6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May, 2021

Commission File Number: 000-30540

GIGAMEDIA LIMITED

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

Neihu District

Taipei, Taiwan (R.O.C.)

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

Form 20-F  [  x  ]Form 40-F  [      ]

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

Yes  [     ]No   [  x  ]

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

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

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

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

3. GigaMedia 2020 Financial Statements Prepared in Accordance with U.S. GAAP (attached hereto as Exhibit 99.3)

4. GigaMedia 2020 Financial Statements Prepared in Accordance with Singapore GAAP (attached hereto as Exhibit 99.4)

Signatures

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

	GigaMedia Limited
	(Registrant)
Date: May 28, 2021	By: /s/ HUANG, CHENG-MING
	(Signature)
	Name: HUANG, CHENG-MING
	Title: Chief Executive Officer

EX-99.1

NOTICE OF THE TWENTY-SECOND ANNUAL GENERAL MEETING OF SHAREHOLDERS

GigaMedia Limited

Incorporated in the Republic of Singapore

Registration No.: 199905474H

REGISTERED OFFICE

80 Robinson Road, #02-00

Singapore 068898

NOTICE IS HEREBY GIVEN that the 22nd annual general meeting of the shareholders of GigaMedia Limited (the “Company”) will be held on June 24, 2021 at 11 a.m. local time at 8F, No.22, Lane 407, Sec.2, Tiding Blvd., Neihu District, Taipei, Taiwan, R.O.C , for the following purposes:

AS ORDINARY AND SPECIAL BUSINESS

ORDINARY RESOLUTIONS:

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

1. Adoption of audited financial statements

RESOLVED that the Statement by the Directors, Auditor’s Report and Audited Financial Statements of the Company for the financial year ended December 31, 2020 are received and adopted.

(Resolution 1)

2. Approval of appointment of auditors

RESOLVED that Deloitte & Touche and Deloitte & Touche LLP be and are hereby appointed as the independent external auditors of the Company until the next Annual General Meeting and that the Directors be and are hereby authorized to fix their remuneration for the financial year ended December 31, 2021.

(Resolution 2)

3. Approval of Directors’ remuneration

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

(Resolution 3)

4. Approval for authority to allot and issue shares

RESOLVED that pursuant to Section 161 of the Companies Act, Chapter 50 of Singapore (“Companies Act”), authority be and is hereby given to the Directors of the Company to:

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

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

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

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

(i) until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held whichever is earlier; or

1

(ii) in the case of Shares to be issued pursuant to the Instruments that are made or granted pursuant to this Resolution, until the issuance of such Shares in accordance with the terms of the Instruments.

(Resolution 4)

5. Approval for share purchase mandate

RESOLVED that:

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

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

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

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

(3)in this Resolution:

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

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

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

(4) the Directors of the Company and/or any of them be and are hereby authorized to complete and do all such acts and things (including executing such documents as may be required) as they and/or he may consider expedient or necessary to give effect to the transactions contemplated and/or authorized by this Resolution.

(Resolution 5)

6. To transact any other business as may properly be transacted at an Annual General Meeting of the Company.

2

NOTES:

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

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

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

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

5.The proxy form (and if relevant, the original power of attorney, or other authority under which it is signed or a notarially certified copy of such power or authority) must be deposited at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, or the office of the Company, 8F, No. 22, Lane 407, Section 2, Tiding Boulevard, Taipei 114, Taiwan R.O.C., not less than 48 hours before the time for holding the Twenty-Second Annual General Meeting, that is by no later than 11 p.m. June 21, 2021 (New York time), or 11 a.m. June 22, 2021 (Taipei time), failing which the proxy shall not be treated as valid.

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

7.Only shareholders of record at the close of business on April 23, 2021 are entitled to notice of and to vote at the Twenty- Second Annual General Meeting, or any adjournment or postponement of the Twenty- Second Annual General Meeting. If you have sold or transferred the Shares you hold in the Company to another person (the “Purchaser” or “Transferee”) after April 23, 2021 and prior to the Twenty- Second Annual General Meeting, you should immediately forward this Notice and the attached proxy statement and proxy card to the Purchaser or Transferee of such Shares, or to the bank, broker, or agent through whom the sale of such Shares was effected, for onward transmission to the Purchaser or Transferee.

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

BY ORDER OF THE BOARD

/s/ Cheng-Ming Huang

………………………………………..

Cheng-Ming Huang (aka James Huang)

Chairman of the Board and Chief Executive Officer

3

TABLE OF CONTENTS

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

PROXY STATEMENT

Questions and Answers about the Annual Meeting and Voting

Proposal 1

Proposal 2

Proposal 3

Proposal 4

Proposal 5

Other Matters

Proxy Solicitation

4

GigaMedia Limited

Incorporated in the Republic of Singapore

Registration No.: 199905474H

REGISTERED OFFICE

80 Robinson Road, #02-00

Singapore 068898

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

Why Did I Receive This Proxy Statement?

We sent you this proxy statement and the enclosed proxy card because the Company’s Board of Directors is soliciting your proxy to be used at the Company’s annual meeting of shareholders on June 24, 2021 at 8F, No.22, Lane 407, Sec.2, Tiding Blvd., Neihu District, Taipei, Taiwan, R.O.C., or at any adjournment or postponement of the meeting.  

Who Can Vote?

You are entitled to vote if you owned the Shares on the record date (“Record Date”), which is the close of business on April 23, 2021.  Each Share that you own entitles you to one vote.

How Many Shares of Voting Stock Are Outstanding?

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

What May I Vote On?

1. Adoption of Audited Financial Statements

2. Approval of Appointment of Auditors

3. Approval of Directors’ Remuneration

4. Approval for Authority to Allot and Issue Shares

5. Approval for Share Purchase Mandate

Other Business

How Do I Vote?

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

How Do I Request Electronic Delivery of Future Proxy Materials?

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

May I Revoke My Proxy?

5

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

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

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

How Will My Proxy Get Voted?

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

How Will Voting On Any Other Business Be Conducted?

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

Proposal 1.

6

ADOPTION OF AUDITED FINANCIAL STATEMENTS

The Company seeks shareholders’ adoption of the audited financial statements of the Company (the “Audited Financial Statements”), which have been prepared under Financial Reporting Standards in Singapore (“FRSs”) , in respect of the financial year ended December 31, 2020. Along with the Audited Financial Statements, the Company seeks Shareholders’ adoption of the Statement by the Directors and Auditor’s Report of the Company in respect of the same financial year.

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

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

Proposal 2.APPROVAL OF APPOINTMENT OF AUDITORS

The Company seeks Shareholders’ approval for the appointment of Deloitte & Touche and Deloitte & Touche LLP as the independent external auditors of the Company to hold such office until the conclusion of the next Annual General Meeting of the Company. The Board of Directors also seeks shareholders’ approval to authorize the Board of Directors to fix the remuneration for Deloitte & Touche and Deloitte & Touche LLP in respect of their services to the Company for the financial year ended December 31, 2021.

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

The Board of Directors recommends a vote FOR this proposal.

Proposal 3.APPROVAL OF DIRECTORS’ REMUNERATION

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

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

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

Proposal 4. APPROVAL FOR AUTHORITY TO ALLOT AND ISSUE SHARES

The Company is incorporated in Singapore. Under the Companies Act, Chapter 50 of Singapore (the “Companies Act”), the Directors may exercise any power of the Company to issue new Shares only with the prior approval of the shareholders of the Company at a general meeting. Such approval, if granted, is effective from the date of the general meeting at which the approval was given until the date on which the next Annual General Meeting of the Company is held or is required by law to be held, whichever is earlier.

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

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

The Board of Directors recommends a vote FOR this proposal.

Proposal 5. APPROVAL FOR SHARE PURCHASE MANDATE

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

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

A Share purchase is also an available option for the Company to return surplus cash that is in excess of the financial and possible investment needs of the Group to its shareholders. In addition, the Share Purchase Mandate will allow the Company to have greater flexibility over, inter alia, the Company’s share capital structure and its dividend policy.

7

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

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

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

The Board of Directors recommends a vote FOR this proposal.

OTHER MATTERS

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

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

PROXY SOLICITATION

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

GIGAMEDIA LIMITED

/s/ Cheng-Ming Huang

………………………………………..

Cheng-Ming Huang (aka James Huang)

Chairman of the Board and Chief Executive Officer

8

EX-99.2

NASDAQ:GIGM GIGAMEDIA LIMITED 8F, NO. 22, LANE 407, SECTION 2 TIDING BLVD. NEIHU DISTRICT, TAIPEI 114 TAIWAN R.O.C VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:00 P.M. ET on 06/21/2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY For Against Abstain The Board of Directors recommends you vote FOR proposals 1 through 5. 1. Adoption of 2020 Audited Financial Statements. 2. Approval of Appointment of Auditors- Deloitte & Touche and Deloitte & Touche LLP. 3. Approval of Directors' Remuneration. 4. Approval for Authority to Allot and Issue Shares. 5. Approval for Share Purchase Mandate. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. 0000507030_1 R1.0.0.177 Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date

0000507030_2 R1.0.0.177 Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting: The Notice and Proxy Statement, U.S. Annual Report and Singapore Annual Report are available at www.proxyvote.com GIGAMEDIA LIMITED Annual General Meeting of Shareholders June 24, 2021 11:00 AM This proxy is solicited by the Board of Directors I/We, being a shareholder/shareholders of the above named Company, hereby appoint Cheng-Ming Huang (aka James Huang) of 8F, No. 22, Lane 407, Section 2, Tiding Blvd., Neihu District, Taipei, Taiwan, R.O.C., failing whom the Chairman of the Meeting, as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 8F, No. 22, Lane 407, Section 2, Tiding Blvd., Neihu District, Taipei, Taiwan, R.O.C. on Thursday, June 24, 2021, at 11:00 AM local time, and at any adjournment or postponement thereof. This proxy, when properly executed, and returned in a timely manner, will be voted at the Annual General Meeting and any adjournments thereof in the manner described herein. If no contrary indication is made, the proxy will be voted as recommended by the Board of Directors and the Company's management. 1. The proxy form must be signed by the shareholder or by the shareholders' attorney duly authorized in writing or, if the appointer is a corporation, either, under seal or in some other manner approved by the directors of the Company. 2. To be effective, the proxy form (and power of attorney or other authority under which it is signed or a notarially certified copy of such power of authority, if relevant) must be returned to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, no less than 48 hours before the meeting.

EX-99.3

GIGAMEDIA LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2020

FOR THE YEARS ENDED DECEMBER 31, 2018, 2019 AND 2020

(With Report of Independent Registered Public Accounting Firm Thereon)

GIGAMEDIA LIMITED AND SUBSIDIARIES

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated balance sheets as of December 31, 2019 and 2020	F-4
Consolidated statements of operations for the years ended December 31, 2018, 2019 and 2020	F-6
Consolidated statements of comprehensive income (loss) for the years ended December 31, 2018, 2019 and 2020	F-7
Consolidated statements of changes in shareholders’ equity for the years ended December 31, 2018, 2019 and 2020	F-8
Consolidated statements of cash flows for the years ended December 31, 2018, 2019 and 2020	F-9
Notes to consolidated financial statements	F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

GigaMedia Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of GigaMedia Limited and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the result of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of FASB Accounting Standards Codification (“ASC”) Topic 842, Leases.

Basis for Opinion

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

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

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

Critical Audit Matter

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

F-2

Fair Value — Level 3 Assets— Refer to Note 4 to the consolidated financial statements

Critical Audit Matter Description

The Company holds a debt instrument amounted to $10,000 thousand, a convertible note with an option to convert it into equity securities issued by a private company. The fair value of this investment is based on complex valuation methods with unobservable inputs, therefore, classified as Level 3.

