GigaMedia (GIGM) - 2024 Q4 - Annual Report

PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS This item is not applicable to the report, indicating no specific disclosures are required or provided regarding the identity of directors, senior management, and advisers - The company states that Item 1, concerning the identity of directors, senior management, and advisers, is not applicable[22] ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE This item is not applicable to the report, indicating no specific disclosures are required or provided regarding offer statistics and expected timetable - The company states that Item 2, concerning offer statistics and expected timetable, is not applicable[23] ITEM 3. KEY INFORMATION This section outlines key information about GigaMedia, including its non-applicability for capitalization and indebtedness, and reasons for the offer, primarily focusing on a comprehensive list of risk factors that could materially affect the company's business, financial condition, and results of operations A. [Reserved] This sub-section is reserved, indicating no specific content is provided - Item 3.A is reserved, indicating no specific content for this sub-section[24] B. Capitalization and Indebtedness This sub-section on capitalization and indebtedness is not applicable to the report - The company states that Item 3.B, concerning capitalization and indebtedness, is not applicable[24] C. Reasons for the Offer and Use of Proceeds This sub-section on reasons for the offer and use of proceeds is not applicable to the report - The company states that Item 3.C, concerning reasons for the offer and use of proceeds, is not applicable[25] D. Risk Factors This section details various risks that could materially affect GigaMedia's business, financial condition, and operating results, including market competition, technological changes, geopolitical factors, and share ownership risks - The company's future operating results are highly uncertain and depend on factors like the popularity of digital entertainment services, introduction of new services, economic conditions, customer preferences, regulatory risks, and competition from other entertainment forms[26][27][28] - A substantial portion of digital entertainment revenue comes from PC-based online games (MahJong, casual games, Tales Runner, Yume100), which have seen declining popularity due to a shift in player preferences, potentially adversely affecting business[27] - The company faces intense competition in the digital entertainment market from online game operators in Taiwan and Hong Kong (e.g., Soft-World, IGS, UserJoy, GodGame), as well as offline entertainment[33][34] - GigaMedia incurred consolidated operating losses of US$3.7 million, US$3.2 million, and US$3.0 million, and net losses of US$2.3 million, US$3.4 million, and US$2.8 million in 2024, 2023, and 2022, respectively, with future profitability dependent on digital entertainment performance and non-operating aspects[36] - The company's growth strategy involves acquisitions and strategic investments, which carry risks such as diversion of management resources, business disruption, unfamiliarity with new markets, integration difficulties, and potential dilution to stockholders[38][39][40][42] - Dependence on third-party network suppliers and Google Cloud for mobile services poses risks of service interruptions, reduced capacity, and increased costs, which could negatively impact operations and harm the business[50][51][52] - The company faces risks of intellectual property infringement claims and may incur significant expenses to protect its own IP rights, especially given the evolving nature of IP laws in Internet-related industries in Taiwan and Hong Kong[56][57][58][59] - Cybersecurity incidents, including physical damage, power loss, telecommunications failure, hardware/software defects, and cyber-attacks, could disrupt operations, lead to revenue loss, increased costs, significant liability, and reputational harm[61][62][63][64][65][67][69][70][71] - Operations in Taiwan, Hong Kong, and Macau are exposed to risks from political instability, natural disasters, epidemics, and geopolitical tensions, particularly the tense relationship between Taiwan and the PRC, which could affect business and financial results[75][76] - Fluctuations in exchange rates, especially between the U.S. dollar and NT/Hong Kong dollars, can positively or negatively affect reported results, with no assurance against future currency losses[79] - The company's shares have historically been volatile, and failure to meet Nasdaq listing standards (e.g., $1.00 minimum bid price) could lead to delisting, adversely affecting stock prices and investor standing[80][81][82] - Mr. John-Lee Andre Koo beneficially owns 19.54% of outstanding shares as of March 31, 2025, giving him considerable influence over corporate transactions, which may differ from other shareholders' interests[83][264] - There is a risk that GigaMedia could be deemed an investment company under the U.S. Investment Company Act of 1940 due to significant cash and securities holdings, which could have a negative impact on operations and require asset restructuring[91][93][94][95] - It is likely that GigaMedia was classified as a Passive Foreign Investment Company (PFIC) for the taxable year ended December 31, 2024, and will likely be one for 2025, potentially subjecting U.S. shareholders to adverse tax consequences[96][97] ITEM 4. INFORMATION ON THE COMPANY This section provides an overview of GigaMedia's history, business operations, organizational structure, and property, detailing its founding, digital entertainment services, revenue models, marketing, distribution, infrastructure, regulatory environment, and competitive landscape A. History and Development of Our Company This sub-section outlines GigaMedia's corporate history, including its incorporation, public offering, key acquisitions, and current principal executive office location - GigaMedia Limited was incorporated in Singapore in September 1999 for a public equity offering, following the founding of Hoshin GigaMedia in Taiwan in October 1998[98] - The company completed its initial public offering in February 