders. In addition, the Share Purchase Mandate will

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allow the Company to have greater flexibility over, inter alia, the Company’s share capital structure and its dividend policy.

 

The Company intends to use internal sources of funds or external borrowings or a combination of both to finance the Company's purchase or acquisition of the Shares pursuant to the Share Purchase Mandate. The Directors do not propose to exercise the Share Purchase Mandate to such extent that it would materially and adversely affect the financial position of the Group.

 

Share repurchase programmes may also help buffer short-term Share price volatility and off-set the effects of short-term speculators and investors and, in turn, bolster shareholder confidence and employee morale.

 

Adoption of this proposal requires the affirmative vote of a majority of the votes cast by shareholders entitled to vote at the AGM.

 

The Board of Directors recommends a vote FOR this proposal.

 

 

OTHER MATTERS

 

As of the date of this Proxy Statement, the Company does not intend to present and has not been informed that any other person intends to present any business not specified in this Proxy Statement for action at the Twenty- Fifth Annual General Meeting.

 

Shareholders are urged to sign the enclosed proxy form and to return it promptly in the enclosed envelope. Proxies will be voted in accordance with shareholders’ directions. Signing the proxy form does not affect a shareholder’s right to vote at the Twenty- Fifth Annual General Meeting, and the proxy may be revoked prior to its exercise by appropriate notice to the undersigned.

 

 

PROXY SOLICITATION

 

The Company will pay the cost of preparing and mailing this proxy statement and form of proxy to its shareholders. The Company has retained Mackenzie Partners, Inc. to request banks and brokers to forward copies of these materials to persons for whom they hold Shares and to request authority for execution of the proxies.

 

 

 

 

GIGAMEDIA LIMITED

 

/s/ Cheng-Ming Huang

………………………………………..

Cheng-Ming Huang (aka James Huang)

Chairman of the Board and Chief Executive Officer

 

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GIGAMEDIA LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(With Report of Independent Registered Public Accounting Firm Thereon)

 

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

Index to Consolidated Financial Statements

 

	Page
Report of Independent Registered Public Accounting Firm	F-3
Consolidated balance sheets as of December 31, 2023 and 2022	F-4
Consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021	F-6
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021	F-7
Consolidated statements of changes in shareholders’ equity for the years ended December 31, 2023, 2022 and 2021	F-8
Consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021	F-9
Notes to consolidated financial statements	F-11

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

GigaMedia Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of GigaMedia Limited and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the result of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair Value - Level 3 Assets - Refer to Note 4 to the Consolidated Financial Statements

Critical Audit Matter Description

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The Company holds investment in securities amounted to $5,777 thousand issued by a private company. The fair value of the investments is based on complex valuation methods with unobservable inputs, therefore, classified as Level 3.

Unlike the valuation of assets with readily observable market prices, therefore, more easily independently corroborated, the valuation of financial instruments classified as Level 3 is inherently subjective, and often involves the use of complex proprietary methods and unobservable inputs.

We identified the valuation of the Level 3 assets as a critical audit matter because of the complex valuation methods and unobservable inputs, including the discount rate, discount of lack of marketability and volatility management uses to estimate the fair value. This requires a high degree of auditor’s professional judgment and an increased extent of effort, including the involvement of our fair value specialists, when evaluating the methods and related inputs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures included the following, among others:

— We obtained an understanding and evaluated the design and implementation of controls over management’s valuation of the Level 3 assets, including controls over the Company’s valuation methods and significant unobservable inputs.

— With the assistance of our fair value specialists, (1) we evaluated the appropriateness of the valuation methodologies and techniques used in determining the fair value of the Level 3 asset;(2)we tested the underlying data used in the methods calculations and the mathematical accuracy of the calculation; (3)we evaluated the appropriateness of the judgements and estimates of the key inputs used in determining the fair value of the Level 3 assets including but not limited to the discount rate, discount of lack of marketability and volatility.

/s/Deloitte & Touche

Taipei, Taiwan

Republic of China

April 29, 2024

We have served as the Company’s auditor since 2017.

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2023 AND 2022

(in thousands of US dollars)

 

		December 31
		2023				2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 5)		$	38,470			$	38,794
Investment in securities - current (Note 8)			—				7,950
Accounts receivable - net (Note 6)			227				199
Prepaid expenses			54				60
Restricted cash (Note 5)			313				313
Other current assets (Note 7)			143				510
Total Current Assets			39,207				47,826
INVESTMENT IN SECURITIES - NONCURRENT (Note 8)			5,777				2,371
PROPERTY, PLANT AND EQUIPMENT, NET (Note 18)			111				103
INTANGIBLE ASSETS - NET (Note 18)			13				19
OTHER ASSETS
Refundable deposits			193				192
Prepaid licensing and royalty fees (Note 3)			24				177
Right-of-use assets (Note 9 and 18)			944				1,306
Other (Note 12)			228				142
TOTAL ASSETS		$	46,497			$	52,136

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

DECEMBER 31, 2023 AND 2022

(in thousands of US dollars, except share data)

 

		December 31
		2023				2022
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	44			$	53
Accrued expenses (Note 10)			1,182				1,151
Deferred revenue (Note 11)			573				817
Other current liabilities (Notes 9 and 17)			665				616
Total Current Liabilities			2,464				2,637
NONCURRENT LIABILITIES
Lease liabilities (Note 9)			495				893
Total Liabilities			2,959				3,530
COMMITMENTS AND CONTINGENCIES (Note 17)			—				—
SHAREHOLDERS' EQUITY (Note 13)
Ordinary shares, no par value, and additional paid-in capital; issued    and outstanding 11,052 thousand shares in 2023 and 2022			308,752				308,752
Accumulated deficit			(241,830	)			(238,431	)
Accumulated other comprehensive loss (Note 14)			(23,384	)			(21,715	)
Total GigaMedia Shareholders’ Equity			43,538				48,606
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	46,497			$	52,136

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(in thousands of US dollars, except for earnings per share amounts)

 

		2023				2022				2021
OPERATING REVENUES
Digital entertainment service revenues (Note 18)		$	4,292			$	5,585			$	5,492
COSTS OF REVENUES
Cost of digital entertainment service revenues			(1,846	)			(2,335	)			(2,584	)
GROSS PROFIT			2,446				3,250				2,908
OPERATING EXPENSES
Product development and engineering expenses			(729	)			(1,110	)			(1,449	)
Selling and marketing expenses			(1,623	)			(1,644	)			(1,729	)
General and administrative expenses			(3,242	)			(3,515	)			(3,697	)
Bad debt expense (Note 6)			(7	)			(2	)			(7	)
			(5,601	)			(6,271	)			(6,882	)
LOSS FROM OPERATIONS			(3,155	)			(3,021	)			(3,974	)
NON-OPERATING INCOME (EXPENSES)
Interest income from financial institutions			1,609				559				92
Interest income on securities (Note 17)			202				159				160
Gain on disposal or repayment of investment in securities (Note 8)			76				—				125
Foreign exchange gain (loss), net			(34	)			(941	)			122
Changes in the fair value of investment in equity securities recognized at fair value (Note 4)			(2,110	)			409				—
Other			13				83				50
			(244	)			269				549
LOSS BEFORE INCOME TAXES			(3,399	)			(2,752	)			(3,425	)
INCOME TAX EXPENSE (Note 16)			—				—				—
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS OF GIGAMEDIA		$	(3,399	)		$	(2,752	)		$	(3,425	)
LOSS PER SHARE ATTRIBUTABLE TO GIGAMEDIA
Basic and Diluted:		$	(0.31	)		$	(0.25	)		$	(0.31	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER SHARE    ATTRIBUTABLE TO GIGAMEDIA SHAREHOLDERS (Note 2)
Basic			11,052				11,052				11,052
Diluted			11,052				11,052				11,052

The accompanying notes are an integral part of these consolidated financial statements.

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(in thousands of US dollars)

 

		2023				2022				2021
NET LOSS		$	(3,399	)		$	(2,752	)		$	(3,425	)
OTHER COMPREHENSIVE INCOME (LOSS) - NET OF TAX:
Defined benefit pension plan adjustment			(11	)			76				14
Foreign currency translation adjustment			(129	)			(190	)			203
Unrealized holding gain (loss) on investment in securities			(1,453	)			620				(124	)
Reclassification adjustment for loss included in net income			(76	)			—				97
Other			—				—				(10	)
			(1,669	)			506				180
COMPREHENSIVE LOSS ATTRIBUTABLE TO GIGAMEDIA    SHAREHOLDERS		$	(5,068	)		$	(2,246	)		$	(3,245	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(in thousands of US dollars and shares)

 

		GIGAMEDIA SHAREHOLDERS
		Ordinary shares and additional paid-in capital								Accumulated deficit				Accumulated other comprehensive loss
		Shares				Amount				(Note 13)				(Note 14)				Total
Balance as of January 1, 2021			11,052			$	308,752			$	(232,254	)		$	(22,401	)		$	54,097
Net loss			—				—				(3,425	)			—				(3,425	)
Other comprehensive income			—				—				—				180				180
Balance as of December 31, 2021			11,052				308,752				(235,679	)			(22,221	)			50,852
Net loss			—				—				(2,752	)			—				(2,752	)
Other comprehensive loss			—				—				—				506				506
Balance as of December 31, 2022			11,052				308,752				(238,431	)			(21,715	)			48,606
Net loss			—				—				(3,399	)			—				(3,399	)
Other comprehensive loss			—				—				—				(1,669	)			(1,669	)
Balance as of December 31, 2023			11,052			$	308,752			$	(241,830	)		$	(23,384	)		$	43,538

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(in thousands of US dollars)

		2023				2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(3,399	)		$	(2,752	)		$	(3,425	)
Adjustments to reconcile net income (loss) to net cash used in operating    activities:
Depreciation			43				24				11
Amortization			12				9				9
Bad debt expense			7				2				7
Gain on disposal of investment in securities			(76	)			—				(125	)
Changes in the fair value of investment in equity securities recognized at fair value			2,110				(409	)			—
Unrealized foreign exchange (gain) loss			(85	)			1,022				—
Other			—				3				—
Net changes in:
Accounts receivable			(35	)			64				3
Prepaid expenses			7				341				(313	)
Prepaid licensing and royalty fees			152				(142	)			96
Prepaid pension assets			9				(59	)			(16	)
Other assets			272				(141	)			(151	)
Accounts payable			(9	)			(66	)			47
Accrued expenses			31				(284	)			(80	)
Other liabilities			(232	)			(121	)			(198	)
Net cash used in operating activities			(1,193	)			(2,509	)			(4,135	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment in securities			(105	)			—				—
Purchases of property, plant and equipment			(52	)			(52	)			(76	)
Increase in intangible assets			(6	)			(18	)			(17	)
Proceeds from disposal of investment in securities			1,000				—				80
Increase in refundable deposits			—				—				(4	)
Net cash provided by (used in) investing activities			837				(70	)			(17	)

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(in thousands of US dollars)

 

		2023				2022				2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash used in financing activities			—				—				—
Net foreign currency exchange differences on cash, cash equivalents    and restricted cash			32				(75	)			(89	)
NET DECREASE IN CASH, CASH EQUIVALENTS AND    RESTRICTED CASH			(324	)			(2,654	)			(4,241	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT    BEGINNING OF YEAR			39,107				41,761				46,002
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END    OF YEAR		$	38,783			$	39,107			$	41,761
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year		$	—			$	—			$	—
Income tax refunded during the year		$	—			$	—			$	(2	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

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GIGAMEDIA LIMITED AND SUBSIDIARIES

Notes To Consolidated Financial Statements

December 31, 2023, 2022 and 2021

 

 

NOTE 1. Principal Activities, Basis of Presentation, and Summary of Significant Accounting Policies

(a) Principal Activities

GigaMedia Limited (referred to hereinafter as GigaMedia, our Company, we, us, or our) is a diversified provider of digital entertainment services, with a headquarters in Taipei, Taiwan.

Our digital entertainment service business operates a suite of play-for-fun digital entertainment services, mainly targeting online and mobile-device users across Asia.

(b) Basis of Presentation

The accompanying consolidated financial statements of our Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(c) Summary of significant accounting policies

Principles of Consolidation

The consolidated financial statements include the accounts of GigaMedia and its subsidiaries after elimination of all inter-company accounts and transactions.

Foreign Currency Transactions

The functional currency of each individual consolidated entity is determined based on the primary economic environment in which the entity operates. Foreign currency transactions denominated in currencies other than the functional currencies are translated into the functional currency using the exchange rate prevailing on the transactions dates. At year-end, the balances of foreign currency monetary assets and liabilities are recorded based on prevailing exchange rates and any resulting gains or losses are included in other income and expenses. For the Investments in debt securities that are classified as either trading or available for sale that is denominated in a foreign currency, see Note 1(c), Summary of significant accounting policies - Investment in Securities, for additional information.

Translation of Foreign Currency Financial Statements

The reporting currency of our Company is the U.S. dollars. The functional currency of some of our Company’s subsidiaries is the local currency of the respective entity. Accordingly, the financial statements of the foreign subsidiaries were translated into U.S. dollars at the following exchange rates: assets and liabilities — current rate on the balance sheet date; shareholders’ equity — historical rates; income and expenses — average rate during the period. Cumulative translation adjustments resulting from this process are charged or credited to other comprehensive income.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management bases its estimates on historical experience and on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however, actual results could differ from those estimates. Items subject to such estimates and assumptions include but not limit to the deferral and breakage of revenues; the fair value of unquoted debt and equity securities, the useful lives of property, plant and equipment and right-of-use assets; allowances for doubtful accounts; the valuation of deferred tax assets, long-lived assets, investments and share-based compensation; and accrued pension liabilities (prepaid pension assets), income tax uncertainties and other contingencies. We believe the critical accounting policies listed below affect management’s judgments and estimates used in the preparation of the consolidated financial statements.

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Revenue Recognition and Deferral

General

Our recognition of revenue from contracts with customers is in accordance with the five-step revenue recognition model: (1) identify the contract with a customer; (2) identify the performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation; and (5) recognize revenue when or as we satisfy a performance obligation.

Sales taxes assessed by governmental authorities on our revenue transactions are presented on a net basis of digital entertainment service revenues in our consolidated financial statements.

In addition to the aforementioned general policies, the following are the specific revenue recognition policies for revenue from contracts with customers.

Digital Entertainment Product and Service Revenues

Digital entertainment product and service revenues are mainly generated through sale of virtual points and in-game items, and those virtual goods purchased in our games can only be consumed in our games. Therefore, we regard the sale of a virtual good as a service, where the related performance obligation is satisfied over time, and revenues are recognized by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. Accordingly, we recognize revenues from the sale of virtual goods over the period of time using the output method, which is generally the estimated service period.

Digital entertainment product and service revenues are generated through the sale of virtual points, prepaid cards and game packs via various third-party storefronts, distributors and payment channels, including but not limited to the “Google Play Store,” the “Apple App Store,” convenience stores, telecom service providers and other payment service providers. Proceeds from sales of prepaid cards and game packs, net of sales discounts, and virtual points are deferred when received, and revenue is recognized upon the actual usage of the playing time or in-game virtual items by the end-users, or over the estimated useful life of virtual items, when the game is terminated and the period of refund claim for any sold virtual items is ended in accordance with our published policy, or when the likelihood of the customer exercising the remaining rights becomes remote. (Please see “Deferred Revenues and Breakage” below for more discussion of accounting treatments of the unexercised rights.)

Estimated Service Period

The virtual goods for our games may have different service periods. We use the weighted average number of days of a player’s payment interval as the estimate for the service period of each game. We evaluate the appropriateness of such estimates quarterly to see if they are in line with our observations in the operations. We believe this provides a reasonable depiction of the transfer of services to our customers, as it is the best representation of the time period during which our customers play our games. Determining the estimated service period is subjective and requires management’s judgment. Future usage patterns may differ from historical ones and therefore, the estimated service period may change in the future. The estimated service periods for players of our current games are generally less than 6 months.