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

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

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures included the following, among others:

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

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

/s/ Deloitte & Touche

Taipei, Taiwan

Republic of China

April 28, 2021

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

F-3

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2019 AND 2020

(in thousands of US dollars)

	December 31
	2019		2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 5)	$	57,743	$	45,702
Accounts receivable - net (Note 6)		368		275
Prepaid expenses		112		88
Restricted cash (Note 5)		531		300
Other current assets (Note 7)		139		160
Total Current Assets		58,893		46,525
Marketable securities - noncurrent (Note 8)		—		10,000
PROPERTY, PLANT AND EQUIPMENT, NET		—		22
INTANGIBLE ASSETS - NET		—		4
OTHER ASSETS
Refundable deposits		199		208
Prepaid licensing and royalty fees (Note 3)		44		130
Other (Note 12)		86		134
TOTAL ASSETS	$	59,222	$	57,023

F-4

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

DECEMBER 31, 2019 AND 2020

(in thousands of US dollars, except share data)

	December 31
	2019			2020
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	64		$	70
Accrued expenses (Note 10)		1,280			1,516
Deferred revenue (Note 11)		1,365			950
Other current liabilities (Notes 9 and 17)		875			387
Total Current Liabilities		3,584			2,923
NONCURRENT LIABILITIES
Lease liabilities (Note 9)		94			3
Total Liabilities		3,678			2,926
COMMITMENTS AND CONTINGENCIES (Note 17)		—			—
SHAREHOLDERS' EQUITY (Note 13)
Common shares, no par value, and additional paid-in capital; issued    and outstanding 11,052 thousand shares in 2019 and 2020		308,751			308,752
Accumulated deficit		(230,961	)		(232,254	)
Accumulated other comprehensive loss		(22,246	)		(22,401	)
Total GigaMedia Shareholders’ Equity		55,544			54,097
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	59,222		$	57,023

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

F-5

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2018, 2019 AND 2020

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

	2018			2019			2020
OPERATING REVENUES
Digital entertainment service revenues (Note 18)	$	7,101		$	6,645		$	6,875
COSTS OF REVENUES
Cost of digital entertainment service revenues		(3,585	)		(3,064	)		(2,956	)
GROSS PROFIT		3,516			3,581			3,919
OPERATING EXPENSES
Product development and engineering expenses		(1,091	)		(1,186	)		(1,327	)
Selling and marketing expenses		(3,297	)		(1,995	)		(1,618	)
General and administrative expenses		(3,684	)		(3,182	)		(3,121	)
Impairment loss on property, plant and equipment (Note 4)		—			(109	)		—
Impairment loss on intangible assets (Note 4)		—			(15	)		—
Impairment loss on prepaid licensing and royalty fees (Notes 3 and 4)		(244	)		(85	)		—
Bad debt expense (Note 6)		(23	)		(24	)		(5	)
		(8,339	)		(6,596	)		(6,071	)
LOSS FROM OPERATIONS		(4,823	)		(3,015	)		(2,152	)
NON-OPERATING INCOME (EXPENSES)
Interest income		1,302			1,483			613
Interest expense		—			—			—
Foreign exchange gain (loss), net		267			(68	)		199
Impairment loss on investments		—			—			—
Other		61			(59	)		47
		1,630			1,356			859
LOSS BEFORE INCOME TAXES		(3,193	)		(1,659	)		(1,293	)
INCOME TAX EXPENSE (Note 16)		—			—			—
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS OF GIGAMEDIA	$	(3,193	)	$	(1,659	)	$	(1,293	)
LOSS PER SHARE ATTRIBUTABLE TO GIGAMEDIA
Basic and Diluted:	$	(0.29	)	$	(0.15	)	$	(0.12	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER SHARE    ATTRIBUTABLE TO GIGAMEDIA SHAREHOLDERS (Note 2)
Basic		11,052			11,052			11,052
Diluted		11,052			11,052			11,052

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

F-6

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2018, 2019 AND 2020

(in thousands of US dollars)

	2018			2019			2020
NET LOSS	$	(3,193	)	$	(1,659	)	$	(1,293	)
OTHER COMPREHENSIVE INCOME (LOSS) - NET OF TAX:
Unrealized loss on marketable securities		—			—			(351	)
Defined benefit pension plan adjustment		(17	)		20			(28	)
Foreign currency translation adjustment		(332	)		66			224
		(349	)		86			(155	)
COMPREHENSIVE LOSS ATTRIBUTABLE TO GIGAMEDIA    SHAREHOLDERS	$	(3,542	)	$	(1,573	)	$	(1,448	)

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

F-7

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018, 2019 AND 2020

(in thousands of US dollars and shares)

	GIGAMEDIA SHAREHOLDERS
	Common shares and additional paid-in capital				Accumulated deficit			Accumulated other comprehensive loss
	Shares		Amount		(Note 13)			(Note 14)			Total
Balance as of January 1, 2018		11,052	$	308,747	$	(225,399	)	$	(21,983	)	$	61,365
Cumulative effect of initially applying new accounting standards (Note 11)		—		—		346			—			346
Stock-based compensation		—		3		—			—			3
Net loss		—		—		(3,193	)		—			(3,193	)
Other comprehensive loss		—		—		—			(349	)		(349	)
Balance as of December 31, 2018		11,052		308,750		(228,246	)		(22,332	)		58,172
Cumulative effect of initially applying new accounting standards (Note 1)		—		—		(1,056	)		—			(1,056	)
Stock-based compensation		—		1		—			—			1
Net loss		—		—		(1,659	)		—			(1,659	)
Other comprehensive income		—		—		—			86			86
Balance as of December 31, 2019		11,052	$	308,751	$	(230,961	)	$	(22,246	)	$	55,544
Stock-based compensation		—		1		—			—			1
Net loss		—		—		(1,293	)		—			(1,293	)
Other comprehensive loss		—		—		—			(155	)		(155	)
Balance as of December 31, 2020		11,052	$	308,752	$	(232,254	)	$	(22,401	)	$	54,097

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

F-8

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018, 2019 AND 2020

(in thousands of US dollars)

	2018			2019			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,193	)	$	(1,659	)	$	(1,293	)
Adjustments to reconcile net income (loss) to net cash used in operating    activities:
Depreciation		100			61			3
Amortization		36			47			5
Stock-based compensation		3			1			1
Impairment loss on property, plant and equipment		—			109			—
Impairment loss on intangible assets		—			15			—
Impairment losses on prepaid licensing and royalty fees		244			85			—
Bad debt expense		23			24			5
Impairment losses on marketable securities and investments		—			—			—
Loss of lawsuit contingent liabilities		—			96			—
Net changes in:
Accounts receivable		205			130			89
Prepaid expenses		267			10			25
Prepaid licensing and royalty fees		(220	)		306			(87	)
Prepaid pension assets		14			(29	)		19
Other assets		35			(15	)		(90	)
Accounts payable		(210	)		(40	)		5
Accrued expenses		(1,273	)		(153	)		236
Other liabilities		55			(555	)		(993	)
Net cash used in operating activities		(3,914	)		(1,567	)		(2,075	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities		—			—			(10,000	)
Purchases of property, plant and equipment		(66	)		(48	)		(24	)
Increase in intangible assets		(61	)		(14	)		(8	)
Decrease (increase) in refundable deposits		11			(2	)		(9	)
Other		26			(9	)		—
Net cash provided used in investing activities		(90	)		(73	)		(10,041	)

F-9

GIGAMEDIA LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2018, 2019 AND 2020

(in thousands of US dollars)

	2018			2019			2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings		—			—			—
Repayments of short-term borrowings		—			—			—
Net cash used in financing activities		—			—			—
Net foreign currency exchange differences on cash, cash equivalents    and restricted cash		(347	)		88			(156	)
NET DECREASE IN CASH, CASH EQUIVALENTS AND    RESTRICTED CASH		(4,351	)		(1,552	)		(12,272	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT    BEGINNING OF YEAR		64,177			59,826			58,274
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END    OF YEAR	$	59,826		$	58,274		$	46,002
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year	$	—		$	—		$	—
Income tax refund during the year	$	—		$	(6	)	$	—

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

F-10

GIGAMEDIA LIMITED AND SUBSIDIARIES

Notes To Consolidated Financial Statements

December 31, 2018, 2019 and 2020

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

(a) Principal Activities

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

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

(b) Basis of Presentation

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

(c) Summary of significant accounting policies

Principles of Consolidation

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

Foreign Currency 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. Items subject to such estimates and assumptions include but not limit to the deferral and breakage of revenues; the fair value of unquoted marketable securities, the useful lives of property, plant and equipment; allowances for doubtful accounts; the valuation of deferred tax assets, long-lived assets, investments and share-based compensation; and accrued pension liabilities (prepaid pension assets), income tax uncertainties and other contingencies. We believe the critical accounting policies listed below affect management’s judgments and estimates used in the preparation of the consolidated financial statements.

Revenue Recognition and Deferral

General

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

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

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

F-11

Digital EntertainmentProduct and Service Revenues

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

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

Estimated Service Period

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

Principal Agent Considerations

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

• which party isprimarily responsible for fulfilling the promise to provide the specified good or service; and

• which party has discretion in establishing the price for the specified good or service.

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

Deferred Revenues and Breakage

Deferred revenues representing contract liabilities consist mainly of the advanced income related to our digital entertainment business. Deferred revenue represents proceeds received relating to the sale of virtual points and in-game items that are activated or charged to the respective user account by users, but which have not been consumed by the users or expired. Deferred revenue is credited to profit or loss when the virtual points and in-game items are consumed or have expired. Pursuant to relevant requirements in Taiwan, as of December 31, 2019 and 2020, cash totaling $531 thousand and $300 thousand, respectively, had been deposited in an escrow account in a bank as a performance bond for the users’ prepayments and virtual points, and is included within restricted cash in the consolidated balance sheets.

F-12

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

Prepaid Licensing and Royalty Fees

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

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

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

Fair Value Measurements

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

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• 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.

• 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 Company’s estimates for non-performance and liquidity risk, or the backsolve method, where we derive the implied value of financial instruments for the target company from a recent transaction involving the target company’s own securities. These techniques rely extensively on the use of a number of assumptions, including the discount rate, credit spreads, and estimates of future cash flows. (Please see Note 4, “Fair Value Measurements”, for additional information.)

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

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

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

F-13

Marketable Securities

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance makes targeted improvements to existing U.S. GAAP mainly by requiring the following accounting treatments, along with certain disclosure and presentation requirements and improvements:

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

• Public business entities are to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

• An entity are to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

Debt securities

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

Debt securities not classified as held-to-maturity or trading are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of income taxes, as a separate component of other comprehensive income, unless an impairment is determined to be the result of credit-related factors, or our Company intends to sell the security, or it is more likely than not that we will be required to sell the security before recovery.

Losses on debt security transactions and declines in value that are determined to be the result of credit losses, if any, are reported in the consolidated statements of operations. In measuring credit losses, management adopts a current expected credit loss model, where the expected losses are measured on the basis of relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of reported amount. Unrealized gains on credit-related recoveries are reported in the consolidated statements of operations.

Receivables

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

Property, Plant and Equipment

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

Categories	Years
Information and communication equipment	2 to 5
Office furniture and equipment	3 to 5
Leasehold improvements	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.

F-14

Software Cost

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

Impairment of Long-Lived Assets

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

Product Development and Engineering

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

Advertising

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

Advertising expenses incurred in 2018, 2019 and 2020 totaled $1.2 million, $0.4 million and $0.3 million, respectively and were included in selling and marketing expenses.

Leases

General

On January 1, 2019, we adopted Accounting Standards Codification (“ASC”) Topic 842, “Leases,” using the modified retrospective transition method applied to contracts that were not complete as of the adoption date. Consolidated financial results for reporting periods beginning after January 1, 2019 are presented under ASC Topic 842, while prior period amounts continue to be reported in accordance with ASC Topic 840, “Leases”. Please refer to Note 1(d) of our consolidated financial statements contained in our previously-filed Annual Report on Form 20-F for the year ended December 31, 2019 for information about the impact of adoption on our consolidated financial statements.

Please refer to Note 1 of our consolidated financial statements contained in our previously-filed Annual Report on Form 20-F for the year ended December 31, 2018 for our lease accounting policy as it relates to lease transactions prior to January 1, 2019. The leases accounting policy described below relates to lease transactions from January 1, 2019 and onward, which are accounted for in accordance with ASC Topic 842.

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

F-15

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

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

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

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 costs of revenues and operating expenses in the consolidated statements of operations on the date of grant based on the employees’ respective function.

For shares and stock options granted to non-employees, we measure the fair value of the equity instruments granted at the earlier of the performance commitment date or when the performance is completed.

Retirement Plan and Net Periodic Pension Cost

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

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

Income Taxes

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

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

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to 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 earnings (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 options in all periods, are included in the computation of diluted earnings (loss) per share to the extent such shares are dilutive. Diluted earnings (loss) per share also takes into consideration the effect of dilutive securities issued by subsidiaries. In a period in which a loss is incurred, only the weighted average number of 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, 2018, 2019 and 2020, basic and diluted loss per share were $0.29, $0.15 and $0.12, respectively.

F-16

Segment Reporting

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

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

(d) Recently Adopted Accounting Pronouncements

Financial Instruments

On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is an accounting update to amend the guidance on the impairment of financial instruments that are not measured at fair value through profit and loss, and which has subsequently been amended by ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02, and ASU 2020-03. The amendment introduces a current expected credit loss (CECL) model based on expected losses rather than incurred losses to estimate credit losses on financial instruments measured at amortized cost and requires a broader range of reasonable and supportable information to estimate expected credit loss. In addition, under the amendment, an entity recognizes an allowance for expected credit losses on financial instruments measured at amortized cost and available-for-sale debt securities rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. The adoption of the amendments did not have any material impact on our Company’s consolidated financial position, results of operations, cash flow and consolidated financial statement disclosures.

Fair Value Measurement

On January 1, 2020, we adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which is an accounting update to amend fair value measurement disclosure requirements to eliminate, add and modify certain disclosures to improve the effectiveness of such disclosure. The amendments removed (1) the disclosure requirements for transfers between Levels 1 and 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels of the fair value hierarchy, and (3) the valuation processes for Level 3 fair value measurements. Additionally, the amendments modified the disclosure requirements for investments in certain entities that calculate net asset value and measurement uncertainty. Finally, the amendments added disclosure requirements for the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments were applied retrospectively to all periods presented upon the effective date. In measuring of the fair value of our Level 3 financial assets, we have applied the requirements in this amendment.  Please see Note 4, “Fair Value Measurements”, for additional information.

