The accompanying notes are an integral part of these consolidated financial statements.
Notes To Consolidated Financial Statements
December 31, 2011, 2012 AND 2013
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 online games and cloud computing services,
with headquarters in Taipei, Taiwan.
Our Asian online game and service business operates a suite of play-for-fun online games and provides related
services, mainly targeting online game players across Asia, including Greater China and Southeast Asia.
We began developing a new cloud computing
business in the second half of 2012. The cloud business aims at providing an integrated platform of services and tools for small-to-medium enterprises in Greater China to increase flexibility, efficiency and competitiveness. We launched the business
in April 2013.
In July 2012 we sold a non-controlling interest we held in an online gaming software and service business to BetClic Everest Group
(BEG). (See Note 5, Divestitures, for additional information.) Prior to the disposal, through our equity investment, the gaming software and service business offered software solutions for online gaming, which was licensed
under a software license and support service contract.
(b) Basis of Presentation
The accompanying consolidated financial statements of our Company have been prepared in accordance with U.S. generally accepted accounting principles
(U.S. GAAP).
Following the completion of the sale of 60 percent interest in our gaming software and service business in April 2010, we
deconsolidated the results of the gaming software and service business and began accounting for the remaining interest under the equity method of accounting until the closing of the disposal transaction in July 2012 when we sold our remaining
ownership. (See Note 5, Divestitures, for additional information.)
F-10
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
In June 2012, our board of directors approved a plan to liquidate and dissolve JIDI Network Technology
(Shanghai) Co., Ltd. (JIDI), a wholly-owned subsidiary, and Shanghai JIDI Network Technology Co., Ltd. (Shanghai JIDI), a variable-interest entity controlled through a series of contractual arrangements. Therefore the results
of these entities are reported as discontinued operations for all periods presented. (See Note 5, Divestitures, for additional information.)
(c) Summary of significant accounting policies
Principles of Consolidation
The consolidated
financial statements include the accounts of GigaMedia and subsidiaries after elimination of all significant inter-company accounts and transactions. In addition, the accounts of our Companys variable-interest entities are included in the
consolidated financial statements. (See Note 3, Variable-Interest Entities, for additional information.) The accounting policies for other less than majority-owned investments are described in Note 1 below within the paragraphs headed
Marketable Securities and Investments.
Foreign Currency Translation and Transactions
Assets and liabilities denominated in non-U.S. dollars are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at
weighted-average rates of exchange prevailing during the year. Cumulative translation adjustments resulting from this process are charged or credited to other comprehensive income. Gains and losses on foreign currency transactions are included in
other income and expenses.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America
(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 also on assumptions that it believes are reasonable. Management assesses these estimates on a regular basis; however,
actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment; allowances for doubtful accounts; the valuation of deferred tax assets,
long-lived assets, inventory, investments and
share-based
compensation; and accrued pension liabilities, income tax uncertainties and other contingencies.
F-11
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Revenue Recognition
General
Revenues are recognized when persuasive
evidence of an arrangement exists, delivery occurs and the customer takes ownership and assumes risks or services are rendered, the sales price is fixed or determinable and collectability is reasonably assured.
Sales taxes assessed by governmental authorities on our revenue transactions are presented on a net basis and therefore are excluded from revenues in our
consolidated financial statements.
Multiple-Element Arrangements
Our Company enters into multiple-element revenue arrangements, which may include any combination of services, software, and/or products. To the extent that a
deliverable in a multiple-element arrangement is subject to specific accounting guidance, whether and/or how to separate multiple deliverable arrangements into separate units of accounting (separability) and how to allocate the arrangement
consideration among those separate units of accounting (allocation) for that deliverable is accounted for in accordance with such specific guidance.
In
addition to the aforementioned general policies, the following are the specific revenue recognition policies for each major category of revenue.
F-12
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Asian Online Game and Service Revenues
Online game revenues are earned through the sale of online game points, prepaid cards, game packs, through the sublicensing of certain games to distributors
and through licensing fee revenues. Virtual online game points are sold to distributors or end-users who can make the payments through credit cards, Internet ATMs or telecommunication service operators. Physical prepaid cards and game packs are sold
through distributors and convenience stores. Proceeds from sales of physical cards and game packs, net of sales discounts, and online game 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; over the estimated useful life of virtual items; or when the sold game points expire and can no longer be used to access the online games or products in accordance with our published game points expiration
policy. Sublicensing revenues from the distributors are recognized based on end-users activation to the game system and when the performance obligations have been completed. Licensing fee revenues are recognized when the delivery of licensed
products has occurred and the fee is fixed or determinable.
Sales of virtual online game points and licensing fee revenues are reported on a gross basis.
In the sales of virtual online game points and game licenses, we act as principal and we have latitude in establishing price. Fixed percentage fees retained by service providers for payment processing related to our online game services are
recognized as cost of online game revenues. We report sublicensing revenues on a net basis. In the sublicense agreements, we act as agent and the distributors are responsible for the operating and the marketing.
Online game and service revenues also include revenues derived from online advertising arrangements, sponsorship arrangements, or a combination of both. These
service arrangements allow advertisers to place advertisements on particular areas of our Companys websites and online game platforms over a stated period of time. Service revenues from online advertising arrangements are recognized ratably
over the period of the contract when the collectability is reasonably assured.
Cloud Product and Service Revenues
Cloud service revenues are related to cloud computing services provided by our Company. Revenues are recorded net of discounts. Cloud service revenues are
recognized for the period of time for which we provide services to the customer. Customers have a choice of paying either monthly or in advance for a certain period of time, for which they receive corresponding discounts. Our Company records any
such advanced payment receipts as other current liabilities and amortizes such revenues over the subscription period.
F-13
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Revenues from the sales of equipment and other related products are recognized upon acceptance.
Deferred Revenues
Deferred revenues consist
mainly of the prepaid income related to our Asian online game and service business. Deferred revenue represents proceeds received relating to the sale of game points and in-game items which are activated or charged to the respective player game
account by players, but which have not been consumed by the players or expired. Deferred revenue is credited to profit or loss when the game points and in-game items are consumed or expired.
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 multi-player online games.
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 online
game or license period, which is usually within two to five years. The annual amortization is modified if the amount computed on the ratio of current gross revenues for a game license over the total of current and anticipated future gross
revenues for that game license is greater than the amount computed using the straight-line method.
Prepaid royalty fees and related costs are initially
deferred when paid to licensors and amortized as operating costs based on certain percentage of revenues generated by the licensee from operating the related online game in the specific country or region over the contract period.
F-14
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
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 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:
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Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
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Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
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Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any,
market activity for the asset or liability at measurement date.
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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 discounted cash flow analyses, incorporating adjusted available market
discount rate information and our Companys estimates for non-performance and liquidity risk. These techniques rely extensively on the use of a number of assumptions, including the discount rate, credit spreads, and estimates of future cash
flows. (See Note 9, Fair Value Measurements, for additional information.)
Cash Equivalents
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.
Pledged time deposits are excluded from cash and cash equivalents for purposes of the consolidated statements of cash flows.
F-15
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Marketable Securities
All of our Companys investments in marketable securities are classified as available-for-sale. These marketable securities are stated at fair value with
any unrealized gains or losses recorded in accumulated other comprehensive income (loss) within equity until realized.
Other-than-temporary impairments,
if any, are charged to non-operating expense in the period in which the loss occurs. In determining whether an other-than-temporary impairment has occurred, our Company primarily considers, among other factors, the length of the time and the extent
to which the fair value of an investment has been at a value less than cost. When an other-than-temporary loss is recorded, the fair value of the investment becomes the new cost basis of the investment and is not adjusted for subsequent recoveries
in fair value. Realized gains and losses also are included in non-operating income and expense in the consolidated statements of operations. (See Note 9, Fair Value Measurements, for additional information.)
Investments
Equity investments in non-publicly
traded securities of companies over which our Company has no ability to exercise significant influence are accounted for under the cost method.
For
equity investment accounted for as available-for-sale, cash dividends are recognized as investment income upon a resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are
declared prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.
F-16
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
For equity investments accounted under equity method, stock dividends received from investees as a result of
appropriation of net earnings and additional paid-in capital are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the weighted-average method. Cash dividends are
accounted for as a reduction to the original cost of investment.
Equity investments in companies over which our Company has the ability to exercise
significant influence but does not hold a controlling financial interest are accounted for under the equity method and our Companys income or loss on equity method investments is recorded in non-operating income or expenses. The difference
between the cost of the acquisition and our Companys share of the fair value of the net identifiable assets is recognized as goodwill and is included in the carrying amount of the investment. When our Companys carrying value in an equity
method investee is reduced to zero, no further losses are recorded in our Consolidated Financial Statements unless our Company guaranteed obligations of the investee or has committed to additional funding. When the investee subsequently reports
income, our Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.
Unrealized
losses that are considered other-than-temporary, if any, are charged to non-operating expenses. Realized gains and losses, measured against carrying amount, are also included in non-operating income and expenses. (See Note 9, Fair Value
Measurements, for additional information.)
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
considers historical losses adjusted to take into account current market conditions and our customers financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. Account balances
are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
F-17
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
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:
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Categories
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Years
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Buildings
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50
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Information and communication equipment
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2 to 5
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Office furniture and equipment
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3 to 5
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Leasehold improvements
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1 to 5
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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.
We have entered into agreements to lease certain of our Companys land and buildings to a third party under operating leases, which were renewed in
September and October 2013, and which expire no later than September 2016. As of December 31, 2012 and 2013, the carrying amount of the land and buildings under lease was approximately $1.2 million and $1.2 million, respectively. The rental
income under the operating lease amounted to $72 thousand, $74 thousand and $74 thousand for 2011, 2012 and 2013, respectively. The minimum rental income to be received under this operating lease is $209 thousand through September 2016.
Business Acquisitions
Our Company accounts for
its business acquisitions using the acquisition method. Under this method, our Company recognizes and measures the identifiable assets acquired, the liabilities assumed and any noncontrolling interest at their acquisition-date fair values, with
limited exceptions. Acquisition-related costs are generally expensed as incurred.
F-18
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Intangible Assets and Goodwill
Intangible assets with finite lives are amortized by the straight-line method over their estimated useful lives, ranging from half a year to nine years.
Intangible assets with indefinite useful lives are not amortized. Goodwill is not amortized.
Impairment of Intangible Assets, Goodwill and
Long-Lived Assets
Goodwill is reviewed for impairment annually or sooner when circumstances indicate an impairment may exist, using a fair-value
approach at the reporting unit level. A reporting unit is the operating segment, or a business, which is one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by
management at the segment level. Components are aggregated as a single reporting unit if they have similar economic characteristics. In connection with our goodwill impairment test, we first assess qualitative factors as a basis for determining
whether it is necessary to perform the two-step goodwill impairment test.
If the two-step goodwill impairment test is required, first, the fair value of
the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform
step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of
goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of
the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to be performed.
Intangible assets with indefinite useful lives are tested for impairment at the reporting unit level, 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 discounted cash flows. Impairment is measured as the difference between the carrying amounts and the fair value of the assets, and is
recognized as a loss from operations. In connection with our impairment test for the intangible assets with indefinite useful lives, we first assess qualitative factors as a basis for determining whether it is necessary to perform the quantitative
impairment test.
F-19
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Long-lived assets other than goodwill and intangible assets 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 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.
(See Note 9, Fair Value Measurements, for additional information.)
Software Cost
Costs to develop our Asian online
game products are capitalized after technological feasibility has been established, and when the product is available for general release to customers, costs are expensed. Costs incurred prior to the establishment of technological feasibility are
expensed when incurred and are included in product development and engineering expenses. Capitalized amounts are amortized using the straight-line method, which is applied over the estimated useful economic life of the software, ranging from half a
year to five years. The annual amortization is modified if the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product is greater than the amount
computed using the straight-line method.
We capitalize certain costs incurred to purchase or to internally create and implement internal-use computer
software, which includes software coding, installation, testing and certain data conversion. 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 three years.
F-20
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Product Development and Engineering
Product development and engineering expenses primarily consist of research compensation, depreciation and amortization, and are expensed as incurred.