Principal Agent Considerations

For the revenues generated from our digital entertainment offerings which are licensed to us for using, marketing, distributing, selling and publishing, and for the sales of our products and services via third-party storefronts and other channels, we evaluate to determine whether our revenues should be reported on a gross or net basis. Key indicators that we evaluate in determining whether we are the principal in the sale (gross reporting) or an agent (net reporting) include, but are not limited to:

Based on our evaluation of various indicators, we report revenues on a gross basis for games that we publish and operate, as we are, and we present ourselves as, responsible for fulfilling the promise of delivering the virtual goods in the game and maintaining the game environment for customers’ consumption of such virtual goods. We have the discretion in establishing the price for those virtual goods, including the power to decide the range and extent of price discount or quantity discount, while the licensors or the third-party channels charge a fixed percentage of fees for such sales. And any loss on the receivables has to be absorbed by us and not the third-party channels.

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Deferred Revenues and Breakage

Deferred revenues representing contract liabilities consist mainly of the advanced income related to our digital entertainment business. Deferred revenue represents proceeds received relating to the sale of virtual points and in-game items that are activated or charged to the respective user account by users, but which have not been consumed by the users or expired. Deferred revenue is credited to profit or loss when the virtual points and in-game items are consumed or have expired. Pursuant to relevant requirements in Taiwan, as of December 31, 2023 and 2022, cash totaling $313 thousand and $313 thousand, respectively, had been deposited in escrow accounts in banks mainly as a performance bond for the users’ prepayments and virtual points, and is included within restricted cash in the consolidated balance sheets.

For deferred revenues, some users may not exercise all of their contractual rights, and those unexercised rights are referred to as breakage. We estimate and recognize the breakage amount as revenue when the likelihood of the customer exercising the remaining rights becomes remote. We consider a variety of data points when determining the estimated breakage amount, including the time when we ceased selling prepaid products for certain services and when such prepaid products were last used in charging users’ accounts.

Prepaid Licensing and Royalty Fees

Our Company, through our subsidiaries, routinely enters into agreements with licensors to acquire licenses for using, marketing, distributing, selling and publishing digital entertainment offerings.

Prepaid licensing fees paid to licensors are amortized on a straight-line basis over the shorter of the estimated useful economic life of the relevant product and service or license period, which is usually within one to two years.

Prepaid royalty fees and related costs are initially deferred when paid to licensors and amortized as operating costs based on certain percentages of revenues generated by the licensee from operating the related digital entertainment product and service in the specific country or region over the contract period.

Fair Value Measurements

Our Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or a liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Our Company generally determines or calculates the fair value of financial instruments using quoted market prices in active markets when such information is available; otherwise we apply appropriate present value or other valuation techniques, such as the income approach, incorporating adjusted available market discount rate information and our Company’s estimates for non-performance and liquidity risk, or the market approach, where we derive the implied value of financial instruments for the target company from a recent transaction involving the target company’s own securities. These techniques rely extensively on the use of a number of assumptions, including the discount rate, credit spreads, and estimates of future cash flows. (Please see Note 4, “Fair Value Measurements”, for additional information.)

Cash Equivalents, Restricted Cash and Presentation of Statements of Cash Flows

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and so near to their maturity that they present relatively insignificant risk from changes in interest rates. Commercial paper, negotiable certificates of deposit, time deposits and bank acceptances with original maturities of three months or less are considered to be cash equivalents.

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Our consolidated statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statement of cash flows.

Investment in Securities

Debt securities

Debt securities for which we have the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. Debt securities held primarily for the purpose of selling in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses included in income.

Debt securities not classified as held-to-maturity or trading are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of income taxes, as a separate component of other comprehensive income. When a trading or available-for-sale security is denominated in a foreign currency, changes in the exchange rate between the foreign currency and an entity’s functional currency affect the security’s fair value. Therefore, under ASC 320, Investments—Debt Securities, the trading or available-for-sale security must be remeasured from the foreign currency to the functional currency as of each reporting date by using the current exchange rate to determine the fair value of the security. The entire change in the security’s fair value (including the portion related to a change in the exchange rates) is classified in accordance with ASC 320.

Losses on debt security transactions and declines in value that are determined to be the result of credit losses, if any, are reported in the consolidated statements of operations. In evaluating credit losses on the debt securities, management first considers whether the fair value is less than amortized cost. An impairment exists if the fair value of the investment is less than its amortized cost basis. Secondly, the intent or requirement to sell the securities is analyzed. If we intend to sell the debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, any allowance for credit losses shall be written off and the amortized cost basis shall be written down to the debt security’s fair value at the reporting date, with any incremental impairment reported in the consolidated statements of operations. Subsequently, it shall be determined whether the decline in fair value below the amortized cost basis has resulted from a credit loss, considering comprehensive factors including but not limited to changes in industry or area, in technology or changes that indicate likely or realized failure of the issue of the security to make scheduled interest or principal payments. Unrealized gains on credit-related recoveries are reported in the consolidated statements of operations.

Equity securities

Equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) are to be measured at fair value with changes in fair value recognized in net income.

Receivables

Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. Our Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management adopts a current expected credit loss model based on expected losses. The measurement of expected losses is based on relevant information about past events, including historical losses adjusted to take into account the amount of receivables in dispute, and the current receivables aging and current payment patterns, as well as reasonable and supportable forecasts that affect the collectibility of reported amounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is recorded on a straight-line basis over useful lives that correspond to categories as follows:

Categories		Years
Information and communication equipment		2 to 5
Office furniture and equipment		3 to 6
Leasehold improvements		Shorter of 5 or lease term

 

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Leasehold improvements are amortized over the shorter of the term of the lease or the economic useful life of the assets. Improvements and replacements are capitalized and depreciated over their estimated useful lives, while ordinary repairs and maintenance are expensed as incurred.

Software Cost

We capitalize certain costs incurred to purchase computer software. These capitalized costs are amortized on a straight-line basis over the shorter of the useful economic life of the software or its contractual license period, which is typically one to three years.

Impairment of Long-Lived Assets

Long-lived assets other than goodwill not being amortized are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable from its related future undiscounted cash flows. If such assets are considered to be impaired, the impairment to be recognized is measured by the extent to which the carrying amount of the assets exceeds the estimated fair value of the assets. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. When impairment is identified, the carrying amount of the asset is reduced to its estimated fair value, and is recognized as a loss from operations. (Please see Note 4, “Fair Value Measurements”, for additional information.)

Product Development and Engineering

Product development and engineering expenses primarily consist of research compensation, depreciation and amortization, and are expensed as incurred.

Advertising

Costs of broadcast advertising are recorded as expenses as advertising airtime is used. Other advertising expenditures are expensed as incurred.

Advertising expenses incurred in 2023, 2022 and 2021 totaled $0.2 million, $0.2 million and $0.2 million, respectively and were included in selling and marketing expenses.

Leases

General

We determine if an arrangement is or contains a lease at contract inception. In certain situations, judgment may be required in determining if a contract contains a lease. For these arrangements, there is judgment in evaluating if the arrangement provides us with an asset that is physically distinct, or that represents substantially all of the capacity of the asset, and if we have the right to direct the use of the asset. Lease assets and liabilities are recognized based on the present value of future lease payments over the lease term at the commencement date. Included in the lease liability are future lease payments that are fixed, in-substance fixed, or are payments based on an index or rate known at the commencement date of the lease. Variable lease payments are recognized as lease expenses as incurred, and generally relate to variable payments made based on the level of services provided by the lessor of our leases. The operating lease right-of-use (“ROU”) asset also includes any lease payments made prior to commencement, initial direct costs incurred, and lease incentives received. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents the rate required to borrow funds over a similar term to purchase the leased asset, and is based on the information available at the commencement date of the lease. For leased assets with similar lease terms and asset type we applied a portfolio approach in determining a single incremental borrowing rate to apply to the leased assets.

In determining our lease liability, the lease term includes options to extend or terminate the lease when it is reasonably certain that we will exercise such option. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.

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Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term, a change in future lease payments resulting from a change in an index or a rate used to determine those payments, or a change in the assessment of an option to purchase an underlying asset, our Company remeasures the lease liabilities with a corresponding adjustment to the ROU assets.

Operating lease ROU assets are presented in “Other assets” and operating lease liabilities are presented in “Other current liabilities” and “Lease liabilities” on our consolidated balance sheets.

Retirement Plan and Net Periodic Pension Cost

Under our defined benefit pension plan, net periodic pension cost, which includes service cost, interest cost, expected return on plan assets, amortization of unrecognized net transition obligation and gains or losses on plan assets, is recognized based on an actuarial valuation report. We recognize the funded status of pension plans and non-pension post-retirement benefit plans (retirement-related benefit plans) as an asset or a liability in the consolidated balance sheets.

Under our defined contribution pension plans, net periodic pension cost is recognized as incurred.

Government Assistance

Government subsidies received by our Company for employment support are recognized as non-operating income. If we have an obligation to repay any of the funds provided by government plus any penalties due to breach of the terms and conditions of the subsidy scheme, we estimate that obligation and recognize the amount as non-operating loss and a liability.

In 2022, a Hong Kong subsidiary of ours received subsidies from the first and the second tranches of Employment Support Scheme of the Hong Kong Government as a relief from the COVID-19 pandemic. The scheme provided time-limited financial support to employers to retain their employees who may otherwise be made redundant. Employers who participated in the scheme must provide an undertaking not to implement redundancy during the subsidy period and to spend all the wage subsidies on paying wages to their employees. The scheme was not effected in 2023 and 2021.

For the years ended December 31, 2023, 2022 and 2021, the amounts of government subsidies were $0, $44 thousand and $0, respectively.

Income Taxes

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities, which are classified as noncurrent on the consolidated balance sheets, are measured using the enacted tax rate and laws that will be in effect when the related temporary differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount that more-likely-than-not will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and loss carryforwards become deductible.

In addition, we recognize the financial statement impact of a tax position when it is more-likely-than-not that the position will be sustained upon examination. If the tax position meets the more-likely-than-not recognition threshold, the tax effect is measured at the largest amount that is greater than a 50% likelihood of being realized upon settlement. Interest and penalties on an underpayment of income taxes are reflected as income tax expense in the consolidated financial statements.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to ordinary shareholders for the period by the weighted average number of ordinary shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing the net earnings (loss) for the period by the weighted average number of ordinary shares and potential ordinary shares outstanding during the period. Potential ordinary shares, composed of incremental ordinary shares issuable upon the exercise of options in all periods, are included in the computation of diluted earnings (loss) per share to the extent such shares are dilutive. Diluted earnings (loss) per share also takes into consideration the effect of dilutive securities issued by subsidiaries. In a period in which a loss is incurred, only the weighted average number of ordinary shares issued and outstanding is used to compute the diluted loss per share, as the inclusion of potential ordinary shares would be anti-dilutive. Therefore, for the years ended December 31, 2023, 2022 and 2021, basic and diluted loss per share were $0.31, $0.25 and $0.31, respectively.

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Segment Reporting

Our segment reporting is mainly based on lines of business. We use the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by our Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining our operating segments. Our Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer.

Segment profit and loss is determined on a basis that is consistent with how our Company reports operating loss in its consolidated statements of operations. Our Company does not report segment asset information to the CODM. Consequently, no asset information by segment is presented. Because we operate only one segment, there are no intersegment transactions.

(d) Recently Adopted Accounting Pronouncements

In July 2023, the Financial Accounting Standards Board ("FASB") issued an accounting standard update ("ASU"), ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock (SEC Update). This ASU amends or supersedes various SEC paragraphs within the codification to conform to past announcements and guidance issued by the SEC. The adoption of this amendment did not have a material impact on our Company’s results of operations, financial position, cash flows or financial statement disclosures.

(e) Recent Accounting Pronouncements Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within the ASC. These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The adoption of this amendment is not expected to have a material impact on our Company’s financial position, results of operations, cash flows or financial statement disclosures.

Income tax

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds received) to international, federal, and state and local jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The guidance makes several other changes to income tax disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2024 and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. The adoption of this amendment is not expected to have a material impact on our Company’s financial position, results of operations, cash flows or financial statement disclosures.

Segment Reporting

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU:

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The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The adoption of this ASU is not expected to have a material impact on our Company’s financial position, results of operations, cash flows or financial statement disclosures.

 

NOTE 2. EARNINGS (LOSS) PER SHARE

The following table provides a reconciliation of the denominators of the basic and diluted per share computations:

 

(in thousand shares)		2023				2022				2021
Weighted average number of outstanding shares
Basic			11,052				11,052				11,052
Effect of dilutive securities
Employee share-based compensation			—				—				—
Diluted			11,052				11,052				11,052

 

Certain outstanding options were excluded from the computation of diluted EPS since their effect would have been anti-dilutive. The antidilutive stock options excluded and their associated exercise prices per share were 29 thousand shares at the range of $2.90 to $7.15 as of December 31, 2023, 33 thousand shares at $2.90 to $7.15 as of December 31, 2022, and 37 thousand shares at $2.90 to $7.15 as of December 31, 2021. There were no antidilutive Restricted Stock Units (“RSUs”) as of December 31, 2023, 2022, and 2021.

 

NOTE 3. PREPAID LICENSING AND ROYALTY FEES

The following table summarizes changes to our Company’s prepaid licensing and royalty fees:

 

(in US$ thousands)		2023				2022				2021
Balance at beginning of year		$	177			$	35			$	130
Addition			36				369				98
Amortization and usage			(189	)			(227	)			(193	)
Impairment charges			—				—				—
Balance at end of year		$	24			$	177			$	35

 

 

 

 

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NOTE 4. FAIR VALUE MEASUREMENTS

The following table presents the carrying amounts and estimated fair values of our Company’s financial instruments at December 31, 2023 and 2022.

 

(in US$ thousands)		2023								2022
		Carrying amount				Fair value				Carrying amount				Fair value
Financial assets
Cash and cash equivalents		$	38,470			$	38,470			$	38,794			$	38,794
Accounts receivable			227				227				199				199
Restricted cash			313				313				313				313
Refundable deposits			193				193				192				192
Investment in securities - current			—				—				7,950				7,950
Investment in securities - noncurrent			5,777				5,777				2,371				2,371
Financial liabilities
Accounts payable			44				44				53				53
Accrued expenses			1,182				1,182				1,151				1,151
Lease liabilities - current and noncurrent			970				970				1,333				1,333

The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions.

The fair values of the financial instruments shown in the above table as of December 31, 2023 and 2022 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an arm’s length transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. In situations where there is little market activity for the asset or liability at the measurement date, the fair value measurement reflects our Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by us based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

Our Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.

Assets and liabilities measured at fair value on a recurring basis are summarized as below:

(in US$ thousands)		Fair Value Measurement Using
		Level 1				Level 2				Level 3				At December 31, 2023
Assets
Restricted cash - time deposits		$	—			$	313			$	—			$	313
Investment in securities - noncurrent			—				—				5,777				5,777
		$	—			$	313			$	5,777			$	6,090

 

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(in US$ thousands)		Fair Value Measurement Using
		Level 1				Level 2				Level 3				At December 31, 2022
Assets
Restricted cash - time deposits		$	—			$	313			$	—			$	313
Investment in securities - current			—				—				7,950				7,950
Investment in securities - noncurrent			—				—				2,371				2,371
		$	—			$	313			$	10,321			$	10,634

 

Our Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 3 for the years ended December 31, 2023 and 2022.