2000, with shares traded on The Nasdaq Capital Market under the symbol GIGM[99] - In January 2006, GigaMedia acquired FunTown, a digital entertainment business operating in Taiwan and Hong Kong[100] - The principal executive office is located in Taipei, Taiwan, and the company's Singapore registration number is 199905474H[101] B. Business Overview This sub-section describes GigaMedia's digital entertainment services, revenue models, game offerings, marketing strategies, distribution channels, customer base, competitive landscape, seasonality, and regulatory environment - GigaMedia is a diversified provider of digital entertainment services in Taiwan, Hong Kong, and Macau, operating FunTown, a leading digital entertainment portal focused on mobile and browser-based casual games in Asia[103][104] - The primary revenue model is 'Item-Billing,' where users access basic game functions for free but purchase in-game value-added services, virtual items, and premium features to enhance their experience[106] - The company develops and offers various local versions of MahJong and other casual card/table games through its FunTown platform, aiming to be one of the most popular online MahJong networks in Taiwan[108][109][113][114] Revenues from MahJong and Other Casual Games (2022-2024) | Year | Revenue (US$ million) | | :--- | :-------------------- | | 2024 | 1.1 | | 2023 | 1.1 | | 2022 | 1.3 | - GigaMedia also offers role-playing and sports games, including the PC-based 'Tales Runner' and the mobile role-playing game 'Yume100,' which had accumulated sales revenues of approximately US$13.0 million by December 31, 2024[116][119] Revenues from Tales Runner (2022-2024) | Year | Revenue (US$ million) | | :--- | :-------------------- | | 2024 | 1.5 | | 2023 | 2.7 | | 2022 | 3.4 | - The decline in Tales Runner revenues is attributed to decreased gamer participation due to a lack of exciting new content, leading to a drop in monthly average revenue per paying user (ARPPU) from $100 in 2023 to $80 in 2024[117] - The company invests in in-house development of casual games (approx. $0.7 million in 2024) and licenses role-playing and sports games from developers in various regions, paying upfront fees and ongoing royalties[121][122][123][125] - FunTown platform services include Player Clubs, Tournaments, Avatars, Friends and Family Messenger, Online Chatting System, Customer Services, Mobile Platforms, and a Customer Platform called Dream Village, which also functions as a payment gateway[131] - Marketing strategies leverage established brand names and diverse distribution networks, including in-game events, online advertising (YouTube, Google, Meta), and offline promotions (TV, outdoor ads, trade shows, fan meetings)[128][129][130][132] - Distribution and payment channels include Internet-based platforms (official website, Google Play, Apple App Store), telecommunication network operators, payment aggregators, and offline physical channels (convenience chain stores)[133][134][135][136][137] - As of December 31, 2024, GigaMedia had approximately 9.1 million unique registered customers, mostly in Taiwan, with about 19,000 active paying users and monthly ARPPU ranging from $30 to $80[140] - The digital entertainment business faces intense competition from online game operators in Taiwan and Hong Kong (Soft-World, IGS, UserJoy, GodGame) and other entertainment forms, with low entry barriers attracting new competitors[141][142][143] - The business experiences seasonality, with stronger revenues in the first and third quarters due to Chinese New Year, student vacations, and anniversary promotions[144] - Operations are subject to various digital entertainment laws and regulations in Taiwan and Hong Kong, including the Protection of Children and Youths Welfare and Rights Act, Game Software Rating Management Regulations, Online Game Regulations and Standard Contract Template, and Personal Data Protection Acts[145][146][147][148][149][150][151][152][153] - Under Singapore tax regulations, foreign-sourced dividend income used for capital expenditures and debt repayment is not taxable in Singapore[154][216] - GigaMedia, as a foreign private issuer incorporated in Singapore, relies on home country practice for exemption from Nasdaq's Direct Registration Program (DRS) eligibility requirements, as Singapore law mandates physical share certificates[155][156][157] C. Organizational Structure This sub-section details GigaMedia's corporate structure, including its incorporation in Singapore, principal operating subsidiaries, and the dissolution of certain entities - GigaMedia Limited was incorporated in Singapore on September 13, 1999. Its principal operating subsidiaries include Hoshin GigaMedia (Taiwan) and FunTown World Limited (British Virgin Islands), which operate digital entertainment services in Taiwan, Hong Kong, and Macau[158] - The company does not utilize variable-interest entities in its operations[158] Principal Subsidiaries and Their Incorporation Details | Entity | Place of Incorporation | Relationship | | :------------------------------------- | :--------------------- | :------------------ | | GigaMedia International Holdings Limited | British Virgin Islands | Wholly owned subsidiary | | GIGM Corporation | Cayman Islands | Wholly owned subsidiary | | GigaMedia Online Entertainment Corp. | Cayman Islands | Wholly owned subsidiary | | FunTown World Limited | British Virgin Islands | Wholly owned subsidiary | | FunTown Hong Kong Limited | Hong Kong | Wholly owned subsidiary | | Hoshin GigaMedia Center Inc. | Taiwan | Wholly owned subsidiary | | GigaMedia Development Corporation | Taiwan | Wholly owned subsidiary | | GigaMedia Cloud Services Co. Ltd. | Taiwan | Wholly owned subsidiary | - GigaMedia (HK) Limited was deregistered and dissolved on February 21, 2025, and GigaMedia Cloud Services Co., Ltd. was dissolved on March 5, 2025[162][163] D. Property, Plant and Equipment This sub-section provides information on the company's leased office spaces in Taipei and Hong Kong - As of April 6, 2025, the company leased approximately 28,000 square feet for its corporate head office in Taipei, Taiwan, and about 4,000 square feet for FunTown's office in Hong Kong[164] ITEM 