Advertising
Direct-response advertising costs
incurred in relation to the acquisition or origination of a customer relationship are capitalized and deferred. The deferred costs are recognized as expense in the Consolidated Statements of Operations over the estimated lives of customer
relationships. Costs of broadcast advertising are recorded as expenses as advertising airtime is used. Other advertising expenditures are expensed as incurred.
Advertising expenses incurred in 2011, 2012 and 2013 totaled $3.5 million, $3.2 million and $676 thousand, respectively. As of December 31, 2012 and
2013, prepaid advertising amounted to $1 thousand and $1 thousand, respectively.
Leases
Leases for which substantially all of the risks and rewards of ownership remain with the leasing company are accounted for as operating leases. Payments made
under operating leases, net of any incentives received by our Company from the leasing company, are charged to the consolidated statements of operations on a straight-line basis over the lease periods.
Leases are classified as capital leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Assets
held under capital leases are recognized as assets of our Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the
balance sheet as a lease obligation. Lease payments are apportioned between finance charges and a reduction of the lease obligation in order to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly to profit or loss.
F-21
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Share-Based Compensation
Share-based compensation represents the cost related to share-based awards granted to employees. We measure share-based compensation cost at the grant date,
based on the estimated fair value of the award. Share-based compensation is recognized for the portion of the award that is ultimately expected to vest, and the cost is amortized on a straight-line basis (net of estimated forfeitures) over the
vesting period. Our Company estimates the fair value of stock options using the Black-Scholes valuation model. The cost is recorded in operating costs and operating expenses in the consolidated statements of operations based on the employees
respective function.
For shares and stock options granted to non-employees, we measure the fair value of the equity instruments granted at the earlier of
the performance commitment date or when the performance is completed.
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.
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. We recognize the
investment tax credit associated with the purchase of intangible assets and technology, research and development expenditures, employee compensation and certain equity investments using the flow-through method. Deferred tax assets and liabilities
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 will
more-likely-than-not be realized. In assessing the likelihood of realization, management considers estimates of future taxable income.
F-22
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
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 percent likely 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 Per Share
Basic earnings per share is
computed by dividing the net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income for the period by
the weighted average number of common shares and potential common shares outstanding during the period. Potential common shares, composed of incremental common shares issuable upon the exercise of warrants and options in all periods, are included in
the computation of diluted earnings per share to the extent such shares are dilutive. Diluted EPS 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 common shares issued and outstanding is used to compute the diluted loss per share, as the inclusion of potential common shares would be anti-dilutive. Therefore, for the years ended December 31, 2011, 2012 and 2013, basic and
diluted loss per share are the same.
Noncontrolling Interest
Noncontrolling interest in the equity of a subsidiary is accounted for and reported as equity. Changes in our Companys ownership interest in a subsidiary
that do not result in deconsolidation are accounted for as equity transactions. Any retained noncontrolling equity investment upon the deconsolidation of a subsidiary is initially measured at fair value.
F-23
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Reclassifications
Certain amounts in 2011 and 2012 have been reclassified to conform to the presentation in our consolidated financial statements as of and for the year ended
December 31, 2013.
Segment Reporting
We
use the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by our Companys chief operating decision maker for making operating decisions, allocating
resources and assessing performance as the source for determining our operating segments. Our Companys 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 income (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. There are no intersegment transactions.
Discontinued Operations
Discontinued operations
are reported when a component of an entity either has been disposed of, or is classified as held for sale, and (a) represents a separate major line of business or geographical area of operations, (b) is part of a single coordinated plan to
dispose of a separate major line of business or geographical area of operations or (c) is a subsidiary acquired exclusively with a view to resale. Discontinued operations are presented separately in the accompanying consolidated statements of
operations and prior period financial statements are revised to present discontinued operations retrospectively.
F-24
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(d) Recent Accounting Pronouncements Not Yet Adopted
The FASB issued Accounting Standards Update (ASU) 2013-04,
Liabilities (Topic 405); Obligations Resulting from Joint and Several Liability
Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date
, in February 2013. This update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount
of the obligation is fixed as the sum of the amount the entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the entity expects to pay on behalf of its co-obligors. The update is effective for our
fiscal years beginning January 1, 2014, and is to be applied retrospectively to all prior years presented for those obligations resulting from joint and several liability arrangements within the Updates scope that exist at the beginning
of the fiscal year of adoption. We do not expect the initial adoption of the updated guidance to have a significant impact on our consolidated financial position, results of operations or cash flows.
NOTE 2.
LOSS PER SHARE
The following table provides a reconciliation of the denominators of the basic and diluted per share computations:
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(in thousand shares)
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2011
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2012
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2013
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Weighted average number of outstanding shares
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Basic
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54,268
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50,720
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|
|
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50,720
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Effect of dilutive securities
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Employee share-based compensation
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Diluted
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54,268
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50,720
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50,720
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Options to purchase 1,432 thousand, 1,444 thousand and 1,149 thousand shares of common stock were not included
in dilutive securities for the years ended December 31, 2011, 2012 and 2013, respectively, as the effect would be anti-dilutive.
F-25
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 3.
VARIABLE-INTEREST ENTITIES
Shanghai JIDI
In order to comply with
foreign ownership restrictions and to hold the necessary licenses required, through June 2012 we had operated our Asian online game and service business in the Peoples Republic of China (PRC) through our VIE, Shanghai JIDI. We had
no ownership interest in Shanghai JIDI and relied on a series of contractual arrangements that were intended to give us effective control over Shanghai JIDI. Those contractual arrangements were duly executed and the share pledge agreements were
registered with local government authority in compliance with PRC legal requirements. Therefore, we effectively controlled Shanghai JIDI, and were the primary beneficiary of Shanghai JIDI. Shanghai JIDI held an Internet Content Provider
(ICP) license, an Internet cultural operation license and an Internet publishing license. The financial results of Shanghai JIDI had been included in our consolidated financial statements since January 2011. In June 2012, our board of
directors approved a plan to dispose of Shanghai JIDI. As a result, Shanghai JIDIs operations had been accounted for as discontinued operations. (See Note 5, Divestitures, for additional information.) In May 2013, we were notified
by the competent authority that Shanghai JIDI had completed the dissolution procedures and was duly deregistered.
For the years ended December 31,
2011 and 2012, and the period from January to May 2013, total revenues and net loss of Shanghai JIDI (which are included within discontinued operations) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Total revenues
|
|
$
|
29
|
|
|
$
|
100
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,110
|
)
|
|
$
|
(888
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 4.
ACQUISITIONS
Monsoon
Through Infocomm Asia Holdings
Pte Ltd. (IAHGames), our then subsidiary in Southeast Asia, we made an equity investment in Monsoon Online Pte Ltd. (Monsoon), an operator and distributor of online games in Southeast Asia, in connection with our acquisition
of a controlling financial interest in IAHGames with effect from July 1, 2010. In connection with a strategic alliance, Monsoon entered into various agreements with a game licensor to distribute selected games in Southeast Asia (collectively
referred to as the Distribution Partnership). Although IAHGames owned 100 percent of the common stock of Monsoon, we could not consolidate Monsoon at the time of the acquisition as the game licensor had substantive participating rights
in Monsoons business operations pursuant to Monsoons management agreement. In September 2011, IAHGames, Monsoon and the game licensor entered into an agreement whereby all parties agreed to terminate early Monsoons management
agreement and other agreements with the game licensor which had granted the licensor the abovementioned substantive participating rights in connection with Monsoon. The agreement was effective from August 31, 2011. Starting from
September 1, 2011, IAHGames had effective control over Monsoon and had consolidated Monsoon thereon.
The agreement was effective from the third
quarter of 2011. In January 2012, IAHGames and Monsoons commitments under the Distribution Partnership with the game licensor were fully terminated. The execution and closing of this agreement resulted in the following significant
financial statement impacts in our consolidated statements of operations:
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
Gain on cancellation of warrant liabilities
|
|
$
|
665
|
|
Gain on reversal of impairment of prepaid expenses
|
|
|
1,347
|
|
|
|
|
|
|
Recovery of loss on termination of third-party contract
|
|
$
|
2,012
|
|
|
|
|
|
|
FingerRockz
On
October 18, 2013, we subscribed in cash to 405 thousand new common shares of FingerRockz Co., Ltd. (FingerRockz), which represents a controlling financial interest of 51.6 percent of the ownership; thereupon we began
consolidating FingerRockz. FingerRockz is a mobile game developer and publisher in Taiwan, and we acquired it purposely to enhance our research and development capabilities for mobile games. This primary factor among others, contributed to a
purchase price in excess of the fair value of the net identifiable assets acquired and liabilities assumed, and intangible assets. In the acquisition, the most appealing asset to our Company was FingerRockzs creative team. Because the
assembled workforce was not an identifiable asset to be recognized separately from goodwill, the value attributed to it was subsumed into goodwill. The goodwill related to this acquisition is not expected to be deductible for tax purpose.
F-27
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The following table summarizes the consideration paid for the acquisition and the amounts of estimated fair
value of the assets acquired and liabilities assumed at the acquisition date.
|
|
|
|
|
(In US$ thousands)
|
|
Amount
|
|
Consideration and noncontrolling interest:
|
|
|
|
|
The consideration transferred
|
|
$
|
510
|
|
The fair value of noncontrolling interest in FingerRockz
|
|
|
478
|
|
|
|
|
|
|
|
|
$
|
988
|
|
|
|
|
|
|
|
|
Identifiable assets acquired and liabilities assumed:
|
|
|
|
|
Cash, receivables and other current assets
|
|
$
|
585
|
|
Customer contracts
|
|
|
67
|
|
Payables and other current liabilities
|
|
|
(160
|
)
|
|
|
|
|
|
Net
|
|
|
492
|
|
Goodwill
|
|
|
496
|
|
|
|
|
|
|
|
|
$
|
988
|
|
|
|
|
|
|
F-28
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The following unaudited pro forma results of operations for the years ended December 31, 2012 and 2013
are presented as if the acquisition had been consummated on January 20, 2012, the inception of FingerRockz:
|
|
|
|
|
|
|
|
|
|
|
For the years ended
December 31 (unaudited)
|
|
(in US$ thousands, except for loss per share)
|
|
2012
|
|
|
2013
|
|
Net revenues
|
|
$
|
27,477
|
|
|
$
|
15,040
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to GigaMedia shareholders
|
|
$
|
(15,334
|
)
|
|
$
|
(34,845
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.30
|
)
|
|
$
|
(0.69
|
)
|
|
|
|
|
|
|
|
|
|
The above unaudited pro forma information does not reflect any incremental direct costs, including any restructuring charges
to be recorded in connection with the acquisition, or any potential cost savings that may result from the consolidation of certain operations of our Company or FingerRockz. Accordingly, the unaudited pro forma financial information above not
necessarily indicative the actual results that would have occurred had the acquisition of FingerRockz been combined during the periods presented, nor it necessarily indicative of future consolidated results of operations.
NOTE 5.
DIVESTITURES
T2CN
On December 14, 2011, we
completed the sale of our equity method investee T2CN. Pursuant to the agreement, we sold all of our ownership interest in T2CN to Hornfull Limited in exchange for a cash payment of $4.7 million, resulting in a gain of $4.7 million being recognized
in 2011. Hornfull Limited also reimbursed us $790 thousand in cash for legal fees incurred by us in connection with the T2CN dispute.
F-29
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
IAHGames
In July 2012, we entered into agreements to sell a 60 percent ownership in IAHGames, together with the sale of a 100 percent ownership in Spring Asia Limited
(Spring Asia), which has a 30 percent interest in Game First International Corporation (GFI), to IAHGames management and Management Capital International Limited (MCIL), a British Virgin Islands company
owned by IAHGames management. We retained a 20 percent ownership in IAHGames. Upon the closing of the agreements, we deconsolidated the results of IAHGames operations and began accounting for our remaining 20 percent interest under the
equity method.
Our Company accounted for the deconsolidation of and the retained noncontrolling investment in IAHGames in August 2012 at fair value.
