UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 20-F
| o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
OR
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the fiscal year ended December 31, 2025
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
OR
| o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| Date of event requiring this shell company report ___________ | |||||
| For the transition period from ___________to ___________ | |||||
Commission file number 001-41540
Perfect Corp.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
14F, No. 98 Minquan Road Xindian District
New Taipei City 231 Taiwan
(Address of principal executive offices)
Iris Chen, Head of Finance and Accounting
Telephone: +886-2-8667-1265
Email: investor_relations@perfectcorp.com
14F, No. 98 Minquan Road Xindian District
New Taipei City 231 Taiwan
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
| Class A Ordinary Shares | PERF | New York Stock Exchange, Inc. | ||||||||||||
| Warrants | PERF WS | New York Stock Exchange, Inc. | ||||||||||||
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2025: | |||||
| Class A Ordinary Shares, par value $0.10 per share | 85,059,953 | ||||
| Class B Ordinary Shares, par value $0.10 per share | 16,788,718 | ||||
| Warrants | 20,849,975 | ||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes __ No ü
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes __ No ü
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ü No __
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ü No _
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ___ | Accelerated filer ü | Non-accelerated filer ___ | Emerging growth company ü | ||||||||
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. __
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. __
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. __
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). __
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP __
International Financial Reporting Standards as issued by the International Accounting Standards Board ü
Other __
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 __ Item 18 __
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes __ No ü
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes __ No __
TABLE OF CONTENTS
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Forward-Looking Statements
This annual report includes forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. These statements are based on the beliefs and assumptions of our management. Although we believe that our respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These forward-looking statements are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements may be preceded by, followed by or include the words “may,” “will,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast,” “seek,” “schedule,” or similar expressions. Forward-looking statements contained in this annual report include, but are not limited to, statements about our business strategy and plans, future financing efforts, our future market position and growth prospects, expected operating results, our ability to realize the benefits of mergers and acquisitions, and other matters described in “Item 4. Information on the Company” and “Item 5.Operating and Financial Review and Prospects.”
These forward-looking statements are not intended to serve as, and must not be relied on as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability regarding future performance, events or circumstances. Many of the factors affecting actual performance, events and circumstances are beyond our control. The risk factors and cautionary language discussed in this annual report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements, including, among other things:
•our ability to increase user download and engagement with our mobile apps and webs, including our ability to attract consumers to purchase our subscription plans available on our mobile apps and webs to unlock premium features of our products;
•our ability to innovate, develop and provide market competitive product offerings or upgrade our existing product offerings in response to rapidly-evolving consumer preferences in a timely and cost-effective manner;
•our ability to grow and retain active subscribers’ subscriptions to the premium features of our mobile apps and web services;
•the intensity of competition in the mobile app and web services market, including the development of Generative AI technologies, which may introduce new emerging technologies and competitors for AI photo, AI video use cases;
•the rate of adoption of AI- and AR- virtual try-on technology by consumers, brands, and retailers, and any changes in consumer preferences or shopping habits;
•our ability to retain and expand sales to existing brands or attract new brands;
•the intensity of competition in the enterprise business market, including the emergence of new competitors, the development of competing technologies, and pricing pressures;
•changes in applicable laws or regulations, especially laws and regulations related to privacy and data protection;
•our need to retain, attract or maintain high-quality personnel;
•our ability to enforce, protect and maintain intellectual property rights; and
•our ability to realize the anticipated benefits of the mergers and acquisitions, which may be affected by, among other things, competition, and the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and retain our management and key employees;
•the other matters described in “Item 3. Key Information — D. Risk Factors.”
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Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. There may be additional risks currently considered to be immaterial or which are unknown. It is not possible to predict or identify all such risks.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us, as of the date of this annual report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that such party has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date.
All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. In the event that any forward-looking statement is updated, no inference should be made that we will make additional updates with respect to that statement, related matters, or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements, including discussions of additional significant risk factors, may appear in our public filings with the SEC, which are or will be (as appropriate) accessible at www.sec.gov, and which you are advised to consult. For additional information, please see “Item 10. Additional Information — H. Documents on Display.”
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Certain Terms and Conventions
Unless otherwise indicated or the context otherwise requires, all references in this annual report to “Perfect Corp.” refer to our entity listed on the NYSE, a Cayman Islands exempted company with limited liability, and all references in this annual report to “we,” “us,” “Perfect” or the “Company” refer to Perfect Corp., together with its subsidiaries. In this document:
“AI” means artificial intelligence.
“AR” means artificial reality, including augmented reality, virtual reality and mixed reality.
“API” means application programming interface.
“Articles” means the Sixth Amended and Restated Memorandum and Articles of Association of the Company that has been effective since October 28, 2022.
“Assignment, Assumption and Amendment Agreement” means an assignment, assumption and amendment agreement, dated as of October 28, 2022, by and among Provident, the Company and Continental Stock Transfer & Trust Company (“Continental”), pursuant to which Provident assigned to the Company all of its rights, title, interests, and liabilities and obligations in and under the Warrant Agreement, dated as of January 7, 2021, by and between Provident and Continental (the “Warrant Agreement”).
“Active subscribers” means users who have subscribed to the paid premium features of our mobile apps or web services and maintain an active subscription as of the applicable measurement date. This includes users on annual, monthly, or any other subscription plans offered by our mobile apps or web services.
“Board” or “Board of Directors” means the board of directors of the Company.
“brands” or “brand customers” mean the brand customers of the Company, including global beauty group brands, indie brands and retailers for brands, unless otherwise stated or unless the context otherwise requires.
“Business Combination” means the business combination between Perfect Corp. and Provident that closed on October 28, 2022.
“CAGR” means compound annual growth rate.
“CEO” means the chief executive officer of the Company.
“Class A Ordinary Shares” means the Class A ordinary shares of the Company, par value $0.10 per share.
“Class B Ordinary Shares” means the Class B ordinary shares of the Company, par value $0.10 per share.
“CyberLink” means CyberLink Corp., a company incorporated in Taiwan and listed on the Taiwan Stock Exchange under the code 5203.
“CyberLink International” means CyberLink International Technology Corp., a British Virgin Islands exempted company.
“Director Equity Incentive Plan” means the 2023 Director Equity Incentive Plan adopted by the Company’s Board on October 23, 2023, as amended.
“DMA” means the Digital Markets Act.
“DSA” means the Digital Services Act.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Forward Purchase Agreements” means (i) that certain Forward Purchase Agreement, dated as of December 14, 2020, by and among Provident, Sponsor and WF Asian Reconnaissance Fund Limited, (ii) that certain Forward Purchase
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Agreement, dated as of December 15, 2020, between Provident and PT Nugraha Eka Kencana and (iii) that certain Forward Purchase Agreement, dated as of December 15, 2020, between Provident and Aventis Star Investments Limited.
“Forward Purchase Warrants” means the 2,750,000 warrants to purchase Provident Class A Ordinary Shares issued to the FPA Investors pursuant to the Forward Purchase Agreements.
“Founder Parties” means DVDonet.com. Inc., Golden Edge Co., Ltd., World Speed Company Limited and Alice H. Chang, a citizen of Taiwan.
“FPA Investment” means the transaction where the FPA Investors subscribed for and purchased, and Provident issued and sold to such FPA Investors, an aggregate of 5,500,000 Provident Class A Ordinary Shares and 2,750,000 Forward Purchase Warrants in consideration for an aggregate purchase price of $55.0 million, as closed on October 27, 2022.
“FPA Investors” means (i) WF Asian Reconnaissance Fund Limited (“Ward Ferry”), (ii) PT Nugraha Eka Kencana (“Saratoga”), a controlled subsidiary of PT Saratoga Investama Sedaya Tbk, an Indonesia-based investment company, and (iii) Aventis Star Investments Limited, an affiliate of Provident, and each is a party to a Forward Purchase Agreement, including their respective successors and assigns.
“Generative AI” or “GenAI” means AI technology that assists or replaces manual content generation by generating content in response to user-defined keywords or requirements.
“IFRS” refers to International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).
“Japanese yen” and “JPY” mean the legal currency of Japan.
“JOBS Act” means the Jumpstart Our Business Startups Act.
“Key Customers” means the Company’s brand customers who contributed revenue of more than $50,000 in the trailing 12 months ended on the measurement date.
“Nasdaq” means the Nasdaq Capital Market.
“New Registration Rights Agreement” means the registration rights agreement entered into by the Company, the Sponsor, and certain shareholders of the Company on October 28, 2022.
“New Taiwan Dollar,” “NT Dollar” and “NTD” mean the legal currency of Taiwan.
“NYSE” means the New York Stock Exchange.
“Ordinary Shares” means collectively, Class A Ordinary Shares, Class B Ordinary Shares, and any other class or series of ordinary shares Perfect Corp. may issue from time to time.
“PBR” or “physically based rendering” means using realistic shading/lighting models along with measured surface values to accurately represent real-world materials.
“PDPA” means the Personal Data Protection Act.
“PDPC” means the Personal Data Protection Commission.
“Perfect Forward Purchase Warrants” means Warrants issued by the Company in exchange for Forward Purchase Warrants.
“Perfect Private Placement Warrants” means Warrants issued by the Company in exchange for Private Placement Warrants.
“Perfect Public Warrants” means Warrants issued in exchange for Public Warrants.
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“Perfect Taiwan” means Perfect Mobile Corp., a company incorporated in Taiwan.
“PFIC” means passive foreign investment company.
“PRC” means the People’s Republic of China.
“Private Placement Warrants” means the warrants sold by Provident privately to the Sponsor simultaneously with the consummation of the Provident Initial Public Offering (including the underwriters’ partial exercise of their over-allotment option).
“Provident” means Provident Acquisition Corp., a Cayman Islands exempted company with limited liability, which has ceased to exist on October 28, 2022.
“Provident Class A Ordinary Shares” means the Class A ordinary shares of Provident, par value $0.0001 per share.
“Provident Class B Ordinary Shares” means the Class B ordinary shares of Provident, par value $0.0001 per share.
“Provident Initial Public Offering” means the initial public offering of units of Provident, consummated on January 12, 2021.
“Public Warrants” means the warrants included in the units sold in the Provident Initial Public Offering (including the underwriters’ partial exercise of their over-allotment option), each of which is exercisable for one Provident Class A Ordinary Share, in accordance with its terms.
“ROI” means return on investment.
“SaaS” means software as a service.
“SDK” means software development kit, a collection of software development tools in one installable package which can facilitate the creation of applications by having a compiler, debugger and sometimes a software framework.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Shareholder Earnout Shares” means an aggregate of 10,000,000 Ordinary Shares issuable to the selected shareholders of the Company within five years from October 28, 2022, upon the occurrence of certain milestones.
“Share Incentive Plan” means the 2021 Stock Compensation Plan adopted by the Company’s Board on December 13, 2021, as amended.
“Shares” means shares in the capital of the Company of any class including a fraction of such shares, whether the Class A Ordinary Shares, the Class B Ordinary Shares any other class or series of shares Perfect Corp. may issue from time to time.
“SKU” means stock keeping unit, which is a scannable bar code printed on product labels.
“Sponsor” means Provident Acquisition Holdings Ltd., a Cayman Islands exempted company with limited liability.
“Sponsor Earnout Promote Shares” has the meaning given to “Earnout Promote Shares” in the Sponsor Letter Agreement.
“Sponsor Letter Agreement” means the sponsor letter agreement, dated as of March 3, 2022, entered into by the Company, Provident and Sponsor, as amended.
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“Stable Diffusion” means a Generative AI model that produces unique photorealistic images from text and image prompts, the development of which involved researchers from the CompVis Group at Ludwig Maximilian University of Munich and Runway with a computational donation by Stability AI and training data from non-profit organizations.
“U.K.” means the United Kingdom.
“U.S.” means the United States of America.
“U.S. dollar,” “US$,” “USD,” “United States Dollar” and “$” mean the legal currency of the United States.
“U.S. GAAP” means United States generally accepted accounting principles.
