The accompanying notes are an integral part of these consolidated financial statements.
Notes To Consolidated Financial Statements
December 31, 2013, 2014 AND 2015
NOTE 1.
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Principal Activities, Basis of Presentation, and Summary of Significant Accounting Policies
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(a) Principal Activities
GigaMedia Limited
(referred to hereinafter as GigaMedia, our Company, we, us, or our) is a diversified provider of online and mobile 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 and mobile
game players across Asia, including Greater China and Southeast Asia.
Our cloud business aims at providing an integrated platform of services and tools
for medium-to-larger enterprises in Greater China to increase flexibility, efficiency and competitiveness, as well as in bidding for government contracts in Taiwan.
On December 16, 2015, the Extraordinary General Meeting of our Company approved to effect a reverse share split of our Ordinary Shares by a ratio of five
to one. We executed reverse splits of the issued and outstanding shares including but not limited to common shares, shares granted by employee plans, options, restricted stock awards, and units, warrants and convertible or exchange securities,
effective at the open of the market on December 16, 2015. Based upon the Reverse Share Split Scheme, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise
or conversion of all outstanding options. These consolidated financial statements reflect retroactive effect to such reverse split and all share and per share amounts have been adjusted accordingly.
(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).
F-10
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
(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
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 U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at
the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management bases its estimates on historical experience and 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 but not limit to 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. We believe the critical accounting policies listed below affect significant judgments and estimates used in the preparation of the financial statements.
F-11
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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.
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.
F-12
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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 upon acceptance for project services provided, or for the period of time for which we provide services to the customer. Customers of subscriptions 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.
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. Pursuant to relevant new requirements in Taiwan, as of
December 31, 2014 and 2015, cash totaling $1.5 million and $1 million, respectively, has been deposited in an escrow account in a bank as a performance bond for the players game points, and is included within restricted cash in the
consolidated balance sheets.
F-13
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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.
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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F-14
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
|
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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.
|
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, 2013, 2014 AND 2015
Marketable Securities
Our Companys investments in marketable securities are classified either as available-for-sale or trading. For the marketable securities classified as
available-for-sale, the investments are stated at fair value with any unrealized gains or losses reported in accumulated other comprehensive income (loss) within equity until realized. For the marketable security classified as trading, we recognize
the changes of the fair value of the investment in our consolidated statements of operations.
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 recognized, 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 investments accounted for as available-for-sale or trading, cash dividends are recognized as investment income. Stock dividends are recognized 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.
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 recognized 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 carrying value of the investment.
F-16
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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. We recognize our share of the earnings or losses of the investee. Under the equity method, 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, 2013, 2014 AND 2015
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
|
|
2 to 5
|
Office furniture and equipment
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3 to 5
|
Leasehold improvements
|
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3 to 5
|
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, 2014 and 2015, the carrying amount of the land and buildings under lease was $1.1 million and $1.1 million, respectively. The rental income under the
operating lease amounted to $74 thousand, $73 thousand and $69 thousand for 2013, 2014 and 2015, respectively. The minimum rental income to be received under this operating lease is $8 thousand through February 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.
Intangible Assets and Goodwill
Intangible assets with finite lives are amortized by the straight-line method over their estimated useful lives, typically three years. Intangible assets with
indefinite useful lives are not amortized. Goodwill is not amortized.
F-18
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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, 2013, 2014 AND 2015
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, typically three 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.
Product Development and Engineering
Product
development and engineering expenses primarily consist of research compensation, depreciation and amortization, and are expensed as incurred.
F-20
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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 2013, 2014 and 2015 totaled $676 thousand, $888 thousand and $3.1 million,
respectively. As of December 31, 2014 and 2015, prepaid advertising amounted to $12 thousand and $5 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.
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 on the date of grant based on
the employees respective function.
F-21
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences and loss carryforwards become deductible.
F-22
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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.
The
Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2015-17,
Income Taxes: Balance Sheet Classification of Deferred Taxes
. This ASU eliminates the requirement for
organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. Our Company applied the
amendments in the ASU No. 2015-17 prospectively, effective January 1, 2015, to classify all deferred tax assets and liabilities as noncurrent. Prior periods were not retrospectively adjusted.
Loss Per Share
Basic loss per share is computed
by dividing the net loss attributable to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings loss per share is computed by dividing the net loss 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 loss per share to the extent such shares are dilutive. Diluted loss per share also takes into consideration the effect of dilutive securities issued by subsidiaries. In a period in which a loss is incurred, only the weighted
average number of 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, 2013, 2014 and 2015, basic and
diluted loss per share are the same.
F-23
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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.
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 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.
(d) Recent Accounting
Pronouncements Not Yet Adopted
The FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
, in May 2014. ASU 2014-09
requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity
should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new
standard was originally designated to be effective for annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers
, to defer the effective date
of ASU 2014-09 by one year. Our Company will implement the provisions of ASU 2014-09 as of January 1, 2018. We expect to determine and disclose the extent of the potential impact of the new standard in our consolidated financial statements for
the year ended December 31, 2016.
F-24
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers: Principal versus
Agent
Considerations (Reporting Revenue Gross versus Net), in March 2016. The amendments in ASU 2016-08 clarify the implementation guidance on principal versus agent considerations. An entity is required to determine whether the nature of its promise for
providing goods or services to a customer is to provide the specified good or service itself (as a principal) or to arrange for that good or service to be provided by the other party (as an agent), and accordingly to determine whether to recognize
revenue in the gross amount of consideration for the specified good or service transferred to the customer, or to recognize revenue in the amount of any fee or commission for arranging for the specified good or service to be provided by the other
party. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customer. The effective date for the amendments in this Update are the same as the effective
date of ASU 2014-09, deferred by one year. Our Company will accordingly implement the provisions of ASU 2016-08 as of January 1, 2018. We expect to determine and disclose the extent of the potential impact of the new standard in our
consolidated financial statements for the year ended December 31, 2016.
F-25
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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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2013
|
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2014
|
|
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2015
|
|
Weighted average number of outstanding shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,144
|
|
|
|
10,785
|
|
|
|
11,052
|
|
Effect of dilutive securities
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|
|
|
|
|
|
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|
|
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Employee share-based compensation
|
|
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|
|
|
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|
|
|
|
|
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|
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Diluted
|
|
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10,144
|
|
|
|
10,785
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|
|
|
11,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase 230 thousand, 137 thousand and 0 thousand shares of common stock were not included in dilutive
securities for the years ended December 31, 2013, 2014 and 2015, respectively, as the effect would be anti-dilutive.
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. In June 2012, our board of directors approved a plan to dispose of Shanghai JIDI. As a result, Shanghai JIDIs operations have 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.
F-26
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
For the period from January to May 2013, Shanghai JIDI was pending official notification of deregistration
and generated no revenue and incurred no profit or loss.
NOTE 4.
ACQUISITIONS
Strawberry Cosmetics
On June 26,
2015, we entered into a share purchase agreement to acquire a 70% equity interest in Strawberry Cosmetics Holding Limited (Strawberry Cosmetics), a global cosmetics e-commerce company with a total consideration of approximately $93.1
million. The proposed acquisition was then duly approved by the Extraordinary General Meeting of our Company held on August 5, 2015.
However, in
light of the drastic slowdown in global economy and turmoil in stock markets beginning in late August 2015 that resulted in a change in business development strategy on the part of GigaMedia, our board of directors concluded that the mutual
termination of the acquisition was in the best interests of GigaMedia stockholders.
