GigaMedia (US:GIGM)2022-04-27 16:00Revenue Performance - Revenues from MahJong and other casual games were approximately US$1.5 million in 2021, a slight decrease from US$1.8 million in both 2020 and 2019[101]. - Revenues generated from the PC-based MMO sports game Tales Runner were approximately US$2.4 million in 2021, down from US$2.7 million in 2020 but up from US$1.2 million in 2019[103]. - The accumulated sales revenues of the mobile role-playing game Yume100 since its launch were approximately US$11.9 million as of December 31, 2021[105]. - Total operating revenues for 2021 were approximately US$5.5 million, a decrease of approximately US$1.4 million year-over-year[150]. - Digital entertainment service revenues for 2021 were US$11.6 million, compared to US$7.1 million in 2020, reflecting a significant increase[147]. - Operating revenues decreased by 20.1% in 2021, totaling US$5.492 million compared to US$6.875 million in 2020[169]. - Revenues from mobile games declined to US$1.5 million in 2021 from US$2.3 million in 2020, and revenues from a licensed sports game decreased by US$0.3 million to US$2.4 million[169]. Financial Performance - The company incurred an operating loss of approximately US$4.0 million in 2021, an increase of approximately US$1.8 million year-over-year[150]. - The net loss for 2021 was approximately US$3.4 million, representing an increase of US$2.1 million year-over-year[150]. - Gross profit for 2021 was approximately US$6.5 million, up from US$3.5 million in 2020[147]. - Gross profit was US$2.9 million in 2021, with a gross profit margin of 52.9%, down from US$3.9 million and 57.0% in 2020[170]. - Total costs and expenses increased by approximately US$0.4 million year-over-year to US$9.5 million, primarily due to increases in depreciation and other expenses[150]. - Total current assets as of December 31, 2021, were US$42.6 million, down from US$46.5 million in 2020[148]. - Total liabilities for the company were US$3.2 million as of December 31, 2021, compared to US$2.9 million in 2020[148]. - The company recognized a non-operating income of approximately US$0.5 million in 2021, down from US$0.9 million in the prior year[150]. - The net loss attributable to shareholders increased by 164.9% to US$3.4 million in 2021 from US$1.3 million in 2020[178]. - Net cash used in operating activities was approximately US$4.1 million in 2021, compared to US$2.1 million in 2020[181]. - Cash, cash equivalents, and restricted cash at the end of 2021 were US$41.8 million, down from US$46.0 million in 2020[181]. Business Strategy and Operations - The company plans to enhance its market position by increasing focus on mobile and browser-based games, expecting to drive growth both organically and through accretive transactions[96]. - FunTown operates a mobile platform for casual games that works on both Android and iOS, allowing data synchronization between the two systems[112]. - The company utilizes an item-billing revenue model, allowing users to access basic game functions for free while offering in-game purchases for enhanced experiences[95]. - FunTown's marketing strategy includes in-game events and online promotions to increase user engagement and attract new users[113]. - The company has established a strong brand presence in Taiwan and Hong Kong, leveraging its community-based online platforms to cater to social networking needs[96]. - The company implemented a strategy to optimize its product portfolio by trimming underperforming products and investing US$1.4 million in developing its own offerings in 2021[167]. - The transition to browser/mobile casual games is underway to capitalize on growth trends in Asia[192]. Competition and Market Environment - The company expects increased competition in the digital entertainment market due to low entry barriers, with competitors having greater financial and technical resources[127]. - The company has faced strong competition from mobile and browser-based games, prompting the launch of a web-based MahJong game application to simplify user access[99]. - The business experiences seasonality, with stronger revenue typically in the first and fourth quarters, while the second and third quarters see slower sales[128]. Technology and Infrastructure - The company has developed an extensive technology infrastructure to support online game operations, including transitioning servers to cloud solutions[124]. - The company operates a scalable and modular architecture that includes key subsystems such as game services, a central user database, and billing and payment systems[123]. - The company collaborates with telecommunication network operators and payment aggregators to distribute game points, enhancing payment flexibility for users[120][121]. Regulatory and Compliance - The company is subject to various regulations in the digital entertainment industry, including personal data protection laws in Taiwan and Hong Kong[129][136]. - The company does not utilize variable-interest entities in its operations, maintaining a straightforward organizational structure[141]. Employee and Shareholder Information - As of December 31, 2021, the total number of employees decreased to 123 from 135 in 2020, with a notable reduction in development staff from 48 to 41[221]. - Major shareholders include John-Lee Andre Koo with 2,159,999 shares (19.54%), and James Cheng-Ming Huang with 1,073,566 shares (9.71%) as of March 31, 2022[230]. - The aggregate cash compensation paid to directors and executive officers for the year ended December 31, 2021, was approximately $0.6 million[211]. - The board of directors consists of 6 male directors and no female directors as of April 20, 2022[209]. Investment and Financing - GigaMedia entered into a convertible note purchase agreement for a principal amount of US$10,000,000 with Aeolus, bearing interest at 2% per annum, due on August 30, 2022, extendable to August 30, 2023[240]. - GigaMedia has the option to convert the note into ordinary or preferred shares of Aeolus at a price of US$3.00 per share, potentially owning approximately 4.62% of Aeolus's total ordinary shares upon full conversion[240]. - On December 30, 2021, GigaMedia converted US$2,000,000 of the note into 735,835 Series B Preferred Shares at a conversion price of US$2.718 per share, leaving a remaining principal amount of US$8,000,000[240]. - The company has not declared or paid any dividends and plans to retain earnings for business operations[236]. Foreign Exchange and Currency - The company recognized a realized foreign exchange gain of approximately US$21 thousand and an unrealized foreign exchange gain of approximately US$101 thousand for the year ended December 31, 2021[280]. - A hypothetical 10% change in the exchange rate between the U.S. dollar and the underlying currencies would result in a change of 0.11% in the company's total equity as of December 31, 2021[280]. - The NT dollar to U.S. dollar exchange rate fluctuated approximately 5% from January 1, 2021, to April 11, 2022, while the Hong Kong dollar to U.S. dollar exchange rate fluctuated approximately 1.1% during the same period[281].