In consideration for the sale of IAHGames and Spring Asia, we were to receive $3 million in cash. The consideration was to be collected in four equal
installments, with the first due upon closing, the second due in October 2012, the third due in January 2013 and the fourth due in April 2013. The payments were collateralized by the shares of Spring Asia and were only released from the escrow in
proportion to the payment made upon each installment. The first installment of $750 thousand was received upon the closing on August 15, 2012. However, the buyer had defaulted on the remaining three installments. Considering the uncertainty as
to the collectability of the remaining three installments, we had deferred the disposal gain of $211 thousand against the consideration installments receivable of $2,250 thousand as of December 31, 2012. The deferred gain was determined as
follows:
|
|
|
|
|
(In US$ thousand)
|
|
Amount
|
|
The fair value of consideration received and receivable, net of any transaction costs, plus
|
|
$
|
3,000
|
|
The fair value of the 20% retained noncontrolling investment in IAH at the date of deconsolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
The carrying amount (credit balance) of IAHGames at the date of deconsolidation
|
|
|
(14,536
|
)
|
Net receivables due to GigaMedia from IAHGames waived upon the closing of the sale
|
|
|
17,542
|
|
Other comprehensive income component of equity related to IAHGames at the date of the deconsolidation
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
2,789
|
|
|
|
|
|
|
Deferred gain on deconsolidation of IAH
|
|
$
|
211
|
|
|
|
|
|
|
F-30
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
On April 17, 2013, we entered into a settlement agreement with IAHGames, IAHGames management, and
MCIL. Pursuant to the settlement agreement, either IAHGames or IAHGames management was to pay us $2,258 thousand, which included interest, to fulfill IAHGames obligation under the aforementioned sale of ownership in Spring Asia. In
addition, MCIL was to purchase all of our remaining shares in IAHGames for a consideration of $1,000 thousand. The payments were received in May 2013. Upon the receipt of these payments, the above deferred gain and disposal gain for the remaining
shares were recognized in the non-operating income accordingly.
JIDI Network Technology (Shanghai) Co., Ltd. (JIDI)
In June 2012, our board of directors approved a plan to liquidate and dissolve JIDI, a wholly-owned subsidiary, and Shanghai JIDI, a VIE controlled through a
series of contractual arrangements.
Results for JIDI and Shanghai JIDI operations are reported as discontinued operations for all periods presented. The
carrying amounts of the remaining assets and liabilities, if any, of JIDI and Shanghai JIDI were not significant to our consolidated financial statements as of December 31, 2012 and 2013, and we recorded a loss of approximately $588 thousand in
connection with the disposal of property, plant and equipment, which was included within discontinued operations in 2012. The process of liquidation and dissolution was completed by the end of 2013. Summarized financial information for discontinued
operations of JIDI and Shanghai JIDI are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Revenue
|
|
$
|
29
|
|
|
$
|
100
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before tax
|
|
$
|
(4,240
|
)
|
|
$
|
(2,521
|
)
|
|
$
|
(318
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(4,240
|
)
|
|
$
|
(2,521
|
)
|
|
$
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Non-controlling Interest in Gaming software and service business
We held a non-controlling equity interest in a gaming software and service business to July 2012, when we entered into another agreement with BEG to sell our
non-controlling ownership interest, along with the shareholders loan (discussed in more detail in Note 26, Related-Party Transactions), for a consideration of $1.7 million. Of this consideration, $985 thousand was paid to us in
cash, while the remainder related to the extinguishment of a 2009 tax liability. The closing of the sale occurred in August 2012. The sale resulted in the recognition of a gain of $2.5 million, net of transaction costs.
NOTE 6
.
GOODWILL
The following table summarizes the changes to our Companys goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
39,493
|
|
|
$
|
28,437
|
|
|
$
|
16,934
|
|
Acquisition - OneNet and FingerRockz (Note 4)
|
|
|
1,049
|
|
|
|
|
|
|
|
496
|
|
Impairment charge - IAHGames, OneNet, FunTown and FingerRockz (Note 9)
|
|
|
(5,097
|
)
|
|
|
(12,489
|
)
|
|
|
(17,054
|
)
|
Reversal of contingent payment of minimum guarantee under licensing agreement
|
|
|
(5,885
|
)
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
(1,123
|
)
|
|
|
986
|
|
|
|
(376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
28,437
|
|
|
$
|
16,934
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
By the acquisition of FingerRockz in 2013, we obtained its mobile platform development experience which now
constitutes an important complement to FunTowns R&D capacity in mobile games. We reassigned its role and developed our estimates of future cash flows from mobile games accordingly. Therefore, for the purpose of testing goodwill for
impairment, we determined FingerRockz to be an integral part of FunTown with respect to determining reporting unit, and goodwill arising from the acquisition of FingerRockz was reassigned to FunTown.
F-33
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 7.
INTANGIBLE ASSETS - NET
The following table summarizes our Companys intangible assets, by major asset class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
(In US$ thousands)
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
With finite-life intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed technology
|
|
$
|
2,603
|
|
|
$
|
2,603
|
|
|
$
|
|
|
Capitalized software development cost
|
|
|
3,480
|
|
|
|
1,414
|
|
|
|
2,066
|
|
Customer relationships
|
|
|
6,274
|
|
|
|
4,880
|
|
|
|
1,394
|
|
Other
|
|
|
137
|
|
|
|
133
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,494
|
|
|
|
9,030
|
|
|
|
3,464
|
|
With indefinite-life intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade name and trademark
|
|
|
12,211
|
|
|
|
|
|
|
|
12,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,705
|
|
|
$
|
9,030
|
|
|
$
|
15,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
(In US$ thousands)
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
With finite-life intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed technology
|
|
$
|
2,536
|
|
|
$
|
2,536
|
|
|
$
|
|
|
Capitalized software development cost
|
|
|
3,130
|
|
|
|
2,471
|
|
|
|
659
|
|
Customer relationships
|
|
|
6,112
|
|
|
|
5,433
|
|
|
|
679
|
|
Other
|
|
|
141
|
|
|
|
18
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,919
|
|
|
|
10,458
|
|
|
|
1,461
|
|
With indefinite-life intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade name and trademark
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,919
|
|
|
$
|
10,458
|
|
|
$
|
1,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Intangible assets with finite lives are amortized over their estimated useful lives ranging from 0.5 to 9
years, with the overall weighted-average life of 5.6 years.
For the years ended December 31, 2011, 2012 and 2013, total amortization expense of
intangible assets were $2.3 million, $2.2 million and $1.9 million, respectively, which includes amortization of capitalized software development costs of $962 thousand, $1.1 million and $1.2 million. As of December 31, 2013, based on the
current amount of intangibles subject to amortization, the estimated amortization expense for each of the following years is as follows:
|
|
|
|
|
(In US$ thousands)
|
|
Amount
|
|
2014
|
|
$
|
1,104
|
|
2015
|
|
|
202
|
|
2016
|
|
|
147
|
|
2017
|
|
|
8
|
|
|
|
|
|
|
|
|
$
|
1,461
|
|
|
|
|
|
|
NOTE 8
.
PREPAID LICENSING AND ROYALTY FEES
The following table summarizes changes to our Companys prepaid licensing and royalty fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
4,214
|
|
|
$
|
7,103
|
|
|
$
|
8,644
|
|
Net operating additions
|
|
|
3,379
|
|
|
|
2,395
|
|
|
|
(908
|
)
|
Acquisition - OneNet
|
|
|
129
|
|
|
|
|
|
|
|
|
|
Deconsolidation - IAHGames
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
Impairment charges (Note 9)
|
|
|
(247
|
)
|
|
|
(702
|
)
|
|
|
(3,070
|
)
|
Impairment charges (Note 9) recorded in loss from discontinued operations
|
|
|
(372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
7,103
|
|
|
$
|
8,644
|
|
|
$
|
4,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-35
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 9.
FAIR VALUE MEASUREMENTS
The following table presents the carrying amounts and estimated fair values of our Companys financial instruments at December 31,
2012 and 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
|
|
Carrying
amount
|
|
|
Fair value
|
|
|
Carrying
amount
|
|
|
Fair value
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
62,731
|
|
|
$
|
62,731
|
|
|
$
|
58,801
|
|
|
$
|
58,801
|
|
Marketable securities - current
|
|
|
17,773
|
|
|
|
17,773
|
|
|
|
21,460
|
|
|
|
21,460
|
|
Accounts receivable
|
|
|
2,829
|
|
|
|
2,829
|
|
|
|
2,027
|
|
|
|
2,027
|
|
Marketable securities - noncurrent
|
|
|
4,292
|
|
|
|
4,292
|
|
|
|
6,048
|
|
|
|
6,048
|
|
Refundable deposits
|
|
|
392
|
|
|
|
392
|
|
|
|
306
|
|
|
|
306
|
|
Other receivable - noncurrent
|
|
|
2,039
|
|
|
|
2,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
324
|
|
|
|
324
|
|
|
|
1,178
|
|
|
|
1,178
|
|
Accrued compensation
|
|
|
1,233
|
|
|
|
1,233
|
|
|
|
380
|
|
|
|
380
|
|
Accrued expenses
|
|
|
5,182
|
|
|
|
5,182
|
|
|
|
2,617
|
|
|
|
2,617
|
|
Short-term borrowings
|
|
|
7,748
|
|
|
|
7,748
|
|
|
|
4,361
|
|
|
|
4,361
|
|
The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions, except
for Other receivable - noncurrent, which is included in Other assets - other.
The fair values of the financial instruments shown in the above table as of
December 31, 2012 and 2013 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an arms 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 Companys 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.
F-36
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The following methods and assumptions were used to estimate the fair value of each class of financial
instruments:
|
|
|
Cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and expenses, and short-term borrowings: The carrying amounts, at face value or cost plus accrued interest, approximate fair value
because of the short maturity of these instruments.
|
|
|
|
Marketable securities: Open-end fund, debt and equity securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. Equity securities under
resale restriction are measured with estimated restriction discount. Redeemable preferred shares are measured using valuation techniques.
|
|
|
|
Refundable deposits: Measurement of refundable deposits with no fixed maturities is based on carrying amounts.
|
|
|
|
Other receivable noncurrent: Considering the uncertainty of collectability being mitigated by the short maturity and the equity securities pledged as collateral, we determined that its carrying amount
approximated the fair value.
|
Significant Unobservable Inputs
The table below presents the ranges of significant unobservable inputs used to value our Companys level 3 financial instruments. These ranges represent
the significant unobservable inputs that were used in the valuation of each type of financial instrument. These inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument. Accordingly, the
ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of our level 3 financial instruments.
F-37
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
|
|
|
|
|
Level 3 Financial
Instruments
|
|
Significant Unobservable Inputs by
Valuation Technique
|
|
Range of Significant
Unobservable
Inputs as of December
2012
|
Debt securities Preferred shares with redemption rights
|
|
Recoverability considering:
Undiscounted cash flow forecast
Long-term growth rate
Discount rate
Volatility
Redemption date
|
|
KRW -8.2 billion ~ 22.1 billion, (equivalent to
-$7.7 million ~$20.8 million)
3%
17.8%
44.7%
1
year later
|
|
|
|
Equity securities Listed securities under resale restriction
|
|
Restriction discount
|
|
34.81%
|
|
|
|
|
|
Level 3 Financial
Instruments
|
|
Significant Unobservable Inputs by
Valuation Technique
|
|
Range of Significant
Unobservable
Inputs as of December
2013
|
Debt securities Preferred shares with redemption rights
|
|
Price/Sales per share ratio for selective comparable
companies
Discount for lack of marketability
|
|
2.5 times ~ 5.9 times
25%
|
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
Our Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most
appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below.
F-38
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Assets and liabilities measured at fair value on a recurring basis are summarized as below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Fair Value Measurement Using
|
|
|
Year Ended
December 31,
2012
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents - time deposits
|
|
$
|
|
|
|
$
|
1,514
|
|
|
$
|
|
|
|
$
|
1,514
|
|
Marketable securities - current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
17,773
|
|
|
|
|
|
|
|
|
|
|
|
17,773
|
|
Marketable securities - noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
2,727
|
|
|
|
2,727
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
1,565
|
|
|
|
1,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,773
|
|
|
$
|
1,514
|
|
|
$
|
4,292
|
|
|
$
|
23,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Fair Value Measurement Using
|
|
|
Year Ended
December 31,
2013
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents - time deposits
|
|
$
|
|
|
|
$
|
14,638
|
|
|
$
|
|
|
|
$
|
14,638
|
|
Marketable securities - current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-end fund
|
|
|
336
|
|
|
|
|
|
|
|
|
|
|
|
336
|
|
Equity securities
|
|
|
21,124
|
|
|
|
|
|
|
|
|
|
|
|
21,124
|
|
Marketable securities - noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
2,109
|
|
|
|
3,939
|
|
|
|
6,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,460
|
|
|
$
|
16,747
|
|
|
$
|
3,939
|
|
|
$
|
42,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Companys 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 1 for the years ended December 31, 2012 and 2013.