Accordingly, in October 2015, our Company entered into a mutual
termination agreement with the shareholders of Strawberry Cosmetics to terminate the share purchase agreement, whereby GigaMedia paid US$2.0 million consideration to the shareholders of Strawberry Cosmetics and the parties, in turn, released
each other from any claims relating to the proposed acquisition. The payment was reported in operating expenses in our consolidated statements of operations.
FingerRockz
On October 18, 2013, we subscribed in
cash to 405 thousand new common shares of FingerRockz Co., Ltd. (FingerRockz), which represents a controlling financial interest of 51.6 percent of the ownership; thereupon we began consolidating FingerRockz. FingerRockz is a mobile
game developer and publisher in Taiwan, and we acquired it purposely to enhance our research and development capabilities for mobile games. This primary factor among others, contributed to a purchase price in excess of the fair value of the net
identifiable assets acquired and liabilities assumed, and intangible assets. In the acquisition, the most appealing asset to our Company was FingerRockzs creative team. Because the assembled workforce was not an identifiable asset to be
recognized separately from goodwill, the value attributed to it was subsumed into goodwill. The goodwill related to this acquisition is not expected to be deductible for tax purpose.
F-27
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The following table summarizes the consideration paid for the acquisition and the amounts of estimated fair
value of the assets acquired and liabilities assumed at the acquisition date.
|
|
|
|
|
(In US$ 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, 2013, 2014 AND 2015
The following unaudited pro forma results of operations for the years ended December 31, 2013 are
presented as if the acquisition had been consummated on January 1, 2013:
|
|
|
|
|
(in US$ thousands, except for loss per share)
|
|
For the years
ended
December 31,
2013
(unaudited)
|
|
Net revenues
|
|
$
|
15,040
|
|
|
|
|
|
|
Net loss attributable to GigaMedia shareholders
|
|
$
|
(34,845
|
)
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(3.44
|
)
|
|
|
|
|
|
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
FingerRockz
In September 2015, we
entered into an agreement to sell all the ownership for a consideration of NT$1 we held in FingerRockz to its management. Upon the closing of the agreement, we deconsolidated the results of FingerRockz operations.
The deconsolidation gain was as follows:
|
|
|
|
|
(In US$ thousand)
|
|
Amount
|
|
The fair value of consideration received and receivable, net of any transaction costs
|
|
$
|
|
|
The carrying amount (credit balance) of FingerRockz at the date of deconsolidation
|
|
|
(37
|
)
|
|
|
|
|
|
Gain on deconsolidation of FingerRockz
|
|
$
|
37
|
|
|
|
|
|
|
F-29
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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 IAHGames
|
|
$
|
211
|
|
|
|
|
|
|
F-30
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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 which totaled approximately $1.2 million, was recognized as non-operating income.
JIDI Network Technology (Shanghai) Co., Ltd.
(JIDI)
In June 2012, our board of directors approved a plan to liquidate and dissolve JIDI, a wholly-owned subsidiary, and Shanghai JIDI,
a VIE controlled through a series of contractual arrangements.
Results for JIDI and Shanghai JIDI operations are reported as discontinued operations for
all periods presented. The carrying amounts of the remaining assets and liabilities, if any, of JIDI and Shanghai JIDI were not significant to our consolidated financial statements as of December 31, 2013. The process of liquidation and
dissolution was completed by the end of 2013. Summarized financial information for discontinued operations of JIDI and Shanghai JIDI are as follows:
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
Revenue
|
|
$
|
|
|
|
|
|
|
|
Loss from discontinued operations before tax
|
|
$
|
(318
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(318
|
)
|
|
|
|
|
|
F-31
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 6.
GOODWILL
The following table summarizes the changes to our Companys goodwill:
|
|
|
|
|
(In US$ thousands)
|
|
2013
|
|
Balance at beginning of year
|
|
$
|
16,934
|
|
Acquisition - FingerRockz (Note 4)
|
|
|
496
|
|
Impairment charge - FunTown and FingerRockz (Note 9)
|
|
|
(17,054
|
)
|
Translation adjustment
|
|
|
(376
|
)
|
|
|
|
|
|
Balance at end of year
|
|
$
|
|
|
|
|
|
|
|
By the acquisition of FingerRockz in 2013, we obtained its mobile platform development experience which constituted 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-32
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 7.
INTANGIBLE ASSETS - NET
The following table summarizes our Companys intangible assets, by major asset class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
(In US$ thousands)
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
With finite-life intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized software development cost
|
|
$
|
775
|
|
|
$
|
687
|
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
(In US$ thousands)
|
|
Gross carrying
amount
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
With finite-life intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized software development cost
|
|
$
|
2,503
|
|
|
$
|
2,300
|
|
|
$
|
203
|
|
Customer relationships
|
|
|
5,757
|
|
|
|
5,757
|
|
|
|
|
|
Other
|
|
|
71
|
|
|
|
52
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,331
|
|
|
$
|
8,109
|
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with finite lives are amortized over their estimated useful lives, typically 3 years, with the overall
weighted-average life of 3.0 years.
For the years ended December 31, 2013, 2014 and 2015, total amortization expense of intangible assets were $1.9
million, $1.2 million and $236 thousand, respectively, which includes amortization of capitalized software development costs of $1.2 million, $494 thousand and $217 thousand. As of December 31, 2015, based on the current amount of intangibles
subject to amortization, the estimated amortization expense for each of the following years is as follows:
|
|
|
|
|
(In US$ thousands)
|
|
Amount
|
|
2016
|
|
$
|
71
|
|
2017
|
|
|
14
|
|
2018
|
|
|
3
|
|
|
|
|
|
|
|
|
$
|
88
|
|
|
|
|
|
|
F-33
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 8
.
PREPAID LICENSING AND ROYALTY FEES
The following table summarizes changes to our Companys prepaid licensing and royalty fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
8,644
|
|
|
$
|
4,666
|
|
|
$
|
4,383
|
|
Addition
|
|
|
14
|
|
|
|
1,498
|
|
|
|
1,801
|
|
Amortization and usage
|
|
|
(706
|
)
|
|
|
(264
|
)
|
|
|
(1,743
|
)
|
Exchange difference
|
|
|
(216
|
)
|
|
|
(258
|
)
|
|
|
(15
|
)
|
Impairment charges (Note 9)
|
|
|
(3,070
|
)
|
|
|
(1,259
|
)
|
|
|
(4,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
4,666
|
|
|
$
|
4,383
|
|
|
$
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 9.
FAIR VALUE MEASUREMENTS
The following table presents the carrying amounts and estimated fair values of our Companys financial instruments at December 31,
2014 and 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
|
|
Carrying
amount
|
|
|
Fair value
|
|
|
Carrying
amount
|
|
|
Fair value
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
50,640
|
|
|
$
|
50,640
|
|
|
$
|
71,432
|
|
|
$
|
71,432
|
|
Marketable securities - current
|
|
|
29,340
|
|
|
|
29,340
|
|
|
|
4
|
|
|
|
4
|
|
Accounts receivable
|
|
|
1,298
|
|
|
|
1,298
|
|
|
|
1,246
|
|
|
|
1,246
|
|
Restricted cash
|
|
|
8,991
|
|
|
|
8,991
|
|
|
|
1,000
|
|
|
|
1,000
|
|
Marketable debt securities - noncurrent
|
|
|
4,744
|
|
|
|
4,744
|
|
|
|
|
|
|
|
|
|
Refundable deposits
|
|
|
302
|
|
|
|
302
|
|
|
|
272
|
|
|
|
272
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
18,641
|
|
|
|
18,641
|
|
|
|
6,093
|
|
|
|
6,093
|
|
Accounts payable
|
|
|
771
|
|
|
|
771
|
|
|
|
320
|
|
|
|
320
|
|
Accrued compensation
|
|
|
796
|
|
|
|
796
|
|
|
|
759
|
|
|
|
759
|
|
Accrued expenses
|
|
|
3,465
|
|
|
|
3,465
|
|
|
|
3,037
|
|
|
|
3,037
|
|
The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions.