Level 2 measurements:

Cash equivalents – time deposits and restricted cash – time deposits are interest-earning deposits in banks, and the cash flows are estimated based on the terms of the contracts and discounted using the market interest rates applicable to the maturity of the contracts, which are adjusted to reflect credit risks on counterparties. As the inputs into the valuation techniques are readily observable, these deposits are classified in Level 2 of the fair value hierarchy.

Level 3 measurements:

For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2023 and 2022, a reconciliation of the beginning and ending balances are presented as follows:

(in US$ thousands)		2023
		Investment in debt securities				Investment in equity securities
Balance at beginning of year		$	7,950			$	2,371
Purchase			105				—
Disposal or repayment			(1,000	)			—
Total gains or (losses) (realized/unrealized)
included in earnings			—				(2,110	)
included in other comprehensive income - unrealized gain (loss) on security			(1,453	)			—
included in other comprehensive income - foreign currency items			(54	)			(32	)
Balance at end of year		$	5,548			$	229
The amount of total gains or (losses) for the period    included in earnings attributable to the change in    unrealized gains or losses relating to assets still held at    the reporting date.		$	—			$	(2,110	)

 

(in US$ thousands)		2022
		Investment in debt securities				Investment in equity securities
Balance at beginning of year		$	8,132			$	2,190
Purchase			—				—
Disposal			—				—
Total gains or (losses) (realized/unrealized)
included in earnings			—				409
included in other comprehensive income - unrealized gain (loss) on security			620				—
included in other comprehensive income - foreign currency items			(802	)			(228	)
Balance at end of year		$	7,950			$	2,371
The amount of total gains or (losses) for the period    included in earnings attributable to the change in    unrealized gains or losses relating to assets still held at    the reporting date.		$	—			$	409

 

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The significant unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as of December 31, 2023 and 2022 are shown below:   Investment in securities - Level 3 financial assets   Sensitivity of the Input to Fair Value
					Changes of Fair Value (in US$ thousands)
Calculation Date	Valuation Technique	Significant Unobservable Inputs	Rate for debt investment	Rate for equity investment	If the Rate of Input changes by -1%	If the Rate of Input changes by +1%
December 31, 2023	The discounted cash flow analysis to estimate the enterprise value, and then the  option pricing method to allocate equity value among various classes of stakeholders.	Discount rate for future cash flows	38.5%	38.5%	Debt securities: +$90 Equity securities: +$67	Debt securities: -$121 Equity securities: -$58
		Discount for lack of marketability (“DLOM”)	12%	From12.0% to 30.0% for different scenarios	Debt securities: +$63 Equity securities: +$4	Debt securities: -$63 Equity securities: -$3
		Volatility	29%	29%	Debt securities: +$22 Equity securities: +$3	Debt securities: -$86 Equity securities: -$2
December 31, 2022	The discounted cash flow analysis to estimate the enterprise value, and then the option pricing method to allocate equity value among various classes of stakeholders.	Discount rate for future cash flows	38.5%	38.5%	Debt securities: +$372 Equity securities: +$175	Debt securities: -$262 Equity securities: -$170
		Discount for lack of marketability (“DLOM”)	From 4.0% to 12.0% for different scenarios	From 6.0% to 12.0% for different scenarios	Debt securities: +$93 Equity securities: +$26	Debt securities: -$93 Equity securities: -$25
		Volatility	From 28% to 31.0% for different scenarios	From 28% to 31.0% for different scenarios	Debt securities: +$23 Equity securities: +$16	Debt securities: +$24 Equity securities: -$10

 

When estimating the value of the early stage enterprise, in the absence of observable market prices or a recent financing transaction, we obtained sufficient financial and operational information from the issuer’s company, using the income approach as our primary method, which reflects the close relationship between the future cash generating ability of the issuer’s company and respective enterprise value. As the issuer’s company was still at its early stage of development with limited historical track record, market multiples were conducted for supplementary reference only.

The derived enterprise value was then served as a reasonable basis for the subsequent equity value allocation exercise to estimate the portion assignable to the issuer’s convertible note and respective share categories as of the measurement date by applying a hybrid method of Probability Weighted Expected Return Method (“PWERM”) and Option Pricing Method (“OPM”). Such hybrid method estimates the probability weighted value across multiple scenarios, using OPM to estimate the allocation of value within one or more of those scenarios.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities measured at fair value on a nonrecurring basis include measuring impairment when required for long-lived assets. For GigaMedia, long-lived assets measured at fair value on a nonrecurring basis include property, plant, and equipment, intangible assets, operating lease ROU assets, and prepaid licensing and royalty fees.

No assets and liabilities measured at fair value on a nonrecurring basis were determined to be impaired as of December 31, 2023 and 2022.

 

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NOTE 5. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows as of December 31, 2023 and 2022.

 

		December 31
(in US$ thousands)		2023				2022
Cash and savings accounts		$	38,470			$	38,794
Time deposits			—				—
Cash and cash equivalents reported on the consolidated    balance sheets			38,470				38,794
Cash restricted as performance bond			313				313
Total cash, cash equivalents and restricted cash reported    on the consolidated statements of cash flows		$	38,783			$	39,107

 

As of December 31, 2023 and 2022, cash amounting to $313 thousand and $313 thousand, respectively, has been deposited in escrow accounts in banks mainly as a performance bond for our players’ game points. These deposits are restricted and are included in restricted cash in the consolidated balance sheets.

We maintain cash and cash equivalents, as well as restricted cash, in bank accounts with major financial institutions with high credit ratings located in the following jurisdictions:

 

		December 31
(in US$ thousands)		2023				2022
Taiwan		$	38,289			$	38,352
Hong Kong			494				739
China			—				16
		$	38,783			$	39,107

 

NOTE 6. ACCOUNTS RECEIVABLE – NET

Accounts receivable consist of the following:

 

		December 31
(in US$ thousands)		2023				2022
Accounts receivable		$	229			$	200
Less: Allowance for doubtful accounts			(2	)			(1	)
		$	227			$	199

 

The following is a summary of the changes in our Company’s allowance for doubtful accounts during the years ended December 31, 2023, 2022 and 2021:

 

(in US$ thousands)		2023				2022				2021
Balance at beginning of year		$	1			$	2			$	1
Additions: Bad debt expense			7				2				7
Less: Write-off			(6	)			(3	)			(6	)
Translation adjustment			—				—				—
Balance at end of year		$	2			$	1			$	2

 

NOTE 7. OTHER CURRENT ASSETS

Other current assets consist of the following:

 

		December 31
(in US$ thousands)		2023				2022
Loans receivable - current		$	24			$	29
Less: Allowance for loans receivable - current			(24	)			(29	)
Other receivable			2				374
Other			141				136
		$	143			$	510

 

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The following is a reconciliation of changes in our Company’s allowance for loans receivable - current during the years ended December 31, 2023, 2022 and 2021:

 

(in US$ thousands)		2023				2022				2021
Balance at beginning of year		$	29			$	33			$	32
Reversal for collection of bad debt			(5	)			—				—
Translation adjustment			—				(4	)			1
Balance at end of year		$	24			$	29			$	33

 

NOTE 8. INVESTMENT IN SECURITIES

 

Investment in securities – current and noncurrent consist of the following:

 

		December 31
(in US$ thousands)		2023				2022
Debt securities, classified as available-for-sale		$	5,548			$	7,950
Equity securities			229				2,371
		$	5,777			$	10,321

 

 

Our Company’s investment in securities - current and noncurrent are invested in convertible promissory notes and preferred shares. During 2023, we recognized a realized exchange gain of $76 thousand arising from the partial repayment of the aforementioned promissory note. During 2021, we recognized gains of $125 thousand on disposal of investment in securities, consisting of a gain of $79 thousand on the disposal of an equity security that have been fully impaired years ago, and a gain of $46 thousand on the deemed disposal arising from the partial conversion of the aforementioned promissory note into the preferred shares. Certain of our investment in securities, though denominated in US dollars, are held by an entity of ours whose functional currency is not US dollars, resulting to unrealized exchange gain or loss accounted for as other comprehensive income or loss, and corresponding translation adjustment accordingly.

 

The promissory notes are purchased under different agreements, and are convertible into common or preferred shares at certain different prices, subject to applicable adjustments. Upon conditions outlined in the agreements, the convertible promissory notes may be automatically converted or become redeemable. See Note 17, “Commitments and Contingencies, (c) Investment Agreements”, for additional information.

 

We assessed the estimated fair values of these investments as of December 31, 2023. See Note 4 “Fair Value Measurements” for additional information.

 

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NOTE 9. LEASE ARRANGEMENTS

We rent certain office premises and automobile for operation use under lease agreements that expire at various dates through 2026.

 

Right-of-use assets

 

Right-of-use assets consist of the following:

 

		December 31
(in US$ thousands)		2023				2022
Carrying amount:
Office premise		$	944			$	1,306

 

The following tables summarize changes to our Company’s right-of use assets during 2023 and 2022:

(in US$ thousands)		Cost
		2023				2022
Balance at January 1		$	2,165			$	2,390
Additions			116				—
Exchange differences			—				(225	)
Balance at December 31		$	2,281			$	2,165
		Accumulated depreciation
		2023				2022
Balance at January 1		$	859			$	419
Depreciation			472				489
Exchange differences			6				(49	)
Balance at December 31		$	1,337			$	859
		Carrying amounts
		2023				2022
Balance at January 1		$	1,306			$	1,971
Balance at December 31		$	944			$	1,306

 

Lease liabilities

 

		December 31
(in US$ thousands)		2023				2022
Carrying amount:
Current portion (classified under other current liabilities)		$	475			$	440
Noncurrent portion			495				893
		$	970			$	1,333

 

Discount rates for the existing lease liabilities ranged from 1.44% to 3.6% as of December 31, 2023, and from 1.44% to 2.88% as of December 31, 2022.

 

Material terms of right-of-use assets

We lease office premises and automobile for operational use with lease terms of 2 to 5 years. We do not have purchase options to acquire the leasehold office premises at the end of the lease terms.

 

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Supplemental information

Supplemental disclosures of cash flow and noncash information consist of the following:

 

		For the Year ended December 31
(in US$ thousands)		2023				2022
Cash paid for operating leases		$	491			$	502
Lease liabilities arising from obtaining right-of-use assets		$	116			$	—
		As of December 31
		2023				2022
Weighted-average remaining lease term		2.04 years				3.03 years
Weighted-average discount rate		1.60%				1.50%

 

Operating lease expenses were $495 thousand and $520 thousand during the years ended December 31, 2023 and 2022, respectively.

 

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2023:

 

(in US$ thousands)				Operating Leases
Year
2024				$	486
2025					430
2026					69
Total minimum lease payments					985
Less: amount of lease payments representing interest					(15	)
Present value of future minimum lease payments					970
Less: current obligation under leases					(475	)
Non-current lease obligations				$	495

 

NOTE 10. ACCRUED EXPENSES

Accrued expenses consist of the following:

		December 31
(in US$ thousands)		2023				2022
Accrued professional fees		$	356			$	393
Accrued compensation			423				201
Accrued royalties			45				122
Accrued advertising expenses			2				21
Accrued director compensation and liability insurance			100				107
Other			256				307
		$	1,182			$	1,151

 

NOTE 11. DEFERRED REVENUE

Deferred revenue consists of the following:

 

		December 31
(in US$ thousands)		2023				2022
Unused virtual points		$	481			$	700
Unamortized virtual items			75				95
Advances for pre-order items			17				22
		$	573			$	817

 

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The breakage amounts recognized as revenue during the years ended December 31, 2023, 2022 and 2021 were $228 thousand, $20 thousand and $62 thousand, respectively.

NOTE 12. PENSION BENEFITS

Our Company and our subsidiaries have defined benefit and defined contribution pension plans that cover substantially all of our employees.

Defined Benefit Pension Plan

We have a defined benefit pension plan in accordance with the Labor Standards Law of the Republic of China (R.O.C.) for our employees located in Taiwan, covering substantially all full-time employees for services provided prior to July 1, 2005, and employees who have elected to remain in the defined benefit pension plan subsequent to the enactment of the Labor Pension Act on July 1, 2005. Under the defined benefit pension plan, employees are entitled to a lump sum retirement benefit upon retirement equivalent to the aggregate of 2 months’ pensionable salary for each of the first 15 years of service and 1 month’s pensionable salary for each year of service thereafter subject to a maximum of 45 months’ pensionable salary. The pensionable salary is the monthly average salary or wage of the final six months prior to approved retirement.

We use December 31 as the measurement date for our defined benefit pension plan. As of December 31, 2023 and 2022, the accumulated benefit obligation amounted to $266 thousand and $247 thousand, respectively, and the funded status of prepaid pension assets amounted to $134 thousand and $142 thousand, respectively. The fair value of plan assets amounted to $473 thousand and $463 thousand as of December 31, 2023 and 2022, respectively. The accumulated other comprehensive income amounted to $15 thousand and $4 thousand as of December 31, 2023 and 2022, respectively. The net periodic benefit cost for 2023, 2022 and 2021 amounted to ($2) thousand, $1 thousand and $3 thousand, respectively.

The following table sets forth the plan’s benefit obligations, fair value of plan assets, and funded status at December 31, 2023 and 2022:

 

		December 31
(in US$ thousands)		2023				2022
Benefit obligation		$	339			$	321
Fair value of plan assets			473				463
		$	(134	)		$	(142	)
Amounts recognized in the balance sheet consist of:
Noncurrent liabilities (assets)		$	(134	)		$	(142	)
Accumulated other comprehensive income			—				—
Net amount recognized		$	(134	)		$	(142	)
Amounts recognized in accumulated comprehensive income    (loss) consist of:
Unrecognized net gain (loss)		$	(15	)		$	(4	)

 

For the years ended December 31, 2023, 2022 and 2021, the net period pension cost consisted of the following:

 

		December 31
(in US$ thousands)		2023				2022				2021
Service cost		$	—			$	—			$	—
Interest cost			6				2				3
Expected return on plan assets			(8	)			(3	)			(3	)
Amortization of net loss			—				2				3
Curtailment gain			—				—				—
		$	(2	)		$	1			$	3

 

Weighted average assumptions used to determine benefit obligations for 2023 and 2022 were as follows:

 

		December 31
		2023				2022
Discount rate			1.625	%			1.750	%
Rate of compensation increase			2.00	%			2.00	%

 

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Weighted average assumptions used to determine net periodic benefit cost for end of fiscal year were as follows:

 

		2023				2022
Discount rate			1.750	%			0.750	%
Rate of return on plan assets			1.750	%			0.750	%
Rate of compensation increase			2.00	%			2.00	%

 

Management determines the discount rate and rate of return on plan assets based on the yields of fifteen year ROC central government bonds which is in line with the respective employees remaining service period and the historical rate of return on the above mentioned Fund mandated by the ROC Labor Standard Law.

We have contributed an amount equal to 2% of the salaries and wages paid to all qualified employees located in Taiwan to a pension fund (the “Fund”). The Fund is administered by a pension fund monitoring committee (the “Committee”) and deposited in the Committee’s name in the Bank of Taiwan. Our Company makes pension payments from our account in the Fund unless the Fund is insufficient, in which case we make payments from internal funds as payments become due. We seek to maintain a normal, highly liquid working capital balance to ensure payments are made timely.

We expect to make a contribution of $0 thousand to the Fund in 2024. We expect to make future benefit payments of $10 thousand to employees from 2024 to 2028 and $75 thousand from 2029 to 2033.

Defined Contribution Pension Plans

We have provided defined contribution plans for employees located in Taiwan and Hong Kong. Contributions to the plans are expensed as incurred.