Level 1 and 2 measurements:
Cash equivalents time
deposits are convertible into a known amount of cash and are subject to an insignificant risk of change in value. Certain marketable securities are valued using a market approach based on the quoted market prices of identical instruments when
available, or other observable inputs such as trading prices of identical instruments in inactive markets. The fair values of the marketable equity securities that have publicly quoted trading prices are valued using those observable prices, unless
adjustments are required to available observable inputs.
F-39
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
In 2011, 2012 and 2013, we recorded unrealized gains (losses) of $16.2 million, $(24.0) million and $4.7
million, respectively, on marketable securities, which are included in other comprehensive income.
Level 3 measurements:
For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2012 and 2013, a reconciliation of the beginning
and ending balances are presented as follows:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Marketable Securities - Debt
and Equity Securities
|
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
5,454
|
|
|
$
|
4,292
|
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
included in earnings
|
|
|
(493
|
)
|
|
|
985
|
|
included in other comprehensive income
|
|
|
|
|
|
|
1,212
|
|
Sale
|
|
|
(2,727
|
)
|
|
|
(2,550
|
)
|
Transfer into Level 3
|
|
|
2,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
4,292
|
|
|
$
|
3,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
$
|
(493
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
F-40
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Realized and unrealized gains (or losses) included in income for 2012 and 2013 for assets and liabilities
measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in the consolidated statements of operations within the following line items:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Gain on sales
of marketable
securities
|
|
|
Impairment
loss on
marketable
securities and
investments
|
|
|
Recovery of
loss on
termination of
third-party
contract
|
|
Total gains (losses) included in earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
for 2011
|
|
$
|
|
|
|
$
|
|
|
|
$
|
665
|
|
for 2012
|
|
|
3,370
|
|
|
|
(493
|
)
|
|
|
|
|
for 2013
|
|
|
985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) relating to assets still held at the reporting date
|
|
|
|
|
|
|
|
|
|
|
|
|
for 2011
|
|
$
|
(674
|
)
|
|
$
|
|
|
|
$
|
|
|
for 2012
|
|
|
352
|
|
|
|
(493
|
)
|
|
|
|
|
for 2013
|
|
|
1,212
|
|
|
|
|
|
|
|
|
|
The marketable equity securities were transferred from Level 2 to Level 3 in 2012 to reflect the fact of dwindled market
transaction volume of the investees shares, and the auditors report on its interim financial statements including an explanatory paragraph about uncertainties regarding the investees ability to continue as a going-concern.
The fair values of the marketable debt and equity securities are derived using a discounted cash flow method with unobservable inputs or adopting a market
approach using observable inputs of guideline public companies that market participants would use in pricing the securities. The discounted cash flow method incorporates adjusted available market discount rate information and our Companys
estimates of liquidity risk, and other cash flow model related assumptions.
In 2011, 2012 and 2013, we recognized other-than-temporary impairments of $0,
$493 thousand and $0, respectively, related to marketable debt and equity securities, which is included in non-operating expenses within impairment loss on marketable securities and investments in the consolidated statements of
operations.
F-41
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities measured at fair value on a nonrecurring basis include measuring impairment when required for long-lived assets. For GigaMedia,
long-lived assets measured at fair value on a nonrecurring basis include investments accounted for under the equity method and cost method, property, plant, and equipment, intangible assets, prepaid licensing and royalty fees, and goodwill.
Assets and liabilities measured at fair value on a nonrecurring basis that were determined to be impaired as of December 31, 2012 and 2013 are summarized
as below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Fair Value measurement Using
|
|
|
|
|
|
Total
Impairment
Losses
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Year Ended
December 31,
2012
|
|
|
(a) Goodwill - Resulting from acquisition of FunTown
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,934
|
|
|
$
|
16,934
|
|
|
$
|
12,489
|
|
(b) Intangible assets - Capitalized software cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
(c) Prepaid licensing and royalty fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
702
|
|
(d) Investments - Cost-method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,934
|
|
|
$
|
16,934
|
|
|
$
|
13,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Fair Value measurement Using
|
|
|
|
|
|
Total
Impairment
Losses
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Year Ended
December 31,
2013
|
|
|
(a) Goodwill - Resulting from acquisition of FunTown and FingerRockz
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,054
|
|
(b) Intangible assets - Trade name and Capitalized software cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,251
|
|
(c) Prepaid licensing and royalty fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
33,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(a) Impairment losses on goodwill which was determined to be impaired:
The fair value of the Asian online game reporting unit was determined based on the present value of estimated future net cash flows discounted at the weighted
average cost of capital. In the 2012 goodwill impairment assessment, we estimated future net cash flow using managements internally developed estimates and included a terminal value calculated using a long-term future growth rate of 0% based
on analysis of the current and expected future economic conditions. Other significant estimates and assumptions used in developing the future net cash flows included an assumed average revenue decline of 7% and a weighted average cost of capital to
discount these expected future cash flows of 17%. As a result, the carrying value of this reporting unit exceeded its fair value, and the implied fair value of the goodwill was determined to be $16.9 million. Consequently, a goodwill impairment
charge of $12.5 million was recognized in 2012.
In 2013, due to a continued slowdown in demand for our casual online games and the unexpected loss of a
key licensed game, we experienced a significant decline in revenues and a negative operating margin in Taiwan from our previous future cash flow expectations from this reporting unit. Further, in the Fall of 2013 we went through an internal
restructuring of our operations and made a business decision to transition from PC-based games to browser/mobile games and social casino games. Also our market capitalization had also fallen below our net book value based on the quoted market price
of our common stock for a sustained period of time. Based on these qualitative factors, we determined it was more likely than not the revised fair value of this reporting unit may be less than its carrying value, and the related recovery of the
remaining goodwill could be impaired. Using the same methodology as in the past to determine the estimated fair value of this reporting unit, we developed our expected future net cash flows based on historical data and internally developed estimates
as part of our updated long-term strategic plan and included a terminal value of $0. Other significant estimates and assumptions used in developing the future net cash flows included an assumed average revenue decline of 28% and a weighted average
cost of capital to discount these expected future cash flows of 13%. As a result, the carrying value of this reporting unit exceeded its fair value, and the implied fair value of the goodwill was determined to be $0. Consequently, a goodwill
impairment charge of $17.1 million was recognized in 2013.
F-43
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(b) Impairment losses on certain intangible assets which were determined to be impaired:
In 2012 and 2013, the trade name arising from the acquisition of FunTown and certain capitalized software development costs were fully written down, resulting
in impairment charges of $15 thousand and $13.3 million, respectively, included in operating expenses within impairment loss on intangible assets in the consolidated statements of operations. The impairment charge for the Trade name of
FunTown is a result of our repositioning of it as described above, while the impairment charges for the capitalized software costs were the result of certain projects within our Asian online game and service business that we ceased further
development on, and as a result, we recorded a full impairment of the carrying value of the assets related to these projects.
(c) Impairment losses on
certain prepaid licensing and royalty fees which were determined to be impaired:
In 2012 and 2013, certain prepaid licensing and royalty fees were fully
written down, resulting in impairment charges of $702 thousand and $2.8 million, respectively. This impairment is included in operating expenses in the consolidated statements of operations. The impairment charges for the prepaid licensing and
royalty fees related to certain licensed games within our Asian online game and service business that we stopped operating or for which the carrying amounts of the related assets were determined not to be recoverable from their expected future
undiscounted cash flows. The licensing fee games and related royalties are re-valued on when impairment exists, using unobservable inputs such as discounted cash flows, incorporating adjusted available market discount rate information and our
Companys estimates for liquidity risk, along with other cash flow model related assumptions.
(d) Impairment losses on certain cost method
investments which were determined to be impaired:
In 2012, certain cost method investments were fully written down, resulting in an impairment charge of
$700 thousand. The impairment charges are included in non-operating expenses within impairment loss on marketable securities and investments in the consolidated statements of operations.
Cost method and equity method investments are measured at fair value on a nonrecurring basis when declines in fair value are determined to be
other-than-temporary, using other observable inputs such as trading prices of similar classes of the stock or using discounted cash flows, incorporating adjusted available market discount rate information and our Companys estimates for
liquidity risk.
F-44
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 10.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Cash and savings accounts
|
|
$
|
61,217
|
|
|
$
|
44,163
|
|
Time deposits
|
|
|
1,514
|
|
|
|
14,638
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62,731
|
|
|
$
|
58,801
|
|
|
|
|
|
|
|
|
|
|
We maintain cash and cash equivalents in bank accounts with major financial institutions with high credit ratings located in
the following jurisdictions:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Taiwan
|
|
$
|
59,195
|
|
|
$
|
55,661
|
|
Hong Kong
|
|
|
2,809
|
|
|
|
2,956
|
|
Malaysia
|
|
|
100
|
|
|
|
133
|
|
PRC
|
|
|
626
|
|
|
|
|
|
Others
|
|
|
1
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62,731
|
|
|
$
|
58,801
|
|
|
|
|
|
|
|
|
|
|
F-45
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 11.
MARKETABLE SECURITIES CURRENT
Marketable securities current consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
17,773
|
|
|
$
|
21,124
|
|
Open-end fund
|
|
|
|
|
|
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,773
|
|
|
$
|
21,460
|
|
|
|
|
|
|
|
|
|
|
All of our Companys marketable securities current are classified as available-for-sale. As of December 31,
2012 and 2013, the balances of unrealized gains for marketable securities - current were $14.4 million and $17.9 million, respectively. During 2011, 2012 and 2013, realized gains from the disposal of marketable securities - current amounted to $535
thousand, $2.3 million, and $754 thousand, respectively. The costs for calculating gains on disposal were based on each securitys average cost.
NOTE 12.
ACCOUNTS RECEIVABLE NET
Accounts
receivable consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Accounts receivable
|
|
$
|
2,959
|
|
|
$
|
2,082
|
|
Less: Allowance for doubtful accounts
|
|
|
(130
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,829
|
|
|
$
|
2,027
|
|
|
|
|
|
|
|
|
|
|
F-46
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The following is a summary of the changes in our Companys allowance for doubtful accounts during the
years ended December 31, 2011, 2012 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
842
|
|
|
$
|
2,594
|
|
|
$
|
130
|
|
Additions: Provision for bad debt expense
|
|
|
1,820
|
|
|
|
169
|
|
|
|
37
|
|
Less: Write-offs
|
|
|
(61
|
)
|
|
|
(269
|
)
|
|
|
(109
|
)
|
Deconsolidation - IAHGames
|
|
|
|
|
|
|
(2,370
|
)
|
|
|
|
|
Translation adjustment
|
|
|
(7
|
)
|
|
|
6
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
2,594
|
|
|
$
|
130
|
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 13.
OTHER CURRENT ASSETS
Other current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Loans receivable - current
|
|
$
|
3,437
|
|
|
$
|
3,394
|
|
Less: Allowance for loans receivable - current
|
|
|
(3,437
|
)
|
|
|
(3,394
|
)
|
Deferred income tax assets - current, net (Note 25)
|
|
|
840
|
|
|
|
|
|
Other
|
|
|
161
|
|
|
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,001
|
|
|
$
|
293
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of changes in our Companys allowance for loans receivable - current during the years
ended December 31, 2011, 2012 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
5,057
|
|
|
$
|
5,057
|
|
|
$
|
3,437
|
|
Additions: Provision for bad debt expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Writes-offs
|
|
|
|
|
|
|
(1,620
|
)
|
|
|
|
|
Less: Reversal for collection of bad debt
|
|
|
|
|
|
|
|
|
|
|
(54
|
)
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
5,057
|
|
|
$
|
3,437
|
|
|
$
|
3,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 14.
MARKETABLE SECURITIES NONCURRENT
Marketable securities noncurrent consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
Debt securities
|
|
$
|
2,727
|
|
|
$
|
6,048
|
|
Equity securities
|
|
|
1,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,292
|
|
|
$
|
6,048
|
|
|
|
|
|
|
|
|
|
|
Our Companys marketable securities - noncurrent are invested in convertible preferred shares, corporate bonds and
publicly-traded common shares and are classified as available-for-sale securities.