The fair values of the financial instruments shown in the above table as of December 31, 2014 and 2015 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-35
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The following methods and assumptions were used to estimate the fair value of each class of financial
instruments:
|
|
|
Cash and cash equivalents, accounts receivable, restricted cash, 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 are measured using quoted market prices at the reporting date multiplied by the quantity held. Redeemable preferred shares are measured using valuation
techniques.
|
|
|
|
Refundable deposits: Measurement of refundable deposits with no fixed maturities is based on carrying amounts.
|
F-36
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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.
|
|
|
|
|
Level 3 Financial Instruments
|
|
Significant Unobservable Inputs by
Valuation Technique
|
|
Range of Significant
Unobservable
Inputs as of December
2014
|
Debt securities Preferred shares with redemption rights
|
|
Price/Sales per share ratio for selective comparable
companies
Discount for lack of marketability
|
|
2.0 times ~ 14.0 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-37
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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,
2015
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents - time deposits
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
6
|
|
Restricted cash - time deposits
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
Marketable securities - current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4
|
|
|
$
|
1,006
|
|
|
$
|
|
|
|
$
|
1,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Fair Value Measurement Using
|
|
|
Year Ended
December 31,
2014
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents - time deposits
|
|
$
|
|
|
|
$
|
12,112
|
|
|
$
|
|
|
|
$
|
12,112
|
|
Restricted cash - time deposits
|
|
|
|
|
|
|
8,991
|
|
|
|
|
|
|
|
8,991
|
|
Marketable securities - current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-end fund
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
318
|
|
Equity securities
|
|
|
29,022
|
|
|
|
|
|
|
|
|
|
|
|
29,022
|
|
Marketable securities - noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
4,744
|
|
|
|
4,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,340
|
|
|
$
|
21,103
|
|
|
$
|
4,744
|
|
|
$
|
55,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2014 and 2015.
F-38
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Level 1 and 2 measurements:
Cash equivalents time deposits and restricted cash 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.
In 2013, 2014 and 2015, we recognized unrealized gains of $4.7 million, $101 thousand and $4.8 million, respectively, on marketable securities valued using
market observable inputs, which are included in other comprehensive income.
Level 3 measurements:
For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2014 and 2015, a reconciliation of the beginning
and ending balances are presented as follows:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Marketable Securities - Debt
Securities
|
|
|
|
2014
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
3,939
|
|
|
$
|
4,744
|
|
Total gains or (losses) (realized/unrealized)
|
|
|
|
|
|
|
|
|
included in earnings
|
|
|
|
|
|
|
(2,017
|
)
|
included in other comprehensive income
|
|
|
805
|
|
|
|
|
|
Sale
|
|
|
|
|
|
|
(2,727
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
4,744
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
F-39
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Realized and unrealized gains (or losses) included in the consolidated financial statements for 2013, 2014
and 2015 for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in the consolidated financial statements as follows:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Gain on sales
of marketable
securities
|
|
|
Impairment
loss on
marketable
securities and
investments
|
|
Total gains (losses) included in earnings
|
|
|
|
|
|
|
|
|
for 2013
|
|
$
|
985
|
|
|
$
|
|
|
for 2014
|
|
|
|
|
|
|
|
|
for 2015
|
|
|
5,845
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) relating to assets still held at the reporting date
|
|
|
|
|
|
|
|
|
for 2013
|
|
$
|
1,212
|
|
|
$
|
|
|
for 2014
|
|
|
805
|
|
|
|
|
|
for 2015
|
|
|
|
|
|
|
|
|
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.
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.
F-40
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Assets and liabilities measured at fair value on a nonrecurring basis that were determined to be impaired as
of December 31, 2014 and 2015 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,
2015
|
|
|
(a) Investments - Cost-method
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,000
|
|
(a) Investments - Equity-method
|
|
|
|
|
|
|
|
|
|
|
188
|
|
|
|
188
|
|
|
|
290
|
|
(b) Property, plant and equipment - Information and communication equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
(c) Intangible assets - Capitalized software cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
(d) Prepaid licensing and royalty fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
188
|
|
|
$
|
188
|
|
|
$
|
5,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Fair Value measurement Using
|
|
|
|
|
|
Total
Impairment
Losses
|
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Year Ended
December 31,
2014
|
|
|
(b) Property, plant and equipment - Information and communication equipment
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
28
|
|
(c) Intangible assets - Capitalized software cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
(d) Prepaid licensing and royalty fees
|
|
|
|
|
|
|
|
|
|
|
3,033
|
|
|
|
3,033
|
|
|
|
1,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,033
|
|
|
$
|
3,033
|
|
|
$
|
1,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
(a)
|
Impairment losses on certain cost method and equity method investments which were determined to be impaired:
|
In 2015, certain cost method investments with carrying amounts of $1.0 million were fully written down to zero, resulting in an impairment charge of $1.0
million, and an equity method investment with a carrying amount of $478 thousand was written down to its estimated fair value of $188 thousand, resulting in an impairment charge of $290 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.
(b)
|
Impairment losses on certain property, plant, and equipment which were determined to be impaired:
|
In 2014 and
2015, we recognized an impairment loss of $28 thousand and $60 thousand against our information and communication equipment. The impairment charges are included in operating expenses within impairment losses on property, plant and
equipment in the consolidated statements of operations. The impairment charge for the equipment was related to servers used for certain product and service lines within our cloud product and service business for which the carrying amount was
determined not to be recoverable from its related future undiscounted cash flows. This equipment was valued using unobservable inputs such as discounted cash flows, incorporating adjusted available market discount rate information and our
Companys estimates for liquidity risk, and other cash flow model - related assumptions.
F-42
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
(c)
|
Impairment losses on certain intangible assets which were determined to be impaired:
|
In 2014 and 2015, certain
capitalized and prepaid software development costs for our cloud product and service business were fully written down, resulting in impairment charges of $115 thousand and $5 thousand, included in operating expenses within impairment loss on
intangible assets in the consolidated statements of operations. The impairment charge is for certain product lines within our cloud product and service business that we decided to shift focus from, and as a result, we recorded a full
impairment of the carrying value of the assets related to these items.
(d)
|
Impairment losses on certain prepaid licensing and royalty fees which were determined to be impaired:
|
In 2014
and 2015, certain prepaid licensing and royalty fees were written down to $3.0 million and $0, respectively, resulting in impairment charges of $1.3 million and $4.2 million, respectively. This impairment is included in operating expenses in the
consolidated statements of operations. The impairment charges for the prepaid licensing and royalty fees related to certain licensed games within our Asian online game and service business that we stopped operating or for which the carrying amounts
of the related assets were determined not to be recoverable from their expected future undiscounted cash flows. The licensing fee games and related royalties are re-valued on when impairment exists, using unobservable inputs such as discounted cash
flows, incorporating adjusted available market discount rate information and our Companys estimates for liquidity risk, along with other cash flow model related assumptions.