“Wannaby” means Wannaby Inc., a corporation incorporated in the State of Delaware.
“Warrants” means the warrants that entitle the holder thereof to purchase one Class A Ordinary Share pursuant to the terms of the Warrant Agreement as amended by the Assignment, Assumption and Amendment Agreement, including Perfect Public Warrants, Perfect Private Placement Warrants and Perfect Forward Purchase Warrants.
“Warrant Agreement” means the warrant agreement dated January 7, 2021, entered into by and between Provident and Continental Stock Transfer & Trust Company.
Discrepancies in any table between totals and sums of the amounts listed are due to rounding. Certain amounts and percentages have been rounded; consequently, certain figures may add up to be more or less than the total amount and certain percentages may add up to be more or less than 100% due to rounding. In particular and without limitation, amounts expressed in millions contained in this annual report have been rounded to a single decimal place for the convenience of readers. In addition, period-on-period percentage changes with respect to our IFRS measures and operating metrics have been calculated using actual figures derived from our internal accounting records and not the rounded numbers contained in this annual report, and as a result, such percentages may differ from those calculated based on the numbers contained in this annual report.
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PART I
Item 1. Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A.[Reserved]
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
D.Risk Factors
You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our securities could decline due to any of these risks, and you may lose all or part of your investment. This annual report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this annual report.
Risks Related to Our Business and Industry
If we fail to grow or retain our mobile app and web service users, or if user engagement declines, our business and operating results may be materially and adversely affected.
The size of our user base and the level of user engagement with our products are critical to the success of our B2C business. As of December 31, 2025, our apps had over 1.1 billion downloads. Our active subscribers increased from approximately 879,000 as of December 31, 2023 to 1,000,612 as of December 31, 2024, and then declined modestly to 908,239 as of December 31, 2025. During 2025, we adjusted certain product and commercialization initiatives which may have contributed to this decline, including the rollout of higher-value generative AI features and premium creative tools and efforts to emphasize subscriber quality and monetization. There can be no assurance that these initiatives will improve subscriber growth, retention, engagement, or average revenue per user, and subscriber levels may continue to fluctuate or decline as we refine pricing, packaging, and product features or as competitive and macroeconomic conditions change.
We expect existing paying subscribers to renew or upgrade their subscriptions, and we aim to continuously attract free users under our freemium model and convert them to paid subscriptions to unlock premium features of our mobile app and web services. Our ability to do so depends on maintaining a compelling value proposition and a favorable user experience across the entire user lifecycle—from acquisition and onboarding to engagement, conversion, renewals, and upgrades. If users do not perceive sufficient incremental value in our paid offerings (including new AI-enabled capabilities), if pricing or packaging changes increase churn, if the cost to acquire users increases, or if renewal rates decline, our subscription revenue could stagnate or decline and we may need to increase discounting or marketing spend to offset lower organic growth, which could adversely affect our margins and operating results. In addition, to the extent we
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rely on app-store-driven discovery, ratings and reviews, and other third-party distribution channels, adverse changes in those channels could reduce our ability to grow and retain users.
The continued success of our B2C business also depends on our ability to develop, improve, and differentiate our AI- and AR-enabled features, including Generative AI solutions, to meet evolving user preferences and competitive offerings. The development and integration of advanced AI technologies can be complex, expensive, and time-consuming, and may require access to specialized talent, third-party technologies, and significant computing resources. Even if we invest substantial resources, we may not be able to deliver new features on a timely basis, maintain consistent output quality, or achieve user adoption at scale. AI-enabled features may also present heightened risks, including performance issues, unexpected outputs, user dissatisfaction, increased customer support demands, reputational harm, and scrutiny regarding data usage, privacy, and security practices. If our AI and premium creative tools do not deliver meaningful and durable value to users relative to competing products, our retention, engagement, and conversion rates could decline.
Several factors could negatively impact our user growth, retention, and engagement, including:
•Product competitiveness and innovation risk. Challenges in optimizing or upgrading our AI- and AR-based solutions (particularly Generative AI), delays in product releases, or failures to anticipate and respond to shifting user preferences, which could make our offerings less competitive.
•Competitive intensity and pricing pressure. Competitors may introduce superior, lower-priced, or more aggressively marketed products, including AI-enabled features, drawing users away or forcing us to reduce prices, increase promotions, or add costly features to remain competitive.
•Economic and consumer spending conditions. Prolonged economic uncertainty or reduced discretionary spending could lower conversion rates to paid plans, reduce renewals, increase downgrades, and make users more price sensitive.
•Higher user acquisition costs and weaker organic growth. Slower organic growth due to weaker word-of-mouth referrals, lower virality, changes in in-app cross-promotion effectiveness, or reduced distribution effectiveness, which could require higher marketing expenditures to maintain growth.
•Platform and distribution dependence. Changes in policies, algorithms, technical requirements, or fee structures of mobile operating systems, app stores, browsers, or other third-party platforms; adverse changes in app store featuring, search rankings, or review/rating trends; or restrictions that limit our ability to market, distribute, or monetize our apps and web services.
•Privacy, data security, and user trust. Inadequate responses to user concerns about privacy, data usage, data security, or transparency; actual or perceived misuse of data; or data incidents, which could reduce engagement and retention, trigger negative publicity, and increase regulatory and compliance costs.
•Service reliability and performance. Technical, operational, or third-party outages; latency; bugs; failed updates; interoperability issues; or other disruptions that degrade user experience, lead to app store delisting risk, or increase refunds, chargebacks, and churn.
•Content, safety, and reputational risks. User dissatisfaction stemming from low-quality outputs, misleading or inappropriate AI-generated results, or other quality and safety concerns, which could harm our brand, reduce ratings and reviews, and increase churn and customer support costs.
•Changes in measurement or mix. Shifts in the mix of subscribers (including higher-value subscribers), changes to our product tiers, bundling, or promotions, or changes in how users engage with our products, which could reduce monetization even if headline user metrics remain stable.
If we fail to maintain or expand our user base and engagement, or if our efforts to improve monetization and subscriber quality are unsuccessful, our B2C revenue could decline and our growth prospects could be adversely affected. Any of these outcomes could reduce our profitability, increase our marketing and development costs, impair our ability to invest in product innovation, and materially and adversely affect our business, operating results, and long-term monetization potential.
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The consumer app market is rapidly evolving, especially with the introduction of Generative AI related functions. If the demand for AI photo and AI video markets stops or slows down, our business will be materially and adversely affected.
Our sustainable development of B2C business benefited from the rapid growth of the demand and usage of mobile photo and video editing apps in recent years. The popularity of photo and video editing software has been fueled by the rise of the selfie culture, the popularity of social media and the increasing adoption of smartphones with high-definition cameras.
The increasingly growing demand for photo and video editing software driven by the increase and improvement in consumer content creation has prompted software providers to enhance their offerings by integrating into advanced features such as AR effects, AI editing and layer editing, powered by the Generative AI technologies. If the demand for photo and video editing software slows, if we fail to accurately predict consumer demand and preferences for our mobile apps or web services, or if we fail to promptly adapt or introduce new product offerings to meet the evolving preferences and needs of our consumers, our business and operating results may be materially and adversely affected.
In particular, we anticipate encountering inherent risks and challenges in the developing and rapidly evolving consumer app markets, which include our ability to, among other things:
•develop and optimize the Generative AI solutions integrated into our product offerings,
•develop and launch diversified and distinguishable products and premium features catering to consumers’ evolving needs in a timely and cost-effective manner;
•introduce innovative premium features and competitive pricing to entice free users to purchase our subscription plans;
•continuously grow and retain the subscriptions to our premium features available on our YouCam suite of mobile apps and web services; and
•effectively address the emergence of new disruptive technologies, particularly AI-driven competition, to maintain the attractiveness and performance of our product offerings.
We make selective investments in new features and new enhancement to our existing mobile apps and web services which may not be successful and may not achieve expected returns.
Our steady growth in our B2C business depends heavily on our ability to continue to evolve our existing product offerings and introduce market-competitive products that effectively address the shifting consumer preferences and demands, so as to grow or retain our existing mobile app and web service users and convert free users into paying subscribers. To achieve this, we make selective investments in developing new products and services or enhancing our current offerings.
Since early 2023, we began developing Generative AI technologies by fully utilizing our in-house technology development capabilities and integrating Generative AI solutions into our product portfolio, enabling our consumers to create and enhance their photos and videos with high-quality and creative outputs via our mobile apps and SaaS services. In 2024, we further upgraded our Generative AI solutions integrated into our product portfolio, powered by our in-house research and development team, to incorporate a significantly broader range of generative features. In 2025, we advanced our Generative AI roadmap by expanding our B2C mobile apps with next-generation AI-powered creative tools, particularly for photo and video creation. We adopted multimodal AI solutions that integrate text, image, audio, and video capabilities to deliver more intuitive user experiences, while expanding our platform with leading third-party AI models to support end-to-end creative workflows. In response to the rapidly-evolving consumer demands and market conditions, we may introduce significant changes to our existing products and services or develop and introduce new and unproven products and services, including technologies with which we have little or no prior development or operating experience. However, we may not be equipped with significant experience in these technologies and business areas, which may adversely affect our ability to successfully develop and monetize our product offerings. We may incur substantial costs, and may not be successful in generating profits, in connection with these efforts. In addition, the introduction of new products and services, or changes to existing products and services, may result in new or enhanced governmental or
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regulatory scrutiny, litigation or other complications that could adversely affect our reputation, business and operating results.
We also aim to continuously create new premium features and content, and innovate and improve on our existing product offerings. Although we believe that these efforts are likely to benefit the aggregate consumer experience and improve our financial performance over the long term, we may experience disruptions or declines in our active subscribers or user activity if new premium features cause technical issues that diminish the performance or attractiveness of our mobile apps and web services. Product innovation is inherently unpredictable and fraught with uncertainty. If our new or enhanced products fail to engage users, advertisers or business partners, or if we fail to grow or retain the existing subscription to the premium features available on our mobile apps or web services, we may fail to generate sustainable revenue, operating margin or other value to justify our investments, or maintain our market leadership in the consumer beauty and AI mobile apps, as well as in the beauty and fashion AI- and AR- industry. Any of these outcomes may seriously harm our business, in the short term, long term or both.
We rely primarily on certain app stores and similar digital platforms, such as the Apple App Store and Google Play, for downloads of YouCam and our other apps, as well as for payment processing, and any interruption or deterioration in our relationship with such entities may negatively impact our business.
We currently rely on third-party digital distribution platforms, primarily Apple App Store and Google Play, as the channels for downloads of our mobile apps, as well as the processing of payments for app subscription. We expect to continue to rely on these services for the continuity of this business segment. Accordingly, we believe that maintaining successful partnerships with Apple and Google is critical to our success.
The operating policies of Apple or Google will affect the accessibility of our products and services. The promotion, distribution and operation of our mobile apps are subject to distribution platforms’ standard terms and policies for apps developers, which are subject to the interpretation of, and frequent changes by, these distribution platforms. If Apple App Store, Google Play or any of the major distribution platforms change their respective standard terms and conditions, application review policy or application enforcement guidelines in a manner that is detrimental to us, suspend our access to the platforms or terminate their existing relationship with us, our business, financial condition and results of operations may be materially and adversely affected. For example, Apple App Store and/or Google Play may adjust the categories of application on their distribution platforms and remove the type(s) of our mobile apps, which would significantly limit or even cut off the distribution of our mobile apps. In addition, our pricing strategy is affected by changes in the payment processing fees charged by Apple or Google. If we are unable to pass along any increases in the payment processing fees charged by Apple or Google to our users on a timely basis, or if the paying user engagement decreases due to a price increase, our net revenue or profit margin may be negatively affected. If we fail to maintain good relationships with Apple or Google, it may adversely impact our ability to continue to offer our products and services or effect payment processing, which in turn could have a material adverse impact on our business.
We operate in a rapidly evolving markets in beauty and fashion. If the development of the markets stops or slows down, our B2B business will be materially and adversely affected.