The preferred shares are convertible into common shares on 1:1 basis,
subject to certain adjustments, and shall be automatically converted upon certain conditions outlined in the agreements. The convertible preferred shares are all redeemable based upon certain agreed-upon conditions.
The embedded conversion options of the convertible preferred shares do not meet the definition of derivative instruments and therefore are not bifurcated from
the preferred share investment.
We have also considered and determined whether our investments in preferred shares are in-substance common shares which
should be accounted for under the equity method. Given that our convertible preferred shares have substantive redemption rights and thus do not meet the criteria of in-substance common shares, we have accounted for them as debt securities.
As of December 31, 2012 and 2013, the balances of unrealized gains for marketable securities - noncurrent were $0 and $1.2 million, respectively. During
2011, 2012 and 2013, realized gains from the disposal of marketable securities non-current amounted to $5.8 million, $3.4 million and $985 thousand, respectively. Gains on disposal were based on the securitys average cost.
F-48
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 15.
INVESTMENTS
Investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Investments accounted for under the equity method
|
|
$
|
5,223
|
|
|
$
|
5,822
|
|
|
|
|
|
|
|
|
|
|
Our Companys investments accounted for under the equity method primarily consist of the following: (a) through
July 31, 2012, a 40 percent equity interest investment, later diluted to 33.66 percent interest in Mangas Everest S.A.S. (Mangas Everest), which is engaged in the gaming software and service business (See Note 5
Divestitures for additional information); (b) through August 15, 2012, a 30 percent equity interest investment in Game First International Corporation (GFI), an operator and distributor of online games in Taiwan
(See Note 5 Divestitures, for additional information); (c) through August 31, 2011, a 100 percent equity interest investment in Monsoon Online Pte Ltd. (Monsoon), an operator and distributor of online games in
Southeast Asia (See Note 4 Acquisitions for additional information); (d) from July 2012 to May 2013, a 20 percent equity interest investment in Infocomm Asia Holdings Pte Ltd. (IAHGames), an online game operator,
publisher and distributor in Southeast Asia (See Note 5 Divestitures, for additional information); and (e) an 18 percent equity interest investment in East Gate Media Contents & Technology Fund (East Gate), a
Korean Fund Limited Partnership that invests in online game businesses and films. The investments in these companies amounted to $5.2 million and $5.8 million as of December 31, 2012 and 2013, respectively.
As of December 31, 2011, our share of the underlying net assets of Mangas Everest exceeded the carrying value of our investment by $9.3 million. The
excess results from the difference between the fair value we assigned to the 40 percent retained interest in Mangas Everest at the date the business was deconsolidated, compared to 40 percent of the total fair value of Mangas Everest as determined
by BEG, the purchaser of the 60 percent interest.
F-49
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
In 2011 and 2012 (through July 31, 2012 when we sold the remaining 33.66 percent interest to BEG), we
recognized our share of losses in Mangas Everest under the equity method of accounting which totaled $49.7 million, and $0, respectively, which resulted in a negative investment balance as of July 31, 2012. We charged this negative investment
balance against the loan receivable that Mangas Everest had outstanding to us as of July 31, 2012. (See Note 26, Related Party Transactions, for additional information.)
We, through IAHGames, made an equity investment in Monsoon in connection with our acquisition of a controlling financial interest in IAHGames. Although
IAHGames owned 100 percent of the common stock of Monsoon, prior to September 2011 we determined that Monsoon could not be consolidated by IAHGames due to the substantive participating rights that the game licensor had in Monsoon pursuant to
Monsoons management agreement. In 2011 (through August 31, 2011), we recognized our share of gains under the equity method of accounting which totaled $230 thousand. (See Note 26, Related Party Transactions, for additional
information.)
In September 2011, IAHGames, Monsoon and the game licensor entered a transition agreement to early terminate the previous agreement in
which the abovementioned substantive participating rights were granted, effective August 31, 2011, and thus restored IAHGames full control in Monsoon. Therefore, starting September 1, 2011, we had consolidated Monsoon until July 2012
when we deconsolidated IAHGames. (See Note 4, Acquisition, for additional information.)
In July 2012, we entered into agreements to sell a 60
percent ownership in IAHGames to IAHGames management and Management Capital International Limited (MCIL), a British Virgin Islands company owned by IAHGames management. As we only retained a 20 percent ownership in IAHGames,
upon the closing of the agreements, we deconsolidated the results of IAHGames operations and began accounting for our remaining 20 percent interest under the equity method up to May 2013 when we sold the remaining interest in IAHGames to
IAHGames management and MCIL. (See Note 5, Divestitures for additional information.)
F-50
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Our Company has an 18 percent interest in East Gate, a Korean Limited Partnership. We account for this
limited partnership investment under the equity method accounting since we have the ability to exercise significant influence over partnership operating and financial policies based on the terms of the partnership agreement.
NOTE 16.
SHORT-TERM BORROWINGS
As of December 31, 2012 and 2013, unsecured short-term borrowings totaled $7.7 million and $4.4 million, respectively. These amounts
were borrowed from certain financial institutions. The annual interest rates on these borrowings was 1.42 percent for 2012, and ranged from 1.50 percent to 1.60 percent for 2013. The maturity dates fell in mid-January 2013 as of December 31,
2012 and in late January 2014 as of December 31, 2013. As of December 31, 2012 and 2013, the weighted-average interest rate on total short-term borrowings was 1.42 percent and 1.52 percent, respectively.
As of December 31, 2012 and 2013, the total amount of unused lines of credit available for borrowing under these agreements was approximately $6.9
million and $9.9 million, respectively.
During the period from January 2014 to March 2014, we repaid certain short-term borrowings totaling $11.9
million, and renewed short-term borrowing agreements totaling $11.9 million.
F-51
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 17.
ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Accrued professional fees
|
|
$
|
1,319
|
|
|
$
|
740
|
|
Accrued royalties
|
|
|
967
|
|
|
|
128
|
|
Accrued advertising expenses
|
|
|
696
|
|
|
|
421
|
|
Accrued incentive to distributors
|
|
|
172
|
|
|
|
137
|
|
Accrued director compensation and liability insurance
|
|
|
513
|
|
|
|
424
|
|
Other
|
|
|
1,515
|
|
|
|
767
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,182
|
|
|
$
|
2,617
|
|
|
|
|
|
|
|
|
|
|
NOTE 18.
OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Income taxes payable
|
|
$
|
1,381
|
|
|
$
|
1,560
|
|
Deferred tax liabilities (Note 25)
|
|
|
2,207
|
|
|
|
1,987
|
|
Other
|
|
|
398
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,986
|
|
|
$
|
3,862
|
|
|
|
|
|
|
|
|
|
|
F-52
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 19.
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 months 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 a December 31
measurement date for our defined benefit pension plan. As of December 31, 2012 and 2013, the accumulated benefit obligation amounted to $429 thousand and $360 thousand, respectively, and the funded status of accrued pension liability amounted
to $281 thousand and $170 thousand, respectively. The fair value of plan assets amounted to $291 thousand and $300 thousand as of December 31, 2012 and 2013, respectively. The accumulated other comprehensive income amounted to $2 thousand and
$0 as of December 31, 2012 and 2013, respectively. The net periodic benefit cost (income) for 2011, 2012 and 2013 amounted to $(18) thousand, $30 thousand and ($77) thousand, respectively.
F-53
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The following table sets forth the plans benefit obligations, fair value of plan assets, and funded
status at December 31, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Benefit Obligation
|
|
$
|
572
|
|
|
$
|
470
|
|
Fair value of plan assets
|
|
|
291
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
281
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the balance sheet consist of:
|
|
|
|
|
|
|
|
|
Noncurrent liabilities
|
|
$
|
281
|
|
|
$
|
170
|
|
Accumulated other comprehensive income
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
279
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated comprehensive income consist of:
|
|
|
|
|
|
|
|
|
Unrecognized net gain
|
|
$
|
2
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions used to determine benefit obligations for 2013 and 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2012
|
|
|
2013
|
|
Discount rate
|
|
|
1.75
|
%
|
|
|
2.00
|
%
|
Rate of compensation increase
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
Rate of return on plan assets
|
|
|
1.75
|
%
|
|
|
2.00
|
%
|
Management determines the discount rate and rate of return on plan assets based on the yields of twenty 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 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 Committees 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.
F-54
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
We expect to make a contribution of $17 thousand to the Fund in 2014. We do not expect to make any benefit
payments through 2020.
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 percent of an employees monthly salary and wage and up to the maximum amount of NT$9 thousand (approximately $302), 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 percent of the employees total salaries. For this purpose, the monthly relevant contribution to their individual
contribution accounts is subject to a cap of HK$1.25 thousand (approximately $161). 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, 2011, 2012, and
2013 were $896 thousand, $585 thousand, and $357 thousand, respectively.
F-55
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 20.
OTHER LIABILITIES - OTHER
Other liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2012
|
|
|
2013
|
|
Deferred tax liabilities (Note 25)
|
|
$
|
561
|
|
|
$
|
|
|
Other
|
|
|
12
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
573
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
NOTE 21.
SUBSIDIARY PREFERRED SHARES
In connection with our acquisition of a controlling financial interest in IAHGames, that subsidiary had Class A preferred shares, which
were owned by the noncontrolling shareholders. As August 15, 2012 when we deconsolidated IAHGames, these Class A preferred shares were valued at $1.3 million, and represented 8.9 percent of IAHGames accumulated voting interest. The
holder of the Class A preferred shares was entitled to cumulative dividends at 10 percent per annum. The preferred shares were redeemable at the holders option at any time after the expiration of certain licensed games, and were
convertible into ordinary shares at any time. Pursuant to agreements entered into in connection with our acquisition of IAHGames in July 2010, all Class A preferred shares were to be converted to ordinary shares of IAHGames at the acquisition
date. The preferred shares were fully converted into ordinary shares by the closing date when we sold 60 percent of IAHGames. (See Note 5, Divestitures, for additional information.)
Since the Class A preferred shares were never currently redeemable and it was not probable that they would become redeemable as a result of our
acquisition of IAHGames, the subsequent adjustment for accretion was not required. However, the cumulative dividends and the reversal of dividends upon the conversion described above for these Class A preferred shares of $321 thousand and
$(469) thousand for the years ended December 31, 2011 and the period from January 1, 2012 to July 31, 2012, respectively, are included as a component of net income (loss) attributable to the noncontrolling interest in the
consolidated statement of operations.
F-56
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 22.
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 companys residual assets. In addition, we are not required to have a number of authorized common shares
to be issued.
In accordance with R.O.C. law, an appropriation for legal reserve amounting to 10 percent of a companys net profit is required until
the reserve equals the aggregate par value of such Taiwan companys issued capital stock. As of December 31, 2012 and 2013, the legal reserves of Hoshin GigaMedia Center Inc. (Hoshin GigaMedia) were $3.0 million for each
period. The reserve can only be used to offset a deficit or be distributed as a stock dividend of up to 50 percent of the reserve balance when the reserve balance has reached 50 percent of the aggregate paid-in capital of Hoshin GigaMedia.
Under PRC laws and regulations, there were certain foreign exchange restrictions on our Companys PRC subsidiaries and VIE subsidiaries with respect to
transferring certain of their net assets to our Company either in the form of dividends, loans or advances. As of December 31, 2012 and 2013, our Companys total restricted net assets, which included paid up capital of PRC subsidiaries and
the net assets of VIE subsidiaries in which our Company had no legal ownership, were approximately $1.5 million and $0, respectively.
F-57
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
On May 20, 2011, our board of directors approved an $11 million share repurchase program of
GigaMedias common stock. Under the terms of the share repurchase program, GigaMedia could repurchase up to $11 million worth of its issued and outstanding shares during the period starting from June 1, 2011 to November 30, 2011. The
repurchases could be made from time to time on the open market at prevailing market prices pursuant to a Rule 10b5-1 plan, subject to restrictions relating to volume, pricing and timing. The timing and extent of any repurchases depended upon market
conditions, the trading price of GigaMedias shares and other factors. This share repurchase program was implemented in a manner consistent with market conditions, in the interests of our shareholders, and in compliance with GigaMedias
securities trading policy and relevant Singapore and U.S. laws and regulations. During 2011, repurchases under this program amounted to approximately 5.6 million shares at a cost of $6.0 million. All of the treasury shares under this program
were cancelled by the end of 2011.