F-43
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 10.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Cash and savings accounts
|
|
$
|
38,529
|
|
|
$
|
71,426
|
|
Time deposits
|
|
|
21,102
|
|
|
|
1,006
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
59,631
|
|
|
|
72,432
|
|
Less: Cash restricted as collateral and performance bond
|
|
|
(8,991
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents reported on the consolidated statements of cash flows
|
|
$
|
50,640
|
|
|
$
|
71,432
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014, cash amounting to $1.5 million has been deposited in an escrow account in a bank as a
performance bond for our players game points, and certain time deposits amounting to $7.5 million have also been pledged as collateral for borrowings from financial institutions. As of December 31, 2015, cash amounting to $1.0 million has
been deposited in an escrow account in a bank as a performance bond for our players game points. These deposits are restricted and are included in restricted cash in the consolidated balance sheets.
We maintain cash and cash equivalents, as well as restricted cash, in bank accounts with major financial institutions with high credit ratings located in the
following jurisdictions:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Taiwan
|
|
$
|
49,829
|
|
|
$
|
69,879
|
|
Hong Kong
|
|
|
2,178
|
|
|
|
1,120
|
|
China
|
|
|
6,055
|
|
|
|
16
|
|
Singapore
|
|
|
1,418
|
|
|
|
1,417
|
|
Others
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
59,631
|
|
|
$
|
72,432
|
|
|
|
|
|
|
|
|
|
|
F-44
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 11.
MARKETABLE SECURITIES CURRENT
Marketable securities current consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Equity securities
|
|
$
|
29,022
|
|
|
$
|
4
|
|
Open-end fund
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,340
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014 and 2015, the balances of unrealized gains for marketable securities - current were $9.4 million
and $3 thousand, respectively. During 2013, 2014 and 2015, realized gains from the disposal of marketable securities - current amounted to $754 thousand, $8.8 million, and $14.1 million, respectively. The costs for calculating gains on disposal were
based on each securitys average cost.
NOTE 12.
ACCOUNTS RECEIVABLE NET
Accounts receivable consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Accounts receivable
|
|
$
|
1,354
|
|
|
$
|
1,275
|
|
Less: Allowance for doubtful accounts
|
|
|
(56
|
)
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,298
|
|
|
$
|
1,246
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the changes in our Companys allowance for doubtful accounts during the years ended
December 31, 2013, 2014 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
130
|
|
|
$
|
55
|
|
|
$
|
56
|
|
Additions: Provision for bad debt expense
|
|
|
37
|
|
|
|
37
|
|
|
|
3
|
|
Less: Write-offs
|
|
|
(109
|
)
|
|
|
(33
|
)
|
|
|
(28
|
)
|
Translation adjustment
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
55
|
|
|
$
|
56
|
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 13.
OTHER CURRENT ASSETS
Other current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Loans receivable - current
|
|
|
27
|
|
|
|
64
|
|
Less: Allowance for loans receivable - current
|
|
|
(27
|
)
|
|
|
(28
|
)
|
Other
|
|
|
325
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
325
|
|
|
$
|
271
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of changes in our Companys allowance for loans receivable - current during the years
ended December 31, 2013, 2014 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
3,437
|
|
|
$
|
3,394
|
|
|
$
|
27
|
|
Less: Writes-offs
|
|
|
|
|
|
|
(3,359
|
)
|
|
|
|
|
Less: Reversal for collection of bad debt
|
|
|
(54
|
)
|
|
|
|
|
|
|
2
|
|
Translation adjustment
|
|
|
11
|
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
3,394
|
|
|
$
|
27
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14.
MARKETABLE DEBT SECURITIES NONCURRENT
Marketable debt securities noncurrent consist of the following:
|
|
|
|
|
(in US$ thousands)
|
|
December 31,
2014
|
|
Available-for-sale securities
|
|
|
|
|
Debt securities
|
|
$
|
4,744
|
|
|
|
|
|
|
F-46
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Our Companys marketable securities - noncurrent were invested in convertible preferred shares and were
classified as available-for-sale securities.
We had considered and determined whether our investments in preferred shares were in-substance common shares
which should be accounted for under the equity method. Given that our convertible preferred shares had substantive redemption rights and thus did not meet the criteria of in-substance common shares, we had accounted for them as debt securities.
As of December 31, 2014 and 2015, the balances of unrealized gains for marketable securities - noncurrent were $2.0 million and $0, respectively. During
2013, 2014 and 2015, realized gains (losses) from the disposal of marketable securities - non-current amounted to $985 thousand, ($171) thousand and $5.8 million, respectively. Gains (losses) on disposal were based on the securitys average
cost.
NOTE 15.
EQUITY INVESTMENTS
Equity investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Investments accounted for under the equity method
|
|
$
|
5,781
|
|
|
$
|
4,524
|
|
|
|
|
|
|
|
|
|
|
Our Companys investments accounted for under the equity method primarily consist of the following: (a) 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); (b) an 17.65 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; and (c) a
22.86 percent equity interest investment in Double2 Network Technology Co., Ltd. (Double2), a Taiwanese company that mainly engaged in development of causal gaming software.
F-47
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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.)
East Gate
Our Company has an 17.65 percent interest in East Gate, a Korean fund partnership. We account for our investment in this limited partnership 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.
East Gate is considered an investment company that primarily invests in: (1) Equity securities of small, medium-sized companies or venture companies, mainly
Korean game companies, and (2) funding for specific projects, mainly Korean films, of an entrepreneur or venture company in return for the rights to a future revenue stream from the income generated by the entrepreneur or venture company from the
film and related products.
Summarized U.S. GAAP financial information of East Gate as of December 31, 2014 and 2015, and for the years ended December 31,
2013, 2014 and 2015 is presented below (in US$ thousands):
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
Investments and other related assets
|
|
$
|
25,567
|
|
|
$
|
21,833
|
|
Other assets
|
|
|
4,365
|
|
|
|
3,212
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
29,932
|
|
|
$
|
25,045
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
533
|
|
|
$
|
478
|
|
|
|
|
|
|
|
|
|
|
Total net assets of the fund
|
|
$
|
29,399
|
|
|
$
|
24,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Investment and related income
|
|
$
|
10,735
|
|
|
$
|
8,351
|
|
|
$
|
5,419
|
|
Impairment loss
|
|
|
|
|
|
|
(480
|
)
|
|
|
|
|
Other costs and expenses
|
|
|
(7,755
|
)
|
|
|
(10,642
|
)
|
|
|
(8,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,980
|
|
|
$
|
(2,771
|
)
|
|
$
|
(2,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 16.
SHORT-TERM BORROWINGS
As of December 31, 2014 and 2015, short-term borrowings totaled $18.6 million and $6.1 million, respectively. These amounts were
borrowed from certain financial institutions. The annual interest rates on these borrowings ranged from 1.35 percent to 1.95 percent for 2014 and from 1.81 percent to 1.90 percent for 2015. The maturity dates fell in January and July 2015 as of
December 31, 2014, and fell in January, February and May 2016 as of December 31, 2015. As of December 31, 2014 and 2015, the weighted-average interest rate on total short-term borrowings was 1.72 percent and 1.89 percent,
respectively.
As of December 31, 2014 and 2015, the total amount of unused lines of credit available for borrowing under these agreements was
approximately $1.1 million and $12.9 million, respectively.
We pledged certain time deposits as collateral for borrowings from financial institutions.
The pledged time deposits amounted to $7.5 million and $1 million as of December 31, 2014 and 2015, respectively, and are included in restricted cash in the consolidated balance sheets.
F-49
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 17.
ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Accrued outsourced development
|
|
$
|
838
|
|
|
$
|
52
|
|
Accrued professional fees
|
|
|
603
|
|
|
|
865
|
|
Accrued royalties
|
|
|
308
|
|
|
|
313
|
|
Accrued advertising expenses
|
|
|
613
|
|
|
|
811
|
|
Accrued incentive to distributors
|
|
|
71
|
|
|
|
63
|
|
Accrued director compensation and liability insurance
|
|
|
155
|
|
|
|
238
|
|
Other
|
|
|
877
|
|
|
|
695
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,465
|
|
|
$
|
3,037
|
|
|
|
|
|
|
|
|
|
|
NOTE 18.
OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Income taxes payable
|
|
$
|
1,542
|
|
|
$
|
1,252
|
|
Other
|
|
|
176
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,718
|
|
|
$
|
1,523
|
|
|
|
|
|
|
|
|
|
|
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.
F-50
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
We use a December 31 measurement date for our defined benefit pension plan. As of December 31, 2014
and 2015, the accumulated benefit obligation amounted to $196 thousand and $153 thousand, respectively, and the funded status of prepaid pension assets amounted to $45 thousand and $109 thousand, respectively. The fair value of plan assets amounted
to $303 thousand and $310 thousand as of December 31, 2014 and 2015, respectively. The accumulated other comprehensive income amounted to $0 and $0 as of December 31, 2014 and 2015, respectively. The net periodic benefit cost (income) for
2013, 2014 and 2015 amounted to ($77) thousand, ($199) thousand and ($58) thousand, respectively.
F-51
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The following table sets forth the plans benefit obligations, fair value of plan assets, and funded
status at December 31, 2014 and 2015:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Benefit Obligation
|
|
$
|
258
|
|
|
$
|
201
|
|
Fair value of plan assets
|
|
|
303
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(45
|
)
|
|
$
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the balance sheet consist of:
|
|
|
|
|
|
|
|
|
Noncurrent liabilities (assets)
|
|
$
|
(45
|
)
|
|
$
|
(109
|
)
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(45
|
)
|
|
$
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated comprehensive income consist of:
|
|
|
|
|
|
|
|
|
Unrecognized net gain
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2014 and 2015, the net period pension cost consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Service cost
|
|
$
|
15
|
|
|
$
|
|
|
Interest cost
|
|
|
9
|
|
|
|
5
|
|
Expected return on plan assets
|
|
|
(6
|
)
|
|
|
(6
|
)
|
Amortization of prior service cost
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
|
|
|
|
|
|
|
Curtailment gain
|
|
|
(217
|
)
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(199
|
)
|
|
$
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
F-52
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Weighted average assumptions used to determine benefit obligations for 2014 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2014
|
|
|
2015
|
|
Discount rate
|
|
|
2.00
|
%
|
|
|
1.875
|
%
|
Rate of compensation increase
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
Weighted average assumptions used to determine net periodic benefit cost for end of fiscal year were as follows:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
Discount rate
|
|
|
2.00
|
%
|
|
|
2.00
|
%
|
Rate of return on plan assets
|
|
|
2.00
|
%
|
|
|
2.00
|
%
|
Rate of compensation increase
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
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.
We expect to make a contribution of $7 thousand to the Fund in 2016. We expect to make benefit payments of $1 thousand from 2016 to 2020 and $1 thousand from
2021 to 2025.
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.
F-53
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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
$274), 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$1.5 thousand (approximately $194). 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, 2013, 2014, and 2015 were $357 thousand, $364 thousand, and $318 thousand, respectively.
NOTE 20.
OTHER LIABILITIES - OTHER
Other liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
(in US$ thousands)
|
|
2014
|
|
|
2015
|
|
Deferred tax liabilities (Note 24)
|
|
$
|
1,928
|
|
|
$
|
1,712
|
|
Other
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,938
|
|
|
$
|
1,722
|
|
|
|
|
|
|
|
|
|
|
F-54
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 21.
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.
A 1-for-5 reverse stock split was approved by our shareholders at a special shareholders meeting held on December 16, 2015. The
reverse stock split was effective as of December 16, 2015, which resulted in our common stock trading on a split-adjusted basis at market open on December 16, 2015. Upon completion of the reverse stock split, every five shares of common
stock owned by a shareholder were combined into one share of common stock, with a proportionate adjustment made to the per-share value of common stock.
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, 2014 and 2015, the legal reserves of Hoshin GigaMedia Center Inc. (Hoshin GigaMedia) were $3.0 million for each period. The reserve can
only be used to offset a deficit or be distributed as a stock dividend of up to 50 percent of the reserve balance when the reserve balance has reached 50 percent of the aggregate paid-in capital of Hoshin GigaMedia.
F-55
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 22.
COMPREHENSIVE INCOME
The accumulated balances for each classification of other comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Foreign
currency items
|
|
|
Unrealized
gain on
securities
|
|
|
Pension and
post retirement
benefit plans
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Balance at January 1, 2013
|
|
$
|
(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
|
)
|
Net current period change
|
|
|
(176
|
)
|
|
|
906
|
|
|
|
|
|
|
|
730
|
|
Reclassification adjustments for gains reclassified into income
|
|
|
7
|
|
|
|
(8,621
|
)
|
|
|
|
|
|
|
(8,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
(22,876
|
)
|
|
|
11,389
|
|
|
|
|
|
|
|
(11,487
|
)
|
Net current period change
|
|
|
(118
|
)
|
|
|
8,553
|
|
|
|
|
|
|
|
8,435
|
|
Reclassification adjustments for gains reclassified into income
|
|
|
656
|
|
|
|
(19,939
|
)
|
|
|
|
|
|
|
(19,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
(22,338
|
)
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
(22,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no significant tax effects allocated to each component of other comprehensive income for the years ended
December 31, 2013, 2014 and 2015.
NOTE 23.
SHARE-BASED COMPENSATION
The following table summarizes the total stock-based compensation expense recognized in our consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Cost of online game and service revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Product development & engineering expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
219
|
|
|
|
21
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense reported in continuing operations
|
|
$
|
219
|
|
|
$
|
21
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense reported in discontinued operations, net of tax
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
There were no significant capitalized stock-based compensation costs at December 31, 2014 and 2015.
There was no recognized stock-based compensation tax benefit for the years ended December 31, 2014 and 2015, as our Company recognized a full valuation allowance on net deferred tax assets as of December 31, 2014 and 2015.
(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. This plan and all the grants have expired by the end of 2014.
2004 Employee Share Option Plan
At the June 2004
annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2004 Employee Share Option Plan (the 2004 Plan) under which up to 1.4 million common shares of our Company have been reserved for
issuance. All employees, officers, directors, supervisors, advisors, and consultants of our Company are eligible to participate in the 2004 Plan. The 2004 Plan is administered by a committee designated by the board of directors. The committee as
plan administrator has complete discretion to determine the exercise price for the option grants, the eligible individuals who are to receive option grants, the time or times when options grants are to be made, the number of shares subject to grant
and the vesting schedule. The maximum contractual term for the options under the 2004 Plan is 10 years.
F-57
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
2006 Equity Incentive Plan
At the June 2006 annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2006 Equity Incentive Plan (the
2006 Plan) under which up to 200 thousand common shares of our Company have been reserved for issuance. The 2006 Plan is administered by a committee designated by the board of directors. The committee as plan administrator has
complete discretion to determine the grant of awards under the 2006 Plan. The maximum contractual term for the options under the 2006 Plan is 10 years.
2007 Equity Incentive Plan
At the June 2007
annual general meeting of shareholders, the shareholders of our Company approved the GigaMedia Limited 2007 Equity Incentive Plan (the 2007 Plan) under which up to 400 thousand 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.
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 200 thousand 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 40 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, 2015, no shares have been subscribed by qualified employees under the 2008 ESPP.
F-58
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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 300 thousand 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 40 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, 2015, no shares have been issued to employees under the 2009 ESPP.
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 200 thousand 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.