The AI- and AR- beauty and fashion technologies and markets are rapidly evolving, which subjects our business to uncertainties and challenges relating to the growth and profitability of these markets as a whole. Our global addressable market is mainly driven by the growth in the beauty and fashion markets and the expected marketing and AI- and AR- spending by beauty and fashion brands, which depend on a number of factors, including overall consumer awareness about beauty and fashion products and services, brands’ deployment of digital marketing to create meaningful customer interaction and engagement, brands’ investment in omni-channels to build relationships with their customers, budgetary constraints of brands, regulatory changes and changes in broader economic conditions. If brands do not recognize our value proposition, a viable market may not develop further, or develop more slowly than we expect, and our business and operating results will be materially and adversely affected.
We have a short operating history in developing and rapidly evolving markets for our products and services, which makes it difficult to evaluate our future prospects.
We launched our AR Makeup solution in 2015 and have offered other solutions and products over the recent years. We are still in the process of expanding into new segments of the beauty and fashion technology market, such as the aesthetic skin technology market, and exploring the potential applications of Generative AI technologies. These initiatives involve substantial uncertainty and may materially and adversely affect our business, financial condition, and results of
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operations. Our limited operating history makes it difficult to effectively assess our future prospects or forecast our future results. In particular, we anticipate encountering inherent risks and challenges in the developing and rapidly evolving beauty and fashion technologies and markets, which include our ability to, among other things:
•maintain and strengthen our competitive edge on our key technologies, including Generative AI technology;
•grow our brand portfolio and enhance the level of consumer engagement with brands;
•develop or implement additional strategic initiatives to further increase monetization of our products and services;
•successfully expand our business operations and enhance the value of our brand globally;
•develop and launch diversified and distinguishable products and premium features to effectively address the needs of brands and consumers;
•maintain a reliable, secure, high-performance and scalable technology infrastructure that can efficiently handle increased usage;
•develop and maintain relationships with brands, digital distribution platforms and other third parties;
•successfully compete with other companies that are currently in, or may in the future enter into, the markets that we operate in, or duplicate the features of our products;
•maintain our innovative company culture and continue to attract, retain and motivate talented employees; and
•defend ourselves against litigation, regulatory interference, claims concerning intellectual property or privacy or other aspects of our business.
Failure to adequately address any of the risks and challenges associated with these dynamic and evolving markets may adversely affect our business, financial condition and results of operations.
If we fail to retain and expand sales to existing brands, attract new brands, or sustain consumer engagement with these brands, our business, financial condition, and operating results may be materially and adversely affected.
Our brand portfolio and consumer engagement with these brands are critical to the success of our B2B business. As of December 31, 2025, we had 859 brands in our cumulative portfolio, serving approximately 90% of the top 20 beauty groups that have adopted AI- and AR-based technologies. However, as the beauty and fashion technology market matures, competitors may introduce more innovative, cost-effective, or user-friendly solutions. If our offerings become less competitive in terms of pricing, quality, or effectiveness, we risk losing existing brand customers, failing to attract new ones, or experiencing a decline in consumer engagement, all of which could negatively impact our financial performance.
We expect our existing brand customers to continue using and expanding their adoption of our products and services. However, we cannot guarantee that they will increase spending, renew their contracts on similar or more favorable terms, or extend their engagements with us.
The success of our B2B business depends on our ability to expand our brand portfolio and enhance consumer engagement. If brands or their target consumers perceive our solutions as less useful, reliable, or effective compared to alternatives, we may struggle to retain customers, drive repeat business, or maintain strong consumer interactions. Several factors could negatively impact brand retention and consumer engagement, including:
•Inability to continuously develop products and services that align with evolving brand and consumer preferences.
•Competitors launching superior or more cost-effective solutions, leading to reduced demand for our offerings.
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•Budget cuts or lower spending on AI- and AR-based solutions by brands, particularly amid economic downturns in China.
•Insufficient customer service or weakened brand relationships, resulting in dissatisfaction or disengagement.
•Failure to address consumer concerns about privacy, data security, and information-sharing.
•Technical issues or service disruptions that diminish the reliability or performance of our products.
There is no assurance that we will not experience brand customer attrition or declining consumer engagement. If we fail to maintain or grow our brand portfolio, our business, financial condition, reputation, and operating results could be significantly affected.
Our success is dependent on the continued popularity and perceived quality of our technology solutions.
Our success depends on our ability to continuously offer high-quality products that are attractive to both our B2C and B2B customers, and our ability to effectively adapt to changes in overall consumer demographics, tastes and preferences. Consumer preferences may shift over time due to changes in demographic and social trends, technological developments, economic conditions, and the marketing efforts of our competitors. We intend to continue to implement our data and AI strategy to enhance our platform and provide a broader range of products and services with higher precision, improved true-to-life accuracy, as well as more personalized and individualized recommendations for our consumers. However, there can be no assurance that our existing products will continue to be favored by brands and users of our mobile apps or that we will be able to anticipate or respond to shifts in consumer preferences, technological changes and industry trends in a timely manner.
In addition, as we expand into new countries and regions, we may not be able to launch products that appeal to local consumers due to an insufficient understanding of local cultures and lifestyles. Our failure to anticipate, identify or react to these specific preferences could adversely affect our sales performance and our results of operations.
We may not be successful if we are not able to innovate, develop and provide new products and services or upgrade our existing products and services in a timely and cost-effective manner to address rapidly evolving consumer preferences, industry trends and technological changes, and any new products and services we develop and provide may expose us to new risks and may not achieve expected returns.
We compete in markets characterized by rapidly changing products and services, evolving consumer preferences, technological advancements, and continual improvements in product performance and features. As a result, our success depends on our ability to anticipate, innovate, develop and provide new products and services or enhance our existing products and services in a timely and cost-effective manner to address evolving consumer preferences and demands, including in areas where we have little or no prior development or operating experience.
As of December 31, 2025, our team consists of 180 technology professionals, accounting for 51.0% of our employees, is dedicated to the continuous improvement of our platform, development of new features, as well as creation of innovative apps. We provide comprehensive omni-channel solutions to brands and retailers across various industries, including beauty, fashion, skincare, jewelry, watch, and aesthetic skin beauty. Since early 2023, we began developing Generative AI technologies by fully utilizing our in-house technology development capabilities and integrating Generative AI solutions into our product portfolio, enabling consumers to create and enhance their photos and videos with high-quality and creative outputs via our mobile apps and SaaS services. In 2024, we further upgraded our Generative AI solutions integrated into our product portfolio, powered by our in-house research and development team, to incorporate a significantly broader range of generative features. In 2025, we accelerated our Generative AI roadmap by enriching our B2C mobile apps with advanced AI-driven photo and video creation tools, leveraging multimodal technologies that seamlessly integrate text, image, audio, and video understanding, and incorporating leading third-party AI models to deliver more intuitive, powerful, and end-to-end creative workflows. However, we cannot guarantee that we will succeed in developing products and services that achieved widespread adoption, nor that we will be able to release commercially viable products and services in a timely manner. Failure to do so may adversely impact our business, financial condition and results of operations.
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Our recent growth may not be indicative of our future growth. Even if we continue to grow, we may not be able to successfully execute our growth strategies.
We have achieved significant scale and steady growth since our inception in 2015. Our total revenue grew from $22.9 million in 2019 to $69.2 million in 2025, at a CAGR of 20.3%.
Our B2C business delivered strong and consistently increasing revenue contribution, with revenue rising from $27.7 million in 2023 to $47.0 million in 2025, representing a robust CAGR of 30.2%. We believe that the continued growth in active subscribers depends on a number of factors, in particular, our ability to:
•attract and convert free users into paying subscribers for our mobile apps and web services;
•expand our subscriber base in emerging markets;
•achieve higher renewal rate for premium feature subscribers;
•increase our market share among target audience groups via online marketing and brand awareness initiatives;
•enhance our AI photo and AI video related offerings with state-of-the-art implementations to improve consumer satisfaction rate; and
•develop and launch new innovative Generative AI functions into our apps and web services in a timely manner.
For B2B business, the number of cumulative brands in our brand portfolio increased from 645 as of December 31, 2023 to 859 as of December 31, 2025 at a CAGR of 15.4%. As the market continues to mature, we expect that our growth rate may moderate over time compared to historical levels. In particular, we believe that sustained revenue growth will depend on a number of factors, including our ability to:
•deepen our penetration into the top 20 beauty groups;
•expand our services into top fashion groups;
•expand our reach among the indie brands, emerging new brands and retailers;
•expand our market penetration into global top luxury and fashion brands;
•increase market share/awareness in med-spa, skincare clinics and aesthetic beauty clinics;
•develop and launch market competitive products and premium features that effectively address brands and consumer demands;
•enhance and optimize AI- and AR- technology solutions to advance product offerings; and
•pursue strategic alliances, joint venture, investments and acquisition opportunities across categories and geographies.
Given our limited operating history and the rapidly evolving nature of AI- and AR- technologies and markets, we may not be able to achieve our objectives as initially projected. Our rapid growth in history has already placed and may continue to place significant demands on our management, operational, and financial resources. As the cumulative number of brands in our portfolio, mobile app users, employee headcount, and data volume supported by our infrastructure continue to grow, we are pressed to enhance our efficiency across operations, finance, and management, as well as improving our reporting systems and procedures. Our rapid growth also presents significant challenges in terms of requiring substantial capital expenditures to fuel our future growth and allocating valuable management resources to support the increasingly complex organizational structures. As we navigate the rapidly evolving AI landscape, we may encounter difficulties in maintaining and strengthening our competitive edge, launch innovative products to address brands and consumer demands, and executing our growth strategies as planned. If we fail to adequately address any of the
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challenges and manage our growth effectively, our financial performance, business and results of operations may be adversely impacted.
Any businesses we will invest in or acquire may not perform as expected or be successfully integrated.
Although we focused on organic growth in the past, as part of our business strategy, we expect to invest in or acquire companies, form joint ventures, and acquire complementary assets or technologies. Competition within our industry for investments in and acquisitions of businesses, technologies, and assets is intense.
Even if we are able to identify a target for investment or acquisition, we may not be able to complete the transaction on commercially reasonable terms, we may not be able to receive approval under anti-monopoly and competition laws, or the target may choose to enter into a transaction with another party, which could be our competitor.
In addition, businesses we will invest in or acquire may not perform as expected. Failure to effectively manage and successfully integrate acquired businesses and technologies, including addressing any privacy or data security risks associated with such acquisitions, could adversely impact our operating results and expansion prospects. The process of integrating an acquired company, business, technology, or personnel into our Company, as well as the performance of an acquired company, business, technology or personnel, are subject to various risks and challenges, including:
•diverting management time and attention from operating our business;
•disrupting our existing business operations;
•customer acceptance of the acquired company’s offerings;
•establishing or remediating the controls, procedures, and policies of the acquired company;
•integrating the acquired business onto our systems and ensuring the acquired business complies with our financial reporting requirements and timelines;
•retaining and integrating acquired employees, including aligning incentives between acquired employees and existing employees, as well as managing costs associated with eliminating redundancies or transferring employees under mutually agreed terms with minimal business disruption;
•maintaining important business relationships and contracts of the acquired business;
•liability for pre-acquisition activities of the acquired company;
•litigation or other claims or liabilities arising in connection with the acquired company;
•impairment charges associated with goodwill, investments, and other acquired intangible assets; and
•other unforeseen operational difficulties and expenditures.
We cannot predict whether any strategic investment or acquisition will be accretive to the value of our Ordinary Shares. It is also possible that any of our future strategic transactions could be perceived negatively by the press, investors, customers or regulators, or be subject to regulatory inquiries or proceedings, which may adversely affect our reputation, business, financial condition and prospects.
We may fail to compete effectively or maintain market leadership in the markets in which we currently operate or expand into.