NOTE 23.
COMPREHENSIVE INCOME
The accumulated balances for each classification of other comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Foreign
currency items
|
|
|
Unrealized
gain on
securities
|
|
|
Pension and
post retirement
benefit plans
|
|
|
Accumulated
other
comprehensive
income
|
|
Balance at January 1, 2011
|
|
$
|
(22,554
|
)
|
|
$
|
22,243
|
|
|
$
|
239
|
|
|
$
|
(72
|
)
|
Net current period change
|
|
|
(1,813
|
)
|
|
|
22,466
|
|
|
|
69
|
|
|
|
20,722
|
|
Reclassification adjustments for gains reclassified into income
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
(6,299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
|
(24,367
|
)
|
|
|
38,410
|
|
|
|
308
|
|
|
|
14,351
|
|
Net current period change
|
|
|
1,814
|
|
|
|
(18,339
|
)
|
|
|
(323
|
)
|
|
|
(16,848
|
)
|
Reclassification adjustments for gains reclassified into income
|
|
|
|
|
|
|
(5,665
|
)
|
|
|
|
|
|
|
(5,665
|
)
|
Deconsolidation of subsidiaries
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012
|
|
|
(22,770
|
)
|
|
|
14,406
|
|
|
|
(15
|
)
|
|
|
(8,379
|
)
|
Net current period change
|
|
|
(801
|
)
|
|
|
6,437
|
|
|
|
15
|
|
|
|
5,651
|
|
Reclassification adjustments for gains reclassified into income
|
|
|
864
|
|
|
|
(1,739
|
)
|
|
|
|
|
|
|
(875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
$
|
(22,707
|
)
|
|
$
|
19,104
|
|
|
$
|
|
|
|
$
|
(3,603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
There were no significant tax effects allocated to each component of other comprehensive income for the years
ended December 31, 2011, 2012 and 2013.
F-59
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 24.
SHARE-BASED COMPENSATION
The following table summarizes the total stock-based compensation expense recognized in our consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Cost of online game and service revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Product development & engineering expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
62
|
|
|
|
20
|
|
|
|
|
|
General and administrative expenses
|
|
|
1,103
|
|
|
|
159
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax stock-based compensation expense
|
|
|
1,165
|
|
|
|
179
|
|
|
|
219
|
|
Income tax (benefit) expense
|
|
|
(109
|
)
|
|
|
(41
|
)
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense reported in continuing operations
|
|
$
|
1,056
|
|
|
$
|
138
|
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense reported in discontinued operations, net of tax
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no significant capitalized stock-based compensation costs at December 31, 2012 and 2013. There was no
recognized stock-based compensation tax benefit for the years ended December 31, 2013 and 2012, as our Company recorded a full allowance on net deferred tax assets as of December 31, 2013 and 2012.
(a) Overview of Stock-Based Compensation Plans
2002 Employee Share Option Plan
At the June 2002
annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2002 Employee Share Option Plan (the 2002 Plan) under which up to three 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 2002 Plan. The 2002 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 2002 Plan is 10 years.
F-60
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
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 seven 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.
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 one million 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.
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 two million common 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.
F-61
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
2008 Equity Incentive Plan
At the June 2008 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2008 Equity Incentive Plan (the
2008 Plan) under which up to one million common shares of our Company have been reserved for issuance. The 2008 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 2008 Plan. The maximum contractual term for the options under the 2008 Plan is 10 years.
2008
Employee Share Purchase Plan
At the June 2008 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia
Limited 2008 Employee Share Purchase Plan (the 2008 ESPP) under which up to two hundred thousand common shares of our Company were reserved for issuance. Any person who is regularly employed by our Company or our designated subsidiaries
shall be eligible to participate in the 2008 ESPP. Pursuant to the 2008 ESPP, our Company would offer the shares to qualified employees on favorable terms. Employees are also subject to certain restrictions on the amount that may be invested to
purchase the shares and to other terms and conditions of the 2008 ESPP. The 2008 ESPP is administered by a committee designated by the board of directors. As of December 31, 2013, no shares have been subscribed by qualified employees under the
2008 ESPP.
2009 Equity Incentive Plan
At the
June 2009 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2009 Equity Incentive Plan (the 2009 Plan) under which up to one and a half million common shares of our Company have been
reserved for issuance. The 2009 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 2009 Plan. The maximum contractual term
for the options under the 2009 Plan is 10 years.
2009 Employee Share Purchase Plan
At the June 2009 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2009 Employee Share Purchase Plan (the
2009 ESPP) under which up to two hundred thousand common shares of our Company have been reserved for issuance. To be eligible, employees must be regularly employed by us or our designated subsidiaries. Employees are also subject to
certain restrictions on the amount that may be invested to purchase the shares and to other terms and conditions of the 2009 ESPP. The 2009 ESPP is administered by a committee designated by the board of directors. As of December 31, 2013, no
shares have been issued to employees under the 2009 ESPP.
F-62
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
2010 Equity Incentive Plan
At the June 2010 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2010 Equity Incentive Plan (the
2010 Plan) under which up to one million common shares of our Company have been reserved for issuance. The 2010 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 2010 Plan. The maximum contractual term for the options under the 2010 Plan is 10 years.
2010
Employee Share Purchase Plan
At the June 2010 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia
Limited 2010 Employee Share Purchase Plan (the 2010 ESPP) under which up to two hundred thousand common shares of our Company have been reserved for issuance. To be eligible, employees must be regularly employed by us or our designated
subsidiaries. Employees are also subject to certain restrictions on the amount that may be invested to purchase the shares and to other terms and conditions of the 2010 ESPP. The 2010 ESPP is administered by a committee designated by the board of
directors. As of December 31, 2013, no shares have been issued to employees under the 2010 ESPP.
F-63
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Summarized below are the general terms of our stock-based compensation plans, for which awards have been
granted as of December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
Stock-Based compensation plan
|
|
Granted awards
|
|
|
Vesting schedule
|
|
Options exercise
price
|
|
RSUs grant date
fair value
|
2002 Plan
|
|
|
3,000,000
|
|
|
immediately upon granting
|
|
$0.79
|
|
|
2004 Plan
|
|
|
7,703,185
|
(1)
|
|
immediately upon granting to four years
|
|
$0.79~$2.55
|
|
|
2006 Plan
|
|
|
1,217,333
|
(2)
|
|
immediately upon granting to four years
|
|
$0.8101~$16.60
|
|
$2.91~$16.01
|
2007 Plan
|
|
|
3,205,217
|
(3)
|
|
immediately upon granting to four years
|
|
$1.20~$18.17
|
|
$2.47~$15.35
|
2008 Plan
|
|
|
1,000,000
|
|
|
immediately upon granting to six years
|
|
$2.47~$4.24
|
|
|
2009 Plan
|
|
|
2,500,000
|
(4)
|
|
immediately upon granting to four years
|
|
$0.955~$2.47
|
|
|
2010 Plan
|
|
|
2,200,000
|
(5)
|
|
three years
|
|
$0.8101~$1.14
|
|
|
(1)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of seven million common shares.
|
(2)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of one million common shares.
|
(3)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of two million common shares.
|
(4)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of one and a half million common shares.
|
(5)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of one million common shares.
|
Options and Restricted Stock Units (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.
F-64
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(b) Options
In 2011, 2012 and 2013, 0, 0 and 3,000 options were exercised, and cash received from the exercise of stock options was $0, $0 and $2 thousand, respectively,
which resulted in no significant tax benefit realized on a consolidated basis.
Our Company uses the Black-Scholes option-pricing model to estimate the
fair value of stock options granted to employees. The following table summarizes the assumptions used in the model for options granted during 2012 and 2013:
|
|
|
|
|
|
|
2012
|
|
2013
|
Option term (years)
|
|
5.73
|
|
5.8
|
Volatility
|
|
59.76%~67.02%
|
|
59.46%~61.84%
|
Weighted-average volatility
|
|
62%
|
|
61%
|
Risk-free interest rate
|
|
0.885%~1.152%
|
|
0.930%~1.610%
|
Dividend yield
|
|
0%
|
|
0%
|
Weighted-average fair value of option granted
|
|
$0.54
|
|
$0.60
|
Option term. The expected term of the options granted represents the period of time that they are expected to be outstanding.
Our Company estimates the expected term of options granted based on historical experience with grants and option exercises.
Expected volatility rate. An
analysis of historical volatility was used to develop the estimate of expected volatility.
Risk-free interest rate. The risk-free interest rate is based
on yields of U.S. Treasury bonds for the expected term of the options.
Expected dividend yield. The dividend yield is based on our Companys current
dividend yield.
F-65
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Option transactions during the last three years are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
|
Weighted
Avg.
Exercise
Price
|
|
|
No.of
Shares
(in
thousands)
|
|
|
Weighted
Avg.
Exercise
Price
|
|
|
No.of
Shares
(in
thousands)
|
|
|
Weighted
Avg.
Exercise
Price
|
|
|
No.of
Shares
(in
thousands)
|
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
(in
thousands)
|
|
Balance at January 31
|
|
$
|
2.33
|
|
|
|
9,780
|
|
|
$
|
2.13
|
|
|
|
9,493
|
|
|
$
|
1.97
|
|
|
|
9,210
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1.06
|
|
|
|
1,060
|
|
|
|
0.96
|
|
|
|
2,070
|
|
|
|
1.09
|
|
|
|
620
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.79
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Options Forfeited / canceled / expired
|
|
|
2.72
|
|
|
|
(1,347
|
)
|
|
|
1.74
|
|
|
|
(2,353
|
)
|
|
|
1.28
|
|
|
|
(604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
2.13
|
|
|
|
9,493
|
|
|
$
|
1.97
|
|
|
|
9,210
|
|
|
$
|
1.95
|
|
|
|
9,223
|
|
|
|
3.00
|
|
|
$
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
$
|
2.19
|
|
|
|
7,754
|
|
|
$
|
2.15
|
|
|
|
7,584
|
|
|
$
|
2.13
|
|
|
|
7,770
|
|
|
|
1.87
|
|
|
$
|
1,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31
|
|
$
|
2.13
|
|
|
|
9,493
|
|
|
$
|
1.97
|
|
|
|
9,210
|
|
|
$
|
1.95
|
|
|
|
9,223
|
|
|
|
3.00
|
|
|
$
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between
GigaMedias closing stock price on the last trading day of 2013 and the fair value of the exercise price, 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, 2013. This amount changes based on the fair market value of GigaMedias stock. The total intrinsic value of options exercised for the years ended December 31, 2011, 2012, and 2013 were $0, $0, and $600 thousand,
respectively.
As of December 31, 2013, there was approximately $348 thousand of unrecognized compensation cost related to nonvested options. That
cost is expected to be recognized over a period of 2.16 years.
F-66
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The following table sets forth information about stock options outstanding at December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $1
|
|
|
6,188
|
|
|
1.88 years
|
|
Under $1
|
|
|
5,175
|
|
$ 1~$10
|
|
|
2,419
|
|
|
5.72 years
|
|
$ 1~$10
|
|
|
1,979
|
|
$10~$20
|
|
|
616
|
|
|
3.65 years
|
|
$10~$20
|
|
|
616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,223
|
|
|
|
|
|
|
|
7,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) RSUs
The fair
value of RSUs is determined and fixed on the grant date based on our stock price. The fair value of RSUs granted during the years ended December 31, 2011, 2012 and 2013 was $1.0 million, $0 and $0, respectively. The total fair value of RSUs
vested during the years ended December 31, 2011, 2012 and 2013 was $0.2 million, $0 and $0, respectively, which resulted in no significant tax benefit realized on a consolidated basis.
As of December 31 2012 and 2013, there was no unrecognized compensation cost related to nonvested RSUs. Our Company received no cash from employees as a
result of employee stock award vesting and the forfeiture of RSUs during 2011, 2012 and 2013.
F-67
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 25.