4A. UNRESOLVED STAFF COMMENTS This item indicates that there are no unresolved staff comments from the SEC - There are no unresolved staff comments[165] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section provides a detailed analysis of GigaMedia's financial condition and results of operations for 2022-2024, covering operating results, significant investments, liquidity, capital resources, R&D, market trends, and critical accounting estimates, highlighting revenue and gross profit declines alongside expense control efforts A. Operating Results This sub-section presents GigaMedia's consolidated statements of operations and balance sheet data, detailing revenues, costs, gross profit, operating expenses, and net loss, along with insights into segment performance and investment activities Consolidated Statements of Operations Data (2022-2024) | CONSOLIDATED STATEMENTS OF OPERATIONS DATA: | 2024 | 2023 | 2022 | | :------------------------------------------ | :-------- | :-------- | :-------- | | OPERATING REVENUES | | | | | Digital entertainment service revenues | $ 2,969 | $ 4,292 | $ 5,585 | | COSTS OF REVENUES | | | | | Cost of digital entertainment service revenues | (1,494) | (1,846) | (2,335) | | GROSS PROFIT | 1,475 | 2,446 | 3,250 | | OPERATING EXPENSES | | | | | Product development and engineering expenses | (694) | (729) | (1,110) | | Selling and marketing expenses | (1,451) | (1,623) | (1,644) | | General and administrative expenses | (3,030) | (3,242) | (3,515) | | Other | (1) | (7) | (2) | | Total operating expense | (5,176) | (5,601) | (6,271) | | Loss from operations | (3,701) | (3,155) | (3,021) | | Net loss attributable to shareholders of GigaMedia | $ (2,296) | $ (3,399) | $ (2,752) | | Loss per share (Basic and diluted) | $ (0.21) | $ (0.31) | $ (0.25) | Consolidated Balance Sheet Data (2023-2024) | CONSOLIDATED BALANCE SHEET DATA: | 2024 | 2023 | | :------------------------------- | :-------- | :-------- | | Total current assets | $ 35,433 | $ 39,207 | | Investment in securities - noncurrent | 5,441 | 5,777 | | Property, plant and equipment-net | 101 | 111 | | Intangible assets-net | 7 | 13 | | Total assets | 42,358 | 46,497 | | Total current liabilities | 1,931 | 2,464 | | Total GigaMedia's shareholders' equity | 40,343 | 43,538 | | Number of issued shares (in thousands) | 11,052 | 11,052 | - GigaMedia's sole segment is digital entertainment services, operating FunTown in Taiwan, Hong Kong, and Macau, facing intense competition from other online game operators and potential new entrants[170][171][172] - The company has made multiple investments in convertible notes issued by Aeolus Robotics Corporation, with principal amounts totaling US$10 million initially, and additional notes purchased in 2023, 2024, and 2025[173][174][175][176][178][179][180][181] - Digital entertainment service revenues decreased by 30.8% in 2024 from 2023, with mobile game revenues declining to US$0.3 million (from US$0.4 million) and a licensed sports game revenue decreasing by 42.9% to US$1.5 million (from US$2.7 million)[195] - The decline in revenues is primarily attributed to reduced gamer participation due to a lack of exciting new content, leading to a decrease in monthly ARPPU from $40-$100 in 2023 to $30-$80 in 2024[195][220] - Gross profit decreased by 39.7% to US$1.5 million in 2024 from US$2.4 million in 2023, with gross margin falling from 57.0% to 49.7%, mainly due to decreased revenues against comparatively fixed operating costs[197] - Total operating expenses decreased by 7.6% to US$5.2 million in 2024, reflecting efforts to curb expenditure growth in an inflationary environment[199][200] - Product development and engineering expenses remained at US$0.7 million in 2024 and 2023, down from US$1.1 million in 2022, due to workforce streamlining[201] - Non-operating income, net, was US$1.4 million in 2024, a significant increase from non-operating expenses of US$0.2 million in 2023, primarily driven by changes in the fair value of Aeolus investments and interest income[204] - No significant income tax benefits or expenses were incurred in 2024 and 2023, with full allowance provided against all deferred tax assets[205] B. Liquidity and Capital Resources This sub-section details GigaMedia's liquidity sources, cash flow activities, and contractual obligations, highlighting its reliance on cash on deposit and investments in convertible notes - The principal source of liquidity in 2024 was cash on deposit, held primarily in U.S. dollars and NT dollars, with a policy to maintain sufficient cash for operations and strategic transactions while investing remaining funds in higher-yield instruments[206] - The company had zero bank borrowing as of December 31, 2024 and 2023, but maintains strong relationships with financial institutions for potential lines of credit[206] Summary of Cash Flows (2022-2024) | (in US$ thousands) | 2024 | 2023 | 2022 | | :-------------------------------------------------- | :-------- | :-------- | :-------- | | Net cash used in operating activities | $ (2,333) | $ (1,193) | $ (2,509) | | Net cash provided by (used in) investing activities | (1,113) | 837 | (70) | | Net cash used in financing activities | — | — | — | | Exchange difference | (243) | 32 | (75) | | Net decrease in cash, cash equivalents and restricted cash | (3,689) | (324) | (2,654) | | Cash, cash equivalents and restricted cash at beginning of year | 38,783 | 39,107 | 41,761 | | Cash, cash equivalents and restricted cash at end of year | $ 35,094 | $ 38,783 | $ 39,107 | - Net cash used in operating activities was US$2.3 million in 2024, primarily due to US$6.1 million paid to employees, suppliers, and vendors, offset by US$3.1 million collected from customers[208] - Net cash used in investing activities was US$1.1 million in 2024, mainly reflecting the purchase of convertible notes from Aeolus[209] - The company believes existing cash, cash equivalents, and restricted cash, along with potential short-term borrowings, will be sufficient to meet capital expenditure, debt, and operating cash obligations through 2025[211] Contractual Obligations as of December 31, 2024 (in US$ thousands) | Payment Due by Period (in US$ thousands) | Within 