Intangibles—Goodwill and Other

On January 1, 2020, our Company adopted ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which is an accounting update to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendment also requires the entity to present capitalized implementation costs and the related amortization in the same line item in the balance sheet, income statement and statement of cash flows as the presentation of the hosting (service) element of the arrangement. The amendment was applied prospectively to all implementation costs incurred after the date of adoption. The adoption of this amendment did not have any material impact on our consolidated financial position, results of operations, cash flows and consolidated financial statement disclosures.

F-17

On January 1, 2020, our Company adopted ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which is an accounting update to simplify the accounting treatment for the impairment of goodwill. The amendment eliminates Step 2 from the goodwill impairment test, which measures a goodwill impairment loss by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, under this amendment, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value and the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The adoption of this amendment did not have any material impact on our Company’s consolidated financial position, results of operations, cash flows and consolidated financial statement disclosures.

Retirement Plan

On January 1, 2020, our Company adopted ASU No. 2018-14, Compensation—Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans, which is an accounting update to modify the disclosure requirements by removing, modifying and clarifying disclosures related to defined benefit plans. This amendment modified the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements have been removed while the disclosure requirements of (1) the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates; and (2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period, have been added. The amendment also clarified the disclosure requirements with respect to the projected benefit obligation and the accumulated benefit obligation. The amendments were applied on a retrospective basis to all periods presented. The adoption of this amendment did not have any material impact on our Company’s consolidated financial statement disclosures.

(e) Recent Accounting Pronouncements Not Yet Adopted

Income Taxes

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740), which is an amendment that (i) eliminated certain exceptions for recognizing deferred taxes liability associated with ownership changes in foreign equity method investments, performing intraperiod allocation, and calculating income taxes in interim periods for year-to-date losses that exceed anticipated losses, (ii) simplified income tax accounting for franchise taxes that are partially based on income, transactions with a government that results in a step-up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and (iii) enacted changes in tax laws in interim periods. This amendment is effective for our Company’s fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of this amendment is not expected to have a material impact on our Company’s consolidated financial position, results of operations, cash flow and consolidated financial statement disclosures.

NOTE 2. EARNINGS (LOSS) PER SHARE

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

(in thousand shares)	2018		2019		2020
Weighted average number of outstanding shares
Basic		11,052		11,052		11,052
Effect of dilutive securities
Employee share-based compensation		—		—		—
Diluted		11,052		11,052		11,052

Certain outstanding options were excluded from the computation of diluted EPS since their effect would have been anti-dilutive. The antidilutive stock options excluded and their associated exercise prices per share were 229 thousand shares at the range of $2.90 to $12.35 as of December 31, 2018, 225 thousand shares at $2.90 to $12.35 as of December 31, 2019, and 49 thousand shares at $2.90 to $7.15 as of December 31, 2020. There were no antidilutive Restricted Stock Units (“RSUs”) as of December 31, 2020, 2019, and 2018.

F-18

NOTE 3. PREPAID LICENSING AND ROYALTY FEES

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

(in US$ thousands)	2018			2019			2020
Balance at beginning of year	$	459		$	435		$	44
Addition		968			205			340
Amortization and usage		(747	)		(511	)		(254	)
Exchange difference		(1	)		—			—
Impairment charges (Note 4)		(244	)		(85	)		—
Balance at end of year	$	435		$	44		$	130

At the end of 2018, 2019 and 2020, we recognized impairment losses of $244 thousand, $85 thousand and $0, respectively, for the prepaid licensing and royalty fees related to certain licensed games 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.

NOTE 4. FAIR VALUE MEASUREMENTS

The following table presents the carrying amounts and estimated fair values of our Company’s financial instruments at December 31, 2019 and 2020.

(in US$ thousands)	2019				2020
	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Cash and cash equivalents	$	57,743	$	57,743	$	45,702	$	45,702
Accounts receivable		368		368		275		275
Restricted cash		531		531		300		300
Refundable deposits		199		199		208		208
Marketable securities - noncurrent		—		—		10,000		10,000
Financial liabilities
Accounts payable		64		64		70		70
Accrued expenses		1,280		1,280		1,516		1,516
Lease liabilities - current and noncurrent		592		592		98		98

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, 2019 and 2020 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an arm’s length transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. In situations where there is little market activity for the asset or liability at the measurement date, the fair value measurement reflects our Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by us based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

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

• Cash and cash equivalents, accounts receivable, restricted cash, accounts payable, accrued expenses: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

• Refundable deposits: Measurement of refundable deposits with no fixed maturities is based on carrying amounts.

• Marketable securities – noncurrent: Valuation techniques are applied for measurement of marketable securities.

• Lease liabilities: Measured at discounted amounts of lease payments.

F-19

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

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

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

(in US$ thousands)	Fair Value Measurement Using
	Level 1		Level 2		Level 3		At December 31, 2020
Assets
Cash equivalents - time deposits	$	—	$	6	$	—	$	6
Restricted cash - time deposits		—		300		—		300
Marketable securities - noncurrent
Debt securities		—		—		10,000		10,000
	$	—	$	306	$	10,000	$	10,306

(in US$ thousands)	Fair Value Measurement Using
	Level 1		Level 2		Level 3		At December 31, 2019
Assets
Cash equivalents - time deposits	$	—	$	7	$	—	$	7
Restricted cash - time deposits		—		531		—		531
	$	—	$	538	$	—	$	538

Our Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 3 for the years ended December 31, 2019 and 2020.

Level 2 measurements:

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

Level 3 measurements:

We did not hold assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2019. For assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2020, a reconciliation of the beginning and ending balances are presented as follows:

(in US$ thousands)	Marketable Securities - Debt Securities
	2020
Balance at beginning of year	$	—
Purchase		10,000
Total gains or (losses) (realized/unrealized)
included in earnings		—
included in other comprehensive income - unrealized gain (loss) on security		(351	)
included in other comprehensive income - foreign currency items		351
Balance at end of year	$	10,000
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.	$	—

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The significant unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as of December 31, 2020 are shown below:

Non-listed equity investments -Level 3 financial assets
Calculation Date	Valuation Technique	Significant Unobservable Inputs	Rate	Sensitivity of the Input to Fair Value
December 31, 2020	The backsolve method to establish the equity value, and then the option pricing method to allocate the portion of the security value	Discount for lack of marketability (“DLOM”)	From 13.50% to 26.00% for different scenarios	1% increase or decrease in DLOM would result in a variation in the fair value by approximately $120 thousand.
		Volatility	41.0%	1% increase or decrease in volatility would result in a variation in the fair value by less than $30 thousand.

For the convertible promissory note of the early stage enterprise, the backsolve method was employed for inferring the equity value implied by a recent financing transaction involves selecting the future outcomes available to the enterprise and then calibrating the future exit values, the probabilities for each scenario and the discount rates for the various equity securities framework and making assumptions for the expected time to liquidity, volatility and risk-free rate and then solving for the value of equity, such that value for the most recent financing equals the amount paid. Market and the issuer’s company operating conditions are then considered between the initial transaction date and subsequent measurement dates.

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

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

We recognized the cumulative effects of impairment on the operating lease ROU assets when initially applying the new leases accounting standard at January 1, 2019, as such impairments occurred before the date of initial application. Please see Note 1, “Principal Activities, Basis of Presentation, and Summary of Significant Accounting Policies”, for additional information. Assets and liabilities measured at fair value on a nonrecurring basis that were determined to be impaired as of December 31, 2019 and 2020 are summarized as below:

(in US$ thousands)	Fair Value measurement Using
Assets	Level 1		Level 2		Level 3		At December 31, 2020		Total Impairment Losses
(a) Prepaid licensing and royalty fees	$	—	$	—	$	—	$	—	$	—
(b) Property, plant and equipment		—		—		—		—		—
(c) Intangible assets		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—

(in US$ thousands)	Fair Value measurement Using
Assets	Level 1		Level 2		Level 3		At December 31, 2019		Total Impairment Losses
(a) Prepaid licensing and royalty fees	$	—	$	—	$	—	$	—	$	85
(b) Property, plant and equipment		—		—		—		—		109
(c) Intangible assets		—		—		—		—		15
Total	$	—	$	—	$	—	$	—	$	209

(a) Impairment losses on certain prepaid licensing and royalty fees which were determined to be impaired:
In 2019, certain prepaid licensing and royalty fees were written down to zero, resulting in an impairment charge of $85 thousand. 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 digital entertainment 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 and related royalties are re-valued when impairment exists, using unobservable inputs

F-21

such as discounted cash flows, incorporating adjusted available market discount rate information and our Company’s estimates for liquidity risk, along with other cash flow model related assumptions.

(b) Impairment losses on certain property, plant, and equipment which were determined to be impaired:

In 2019, we recognized an impairment loss of $109 thousand on property, plant and equipment as while the recent years’ operating losses were expected to continue in the short-term, the carrying amounts of those long-lived assets would not be recoverable based on cash flow projections.

(c) Impairment losses on certain intangible assets which were determined to be impaired:

In 2019, we recognized an impairment loss of $15 thousand on intangible assets as while the recent years’ operating losses were expected to continue in the short-term, the carrying amounts of those intangible assets would not be recoverable based on cash flow projections.

NOTE 5. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows as of December 31, 2019 and 2020.

	December 31
(in US$ thousands)	2019		2020
Cash and savings accounts	$	57,736	$	45,696
Time deposits		7		6
Cash and cash equivalents reported on the consolidated    balance sheets		57,743		45,702
Cash restricted as performance bond		531		300
Total cash, cash equivalents and restricted cash reported    on the consolidated statements of cash flows	$	58,274	$	46,002

As of December 31, 2019 and 2020, cash amounting to $531 thousand and $300 thousand, respectively, 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)	2019		2020
Taiwan	$	52,261	$	42,040
Hong Kong		5,997		3,946
China		16		16
	$	58,274	$	46,002

NOTE 6. ACCOUNTS RECEIVABLE – NET

Accounts receivable consist of the following:

	December 31
(in US$ thousands)	2019			2020
Accounts receivable	$	371		$	276
Less: Allowance for doubtful accounts		(3	)		(1	)
	$	368		$	275

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The following is a summary of the changes in our Company’s allowance for doubtful accounts during the years ended December 31, 2018, 2019 and 2020:

(in US$ thousands)	2018			2019			2020
Balance at beginning of year	$	12		$	5		$	3
Additions: Bad debt expense		23			24			5
Less: Write-off		(29	)		(26	)		(7	)
Translation adjustment		(1	)		—			—
Balance at end of year	$	5		$	3		$	1

NOTE 7. OTHER CURRENT ASSETS

Other current assets consist of the following:

	December 31
(in US$ thousands)	2019			2020
Loans receivable - current	$	30		$	32
Less: Allowance for loans receivable - current		(30	)		(32	)
Other receivable		—			3
Other		139			157
	$	139		$	160

The following is a reconciliation of changes in our Company’s allowance for loans receivable - current during the years ended December 31, 2018, 2019 and 2020:

(in US$ thousands)	2018			2019		2020
Balance at beginning of year	$	30		$	29	$	30
Reversal for collection of bad debt		—			—		—
Translation adjustment		(1	)		1		2
Balance at end of year	$	29		$	30	$	32

NOTE 8. MARKETABLE SECURITIES – NONCURRENT

Marketable securities – noncurrent consist of the following:

	December 31
(in US$ thousands)	2019		2020
Debt securities, classified as available-for-sale	$	—	$	10,000

Our Company’s marketable securities - noncurrent are invested in convertible promissory notes and are classified as available-for-sale. (Please see Note 17, “Commitments and Contingencies, (c) Investment Agreements”, for additional information.)

The promissory notes are convertible into common shares at a price of US$3.00 per share, subject to certain adjustments, and shall be automatically converted upon certain conditions outlined in the agreements. The convertible promissory notes are redeemable based upon certain agreed-upon conditions.

We have also considered and determined whether our investments in the convertible notes are in-substance common shares which should be accounted for under the equity method. Given that our convertible notes have substantive redemption rights and thus, do not meet the criteria of in-substance common shares, and even if fully converted into common shares, will not enable us to exercise significant influence over the investee’s operating and financial decisions, we have accounted for them as debt securities in accordance with the guidance issued by FASB Accounting Standards Codification.

We assessed the estimated fair values and potential impairment of these investments as of December 31, 2020. See Note 4 “Fair Value Measurements” for additional information.