Taiwan

Pursuant to the new “Labor Pension Act” enacted on July 1, 2005, our Company has a defined contribution pension plan for our employees located in Taiwan. For eligible employees who elect to participate in the defined contribution pension plan, we contribute no less than 6% of an employee’s monthly salary and wage and up to the maximum amount of NT$9 thousand (approximately $293), to each of the eligible employees’ individual pension accounts at the Bureau of Labor Insurance each month. Pension payments to employees are made either by monthly installments or in a lump sum from the accumulated contributions and earnings in employees’ individual accounts.

Hong Kong

According to the relevant Hong Kong regulations, we provide a contribution plan for the eligible employees in Hong Kong. We must contribute at least 5% of the employees’ total salaries. For this purpose, the monthly relevant contribution to their individual contribution accounts is subject to a cap of HK$1.5 thousand (approximately $192). After the termination of employment, the benefits still belong to the employees in any circumstances.

The total amount of defined contribution pension expenses pursuant to our defined contribution plans for the years ended December 31, 2023, 2022 and 2021 were $163 thousand, $167 thousand, and $193 thousand, respectively, which are included in operating expenses.

 

NOTE 13. SHAREHOLDERS’ EQUITY

In accordance with Singapore law, the holders of ordinary shares that do not have par value, are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meeting of our Company. All Shares rank equally with regard to our Company’s residual assets. In addition, we are not required to have a number of authorized ordinary shares to be issued.

 

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NOTE 14. ACCUMULATED OTHER COMPREHENSIVE LOSS

The accumulated balances for each component of other comprehensive income (loss) are as follows:

(in US$ thousands)		Foreign currency items				Unrealized gain (loss) on securities				Pension and post retirement benefit plans				Accumulated other comprehensive loss
Balance as of January 1, 2021		$	(21,956	)		$	(351	)		$	(94	)		$	(22,401	)
Foreign currency translation adjustment			203				—				—				203
Pension and post retirement benefit adjustment			—				—				14				14
Unrealized holding loss arising during period			—				(124	)			—				(124	)
Reclassification adjustment for loss included in net income			—				97				—				97
Other			—				(10	)			—				(10	)
Balance as of December 31, 2021			(21,753	)			(388	)			(80	)			(22,221	)
Foreign currency translation adjustment			(190	)			—				—				(190	)
Pension and post retirement benefit adjustment			—				—				76				76
Unrealized holding loss arising during period			—				620				—				620
Balance as of December 31, 2022			(21,943	)			232				(4	)			(21,715	)
Foreign currency translation adjustment			(144	)			15				—				(129	)
Pension and post retirement benefit adjustment			—				—				(11	)			(11	)
Unrealized holding loss arising during period			—				(1,453	)			—				(1,453	)
Reclassification adjustments for loss included in net income							(76	)							(76	)
Balance as of December 31, 2023		$	(22,087	)		$	(1,282	)		$	(15	)		$	(23,384	)

 

There were no significant tax effects allocated to each component of other comprehensive income for the years ended December 31, 2023, 2022 and 2021.

 

NOTE 15. SHARE-BASED COMPENSATION

During 2023, 2022 and 2021, no stock-based compensation expenses were incurred and recognized.

 

There were no capitalized stock-based compensation costs at December 31, 2023 and 2022. There was no recognized stock-based compensation tax benefit for the years ended December 31, 2023, 2022 and 2021, as our Company recognized a full valuation allowance on net deferred tax assets as of December 31, 2023 and 2022.

(a) Overview of Stock-Based Compensation Plans

Summarized below are the stock-based compensation plans pursuant to which awards have been granted as of December 31, 2023.

2004 Employee Share Option Plan

At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the “2004 Plan”) under which up to 1.4 million ordinary shares of our Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of our Company are eligible to participate in the 2004 Plan. The 2004 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, the eligible individuals who are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the vesting schedule. The maximum contractual term for the options under the 2004 Plan is 10 years.

2006 Equity Incentive Plan

At the June 2006 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the “2006 Plan”) under which up to 200 thousand ordinary shares of our Company have been reserved for issuance. The 2006 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2006 Plan. The maximum contractual term for the options under the 2006 Plan is 10 years.

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2007 Equity Incentive Plan

At the June 2007 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2007 Equity Incentive Plan (the “2007 Plan”) under which up to 400 thousand ordinary shares of our Company have been reserved for issuance. The 2007 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2007 Plan. The maximum contractual term for the options under the 2007 Plan is 10 years.

 

Summarized below are the general terms of our stock-based compensation plans, for which awards have been granted as of December 31, 2023.

 

Stock-Based compensation plan

Granted awards

Vesting schedule

Options’ exercise price

RSUs’ grant date fair value

2004 plan

1,575,037

(1)

immediately upon granting to four years

$3.95~$12.75

—

2006 Plan

256,716

(2)

immediately upon granting to four years

$3.85~$83

$14.55~$80.05

2007 Plan

675,057

(3)

immediately upon granting to four years

$2.90~$90.85

$12.35~$76.75

 

 

Options and RSUs generally vest over the schedule described above. Certain RSUs provide for accelerated vesting if there is a change in control. All options and RSUs are expected to be settled by issuing new shares.

(b) Options

In 2023, 2022 and 2021, no options were exercised for each year.

Our Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted to employees on the grant date. No options were granted to employees during 2023, 2022 and 2021.

Option transactions during the last three years are summarized as follows:

	2023																2022									2021
	Weighted Avg. Exercise Price				No. of Shares (in thousands)				Weighted- Average Remaining Contractual Term				Aggregate Intrinsic Value (in thousands)				Weighted Avg. Exercise Price				No. of Shares (in thousands)					Weighted Avg. Exercise Price				No. of Shares (in thousands)
Balance at January 1	$	6.38				33											$	6.13				37				$	6.16				49
Options granted		—				—												—				—					—				—
Options exercised		—				—												—				—					—				—
Options Forfeited / canceled /    expired		5.05				(4	)											4.05				(4	)				6.25				(12	)
Balance at December 31	$	6.56				29				0.67			$	—			$	6.38				33				$	6.13				37
Exercisable at December 31	$	6.56				29				0.67			$	—			$	6.38				33				$	6.13				37
Vested and expected to vest at    December 31	$	6.56				29				0.67			$	—			$	6.38				33				$	6.13				37

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between GigaMedia’s closing stock price on the last trading day of 2023 and the exercise price of an option, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on December 31, 2023. This amount changes based on the fair market value of GigaMedia’s stock.

As of December 31, 2023, there was no unrecognized compensation cost related to non-vested options.

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The following table sets forth information about stock options outstanding at December 31, 2023:

 

Options outstanding

Option currently exercisable

Exercise price

No. of Shares (in thousands)

Weighted average remaining contractual life

Exercise price

No. of Shares (in thousands)

Under $5

4

3.35 years

Under $5

4

$5~$50

25

0.24 years

$5~$50

25

$50~$100

—

$50~$100

—

29

29

 

 

NOTE 16. INCOME TAXES

Income (loss) before income taxes by geographic location is as follows:

 

(in US$ thousands )		2023				2022				2021
Taiwan operations		$	(1,726	)		$	(1,588	)		$	(1,989	)
Non-Taiwan operations			(1,673	)			(1,164	)			(1,436	)
		$	(3,399	)		$	(2,752	)		$	(3,425	)

 

The components of income tax benefit (expense) by taxing jurisdiction are as follows:

 

( in US$ thousands )		2023				2022				2021
Taiwan:
Current		$	—			$	—			$	—
Deferred			—				—				—
		$	—			$	—			$	—
Non-Taiwan:
Current		$	—			$	—			$	—
Deferred			—				—				—
		$	—			$	—			$	—
Total current income tax benefit (expense)		$	—			$	—			$	—
Total deferred income tax benefit		$	—			$	—			$	—
Total income tax benefit		$	—			$	—			$	—

 

Our ultimate parent company is based in Singapore.

A reconciliation of our effective tax rate related to the statutory tax rate in Taiwan, where our major operations are based, is as follows:

		2023				2022				2021
Taiwan statutory rate, including taxes on income and    retained earnings			24.00	%			24.00	%			24.00	%
Foreign tax differential			0.75	%			(3.03	)%			(5.75	)%
Expiration of net operating loss carryforwards			(27.71	)%			(20.18	)%			(6.47	)%
Net operating loss carryforwards not utilized due to dissolution of subsidiaries			—				(42.73	)%			—
Other non-deductible expenses			(12.84	)%			(9.79	)%			(1.65	)%
Change in deferred tax assets and valuation allowance			15.79	%			24.94	%			(10.32	)%
Loss on investment in subsidiaries dissolved			—				26.62	%			—
Other			0.01	%			0.17	%			0.19	%
Effective rate			—				—				—

 

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The significant components of our deferred tax assets consist of the following:

 

(in US$ thousands)		December 31
		2023				2022
Net operating loss carryforwards		$	10,630			$	11,385
Share-based compensation			292				292
Investments			131				131
Lease right-of-use assets			6				6
Other			5				66
			11,064				11,880
Less: valuation allowance			(11,064	)			(11,880	)
Deferred tax assets - net		$	—			$	—

 

A reconciliation of the beginning and ending amounts of our valuation allowance on deferred tax assets for the years ended December 31, 2023, 2022 and 2021 are as follows:

 

(in US$ thousands)		2023				2022				2021
Balance at beginning of year		$	11,880			$	13,607			$	13,046
Subsequent reversal and utilization of valuation allowance			(263	)			(94	)			(81	)
Changes to valuation allowance			405				1,158				575
Expirations			(942	)			(1,731	)			(221	)
Exchange differences			(16	)			(1,060	)			288
Balance at end of year		$	11,064			$	11,880			$	13,607

 

Under ROC Income Tax Act, the tax loss carryforward in the preceding ten years would be deducted from income tax for Taiwan operations.

As of December 31, 2023, we had net operating loss carryforwards available to offset future taxable income, shown below by major jurisdictions:

 

Jurisdiction		Amount				Expiring year
Hong Kong		$	15,521			indefinite
Taiwan			33,414			2024~2033
		$	48,935

 

Unrecognized Tax Benefits

 

As of December 31, 2023, 2022 and 2021, there were no unrecognized tax benefits that if recognized would affect the effective tax rate.

There were no interest and penalties related to income tax liabilities recognized for the years ended December 31, 2023, 2022 and 2021.

Our major tax paying components are all located in Taiwan. As of December 31, 2023, the income tax filings in Taiwan have been examined for the years through 2021.

 

NOTE 17. COMMITMENTS AND CONTINGENCIES

Commitments

(a) Operating Leases

We rent certain office premises and automobile for operation use under lease agreements that expire at various dates through 2026. Please refer to Note 9 for more information of our lease arrangements.

 

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(b) License Agreements

We have contractual obligations under various license agreements to pay the licensors license fees and minimum guarantees against future royalties. There were no committed license fees and minimum guarantees against future royalties set forth in our significant license agreements as of December 31, 2023.

 

For a specific licensed game, we were required to pay an incentive fee of $20 thousand to the licensor for every $600 thousand additional revenues generated from the game during the agreement period from January 2022 to January 2024. In January 2024, we entered an extension and amendment agreement to extend the term and modified certain provisions. The extension term commenced on January 27, 2024 and expires on January 26, 2026, and the incentive fee remains $20 thousand for every $600 thousand additional revenues generated during the extension term.

 

(c) Investment Agreements

On August 31, 2020, we entered into a convertible note purchase agreement to purchase a US$10,000,000 principal amount convertible promissory note (the “Note”) issued by Aeolus Robotics Corporation (“Aeolus”), a global company primarily engaged in designing, manufacturing, processing and sales of intellectual robotics. The Note, which bears interest at a rate of 2% per annum, was due on August 30, 2022 but was extendable to August 30, 2023 at Aeolus’s option, and all or a portion of the principal amount under the Note was convertible at GigaMedia’s option upon maturity, upon prepayment, or when certain events occur, into ordinary shares or preferred shares of Aeolus at a price of US$3.00 per share, or into preferred shares in Aeolus’s nearest next round equity financing where Aeolus issues further preferred shares. GigaMedia may elect to convert all or any part of the principal amount of the Note into the preferred shares to be issued at the Qualified Financing, among which (1) 20% of such outstanding principal amount shall be converted at a conversion price equal to 90% of the purchase price offered to the investors in such qualified financing, and (2) 80% of such outstanding principal amount shall converted at a conversion price equal to 100% of the purchase price offered to the investors in such qualified financing. In the event that any portion of the principal amount is converted into the ordinary or preferred shares, all the interest accrued but unpaid on such portion of principal amount shall be waived. Assuming full conversion of the Note into ordinary shares and the exercise or conversion of all other Aeolus rights, options and convertible securities outstanding as of August 31, 2020, we would beneficially own 3,333,333 shares representing approximately 4.62% of the total ordinary shares of Aeolus as of August 31, 2020.

In November 2021, Aeolus notified GigaMedia that it intended to issue series B preferred shares, par value of US$0.0001 per share (the “Series B Preferred Shares”), to certain new series B preferred shareholders for a subscription price of US$3.02 per share (the “Next Round Financing”). The Next Round Financing constituted a Qualified Financing as defined in the said Note. GigaMedia exercised its conversion right in accordance with the Note with respect to US$2,000,000 of principal amount at the conversion price of US$2.718 per share, effective December 30, 2021. GigaMedia received 735,835 Series B Preferred Shares.

After the conversion, the outstanding principal amount under the note was US$8,000,000, and GigaMedia’s right to elect to convert the remaining amount upon maturity, upon prepayment, or when certain events occur, into ordinary shares of Aeolus at a price of US$3.00 per share, is not affected.

On July 29, 2022, Aeolus notified GigaMedia that it had decided to exercise its right of extension under the Note to extend the original August 30, 2022 maturity date to August 30, 2023.

On August 31, 2023, GigaMedia and Aeolus entered into an agreement to amend the Note. The amendment extends the maturity date of the Note after the partial repayment of US$1,000,000 and the payment of accrued interest on the unpaid principal amount of the Note due through August 30, 2023 in the amount of US$480,000 are made by Aeolus and the outstanding principal amount becomes US$7,000,000 due thereunder. The US$1,480,000 payment by Aeolus was made on September 6, 2023.

Pursuant to the amendment to the Note, the remaining principal amount of US$7,000,000 due thereunder will bear interest at a rate of 4% per annum, shall be due on February 28, 2025 (such date to be extended, at Aeolus’s option, to February 28, 2026), and all or a portion of the principal amount due thereunder may be converted upon maturity, upon prepayment or upon the occurrence of certain specified events, upon Aeolus’s next round of equity financing, or upon Aeolus’s initial public offering, at the lower of US$1.25 per share or 80% of the applicable offering price.

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On August 15, 2023, we entered into an agreement to purchase a convertible promissory note, with principal amount of US$105,346, issued by Aeolus, and on March 15, 2024, we entered into an agreement to purchase a convertible promissory note, with principal amount of US$63,208, issued by Aeolus. These notes bear interest at a rate of 4.5% per annum and are convertible at US$0.1 per share, while other terms and conditions are similar to the original Note.

Contingencies

We are subject to legal proceedings and claims that arise in the normal course of business.