1 year | 1-3 years | 3-5 years | >5 years | Total | | :--------------------------------------- | :------------ | :-------- | :-------- | :------- | :---- | | Operating leases | $ — | $ 421 | $ 84 | $ — | $ 505 | - Capital expenditures for equipment, furniture, fixtures, intangible assets, and other deferred assets were US$50 thousand in 2024, primarily for software and computer hardware for digital entertainment and general corporate use[214] - Hoshin GigaMedia's legal reserves were US$0 as of December 31, 2024 and 2023, down from US$1.5 million in 2022, as all legal reserves were used to offset deficits in 2023[217] C. Research, Development, Patents and Licenses, etc. This sub-section details GigaMedia's R&D expenses and its commitment to technological advancements and product development in digital entertainment Research and Development Expenses (2022-2024) | Year | R&D Expenses (US$ million) | | :--- | :------------------------- | | 2024 | 0.7 | | 2023 | 0.7 | | 2022 | 1.1 | - The company invests in R&D to keep pace with technology advancements and product development in its digital entertainment service business[218] D. Trend Information This sub-section discusses key trends in the digital entertainment industry, including the shift to mobile platforms and GigaMedia's strategic response to declining gamer participation and ARPPU - The digital entertainment industry is shifting from PC-based to browser/mobile platforms, with strong demand for casual browser/mobile games in Taiwan and Hong Kong[219] - GigaMedia is transitioning its game portfolio from social casino games for PC to other genres for casual leisure and mobile play, leveraging its expertise in casino games like poker, slots, and MahJong[220] - In 2024, the company experienced a decline in gamer participation and monthly ARPPU (from $100 in 2023 to $80 in 2024) due to a lack of satisfactorily exciting new content[220] E. Critical Accounting Estimates This sub-section outlines GigaMedia's critical accounting estimates, focusing on revenue recognition and the valuation of investment in securities, which involve significant judgments and assumptions - Critical accounting estimates include revenue recognition and deferral, and valuation of investment in securities, which involve significant judgments and assumptions that could materially affect financial results[223][225] - Revenues from virtual goods are recognized over the estimated service period, typically less than 6 months, using the output method. Breakage (unexercised rights) is recognized as revenue when the likelihood of exercise becomes remote[226][227][228][229] - A hypothetical 10% increase in the estimated service period would decrease earnings by $7 thousand in 2024, while a 10% decrease would increase earnings by $9 thousand[231] - Investment in securities are valued using techniques that maximize observable inputs (Level 1, 2) and minimize unobservable inputs (Level 3), relying on quoted market prices or valuation techniques like income and market approaches[232][233][236] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section details GigaMedia's leadership, compensation practices, board structure, and employee demographics, listing directors and executive officers, their roles, compensation, share option plans, board committee structures, and a breakdown of employee numbers by function and location A. Directors and Senior Management This sub-section lists the directors and executive officers of GigaMedia, their ages, positions, and appointment years, confirming no family relationships among them Directors and Executive Officers as of Report Date | Name | Age | Position | Year Appointed to Current Position | | :-------------------- | :-- | :-------------------------------------------------------------------- | :--------------------------------- | | HUANG, James Cheng-Ming | 70 | Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Director | 2017 | | HUANG, John Ping Chang | 73 | Chairman of the Compensation Committee of the Board and Independent Non-Executive Director | 2012/2011 | | LIU, Nick Chia-En | 63 | Independent Non-Executive Director | 2011 | | HONG, Chin Fock (Damian)| 77 | Independent Non-Executive Director | 2013 | | LIN, Wan-Wan | 62 | Chairman of the Audit Committee of the Board and Independent Non-Executive Director | 2023 | | TSAI, Chih-Hong | 70 | Independent Non-Executive Director | 2023 | - There are no family relationships among any of the executive officers or directors[247] B. Compensation This sub-section details the aggregate cash compensation paid to directors and executive officers, outstanding share options, and the company's compensation recovery policy - For the year ended December 31, 2024, the aggregate cash compensation paid to directors and executive officers was approximately US$0.5 million[248] - As of December 31, 2024, the total outstanding number of share options granted to directors and officers was 4,000, with zero restricted stock units outstanding[249] Outstanding Options for Directors and Executive Officers (as of March 31, 2025) | Date of Grant | Ordinary Shares Underlying Outstanding Options | Exercise Price ($/Share) | Date of Expiration | | :------------ | :------------------------------------------- | :----------------------- | :----------------- | | May 5, 2017 | 4,000 | 2.90 | May 5, 2027 | | Total | 4,000 | | | - The company has three employee share option and equity incentive plans (2004, 2006, and 2007 Plans), with the 2007 Plan still having outstanding awards[251][252][254] - The Board of Directors adopted a written compensation recovery (clawback) policy on October 30, 2023, in compliance with SEC rules, for incentive-based compensation in the event of accounting restatements[256] C. Board Practices This sub-section describes the composition of GigaMedia's board of directors, the structure and responsibilities of its Audit and Compensation Committees, and the process for director nominations - The board of directors consists of six members (five male, one female), including five independent non-executive directors. Directors are elected by shareholders or appointed by the board and serve until a successor is qualified or until earlier