F-59
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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 40 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, 2015, no shares
have been issued to employees under the 2010 ESPP.
F-60
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Summarized below are the general terms of our stock-based compensation plans, for which awards have been
granted as of December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
Stock-Based compensation plan
|
|
Granted awards
|
|
|
Vesting schedule
|
|
Options exercise
price
|
|
RSUs grant date
fair value
|
2002 plan
|
|
|
600,000
|
|
|
immediately upon granting
|
|
(expired)
|
|
|
2004 plan
|
|
|
1,575,037
|
(1)
|
|
immediately upon granting to four years
|
|
$7.15~$12.35
|
|
|
2006 Plan
|
|
|
256,716
|
(2)
|
|
immediately upon granting to four years
|
|
$3.85~$83
|
|
$14.55~$80.05
|
2007 Plan
|
|
|
671,057
|
(3)
|
|
immediately upon granting to four years
|
|
$4.9885~$90.85
|
|
$12.35~$76.75
|
2008 Plan
|
|
|
200,000
|
|
|
immediately upon granting to six years
|
|
$12.35~$21.2
|
|
|
2009 Plan
|
|
|
500,000
|
(4)
|
|
immediately upon granting to four years
|
|
$4.775~$12.35
|
|
|
2010 Plan
|
|
|
440,000
|
(5)
|
|
three years
|
|
$4.0505~$5.7
|
|
|
(1)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of 1,400 thousand common shares.
|
(2)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of 200 thousand common shares.
|
(3)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of 400 thousand common shares.
|
(4)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of 300 thousand common shares.
|
(5)
|
The granted awards, net of forfeited or canceled shares, were within reserved shares of 200 thousand 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.
(b) Options
In 2013, 2014 and 2015, approximately 1 thousand, 907 thousand and 0 options were exercised, and cash received from the exercise of stock options was
approximately $2 thousand, $3.6 million and $0, respectively, which resulted in no significant tax benefit realized on a consolidated basis.
F-61
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Our Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted
to employees on the grant date. The following table summarizes the assumptions used in the model for options granted during 2014 and 2015:
|
|
|
|
|
|
|
2014
|
|
2015
|
Option term (years)
|
|
5.9
|
|
5.75
|
Volatility
|
|
58.75%~59.27%
|
|
49.239%
|
Weighted-average volatility
|
|
59%
|
|
49%
|
Risk-free interest rate
|
|
1.968%~2.065%
|
|
1.506%
|
Dividend yield
|
|
0%
|
|
0%
|
Weighted-average fair value of option granted
|
|
$3.41
|
|
$1.80
|
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-62
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Option transactions during the last three years are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
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
|
|
$
|
9.85
|
|
|
|
1,841
|
|
|
$
|
9.75
|
|
|
|
1,844
|
|
|
$
|
20.30
|
|
|
|
626
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
5.45
|
|
|
|
124
|
|
|
|
6.15
|
|
|
|
66
|
|
|
|
3.85
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
3.95
|
|
|
|
(1
|
)
|
|
|
3.95
|
|
|
|
(907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Forfeited / canceled / expired
|
|
|
6.40
|
|
|
|
(120
|
)
|
|
|
5.65
|
|
|
|
(377
|
)
|
|
|
5.31
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
9.75
|
|
|
|
1,844
|
|
|
$
|
20.30
|
|
|
|
626
|
|
|
$
|
20.51
|
|
|
|
617
|
|
|
$
|
4.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
$
|
10.80
|
|
|
|
1,514
|
|
|
$
|
23.35
|
|
|
|
519
|
|
|
$
|
21.28
|
|
|
|
586
|
|
|
$
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31
|
|
$
|
9.75
|
|
|
|
1,844
|
|
|
$
|
20.30
|
|
|
|
626
|
|
|
$
|
20.51
|
|
|
|
617
|
|
|
$
|
4.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2015 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, 2015. 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, 2013, 2014, and 2015 were $1 thousand, $1,855 thousand, and
$0, respectively.
As of December 31, 2015, there was approximately $18 thousand of unrecognized compensation cost related to nonvested options. That
cost is expected to be recognized over a period of 0.75 years.
F-63
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The following table sets forth information about stock options outstanding at December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding
|
|
Option currently exercisable
|
|
Exercise price
|
|
No. of Shares
(in thousands)
|
|
|
Weighted
average
remaining
contractual life
|
|
Exercise price
|
|
No. of Shares
(in thousands)
|
|
Under $5
|
|
|
116
|
|
|
7.12 years
|
|
Under $5
|
|
|
104
|
|
$5~$50
|
|
|
378
|
|
|
4.11 years
|
|
$5~$50
|
|
|
359
|
|
$50~$100
|
|
|
123
|
|
|
1.65 years
|
|
$50~$100
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617
|
|
|
|
|
|
|
|
586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) RSUs
The fair
value of RSUs is determined and fixed on the grant date based on our stock price. No RSUs were granted during the years ended December 31, 2013, 2014 and 2015.
As of December 31 2014 and 2015, there was no unrecognized compensation cost related to nonvested RSUs. Our Company received no cash from employees as a
result of employee stock award vesting and the forfeiture of RSUs during 2013, 2014 and 2015.
NOTE 24.
INCOME TAXES
Income (loss) from continuing operations before income taxes by geographic location is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands )
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Taiwan operations
|
|
$
|
(33,077
|
)
|
|
$
|
(13,158
|
)
|
|
$
|
(13,177
|
)
|
Non-Taiwan operations
|
|
|
(1,605
|
)
|
|
|
8,095
|
|
|
|
10,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(34,682
|
)
|
|
$
|
(5,063
|
)
|
|
$
|
(2,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The components of income tax expense (benefit) from continuing operations by taxing jurisdiction are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
( in US$ thousands )
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Taiwan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(131
|
)
|
|
$
|
(74
|
)
|
|
$
|
(198
|
)
|
Deferred
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
248
|
|
|
$
|
(74
|
)
|
|
$
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Taiwan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(187
|
)
|
|
$
|
1
|
|
|
$
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
(216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187
|
)
|
|
$
|
1
|
|
|
$
|
(216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax benefit
|
|
$
|
(318
|
)
|
|
$
|
(73
|
)
|
|
$
|
(198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax expense (benefit)
|
|
$
|
379
|
|
|
$
|
|
|
|
$
|
(216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
61
|
|
|
$
|
(73
|
)
|
|
$
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our ultimate parent company is based in Singapore.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Taiwan statutory rate, including taxes on income and retained earnings
|
|
|
23.85
|
%
|
|
|
23.85
|
%
|
|
|
23.85
|
%
|
Foreign tax differential
|
|
|
(3.71
|
%)
|
|
|
42.23
|
%
|
|
|
183.28
|
%
|
Tax-exempt income in foreign jurisdictions
|
|
|
3.12
|
%
|
|
|
0.00
|
%
|
|
|
2.71
|
%
|
Non-deductible items - impairment charges on goodwill
|
|
|
(11.73
|
%)
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Non-deductible items - bad debts
|
|
|
0.00
|
%
|
|
|
(5.16
|
%)
|
|
|
(57.91
|
%)
|
Other non-deductible expenses
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
(17.47
|
%)
|
Changes in unrecognized tax benefits
|
|
|
(4.12
|
%)
|
|
|
(3.15
|
%)
|
|
|
6.84
|
%
|
Adjustment for prior year payable
|
|
|
0.54
|
%
|
|
|
1.81
|
%
|
|
|
0.00
|
%
|
Change in valuation allowance
|
|
|
(8.83
|
%)
|
|
|
(52.97
|
%)
|
|
|
(130.14
|
%)
|
Other
|
|
|
0.70
|
%
|
|
|
(5.16
|
%)
|
|
|
4.17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective rate
|
|
|
(0.18
|
%)
|
|
|
1.45
|
%
|
|
|
15.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The expense (benefit) for income taxes attributable to discontinued operations was $0 for each of the years ended
December 31, 2013, 2014 and 2015, respectively.