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NOTE 9. LEASE ARRANGEMENTS

a. Right-of-use assets

	2019
(in US$ thousands)	Cost			Accumulated depreciation		Net
Recognition of right-of-use assets upon adoption of ASC 842 at beginning of    year (Note 1)	$	1,056		$	—	$	1,056
Recognition of impairment upon adoption of ASC 842 at beginning of    year (Note 1)		(1,056	)		—		(1,056	)
Balance at end of year	$	—		$	—	$	—

b. Lease liabilities

	December 31
(in US$ thousands)	2019		2020
Carrying amount:
Current portion (classified under other current liabilities)	$	498	$	95
Noncurrent portion		94		3
	$	592	$	98

Discount rates for the existing lease liabilities ranged from 1.7% to 2.8%.

c. Material terms of right-of-use assets

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

d. Supplemental information

Supplemental disclosures of cash flow information consist of the following:

	For the Year ended December 31
(in US$ thousands)	2019		2020
Cash paid for operating leases	$	510	$	533
Right-of-use assets obtained in exchange for operating lease liabilities		1,056		—

Operating lease expenses were $15 thousand and $6 thousand during the years ended December 31, 2019 and 2020, respectively.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2020:

(in US$ thousands)	Operating Leases
Year
2021	$	96
2022		1
2023		1
2024		1
2025		—
Total minimum lease payments		99
Less: amount of lease payments representing interest		(1	)
Present value of future minimum lease payments		98
Less: current obligation under leases		(95	)
Non-current lease obligations	$	3

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We have elected the transition option under ASU 2016-02 and continued to apply the prior accounting standard for leases, including the disclosure requirements, in the comparative periods. Future minimum lease payments due under those lease agreements as of December 31, 2018, were as follows:

(in US$ thousands)	December 31, 2018
Not later than 1 year	$	450
Later than 1 year and not later than 5 years		504
Later than 5 years		—
Balance at end of year	$	954

Rent expense for the year ended December 31, 2018 was $493 thousand, recognized on a straight-line basis for the Company’s office and car leases which were accounted for as operating leases.

NOTE 10. ACCRUED EXPENSES

Accrued expenses consist of the following:

	December 31
(in US$ thousands)	2019		2020
Accrued professional fees	$	401	$	457
Accrued compensation		200		474
Accrued royalties		152		164
Accrued advertising expenses		76		25
Accrued director compensation and liability insurance		70		102
Other		381		294
	$	1,280	$	1,516

NOTE 11. DEFERRED REVENUE

Deferred revenue consists of the following:

	December 31
(in US$ thousands)	2019		2020
Unused virtual points	$	999	$	724
Unamortized virtual items		366		226
	$	1,365	$	950

The breakage amounts recognized as revenue during the years ended December 2019 and 2020 were $63 and $51 thousand, respectively. The cumulative amount of breakage for the years during and prior to 2017 was $346 thousand, recorded to our accumulated deficits at January 1, 2018, as a cumulative effect of initially applying the new revenue accounting standard.

NOTE 12. PENSION BENEFITS

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

Defined Benefit Pension Plan

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

F-25

We use December 31 as the measurement date for our defined benefit pension plan. As of December 31, 2019 and 2020, the accumulated benefit obligation amounted to $238 thousand and $287 thousand, respectively, and the funded status of prepaid pension assets amounted to $85 thousand and $67 thousand, respectively. The fair value of plan assets amounted to $411 thousand and $452 thousand as of December 31, 2019 and 2020, respectively. The accumulated other comprehensive loss amounted to ($66)thousand and ($94)thousand as of December 31, 2019 and 2020, respectively. The net periodic benefit cost for 2018, 2019 and 2020 amounted to $1 thousand, $2 thousand and $1 thousand, respectively.

The following table sets forth the plan’s benefit obligations, fair value of plan assets, and funded status at December 31, 2019 and 2020:

	December 31
(in US$ thousands)	2019			2020
Benefit Obligation	$	326		$	385
Fair value of plan assets		411			452
	$	(85	)	$	(67	)
Amounts recognized in the balance sheet consist of:
Noncurrent liabilities (assets)	$	(85	)	$	(67	)
Accumulated other comprehensive income		—			—
Net amount recognized	$	(85	)	$	(67	)
Amounts recognized in accumulated comprehensive income    (loss) consist of:
Unrecognized net gain (loss)	$	(66	)	$	(94	)

For the years ended December 31, 2018, 2019 and 2020, the net period pension cost consisted of the following:

	December 31
(in US$ thousands)	2018			2019			2020
Service cost	$	—		$	—		$	—
Interest cost		5			4			4
Expected return on plan assets		(6	)		(5	)		(5	)
Amortization of net loss		2			3			2
Curtailment gain		—			—			—
	$	1		$	2		$	1

Weighted average assumptions used to determine benefit obligations for 2019 and 2020 were as follows:

	December 31
	2019			2020
Discount rate		1.125	%		0.750	%
Rate of compensation increase		2.00	%		2.00	%

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

	2019			2020
Discount rate		1.375	%		1.125	%
Rate of return on plan assets		1.375	%		1.125	%
Rate of compensation increase		2.00	%		2.00	%

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

F-26

We expect to make a contribution of $0 thousand to the Fund in 2021. We expect to make future benefit payments of $1 thousand to employees from 2021 to 2025 and $23 thousand from 2026 to 2030.

Defined Contribution Pension Plans

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

Taiwan

Pursuant to the new “Labor Pension Act” enacted on July 1, 2005, our Company has a defined contribution pension plan for our employees located in Taiwan. For eligible employees who elect to participate in the defined contribution pension plan, we contribute no less than 6% of an employee’s monthly salary and wage and up to the maximum amount of NT$9 thousand (approximately $316), to each of the eligible employees’ individual pension accounts at the Bureau of Labor Insurance each month. Pension payments to employees are made either by monthly installments or in a lump sum from the accumulated contributions and earnings in employees’ individual accounts.

Hong Kong

According to the relevant Hong Kong regulations, we provide a contribution plan for the eligible employees in Hong Kong. We must contribute at least 5% of the employees’ total salaries. For this purpose, the monthly relevant contribution to their individual contribution accounts is subject to a cap of HK$1.5 thousand (approximately $193). 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, 2018, 2019 and 2020 were $210 thousand, $187 thousand, and $187 thousand, respectively, which are included in operating expenses.

NOTE 13. SHAREHOLDERS’ EQUITY

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

NOTE 14. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

(in US$ thousands)	Foreign currency items			Unrealized gain on securities			Pension and post retirement benefit plans			Accumulated other comprehensive loss
Balance at January 1, 2018	$	(21,914	)	$	—		$	(69	)	$	(21,983	)
Net current period change		(332	)		—			(17	)		(349	)
Balance at December 31, 2018		(22,246	)		—			(86	)		(22,332	)
Net current period change		66			—			20			86
Balance at December 31, 2019		(22,180	)		—			(66	)		(22,246	)
Net current period change		224			(351	)		(28	)		(155	)
Balance at December 31, 2020	$	(21,956	)	$	(351	)	$	(94	)	$	(22,401	)

There were no significant tax effects allocated to each component of other comprehensive income for the years ended December 31, 2018, 2019 and 2020.

F-27

NOTE 15. SHARE-BASED COMPENSATION

During 2018, 2019 and 2020, all the stock-based compensation expenses were recognized in the general and administrative expenses in our consolidated statements of operations. The stock-based compensation expense recognized in the general and administrative expenses in our consolidated statements of operations were $3 thousand, $1 thousand and $1 thousand, respectively.

There were no significant capitalized stock-based compensation costs at December 31, 2019 and 2020. There was no recognized stock-based compensation tax benefit for the years ended December 31, 2018, 2019 and 2020, as our Company recognized a full valuation allowance on net deferred tax assets as of December 31, 2019 and 2020.

(a) Overview of Stock-Based Compensation Plans

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.

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, 2020, no shares have been subscribed by qualified employees under the 2008 ESPP.

F-28

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, 2020, no shares were 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.

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, 2020, no shares were issued to employees under the 2010 ESPP.

Summarized below are the general terms of our stock-based compensation plans, for which awards have been granted as of December 31, 2020.

Stock-Based compensation plan	Granted awards			Vesting schedule	Options’ exercise price	RSUs’ grant date fair value
2004 plan		1,575,037	(1)	immediately upon granting to four years	$3.95~$12.75		—
2006 Plan		256,716	(2)	immediately upon granting to four years	$3.85~$83	$14.55~$80.05
2007 Plan		675,057	(3)	immediately upon granting to four years	$2.90~$90.85	$12.35~$76.75
2008 Plan		200,000		immediately upon granting to six years	$12.35~$21.20		—
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 options, were within reserved shares of 1,400 thousand common shares.

(2) The granted awards, net of forfeited or canceled options or shares, were within reserved shares of 200 thousand common shares.

(3) The granted awards, net of forfeited or canceled options or shares, were within reserved shares of 400 thousand common shares.

(4) The granted awards, net of forfeited or canceled options, were within reserved shares of 300 thousand common shares.

(5) The granted awards, net of forfeited or canceled options, were within reserved shares of 200 thousand common shares.

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

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(b) Options

In 2018, 2019 and 2020, no options were exercised for each year.

Our Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted to employees on the grant date. No options were granted to employees during 2018, 2019 and 2020.

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 Company’s current dividend yield.

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

	2018					2019					2020
	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 1	$	14.78		308		$	10.88		229		$	11.00		225
Options granted		—		—			—		—			—		—
Options exercised		—		—			—		—			—		—
Options Forfeited / canceled / expired		26.08		(79	)		3.85		(4	)		12.35		(176	)
Balance at December 31	$	10.88		229		$	11.00		225		$	6.16		49			2.58	$	1
Exercisable at December 31	$	10.97		227		$	11.05		224		$	6.16		49			2.58	$	1
Vested and expected to vest at    December 31	$	10.88		229		$	11.00		225		$	6.16		49			2.58	$	1

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between GigaMedia’s closing stock price on the last trading day of 2020 and the exercise price of an option, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on December 31, 2020. This amount changes based on the fair market value of GigaMedia’s stock.

As of December 31, 2020, there was no unrecognized compensation cost related to non-vested options.

The following table sets forth information about stock options outstanding at December 31, 2020:

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		8	3.68 years	Under $5		8
$5~$50		41	2.36 years	$5~$50		41
$50~$100		—		$50~$100		—
		49				49

F-30

(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, 2018, 2019 and 2020.

As of December 31 2019 and 2020, there was no unrecognized compensation cost related to non-vested RSUs. Our Company received no cash from employees as a result of employee stock award vesting and the forfeiture of RSUs during 2018, 2019 and 2020.

NOTE 16. INCOME TAXES

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

(in US$ thousands )	2018			2019			2020
Taiwan operations	$	(3,146	)	$	(2,191	)	$	(1,129	)
Non-Taiwan operations		(47	)		532			(164	)
	$	(3,193	)	$	(1,659	)	$	(1,293	)

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

( in US$ thousands )	2018		2019		2020
Taiwan:
Current	$	—	$	—	$	—
Deferred		—		—		—
	$	—	$	—	$	—
Non-Taiwan:
Current	$	—	$	—	$	—
Deferred		—		—		—
	$	—	$	—	$	—
Total current income tax benefit (expense)	$	—	$	—	$	—
Total deferred income tax benefit	$	—	$	—	$	—
Total income tax benefit	$	—	$	—	$	—

Our ultimate parent company is based in Singapore.

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

	2018			2019			2020
Taiwan statutory rate, including taxes on income and    retained earnings		24.00	%		24.00	%		24.00	%
Foreign tax differential		3.43	%		10.14	%		(0.47	)%
Expiration of net operating loss carryforwards		—			—			(31.92	)%
Tax-exempt income		—			—			—
Non-deductible items - bad debts		(0.22	)%		—			—
Other non-deductible expenses		(3.50	)%		(7.01	)%		(3.99	)%
Changes in unrecognized tax benefits		17.17	%		—			—
Cumulative effect of initially applying new accounting standards		—			13.13	%		—
Change in deferred tax assets and valuation allowance		(42.02	)%		(43.38	)%		10.52	%
Change in tax rate		0.15	%		—			—
Other		0.99	%		3.12	%		1.86	%
Effective rate		—			—			—

F-31

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

(in US$ thousands)	December 31
	2019			2020
Net operating loss carryforwards	$	12,005		$	12,519
Share-based compensation		299			315
Investments		134			141
Lease right-of-use assets		122			19
Intangible assets and goodwill		64			2
Other		108			50
		12,732			13,046
Less: valuation allowance		(12,732	)		(13,046	)
Deferred tax assets - net	$	—		$	—

A reconciliation of the beginning and ending amounts of our valuation allowance on deferred tax assets for the years ended December 31, 2018, 2019 and 2020 are as follows:

(in US$ thousands)	2018			2019			2020
Balance at beginning of year	$	9,928		$	11,765		$	12,732
Subsequent reversal and utilization of valuation allowance		—			(17	)		(87	)
Changes to valuation allowance		2,107			723			1,585
Expirations		—			—			(1,720	)
Exchange differences		(270	)		261			536
Balance at end of year	$	11,765		$	12,732		$	13,046

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

As of December 31, 2020, we had net operating loss carryforwards available to offset future taxable income, shown below by major jurisdictions:

Jurisdiction	Amount		Expiring year
Hong Kong	$	15,760	indefinite
Taiwan		41,329	2021~2030
	$	57,089

Pursuant to the amendment of the ROC Income Tax Act in February 2018, starting from 2018, the corporate income tax rate was adjusted from 17% to 20%. In addition, the tax rate applicable to the undistributed portion of earnings to be made in 2018 and thereafter was reduced from 10% to 5%.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding the effects of accrued interest) for the years 2018, 2019 and 2020 are as follows:

(in US$ thousands)	2018			2019		2020
Balance at beginning of year	$	1,110		$	—	$	—
Increase related to prior year tax positions		—			—		—
Decrease related to prior year tax positions		—			—		—
Settlement of intercompany charge adjustments		(1,095	)		—		—
Expiration of statute of limitations		—			—		—
Exchange differences		(15	)		—		—
Balance at end of year	$	—		$	—	$	—

F-32

As of December 31, 2018, 2019 and 2020, there were no unrecognized tax benefits that if recognized would affect the effective tax rate. As of December 31, 2018, 2019 and 2020, $0, $0 and $0 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, 2018, 2019 and 2020.