termination[257] - The company has a standing Audit Committee and Compensation Committee, both operating under written charters. All members of these committees are independent directors[257][258][259] - The Audit Committee, comprising Wan-Wan LIN (Chair), Nick Chia-En LIU, and Chih-Hong TSAI, met five times in fiscal 2024 and oversees auditing, accounting, risk management (including cybersecurity), and related-party transactions[258] - The Compensation Committee, consisting of John Ping Chang HUANG (Chair) and Wan-Wan LIN, met two times in fiscal 2024 and reviews and approves executive compensation goals, evaluates performance, and makes recommendations on compensation plans[259] - The company does not have a separate nominations committee; director nominees are recommended by a majority of independent directors[260] D. Employees This sub-section provides a breakdown of GigaMedia's full-time employees by function and geographic location for the years 2022-2024, showing a slight decrease in total employees Full-time Employees by Function (2022-2024) | Function | 2024 | 2023 | 2022 | | :------------------ | :--- | :--- | :--- | | Development | 23 | 27 | 27 | | Operation | 30 | 33 | 37 | | Customer Service | 13 | 13 | 13 | | Administrative Support | 21 | 23 | 24 | | Total | 87 | 96 | 101 | Full-time Employees by Geographic Location (2022-2024) | Location | 2024 | 2023 | 2022 | | :---------------- | :--- | :--- | :--- | | Taipei City, Taiwan | 74 | 83 | 87 | | Hong Kong | 13 | 13 | 14 | | Total | 87 | 96 | 101 | E. Share Ownership This sub-section presents the share ownership of GigaMedia's directors and executive officers as of March 31, 2025, including common shares and shares issuable upon option exercise Share Ownership of Directors and Executive Officers (as of March 31, 2025) | Person | Number of Common Shares | Number of Shares Issuable upon exercise of options | | :---------------------- | :---------------------- | :----------------------------------------------- | | HUANG, James Cheng-Ming | 1,073,566 | 4,000 | | HUANG, John Ping Chang | — | — | | LIU, Nick Chia-En | — | — | | LIN, Charlotte Wan-Wan. | — | — | | TSAI, John Chih-Hong | — | — | | HONG, Chin Fock | — | — | | Directors and executive officers as a group of 6 individuals | 1,073,566 | 4,000 | F. Disclosure of Action to Recover Erroneously Awarded Compensation This item is not applicable, as the full text of the compensation recovery policy is incorporated by reference to an exhibit - This item is not applicable, as the full text of the compensation recovery policy is incorporated by reference to Exhibit 97.1 of the 2023 annual report[263] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section identifies GigaMedia's major shareholders and confirms the absence of material related-party transactions outside the ordinary course of business from January 1, 2024, through March 31, 2025 A. Major Shareholders This sub-section lists GigaMedia's major shareholders, their shareholdings, and percentages of ownership as of March 31, 2025, and confirms equal voting rights for all shares Major Shareholders (as of March 31, 2025) | Name of Owner | Shares Owned | Percentage of Shares Owned | | :-------------------- | :----------- | :------------------------- | | John-Lee Andre Koo | 2,159,999 | 19.54% | | James Cheng-Ming Huang| 1,073,566 | 9.71% | | Collin Hwang | 696,435 | 6.30% | | Jonathan Honig | 1,105,145 | 9.99% | - As of March 31, 2025, 11,052,235 Shares were outstanding, with 54.44% not held by major shareholders. Cede & Co., a U.S. shareholder of record, held 8,732,727 shares[265] - No major shareholders have voting rights different from those of other shareholders[266] B. Related Party Transactions This sub-section confirms that GigaMedia was not involved in any material related-party transactions outside the ordinary course of business during the specified period - From January 1, 2024, through March 31, 2025, the company was not a party to any material related-party transactions outside the ordinary course of business[267] C. Interests of Experts and Counsel This item is not applicable - This item is not applicable[268] ITEM 8. FINANCIAL INFORMATION This section refers to the consolidated financial statements provided elsewhere in the report and outlines the company's dividend policy, confirming no significant changes since the financial statements' date A. Consolidated Statements and Other Financial Information This sub-section directs to the location of the consolidated financial statements and clarifies the company's dividend policy - The consolidated financial statements are located starting on page F-1 of the annual report[270] - The company has neither declared nor paid any dividends on its shares and anticipates retaining future earnings for business operations, with no intention to pay dividends in the foreseeable future[271] B. Significant Changes This sub-section confirms that no significant changes have occurred since the date of the consolidated financial statements, except as disclosed in the annual report - Except as disclosed in the annual report, no significant changes have occurred since the date of the consolidated financial statements[272] ITEM 9. THE OFFER AND LISTING This section confirms that GigaMedia's shares have been listed and traded on The Nasdaq Capital Market under the symbol "GIGM" since February 18, 2000 - GigaMedia's shares have been listed and traded on The Nasdaq Capital Market under the symbol "GIGM" since February 18, 2000[273] ITEM 10. ADDITIONAL INFORMATION This section provides additional corporate information, including the non-applicability of share capital, details on the company's memorandum and articles of association, material contracts (specifically investments in Aeolus convertible notes), exchange controls in the R.O.C., and tax considerations for Singapore and U.S. shareholders, and where to access public filings A. Share Capital This item is not applicable - This item is not applicable[274] B. Memorandum and Articles of Association This sub-section refers to the company's amended and restated memorandum and articles of association and confirms no limitations on non-resident or foreign owners' rights to hold or vote shares - The