INCOME TAXES
Loss from continuing operations before income taxes by geographic location is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands )
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Taiwan operations
|
|
$
|
(770
|
)
|
|
$
|
(14,871
|
)
|
|
$
|
(33,077
|
)
|
Non-Taiwan operations
|
|
|
(66,865
|
)
|
|
|
1,946
|
|
|
|
(1,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(67,635
|
)
|
|
$
|
(12,925
|
)
|
|
$
|
(34,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit) from continuing operations by geographic location is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands )
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Taiwan operations
|
|
$
|
33
|
|
|
$
|
456
|
|
|
$
|
248
|
|
Non-Taiwan operations
|
|
|
(278
|
)
|
|
|
215
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(245
|
)
|
|
$
|
671
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our ultimate parent company is based in Singapore. It reported no pretax income or loss.
The components of income tax provision (benefit) from continuing operations by taxing jurisdiction are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
( in US$ thousands )
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Taiwan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
|
|
|
$
|
410
|
|
|
$
|
(131
|
)
|
Deferred
|
|
|
33
|
|
|
|
46
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33
|
|
|
$
|
456
|
|
|
$
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Taiwan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(539
|
)
|
|
$
|
215
|
|
|
$
|
(187
|
)
|
Deferred
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(278
|
)
|
|
$
|
215
|
|
|
$
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax expense (benefit)
|
|
$
|
(539
|
)
|
|
$
|
625
|
|
|
$
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax expense (benefit)
|
|
$
|
294
|
|
|
$
|
46
|
|
|
$
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
$
|
(245
|
)
|
|
$
|
671
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-68
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
A reconciliation of our effective tax rate related to continuing operations to the statutory tax rate in
Taiwan, where our major operations are based, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Taiwan statutory rate, including taxes on income and retained earnings
|
|
|
23.85
|
%
|
|
|
23.85
|
%
|
|
|
23.85
|
%
|
Foreign tax differential
|
|
|
1.02
|
%
|
|
|
(0.17
|
%)
|
|
|
(3.71
|
%)
|
Non-deductible items - impairment charges on goodwill
|
|
|
(1.82
|
%)
|
|
|
(16.43
|
%)
|
|
|
(10.39
|
%)
|
Changes in unrecognized tax benefits
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
(4.12
|
%)
|
Tax-exempted income in foreign jurisdictions
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
3.12
|
%
|
Adjustment for prior year payable
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.55
|
%
|
Change in valuation allowance
|
|
|
(21.70
|
%)
|
|
|
(4.00
|
%)
|
|
|
(10.17
|
%)
|
Tax effect of earnings for equity method investees and certain subsidiaries
|
|
|
(0.02
|
%)
|
|
|
(4.38
|
%)
|
|
|
0.00
|
%
|
Other
|
|
|
(0.99
|
%)
|
|
|
(4.06
|
%)
|
|
|
0.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective rate
|
|
|
0.34
|
%
|
|
|
(5.19
|
%)
|
|
|
(0.18
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision (benefit) for income taxes attributable to discontinued operations was $0 for each of the years ended
December 31, 2011, 2012 and 2013, respectively.
Significant components of our deferred tax assets consist of the following:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
December 31
|
|
|
|
2012
|
|
|
2013
|
|
Net operating loss carryforwards
|
|
$
|
3,248
|
|
|
$
|
4,072
|
|
Loss on equity method investment
|
|
|
15,621
|
|
|
|
|
|
Share-based compensation
|
|
|
234
|
|
|
|
267
|
|
Intangible assets
|
|
|
354
|
|
|
|
738
|
|
Property, plant and equipment
|
|
|
100
|
|
|
|
86
|
|
Other
|
|
|
(275
|
)
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,282
|
|
|
|
5,272
|
|
Less: valuation allowance
|
|
|
(18,333
|
)
|
|
|
(5,216
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets - net
|
|
$
|
949
|
|
|
$
|
56
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012 and 2013, $840 thousand and $0, respectively, of the net deferred tax assets were reported as
current and included in other current assets on the balance sheet.
F-69
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Significant components of our deferred tax liabilities consist of the following:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
December 31
|
|
|
|
2012
|
|
|
2013
|
|
Depreciation and amortization
|
|
$
|
255
|
|
|
$
|
|
|
Investment in affiliated companies, principally
due to undistributed income
|
|
|
2,207
|
|
|
|
1,987
|
|
|
|
|
Capitalized software development costs
|
|
|
306
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
$
|
2,768
|
|
|
$
|
2,043
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012 and 2013, $561 thousand and $0, respectively, of deferred tax liabilities were reported as
non-current deferred tax liabilities and included in other liabilities.
A reconciliation of the beginning and ending amounts of our valuation allowance
on deferred tax assets for the years ended December 31, 2011, 2012 and 2013 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
7,402
|
|
|
$
|
25,256
|
|
|
$
|
18,333
|
|
Subsequent utilization of valuation allowance
|
|
|
(270
|
)
|
|
|
(4
|
)
|
|
|
(7
|
)
|
Additions to valuation allowance
|
|
|
15,597
|
|
|
|
214
|
|
|
|
3,527
|
|
Divestitures
|
|
|
|
|
|
|
(7,026
|
)
|
|
|
(16,616
|
)
|
Acquisitions
|
|
|
2,491
|
|
|
|
|
|
|
|
|
|
Exchange differences
|
|
|
36
|
|
|
|
(107
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
25,256
|
|
|
$
|
18,333
|
|
|
$
|
5,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under ROC Income Tax Acts, the tax loss carryforward in the preceding ten years would be deducted from income tax for Taiwan
operations. The Statutory losses would be deducted from undistributed earnings tax and were not subject to expiration from Taiwan operations.
F-70
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
As of December 31, 2013, we had net operating loss carryforwards available to offset future income,
amounting to $20.1 million. Below is the breakdown of the expiration of the net operating loss carryforwards in major jurisdictions:
|
|
|
|
|
|
|
Jurisdiction
|
|
Amount
|
|
|
Expiring year
|
Hong Kong
|
|
|
9,975
|
|
|
indefinite
|
Taiwan
|
|
|
10,170
|
|
|
2020~2023
|
|
|
|
|
|
|
|
|
|
|
20,145
|
|
|
|
|
|
|
|
|
|
|
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding the effects of accrued interest) for the years 2011, 2012 and 2013
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
3,887
|
|
|
$
|
4,714
|
|
|
$
|
4,202
|
|
Increase related to prior year tax positions
|
|
|
965
|
|
|
|
573
|
|
|
|
706
|
|
Deconsolidation of IAHGames
|
|
|
|
|
|
|
(1,072
|
)
|
|
|
|
|
Exchange differences
|
|
|
(138
|
)
|
|
|
(13
|
)
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
4,714
|
|
|
$
|
4,202
|
|
|
$
|
4,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-71
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
As of December 31, 2011, 2012 and 2013, there were approximately $4.7 million, $4.2 million and $5.0
million of unrecognized tax benefits that if recognized would affect the effective tax rate. As of December 31, 2011, 2012 and 2013, $2.3 million, $2.8 million and $2.9 million of the total unrecognized tax benefit were presented as a reduction of a
deferred tax asset that, if recognized, would be offset by a valuation allowance.
There were no interest and penalties related to income tax liabilities
recognized for the years ended December 31, 2011, 2012 and 2013.
Our major tax jurisdictions are located in Taiwan. As of December 31, 2013,
the income tax filings under tax jurisdictions located in Taiwan have been examined for the years through 2008 and for 2011, but we have filed appeals for the 2008 and 2011 tax filings. Our Company also files income tax returns in the United States
federal and state jurisdictions.
In 2011, 2012 and 2013, our unrecognized tax benefits were related to amortization of goodwill and intangible assets
resulting from the acquisition of FunTown. The income tax authority has made decisions on the amortization for our 2006, 2007 and 2008 tax filings. We have filed appeals against the unfavorable parts of the decision regarding these amortization
adjustments, appending further response from the tax authority.
In 2011, our unrecognized tax benefits increased due to IAHGames. These unrecognized tax
benefits primarily related to certain related party transactions.
The amount of unrecognized tax benefits may increase or decrease in the future for
various reasons such as current year tax positions, expiration of statutes of limitations, litigation, legislative activity, or other changes in facts regarding realizability. Taiwanese entities are customarily examined by the tax authorities and it
is possible that a future examination will result in positive or negative adjustment to our unrecognized tax benefit within the next 12 months; however management does not expect that the total amount of unrecognized tax benefit will change
significantly within the next 12 months of December 31, 2013.
F-72
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 26.
RELATED-PARTY TRANSACTIONS
In 2011, to support our current operations we had short-term indebtedness from Waterland Financial Holdings (Waterland), a key
manager of which was one of our directors. The largest amounts of outstanding short-term indebtedness to Waterland during the year ended December 31, 2011 was $1.7 million. As of December 31, 2012 and 2013, we did not have any indebtedness
owed to Waterland.
We, through IAHGames, made an equity investment in Monsoon in connection with our acquisition of IAHGames with effect from
July 1, 2010. In 2010, prior to our acquisition, IAHGames loaned $5.0 million to Monsoon to support Monsoons current operations at interest of 7 percent per annum. In addition, from September to December 2010, IAHGames, then one of our
subsidiaries, loaned an additional $5.1 million to Monsoon to support its operation at an interest rate of 7 percent per annum. The largest amount outstanding to Monsoon from July 1, 2010 through August 31, 2011, after which we began to
consolidate Monsoon, was $10.3 million. As of August 31, 2011, the net book value of the loans receivable was $3.2 million, after being reduced in connection with absorbing additional losses of Monsoon as discussed in more detail in Note 15,
Investments. Upon the deconsolidation of IAHGames operations of in August 2012, the loans receivable were deconsolidated as well. (See Note 5, Divestitures, for additional information.)
During 2011, our Company entered into loan agreements in the aggregate of $5.2 million with Mangas Everest, with interest rates of 3 percent per annum. As of
December 31, 2011, the net book value of this loan receivable was nil after being reduced in connection with absorbing additional losses of Mangas Everest (as discussed in more detail in Note 15, Investments) and considering the
financial status of Mangas Everest, from which we do not expect to collect all principal and interest. We also reversed the interest recognized previously on these loans and ceased to recognize interest income going forward. Upon the closing of the
sale of our remaining ownership in the gaming software and service business in August 2012, the rights and interest in and to the loan agreements were also assigned to BEG. (See Note 5, Divestitures, for additional information.)
F-73
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 27.
COMMITMENTS AND CONTINGENCIES
Commitments
(a) Operating
Leases
We rent certain properties which are used as office premises under lease agreements that expire at various dates through 2016. The
following table sets forth our future aggregate minimum lease payments required under these operating leases, as of December 31, 2013:
|
|
|
|
|
(in US$ thousands)
|
|
Amount
|
|
2014
|
|
$
|
941
|
|
2015
|
|
|
754
|
|
2016
|
|
|
138
|
|
|
|
|
|
|
|
|
$
|
1,833
|
|
|
|
|
|
|
Rental expense for operating leases amounted to $2.5 million, $1.8 million and $1.0 million for the years ended
December 31, 2011, 2012 and 2013, respectively.
F-74
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(b) Service agreement
We entered in to certain maintenance and out-sourcing service agreement in 2013 regarding our cloud business operations. The following table sets forth our
future aggregate minimum payments required under this agreement as of December 31, 2013:
|
|
|
|
|
(in US$ thousands)
|
|
Amount
|
|
2014
|
|
$
|
214
|
|
2015
|
|
|
251
|
|
2016
|
|
|
42
|
|
|
|
|
|
|
|
|
$
|
507
|
|
|
|
|
|
|
The service fee under this agreement amounted to $111 thousand for the year ended December 31, 2013.
(c) License Agreements
We have contractual
obligations under various license agreements to pay the licensors license fees and minimum guarantees against future royalties. The following table summarizes the committed license fees and minimum guarantees against future royalties set forth in
our significant license agreements as of December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
License fees
|
|
|
Minimum
guarantees
against future
royalties
|
|
|
Total
|
|
Minimum required payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2014
|
|
$
|
100
|
|
|
$
|
100
|
|
|
$
|
200
|
|
After 2014
|
|
|
5,300
|
|
|
|
1,500
|
|
|
|
6,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,400
|
|
|
$
|
1,600
|
|
|
$
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The initial minimum guarantees against future royalties and license fees are not required to be paid until the licensed games
are commercially released or until certain milestones are achieved, as stipulated in the individual license agreements. The remaining minimum guarantees are generally required to be paid within three years subsequent to the commercial release dates
of the licensed games.