Our major tax paying components are all located in Taiwan. As of December 31, 2020, the income tax filings in Taiwan have been examined for the years through 2018.

In 2018, our unrecognized tax benefits were related to intercompany charges in 2014 and 2015. The income tax authority had made decisions on the intercompany charges for our tax filings through 2014. We filed appeals against the unfavorable parts of the decision regarding these intercompany charge adjustments, and subsequently reached agreement and settlement in 2018 with the tax authority regarding the tax filings for those years. The settlement did not have significant impact to our financial statements.

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.

NOTE 17. COMMITMENTS AND CONTINGENCIES

Commitments

(a) Operating Leases

We rent certain office premises, office equipment and automobile for operation use under lease agreements that expire at various dates through 2024. The following table sets forth our future aggregate minimum lease payments required under these operating leases, as of December 31, 2020:

(in US$ thousands)	Amount
2021	$	96
2022		1
2023		1
2024		1
2025 and after		—
	$	99

Please refer to Note 8 for more information of our lease arrangements.

(b) License Agreements

We have contractual obligations under various license agreements to pay the licensors license fees and minimum guarantees against future royalties. There were no committed license fees and minimum guarantees against future royalties set forth in our significant license agreements as of December 31, 2020.

For a specific licensed game, we are committed to paying an incentive fee of $30 thousand to the licensor for every $500 thousand additional revenues generated from the game during the agreement period from January 2018 to January 2020. In January 2020, we entered an extension and amendment agreement to extend the term and modified certain provisions. The extension term commenced on January 27, 2020 and expires on January 26, 2022, and the incentive fee is $30 thousand for every $500 thousand additional revenues generated during the extension term.

F-33

(c) Investment Agreements

On August 31, 2020, we entered into a convertible note purchase agreement to purchase a US$10,000,000 principal amount convertible promissory note (the “Note”) issued by Aeolus Robotics Corporation (“Aeolus”), a global company primarily engaged in designing, manufacturing, processing and sales of intellectual robotics. The Note, bearing an interest rate of 2% per annum, shall be due on August 30, 2022 but is extendable to August 30, 2023 at Aeolus’s option, and all or a portion of the principal amount under the Note may be convertible at GigaMedia’s option upon maturity, upon prepayment, or when certain events occur, into ordinary shares or preferred shares of Aeolus at a price of US$3.00 per share, or into preferred shares in Aeolus’s nearest next round equity financing where Aeolus issues further preferred shares, at a price equal to the purchase price offered in such financing or with certain discount. Assuming full conversion of the Note into ordinary shares, we would beneficially own 3,333,333 shares representing, assuming the exercise or conversion of all other rights, options and convertible securities, approximately 4.62% of the total ordinary shares of Aeolus as of August 31, 2020.

Contingencies

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

On January 15, 2018, Ennoconn Corporation (“Ennoconn”) filed a complaint against one of our subsidiaries, GigaMedia Cloud Services Co., Ltd. (“GigaMedia Cloud”) in the Taiwan Taipei District Court. The complaint alleged that GigaMedia Cloud is obligated to pay Ennoconn NTD 79,477,648 (approximately $2,697,471) in connection with a transaction to purchase taximeters in 2015. GigaMedia Cloud filed an answer to the complaint denying Ennoconn’s allegations in the lack of factual and legal basis on March 1, 2018. On November 15, 2018, the Taiwan Taipei District Court determined that all of Ennoconn’s claims were without merit and made a judgment denying the complaint. On January 3, 2019, Ennoconn filed an appeal demanding the judgment which was entered in the District Court, to be reversed and amended. The civil court of the second instance, the Taiwan High Court, has conducted the session of the preparatory proceedings for several times during the past year. As a result, the Taiwan High Court ruled on January 8, 2020, that the decision of the Taiwan Taipei District Court should be partially modified and Ennoconn is entitled to NTD 27,084,180 (approximately $892,763). GigaMedia Cloud has filed another appeal with the Taiwan Supreme Court on February 4, 2020. On March 19, 2020, the Taiwan High Court has forwarded the dossier and other relevant documents to the Taiwan Supreme Court. As of the issue date of these consolidated financial statements, the Taiwan Supreme Court has yet to issue its ruling. GigaMedia Cloud accrued its best estimate for the ultimate resolution of this claim. On the other hand, pursuant to Taiwan’s Company Act, the shareholder of GigaMedia Cloud is limitedly liable for GigaMedia Cloud in an amount equal to the total value of shares subscribed. Therefore, we believe that the immediate parent company, the intermediate parent companies, as well as GigaMedia, the ultimate parent company, individually or collectively do not have obligations to absorb GigaMedia Cloud’s loss exceeding GigaMedia Cloud’s net worth, amounting to approximately $100 thousand before such accrual, as of December 31, 2020, and accordingly, it will not have a material adverse impact on our financial condition, results of operations or cash flows.

NOTE 18. SEGMENT, PRODUCT, GEOGRAPHIC AND OTHER INFORMATION

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

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

Major Product Lines

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

(in US$ thousands)	2018		2019		2020
MahJong and casino casual games	$	1,816	$	1,778	$	1,833
PC-based massive multiplayer online games		1,272		1,204		2,730
Mobile role playing games		3,998		3,538		2,270
Other games and game related revenues		15		125		42
	$	7,101	$	6,645	$	6,875

Major Customers

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

F-34

Geographic Information

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

(in US$ thousands)
Geographic region / country	2018		2019		2020
Taiwan	$	2,958	$	3,074	$	3,743
Hong Kong		4,143		3,571		3,132
	$	7,101	$	6,645	$	6,875

Net tangible long-lived assets by geographic region are as follows:

(in US$ thousands)	December 31
Geographic region / country	2018		2019		2020
Taiwan	$	94	$	—	$	22
Hong Kong		27		—		—
	$	121	$	—	$	22

NOTE 19. SUBSEQUENT EVENT

There have been no events that have occurred subsequent to December 31, 2020, and through the date that the consolidated financial statements are issued that would require adjustment to or disclosure except as already disclosed in the consolidated financial statements.

F-35

EX-99.4

GIGAMEDIA  LIMITED  AND  ITS  SUBSIDIARIES

(Registration  Number:  199905474H)

ANNUAL  REPORT

YEAR  ENDED  31  DECEMBER  2020

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

C O N T E N T S

	PAGE
Directors’ statement	1 - 5
Independent auditor’s report	6 – 9
Statements of financial position	10
Consolidated statement of profit or loss	11
Consolidated statement of comprehensive income	12
Consolidated statement of changes in equity	13 - 14
Consolidated statement of cash flows	15
Notes to the consolidated financial statements	16 - 59

GRPA-SM/3017458-4085296-FS/LBT/BTCC/FLCH

GigaMedia Limited and its subsidiariesFinancial statementsYear ended 31 December 2020

Directors’ statement

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2020.

In our opinion:

(a) the financial statements set out on pages 10 to 59 are drawn up so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2020 and the financial performance, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards; and

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

Directors

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

Huang, James Cheng-Ming

Hong, Chin Fock (Damian)

Huang, John Ping Chang

Huang, Billy Bing-Yuan

Liu, Nick Chia-En

Tung, Casey Kuo Chong

Directors' interests

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

Name of director and corporation in which interests are held	Holdings at beginning of the financial year	Holdings at end of the financial year
The Company
Huang, James Cheng-Ming
-ordinary shares	873,069	1,073,566
-options to subscribe for ordinary shares	4,000	4,000

Huang, John Ping Chang
-options to subscribe for ordinary shares	4,000	4,000

GigaMedia Limited and its subsidiariesFinancial statementsYear ended 31 December 2020

Name of director and corporation in which interests are held	Holdings at beginning of the financial year	Holdings at end of the financial year
Huang, Billy Bing-Yuan
-options to subscribe for ordinary shares	4,000	4,000
Liu, Nick Chia-En
-options to subscribe for ordinary shares	4,000	4,000
Tung, Casey Kuo Chong
-options to subscribe for ordinary shares	4,000	4,000
Hong, Chin Fock (Damian)
-options to subscribe for ordinary shares	4,000	4,000

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

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

Share options

2004 Employee Share Option Plan

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

2006 Equity Incentive Plan

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

GigaMedia Limited and its subsidiariesFinancial statementsYear ended 31 December 2020

2007 Equity Incentive Plan

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

2008 Equity Incentive Plan

At the June 2008 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2008 Equity Incentive Plan (the “2008 Plan”) under which up to 200 thousand ordinary shares of the 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. No shares have been issued under the 2008 Plan during the current financial year.

2008 Employee Share Purchase Plan

At the June 2008 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2008 Employee Share Purchase Plan (the “2008 ESPP”) under which up to 40 thousand ordinary shares of the Company were reserved for issuance.  Any person who is regularly employed by the Company or its designated subsidiaries shall be eligible to participate in the 2008 ESPP.  Pursuant to the 2008 ESPP, the 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 the date of this annual report, no shares have been granted or subscribed by qualified employees under the 2008 ESPP.

2009 Equity Incentive Plan

At the June 2009 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2009 Equity Incentive Plan (the “2009 Plan”) under which up to 300 thousand ordinary shares of the 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. The 2009 Plan has lapsed in June 2019.

2009 Employee Share Purchase Plan

At the June 2009 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2009 Employee Share Purchase Plan (the “2009 ESPP”) under which up to 40 thousand ordinary shares of the Company have been reserved for issuance.  To be eligible, employees must be regularly employed by the Company or its 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 the date of this annual report, no shares have been granted or subscribed by qualified employees under the 2009 ESPP.

GigaMedia Limited and its subsidiariesFinancial statementsYear ended 31 December 2020

2010 Equity Incentive Plan

At the June 2010 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2010 Equity Incentive Plan (the “2010 Plan”) under which up to 200 thousand ordinary shares of the 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. No shares have been issued under the 2010 Plan during the current financial year. The 2010 Plan has lapsed during the current financial year.

2010 Employee Share Purchase Plan

At the June 2010 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2010 Employee Share Purchase Plan (the “2010 ESPP”) under which up to 40 thousand ordinary shares of the Company have been reserved for issuance.  To be eligible, employees must be regularly employed by the Company or its 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 the date of this annual report, no shares have been granted or subscribed by qualified employees under the 2010 ESPP.  

Summarised below are the general terms of its share-based compensation plans as of 31 December 2020.

Date granted	Balance at beginning of year	Granted during the year	Expired/ forfeited during the year	Balance at end of year	Options’ exercise price	Exercise period
	’000	’000	’000	’000	US$
13.05.2010	176	–	(176)	–	$12.35	13.05.2010 - 13.05.2020
20.05.2011	12	–	–	12	$6.25	20.05.2011 - 20.05.2021
05.01.2012	4	–	–	4	$4.05	05.01.2012 - 05.01.2022
28.10.2013	4	–	–	4	$5.05	28.10.2013 - 28.10.2023
28.03.2014	25	–	–	25	$7.15	28.03.2014 - 28.03.2024
05.05.2017	4	–	–	4	$2.90	05.05.2017 - 05.05.2027
	225	–	(176)	49

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

GigaMedia Limited and its subsidiariesFinancial statementsYear ended 31 December 2020

Auditors

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

On behalf of the Board of Directors

/S/ HUANG, JAMES CHENG-MING

─────────────────────

HUANG, JAMES CHENG-MING

Director

/S/ HUANG, JOHN PING CHANG

─────────────────────

HUANG, JOHN PING CHANG

Director

28 April 2021

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

GIGAMEDIA LIMITED

Report on the audit of the financial statements

Opinion

We have audited the financial statements of GigaMedia Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies, as set out on pages 10 to 59.

In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the “Act”) and Financial Reporting Standards in Singapore (“FRSs”) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2020, and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group for the year ended on that date.

Basis for opinion

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

Key audit matters

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

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

GIGAMEDIA LIMITED

Fair valuation of financial asset at FVTPL

The Company holds a financial asset at FVTPL amounted to $10,000,000, a convertible note with an option to convert it into equity securities issued by a private company. The fair value of this investment is based on complex valuation methods with unobservable inputs, therefore, classified as Level 3.