company's current amended and restated memorandum and articles of association (the "Constitution") were filed as an exhibit to its 2014 annual report[275] - There are no limitations under Singapore law or the Constitution on the right of a non-resident or foreign owner to hold or vote the Shares[276] C. Material Contracts This sub-section details GigaMedia's material contracts, specifically its convertible note purchase agreements and subsequent investments with Aeolus Robotics Corporation - GigaMedia entered into a convertible note purchase agreement with Aeolus Robotics Corporation on August 31, 2020, for a US$10,000,000 principal amount convertible promissory note[278] - In December 2021, GigaMedia converted US$2,000,000 of the principal into 735,835 Series B Preferred Shares of Aeolus at US$2.718 per share[279] - The maturity date of the original note was extended multiple times, most recently to February 28, 2026, at Aeolus's option, with the remaining principal amount of US$7,000,000 bearing 4% interest per annum[280][282][283] - Additional convertible promissory notes were purchased from Aeolus in 2023, 2024, and 2025, with principal amounts ranging from US$52,674 to US$2,600,000, bearing 4.5% interest per annum and convertible at various prices[284][285] D. Exchange Controls This sub-section outlines the foreign currency remittance limits for R.O.C. companies, resident individuals, and foreign persons without requiring foreign exchange approval - R.O.C. companies and resident individuals can remit up to US$50 million and US$5 million, respectively, in foreign currency to and from the R.O.C. annually without foreign exchange approval[287] - Foreign persons can remit up to US$100,000 in foreign currencies per remittance to and from the R.O.C. without foreign exchange approval[288] E. Taxation This sub-section details tax considerations for Singapore and U.S. shareholders, including dividend taxation, capital gains, stamp duty, estate duty, GST, and the implications of GigaMedia's likely classification as a Passive Foreign Investment Company (PFIC) - Dividends paid by GigaMedia may be taxable in Singapore if received in Singapore or derived from a trade/business there, though foreign-sourced dividends can be exempt if certain conditions (e.g., similar foreign income tax, 15% foreign tax rate) are met[289][290] - Singapore does not impose taxes on capital gains, but gains on share disposal may be subject to income tax if construed as arising from a trade or business in Singapore[293] - Stamp duty is payable on the transfer of existing shares acquired in Singapore at S$2.00 per S$1,000 of consideration or market value, borne by the purchaser[294] - Estate duty in Singapore was abolished for deaths occurring on or after February 15, 2008[297] - The sale of shares by a Singapore-based investor to a person outside Singapore is generally a zero-rated taxable supply for GST purposes, allowing full recovery of incurred GST[300][301] - GigaMedia believes it was likely classified as a Passive Foreign Investment Company (PFIC) for 2024 and will likely be one for 2025, potentially subjecting U.S. persons holding shares to special, penalizing tax rules unless a mark-to-market election is made[308][309][310][313] - U.S. persons are urged to consult tax advisors regarding PFIC rules, mark-to-market elections, and annual reporting requirements (IRS Form 8621 and FinCEN Report 114)[316][321][323] - Dividends received by U.S. persons are generally treated as ordinary income. As there is no tax treaty between the U.S. and Singapore, reduced tax rates for qualified dividend income may not apply[317] - Gain or loss from the sale or disposition of shares by a U.S. person is generally recognized as capital gain or loss, treated as U.S. source income for foreign tax credit purposes[320] F. Dividends and Paying Agents This item is not applicable - This item is not applicable[324] G. Statements by Experts This item is not applicable - This item is not applicable[325] H. Documents on Display This sub-section informs about the availability of the company's reports and information on the SEC's website and highlights GigaMedia's exemptions as a foreign private issuer - The SEC maintains an Internet site (www.sec.gov) where reports and other information filed electronically by the company can be accessed[326] - As a foreign private issuer, GigaMedia is exempt from certain SEC rules, including those for proxy statements and Section 16 reporting, and files periodic reports less frequently than U.S. companies[328] I. Subsidiary Information This item is not applicable - This item is not applicable[329] J. Annual Report to Security Holders This sub-section states that if an annual report to security holders is required under Form 6-K, it will be submitted in electronic format - If required to furnish an annual report to security holders under Form 6-K, the company will submit it in electronic format[330] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses GigaMedia's exposure to market risks, primarily foreign currency and interest rate risks, detailing the impact of exchange rate fluctuations, mitigation strategies, and risks related to investments in privately held companies Foreign Currency Risk This sub-section describes GigaMedia's exposure to foreign currency fluctuations, the impact on its financial instruments, and its strategy to mitigate this risk - GigaMedia's subsidiaries conduct most business in their functional currencies, limiting operational foreign currency risks. However, assets/liabilities in other currencies are subject to exchange rate fluctuations[333] - As of December 31, 2024, the company held approximately US$3.0 million in bank deposits and US$3.8 million in financial instruments denominated in foreign currencies, leading to a realized foreign exchange loss of US$21 thousand and an unrealized loss of US$405 thousand in 2024[334] - A hypothetical 10% change in exchange rates between the U.S. dollar and underlying currencies would result in a 0.21% change in total equity as of December 31, 2024[336] - The NT dollar to U.S. dollar exchange rate fluctuated approximately 7.6% from January 1, 2024, to April 11, 2025, mainly due to global