F-75
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
(d) Guaranty
In 2008, Cambridge Interactive Development Corp. (CIDC), a then wholly owned subsidiary of GigaMedia, entered into a lease agreement (the
CIDC Lease) for an office in Delaware. The term of the CIDC Lease is for the period from October 1, 2008 through September 30, 2014. Pursuant to the CIDC Lease, CIDC deposited approximately $690 thousand with a bank in exchange
for a letter of credit issued by the bank (the CIDC L/C) and GigaMedias guaranty of all of CIDCs obligations under the CIDC Lease.
In July 2012, we entered into an agreement with BEG to sell and assign our remaining ownership interest in and all rights and interests related to the
shareholders loans to Mangas Everest (including the CIDC lease) (the Mangas Agreement). Pursuant to the Mangas Agreement, BEG was to use all its reasonable efforts to procure the cancellation and return of the CIDC L/C to GigaMedia and
the landlords release of GigaMedias lease guaranty by September 30, 2012; and unless and until BEG procures the cancellation and return of the CIDC L/C and landlords release of GigaMedias lease guaranty, BEG is obligated
to indemnify and hold GigaMedia (and any Affiliate thereof) harmless from any and all losses, costs and expenses that may be borne by GigaMedia (and any Affiliate thereof) arising under or in connection with the CIDC L/C and/or GigaMedias
lease guaranty.
In accordance with the Mangas Agreement, BEG procured that the bank cancel the CIDC L/C and issue to BEG a new letter of credit under the
same terms and conditions as the CIDC L/C. BEG, however, did not obtain the landlords consent to release us from our lease guaranty within the allotted time. BEGs major shareholders, therefore, issued a separate guaranty to us wherein
they are obligated to indemnify and hold GigaMedia (and any Affiliate thereof) harmless from any and all losses, costs and expenses arising under or in connection with the CIDC Lease. GigaMedias commitment amount under this lease guaranty has
been constantly reduced as Mangas Everests subsidiary who assumed the CIDC Lease makes its monthly rental payments. The leasee is current on its monthly payments through March 2014.
F-76
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Contingencies
We are subject to legal proceedings and claims that arise in the normal course of business. Currently there are no outstanding claims or litigation against us.
F-77
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
NOTE 28
.
SEGMENT INFORMATION
We currently have two operating segments: an Asian online game and service business segment, and a cloud service business segment (began in
2013). The Asian online game and service business segment mainly derives its revenues from recognizing the usage of game playing time or in-game items by the end-users. The cloud service business segment mainly derives its revenues from providing
cloud products and services to small-to-medium and larger enterprises.
F-78
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Financial information for each operating segment was as follows as of and for the years ended
December 31, 2011, 2012, and 2013:
|
|
|
|
|
(in US$ thousands)
|
|
Asian online
game and
service
|
|
|
|
2011:
|
|
|
|
|
|
|
Segment profit or loss:
|
|
|
|
|
Net revenue from external customers
|
|
$
|
34,367
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(10,931
|
)
|
|
|
|
|
|
Share-based compensation
|
|
$
|
308
|
|
|
|
|
|
|
Impairment loss on intangible assets
|
|
$
|
2,583
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees
|
|
$
|
247
|
|
|
|
|
|
|
Impairment loss on goodwill
|
|
$
|
5,097
|
|
|
|
|
|
|
Interest income
|
|
$
|
492
|
|
|
|
|
|
|
Interest expense
|
|
$
|
(50
|
)
|
|
|
|
|
|
Gain on sales of marketable securities
|
|
$
|
6,299
|
|
|
|
|
|
|
Foreign exchange loss
|
|
$
|
(282
|
)
|
|
|
|
|
|
Gain on equity method investments - net
|
|
$
|
1,846
|
|
|
|
|
|
|
Impairment loss on marketable securities and investments
|
|
$
|
13,327
|
|
|
|
|
|
|
Depreciation
|
|
$
|
1,790
|
|
|
|
|
|
|
Amortization, including intangible assets
|
|
$
|
2,251
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
859
|
|
|
|
|
|
|
F-79
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
|
|
|
|
|
(in US$ thousands)
|
|
Asian online
game and
service
|
|
|
|
2012:
|
|
|
|
|
|
|
Segment profit or loss:
|
|
|
|
|
Net revenue from external customers
|
|
$
|
27,470
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(12,271
|
)
|
|
|
|
|
|
Share-based compensation
|
|
$
|
199
|
|
|
|
|
|
|
Impairment loss on intangible assets
|
|
$
|
15
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees
|
|
$
|
702
|
|
|
|
|
|
|
Impairment loss on goodwill
|
|
$
|
12,489
|
|
|
|
|
|
|
Contract termination costs
|
|
$
|
49
|
|
|
|
|
|
|
Interest income
|
|
$
|
9
|
|
|
|
|
|
|
Interest expense
|
|
$
|
44
|
|
|
|
|
|
|
Gain on sales of marketable securities
|
|
$
|
5,665
|
|
|
|
|
|
|
Foreign exchange gain
|
|
$
|
55
|
|
|
|
|
|
|
Gain on equity method investments - net
|
|
$
|
234
|
|
|
|
|
|
|
Impairment loss on marketable securities and investments
|
|
$
|
1,193
|
|
|
|
|
|
|
Depreciation
|
|
$
|
1,059
|
|
|
|
|
|
|
Amortization, including intangible assets
|
|
$
|
2,181
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
710
|
|
|
|
|
|
|
F-80
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Asian online
game and
service
|
|
|
Cloud
service
business
|
|
|
Total
|
|
|
|
|
|
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue from external customers
|
|
$
|
14,106
|
|
|
$
|
925
|
|
|
$
|
15,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(33,677
|
)
|
|
$
|
(1,218
|
)
|
|
$
|
(34,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
(225
|
)
|
|
$
|
69
|
|
|
$
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on intangible assets
|
|
$
|
13,251
|
|
|
$
|
|
|
|
$
|
13,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees
|
|
$
|
2,752
|
|
|
$
|
|
|
|
$
|
2,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on goodwill
|
|
$
|
17,054
|
|
|
$
|
|
|
|
$
|
17,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
9
|
|
|
$
|
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
8
|
|
|
$
|
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of marketable securities
|
|
$
|
1,739
|
|
|
$
|
|
|
|
$
|
1,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
|
$
|
236
|
|
|
$
|
|
|
|
$
|
236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on equity method investments - net
|
|
$
|
526
|
|
|
$
|
|
|
|
$
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
336
|
|
|
$
|
8
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, including intangible assets
|
|
$
|
1,862
|
|
|
$
|
42
|
|
|
$
|
1,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
150
|
|
|
$
|
78
|
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-81
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
The reconciliations of segment information to GigaMedias consolidated totals are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
(10,931
|
)
|
|
$
|
(12,271
|
)
|
|
$
|
(34,895
|
)
|
Other**
|
|
|
(204
|
)
|
|
|
7
|
|
|
|
|
|
Adjustment*
|
|
|
(8,794
|
)
|
|
|
(8,310
|
)
|
|
|
(3,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
(19,929
|
)
|
|
$
|
(20,574
|
)
|
|
$
|
(38,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
308
|
|
|
$
|
199
|
|
|
$
|
(156
|
)
|
Adjustment*
|
|
|
857
|
|
|
|
(20
|
)
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
1,165
|
|
|
$
|
179
|
|
|
$
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
2,583
|
|
|
$
|
15
|
|
|
$
|
13,251
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
2,583
|
|
|
$
|
15
|
|
|
$
|
13,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
247
|
|
|
$
|
702
|
|
|
$
|
2,752
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
247
|
|
|
$
|
702
|
|
|
$
|
2,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
492
|
|
|
$
|
9
|
|
|
$
|
9
|
|
Adjustment*
|
|
|
270
|
|
|
|
274
|
|
|
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
762
|
|
|
$
|
283
|
|
|
$
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
(50
|
)
|
|
$
|
44
|
|
|
$
|
8
|
|
Adjustment*
|
|
|
476
|
|
|
|
203
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
426
|
|
|
$
|
247
|
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
6,299
|
|
|
$
|
5,665
|
|
|
$
|
1,739
|
|
Adjustments*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
6,299
|
|
|
$
|
5,665
|
|
|
$
|
1,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
(282
|
)
|
|
$
|
55
|
|
|
$
|
236
|
|
Adjustments*
|
|
|
(83
|
)
|
|
|
379
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
(365
|
)
|
|
$
|
434
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-82
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Gain (loss) on equity method investments - net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
1,846
|
|
|
$
|
234
|
|
|
$
|
526
|
|
Other**
|
|
|
(49,715
|
)
|
|
|
|
|
|
|
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
(47,869
|
)
|
|
$
|
234
|
|
|
$
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on marketable securities and investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
13,327
|
|
|
$
|
1,193
|
|
|
$
|
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
13,327
|
|
|
$
|
1,193
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
1,790
|
|
|
$
|
1,059
|
|
|
$
|
344
|
|
Adjustments*
|
|
|
290
|
|
|
|
165
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
2,080
|
|
|
$
|
1,224
|
|
|
$
|
408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
2,251
|
|
|
$
|
2,181
|
|
|
$
|
1,904
|
|
Adjustments*
|
|
|
63
|
|
|
|
23
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
2,314
|
|
|
$
|
2,204
|
|
|
$
|
1,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
859
|
|
|
$
|
710
|
|
|
$
|
228
|
|
Other**
|
|
|
(934
|
)
|
|
|
37
|
|
|
|
|
|
Adjustments*
|
|
|
(170
|
)
|
|
|
(76
|
)
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
(245
|
)
|
|
$
|
671
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjustment items include corporate and certain back-office costs and expenses not attributable to any specific segment. As of December 31, 2011, 2012 and 2013, the compensation related was approximately $4.3
million, $4.2 million and $2.1 million, respectively; accrued professional fees was approximately $2.3 million, $911 thousand and $125 thousand, respectively.
|
**
|
Other items relate to the results of operations arising from our non-controlling interest in the online gaming software and service business before we disposed of it in July 2012.
|
Major Customers
No single customer represented 10
percent or more of GigaMedias total net revenues in any period presented.
F-83
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013
Geographic Information
Revenues by geographic area are attributed by country of the server location. Revenue from by geographic region is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
|
|
Geographic region / country
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Taiwan
|
|
$
|
21,214
|
|
|
$
|
18,744
|
|
|
$
|
11,793
|
|
Hong Kong
|
|
|
5,061
|
|
|
|
4,703
|
|
|
|
3,239
|
|
Singapore
|
|
|
4,150
|
|
|
|
2,004
|
|
|
|
|
|
Malaysia
|
|
|
2,228
|
|
|
|
1,550
|
|
|
|
|
|
Thailand
|
|
|
1,447
|
|
|
|
204
|
|
|
|
|
|
Others
|
|
|
267
|
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,367
|
|
|
$
|
27,470
|
|
|
$
|
15,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible long-lived assets by geographic region are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
December 31,
|
|
Geographic region / country
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
Taiwan
|
|
$
|
2,375
|
|
|
$
|
1,932
|
|
|
$
|
1,657
|
|
PRC
|
|
|
763
|
|
|
|
|
|
|
|
|
|
Hong Kong
|
|
|
107
|
|
|
|
17
|
|
|
|
20
|
|
Singapore
|
|
|
551
|
|
|
|
|
|
|
|
|
|
Thailand
|
|
|
380
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,288
|
|
|
$
|
1,949
|
|
|
$
|
1,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 29.
SUBSEQUENT EVENT
On April 10, 2014 (with supplemental modification on April 15, 2014), we entered into a short-term loan agreement on an
arms-length
basis with Wen He Investment Ltd. (Wen He) to finance its purchase from a third-party 15 million common shares of a company in Taiwan. The amount of the loan is approximately $18.8
million, maturing on May 10, 2014, and carries an interest rate of 5% per annum. The term of the loan also requires that all of the shares so purchased by Wen He be pledged to us as collateral together with the personal guarantee of
another major shareholder of the Taiwan company. We entered into this loan agreement because we believe it will support the growth of our online games business.
F-84