F-65
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Significant components of our deferred tax assets consist of the following:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
December 31
|
|
|
|
2014
|
|
|
2015
|
|
Net operating loss carryforwards
|
|
$
|
5,895
|
|
|
$
|
8,475
|
|
Prepaid licensing and royalty fees
|
|
|
369
|
|
|
|
1,035
|
|
Investments
|
|
|
|
|
|
|
814
|
|
Intangible assets and goodwill
|
|
|
509
|
|
|
|
282
|
|
Share-based compensation
|
|
|
242
|
|
|
|
271
|
|
Property, plant and equipment
|
|
|
6
|
|
|
|
91
|
|
Other
|
|
|
126
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,147
|
|
|
|
11,025
|
|
Less: valuation allowance
|
|
|
(7,147
|
)
|
|
|
(11,025
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets - net
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014, $0 of the net deferred tax assets were reported as current and included in other current assets
on the balance sheet.
Significant components of our deferred tax liabilities consist of the following:
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
December 31
|
|
|
|
2014
|
|
|
2015
|
|
Investment in affiliated companies, principally due to undistributed income
|
|
$
|
1,928
|
|
|
$
|
1,712
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014, $1.9 million of deferred tax liabilities were reported as non-current deferred tax liabilities
and included in other liabilities.
Our Company applied the amendments in the ASU No. 2015-17 prospectively, effective January 1, 2015, and
classified all deferred tax assets and liabilities as noncurrent accordingly. Prior periods were not retrospectively adjusted.
F-66
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
A reconciliation of the beginning and ending amounts of our valuation allowance on deferred tax assets for
the years ended December 31, 2013, 2014 and 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
18,333
|
|
|
$
|
4,754
|
|
|
$
|
7,147
|
|
Subsequent utilization of valuation allowance
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
Additions to valuation allowance
|
|
|
3,063
|
|
|
|
2,682
|
|
|
|
4,185
|
|
Divestitures
|
|
|
(16,616
|
)
|
|
|
|
|
|
|
|
|
Exchange differences
|
|
|
(19
|
)
|
|
|
(289
|
)
|
|
|
(307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
4,754
|
|
|
$
|
7,147
|
|
|
$
|
11,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
As of
December 31, 2015, we had net operating loss carryforwards available to offset future income, shown below by major jurisdictions:
|
|
|
|
|
|
|
Jurisdiction
|
|
Amount
|
|
|
Expiring year
|
Hong Kong
|
|
12,092
|
|
|
indefinite
|
Taiwan
|
|
|
27,167
|
|
|
2020~2025
|
|
|
|
|
|
|
|
|
|
|
39,259
|
|
|
|
|
|
|
|
|
|
|
F-67
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding the effects of accrued interest) for the years 2013, 2014 and 2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Balance at beginning of year
|
|
$
|
4,202
|
|
|
$
|
8,798
|
|
|
$
|
8,287
|
|
Current year increase (decrease)
|
|
|
4,173
|
|
|
|
|
|
|
|
|
|
Increase (decrease) related to prior year tax positions
|
|
|
375
|
|
|
|
|
|
|
|
(185
|
)
|
Settlement
|
|
|
|
|
|
|
|
|
|
|
(6,830
|
)
|
Exchange differences
|
|
|
48
|
|
|
|
(511
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
8,798
|
|
|
$
|
8,287
|
|
|
$
|
1,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013, 2014 and 2015, there were $8.8 million, $8.3 million and $1.2 million of unrecognized tax
benefits that if recognized would affect the effective tax rate. As of December 31, 2013, 2014 and 2015, $6.7 million, $6.4 million and $0 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, 2013, 2014 and 2015.
Our major tax paying components are all located in Taiwan. As of December 31, 2015, the income tax
filings in Taiwan have been examined for the years through 2013, but we have filed appeals for the 2009, 2011, 2012 and 2013 tax filings.
In 2013, 2014
and 2015, our unrecognized tax benefits were related to amortization of goodwill and intangible assets resulting from the acquisition of FunTown in 2006. The income tax authority has made decisions on the amortization for our tax filings through
2013. We have filed appeals against the unfavorable parts of the decision regarding these amortization adjustments, pending further response from the tax authority.
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 reasonably possible that a future examination may result in positive or
negative adjustment to our unrecognized tax benefit within the next 12 months.
F-68
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
NOTE 25.
RELATED-PARTY TRANSACTIONS
During 2014 and 2015, we have outsourced certain development of software to Double2 Network Technology Co., Ltd., an equity-method investee.
The operating costs amounted to $113 thousand and $108 thousand for the years ended December 31, 2014 and 2015, respectively.
NOTE 26.
COMMITMENTS AND CONTINGENCIES
Commitments
(a) Operating Leases
We rent certain properties
which are used as office premises under lease agreements that expire at various dates through 2017. The following table sets forth our future aggregate minimum lease payments required under these operating leases, as of December 31, 2015:
|
|
|
|
|
(in US$ thousands)
|
|
Amount
|
|
2016
|
|
|
302
|
|
2017
|
|
|
53
|
|
|
|
|
|
|
|
|
$
|
355
|
|
|
|
|
|
|
Rental expense for operating leases amounted to $1.0 million, $1.0 million and $909 thousand for the years ended
December 31, 2013, 2014 and 2015, respectively.
F-69
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
(b) License Agreements
We have contractual obligations under various license agreements to pay the licensors license fees and minimum guarantees against future royalties. The
following table summarizes the committed license fees and minimum guarantees against future royalties set forth in our significant license agreements as of December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
License fees
|
|
|
Minimum
guarantees
against future
royalties
|
|
|
Total
|
|
Minimum required payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2016
|
|
$
|
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
After 2016
|
|
|
5,000
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,000
|
|
|
$
|
1,500
|
|
|
$
|
6,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Contingencies
We are
subject to legal proceedings and claims that arise in the normal course of business. Currently there are no outstanding claims or litigations against us.
NOTE 27
.
SEGMENT, PRODUCT, GEOGRAPHIC AND OTHER INFORMATION
We currently have two operating segments: an Asian online game and service business segment, and a cloud service business segment. 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
medium-to-larger enterprises as well as public sectors.