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

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

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

Our audit performed and responses thereon

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

Our procedures included:

• We obtained an understanding and evaluated the design and implementation of controls over management’s valuation of the financial asset at FVTPL, including controls over the Company’s valuation methods and significant unobservable inputs.

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

Other information

Management is responsible for the other information. The other information comprises the directors’ statement.

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

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

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

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

GIGAMEDIA LIMITED

Responsibilities of management and directors for the financial statements

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

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

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

Auditor’s responsibilities for the audit of the financial statements

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

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

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

GIGAMEDIA LIMITED

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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

Report on other legal and regulatory requirements

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

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

/S/ Deloitte & Touche LLP

Public Accountants and

Chartered Accountants

Singapore

28 April 2021

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2020

Statements of financial position As at 31 December 2020
		Group		Company
	Note	2020	2019	2020	2019
		US$’000	US$’000	US$’000	US$’000
Assets
Property, plant and equipment	4	22	–	–	–
Right-of-use assets	5	–	–	–	–
Intangible assets	6	4	–	–	–
Subsidiaries	7	–	–	51,297	51,985
Other investment	8	10,000	–	10,000	–
Other assets (non-current)	9	342	285	67	–
Non-current assets		10,368	285	61,364	51,985
Trade and other receivables	10	523	619	1,674	1,703
Other assets (current)	9	130	44	–	–
Cash and cash equivalents	11	46,002	58,274	1,353	1,788
Current assets		46,655	58,937	3,027	3,491
Total assets		57,023	59,222	64,391	55,476
Equity attributable to owners of the Company
Share capital	12	213,238	213,238	213,238	213,238
Reserves	13	(6,508)	(6,758)	2,462	(89)
Accumulated losses		(152,871)	(151,174)	(161,841)	(157,843)
Total equity		53,859	55,306	53,859	55,306
Liability
Other payables	16	–	–	10,067	–
Lease liabilities	15	3	95	–	–
Non-current liabilities		3	95	10,067	–
Trade and other payables	16	1,878	1,720	465	170
Contract liabilities	17	1,188	1,603	–	–
Lease liabilities	15	95	498	–	–
Current liabilities		3,161	3,821	465	170
Total liabilities		3,164	3,916	465	170
Total equity and liabilities		57,023	59,222	64,391	55,476

See accompanying notes to financial statements.

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2020

Consolidated statement of profit or loss Year ended 31 December 2020
	Note	2020	2019
		US$’000	US$’000
Revenue	18	6,875	6,645
Cost of sales		(2,956)	(3,064)
Gross profit		3,919	3,581
Other income		55	-
Product development and engineering expenses		(1,327)	(1,315)
Selling and marketing expenses		(1,619)	(2,129)
General and administrative expenses		(3,120)	(3,364)
Other operating expenses	19	(154)	(918)
Results from operating activities		(2,246)	(4,145)
Finance income		613	1,483
Finance expenses		(6)	(15)
Net finance income	20	607	1,468
Loss before tax		(1,639)	(2,677)
Income tax	21	–	–
Loss for the year	22	(1,639)	(2,677)

See accompanying notes to financial statements.

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2020

Consolidated statement of comprehensive income Year ended 31 December 2020
	Note	2020	2019
		US$’000	US$’000
Loss for the year		(1,639)	(2,677)
Other comprehensive (loss) income:
Item that will not be reclassified to profit or loss:
Defined benefit plan remeasurements	14	(58)	(14)
		(58)	(14)
Item that may be reclassified subsequently to profit or loss:
Foreign currency translation differences – foreign operations		249	63
		249	63
Other comprehensive income for the year, net of tax		191	49
Total comprehensive loss for the year		(1,448)	(2,628)

See accompanying notes to financial statements.

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2020

Consolidated statement of changes in equity Year ended 31 December 2020
		Attributable to owners of the Company
	Note	Share capital	Share option reserve	Statutory reserve	Accumulated losses	Foreign currency translation reserve	Total
		US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
At 1 January 2019		213,238	12,861	1,516	(148,483)	(21,199)	57,933
Total comprehensive income (loss) for the year
Loss for the year		–	–	–	(2,677)	–	(2,677)
Other comprehensive income (loss)
Foreign currency translation		–	–	–	–	63	63
Defined benefit plan remeasurements	14	–	–	–	(14)	–	(14)
Total other comprehensive income (loss), net of tax		–	–	–	(14)	63	49
Total comprehensive income (loss) for the year		–	–	–	(2,691)	63	(2,628)
Transactions with owners, recognised directly in equity
Contributions by and distributions to owners
Share-based payment transactions	13	–	1	–	–	–	1
Total transactions with owners		–	1	–	–	–	1
At 31 December 2019		213,238	12,862	1,516	(151,174)	(21,136)	55,306

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2020

Consolidated statement of changes in equity Year ended 31 December 2020
	Note	Share capital	Share option reserve	Statutory reserve	Accumulated losses	Foreign currency translation reserve	Total
		US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
At 1 January 2020		213,238	12,862	1,516	(151,174)	(21,136)	55,306
Total comprehensive loss for the year
Loss for the year		–	–	–	(1,639)	–	(1,639)
Other comprehensive income
Foreign currency translation		–	–	–	–	249	249
Defined benefit plan remeasurements	14	–	–	–	(58)	–	(58)
Total other comprehensive income, net of tax		–	–	–	(58)	249	191
Total comprehensive loss for the year		–	–	–	(1,697)	249	(1,448)
Transactions with owners, recognised directly in equity
Contributions by and distributions to owners
Share-based payment transactions	13	–	1	–	–	–	1
Total transactions with owners		–	1	–	–	–	1
At 31 December 2020		213,238	12,863	1,516	(152,871)	(20,887)	53,859

See accompanying notes to financial statements.

GigaMedia Limited and its subsidiaries

Financial statements

Year ended 31 December 2020

Consolidated statement of cash flows Year ended 31 December 2020
		2020	2019
	Note	US$’000	US$’000
Cash flows from operating activities
Loss before tax		(1,639)	(2,677)
Adjustments for:
Loss allowances for trade receivables		5	24
Amortisation – intangible assets		5	37
Depreciation of property, plant and equipment		3	61
Depreciation of lease right-of-use assets		–	480
Impairment loss on property, plant and equipment		–	112
Impairment loss on intangible assets		–	16
Impairment loss on prepaid licensing fees and royalty fees		–	85
Impairment loss on lease right-of-use assets		–	576
Interest expense		6	15
Interest income		(613)	(1,483)
Share-based compensation		1	1
Unrealised foreign exchange loss		149	–
Operating loss before working capital changes		(2,083)	(2,753)
Changes in:
Trade and other receivables		91	126
Other assets		(153)	306
Trade and other payables		158	(184)
Contract liabilities		(415)	(5)
Prepaid pension plans		18	(29)
Cash used in operating activities, representing
net cash used in operating activities		(2,384)	(2,539)

Cash flows from investing activities
Interest received	613	1,483
Purchase of property, plant and equipment	(24)	(48)
Purchase of intangible assets	(8)	(14)
Purchase of financial asset at FVTPL	(10,000)	–
Refundable deposit	(9)	(2)
Net cash (used in) from investing activities	(9,428)	1,419

Cash flows from financing activities
Deposits pledged		231	(14)
Repayment of lease liabilities		(495)	(474)
Interest paid		(6)	(15)
Net cash used in financing activities		(270)	(503)
Net decrease in cash and cash equivalents		(12,082)	(1,623)
Cash and cash equivalents at 1 January		57,743	59,308
Effect of exchange rate fluctuations on cash held in foreign currencies		41	58
Cash and cash equivalents at 31 December	11	45,702	57,743

See accompanying notes to financial statements.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

1. Corporate information

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

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

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

The consolidated financial statements of the Group and statement of financial position of the Company for the year ended 31 December 2020 were authorised for issue by the Board of Directors on 28 April 2021.

2.Summary of significant accounting policies

Basis of preparation

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

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

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

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

▪ Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

▪ Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

▪ Level 3 - Unobservable inputs for the asset or liability.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Adoption of new and revised standards

In the current financial year, the Group has adopted all the new and revised FRSs and interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2020. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group’s and Company’s accounting policies in current and prior years.

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

Basis of consolidation

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

•Has power over the investee;

• Is exposed, or has rights, to variable returns from its involvement with the investee; and

•Has the ability to use its power to affect its returns.

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

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

• The size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• Potential voting rights held by the Company, other vote holders or other parties;

• Rights arising from other contractual arrangements; and

• Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

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

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

Changes in the Group's ownership interests in existing subsidiaries

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

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

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates at fair value, with the corresponding gain or loss being recognised in profit or loss.

Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the FRS are recognised at their fair value at the acquisition date, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Benefits respectively;

• Liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in FRS 102 Share-based Payment at the acquisition date; and

• Assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-current Assets Held for Saleand Discontinued Operations are measured in accordance with that Standard.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another FRS.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year from acquisition date.

If the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquire (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Foreign currency

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

a) Transactions and balances

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

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

b) Group companies

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

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

Property, plant and equipment

Property, plant and equipment are stated in the consolidated statement of financial position at cost, less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is charged so as to write off the cost of items of property, plant, and equipment less their residual values over their estimated useful lives, using the straight-line method, on the following bases:

Leasehold improvements -3 to 5 years

Information and communication equipment-2 to 5 years

Office furniture and equipment-3 to 5 years

The residual values, useful life and depreciation method are reviewed at end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in profit or loss.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and impairment losses. Amortisation for intangible assets with finite useful lives is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The following useful life is used in the calculation of amortisation:

Purchased software development costs-1 to 3 years

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Reversal is recognised in the profit or loss unless the asset is measured at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the profit or loss is treated as a revaluation increase.

Financial instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Classification of financial assets

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

• Amortised cost; and

• Fair value through profit or loss (FVTPL).

Financial assets classified as at amortised cost

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

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

• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Amortised cost and effective interest method

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

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

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

Financial asset at FVTPL

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

Impairment of financial assets

The Group recognises a loss allowance for expected credit loss (“ECL”) on financial assets at amortised costs. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Group measures the loss allowance based on lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-months ECL (“12m ECL”). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset being credit-impaired at the reporting date or an actual default occurring.

Significant increase in credit risk

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

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

Derecognition of financial assets

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

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

Financial liabilities

Financial liabilities include trade and other payables and interest bearing loans and borrowings.

Initial recognition and measurement

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

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Subsequent measurement

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

Derecognition

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

Provisions

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

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

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

Equity instruments

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Employee benefits

a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Company makes contributions to the Central Provident Fund (CPF) scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

b) Employee leave entitlement

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

c) Defined benefits plan

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

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

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

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

d) Share-based payment transactions

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

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

Taxes

a) Current income tax

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

b) Deferred tax

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

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

• Where the deferred tax arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future.

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

• Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of deductible temporary differences associated with investments in subsidiaries, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

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

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

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

Leases

As lessee

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

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

Lease payments included in the measurement of the lease liability comprise:

• fixed lease payments (including in-substance fixed payments), less any lease incentives;

• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

• the amount expected to be payable by the lessee under residual value guarantees;

• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

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

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

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

• the lease term has changed, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; or

• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

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

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

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

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

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

Revenue recognition

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

Digital entertainment service revenue

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2.Summary of significant accounting policies (cont’d)

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

Segment reporting

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

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

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

3. Critical accounting judgements and key sources of estimation uncertainty

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

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

3. Critical accounting judgements and key sources of estimation uncertainty (cont’d)

Critical judgements in applying the Group’s accounting policies

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

Key sources of estimation uncertainty

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

a) Recognition of digital entertainment service revenue

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

The carrying amount of the Group’s contract liabilities and digital entertainment service revenue are disclosed in Notes 17 and 18 to the financial statements.

b) Impairment of property, plant and equipment, right-of-use assets, intangible assets and prepaid licensing and royalty fees

The Group regularly reviews whether there are any indications of impairment and recognises an impairment loss if the carrying amount of the property, plant and equipment, right-of-use assets, intangible assets and prepaid licensing and royalty fees is lower than its recoverable amount. The determination of recoverable amount is subject to management’s estimation based on the life cycle and forecasted sales generated from the online games.

The carrying amount of the Group’s property, plant and equipment, right-of-use assets, intangible assets and prepaid licensing and royalty fees are disclosed in Notes 4, 5, 6 and 9 to the financial statements.

c) Fair value of financial asset at FVTPL

In estimating the fair value of the financial asset at FVTPL, the Group engages third party qualified valuer to perform the valuation. Management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model. Key significant observable inputs include discount for lack of marketability and volatility rate as disclosed in Note 24(c) to the financial statements.

The carrying amount of the Group’s financial asset at FVTPL is disclosed in Note 8 to the financial statements.