The AI- and AR- technologies and markets are rapidly evolving. Our primary competition currently comes from companies offering products and services that compete with some but not all of the functionality available on our platform, and there may be an increasing number of similar solutions offered by additional competitors in the future. Our current and potential competitors may also develop and market new technologies and products that render our existing or future products less competitive, unmarketable or obsolete. For example, the mobile device manufacturers may enhance the built-in camera apps in their smartphones with AI- and AR- technologies providing similar functionality to our mobile apps,
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which may render our YouCam apps redundant. Similarly, brands may choose to develop their own in-house AI- and AR- beauty and fashion technology solutions. If an increasing number of products with similar or even superior functionality to our products are introduced to the market, we may need to lower the prices for our products and services in order to remain competitive and, as a result, our margins may be reduced and our operating results may be negatively affected. The introduction of new technologies and the influx of new market entrants may intensify competition in the future, which could adversely impact our business and our ability to increase revenues, maintain or expand our brand portfolio and consumer base, and sustain our pricing.
Expansion by large technology companies into beauty- and fashion-related AI may undermine our position in our niche markets.
Large global technology companies and providers of general-purpose AI platforms, such as major cloud providers and AI foundation model developers, are increasingly integrating advanced image, video and avatar generation capabilities into their products. As these companies expand into beauty, fashion and e-commerce verticals, they may offer experiences similar to our solutions, such as virtual make-up try-on, fashion imagery and styling suggestions, as part of broader subscription bundles or AI “assistant” offerings.
Because these companies have substantially greater financial, technical and marketing resources, larger installed user bases and stronger platform control, they may be able to offer competing features at lower or no additional cost, or to secure privileged placement and deeper integration within operating systems, app stores, search engines and productivity tools.
In addition, certain brand customers have expressed the view that continued improvements in GenAI may eventually replace virtual try-on technology. Although we currently do not share this view, evolving customer expectations may lead brands to reallocate budgets toward more general AI initiatives or in-house capabilities. If we are unable to clearly demonstrate the incremental value of our vertically focused technology, or if AI “giants” succeed in displacing our solutions at key customers, our ability to maintain or grow our market share and to sustain our pricing could be materially and adversely affected.
An intensifying market for B2C Generative AI photo and video tools may limit our ability to attract new users and retain subscribers.
We face intense competition in the consumer market for photo and video editing, beauty filters and creative content tools. The emergence of accessible GenAI models and off-the-shelf tooling has significantly lowered barriers to entry for new competitors. Individual developers and small teams can rapidly launch GenAI-enabled mobile applications that offer avatar creation, AI-generated images and videos, and other features that compete with our YouCam suite of apps and web services.
Many of these competing products may offer for free or at lower price points, are heavily promoted through social media, or are bundled with other services. Because consumers can easily download, trial and switch among such apps at minimal cost, our ability to differentiate on the basis of user experience, feature set, or brand recognition may not be sufficient to retain users or maintain subscriber growth.
If we are unable to continue to innovate and refresh our GenAI-enabled consumer offerings, or if competing applications deliver comparable or superior quality at lower prices, we may experience slower user growth, lower subscription renewal rates, reduced average revenue per subscriber, and higher customer acquisition costs. Any of these developments could adversely affect our business, financial condition and results of operations.
If we fail to access and integrate leading Generative AI models on a timely basis, we may lose our competitive edge.
Our ability to attract and retain both consumer and brand customers increasingly depends on how quickly we can incorporate state-of-the-art GenAI models and capabilities into our products. In some cases, we rely on third-party AI providers for early or priority access to new models and features. These providers may choose to offer earlier or more favorable access to other customers, including our competitors, or may impose usage restrictions, pricing tiers or technical requirements that limit how we can integrate their models into our offerings.
Even when we obtain access to leading models, rapid integration requires significant engineering, product and compliance resources. As GenAI systems have become more complex and multi-modal, the effort required to adapt them to
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our specific beauty and fashion use cases, integrate them into mobile and web experiences, and ensure that outputs are safe and compliant has increased. Delays in integration, quality issues, or misalignment between model capabilities and user expectations could diminish the perceived competitiveness of our offerings.
In a fast-moving AI market, even a short delay in delivering sought-after features can result in lost marketing opportunities, lower app store rankings, slower subscriber growth and brand customers choosing alternative vendors. If we are unable to consistently access, adopt and deploy key GenAI technologies at or near the pace of the market, our competitive position, growth prospects and financial results may be adversely affected.
The increasing use of autonomous or “agentic” AI systems to make or recommend purchasing decisions could reduce differentiation among competitors and fundamentally change how we market our products.
New AI agents prioritize factors such as price, default integrations with certain platforms, or opaque algorithmic scoring over the visual quality, user experience or brand alignment that we emphasize, differentiation among providers may be reduced. Our ability to influence end-user choice through traditional marketing, user interface design or brand positioning could become less effective if the key “customer” becomes an AI agent rather than the human user.
We may need to adapt our business and go-to-market model to focus more heavily on being selected as a preferred provider or default integration point for major AI agents and platforms, including by offering APIs, toolkits or commercial terms tailored to such agents. There is no assurance that we will succeed in securing or maintaining such preferred positions. If we are not favorably ranked or selected by widely adopted AI agents, traffic to our apps and web services, usage of our offerings and our revenues could be adversely affected.
Changes in search engine features, including AI-generated overviews, may significantly reduce organic traffic to our properties.
We rely in part on search engines to drive traffic to our websites and to app stores where our mobile applications are distributed. Search engines are increasingly incorporating AI-generated summaries or “overviews” that provide users with direct answers to their queries, often without requiring them to click through to individual websites. If search engines choose to highlight AI-generated responses, paid advertisements or other content ahead of, or instead of, links to our sites or to content about our products, the number of users who visit our properties through organic search may decline.
We have limited influence over the algorithms and ranking methodologies that search engines use. Changes in these algorithms, or in how AI-generated summaries reference or fail to reference our content, could result in lower visibility for our websites and product pages. As a result, we may experience a reduction in new user acquisition, lower subscription conversions, and decreased engagement from users who previously discovered us through organic search.
To offset any decline in organic traffic, we may need to increase spending on paid search, social media marketing, or other acquisition channels. There is no guarantee that these efforts would fully compensate for lost organic reach or that the unit economics of paid channels would remain attractive. A sustained reduction in organic traffic, or a significant increase in customer acquisition cost, could adversely affect our business, financial condition and results of operations.
Our current operations are international in scope, and we plan to further expand globally. If we fail to address the challenges presented by our growing global presence, our business may be materially and adversely affected.
Our business operations are international in scope, with approximately 49.6% of our revenue coming from the Americas, 29.3% from Europe, 17.4% from Asia-Pacific, and 3.7% coming from other remaining countries and/or regions in 2025. We intend to continue to expand our operations internationally, and develop strategies to address new international markets. However, global expansion has required and will continue to require considerable management attention as well as financial and other resources. We expect to face particular challenges in global expansion and operations including:
•increased costs associated with developing solutions and products and providing support in different languages;
•increased costs in marketing and advertising to promote our products effectively in different markets;
•localizing our products, services, content and features to ensure that they are culturally attuned to the different markets;
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•increased competition from competitors that have strong positions in particular markets;
•increased costs associated with recruiting and retaining talented and capable employees in foreign countries and maintaining our Company culture across all of our offices;
•greater difficulty in receiving payments from different geographies, including difficulties associated with exchange rate fluctuations, transfer of funds, longer cycles for payment and collecting accounts receivable, especially in emerging markets;
•compliance with applicable foreign laws and regulations, including laws and regulations with respect to economic sanctions and export controls, anti-corruption, anti-bribery and anti-kickback, data privacy, cybersecurity and consumer protection that may conflict with local customs and practices in some jurisdictions in which we operate, and the risk of penalties if our practices are deemed not to be in compliance;
•more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in Europe and other jurisdictions;
•limited or insufficient intellectual property protection or difficulties enforcing our rights to intellectual property;
•political, social and economic instability in some countries; and
•exposure to different tax jurisdictions and potential adverse tax consequences.
If we are unable to successfully manage the complexity of our global operations and deal with the related challenges and risks, our business, financial condition and results of operations could be adversely affected.
Our sales cycle for brands and retailers can be long and unpredictable, and our sales efforts require considerable time and expenses.
Due to the length and unpredictability of the sales cycle for brands and retailers, it is difficult to predict the timing of our sales and related revenue recognition. Given that these brands and retailers often view implementation of our solutions as a strategic decision and significant investment, they often require considerable time to evaluate, test and qualify our product offerings prior to entering into or expanding a subscription. During the sales cycle, we often need to spend significant time and resources to better educate and familiarize the potential brands and retailers with the value proposition of our products and services as well as on sales and marketing and contract negotiation activities. Such lengthy sales cycle for the evaluation and implementation of our solutions, in particular for highly customized applications, may cause a delay between increasing operating expenses for such sales efforts and generation of corresponding revenue upon successful sales. Additional factors that may influence the length and variability of our sales cycle to brands and retailers include:
•effectiveness of our sales force, in particular new sales people as we increase the size of our sales force;
•obstacles placed by their procurement process;
•their integration complexity;
•their familiarity with the AI- and AR- technologies; and
•economic conditions and other factors impacting their budgets.
Given these factors, it is difficult to predict whether and when a sale will be completed, and when revenue from a sale will be recognized and reflected in our results of operations.
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For our B2B business, given that a small number of business partners contribute to a significant portion of our revenues, our business and results of operations could be materially and adversely affected if we were to lose a significant business partner or a significant portion of our business.
Currently, a limited number of business partners contribute a significant portion of our revenues. Our B2B business partners primarily comprise top global beauty brands. In 2023, 2024 and 2025, our five largest business partners in aggregate contributed approximately 20.5%, 15.1% and 11.9% of our revenues, respectively. Although the revenue concentration from those largest business partners has been diversifying over the past few years, we expect that a limited number of our business partners will continue to contribute a notable portion of our revenues in the near future. If we lose any of these business partners, or if revenues generated from a significant business partner are substantially reduced due to, for example, increased competition, in-house development, a material change in the business partner’s operations, breach of contract or policy, any deterioration in our relationship with business partners, our business, financial condition and results of operations may be materially and adversely affected.
We depend on the continuing efforts of our founders, senior management team and key personnel, and our business operations may be negatively affected if we lose their services.
We currently depend on the continued services and performance of our founders and other key personnel, including Alice H. Chang, our founder and CEO. Our future success will depend on the continued service of our key personnel who possess significant expertise and knowledge of our industry. In addition, many of our key technologies and products are custom-made for our business by our personnel. The loss of key personnel, including members of management, as well as key engineering, product development, marketing and sales personnel, could disrupt our operations and have an adverse effect on our reputation and business. As we grow, we cannot guarantee that we will continue to attract and retain the personnel needed to maintain our competitive position. In particular, we intend to continue to hire a significant number of technical personnel in the foreseeable future, and we expect to continue to face significant challenges in hiring such personnel. Moreover, if our reputation were to be harmed, whether as a result of media, legislative or regulatory scrutiny or otherwise, it could make it more difficult to attract and retain personnel that are critical to the success of our business.
As we continue to grow and our business matures, or if our stock price declines, the incentives to attract, retain and motivate employees provided by our equity awards or by future arrangements may not be as effective as in the past. Additionally, if we issue significant equity to attract additional employees or to retain our existing employees, we would incur substantial additional share-based compensation expense, and the ownership of our existing shareholders would be further diluted. As a result, it may be difficult for us to continue to retain and motivate certain employees, and this wealth could affect their decision about whether they continue to work for us. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively and our reputation and business could be seriously harmed.
If we are not able to maintain and enhance our brand awareness, our business and operating results may be materially and adversely affected.