 

On January 15, 2018, Ennoconn Corporation (“Ennoconn”) filed a complaint against one of our subsidiaries, GigaMedia Cloud Services Co., Ltd. (“GigaMedia Cloud”) in the Taiwan Taipei District Court. The complaint alleged that GigaMedia Cloud is obligated to pay Ennoconn NTD 79,477,648 (approximately $2,588,005) in connection with a transaction to purchase taximeters in 2015. GigaMedia Cloud filed an answer to the complaint denying Ennoconn’s allegations in the lack of factual and legal basis on March 1, 2018. On November 15, 2018, the Taiwan Taipei District Court determined that all of Ennoconn’s claims were without merit and made a judgment denying the complaint. On January 3, 2019, Ennoconn filed an appeal demanding the judgment which was entered in the District Court, to be reversed and amended. The civil court of the second instance, the Taiwan High Court, has conducted the session of the preparatory proceedings for several times during 2019. As a result, the Taiwan High Court ruled on January 8, 2020, that the decision of the Taiwan Taipei District Court should be partially modified and Ennoconn is entitled to NTD 27,084,180 (approximately $882,077). GigaMedia Cloud has filed another appeal with the Taiwan Supreme Court on February 4, 2020. On May 5, 2021, the Taiwan Supreme Court revoked the previous ruling of the Taiwan High Court, and sent the case back to the Taiwan High Court for a retrial. Under the Taiwan Supreme Court’s ruling, the appeal made by Ennoconn should be reviewed by the Taiwan High Court by following the instructions of the Taiwan Supreme Court. On May 18, 2022, the Taiwan High Court found such appeal meritless and made a civil judgment denying the complaint by Ennoconn. On June 15, 2022, Ennoconn filed an appeal and demanded that the Taiwan Supreme Court reverse this civil judgment and remand the case to the Taiwan High Court. On February 22, 2023, the Taiwan Supreme Court revoked the previous ruling of the Taiwan High Court, and sent the case back to the Taiwan High Court for a retrial. On October 30, 2023, the Taiwan High Court ruled such appeal meritorious and Ennoconn has the right to claim compensation from GigaMedia Cloud. On November 16, 2023, GigaMedia Cloud filed an appeal against the Taiwan High Court’s decision, and the appeal has been transferred to Taiwan Supreme Court on January 2, 2024. On April 17, 2024, the Taiwan Supreme Court, in a written notice, denied GigaMedia’s appeal.

GigaMedia Cloud accrued its best estimate for the ultimate resolution of this claim. On the other hand, pursuant to Taiwan’s Company Act, the shareholder of GigaMedia Cloud is limitedly liable for GigaMedia Cloud in an amount equal to the total value of shares subscribed. Therefore, we believe that the immediate parent company, the intermediate parent companies, as well as GigaMedia, the ultimate parent company, individually or collectively do not have obligations to absorb GigaMedia Cloud’s loss exceeding GigaMedia Cloud’s net worth and accordingly, it will not have a material adverse impact on our financial condition, results of operations or cash flows.

 

 

NOTE 18. SEGMENT, PRODUCT, GEOGRAPHIC AND OTHER INFORMATION

Segment Information

We have only one segment, the digital entertainment business segment, which operates a portfolio of digital entertainment products, primarily targeting digital entertainment service users across Asia.

Our Company uses the loss from operations as the measurement for the basis of performance assessment. The basis for such measurement is the same as that for the preparation of consolidated financial statements. Please refer to the consolidated statements of operations and comprehensive income (loss) for the related segment revenue and operating results.

 

Major Product Lines

Revenues from our Company’s major product lines are summarized as follows:

(in US$ thousands)		2023				2022				2021
MahJong and casino casual games		$	1,070			$	1,308			$	1,493
PC-based online sports games			2,696				3,395				2,376
Mobile role playing games			464				801				1,522
Other games and game related revenues			62				81				101
		$	4,292			$	5,585			$	5,492

 

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Major Customers

No single customer represented 10% or more of GigaMedia’s consolidated total net revenues in any period presented.

Geographic Information

Revenues by geographic area are attributed by country of the operating entity location. Revenue from by geographic region is as follows:

 

(in US$ thousands)
Geographic region / country		2023				2022				2021
Taiwan		$	1,785			$	2,427			$	3,050
Hong Kong			2,507				3,158				2,442
		$	4,292			$	5,585			$	5,492

 

Geographic information for property, plant and equipment, intangible assets and operating lease right-of-use assets are as follows:

 

(in US$ thousands)		December 31, 2023												December 31, 2022
Geographic region / country		Property, plant and equipment, net				Intangible assets, net				Operating lease right-of-use assets, net				Property, plant and equipment, net				Intangible assets, net				Operating lease right-of-use assets, net
Taiwan		$	111			$	13			$	869			$	103			$	19			$	1,289
Hong Kong			—				—				75				—				—				17
		$	111			$	13			$	944			$	103			$	19			$	1,306

 

 

NOTE 19. SUBSEQUENT EVENT

There have been no events that have occurred subsequent to December 31, 2023, and through the date that the consolidated financial statements are issued that would require adjustment to or disclosure except as already disclosed in the consolidated financial statements.

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

(Registration Number: 199905474H)

 

ANNUAL REPORT

 

YEAR ENDED 31 DECEMBER 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

 

 

 

 

C O N T E N T S

 

 

 

	PAGE
Directors’ statement	1 - 4
Independent auditor’s report	5 – 8
Statements of financial position	9
Consolidated statement of profit or loss	10
Consolidated statement of comprehensive income	11
Consolidated statement of changes in equity	12 - 13
Consolidated statement of cash flows	14 - 15
Notes to financial statements	16 - 53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Directors’ statement

 

 

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2023.

 

In our opinion:

 

(a) the financial statements set out on pages 9 to 53 are drawn up so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2023 and the financial performance, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act 1967 (the “Act”) and Financial Reporting Standards in Singapore; and

 

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

 

 

Directors

 

The directors in office at the date of this statement are as follows:

 

Huang, James Cheng-Ming
Hong, Chin Fock (Damian)
Huang, John Ping Chang
Tsai, John Chih-Hong	(Appointed on 20 November 2023)
Liu, Nick Chia-En
Lin, Wan-Wan	(Appointed on 20 November 2023)

 

 

Directors' interests

 

According to the register kept by the Company for the purposes of Section 164 of the Act, particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows:

 

Name of director and corporation in which interests are held	Holdings at beginning of the financial year	Holdings at end of the financial year
The Company
Huang, James Cheng-Ming
- ordinary shares	1,073,566	1,073,566
- options to subscribe for ordinary shares	4,000	4,000

 

 

 

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Name of director and corporation in which interests are held	Holdings at beginning of the financial year	Holdings at end of the financial year
The Company
Hong, Chin Fock (Damian)
- options to subscribe for ordinary shares	4,000	4,000

 

 

Except as disclosed in this statement, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company or of related corporations either at the beginning of the financial year or at the end of the financial year.

 

Except as disclosed under the “Share options” section of this statement, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

 

 

Share options

 

2004 Employee Share Option Plan

 

At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the “2004 Plan”) under which up to 1.4 million common shares of our Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of our Company are eligible to participate in the 2004 Plan. The 2004 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, the eligible individuals who are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the vesting schedule. The maximum contractual term for the options under the 2004 Plan is 10 years. The 2004 Plan has lapsed in June 2014.

 

 

2006 Equity Incentive Plan

 

At the June 2006 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the “2006 Plan”) under which up to 200 thousand common shares of our Company have been reserved for issuance. The 2006 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2006 Plan. The maximum contractual term for the options under the 2006 Plan is 10 years. The 2006 Plan has lapsed in June 2016.

 

 

 

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2007 Equity Incentive Plan

 

At the June 2007 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2007 Equity Incentive Plan (the “2007 Plan”) under which up to 400 thousand ordinary shares of the Company have been reserved for issuance. The 2007 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2007 Plan. The maximum contractual term for the options under the 2007 Plan is 10 years. There were 4,000 shares granted in May 2017. The 2007 Plan has lapsed in
June 2017.

 

Summarised below are the general terms of its share-based compensation plans as of 31 December 2023.

 

Date granted	Balance at beginning of year	Granted during the year	Expired/ forfeited during the year	Balance at end of year	Options’ exercise price	Exercise period
	’000	’000	’000	’000	US$
28.10.2013	4	-	(4)	-	$5.05	28.10.2013 - 28.10.2023
28.03.2014	25	-	-	25	$7.15	28.03.2014 - 28.03.2024
05.05.2017	4	-	-	4	$2.90	05.05.2017 - 05.05.2027
	33	-	(4)	29

 

 

All options are expected to be settled by issuing new shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Auditors

 

The auditors, Deloitte & Touche LLP, have indicated their willingness to accept re-appointment.

 

 

 

 

 

 

On behalf of the Board of Directors

 

 

 

 

 

/s/ HUANG, JAMES CHENG-MING

─────────────────────

HUANG, JAMES CHENG-MING

Director

 

 

 

 

 

/s/ LIN, WAN-WAN

─────────────────────

LIN, WAN-WAN

Director

 

 

 

29 April 2024

 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

 

GIGAMEDIA LIMITED

 

 

 

Report on the audit of the financial statements

 

Opinion

 

We have audited the financial statements of GigaMedia Limited (the “Company”) and its subsidiaries
(the “Group”), which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 31 December 2023, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the year then ended, and the notes to the financial statements, including material accounting policy information, as set out on pages 9 to 53.

 

In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act 1967 (the “Act”) and Financial Reporting Standards in Singapore (“FRSs”) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2023, and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group for the year ended on that date.

 

 

Basis for opinion

 

We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

 

Key audit matters

 

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

 

GIGAMEDIA LIMITED

 

 

 

Fair valuation of financial assets at fair value through profit or loss (“FVTPL”)

 

The Company holds financial assets at FVTPL amounting to US$5,777,000. The fair value of the investments is based on complex valuation methods with unobservable inputs, therefore, classified as Level 3.

 

Unlike the valuation of assets with readily observable market prices, therefore, more easily independently corroborated, the valuation of the financial assets at FVTPL classified as Level 3 is inherently subjective, and often involves the use of complex proprietary methods and unobservable inputs.

 

We identified the valuation of the financial assets at FVTPL as a key audit matter because of the complex valuation methods and unobservable inputs such as the discount rate, discount for lack of marketability and volatility management uses to estimate the fair value. This requires a high degree of auditor’s professional judgment and an increased extent of effort, including the involvement of our fair value specialists, when evaluating the methods and related inputs.

 

The financial assets at FVTPL is disclosed in Note 8 to the financial statements.

 

 

Our audit performed and responses thereon

 

Our audit procedures focussed on evaluating and challenging the key assumptions used in the valuation of the financial assets at FVTPL.

 

Our procedures included:

 

 

 

 

Information other than the financial statements and auditor’s report thereon

 

Management is responsible for the other information. The other information comprises the directors’ statement, but does not include the financial statements and out auditor’s report thereon.

 

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

 

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

 

GIGAMEDIA LIMITED

 

 

 

Responsibilities of management and directors for the financial statements

 

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act and FRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.

 

In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

 

The directors’ responsibilities include overseeing the Group’s financial reporting process.

 

 

Auditor’s responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

 

 

 

 

 

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

 

GIGAMEDIA LIMITED

 

 

 

Auditor’s responsibilities for the audit of the financial statements (cont’d)

 

 

 

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

 

Report on other legal and regulatory requirements

 

In our opinion, the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

 

The engagement partner on the audit resulting in this independent auditor’s report is Tan Puay Boon.

 

 

 

/s/ Deloitte & Touche LLP

 

 

Public Accountants and

Chartered Accountants

Singapore

 

 

 

29 April 2024

 

---

Statements of financial position As at 31 December 2023
		Group		Company
	Note	2023	2022	2023	2022
		US$’000	US$’000	US$’000	US$’000
Assets
Property, plant and equipment	4	111	103	–	–
Right-of-use assets	5	944	1,306	–	–
Intangible assets	6	13	19	–	–
Subsidiaries	7	–	–	45,626	46,599
Other investment	8	5,777	2,371	5,777	2,371
Other assets (non-current)	9	421	334	95	–
Non-current assets		7,266	4,133	51,498	48,970
Other investment (current)	8	–	7,950	–	7,950
Trade and other receivables	10	424	396	1,850	1,493
Other assets (current)	9	24	550	–	373
Cash and cash equivalents	11	38,783	39,107	752	298
Current assets		39,231	48,003	2,602	10,114
Total assets		46,497	52,136	54,100	59,084
Equity attributable to owners of the Company
Share capital	12	213,238	213,238	213,238	213,238
Reserves	13	(8,484)	(6,863)	3,606	(271)
Accumulated losses		(161,454)	(158,007)	(173,544)	(164,599)
Total equity		43,300	48,368	43,300	48,368
Liability
Lease liabilities	15	495	893	–	–
Non-current liability		495	893	-	–
Trade and other payables	16	1,416	1,380	10,800	10,716
Contract liabilities	17	811	1,055	–	–
Lease liabilities	15	475	440	–	–
Current liabilities		2,702	2,875	10,800	10,716
Total liabilities		3,197	3,768	10,800	10,716
Total equity and liabilities		46,497	52,136	54,100	59,084

 

 

 

 

 

 

 

 

 

 

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Consolidated statement of profit or loss Year ended 31 December 2023
	Note	2023	2022
		US$’000	US$’000
Revenue	18	4,292	5,585
Cost of sales		(1,846)	(2,335)
Gross profit		2,446	3,250
Fair value (loss) gain on financial assets at FVTPL	8	(3,663)	1,068
Other income (expenses)		53	(857)
Product development and engineering expenses		(729)	(1,110)
Selling and marketing expenses		(1,623)	(1,644)
General and administrative expenses		(3,222)	(3,490)
Other operating expenses	19	(7)	(2)
Results from operating activities		(6,745)	(2,785)
Finance income		1,811	718
Finance expenses		(18)	(24)
Net finance income	20	1,793	694
Loss before tax		(4,952)	(2,091)
Income tax	21	–	–
Loss for the year	22	(4,952)	(2,091)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---

Consolidated statement of comprehensive income Year ended 31 December 2023
		2023	2022
		US$’000	US$’000
Loss for the year		(4,952)	(2,091)
Other comprehensive (loss) income:
Item that will not be reclassified to profit or loss:
Defined benefit plan remeasurements		(11)	67
Item that may be reclassified subsequently to profit or loss:
Foreign currency translation differences – foreign operations		(105)	(222)
Other comprehensive loss for the year, net of tax		(116)	(155)
Total comprehensive loss for the year		(5,068)	(2,246)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---

Consolidated statement of changes in equity Year ended 31 December 2023
		Attributable to owners of the Company
		Share capital	Share option reserve	Statutory reserve	Accumulated losses	Foreign currency translation reserve	Total
		US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
At 1 January 2022		213,238	12,863	1,516	(155,983)	(21,020)	50,614
Total comprehensive loss for the year
Loss for the year		–	–	–	(2,091)	–	(2,091)
Other comprehensive income (loss)
Foreign currency translation		–	–	–	-	(222)	(222)
Defined benefit plan remeasurements		–	–	–	67	–	67
Total other comprehensive loss, net of tax		–	–	–	67	(222)	(155)
Total comprehensive loss for the year		–	–	–	(2,024)	(222)	(2,246)
At 31 December 2022		213,238	12,863	1,516	(158,007)	(21,242)	48,368

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

---

Consolidated statement of changes in equity (cont’d) Year ended 31 December 2023
		Attributable to owners of the Company
		Share capital	Share option reserve	Statutory reserve	Accumulated losses	Foreign currency translation reserve	Total
		US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
At 1 January 2023		213,238	12,863	1,516	(158,007)	(21,242)	48,368
Total comprehensive loss for the year
Loss for the year		–	–	–	(4,952)	–	(4,952)
Other comprehensive loss
Foreign currency translation		–	–	–	–	(105)	(105)
Defined benefit plan remeasurements		–	–	–	(11)	–	(11)
Total other comprehensive loss, net of tax		–	–	–	(11)	(105)	(116)
Total comprehensive loss for the year		–	–	–	(4,963)	(105)	(5,068)
Capital reduction		–	–	(1,516)	1,516	–	–
At 31 December 2023		213,238	12,863	–	(161,454)	(21,347)	43,300

 

 

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Consolidated statement of cash flows Year ended 31 December 2023
		2023	2022
	Note	US$’000	US$’000
Operating activities
Loss before tax		(4,952)	(2,091)
Adjustments for:
Loss allowance for trade receivables		7	2
Amortisation – intangible assets		12	9
Amortisation – lease right-of-use assets		472	489
Depreciation of property, plant and equipment		43	24
Interest expense		18	24
Interest income		(1,811)	(718)
Fair value loss (gain) on financial assets at FVTPL		3,663	(1,068)
Unrealised foreign exchange (gain) loss		(161)	1,022
Loss on disposal of property, plant and equipment		–	3
Operating loss before working capital changes		(2,709)	(2,304)
Changes in:
Trade and other receivables		(128)	637
Other assets		247	(355)
Trade and other payables		22	(350)
Contract liabilities		(231)	(134)
Prepaid pension plans		8	(61)
Cash used in operations, representing
net cash used in operating activities		(2,791)	(2,567)
Investing activities
Interest received		2,087	558
Purchase of property, plant and equipment		(52)	(51)
Purchase of intangible assets		(6)	(18)
Purchase of financial asset at FVTPL		(105)	–
Proceeds from redemption of financial asset at FVTPL		1,000	–
Net cash from investing activities		2,924	489
Financing activities
Deposits pledged		–	(7)
Repayment of lease liabilities		(497)	(490)
Net cash used in financing activities		(497)	(497)
Net decrease in cash and cash equivalents		(364)	(2,575)
Cash and cash equivalents at 1 January		38,794	41,455
Effect of exchange rate fluctuations on    cash held in foreign currencies		40	(86)
Cash and cash equivalents at 31 December	11	38,470	38,794

 

 

 

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Consolidated statement of cash flows (cont’d)

Year ended 31 December 2023

 

 

Reconciliation of liabilities arising from financing activities

 

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities.