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

4 Property, plant and equipment

	Leasehold improvements	Information and communication equipment	Office furniture and equipment	Total
Group	US$’000	US$’000	US$’000	US$’000
Cost
At 1 January 2019	139	91	32	262
Additions	–	44	4	48
Effect of movements in exchange rates	2	4	1	7
At 31 December 2019	141	139	37	317
Additions	–	9	15	24
Disposals/Write offs	(141)	(139)	(37)	(317)
Effect of movements in exchange rates	–	–	1	1
At 31 December 2020	–	9	16	25
Accumulated depreciation
At 1 January 2019	107	20	14	141
Depreciation charge to profit or loss	27	25	9	61
Effect of movements in exchange rates	1	2	–	3
At 31 December 2019	135	47	23	205
Depreciation charge to profit or loss	–	2	1	3
Disposals/Write offs	(135)	(47)	(23)	(205)
At 31 December 2020	–	2	1	3
Accumulated impairment loss
At 1 January 2019	–	–	–	–
Charge to profit or loss	6	92	14	112
At 31 December 2019	6	92	14	112
Disposals/Write offs	(6)	(92)	(14)	(112)
At 31 December 2020	–	–	–	–
Carrying amounts
At 31 December 2019	–	–	–	–
At 31 December 2020	–	7	15	22
As at 31 December 2019, the carrying amount of the property, plant and equipment were determined not to be recoverable based on the forecasted sales of the Group. Accordingly, an impairment loss of US$112,000 was recorded in profit or loss.

36

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

5 Right-out-use assets

	Office space	Motor vehicles	Office equipment	Total
Group	US$’000	US$’000	US$’000	US$’000
Cost
At 1 January 2019	879	47	6	932
Additions	124	–	–	124
Effect of movements in exchange rates	22	–	–	22
At 31 December 2019 and 2020	1,025	47	6	1,078
Accumulated depreciation
At 1 January 2019	–	–	–	–
Depreciation charge to profit or loss	456	23	1	480
Effect of movements in exchange rates	13	–	–	13
At 31 December 2019 and 2020	469	23	1	493
Accumulated impairment loss
At 1 January 2019	–	–	–	–
Charge to profit or loss	547	24	5	576
Effect of movements in exchange rates	9	–	–	9
At 31 December 2019 and 2020	556	24	5	585
Carrying amounts
At 31 December 2019 and 2020	–	–	–	–

The Group leases several assets including office space, motor vehicles and IT equipment. The average lease term is between 2 to 5 years and rentals are generally fixed during the lease term.

During the financial year ended 31 December 2019, the lease for an office space expired. The expired contract was replaced by a new lease and this resulted in additions to right-of-use assets of US$124,000 in 2019.

As at 31 December 2019, the carrying amount of the right-of-use assets were determined not to be recoverable based on the forecasted sales of the Group. Accordingly, an impairment loss of US$576,000 was recorded in profit or loss.

37

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

6Intangible assets

	Purchased software development costs
	US$’000
Group
Cost
At 1 January 2019	64
Additions	14
Disposals/Write offs	(9)
Effect of movements in exchange rates	1
At 31 December 2019	70
Additions	8
Disposals/Write offs	(70)
Effect of movements in exchange rates	1
At 31 December 2020	9
Accumulated amortisation
At 1 January 2019	26
Amortisation for the year	37
Disposals/Write offs	(9)
At 31 December 2019	54
Amortisation for the year	5
Disposals/Write offs	(54)
At 31 December 2020	5
Accumulated impairment loss
At 1 January 2019	-
Charge to profit or loss	16
At 31 December 2019	16
Disposals/Write offs	(16)
At 31 December 2020	-
Carrying amounts
At 31 December 2019	-
At 31 December 2020	4

As at 31 December 2019, the carrying amount of the intangible assets were determined not to be recoverable based on the forecasted sales of the Group. Accordingly, an impairment loss of US$16,000 was recorded in profit or loss.

38

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

7Subsidiaries

	Company
	2020	2019
	US$’000	US$’000
At 1 January	51,985	62,640
Allowance for impairment loss	(3,427)	(12,190)
Effect of movements in exchange rates	2,739	1,535
At 31 December	51,297	51,985

During the year ended 31 December 2020, allowance for impairment loss amounting to US$3,427,000 (2019: US$12,190,000) was made in respect of the Company’s investments in certain subsidiaries to reduce the carrying value of the investments to recoverable amounts based on the net asset value of respective subsidiaries, which approximate their fair value less costs to sell.

Details of the subsidiaries are as follows:

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2020	2019
			%	%
Held by the Company
GigaMedia International Holdings Limited	Holding company	British Virgin Islands	100	100
Held by GigaMedia International Holdings Limited
Cambridge Entertainment Software Limited	Holding company	British Virgin Islands	100	100
GigaMedia (HK) Limited	Holding company	Hong Kong	100	100
GigaMedia Online Entertainment Corp.	Holding company	Cayman Islands	100	100
GigaMedia (Cayman) Limited.	Holding company	Cayman Islands	100	100

Held by FunTown World Limited
FunTown Hong Kong Limited	Online games	Hong Kong	100	100

39

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

Name of subsidiaries	Principal activities	Country of incorporation	Percentage ownership interest
			2019	2018
			%	%

Held by GigaMedia Online Entertainment Corp.
FunTown World Limited	Holding company	British Virgin Islands	100	100
GigaMedia Freestyle Holdings Limited	Holding company	British Virgin Islands	100	100
Megabiz Limited	Holding company	British Virgin Islands	100	100
Held by GigaMedia (Cayman) Limited.
Hoshin GigaMedia Center Inc.	Online games	Taiwan	100	100
Giga Development Corporation	Holding company	Taiwan	100	100
GigaMedia Cloud Services Co., Ltd.	Cloud computing services	Taiwan	100	100
Held by Giga Development Corporation
Wen He Investment Ltd.	Holding company	Taiwan	100	100
Held by Hoshin GigaMedia Center IncPlay2gether Digital Technology Co., Ltd.Online gamesTaiwan100100Gaminfinity Publishing Co., Ltd.Online gamesTaiwan100100Held by GigaMedia (HK) LimitedShanghai Pontoon Networking Technology Co., Ltd.Online gamesChina100100

40

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

8Other investment

	Group and Company
	2020	2019
	US$’000	US$’000
Non-current investment
Financial asset at FVTPL – Debt instrument (unquoted)	10,000	-

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

9Other assets

		Group		Company
	Note	2020	2019	2020	2019
		US$’000	US$’000	US$’000	US$’000
Refundable deposits		208	199	–	–
Prepaid licensing and royalty fees		155	69	–	–
Prepaid pension assets	14	67	85	–	–
Others		67	1	67	–
		497	354	67	–
Less: Impairment loss on prepaid licensing and royalty fees		(25)	(25)	–	–
		472	329	67	–
Non-current assets		342	285	67	–
Current assets		130	44	–	–
		472	329	67	–

Assessment of impairment of prepaid licensing and royalty fees

The Group recorded prepaid licensing and royalty fees of US$155,000 (2019: US$69,000) arising from the purchase of licences for its online games for subsequent financial periods.

41

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

At the reporting date, the impairment charge for prepaid licensing and royalty fees relates to certain licensed online games, which the carrying amounts of the related assets were determined not to be recoverable based on their expected life cycle and the forecasted sales.  As at 31 December 2019, an impairment loss of US$85,000 was recorded in profit or loss based on management’s assessment. Movements in allowance for impairment losses on prepaid licensing and royalty fees during the year were as follows:

	Group
	2020	2019
	US$’000	US$’000
At 1 January	25	202
Impairment loss recognised	-	85
Amounts written off	-	(262)
At 31 December	25	25

10Trade and other receivables

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Trade receivables
-third parties	276	371	–	–
Less: Allowance for doubtful receivables	(1)	(3)	–	–
	275	368	–	–
Other receivables
due from subsidiaries	–	–	1,674	1,703
Prepayments	88	112	–	–
Others	160	139	–	–
	523	619	1,674	1,703

Trade balances

The trade amounts are unsecured, interest-free and with an average credit period of
30 days (2019: 30 days).

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

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

42

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

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

	Group
	2020	2019
	US$’000	US$’000
Current	248	335
Past due 0 – 90 days	27	32
Past due 91 – 180 days	–	1
More than 180 days	–	–
	275	368

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

	Group
	2020	2019
	US$’000	US$’000
Balance at 1 January	3	5
Charge to profit or loss	5	24
Written off	(7)	(26)
Balance at 31 December	1	3

For the financial year ended 31 December 2020, the trade receivables have been assessed based on lifetime ECL individually and are not credit impaired.

Other receivables and amounts due from subsidiaries

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

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

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

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

43

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

11Cash and cash equivalents

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Bank balances	45,696	57,736	1,353	1,788
Short-term deposits	306	538	–	–
	46,002	58,274	1,353	1,788
Less: Restricted cash	(300)	(531)
Cash and cash equivalents in the statement of cash flows	45,702	57,743

The weighted average effective interest rate per annum relating to the fixed deposits at the reporting date for the Group is 0.25% (2019: 2.03%).  Depending on the terms of the deposit, interest rates reprice every half-yearly and yearly.

In 2020, restricted cash amounting to US$300,000 (2019: US$531,000) relates to deposits pledged for unutilised game point cards.

12Share capital

	2020	2019
	No. of shares	No. of shares
	’000	’000
Group and Company
In issue at 1 January and 31 December	11,052	11,052

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

(i)Ordinary shares

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

(ii)Capital management

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

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

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

The Group is not subject to externally imposed capital requirements.

44

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

13Reserves

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Share option reserve	12,863	12,862	12,863	12,862
Statutory reserve	1,516	1,516	–	–
Foreign currency translation reserve	(20,887)	(21,136)	(10,401)	(12,951)
	(6,508)	(6,758)	2,462	(89)

Share option reserve

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

2004 Employee Share Option Plan

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

2006 Equity Incentive Plan

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

2007 Equity Incentive Plan

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

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2008 Equity Incentive Plan

At the June 2008 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2008 Equity Incentive Plan (the “2008 Plan”) under which up to 200 thousand

45

ordinary shares of the 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. No shares have been issued under the 2008 Plan during the current financial year.

2008 Employee Share Purchase Plan

At the June 2008 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2008 Employee Share Purchase Plan (the “2008 ESPP”) under which up to 40 thousand ordinary shares of the Company were reserved for issuance.  Any person who is regularly employed by the Company or its designated subsidiaries shall be eligible to participate in the 2008 ESPP.  Pursuant to the 2008 ESPP, the 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 the date of this annual report, no shares have been granted or subscribed by qualified employees under the 2008 ESPP.

2009 Equity Incentive Plan

At the June 2009 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2009 Equity Incentive Plan (the “2009 Plan”) under which up to 300 thousand ordinary shares of the 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. No shares have been issued under the 2009 Plan during the current financial year.

2009 Employee Share Purchase Plan

At the June 2009 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2009 Employee Share Purchase Plan (the “2009 ESPP”) under which up to 40 thousand ordinary shares of the Company have been reserved for issuance.  To be eligible, employees must be regularly employed by the Company or its 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 the date of this annual report, no shares have been granted or subscribed by qualified employees under the 2009 ESPP.

2010 Equity Incentive Plan

At the June 2010 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2010 Equity Incentive Plan (the “2010 Plan”) under which up to 200 thousand ordinary shares of the 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. No shares have been issued under the 2010 Plan during the current financial year. The 2010 Plan has lapsed during the current financial year

46

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

2010 Employee Share Purchase Plan

At the June 2010 annual general meeting of shareholders, the shareholders of the Company approved the GigaMedia Limited 2010 Employee Share Purchase Plan (the “2010 ESPP”) under which up to 40 thousand ordinary shares of the Company have been reserved for issuance.  To be eligible, employees must be regularly employed by the Company or its 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 the date of this annual report, no shares have been granted or subscribed by qualified employees under the 2010 ESPP.

Summarised below are the general terms of its share-based compensation plans as of 31 December 2020.

Date granted	Balance at beginning of year	Granted during the year	Expired/ forfeited during the year	Balance at end of year	Options’ exercise price	Exercise period
	’000	’000	’000	’000	US$
13.05.2010	176	–	(176)	–	$12.35	13.05.2010 - 13.05.2020
20.05.2011	12	–	–	12	$6.25	20.05.2011 - 20.05.2021
05.01.2012	4	–	–	4	$4.05	05.01.2012 - 05.01.2022
28.10.2013	4	–	–	4	$5.05	28.10.2013 - 28.10.2023
28.03.2014	25	–	–	25	$7.15	28.03.2014 - 28.03.2024
05.05.2017	4	–	–	4	$2.90	05.05.2017 - 05.05.2027
	225	–	(176)	49

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

	Number of outstanding share options
Range of exercise price	At beginning of the year	Granted during the year	Expired/ forfeited during the year	Exercised during the year	At end of the year	Weighted average remaining exercise period
	’000	’000	’000	’000	’000
2020
Under US$5	8	–	–	–	8	3.68 years
US$5–US$50	217	–	(176)	–	41	2.36 years
	225	–	(176)	–	49
2019
Under US$5	12	–	(4)	–	8	4.68 years
US$5–US$50	217	–	–	–	217	0.93 years
	229	–	(4)	–	225

49,000 options (2019 : 224,000) out of options 49,000 (2019 : 225,000) are exercisable at the end of the year.

The Company has used the Black-Scholes option-pricing model to derive the fair value of share options granted to employees on the grant date.  There was no share option granted in 2019 and 2020.