We believe that our company brands, including the brands of our mobile apps such as YouCam, have significantly contributed to the success of our business. We also believe that maintaining and enhancing our brands is critical to expanding our base of mobile app or web service users, business partners and retailers. Many of the new users of our mobile apps or web services are referred by existing users. Maintaining and enhancing our brands will depend largely on our ability to continue to provide useful, reliable, trustworthy and innovative products and technologies, which may not always be successful or timely. We may introduce new products or terms of service or policies that users do not like, which may negatively affect our brands. Additionally, the actions of our developers or advertisers may affect our brands if consumers do not have a positive experience interacting with third parties, including advertisers and platform distributors, through our products and services. We will also continue to experience media, legislative or regulatory scrutiny of our actions or decisions regarding consumer privacy, data use, encryption, content, advertising, competition, security and other issues. Our brands may also be negatively affected by attacks from our competitors, by negative publicity about the actions of consumers that are deemed to be hostile, illegal or inappropriate to other consumers, by third-party content providers acting inappropriately, by any regulatory developments designed to address such risks, or due to legal proceedings or investigations. Maintaining and enhancing our brands may require us to make substantial investments, which may not be successful. If we fail to successfully promote and maintain our brand awareness or if we incur excessive expenses in this effort, our business, financial condition and results of operations may be adversely affected.
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User misconduct and misuse of our mobile apps or any non-compliance of third parties that we conduct business with may adversely impact our brand image and reputation, and we may be held liable for information or content displayed on, retrieved from or linked to our products and services, which may materially and adversely affect our business and operating results.
We may face claims relating to information that is published or made available on our products. Our mobile apps, in particular YouCam Makeup and YouCam Perfect, have the attributes of social media and may be misused by individuals or groups of individuals to engage in inappropriate or illegal activities. We have implemented control procedures, and have an internal team that monitors the content uploaded by users.
While these procedures aim to detect and block illegal, fraudulent, violent, pornographic or other inappropriate content or activities conducted through the misuse of our mobile apps, particularly those that violate applicable laws and regulations, they may not be able to block all such content uploads or activities in real time due to the time lag between content upload and the inspection by our internal team. In addition, as we are developing our live streaming services on our mobile apps, it may become more difficult for our internal team to timely detect and block illegal or inappropriate content or activities in the future.
We may not be well protected from liability for third-party actions in all the jurisdictions in which we operate, as local laws vary, and some of them can be unclear or evolving. For example, in the United States, there have been various congressional and executive branch efforts to remove or restrict the scope of the protections available to online platforms under Section 230 of the Communications Decency Act, and our current protections from liability for third-party content in the United States could decrease or change. We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages or license costs. A number of regulatory initiatives that have been proposed to regulate the operation of online platforms and digital services providers could generate additional operational and technical costs of compliance. Compliance with laws, regulations, and other requirements imposed upon our business may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business.
We could also face fines or orders restricting or blocking our services in particular geographies as a result of content hosted on our services. For example, in June 2020, the Home Ministry in India included our mobile app, YouCam Makeup, on a list of banned applications in the country, which remains in effect, as of the date of this annual report. If any of these events occurs, we may incur significant costs or be required to make significant changes to our products, business practices or operations and our reputation, business and operating results could be seriously harmed.
Certain of our metrics and other estimates are subject to inherent uncertainties in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We regularly review various operating metrics, including our active subscribers, cumulative number of brands and number of SKUs featured on our platform, to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data gathered on an analytics platform that we develop and operate and have not been validated by an independent third party. While we believe these metrics are reasonable estimates of our client base for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally. For example, there may be individuals who have multiple accounts. Our operating metrics may also be affected by technology on certain mobile devices that automatically runs in the background of our mobile apps when another phone function is used, and this activity can cause our system to miscount the consumer metrics associated with such account.
Errors or inaccuracies in our metrics or data could also result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies. We believe that we do not capture all data regarding our active users, which may result in understated metrics. This generally occurs due to technical issues. For example, our systems do not record data from a user’s application or when a user opens our mobile apps and contacts our servers but is not recorded as an active user. We continually seek to address these technical issues and improve our accuracy, but given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to continue. If advertisers, partners or investors do not perceive our consumer, geographic, or other demographic metrics to be accurate representations of our consumer base or consumer engagement, or if we discover material inaccuracies in our consumer,
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geographic or other demographic metrics, our reputation may be seriously harmed, and our advertisers and partners may also be less willing to allocate their budgets or resources to us, which could seriously harm our business.
Our business depends on attracting and retaining high-quality personnel, and failure to attract or maintain such personnel could adversely affect our business.
Our future success depends on our ability to attract, retain, and motivate highly skilled employees, particularly in AI, machine learning, and advanced algorithms. Competition for top talent in our industry is intense, especially in AI and data science. We anticipate that some of our competitors or other players in the AI- and AR- technology sector may have access to greater resources, allowing them to aggressively pursue top talent. If we are unable to attract or retain such highly skilled personnel, or to maintain our current workforce, our ability to keep up with innovation and technological advancements in our industry could be hindered, potentially harming our business.
We have limited business insurance coverage. Any interruption of our business may result in substantial costs and the diversion of our resources, and cause an adverse impact on our financial condition and results of operations.
We have obtained insurance to cover certain potential risks and liabilities, such as error and omission commercial insurance, personal injury insurance, cybersecurity insurance and director and officer insurance for certain businesses we operate. However, consistent with general industry practice, our business insurance is limited and we may not be able to acquire insurance for all types of risks we face in our operations in all the jurisdictions where we operate. For examples, insurance companies in some of the jurisdictions where we operate offer limited cybersecurity insurance products and/or intellectual property infringement insurance products, if any. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured damage to our systems, disruption of our business operations, litigation or natural disasters could require us to incur substantial costs and divert our resources, which could have an adverse effect on our financial condition and results of operations.
We may require additional capital to support our operations and the growth of our business, and we cannot be certain that financing will be available on reasonable terms when required, or at all.
We may need additional financing from time to time to operate or grow our business. Our ability to obtain additional financing, if and when required, will depend on investor and lender demand, our operating performance, the condition of the capital markets and other factors, and we cannot assure you that additional financing will be available to us on favorable terms, or at all. If we incur additional debt, including drawing on our credit facility, the debt holders would have rights senior to holders of our Ordinary Shares to make claims on our assets. If we raise additional funds through the issuance of equity securities, our existing shareholders will experience dilution and those new securities may have rights, preference or privileges senior to those of our ordinary shares. If adequate financing is not available on terms satisfactory to us when we require it, our ability to continue to support the operation and growth of our business could be significantly impaired and our operating results may be adversely affected.
Risks Related to Our Technology, Data Privacy and Intellectual Property
Issues relating to the responsible use of our technologies, including AI Solutions, may result in reputational and financial harm and liability.
Concerns relating to the responsible use of new and evolving technologies, such as AI, in our products and services may result in reputational and financial liabilities, and may cause us to incur costs to resolve such issues. We are increasingly building AI capabilities into many of our products and services. We have employed GenAI technology in our YouCam suite of mobile apps, empowering users to generate hundreds of personalized digital avatars and AI-edited and -enhanced images. In 2025, we advanced our Generative AI roadmap by expanding our B2C mobile apps with next-generation AI-powered creative tools for photo and video creation, while adopting multimodal AI solutions that integrate text, image, audio and video capabilities and incorporating leading third-party AI models to enable more intuitive, end-to-end creative workflows.
AI presents risks and challenges that could affect our business. AI models, particularly Generative AI models, may produce output or take action that is incorrect, that results in the release of private, confidential or proprietary information, that reflects biases included in the data on which they are trained, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it challenging to
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understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI model, reducing erroneous output, eliminating bias and complying with regulations that require documentation or explanation of the basis on which decisions are made. Inappropriate or controversial data practices by us or others could impair the acceptance of our AI solutions. The use of GenAI tools may result in copyright and other legal issues and our GenAI related product offerings may not be able to compete against that of our competitors. These deficiencies could undermine the decisions, predictions, or analysis that AI applications produce, subjecting us to legal liability, and brand or reputational harm.
If we offer AI solutions that draw controversy due to their perceived or actual impact on society because of their impact on human rights, privacy, employment, or other social, economic or political issues, or if we are unable to develop effective internal policies and frameworks relating to the responsible development and use of AI models and systems offered through our products, we may experience brand or reputational harm, become less competitive or incur legal liability.
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the United States and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI. These evolving laws and regulations may require changes in our implementation of AI technology and increase our compliance costs and non-compliance risks. If we fail to address concerns relating to the responsible use of AI by us or others, public confidence in AI adopted in our products may be undermined and the adoption of AI in our products and services may be delayed or suspended, which may cause financial and reputational harm to us.
Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the usage of any unauthorized training data for their models, and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, which we have limited control over. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our cybersecurity measures.
Reliance on third-party Generative AI models and cloud infrastructure could increase our costs and erode the gross margins of our AI-driven products.
Many of our GenAI-enabled features, including image and video generation, AI editing and conversational beauty advisory functions, depend on third-party AI models, APIs and cloud infrastructure. As the adoption and usage intensity of our GenAI-driven offerings increase, the variable costs associated with model licensing, API calls, high-performance computing, data storage and network bandwidth may represent a growing portion of our cost of revenue.
Providers of GenAI models and cloud services generally have discretion to change their pricing, volume-based discounts, service tiers, usage limits and other commercial terms, and may introduce new fees, for example, for priority access, premium features or compliance-related functionality. In addition, changes in regulatory requirements or industry standards, such as data localization or model audit obligations, may require us to use more expensive infrastructure or services, or to duplicate environments across multiple jurisdictions.
Our current strategy in some cases is to license third-party models in order to accelerate time-to-market for new GenAI features, and then, once a feature is proven and scaled, to develop and deploy internal models that can reduce our unit costs. There is no assurance that we will be able to develop internal models that provide comparable quality, safety and performance, or that we will be able to complete such transitions on the timelines and at the cost levels we anticipate. If we experience higher-than-expected third-party GenAI and cloud costs, or delays in migrating workloads to more cost-effective solutions, and we are unable to offset these costs through pricing, increased usage or efficiency gains, the gross margins of our relevant products and our overall profitability could be adversely affected.
AI solutions developed by us may become obsolete due to groundbreaking technological innovations or the entry of competitors with financial and brand power.
In order to maintain our strengths and further grow our AI-driven business and services, we must closely monitor the technological developments and advances as well as the emergence of new competitors in AI and related sectors, and rapidly adopt measures to keep pace with such development and advances. Therefore, the maintenance of strengths and leading position in AI-driven business and services depends largely on our ability to promptly adapt to the fast-paced
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technological changes in the development and implementation of AI products and services. If we cannot adopt measures to keep pace with the rapid changes in technologies or there is an emergency of groundbreaking technological innovations which we cannot adapt to promptly, our AI solutions may become obsolete and thus less desirable to our customers.
Additionally, the successful entry of competitors into the AI market that have excellent technological innovative capability, financial and brand power, could also cause our share of the market for our AI solutions to drop significantly, thereby negatively affecting our results of business operations and financial performance. We may not be able to compete effectively with competitors that have superior technological innovative capability, more financial resources and brand power than us, and we cannot predict when such new competitors will enter the AI industry causing increased competition and possibly less desire for our AI solutions. There is a risk that these, or other developments, could result in significant disruption to our business model, and that we will be unprepared to compete effectively.
If we are unable to provide advanced AI solutions due to challenges in securing necessary infrastructure, facilities, equipment, or skilled development personnel, it could delay or hinder the development, enhancement, introduction, or implementation of our AI solutions, adversely affecting our business, operations, and financial performance.
To maintain our market position and deliver competitive product offerings, we must continuously update and upgrade the AI solutions integrated into our products. This requires ongoing investments in infrastructure, facilities, and equipment, including high-performance computing resources such as GPUs, which are in high demand and often in short supply. We may not always be able to procure the necessary infrastructure, facilities, or equipment in a timely manner, at commercially reasonable prices, or at all. If we fail to secure these resources, our ability to develop and enhance AI solutions could be compromised, negatively impacting our operations and growth prospects. Even if we successfully obtain these resources, doing so may strain our financial position and divert management’s focus.