F-70
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Financial information for each operating segment was as follows for the years ended December 31, 2013,
2014, and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Asian online
game and service
|
|
|
Cloud
service
business
|
|
|
Total
|
|
|
|
|
|
2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue from external customers
|
|
$
|
14,106
|
|
|
$
|
926
|
|
|
$
|
15,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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-71
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Asian online
game and service
|
|
|
Cloud
service
business
|
|
|
Total
|
|
|
|
|
|
2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue from external customers
|
|
$
|
8,199
|
|
|
$
|
1,580
|
|
|
$
|
9,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(8,639
|
)
|
|
$
|
(1,510
|
)
|
|
$
|
(10,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
93
|
|
|
$
|
7
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on property, plant and equipment
|
|
$
|
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on intangible assets
|
|
$
|
|
|
|
$
|
115
|
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees
|
|
$
|
1,259
|
|
|
$
|
|
|
|
$
|
1,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
31
|
|
|
$
|
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
243
|
|
|
$
|
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of marketable securities - net
|
|
$
|
8,792
|
|
|
$
|
|
|
|
$
|
8,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
|
$
|
(306
|
)
|
|
$
|
|
|
|
$
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on equity method investments - net
|
|
$
|
(531
|
)
|
|
$
|
|
|
|
$
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
239
|
|
|
$
|
28
|
|
|
$
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, including intangible assets
|
|
$
|
1,124
|
|
|
$
|
71
|
|
|
$
|
1,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefits)
|
|
$
|
(92
|
)
|
|
$
|
|
|
|
$
|
(92
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-72
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
Asian online
game and service
|
|
|
Cloud
service
business
|
|
|
Total
|
|
|
|
|
|
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue from external customers
|
|
$
|
8,545
|
|
|
$
|
1,706
|
|
|
$
|
10,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
(12,735
|
)
|
|
$
|
(1,240
|
)
|
|
$
|
(13,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
6
|
|
|
$
|
(23
|
)
|
|
$
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on property, plant and equipment
|
|
$
|
|
|
|
$
|
60
|
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on intangible assets
|
|
$
|
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees
|
|
$
|
4,187
|
|
|
$
|
|
|
|
$
|
4,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
12
|
|
|
$
|
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
128
|
|
|
$
|
1
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sales of marketable securities - net
|
|
$
|
19,939
|
|
|
$
|
|
|
|
$
|
19,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
|
$
|
(145
|
)
|
|
$
|
|
|
|
$
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on equity method investments - net
|
|
$
|
(600
|
)
|
|
$
|
|
|
|
$
|
(600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on marketable securities and investments
|
|
$
|
1,290
|
|
|
$
|
|
|
|
$
|
1,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
233
|
|
|
$
|
40
|
|
|
$
|
273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization, including intangible assets
|
|
$
|
212
|
|
|
$
|
32
|
|
|
$
|
244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefits)
|
|
$
|
(14
|
)
|
|
$
|
|
|
|
$
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-73
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
The reconciliations of segment information to GigaMedias consolidated totals are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Loss from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
(34,895
|
)
|
|
$
|
(10,149
|
)
|
|
$
|
(13,975
|
)
|
Adjustment*
|
|
|
(3,592
|
)
|
|
|
(3,324
|
)
|
|
|
(6,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
(38,487
|
)
|
|
$
|
(13,473
|
)
|
|
$
|
(19,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
(156
|
)
|
|
$
|
100
|
|
|
$
|
(17
|
)
|
Adjustment*
|
|
|
375
|
|
|
|
(79
|
)
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
219
|
|
|
$
|
21
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on property, plant and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
|
|
|
$
|
28
|
|
|
$
|
60
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
|
|
|
$
|
28
|
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
13,251
|
|
|
$
|
115
|
|
|
$
|
5
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
13,251
|
|
|
$
|
115
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on prepaid licensing and royalty fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
2,752
|
|
|
$
|
1,259
|
|
|
$
|
4,187
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
2,752
|
|
|
$
|
1,259
|
|
|
$
|
4,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
9
|
|
|
$
|
31
|
|
|
$
|
12
|
|
Adjustment*
|
|
|
229
|
|
|
|
651
|
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
238
|
|
|
$
|
682
|
|
|
$
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
8
|
|
|
$
|
243
|
|
|
$
|
129
|
|
Adjustment*
|
|
|
41
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
49
|
|
|
$
|
243
|
|
|
$
|
182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sales of marketable securities - net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
1,739
|
|
|
$
|
8,792
|
|
|
$
|
19,939
|
|
Adjustments*
|
|
|
|
|
|
|
(171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
1,739
|
|
|
$
|
8,621
|
|
|
$
|
19,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
236
|
|
|
$
|
(306
|
)
|
|
$
|
(145
|
)
|
Adjustments*
|
|
|
(191
|
)
|
|
|
(250
|
)
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
45
|
|
|
$
|
(556
|
)
|
|
$
|
(397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-74
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Gain (loss) on equity method investments - net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
526
|
|
|
$
|
(531
|
)
|
|
$
|
(600
|
)
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
526
|
|
|
$
|
(531
|
)
|
|
$
|
(600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on marketable securities and investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,290
|
|
Adjustment*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
344
|
|
|
$
|
267
|
|
|
$
|
273
|
|
Adjustments*
|
|
|
64
|
|
|
|
39
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
408
|
|
|
$
|
306
|
|
|
$
|
294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
1,904
|
|
|
$
|
1,195
|
|
|
$
|
244
|
|
Adjustments*
|
|
|
3
|
|
|
|
16
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
1,907
|
|
|
$
|
1,211
|
|
|
$
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments
|
|
$
|
228
|
|
|
$
|
(92
|
)
|
|
$
|
(14
|
)
|
Adjustments*
|
|
|
(167
|
)
|
|
|
19
|
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GigaMedia consolidated
|
|
$
|
61
|
|
|
$
|
(73
|
)
|
|
$
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjustment items include corporate and certain back-office costs and expenses not attributable to any specific segment. As of December 31, 2013, 2014 and 2015, the compensation related was approximately $2.1
million, $1.7 million and $1.3 million, respectively; professional fees was approximately $125 thousand, $174 thousand and $587 thousand, respectively. The termination charge of proposed acquisition of $2.0 million in 2015 is also included in the
adjustments.
|
F-75
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
Major Product Lines
Revenues from the Companys major product lines are summarized as follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
MahJong and casino casual games
|
|
$
|
7,065
|
|
|
$
|
4,301
|
|
|
$
|
3,113
|
|
PC massively multiplayer online games
|
|
|
6,968
|
|
|
|
1,908
|
|
|
|
1,670
|
|
Mobile role playing games
|
|
|
|
|
|
|
1,914
|
|
|
|
2,807
|
|
Other games and game related revenues
|
|
|
73
|
|
|
|
76
|
|
|
|
955
|
|
Cloud computing services
|
|
|
926
|
|
|
|
1,580
|
|
|
|
1,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,032
|
|
|
$
|
9,779
|
|
|
$
|
10,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Customers
No single customer represented 10 percent or more of GigaMedias consolidated total net revenues in any period presented.
F-76
GIGAMEDIA LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 31, 2013, 2014 AND 2015
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
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Taiwan
|
|
$
|
11,793
|
|
|
$
|
7,413
|
|
|
$
|
6,889
|
|
Hong Kong
|
|
|
3,239
|
|
|
|
2,366
|
|
|
|
3,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,032
|
|
|
$
|
9,779
|
|
|
$
|
10,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible long-lived assets by geographic region are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands)
|
|
December 31,
|
|
Geographic region / country
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Taiwan
|
|
$
|
1,657
|
|
|
$
|
1,641
|
|
|
$
|
1,320
|
|
Hong Kong
|
|
|
20
|
|
|
|
22
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,677
|
|
|
$
|
1,663
|
|
|
$
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 28.
SUBSEQUENT EVENTS
Divestiture of PerfectPairs
In
January 2016, we disposed of PerfectPairs Gaming Co., Ltd. (PerfectPairs), a Taiwan-based subsidiary of our Asian online game and service business operations, by selling 100% of PerfectPairs shares to two Taiwanese individuals unrelated
to our Group for total cash considerations approximating $746 thousand. Upon the disposal, we deconsolidated PerfectPairs and recognized a disposal gain of approximately $797 thousand in 2016.
Disposal of Owned Office Premises
In January
2016, we entered into disposal agreements to sell certain office premises which were not used for our principal business to several counterparties unrelated to our Group, for total cash considerations approximating $1.8 million. The closing of
the disposals occurred in March 2016. Upon the closing, we recognized disposal gains of approximately $673 thousand.
F-77