47

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

Statutory reserves

In accordance with R.O.C. law, an appropriation for legal reserve amounting to 10% of a company’s net profit is required until the reserve equals the aggregate par value of such Taiwan company’s issued capital stock.  As of 31 December 2020 and 2019, the legal reserves of Hoshin GigaMedia Center Inc. (“Hoshin GigaMedia”), were US$1.5 million and US$1.5 million respectively.  The reserve can only be used to offset a deficit or be distributed as a stock dividend of up to 50% of the reserve balance when the reserve balance has reached 50% of the aggregate paid-in capital of Hoshin GigaMedia.

Translation reserve

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

14 Prepaid pension assets

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

Defined benefit pension plan

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

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

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

	Group
	2020	2019
	US$’000	US$’000
Fair value of plan assets	(452)	(411)
Projected benefit obligation	385	326
Other assets – prepaid pension assets	(67)	(85)

48

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

Expense recognised in profit or loss
	Group
	2020	2019
	US$’000	US$’000
Curtailment gain	-	(33)
Net interest on net defined benefit liability	(1)	(1)
Employee benefits	(1)	(34)
Movement in the present value of the defined benefit obligations
Projected benefit obligation at 1 January	326	320
Interest cost	4	4
Actuarial loss	37	27
Curtailment gain	-	(33)
Effect of movement in exchange rate	18	8
Defined benefit obligation at 31 December	385	326
Movement in the fair value of plan assets
Fair value of plan assets at 1 January	411	376
Expected return on plan assets	5	5
Actuarial gains	12	12
Contributions by employer	2	8
Currency translation difference	22	10
Fair value of plan assets at 31 December	452	411
Return on plan assets
Expected return on plan assets	5	5
Actuarial gains	12	12
Actual return on plan assets	17	17
Assets Categories
Cash	100%	100%

Actuarial assumptions

Weighted-average assumptions used to determine defined benefit obligations as at 31 December 2020 and 2019 were as follows:

	2020	2019
Discount rate	0.75%	1.125%
Rate of compensation increase	2.00%	2.00%

The Group does not expect to make any contribution to the Fund in 2021.  The Group expects to make benefit payments of US$1,000 from 2021 to 2025 and US$23,000 from 2026 to 2030.

49

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

Defined contribution pension plan

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

Taiwan

Pursuant to the new “Labor Pension Act” enacted on 1 July 2005, the Group set up a defined contribution pension plan for its employees located in Taiwan.  For eligible employees who elect to participate in the defined contribution pension plan, the Group contribute no less than 6% of the employees’ salaries and wages paid each month, up to the maximum amount of NT$9,000 (approximately US$316 per individual), to the employees’ individual pension accounts at the Bureau of Labor Insurance.  Pension payments to employees are made either by monthly installments or in a lump sum from the accumulated contributions and earnings in employees’ individual accounts.

Hong Kong

According to the relevant Hong Kong regulations, the Group provides a contribution plan for the eligible employees in Hong Kong.  The Group must contribute at least 5 percent of their total salaries, up to the maximum amount of HK$1,500 (approximately US$193 per individual), to their individual contribution accounts of the authorities monthly.  After the termination of employment, the benefits still belong to the employees in any circumstances.

The total amount of defined contribution pension expenses pursuant to
defined contribution plans for the years ended 31 December 2020 was US$187,000 (2019 : US$187,000).

15 Lease liabilities

	Group
	2020	2019
	US$’000	US$’000
Maturity analysis:
Year 1	95	504
Year 2 to 5	3	95
	98	599
Less: Future finance charges	-	(6)
	98	593

Analysed as:
Current	95	498
Non-current	3	95
	98	593

Lease liabilities were measured at the present value of the remaining lease payments, discounted using lessee’s incremental borrowing rate. As at 31 December 2020, the weighted average incremental borrowing rate applied to the lease liabilities ranged between 1.7% to 2.8% (2019: 1.7% to 2.8%). The fair value of the Group’s lease obligations approximates their carrying amount.

50

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

16Trade and other payables

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Trade payables	70	64	–	–
Accrued expenses	1,516	1,280	200	170
Other payables	292	376	–	–
Amount due to     subsidiaries	–	–	10,332	–
Trade and other payables	1,878	1,720	10,532	170
Analysed as:
Current	1,878	1,720	465	170
Non-current	–	–	10,067	–
	1,878	1,720	10,532	170

The amounts due to subsidiaries are unsecured, interest-free and repayable on demand except for advances made to subsidiaries amounting to US$10,000,000 (2019: Nil) which are unsecured, bear interest at 2% (2019: Nil) per annum and both principal and interest are repayable in full in August 2022.

17Contract liabilities

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

18Revenue

	Group
	2020	2019
	US$’000	US$’000
Digital entertainment service revenue*	6,875	6,645

* Included in the digital entertainment service revenue is revenue from sale of virtual points amounted to US$3.9 million (2019 : US$5.3 million). The digital entertainment service revenue is recognised over time.

As at 31 December 2020, there are unsatisfied performance obligations amounting to US$1,365,000 (2019 : US$950,000).

51

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

19Other operating expenses

	Group
	2020	2019
	US$’000	US$’000
Impairment loss on property, plant and equipment	–	112
Impairment loss on intangible assets	–	16
Impairment loss on right-of-use assets	–	576
Impairment loss on prepaid licensing and royalty fees	–	85
Net exchange loss	149	68
Allowance for doubtful receivables	5	24
Fair value loss on financial asset at FVTPL	–	–
Others	–	37
	154	918

20Net finance (expenses) income

	Group
	2020	2019
	US$’000	US$’000
Finance income
Interest income	613	1,483
Finance expenses
Interest expense on lease liabilities	(6)	(15)
Net finance income	607	1,468

21Income tax

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

Group
2020	2019
US$’000	US$’000

Reconciliation of effective tax rate
Loss before tax	(1,639)	(2,677)
Tax calculated at 17% (2019: 17%)	279	455
Effect of tax rates in foreign jurisdictions	84	345
Non-deductible expenses	(111)	(80)
Current year losses for which no deferred tax asset was recognised	(276)	(723)
Recognition of tax effects of previously unrecognised tax losses	–	18
Others	24	(15)
	–	–

52

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

As at 31 December 2020, the Group has tax losses carried forward, available to offset against future taxable income, the natures and jurisdictions of which were summarised as follows:

	2020		2019
Jurisdiction	Amount (US$’000)	Expiring year	Amount (US$’000)	Expiring year
Hong Kong	15,759	Indefinite	15,759	Indefinite
Taiwan	41,329	2021-2030	39,189	2020-2029

Deferred tax assets relating to unutilised tax losses has not been recognised due to the unpredictability of future profit streams.  Consequently, the Group did not recognise deferred tax assets of US$13,046,000 (2019 : US$12,732,000).

22Loss for the year

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

	Group
	2020	2019
	US$’000	US$’000
Employee benefits expense (see below)	3,991	4,112
Amortisation charge on intangible assets	5	37
Depreciation of property, plant and equipment	3	61
Employee benefits expense
Wages and salaries	3,795	3,854
Employee equity-settled share-based payment	1	1
Employee expense relating to defined benefit and contribution pension plans	187	187
Termination benefits	8	70
	3,991	4,112

53

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

23Related parties

Except for the following transactions, the Group was not a party to any transaction with any related party that did not arise in the ordinary course of business or that was material to it.

Share options granted to key management

As at the end of the financial year, the total outstanding number of share options granted to key management of the Group was 24,000 (2019: 24,000).

Transaction with key management personnel

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

Key management personnel compensation comprised:

	Group
	2020	2019
	US$’000	US$’000
Wages and salaries	381	396
Director fee	135	135
Share-based payments	1	1
Other benefits	36	35
	553	567

Other related party transactions

There are no significant related party transactions during 2020 and 2019.

54

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

24Financial instruments

(a)Categories of financial instruments

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

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Financial asset at FVTPL	10,000	-	10,000	-
Financial assets at amortised     cost	46,712	58,981	3,027	3,491
Financial liabilities at amortised     cost	1,878	1,720	10,532	170
Lease liabilities	98	593	-	-

(b)Financial risk management

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

•Credit risk

•Liquidity risk

•Market risk

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

Risk management framework

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

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

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

55

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

Credit risk

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

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

None of the Group’s customers accounted for over 10 percent of the Group’s revenue in 2020 and 2019 or of the balance of trade receivables as of 31 December 2020 and 2019.  

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

Cash and cash equivalents are held with reputable financial institutions.

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

For non-trade related balances, the Group has established a policy to perform an assessment as at 31 December 2020 and 2019, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. The Group groups its other receivables into Stage 1, Stage 2 and Stage 3, as described below:

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

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

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

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

Liquidity risk

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

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

56

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

Market risk

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

Foreign currency risk

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

The Group’s and Company’s exposures to foreign currencies in US dollar equivalent are as follows:

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Group
Financial assets
USD	15,538	7,867	13,400	3,462
Financial liabilities
USD	68	142	10,067	-

Sensitivity analysis

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

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

	Group		Company
	2020	2019	2020	2019
	US$’000	US$’000	US$’000	US$’000
Group
USD	1,547	773	333	346

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

Interest rate risk

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

57

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

(c)Fair values of financial assets and financial liabilities

The fair values of current financial assets and liabilities approximate the carrying amounts of those assets and liabilities reported in the statement of financial position due to the relatively short-term maturity of these financial instruments, except for financial asset at FVTPL and lease liabilities as disclosed in Notes 8 and 15 to the financial statements respectively.

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

	Total	Level 1	Level 2	Level 3
	US$’000	US$’000	US$’000	US$’000
Group and Company
2020
Financial asset at FVTPL	10,000	-	-	10,000
The following table gives information about how the fair value of the financial asset at FVTPL is determined:

Valuation technique and key input	Significant unobservable input	Rate	Sensitivity of the Input to Fair Value
Backsolve method was used to establish the equity value, and the option pricing method was used to allocate the portion of the security value	Discount for lack of marketability (“DLOM”)	From 13.5% to 26.0% for different scenarios	If the DLOM was 1% higher/lower, the carrying amount would decrease/increase by US$120,000.
	Volatility rate	41.0%	If the volatility was 1% higher/lower, the carrying amount would decrease/increase by US$30,000.

The backsolve method was employed for inferring the equity value implied by a recent financing transaction involves selecting the future outcomes available to the enterprise and then calibrating the future exit values, the probabilities for each scenario and the discount rates for the various equity securities framework and making assumptions for the expected time to liquidity, volatility and risk-free rate and then solving for the value of equity, such that value for the most recent financing equals the amount paid. Market and the issuer’s company operating conditions are then considered between the initial transaction date and subsequent measurement dates.

58

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 202

25Segment information

Business segments

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

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

Major Customers

No single customer represented 10 percent or more of the Group’s total revenue in 2020 and 2019.

Geographic Information

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

Revenue	2020	2019
	US$’000	US$’000
Taiwan	3,743	3,074
Hong Kong	3,132	3,571
Total	6,875	6,645
Non-current assets
Taiwan	10,220	213
Hong Kong	148	72
	10,368	285

59

GIGAMEDIA LIMITED AND ITS SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

31 DECEMBER 2020

26Contingent liability

On 15 January 2018, Ennoconn Corporation (“Ennoconn”) filed a complaint against one of the Company’s subsidiaries, GigaMedia Cloud Services Co., Ltd. (“GigaMedia Cloud”) in the Taiwan Taipei District Court. The complaint alleged that GigaMedia Cloud is obligated to pay Ennoconn the amount totally NTD 79,477,000 (around US$2,697,000) to compensate their loss pursuant to certain documents in connection with purchasing taximeters signed in 2015. GigaMedia Cloud filed an answer to the complaint denying all their allegations in the lack of factual and legal basis on 1 March 2018. On 15 November 2018, the Taiwan Taipei District Court announced all the Ennoconn’s claims without merit and made a judgment denying the complaint by Ennoconn.

During the current financial year, Ennoconn filed an appeal demanded the judgment which was entered in the District Court should be reversed and amended. The civil court of the second instance, the Taiwan High Court, has conducted the session of the preparatory proceedings for several times during 2019. As a result, the Taiwan High Court has ruled on 8 January 2020, that the decision of the Taiwan Taipei District Court should be partially modified and Ennoconn is entitled to the compensation of the amount of NTD 27,084,000 (around US$892,000). On 4 February 2020, GigaMedia Cloud filed its appeal to the Taiwan Supreme Court. As at the date of authorisation of these financial statements, the Taiwan Supreme Court has yet to issue its ruling.

As the litigation process is still on-going, GigaMedia Cloud is unable to assess the likelihood of the claim and the amount of potential damages. However, as the Group does not have legal or constructive obligations to absorb any losses of GigaMedia Cloud in excess of its net worth of approximately US$100,000, the impact to the Group will be capped at approximately US$100,000 accrued by the Group which will not have a material adverse effect on the Group’s financial condition, results of operations or cash flows. GigaMedia Cloud is dormant as at 31 December 2020.

60