Additionally, the development and deployment of AI solutions rely on highly skilled personnel with specialized expertise. The field is knowledge-intensive and requires continuous learning to keep pace with rapid technological advancements. If we fail to attract, hire, or retain AI talent, or if we are unable to train new hires effectively, our ability to innovate and maintain high-quality AI solutions may be severely impacted. Employee departures or a shortage of skilled personnel could diminish the quality and value of our AI solutions, leading to reduced adoption by users and brand customers, ultimately harming our financial and business performance.
The information that our AI solutions learns may include confidential information. In the unlikely event of a leakage of such confidential information, our credibility may be shaken, which may affect our business performance.
Our AI solutions, particularly those used for facial expression analysis, may collect private and sensitive data. This may incur a risk of possible inadvertent leakage of confidential information. In addition, a hack or data breach initiated by unauthorized third parties may also lead to potential noncompliance with data-related laws and a leakage of confidential information. We may also inadvertently leak such confidential information due to a system breakdown or otherwise without any awareness.
Any unauthorized disclosure or leakage of confidential information could harm our reputation, cause disruptions to our business operations and could even result in a violation of applicable laws that govern the maintaining and protection of confidential information. If such confidential information is released, users would lose faith in our AI solutions and we would be unable to draw in as many users and clients. In the event of any unintentional leakage of confidential information, we may need to stop using our AI solutions to put in place more security measures and stop any more leaks of sensitive data, which might be costly and time-consuming and also interrupt our normal business operations. Therefore, it would severely damage our reputation and have a detrimental effect on our business performance, if any kind of sensitive information obtained by our AI solutions was leaked, whether it was due to actions taken by third parties or by us.
Security breaches, improper access to or disclosure of our data or consumer data, other hacking and phishing attacks on our systems, or other cyberattacks may cause our solutions to be perceived as not being secure, which could harm our reputation and adversely affect our business.
Mobile malware, viruses, hacking and phishing attacks have become more prevalent and sophisticated in our industry. If our security measures are breached, or if our products and services are subject to attacks or misuse that disrupt or deny the ability of consumers to access our products and services, our products and services may be perceived as not being secure and consumers and advertisers may curtail or stop using our products and services, which could have a material adverse effect on our reputation, business prospects and results of operations.
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Our efforts to protect the information that our consumers have shared with us could fail due to the actions of third parties, software bugs or other technical malfunctions, employee error or malfeasance, or other factors. Third parties may attempt to fraudulently induce employees or consumers to disclose information to gain access to our data or our consumers’ data. If any of these events occurs, our or our consumers’ information could be accessed or disclosed improperly. Internally, we have our privacy policy in place that governs how we may use and share the personal information that our consumers have provided us.
However, if third parties such as business partners and advertisers fail to implement adequate data security practices or fail to comply with our terms and policies, our consumers’ data may be improperly accessed or disclosed. Any incidents where our consumers’ information is accessed without authorization, or is improperly used, or incidents that violate our terms of service or policies, could damage our reputation and our brand image and diminish our competitive position.
We are subject to data privacy and protection laws and regulations adopted by governmental agencies.
Data privacy laws restrict our storage, use, processing, disclosure, transfer and protection of non-public personal information provided to us by our consumers. Violating existing or future laws or regulations could subject us to substantial monetary fines and other penalties that could seriously harm our business. While we strive to protect our consumers’ privacy and comply with all applicable data protection laws and regulations, any failure to do so may result in proceedings or actions against us by affected consumers or government authorities, which could be time-consuming and cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.
In addition, spammers attempt to use our products to send targeted and untargeted spam messages to consumers, which may embarrass or annoy consumers and make our products less consumer-friendly. We cannot be certain that the technologies that we have developed to repel spamming attacks will be able to eliminate all spam messages from our products. Our actions to combat spam may also require diversion of significant time and focus from improving our products. As a result of spamming activities, our consumers may use our products less or stop using them altogether. Maintaining the trust of our consumers is important to sustain our growth, retention, and consumer engagement. Negative incidents or dissatisfaction in relation to our products and services regardless of all our efforts, could deter current and potential consumers from using our products and services, which could have material adverse effects on our reputation, growth and consumer engagement, and could seriously harm our operational cost structure.
Further, we rely on computer systems and network infrastructure throughout our operations. Amazon, Alibaba and Google also provide with us distributed computing infrastructure platforms for business operations. Our operations depend on our ability to protect our computer equipment and systems from damage from physical theft, fire, power outages, telecommunications failures, and other catastrophic events, as well as from internal and external security breaches, viruses, worms, and other destructive problems. Any disruption to our operations due to damage to or failure of our computer systems, network infrastructure or servers could have a material adverse effect on our business and could subject us to regulatory action or litigation. A significant network breach in the security of these systems because of ineffective operation of these systems, maintenance issues, upgrades, or migrations to new platforms, or cyberattacks or other failures to maintain an ongoing and secure cyber network could result in further damage, delays in customer service, and reduced efficiency in our operations. This could include the theft of our intellectual property and trade secrets, improper use of personal information, and other forms of identity theft. While we utilize our own personnel and various hardware and software to monitor our systems, controls, firewalls, and encryption, and intend to maintain and upgrade our security technology and operating procedures to prevent damage, breaches and other disruptions, there is no guarantee that these security measures will be successful. Any such claims, proceedings or actions by regulatory authorities, or adverse publicity resulting from such claims, could adversely affect our business and results of operations.
Privacy-driven changes by platform providers that reduce advertising and attribution signals may impair our ability and our brand customers’ ability to measure return on investment.
Our business, particularly our B2B solutions for brands and retailers, depends in part on the ability to measure user engagement and conversion attributable to specific campaigns, virtual try-on experiences and other digital touchpoints. Platform providers such as Apple and Google have introduced, and are expected to continue to introduce, technical and policy changes—such as app tracking transparency frameworks, restrictions on third-party cookies and device identifiers, “Privacy Sandbox” initiatives and privacy manifests for software development kits—that limit the collection and sharing of user-level data across apps and websites.
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These changes can lead to “signal loss” and attribution challenges, reducing the accuracy and granularity of performance metrics. As a result, it may become more difficult for our brand customers to determine which experiences drive product discovery, engagement and sales. If brands perceive that they cannot reliably measure the return on investment of our solutions, they may reduce or reallocate marketing budgets, negotiate lower pricing, or decide not to renew or expand their contracts with us.
We may need to invest significantly in alternative, privacy-preserving measurement approaches, such as modeled attribution, aggregated reporting or experimentation frameworks, which may be complex to implement and may still be less precise than prior methods. In addition, discrepancies between our measurement methodologies and those of our customers or third-party analytics providers could lead to disputes regarding performance or fees. Any of these factors could adversely affect our reputation, customer relationships and financial results.
Our business and operating results may be harmed by any significant service disruptions. If our products and services are subject to attacks or misuse that disrupt or deny the ability of consumers to access our products and services, and we fail to develop enhancements to resolve any defect or other problems or adapt our existing technology and infrastructure, our consumers and partners may curtail or stop using our products and services, which could significantly harm our business.
The success of our broad range of AI- and AR- powered business and consumer solutions is reliant on technology. We currently primarily offer seven mobile apps, one-web based editor and 47 SaaS technology solutions, . Our ability to attract and retain consumers largely depends on our ability to maintain and scale our technical infrastructure. We expect to continue to make significant investments to maintain and improve the capacity, capability and reliability of our infrastructure. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed or continually develop our technology and infrastructure to accommodate actual and anticipated changes in our consumers’ needs, our business, financial condition and results of operations may be harmed.
Our business and operating results, reputation and consumer engagement may be harmed by a disruption in our service due to failures in or changes to our systems, or by our failure to timely and effectively expand and adapt our technology and infrastructure. Our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could seriously harm our business. We may experience service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing our products and services simultaneously, computer viruses, denial of service or fraud or security attacks. This would negatively impact our ability to attract consumers, platform partners and advertisers and increase consumer engagement. It is possible that we may fail to effectively scale and grow our technology infrastructure to accommodate increased demands arising from increased consumer traffic. It may also become increasingly difficult to maintain and improve the performance of our products and services, especially during peak usage times, as our products and services become more complex and our consumer traffic increases. In addition, we cannot provide assurance that we will be able to expand our data center infrastructure to meet consumers’ demand in a timely manner, or on favorable economic terms. If any system failure, interruption or downtime occurs, our business, financial condition and results of operations may be materially and adversely affected.
In addition, a substantial portion of our network infrastructure is provided by third parties, including Amazon Web Services (“AWS”), Alibaba Cloud and Google Cloud. Any disruption or failure in the services we receive from these providers could harm our ability to handle existing or increased traffic and could significantly harm our business. Any financial or other difficulties these providers face may also adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide. In the event of a significant issue with the third-party network infrastructure supporting our network traffic, some of our products and services may become inaccessible or consumers may experience difficulties accessing our products and services. Any disruption or failure in our infrastructure could hinder our ability to handle existing or increased traffic on our platform, which could significantly harm our business.
Our technical infrastructure is also vulnerable to the risk of damage from natural disasters, such as earthquakes and typhoons, as well as from acts of terrorism or other criminal acts. Our services and products also incorporate software that is highly technical and complex. Our software has contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities. Some errors in our software code may only be discovered after the code has been released. In particular, the operation of some of our new businesses implicates complex technological and operational considerations, including technical or systematic issues that may arise in the ordinary course of business. In order to address such technical
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difficulties, we may need to make fundamental changes to the configurations or of the underlying systems we use or expend a significant amount of time and resources to obtain the technical skills or expertise needed to adequately address such issues. Any such difficulties could have a material impact on our ability to deliver the products and services we intend to offer, reduce our reliability and harm our reputation.
The successful operation of our business also depends upon the performance and reliability of the Internet infrastructure globally and the safety of our network and infrastructure. If our AWS, Alibaba Cloud or Google Cloud server code comes across some serious bugs that disrupt the service, many of our online services to clients will be affected. The Service-Level Agreement we have signed with most of our clients requires up to 99.5% service availability. Failure to meet that requirement will result in penalty, i.e., extra credits or refunds, as provided by the agreements. Furthermore, even if our Internet infrastructure is free of bugs, we may encounter unexpected issues solely due to administrative oversight.
We rely on AWS, Alibaba Cloud and Google Cloud for the vast majority of our computing, storage, bandwidth, and other services. Any service interruption of their operating systems, networks and hardware or other disruptions of or interference with our use of the cloud operation could impair the delivery of our platform and thus negatively affect our operations and harm our business.
Amazon, Alibaba and Google provide distributed computing infrastructure platforms for business operations, or what is commonly referred to as a “cloud” computing service. We currently run the vast majority of our computing on the three platforms, and our systems are not fully reliant on them. We have also built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by AWS, Alibaba Cloud and Google Cloud. Any disruption of or interference with our use of AWS, Alibaba Cloud and Google Cloud would negatively affect our operations and seriously harm our business.
First of all, any transition of the cloud services currently provided by any one of AWS, Alibaba Cloud and Google Cloud to the other platform or to another cloud provider would be difficult to implement and will cause us to incur significant time and expense. The level of service provided by AWS, Alibaba Cloud and Google Cloud may also impact our users’, advertisers’, and partners’ usage of and satisfaction with products or services. If our users or partners are not able to access our mobile apps or SaaS or specific features of our products or services, or encounter difficulties in doing so, due to issues or disruptions with AWS, Alibaba Cloud or Google Cloud, or if AWS, Alibaba Cloud or Google Cloud experiences interruptions in service regularly or for a prolonged basis, or other similar issues, we may lose users, partners, or advertising revenue and our business would be seriously harmed.