 

			Lease liabilities (Note 15)
			USD’000
Balance at 1 January 2022			1,987
Financing cash flows			(490)
Interest expense			24
Foreign exchange movement			(188)
Balance at 31 December 2022			1,333
Financing cash flows			(497)
New leases			116
Interest expense			18
Balance at 31 December 2023			970

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

1 Corporate information

 

GigaMedia Limited (the “Company”) is a limited liability company domiciled and incorporated in Singapore. The address of its registered office is at 80 Robinson Road, #02-00, Singapore 068898. Its principal place of business is at 8th Floor, No.22, Ln. 407, Sec. 2, Tiding Blvd., Taipei, Taiwan, 114 Republic of China.

 

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements.

 

The Company is listed on the NASDAQ Stock Market in the United States.

 

The consolidated financial statements of the Group and statement of financial position of the Company for the year ended 31 December 2023 were authorised for issue by the Board of Directors on 29 April 2024.

 

 

2 Material accounting policy information

 

Basis of preparation

 

The financial statements have been prepared in accordance with the historical cost basis except as disclosed in the material accounting policy information below, and are drawn up in accordance with the provisions of the Singapore Companies Act 1967 and Financial Reporting Standards in Singapore (“FRSs”).

 

The financial statements are expressed in United States dollars.

 

 

Adoption of new and revised standards

 

In the current financial year, the Group has adopted all the new and revised FRSs and interpretations of FRS (“INT FRSs”) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2023. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group’s and Company’s accounting policies in current and prior years, except as disclosed below.

 

 

Amendments to FRS 1 and FRS Practice Statement 2: Disclosure of Accounting Policies

 

The Group has adopted the amendments to FRS 1 Presentation of Financial Statements for the first time in the current year. The amendments change the requirements in FRS 1 with regard to disclosure of accounting policies. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.

 

The supporting paragraphs in FRS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

The Company has applied materiality guidance in FRS Practice Statement 2 in identifying its material accounting policies for disclosures in the related notes. The previous term ‘significant accounting policies’ used throughout the financial statements has been replaced with ‘material accounting policy information’.

 

 

Standards issued but not yet effective

 

At the date of authorisation of these financial statements, certain new/revised FRSs, INT FRSs and amendments to FRS were issued but not effective. Management is of the view that these are not expected to have an impact to the Group in the periods of their initial adoption.

 

 

Fair value measurement

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability which market participants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of FRS 102 Share-based Payment, leasing transactions that are within the scope of FRS 116 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in FRS 2 Inventories or value in use in FRS 36 Impairment of Assets.

 

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

 

 

 

 

 

Basis of consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

 

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

 

 

 

 

 

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

 

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies.

 

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary
(i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable FRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 109, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

 

In the Company’s financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in profit or loss.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Foreign currency

 

The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The Group’s consolidated financial statements are presented in United States dollars as the Company is listed on the NASDAQ Stock Market at United States. The Company’s functional currency is New Taiwan dollars.

 

a) Transactions and balances

 

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange prevailing at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined.

 

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss for the period except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under translation reserve in equity. The translation reserve is reclassified from equity to the profit or loss of the Group on disposal of the foreign operation.

 

 

b) Group companies

 

The assets and liabilities of foreign operations are translated into United States dollars at the rate of exchange prevailing at the reporting date and income and expenses are translated at the average exchange rates for the year. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

 

In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss. For partial disposals of associates that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Financial instruments

 

Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets (except for trade receivables that do not have a significant financing component which are measured at transaction price), and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

 

 

Classification of financial assets

 

The Company classifies its financial assets in the following measurement categories:

 

 

 

 

Financial assets classified as at amortised cost

 

These mainly comprise cash and cash equivalents and trade and other receivables.

 

Financial assets that meet the following conditions are subsequently measured at amortised cost:

 

 

 

 

Amortised cost and effective interest method

 

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.

 

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance.

 

Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost. Interest income is recognised in profit or loss.

 

 

Financial asset at FVTPL

 

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Impairment of financial assets

 

The Group recognises a loss allowance for expected credit losses (‘ECL’) on trade receivables, other receivables, and contract assets. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial asset. The ECL incorporates forward looking information and is a probability-weighted estimate of the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate. Details about the Group’s and Company’s credit risk management and impairment policies are disclosed in Notes 10 and 24(b).

 

Significant increase in credit risk

 

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default (more than 90 days past due) occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered includes the future prospects of the industries in which the Group’s debtors operate.

 

The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if i) the financial instrument has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

 

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

 

 

Derecognition of financial assets

 

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

 

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Financial liabilities

 

Financial liabilities include trade and other payables.

 

 

Initial recognition and measurement

 

Financial liabilities are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

 

All financial liabilities are recognised initially at fair value plus directly attributable transaction costs.

 

 

Subsequent measurement

 

After initial recognition, financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

 

 

Derecognition

 

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired.

 

 

Provisions

 

Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made on the amount of the obligation.

 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

 

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

 

 

Equity instruments

 

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Employee benefits

 

a) Defined contribution plans

 

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Group makes contributions to the New Pension System under the Labor Pension Act in Taiwan, and to the Mandatory Provident Fund (MPF) scheme in Hong Kong, both are defined contribution pension schemes. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

 

 

b) Employee leave entitlement

 

Employee entitlements to annual leave are recognised as a liability when they accrue to the employees. The estimated liability for leave is recognised for services rendered by employees up to reporting date.

 

 

c) Defined benefits plan

 

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset).

 

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realisable during the life of the plan, or on settlement of the plan liabilities.

 

Remeasurements from defined benefit plans comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest). The Group recognises them immediately in other comprehensive income and all expenses related to defined benefit plans in employee benefits expense in profit or loss.

 

When the benefits of a plan are changed, or when a plan is curtailed, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment, is recognised immediately in profit or loss when the plan amendment or curtailment occurs.

 

The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs. The gain or loss on settlement is the difference between the present value of the defined benefit obligation being settled as determined on the date of settlement and the settlement price, including any plan assets transferred and any payments made directly by the Group in connection with the settlement.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

d) Share-based payment transactions

 

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

 

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognised as employee benefits expense in profit or loss.

 

 

Taxes

 

a) Current income tax

 

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period, in the countries where the Group operates and generates taxable income.

 

Current income taxes are recognised in the profit or loss except to the extent that the tax relates to items recognised outside the profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

 

 

b) Deferred tax

 

Deferred income tax is provided using the liability method on temporary differences at the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred tax liabilities are recognised for all taxable temporary differences, except:

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

 

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

 

 

 

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be utilised.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period. Except for investment properties measured using the fair value model, the measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

 

Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

 

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Leases

 

As lessee

 

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate specific to the lessee.

 

The lease liability is presented as a separate line in the statement of financial position.

 

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

 

 

 

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under FRS 37. The costs are included in the related right-of-use asset.

 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

 

The right-of-use assets are presented as a separate line in the statement of financial position.

 

The Group applies FRS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described above.

 

As a practical expedient, FRS 116 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For a contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

 

 

Revenue recognition

 

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer.

 

 

Digital entertainment service revenue

 

Digital entertainment product and service revenues are generated through the sale of virtual points, prepaid cards and game packs. Virtual points are sold to distributors or end-users who can make the payments through credit cards, internet banking or telecommunication service operators. Physical prepaid cards and game packs are sold through distributors and convenience stores. Proceeds from sales of prepaid cards and game packs, net of sales discounts, and virtual points are deferred when received, and revenue is recognised over time upon the actual usage of the playing time or in-game virtual items by the end-users based on the estimated service period of virtual items determined with reference to expiry period of the sold points in accordance with the Group’s published points expiration policy and the estimated useful life of virtual items.

 

The Group reports sales of virtual points on a gross basis. In the sales of virtual points, the Group acts as a principal and the Group has latitude in establishing price. Fixed percentage fees retained by convenient stores and service providers for payment processing related to the Group’s digital entertainment services are recognised as cost of digital entertainment revenues.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

2 Material accounting policy information (cont’d)

 

Segment reporting

 

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Board of Directors (the chief operating decision maker) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

 

Segment results that are reported to the Board of Directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses and tax assets and liabilities.

 

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment and intangible assets.

 

 

3 Critical accounting judgements and key sources of estimation uncertainty

 

In the application of the Group’s accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions would be reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

 

Critical judgements in applying the Group’s accounting policies

 

Management is of the opinion that any instances of application of judgement are not expected to have a significant effect on the amounts recognised in the financial statements, except for judgements relating to accounting estimates as discussed below.

 

 

Key sources of estimation uncertainty

 

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are related to the following

areas, and further explained in the respective notes:

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

	Information and communication equipment	Office furniture and equipment	Total
Group	US$’000	US$’000	US$’000
Cost
At 1 January 2022	75	28	103
Additions	51	–	51
Disposals	(3)	–	(3)
Effect of movements in exchange rates	(9)	(3)	(12)
At 31 December 2022	114	25	139
Additions	43	9	52
At 31 December 2023	157	34	191
Accumulated depreciation
At 1 January 2022	10	5	15
Depreciation charge to profit or loss	20	4	24
Effect of movements in exchange rates	(2)	(1)	(3)
At 31 December 2022	28	8	36
Depreciation charge to profit or loss	38	5	43
Effect of movements in exchange rates	1	–	1
At 31 December 2023	67	13	80
Carrying amounts
At 31 December 2022	86	17	103
At 31 December 2023	90	21	111

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

	Office space	Motor vehicles	Total
Group	US$’000	US$’000	US$’000
Cost
At 1 January 2022	2,304	86	2,390
Effect of movements in exchange rates	(216)	(9)	(225)
At 31 December 2022	2,088	77	2,165
Additions	116	–	116
At 31 December 2023	2,204	77	2,281
Accumulated amortisation
At 1 January 2022	405	14	419
Amortisation charge to profit or loss	463	26	489
Effect of movements in exchange rates	(47)	(2)	(49)
At 31 December 2022	821	38	859
Amortisation charge to profit or loss	446	26	472
Effect of movements in exchange rates	6	–	6
At 31 December 2023	1,273	64	1,337
Carrying amounts
At 31 December 2022	1,267	39	1,306
At 31 December 2023	931	13	944

 

The Group leases several assets including office space and motor vehicles. The average lease term is between 1 to 4 years (2022: 1 to 4 years) and rentals are generally fixed during the lease term.

 

Key sources of estimation uncertainty

 

Impairment of right-of-use assets

 

The Group regularly reviews whether there are any indications of impairment and recognises an impairment loss if the carrying amount of the right-of-use assets is lower than its recoverable amount. The determination of recoverable amount is subject to management’s estimation based on third party independent appraisal.

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

			Purchased software costs
			US$’000
Group
Cost
At 1 January 2022			26
Additions			18
Disposals			(6)
Effect of movement in exchange rates			(3)
At 31 December 2022			35
Additions			6
Disposals			(6)
At 31 December 2023			35
Accumulated amortisation
At 1 January 2022			14
Amortisation for the year			9
Disposals			(6)
Effect of movement in exchange rates			(1)
At 31 December 2022			16
Amortisation for the year			12
Disposals			(6)
At 31 December 2023			22
Carrying amounts
At 31 December 2022			19
At 31 December 2023			13

 

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

		Company
		2023	2022
		US$’000	US$’000
Unquoted equity shares, at cost		155,702	155,702
Less: Allowance for impairment loss		(114,670)	(113,764)
Effect of movements in exchange rates		4,594	4,661
		45,626	46,599

 

 

During the year ended 31 December 2023, allowance for impairment loss amounting to US$906,000 (2022: US$1,651,000) was made in respect of the Company’s investments in certain subsidiaries to reduce the carrying value of the investments to recoverable amounts based on the net asset value of respective subsidiaries, which approximate their fair value less costs to sell.

 

Details of the subsidiaries are as follows:

 

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2023	2022
			%	%
Held by the Company
GigaMedia International Holdings Limited	Holding company	British Virgin Islands	100	100
GIGM Corporation	Holding company	Cayman Islands	100	100
Held by GigaMedia International Holdings Limited
Cambridge Entertainment Software Limited	Holding company	British Virgin Islands	–*	100
GigaMedia (HK) Limited	Holding company	Hong Kong	100	100
GigaMedia Online Entertainment Corp.	Holding company	Cayman Islands	100	100
GigaMedia (Cayman) Limited.	Holding company	Cayman Islands	100	100
Held by FunTown World Limited
FunTown Hong Kong Limited	Online games	Hong Kong	100	100

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

7 Subsidiaries (cont’d)

 

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2023	2022
			%	%
Held by GigaMedia Online Entertainment Corp.
FunTown World Limited	Holding company	British Virgin Islands	100	100
GigaMedia Freestyle Holdings Limited	Holding company	British Virgin Islands	100	100
Megabiz Limited	Holding company	British Virgin Islands	–*	100
Held by GigaMedia (Cayman) Limited.
Hoshin GigaMedia Center Inc.	Online games	Taiwan	100	100
Giga Development Corporation	Holding company	Taiwan	100	100
GigaMedia Cloud Services Co., Ltd.	Cloud computing services	Taiwan	100	100

 

* The subsidiaries were struck off in 2023.

 

The proportion of voting rights held in the subsidiaries are the same as ownership interest.

 

 

		Group and Company
		2023	2022
		US$’000	US$’000
Financial asset at FVTPL  – Debt instrument (unquoted)		5,548	7,950
– Equity instrument (unquoted)		229	2,371
		5,777	10,321
– Current		–	7,950
– Non-current		5,777	2,371
		5,777	10,321

 

Balance at beginning of year		10,321	10,322
Additions		105	–
Redemption		(1,000)	–
Fair value (loss) gain in profit or loss		(3,663)	1,068
Effect of movement in exchange rate		14	(1,069)
Balance at end of year		5,777	10,321

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

 

On 31 August 2020, the Company entered into a convertible note purchase agreement to purchase a US$10 million (NTD295 million) principal amount of convertible promissory note (the “Note”) issued by the investee, a global company primarily engaged in designing, manufacturing, processing and sales of intellectual robotics. The Note bears interest rate of 2% per annum and shall be due on 30 August 2022, which can be extended to 30 August 2023 at the investee’s option. The Note is convertible into common shares at a price of US$3.00 per share, subject to certain adjustments, and shall be automatically converted upon certain conditions outlined in the purchase agreement.