financial market volatility. The company maintains most financial assets in U.S. dollars to limit risk[337] Interest Rate Risk This sub-section explains GigaMedia's exposure to interest rate risk, noting its current lack of outstanding bank loans - GigaMedia's exposure to interest rates is primarily related to short-term loans, but as of December 31, 2024 and 2023, there were no outstanding bank loans[338] Other Market Risks This sub-section addresses other market risks, primarily stemming from investments in privately held companies like Aeolus Robotics Corporation, and their impact on fair value and potential impairment - Other market risks are mainly derived from investments, including minority stake equity and debt instruments in Aeolus Robotics Corporation, a privately held company[339] - As of December 31, 2024, the aggregate carrying value of investments was $5.4 million. The fair value of investments decreased by $1.4 million in 2024, with $0.2 million included in earnings[339] - No impairment losses were recorded for these investments in 2024, 2023, or 2022[339] ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES This item is not applicable to the report, indicating no specific disclosures are required or provided regarding securities other than equity securities - The company states that Item 12, concerning the description of securities other than equity securities, is not applicable[340] PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES This item indicates that there are no defaults, dividend arrearages, or delinquencies to report - There are no defaults, dividend arrearages, or delinquencies[341] ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS This item states that there have been no material modifications to the rights of security holders, no changes to trustees or paying agents, and no applicable use of proceeds to report - There have been no material modifications to the instruments defining the rights of security holders[342] - There have been no material modifications to the rights of registered securities by issuing or modifying any other class of securities[345] - There has been no withdrawal or substitution of a material amount of assets securing any registered securities[345] - There has been no change of trustees or paying agents for any registered securities[345] - The use of proceeds is not applicable[343] ITEM 15. CONTROLS AND PROCEDURES This section details GigaMedia's disclosure controls and procedures and management's assessment of internal control over financial reporting, concluding that both were effective as of December 31, 2024, with no material changes during the year, and noting the company's exemption from independent auditor attestation Disclosure Controls and Procedures This sub-section confirms the effectiveness of GigaMedia's disclosure controls and procedures as of December 31, 2024, ensuring timely and accurate reporting of required information - As of December 31, 2024, management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective in providing reasonable assurance that required information was recorded, processed, summarized, and reported timely[344][347] Management's Annual Report on Internal Control Over Financial Reporting This sub-section states management's responsibility for internal control over financial reporting and concludes its effectiveness as of December 31, 2024, based on the COSO framework - Management is responsible for establishing and maintaining adequate internal control over financial reporting, designed to provide reasonable assurance regarding financial reporting reliability[348] - Based on an assessment using the COSO framework (2013), management concluded that internal control over financial reporting was effective as of December 31, 2024[350] Attestation Report of the Independent Registered Public Accounting Firm This sub-section clarifies that the annual report does not include an attestation report from the independent registered public accounting firm regarding internal control over financial reporting, due to the company's non-accelerated filer status - This annual report does not include an attestation report from the independent registered public accounting firm regarding internal control over financial reporting, as the company is a non-accelerated filer and exempt from Section 404(b) of the Sarbanes-Oxley Act[351] Changes in Internal Control Over Financial Reporting This sub-section confirms that no material changes occurred in internal control over financial reporting during the year ended December 31, 2024 - During the year ended December 31, 2024, there were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[352] ITEM 16. RESERVED This item is reserved, indicating no specific content for this section - Item 16 is reserved[353] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT This section identifies Ms. Wan-Wan LIN as the audit committee financial expert - Ms. Wan-Wan LIN, an independent director and member of the audit committee, has been determined to be the audit committee financial expert[353] ITEM 16B. CODE OF ETHICS This section outlines GigaMedia's commitment to ethical conduct through its adopted Code of Ethics, anti-fraud policy, whistleblower program, and non-competition/non-solicitation provisions, applicable to all directors, officers, employees, and consultants - GigaMedia has adopted a Code of Ethics applicable to its CEO, CFO, directors, other officers, employees, and consultants, with the full text available on its website[354] - An anti-fraud policy, adopted in 2005 and amended in 2009, aims to prevent fraud schemes, with the audit committee monitoring its implementation and an anti-fraud taskforce managing hotlines, risk assessment, and investigations[355] - A whistleblower program, adopted in 2006, allows employees to confidentially report concerns without fear of retribution, ensuring proper investigation of incidents[357] - Non-competition and non-solicitation provisions were adopted in 2010, restricting employees, consultants, officers, and directors from competitive activities or soliciting employees for a specified period after termination[358] ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES This section provides a summary of fees billed by Deloitte & Touche for audit and tax services in 2024 and 2023, and outlines the audit committee's pre-approval policies for auditor engagements Aggregate Fees Billed by Deloitte & Touche (2023-2024) | For the Years Ended December 31 | 2024 (in US$) | 2023 (in US$) | | :------------------------------ | :------------ | :------------ | | Audit Fees | $ 266,600 | $ 265,000 | | Audit-Related Fees | 0 | 0 | | Tax Fees | 7,000 | 7,000 | | All Other Fees | 0 | 0 | - Audit fees cover the annual audit of consolidated financial statements and services related to statutory and regulatory filings[361] - Tax fees include services for tax compliance[362] - The audit committee is directly responsible for the appointment, compensation, retention, and oversight of auditors, with policies requiring pre-approval for all audit and non-prohibited services[363][364] ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES This item is not applicable, indicating that the company does not claim any exemptions from the listing standards for audit committees - This item is not applicable[365] ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS This item is not applicable, indicating no purchases of equity securities by the issuer or affiliated purchasers to report - This item is not applicable[366] ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT This item is not applicable, indicating no change in the registrant's certifying accountant - This item is not applicable[367] ITEM 16G. CORPORATE GOVERNANCE This section outlines GigaMedia's corporate governance practices, noting its compliance with Nasdaq listing rules as a foreign private issuer, its reliance on home country practice for DRS eligibility, and its voluntary compliance with other Nasdaq Rule 5600 Series requirements - As a foreign private issuer listed on The Nasdaq Capital Market, GigaMedia follows its home country practice (Singapore law) for DRS eligibility, which mandates physical share certificates, thus exempting it from Nasdaq Rule 5255(c)[368][369] - The company voluntarily complies with other requirements of Nasdaq Rule 5600 Series in all material aspects, despite not being mandated by its home country[369] ITEM 16H. MINE SAFETY DISCLOSURE This item is not applicable, indicating no mine safety disclosure is required - This item is not applicable[370] ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This item is not applicable, indicating no foreign jurisdictions prevent inspections - This item is not applicable[371] ITEM 16J. INSIDER TRADING POLICIES This section confirms the adoption of an insider trading policy designed to ensure compliance with applicable laws and regulations, with the full text filed as an exhibit - GigaMedia has adopted an insider trading policy for directors, senior management, and employees to promote compliance with insider trading laws, rules, and regulations[372] - The full text of the insider trading policy is filed as Exhibit 11.2 to the annual report[372] ITEM 16K. CYBERSECURITY This section details GigaMedia's cybersecurity governance, risk management, and incident response, with the audit committee overseeing cyber risk and the IT division head responsible for assessment and management, including established guidelines for security measures and third-party service provider evaluation - The audit committee oversees cyber risk management, reviewing periodic reports on IT and security matters, including incidents, emerging risks, and improvement measures[373] - Cybersecurity processes and guidelines cover employee responsibility, information security coordination, data governance, access controls, network security, monitoring, asset inventory, data center security, and business continuity[374] - Guidelines for reporting and responding to cybersecurity incidents define classifications, responsibilities, and reporting flows, with a team assembled for response, recovery, and post-incident analysis[375] - The head of the IT division, with over 20 years of experience, is responsible for assessing and managing cybersecurity risks and reporting to the audit committee. The IT division regularly assesses threats and uses real-time monitoring for cloud services[376][377] - As of the report date, no past cybersecurity incidents are believed to have had a material adverse effect on the company's business, operations, or financial condition[379] PART III ITEM 17. FINANCIAL STATEMENTS This item refers to Item 18 for the company's financial statements - This item refers to Item 18 for the company's financial statements[380] ITEM 18. FINANCIAL STATEMENTS This section lists the consolidated financial statements and related reports included in the annual report, prepared in accordance with U.S. GAAP and audited by Deloitte & Touche - The consolidated financial statements and reports are prepared in accordance with U.S. GAAP and audited by Deloitte & Touche[388] Index to Consolidated Financial Statements | Document | Page | | :-------------------------------------------------------------------- | :------- | | Report of Independent Registered Public Accounting Firm | F-2 | | Consolidated Balance Sheets as of December 31, 2024 and 2023 | F-4 | | Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 | F-6 | | Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022 | F-7 | | Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2024, 2023 and 2022 | F-8 | | Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 | F-9 | | Notes to the consolidated financial statements | F-11 | ITEM 19. EXHIBITS This section provides a comprehensive index of exhibits filed with the annual report, including corporate documents, material contracts, certifications, and financial data files - The report includes various exhibits such as the Amended Memorandum and Articles of Association, Description of Securities, Convertible Note Purchase Agreements with Aeolus Robotics Corporation, List of Subsidiaries, Code of Ethics, Insider Trading Policy, and certifications by the CEO and CFO[382] - It also includes the Consent of Deloitte & Touche, the Compensation Recovery Policy, and Inline XBRL Instance Document and Cover Page Interactive Data File[382][383]