Secondly, each of Amazon, Alibaba and/or Google may take actions beyond our control that could seriously harm our business, including: (i) discontinuing or limiting our access to its cloud platform; (ii) increasing pricing terms; (iii) terminating or seeking to terminate our contractual relationship altogether; (iv) establishing more favorable relationships or pricing terms with one or more of our competitors; and (v) modifying or interpreting its terms of service or other policies in a manner that impacts our ability to run our business and operations. Amazon, Alibaba and Google each has broad discretion to change and interpret its terms of service and other policies with respect to us. If services and products provided by Amazon, Alibaba and Google are limited, restricted, curtailed or degraded in any way, or become unavailable to us or our consumers for any reason, our business may be materially and adversely affected. They may also alter how we are able to process data on their cloud platforms. If Amazon, Alibaba or Google makes changes or has interpretations that are unfavorable to us, our business could be seriously harmed. Hosting costs also have increased and will continue to increase as our consumer base and consumer engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of AWS, Alibaba Cloud and Google Cloud.
In addition, we also currently rely on third-party mobile apps distribution channels such as iOS App Store and Android Google Play to distribute most of our mobile apps to users. We expect a substantial number of downloads of our mobile apps will continue to be derived from these distribution channels and we expect that we will continue to rely on Apple App Store for downloads of our mobile apps. Accordingly, we believe that maintaining successful partnerships with Apple is critical to our success. If major mobile apps distribution channels change their standard terms and conditions in a manner that is detrimental to us, or terminate their existing relationship with us, our business, financial condition and results of operations may be materially and adversely affected. Moreover, the operating policies of Apple may have an impact on the accessibility of our products and services. If we fail to maintain good relationships with Apple, it may adversely impact our ability to continue to offer our products and services, which in turn could have a material adverse impact on our business.
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We rely on third-party proprietary and open source software for our products and services. The inability to obtain third-party licenses for such software, obtain them on favorable terms, or adhere to the license terms or any errors or failures caused by such software could harm our business.
Some of our offerings include software or other intellectual property licensed from third parties. It may be necessary in the future to renew licenses relating to various aspects of these applications or to seek new licenses for existing or new applications. Necessary licenses may not be available on acceptable terms or under open source licenses permitting redistribution in commercial offerings, if at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms could result in delays in product releases until equivalent technology can be identified, licensed or developed, if at all, and integrated into our products and services, which could harm our business, results of operations and financial condition.
In addition, third parties may allege that additional licenses are required for our use of their software or intellectual property, which it may be unable to obtain on commercially reasonable terms or at all.
The inclusion in our offerings of software or other intellectual property licensed from third parties on a non-exclusive basis could limit our ability to differentiate our offerings from those of our competitors. Failure to properly adhere to the license terms for software or other intellectual property might have negative effects, such as revocation of the license grant, penalties, added license fees or other liabilities. If a distributor of open source software were to allege that we had not complied with our license, we could be required to incur significant legal expenses. Very few legal precedent governs the interpretation of these licenses; therefore, the potential impact of these terms on our business is unknown and may result in unanticipated obligations regarding our technologies. To the extent that our products and services depend upon the successful operation of third-party software, any undetected errors or defects in such third-party software could also impair the functionality of our products and services, delay new feature introductions, result in a failure of products and services, and injure our reputation.
In addition, we use open source software in our solutions, including various open source libraries in our product development, as well as many development tools or libraries from Apple and Google. We expect to incorporate open source software into other offerings or products in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. If we inappropriately use or incorporate open source software subject to certain types of open source licenses that challenge the proprietary nature of our software products, we may be required to re-engineer our products, discontinue the sale of our solutions or take other remedial actions. From time to time, there have also been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products.
Our business depends upon the interoperability of our platform across devices, operating systems, and third-party applications that we do not control.
Our success depends in part on the interoperability of our products and services with third-party operating systems, applications, data, web browsers and devices, including, but not limited to, mobile-device cameras. We may not be successful in adapting our products and services that operate effectively with these technologies, systems, networks, regulations, or standards and we may not successfully cultivate relationships with key industry participants that operate effectively with these technologies, systems, networks, regulations, or standards. We plan to continue to introduce new products regularly and have experienced that it takes time to optimize such products to function with these operating systems and hardware, impacting the popularity of such products, and we expect this trend to continue. If customers have difficulty accessing and using our products and services (including on mobile devices) or if our products and services cannot connect a broadening range of applications, data and devices, then customer growth and retention may be harmed and our business and operating results could be harmed.
In addition, the owners of those third-party operating systems, such as Google and Apple, each provides consumers with products that compete with ours. Any changes in such operating systems, applications, data, web browsers or devices that degrade the functionality of our products and services or give preferential treatment to competitive services could harm the adoption and usage of our products and services. Our competitors that control the operating systems and related hardware that our mobile apps run on could make interoperability of our products with those mobile operating systems more difficult or display their competitive offerings more prominently than ours.
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Moreover, our products require high-bandwidth data capabilities. If the costs of data usage increase, our user growth, retention, and engagement may be seriously harmed. Additionally, to deliver high-quality video and other content over mobile cellular networks, our products must work well with a range of mobile technologies, systems, networks, regulations, and standards that we do not control. In particular, any future changes to the iOS or Android operating systems may impact the accessibility, speed, functionality, and other performance aspects of our products, which issues are likely to occur in the future from time to time.
Because our YouCam apps are used primarily on mobile devices, effective mobile functionality is a part of our long-term development and growth strategy. As our app users download our apps from both iOS and Android operating systems and run our apps on both systems, we must continue to develop and enhance our product functionality on both platforms. Given the growing popularity of mobile photo- and video-editing apps, if we are unable to improve operability of our products on smartphones, our business could be seriously harmed.
We may incur substantial costs in protecting or defending our intellectual property and any failure to protect our intellectual property could impair our competitive position and the value of our brand and other intangible assets may be diminished.
Effective protection of intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. Although we have taken measures to protect our proprietary rights, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective, and our intellectual property rights will be insufficient to protect against others offering products or services that are substantially similar to ours and compete with our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could seriously harm our business.
We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with all our employees, consultants, advisors, and any third parties who access or contribute to our proprietary know-how, information, or technology. We also rely on trademark, copyright, patent, trade secret, and domain-name-protection laws to protect our proprietary rights. Our trade secrets, trademarks, copyrights, patents and other intellectual property rights are important assets for us. There can be no assurance that we will be able to protect against the unauthorized use of our brand, trademarks or other assets. There is also a risk that one or more of our trademarks could become generic, which could result in them being declared invalid or unenforceable. We rely on, and expect to continue to rely on, a combination of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret and patent laws, to protect our brand and other intellectual property rights.
Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could harm our business and our ability to compete.
If we need to license or acquire new intellectual property, we may incur substantial costs and in some cases, pending trademark, copyright and patent applications may not be approved. We have filed various applications to protect aspects of our intellectual property, and we currently hold a number of issued patents, trademarks and copyrights in multiple jurisdictions. Effective protection of patents, trademarks and copyrights is expensive and difficult to maintain, both in terms of application and registration costs, as well as the costs of defending and enforcing those rights. We may be required to protect our rights in an increasing number of countries, in a process that is expensive and may not be successful, or which we may not pursue in every country in which our products and services are distributed or made available. In the future, we may acquire additional patents or patent portfolios, which could require significant cash expenditures.
Further, the laws of certain foreign countries provide different levels of protection of corporate proprietary information and assets, such as intellectual property, trade secrets, know-how, and records. We may fail to obtain effective intellectual property protection, or effective intellectual property protection may not be available in every country in which our products and services are available. As a result, we may be exposed to material risks of theft of our proprietary information and other intellectual property, including technical data, manufacturing processes, data sets, or other sensitive information, and we may also encounter significant problems in protecting and defending our intellectual property or proprietary rights abroad. In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights.
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We may be subject to intellectual property infringement claims or other allegations by third parties, which may cause substantial costs and materially and adversely affect our business operations.
Companies in the mobile, camera, communication, media, Internet, and other technology-related industries own large numbers of patents, copyrights, trademarks, trade secrets, and other intellectual property rights, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In addition, various “non-practicing entities” that own patents, copyrights, trademarks, trade secrets, and other intellectual property rights often attempt to aggressively assert claims in order to extract payments from technology companies. We may be subject to intellectual property infringement lawsuits that are expensive and time-consuming. If resolved adversely, these lawsuits and claims could result in our payment of substantial damages or license fees, disruption to our product and service offerings and reputational harm.
Furthermore, from time to time we may introduce new products or make other business changes, including in areas where we currently do not compete, which could increase our exposure to patent, copyright, trademark, trade secret, and other intellectual property rights claims from competitors and non-practicing entities. Some of our agreements with advertisers, platform partners and data partners require us to indemnify them for certain intellectual property claims against them, which could require us to incur considerable costs in defending such claims, and may require us to pay significant damages in the event of an adverse ruling. Such advertisers, platform partners and data partners may also discontinue use of our products, services and technologies as a result of injunctions or otherwise, which could result in loss of revenue and adversely impact our business.
We might be subject to claims and legal proceedings from holders of patents, trademarks, copyrights, and other intellectual property rights owners alleging that some of our products or content infringe their rights, as well as from non-practicing entities (NPEs), sometimes referred to as “patent trolls,” who may seek monetary settlements from us or our customers. While we believe we have meritorious defenses to these claims, we may, at times, choose to settle certain disputes. In addition, an unfavorable outcome in these lawsuits could seriously harm our business. If these or other matters continue in the future or we need to enter into licensing arrangements, which may not be available to us or on terms favorable to us, it may increase our costs and decrease the value of our products, and our business could be seriously harmed.
In addition, we may have to seek a license to continue practices found to be in violation of a third party’s rights. If we are required or choose to enter into royalty or licensing arrangements, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we may also be required to develop or procure alternative non-infringing technology or discontinue use of the technology. The development or procurement of alternative non-infringing technology could require significant effort and expense or may not be feasible.
Generative AI outputs used in our products may infringe third-party intellectual property, publicity or other rights, exposing us to claims and liability.
Our products enable users and brand customers to create and manipulate images and videos, including by using GenAI to generate avatars, apply beauty and fashion styles, edit photos, and simulate different looks. These GenAI outputs may, intentionally or unintentionally, resemble or incorporate elements of third-party copyrighted works, trademarks, designs, characters, celebrities, influencers or other recognizable persons, or may be combined with brand assets such as logos, packaging and trade dress.
In some cases, we rely on third-party foundation models or services whose training data and methods are not fully transparent to us. To the extent such models were trained on copyrighted or otherwise protected materials without appropriate authorization, or if their outputs are found to be substantially similar to protected content, copyright owners, trademark holders, right-of-publicity claimants or other third parties may allege that our use of these models in our products, or our users’ and customers’ use of the outputs, infringes their rights. Even if we obtain contractual representations, warranties or indemnities from model providers, we may still be named as a defendant in such claims, may incur significant costs in investigating and defending them, and may have to rely on the creditworthiness and willingness of those providers to honor their obligations.
In the beauty and fashion context, brand partners may also assert claims if GenAI outputs misuse their brand elements, misrepresent products, or create content they consider harmful to their brand image. We may be required to implement additional content filters, moderation tools, rights-management processes or contractual restrictions on use
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cases, which could increase our costs and limit product functionality. If we are found to infringe third-party rights, we may be required to pay damages or royalties, modify or remove features or content, discontinue certain uses of GenAI, or seek alternative models or technologies on less favorable terms, any of which could adversely affect our business, reputation and financial performance.
From time to time, we may become involved in litigation, regulatory investigations, administrative proceedings, or other legal disputes that could have a material and adverse impact on our business.
In the course of our operations, we may face lawsuits, claims, arbitration, or regulatory actions related to intellectual property, contractual disputes, consumer protection, employment matters, data privacy, regulatory compliance, or other legal issues. Defending against such actions can be time-consuming, costly, and disruptive to our business. These proceedings may divert senior management’s attention, consume significant financial and operational resources, and result in substantial legal and settlement expenses.
Even if we successfully defend against legal claims, negative publicity and reputational damage may arise during or after such proceedings, potentially eroding customer trust, investor confidence, and brand value. If an adverse judgment or settlement occurs, we may be required to pay substantial monetary damages, incur significant liabilities, modify business practices, or suspend or terminate certain operations, all of which could materially harm our financial condition, results of operations, and long-term growth prospects.