On 30 December 2021, the Company received 735,835 shares of the Series B preferred shares issued by such investee by converting 20% of the US$10 million principal amount of the Note. The conversion was exercised in accordance with the right under the Note and was in the amount of US$2,000,000 at the conversion price of US$2.718 per share.

 

On 29 July 2022, the investee notified the Company that it had decided to exercise its right of extension under the Note to extend the original maturity date of 30 August 2022 to 30 August 2023.

 

On 31 August 2023, GigaMedia and Aeolus Robotics Corporation (“Aeolus”) entered into an agreement to amend the Note. The amendment extends the maturity date of the Note after the partial redemption of US$1,000,000 and the payment of accrued interest on the unpaid principal amount of the Note due through 30 August 2023 in the amount of US$480,000 are made by Aeolus and the outstanding principal amount becomes US$7,000,000 due thereunder. The US$1,480,000 payment by Aeolus was made on 6 September 2023.

 

Pursuant to the amendment to the Note, the remaining principal amount of US$7,000,000 due thereunder bears interest at a rate of 4% per annum, shall be due on 28 February 2025 (which can be extended at the investee’s option, to 28 February 2026), and all or a portion of the principal amount due thereunder can be converted upon maturity, upon prepayment or upon the occurrence of certain specified events, upon the investee’s next round of equity financing, or upon the investee’s initial public offering, at the lower of US$1.25 per share or 80% of the applicable offering price.

 

On 15 August 2023, the Company also entered into an agreement to purchase a convertible promissory note, with principal amount of US$105,346, issued by Aeolus. This note bears interest at a rate of 4.5% per annum and are convertible at US$0.1 per share, while other terms and conditions are similar to the original Note.

 

 

		Group	Company
	Note	2023	2022	2023	2022
		US$’000	US$’000	US$’000	US$’000
Refundable deposits		192	191	–	–
Prepaid licensing and royalty fees		24	202	–	–
Prepaid pension assets	14	134	142	–	–
Others		95	374	95	373
		445	909	95	373
Less: Impairment loss on prepaid            licensing and royalty fees		–	(25)	–	–
		445	884	95	373

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Non-current assets		421	334	95	–
Current assets		24	550	–	373
		445	884	95	373

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

 

Assessment of impairment of prepaid licensing and royalty fees

 

The Group recorded prepaid licensing and royalty fees of US$24,000 (2022: US$202,000) arising from the purchase of licences for its online games for subsequent financial periods.

 

At the reporting date, the impairment charge for prepaid licensing and royalty fees relates to certain licensed online games, which the carrying amounts of the related assets were determined not to be recoverable based on their expected life cycle and the forecasted sales.

 

 

 

		Group		Company
		2023	2022	2023	2022
		US$’000	US$’000	US$’000	US$’000
Trade receivables
- third parties		229	200	–	–
Less: Loss allowance for            trade receivables		(2)	(1)	–	–
		227	199	–	–
Other receivables
due from subsidiaries		–	–	1,850	1,493
Prepayments		53	60	–	–
Others		144	137	–	–
		424	396	1,850	1,493

 

 

Trade balances

 

As at 1 January 2022, the Group’s trade receivables from contracts with customers amounted to US$265,000 (net of loss allowance of US$2,000). The trade amounts are unsecured, interest-free and have an average credit period of 30 days (2022: 30 days).

 

Loss allowance for trade receivables has been measured at an amount equal to lifetime ECL. The ECL on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate.

 

A trade receivable is written off when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings. None of the trade receivables that have been written off is subject to enforcement activities.

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

10 Trade and other receivables (cont’d)

 

The following is an aged analysis of trade receivables at the end of the reporting period, net of loss allowance for trade receivables:

 

		Group
		2023	2022
		US$’000	US$’000
Current		183	186
Past due 0 – 90 days		24	12
Past due 91 – 180 days		10	–
More than 180 days		10	1
		227	199

 

 

The table below shows the movement in loss allowance for trade receivables:

 

		Group
		2023	2022
		US$’000	US$’000
Balance at 1 January		1	2
Charge to profit or loss		7	2
Written off		(6)	(3)
Balance at 31 December		2	1

 

 

Other receivables and amounts due from subsidiaries

 

The non-trade amounts due from subsidiaries are unsecured, interest-free and repayable on demand.

 

For purpose of impairment assessment, other receivables and amounts due from subsidiaries are considered to have low credit risk as they are not due for payment at the end of the reporting period and there has been no significant increase in the risk of default on the receivables since initial recognition.

 

Management estimates the loss allowance on other receivables at an amount equal to 12-month ECL, taking into account the historical default experience, current financial conditions of the counterparties and subsidiaries and the future prospects of the industry of each counterparty and subsidiary.

 

Based on the assessment, management is of the view that the ECL is insignificant as the credit risk of the counterparties and subsidiaries are low.

 

 

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

 

		Group		Company
		2023	2022	2023	2022
		US$’000	US$’000	US$’000	US$’000
Bank balances		38,470	38,794	752	298
Short-term deposits		313	313	–	–
		38,783	39,107	752	298
Less: Restricted cash		(313)	(313)
Cash and cash equivalents in the consolidated statement of cash flows		38,470	38,794

 

 

The weighted average effective interest rate per annum relating to the fixed deposits at the reporting date for the Group is 4.78% (2022: 4.2%). Depending on the terms of the deposit, interest rates reprice every half-yearly and yearly.

 

In 2023, restricted cash amounting to US$313,000 (2022: US$313,000) relates to deposits pledged for unutilised game point cards and the credit line for a corporate credit card.

 

 

		2023	2022
		No. of shares	No. of shares
		’000	’000
Group and Company
In issue at 1 January and 31 December		11,052	11,052

 

 

All issued shares are fully paid, with no par value.

 

 

 

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

 

 

 

The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern while looking for appropriate opportunities to expand its business. In order to do so, the Group may obtain new borrowings or issue new shares.

 

The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. The Group currently does not adopt any formal dividend policy.

 

There were no changes in the Group’s approach to capital management during the year.

 

The Group is not subject to externally imposed capital requirements.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

		Group		Company
		2023	2022	2023	2022
		US$’000	US$’000	US$’000	US$’000
Share option reserve		12,863	12,863	12,863	12,863
Statutory reserve		–	1,516	–	–
Foreign currency translation reserve		(21,347)	(21,242)	(9,257)	(13,134)
		(8,484)	(6,863)	3,606	(271)

 

 

Share option reserve

 

Employee share options represent the equity-settled share option granted to employees and executive director of the Group. The reserve is made up of the cumulative value of services received from employee and executive directors recorded over the vesting period commencing from the grant date of share options, and is reduced by the expiry or exercise of the share options. The details of the share options are disclosed as follows:

 

 

2004 Employee Share Option Plan

 

At the June 2004 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the “2004 Plan”) under which up to 1.4 million common shares of our Company have been reserved for issuance. All employees, officers, directors, supervisors, advisors, and consultants of our Company are eligible to participate in the 2004 Plan. The 2004 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the exercise price for the option grants, the eligible individuals who are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant and the vesting schedule. The maximum contractual term for the options under the 2004 Plan is 10 years. The 2004 Plan has lapsed in June 2014.

 

 

2006 Equity Incentive Plan

 

At the June 2006 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the “2006 Plan”) under which up to 200 thousand common shares of our Company have been reserved for issuance. The 2006 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2006 Plan. The maximum contractual term for the options under the 2006 Plan is 10 years. The 2006 Plan has lapsed in June 2016.

 

 

2007 Equity Incentive Plan

 

At the June 2007 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2007 Equity Incentive Plan (the “2007 Plan”) under which up to 400 thousand ordinary shares of the Company have been reserved for issuance. The 2007 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has complete discretion to determine the grant of awards under the 2007 Plan. The maximum contractual term for the options under the 2007 Plan is 10 years. The 2007 Plan has lapsed in June 2017.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

13 Reserves (cont’d)

 

Summarised below are the general terms of its share-based compensation plans as of 31 December 2023.

 

Date granted	Balance at beginning of year	Granted during the year	Expired/ forfeited during the year	Balance at end of year	Options’ exercise price	Exercise period
	’000	’000	’000	’000	US$
28.10.2013	4	–	(4)	–	$5.05	28.10.2013 - 28.10.2023
28.03.2014	25	–	–	25	$7.15	28.03.2014 - 28.03.2024
05.05.2017	4	–	–	4	$2.90	05.05.2017 - 05.05.2027
	33	–	(4)	29

 

 

All options are expected to be settled by issuing new shares. At the end of the financial year, details of the options granted are as follow:

 

	Number of outstanding share options
Range of exercise price	At beginning of the year	Granted during the year	Expired/ forfeited during the year	Exercised during the year	At end of the year	Weighted average remaining exercise period
	’000	’000	’000	’000	’000
2023
Under US$5	4	–	–	–	4	3.35 years
US$5–US$50	29	–	(4)	–	25	0.24 years
	33	–	(4)	–	29
2022
Under US$5	8	–	(4)	–	4	4.35 years
US$5–US$50	29	–	–	–	29	1.18 years
	37	–	(4)	–	33

 

The options are exercisable at the end of the year.

 

The Company has used the Black-Scholes option-pricing model to derive the fair value of share options granted to employees on the grant date. There was no share option granted in 2023 and 2022.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

13 Reserves (cont’d)

 

Statutory reserves

 

In accordance with R.O.C. law, an appropriation for legal reserve amounting to 10% of a company’s net profit is required until the reserve equals the aggregate par value of such Taiwan company’s issued capital stock. As of 31 December 2023 and 2022, the legal reserves of Hoshin GigaMedia Center Inc. (“Hoshin GigaMedia”), were US$Nil million and US$1.5 million respectively. The reserve can only be used to offset a deficit or be distributed as a stock dividend of up to 50% of the reserve balance when the reserve balance has reached 50% of the aggregate paid-in capital of Hoshin GigaMedia.

 

 

Translation reserve

 

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

 

 

 

The Group has defined benefit and defined contribution pension plans that covered substantially all of the Group’s employees.

 

 

Defined benefit pension plan

 

In accordance with the Labor Standards Law of the Republic of China, the Group has a defined benefit pension plan for its employees in Taiwan. The pension plan covers substantially all full-time employees for services provided prior to 1 July 2005, and employees who have elected to remain in the defined benefit pension plan subsequent to the enactment of the Labor Pension Act on 1 July 2005. Under the defined benefit pension plan, employees are entitled to twice the monthly salary for each year of service for the first 15 years, and an additional one month for every additional year of service, up to a maximum of 45 months. The pension payment to employees is computed based on the average monthly salary for the six months prior to approved retirement.

 

The Group has contributed an amount equal to 2 percent of the salaries and wages paid to all qualified employees located in Taiwan to a pension fund (the “Fund”). The Fund is administered by a pension fund monitoring committee (the “Committee”) and deposited in the Committee’s name in the Bank of Taiwan. The Group makes pension payments from its account in the Fund unless the Fund is insufficient, in which case the Group makes payments from internal funds as payments become due. The Group seeks to maintain a normal, highly liquid working capital balance to ensure payments are made timely.

 

The following provides fund status of the plan and a reconciliation of employee benefits.

 

		Group
		2023	2022
		US$’000	US$’000
Fair value of plan assets		(473)	(463)
Projected benefit obligation		339	321
Other assets – prepaid pension assets		(134)	(142)

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

14 Prepaid pension assets (cont’d)

 

Expense recognised in profit or loss
			Group
			2023	2022
			US$’000	US$’000
Curtailment gain			-	-
Net interest on net defined benefit liability			(3)	-
Employee benefits			(3)	-
Movement in the present value of the defined    benefit obligations
Projected benefit obligation at 1 January			321	390
Interest cost			6	3
Actuarial loss (gain)			13	(34)
Effect of movement in exchange rate			(1)	(38)
Defined benefit obligation at 31 December			339	321
Movement in the fair value of plan assets
Fair value of plan assets at 1 January			463	473
Expected return on plan assets			8	3
Actuarial gains			2	34
Currency translation difference			-	(47)
Fair value of plan assets at 31 December			473	463
Return on plan assets
Expected return on plan assets			8	3
Actuarial gains			2	34
Actual return on plan assets			10	37
Assets Categories
Cash			100%	100%

 

 

Actuarial assumptions

 

Weighted-average assumptions used to determine defined benefit obligations as at 31 December 2023 and 2022 were as follows:

 

		2023	2022
Discount rate		1.63%	1.75%
Rate of compensation increase		2.00%	2.00%

 

 

The Group does not expect to make any contribution to the Fund in 2023. The Group expects to make benefit payments of US$10,000 from 2024 to 2028 and US$75,000 from 2029 to 2033.

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

14 Prepaid pension assets (cont’d)

 

Defined contribution pension plan

 

The Group has provided defined contribution plans for employees located in Taiwan and Hong Kong. Contributions to the plans are expensed as incurred.

 

 

Taiwan

 

Pursuant to the Labor Pension Act enacted on 1 July 2005, the Group set up a defined contribution pension plan for its employees located in Taiwan. For eligible employees who elect to participate in the defined contribution pension plan, the Group contributes no less than 6% of the employees’ salaries and wages paid each month, up to the maximum amount of NT$9,000 (approximately US$293 per individual), to the employees’ individual pension accounts at the Bureau of Labor Insurance. Pension payments to employees are made either by monthly installments or in a lump sum from the accumulated contributions and earnings in employees’ individual accounts.

 

 

Hong Kong

 

According to the relevant Hong Kong regulations, the Group provides a contribution plan for the eligible employees in Hong Kong. The Group must contribute at least 5 percent of their total salaries, up to the maximum amount of HK$1,500 (approximately US$192 per individual), to their individual contribution accounts of the authorities monthly. After the termination of employment, the benefits still belong to the employees in any circumstances.

 

The total amount of defined contribution pension expenses pursuant to defined contribution plans for the year ended 31 December 2023 was US$144,000 (2022: US$167,000).

 

 

		Group
		2023	2022
		US$’000	US$’000
Maturity analysis:
Year 1		486	455
Year 2 to 5		499	907
		985	1,362
Less: Future finance charges		(15)	(29)
		970	1,333
Analysed as:
Current		475	440
Non-current		495	893
		970	1,333

 

 

Lease liabilities were measured at the present value of the remaining lease payments, discounted using lessee’s incremental borrowing rate. As at 31 December 2023, the weighted average incremental borrowing rate applied to the lease liabilities ranged between 1.44% to 3.60% (2022: 1.44% to 2.88%).

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

		Group		Company
		2023	2022	2023	2022
		US$’000	US$’000	US$’000	US$’000
Trade payables		44	53	-	–
Accrued expenses		1,182	1,151	197	249
Other payables		190	176	-	–
Amount due to subsidiaries		-	–	10,603	10,467
Trade and other payables		1,416	1,380	10,800	10,716

 

The amounts due to subsidiaries are unsecured, interest-free and repayable on demand except for advances from subsidiaries amounting to US$10,000,000 (2022: US$10,000,000) which are unsecured, bear interest at Nil% (2022: 2%) per annum and both principal and interest were repayable in full in August 2022 as the initial term, and the term are renewed automatically on a yearly basis unless either party give the other party written notice of non-renewal prior at least 30 days prior to the expiration of the initial term or any renewal term. The Company entered into amendment agreements with the respective subsidiaries in November 2023, and according to the amendment agreements, the interest payable on the unpaid principal amount at the rate of 2% shall not apply with effective from 1 September 2023.

 

 

 

As at 1 January 2022, contract liabilities amounted to US$1,118,000.

 

Contract liabilities represent proceeds received from the sale of virtual points and in-game virtual items which have not been consumed by the users or expired. Contract liabilities are credited to profit or loss and recognised as revenue when the virtual points and virtual in-game items are consumed or expired.

 

The amount of revenue recognised in the current reporting period which relates to brought-forward contract liabilities is US$596,000 (2022: US$451,000).

 

 

		Group
		2023	2022
		US$’000	US$’000
Digital entertainment service revenue*		4,292	5,585

 

 

* Included in the digital entertainment service revenue is revenue from sale of virtual points amounted to US$1.5 million (2022: US$2.1 million). The digital entertainment service revenue is recognised over time.

 

As at 31 December 2023, there are unsatisfied performance obligations amounting to US$811,000 (2022: US$1,055,000).

 

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

Key sources of estimation uncertainty

 

Recognition of digital entertainment service revenue

 

Digital entertainment service revenue is earned via the sale of virtual points, prepaid cards and game packs. Proceeds from the sale of virtual points are deferred when received (Note 17) and revenue is recorded over time when the virtual points are consumed based on estimated life of virtual points. Management determines the estimated useful life of the virtual points based on the weighted average number of days of a user’s payment interval, the average turnover rate of the circulation of virtual point in the Group’s online games and the historical period based on the Group’s previously released online games.

 

 

		Group
		2023	2022
		US$’000	US$’000
Loss allowance for trade receivables		7	2

 

 

		Group
		2023	2022
		US$’000	US$’000
Finance income
Interest income		1,811	718
Finance expenses
Interest expense on lease liabilities		(18)	(24)
Net finance income		1,793	694

 

 

 

The income tax credit varied from the amount of income tax credit determined by applying the Singapore income tax rate of 17% to loss before income tax as a result of the following differences:

 

	Group
	2023	2022
	US$’000	US$’000
Reconciliation of effective tax rate
Loss before tax	(4,952)	(2,091)
Tax calculated at 17% (2022: 17%)	842	355
Effect of tax rates in foreign jurisdictions	264	109
Non-deductible expenses	(701)	(157)
Current year losses for which no deferred tax asset    was recognised	(406)	(312)
Others	1	5
	–	–

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

21 Income tax (cont’d)

 

As at 31 December 2023, the Group has tax losses carried forward, available to offset against future taxable income, the natures and jurisdictions of which were summarised as follows:

 

	2023		2022
Jurisdiction	Amount (US$’000)	Expiring year	Amount (US$’000)	Expiring year
Hong Kong	15,521	Indefinite	15,330	Indefinite
Taiwan	33,414	2024-2033	41,287	2023-2032

 

 

Deferred tax assets relating to unutilised tax losses has not been recognised due to the unpredictability of future profit streams. Consequently, the Group did not recognise deferred tax assets of US$11,064,000 (2022: US$11,880,000).

 

 

 

Other than those disclosed elsewhere in the financial statements, the following items have been included in arriving at loss for the year:

 

		Group
		2023	2022
		US$’000	US$’000
Employee benefits expense (see below)		3,233	3,706
Amortisation charge on intangible assets		12	9
Amortisation charge on lease right-of-use assets		472	489
Depreciation of property, plant and equipment		43	24
Loss on disposal of property, plant and equipment		-	3
Fair value loss (gain) on financial assets at FVTPL		3,663	(1,068)
Employee benefits expense
Wages and salaries		3,011	3,458
Employee expense relating to defined benefit and    contribution pension plans		218	244
Termination benefits		4	4
		3,233	3,706

 

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

 

Share options granted to key management

 

As at the end of the financial year, the total outstanding number of share options granted to key management of the Group was 8,000 (2022: 12,000).

 

 

Transaction with key management personnel

 

Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. The directors are considered as key management personnel of the Group.

 

Key management personnel compensation comprised:

		Group
		2023	2022
		US$’000	US$’000
Wages and salaries		382	387
Director fee		138	135
Other benefits		40	41
		560	563

 

 

Other related party transactions

 

There are no significant related party transactions during 2023 and 2022.

 

 

 

(a) Categories of financial instruments

 

The following table sets out the financial instruments as at the end of the reporting period:

 

	Group		Company
	2023	2022	2023	2022
	US$’000	US$’000	US$’000	US$’000
Financial asset at FVTPL	5,777	10,321	5,777	10,321
Financial assets at amortised cost	39,494	39,991	2,697	2,163
Financial liabilities at amortised cost	1,358	1,307	10,800	10,717
Lease liabilities	970	1,333	-	-

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

24 Financial instruments (cont’d)

 

(b) Financial risk management

 

The Group has exposure to the following risks from its use of financial instruments:

 

 

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

 

 

Risk management framework

 

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Audit Committee, which is responsible for overseeing the Group’s risk management policies. The Audit Committee reports regularly to the Board of Directors on its activities.

 

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

 

The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

 

 

Credit risk

 

The customers of the Group settle the payments in accordance with one of the following ways:

 

(1) by bank transfer or credit card and (2) by advanced payment. The Group is subject to credit risk only for those receivables with credits granted.

 

None of the Group’s customers accounted for over 10 percent of the Group’s revenue in 2023 and 2022 or of the balance of trade receivables as of 31 December 2023 and 2022.

 

The credit risk of the Group’s and the Company’s financial assets, which comprise bank deposits and trade and other receivables, represents the maximum exposure to credit risk is the carrying amounts of these instruments.

 

Cash and cash equivalents are held with reputable financial institutions and subject to immaterial credit loss.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

24 Financial instruments (cont’d)

 

(b) Financial risk management (cont’d)

 

For trade related balances, the Group has applied the simplified approach in FRS 109 to measure the loss allowance at lifetime ECL. The Group determines the expected credit losses on these items based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Note 10 includes further details on the loss allowance for the trade receivables.

 

For non-trade related balances, the Group has established a policy to perform an assessment as at 31 December 2023 and 2022, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. The Group groups its other receivables into Stage 1, Stage 2 and Stage 3, as described below:

 

Stage 1 When other receivables are first recognised, the Group recognised an allowance based on 12 months’ ECL.

 

Stage 2 When other receivables have shown a significant increase in credit risk since origination, the Group records an allowance for the lifetime ECLs.

 

Stage 3 Other receivables considered credit-impaired. The Group records an allowance for the lifetime ECLs.

 

Management also makes periodic collective assessments for other receivables (including amounts due from subsidiaries) as well as individual assessment on the recoverability of other receivables based on historical settlement records, past experience and other factors. The Group classified other receivables in stage 1 and continuously monitored their credit risk.

 

 

Liquidity risk

 

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

 

Except for the lease liabilities, amounts due to subsidiaries and financial assets at FVTPL, the Group’s and Company’s financial assets and liabilities are due on demand or within one year from the end of the reporting period.

 

 

Market risk

 

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income of the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising returns.

 

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

24 Financial instruments (cont’d)

 

(b) Financial risk management (cont’d)

 

Foreign currency risk

 

The Group holds some assets or liabilities in foreign currency other than functional currency and the value of these assets and liabilities are mainly subject to foreign currency risks resulting from fluctuations in exchange rates between the United States dollars (USD) and the functional currency.

 

The Group’s and Company’s exposures to foreign currencies in United States dollars equivalent are as follows:

 

	Group		Company
	2023	2022	2023	2022
	US$’000	US$’000	US$’000	US$’000
Group
Financial assets
USD	7,181	11,514	8,459	12,483
Financial liabilities
USD	221	289	10,782	10,717

 

 

Sensitivity analysis

 

The following table details the Group’s and Company’s sensitivity to a 10% increase and decrease in the USD against the relevant functional currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.

 

If the USD weakens by 10% against the functional currency of each group entity, loss before tax will decrease (increase) by:

 

	Group		Company
	2023	2022	2023	2022
	US$’000	US$’000	US$’000	US$’000
Group
USD	696	1,123	(232)	177

 

 

If the USD strengthens by 10% against the functional currency of each group entity, loss before tax will increase (decrease) by the same amount above.

 

 

Interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and Company’s financial instruments will fluctuate because of changes in market interest rates. The Group and Company are not exposed to significant interest rate risk.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

24 Financial instruments (cont’d)

 

(c) Fair values of financial assets and financial liabilities

 

The fair values of current financial assets and liabilities approximate the carrying amounts of those assets and liabilities reported in the statement of financial position due to the relatively short-term maturity of these financial instruments, except for financial assets at FVTPL as disclosed in Note 8 to the financial statements.

 

The table below analyses financial instrument carried at fair value by valuation method.

 

	Total	Level 1	Level 2	Level 3
	US$’000	US$’000	US$’000	US$’000
Group and Company
2023
Financial assets at FVTPL	5,777	-	-	5,777
2022
Financial assets at FVTPL	10,321	-	-	10,321

 

 

The following table gives information about how the fair value of the financial assets at FVTPL is determined:

 

Calculation date: 31 December 2023
Valuation technique	Significant unobservable input	Rate	Changes of Fair Value (in US$ thousands)
			If the Rate of Input changes by -1%	If the Rate of Input changes by +1%
The discounted cash flow analysis to estimate the enterprise value, and then the option pricing method to allocate equity value among various classes of stakeholders.	Discount rate for future cash flows	38.5%	Debt instrument +$90 Equity instrument +$67	Debt instrument -$121 Equity instrument -$58
	Discount for lack of marketability (“DLOM”)	Debt instrument 12% Equity instrument From 12.0% to 30.0% for different scenarios	Debt instrument +$63   Equity instrument +$4	Debt instrument -$63   Equity instrument -$3
	Volatility	29%	Debt instrument +$22 Equity instrument +$3	Debt instrument +$86 Equity instrument -$2

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

24 Financial instruments (cont’d)

 

(c) Fair values of financial assets and financial liabilities (cont’d)

 

Calculation date: 31 December 2022
Valuation technique	Significant unobservable input	Rate	Changes of Fair Value (in US$ thousands)
			If the Rate of Input changes by -1%	If the Rate of Input changes by +1%
The discounted cash flow analysis to estimate the enterprise value, and then the option pricing method to allocate equity value among various classes of stakeholders.	Discount rate for future cash flows	38.5%	Debt instrument +$372 Equity instrument +$175	Debt instrument -$262 Equity instrument -$170
	Discount for lack of marketability (“DLOM”)	Debt instrument From 4.0% to 12.0% for different scenarios Equity instrument From 6.0% to 12.0% for different scenarios	Debt instrument +$93   Equity instrument +$26	Debt instrument -$93   Equity instrument -$25
	Volatility	From 28% to 31.0% for different scenarios	Debt instrument +$23 Equity instrument +$16	Debt instrument +$24 Equity instrument -$10

 

Key sources of estimation uncertainty

 

Fair value of financial assets at FVTPL

 

In estimating the fair value of the financial assets at FVTPL (Note 8), the Group engages third party qualified valuer to perform the valuation. Management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model.

 

When estimating the value of the early stage enterprise, in the absence of observable market prices or a recent financing transaction, the Company obtained sufficient financial and operational information from the issuer’s company, using the income approach as the primary method, which reflects the close relationship between the future cash generating ability of the issuer’s company and respective enterprise value. As the issuer’s company was still at its early stage of development with limited historical track record, market multiples were conducted for supplementary reference only.

 

The derived enterprise value was then served as a reasonable basis for the subsequent equity value allocation exercise to estimate the portion assignable to the issuer’s convertible note and respective share categories as of the measurement date by applying a hybrid method of Probability Weighted Expected Return Method (“PWERM”) and Option Pricing Method (“OPM”). Such hybrid method estimates the probability weighted value across multiple scenarios, using OPM to estimate the allocation of value within one or more of those scenarios.

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

 

Business segments

 

For the reportable segment, the Group’s chief operating decision maker reviews internal management reports on at least a quarterly basis. Management assesses the performance of the Group’s operations based on the profit before income tax, total assets and total liabilities which are measured in a manner consistent with that of the consolidated financial statements. The following summary describes the operations in the Group’s reportable segments:

 

Digital entertainment service:	The development and licensure of digital entertainment products and services and other investments

 

 

Major Customers

 

No single customer represented 10 percent or more of the Group’s total revenue in 2023 and 2022.

 

 

Geographic Information

 

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of revenue sources. Segment assets are based on the geographical location of the assets.

 

Revenue		2023	2022
		US$’000	US$’000
Taiwan		1,785	2,427
Hong Kong		2,507	3,158
		4,292	5,585

 

Non-current assets
Taiwan		6,338	4,099
Hong Kong		92	34
		6,430	4,133

 

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GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

 

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2023

 

 

 

 

On 15 January 2018, Ennoconn Corporation (“Ennoconn”) filed a complaint against one of our subsidiaries, GigaMedia Cloud Services Co., Ltd. (“GigaMedia Cloud”) in the Taiwan Taipei District Court. The complaint alleged that GigaMedia Cloud is obligated to pay Ennoconn NT$79,477,000 (approximately US$2,588,000) in connection with a transaction to purchase taximeters in 2015. GigaMedia Cloud filed an answer to the complaint denying Ennoconn’s allegations in the lack of factual and legal basis on 1 March 2018. On 15 November 2018, the Taiwan Taipei District Court determined that all of Ennoconn’s claims were without merit and made a judgment denying the complaint.

 

On 3 January 2019, Ennoconn filed an appeal demanding the judgment which was entered in the District Court, to be reversed and amended. The civil court of the second instance, the Taiwan High Court, has conducted the session of the preparatory proceedings for several times during 2019. As a result, the Taiwan High Court ruled on 8 January 2020, that the decision of the Taiwan Taipei District Court should be partially modified and Ennoconn is entitled to NT$27,084,000 (approximately US$882,000). GigaMedia Cloud has filed another appeal with the Taiwan Supreme Court on 4 February 2020.

 

On 5 May 2021, the Taiwan Supreme Court revoked the previous ruling of the Taiwan High Court, and sent the case back to the Taiwan High Court for a retrial. Under the Taiwan Supreme Court’s ruling, the appeal made by Ennoconn should be reviewed by the Taiwan High Court by following the instructions of the Taiwan Supreme Court.

 

On 18 May 2022, the Taiwan High Court found such appeal meritless and made a civil judgment denying the complaint by Ennoconn. On 15 June 2022, Ennoconn filed an appeal and demanded that the Taiwan Supreme Court reverse this civil judgment and remand the case to the Taiwan High Court. On 22 February 2023, the Taiwan Supreme Court revoked the previous ruling of the Taiwan High Court, and sent the case back to the Taiwan High Court for a retrial. On 30 October 2023, the Taiwan High Court ruled such appeal meritorious and Ennoconn has the right to claim compensation from GigaMedia Cloud. On 16 November 2023, GigaMedia Cloud filed an appeal against the Taiwan High Court’s decision, and the appeal has been transferred to Taiwan Supreme Court on 2 January 2024. On 17 April 2024, the Taiwan Supreme Court, in a written notice, denied GigaMedia’s appeal.

 

GigaMedia Cloud accrued its best estimate for the ultimate resolution of this claim. On the other hand, pursuant to Taiwan’s Company Act, the shareholder of GigaMedia Cloud is limitedly liable for GigaMedia Cloud in an amount equal to the total value of shares subscribed. Therefore, it is believed that the immediate parent company, the intermediate parent companies, as well as GigaMedia, the ultimate parent company, individually or collectively do not have obligations to absorb GigaMedia Cloud’s loss exceeding GigaMedia Cloud’s net worth of approximately US$100,000, the impact to the Group will be capped at approximately US$100,000 accrued by the Group and accordingly, it will not have a material adverse impact on the Group’s and Company’s financial condition, results of operations or cash flows.

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