Given the evolving regulatory landscape and increasing scrutiny on businesses operating in digital services, AI, and technology sectors, the likelihood of legal challenges may increase, further exacerbating legal and compliance risks. While we actively monitor and manage our legal exposure, there is no assurance that we will not face legal actions that could significantly impact our business. As a result, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Risks Related to Our Financial Results
We have incurred operating losses in the past, and our ability to maintain profitability in the future is uncertain.
We have incurred operating losses from 2022 to 2025, and have achieved consistent net income from 2023 through 2025 and our future revenue growth and profitability depend on a variety of factors, many of which are beyond our control. Additionally, there is no guarantee that we will be able to obtain additional capital in a timely manner, or on favorable or acceptable terms, or at all.
We recorded net losses of $161.7 million in 2022, and recorded net income of $5.4 million, $5.0 million and $4.6 million, respectively, in 2023, 2024 and 2025. Even though our revenues have grown over the years, from $53.5 million in 2023, $60.2 million in 2024 to $69.2 million in 2025, our revenue growth rate has slightly slowed in recent years and may continue to slow down in the future due to a variety of factors.
We believe that our future revenue growth will depend on, among other factors, our ability to attract new consumers to download our mobile apps and subscribe for the premium features of our mobile apps and web and in acquiring new brand customers while retaining our existing brand portfolio, and launch market competitive products that effectively address the needs of brands and retailers.
Our ability to sustain profitability is also affected by market and regulatory development related to, among others, AI, mobile apps, and online marketing. In addition, our ability to maintain profitability in the future is uncertain and you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future revenue growth.
We expect our operating expenses to increase in absolute dollar in future periods as we continue to expend substantial financial resources on: (i) research and development, especially the development and optimization of Generative AI solutions, (ii) infrastructure, facilities and equipment empowering the AI development, (iii) attracting and retaining talented employees, especially top-tier AI talent, (iv) marketing and sales; (v) global expansion; and (vi) strategic opportunities, including operation of newly developed or newly acquired businesses. These investments, while increasing our expenses, may not result in an increase in revenues or growth in our business. If we are unable to achieve adequate revenue growth and to manage our expenses, we may incur significant losses in the future.
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We recognize revenue from recurring subscriptions to our products over the terms of these subscriptions. Increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern.
Due to the nature of our Company, we recognize revenue from recurring subscriptions to our products ratably over the subscription term. Consequently, a portion of the revenue we report in each period is derived from the recognition of deferred revenue relating to subscriptions and contracts entered into during previous quarters. As a result, if a possible decline in new or renewed subscriptions in any single reporting period may have a small impact on the revenue that we recognize for such quarter. However, such a decline will negatively affect our revenue in future quarters. As such, the effect of significant downturns in sales and potential changes in our pricing policies or rate of customer expansion or retention may not be fully reflected in our results of operations until future periods. In addition, our subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers or existing customers that increase their use of our products or upgrade to higher-priced products or product tiers must be recognized over the applicable subscription term. Finally, because a significant portion of our costs are expensed as incurred while revenue is recognized over the subscription term, an increase in new mobile app and web service subscribers and brand customers has historically resulted, and may continue to result, in higher upfront costs and lower recognized revenue in the early stages of new subscriptions.
Our financial results are likely to fluctuate from period to period due to seasonality and a variety of other factors, which makes our period-to-period results volatile and difficult to predict.
Our periodic financial results are likely to fluctuate in the future. As a result, you should not rely upon our past periodic financial results as indicators of future performance. You should also take into account the risks and uncertainties frequently encountered by companies in rapidly evolving markets. Our financial results in any given period can be influenced by numerous factors occurring in a particular period, many of which we are unable to predict or are outside of our control, including:
•development and introduction of new products or services by us or our competitors and the market reaction to such new products or services;
•our ability to renew our subscriptions with, and expand sales of our solutions to, our existing brand in our portfolio;
•ability of our data service providers to scale effectively and timely to provide the necessary technical infrastructure to offer our services;
•growth and diversification of our revenue sources;
•increases in marketing, sales and other operating expenses that we may incur to grow and expand our operations and to remain competitive;
•changes in budgets of brands and retailers and in the timing of their budget cycles and purchasing decisions, including cost-cutting measures;
•seasonal fluctuations in spending by brands. Historically, the fourth quarter has typically been the quarter with the largest bookings from brands and retailers, which impacts revenue, unbilled revenue, deferred revenue, accounts receivable and amortized commissions in future periods;
•system failures or breaches of security or privacy of our system;
•amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;
•impact of new accounting pronouncements;
•unforeseen contingencies, such as adverse litigation judgments, settlements or other litigation-related costs;
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•fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;
•changes in laws and regulations that affect our business; and
•changes in business or macroeconomic conditions, including the impact of inflationary pressures and increases in interest rates, and global conflicts.
Changes in market interest rates, particularly decreases in benchmark rates, could materially reduce our interest income and adversely affect our results of operations.
We hold significant cash, cash equivalents and short-term investments, and we may from time to time hold other interest-bearing financial assets. The interest income we earn on these balances is affected by market interest rates, including benchmark rates such as the federal funds rate. In recent periods, higher interest rates have contributed meaningfully to our interest income and, consequently, to our overall results of operations.
If market interest rates decline from recent levels, we would expect the yields on our cash, cash equivalents and short-term investments to decrease as we reinvest maturing instruments at lower rates. A material reduction in interest income could adversely affect our net income and cash flows, particularly if it is not offset by growth in our operating business. Our ability to mitigate this risk by investing in longer-term or higher-yielding instruments is limited by our liquidity needs and our risk management policies.
Changes in subjective assumptions, estimates and judgments by our management related to complex accounting matters or changes in the IFRS may significantly affect our financial condition and results of operations.
IFRS and related pronouncements, implementation guidelines, and interpretations apply to a wide range of matters that will be relevant to our business, including revenue recognition, financial instruments, stock-based compensation, deferred commissions and business combinations. These matters are complex and will involve subjective assumptions, estimates, and judgments by our management. Changes in IFRS, relevant accounting pronouncements or interpretation or changes in underlying assumptions, estimates, or judgments by our management, the International Accounting Standards Board, the SEC and others could significantly change our reported or expected financial performance, which could impact the market price of our securities.
Examinations by relevant tax authorities may result in material changes in reserves for tax positions taken in previously filed tax returns or may impact the valuation of certain deferred income tax assets.
Based on the outcome of examinations by relevant tax authorities, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is possible that the reserves for tax positions taken in previously filed tax returns will materially change from those recorded in our financial statements. In addition, the outcome of examinations may impact the valuation of certain deferred income tax assets (such as net operating loss carryforward) in future periods. It is not possible to estimate the impact of such changes, if any, to the reserves for uncertain tax positions.
Our costs are growing and may sometime increase faster than our revenue, which could harm our business or increase our losses.
As our business continues to grow, we expect our expenses to grow in the future. Historically, our costs have increased each year due to several factors, including growth of our brand portfolio and consumer base, an increase in the level of consumer engagement, development and implementation of new product features, enhancement of our technology infrastructure and hiring of additional personnel at a rapid pace to support potential future growth. We expect to continue to incur increasing costs due to these factors to expand our operation and remain competitive. In addition, we expect to continue to invest in our global infrastructure to expand our product offering to a more global consumer base, including in countries where we do not expect significant short-term monetization, if any. Our expenses may be greater than we anticipate, and our investments may outpace monetization efforts. Such increase in our costs without a corresponding growth in our revenue would increase our losses and could harm our business.
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Fluctuations in exchange rates, particularly between the U.S. dollar and the New Taiwan dollar, could adversely affect our operating results and financial condition.
We report our consolidated financial results in U.S. dollars, and a substantial majority of our revenue is denominated in, or effectively linked to, the U.S. dollar. By contrast, a significant portion of our costs and expenses, including personnel and operating costs at our Taiwan headquarters and certain other functions, is denominated in New Taiwan dollars (“NTD”). For the year ended December 31, 2025, expenditures in NTD represented approximately 30% of our total costs and expenses. As a result, our operating results are particularly sensitive to fluctuations in the exchange rate between the U.S. dollar and the NTD.
Movements in the NTD/U.S. dollar exchange rate have been volatile in 2025 and may continue to be volatile in the future. An appreciation of the NTD against the U.S. dollar would increase the U.S.-dollar value of our NTD-denominated costs and expenses, which could reduce our gross margins and operating margins if we are unable to increase prices, improve productivity or otherwise offset the impact. Conversely, a depreciation of the NTD against the U.S. dollar would reduce the U.S.-dollar value of our NTD-denominated costs, but could be accompanied by local wage or cost inflation over time, and would not mitigate any adverse impact of foreign exchange movements on revenues or expenses denominated in other currencies.
We also have revenues, costs, assets and liabilities denominated in other currencies in the jurisdictions where we operate, including Euros and Japanese yen. Fluctuations in exchange rates between the U.S. dollar and these currencies can affect our reported revenues, expenses, assets, liabilities and cash flows, even if our underlying local-currency results remain unchanged. We do not currently engage in material currency hedging activities and, even if we were to implement hedging strategies in the future, such strategies may not fully offset our exposure to foreign exchange risk and could involve additional costs and risks of their own.
Risks Related to Laws and Regulations
Our business is subject to complex and evolving U.S. and international laws and regulations regarding privacy, data protection and AI. These laws and regulations are subject to change and uncertain interpretation, which could result in claims, changes to our data and other business practices, regulatory investigations, monetary penalties, increased cost of operations or declines in consumer growth or engagement, and could otherwise harm our business.
Regulatory authorities and governments around the world have implemented, and are considering further legislative and regulatory proposals regarding, privacy, data protection, cybersecurity and artificial intelligence (including Generative AI). New laws and regulations governing these areas, or those imposing more stringent requirements, may be introduced in various jurisdictions, including the United States, the European Union (the “EU”), the United Kingdom, the PRC and other markets in which we conduct business or may expand. In addition, the interpretation and application of privacy, data protection and AI-related laws in such jurisdictions are often uncertain, complicated and subject to change, including differentiated requirements for different groups of people, different types of data or different AI use cases. It is possible that existing or newly introduced laws and regulations, or their interpretation, application or enforcement, could significantly affect the value of the data collected and generated by us during operation, force us to change our data and other business practices, constrain the design and deployment of our AI systems and cause us to incur significant compliance costs.
In the United States, there are various federal and state laws and regulations concerning privacy, data protection and the use of AI. Certain U.S. state privacy laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. Federal and state regulators, including the Federal Trade Commission (the “FTC”) and state attorneys general, have engaged in enforcement actions focused on biometric information and AI-enabled technologies. For example, the Biometric Information Privacy Act in Illinois (“BIPA”), the Capture or Use of Biometric Identifier Act in Texas (“CUBI”) and the My Health My Data Act in Washington (“MHMD”) restrict the collection and use of biometric identifiers and biometric information. Several class action lawsuits have been brought under BIPA’s private right of action, and BIPA has generally been broadly interpreted by the courts. Certain of our customers and we have been named parties in lawsuits that allege violations of BIPA through deploying our products and technology, including virtual try-on solutions that may be perceived as subject to these laws and regulations. In parallel, a growing number of U.S. states and local jurisdictions have adopted or are considering AI- and automated decision-making specific laws that may require impact or risk assessments, notices, opt-outs, documentation and safeguards for certain AI systems. Some state laws and legislative proposals specifically target AI-powered conversational tools, particularly when
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used by or made available to minors. For example, California has enacted legislation governing so-called “companion chatbots” that imposes obligations such as clearly disclosing that the user is interacting with an AI system, implementing protocols for responding to self-harm and suicide-related content, limiting certain sexual content for minors, providing periodic notices and usage breaks for minor users and, in some cases, creating private rights of action and reporting obligations. At the federal level, proposed legislation such as the Guidelines for User Age-verification and Responsible Dialogue Act of 2025 (the “GUARD Act”), introduced in the U.S. Senate, would, if enacted, require covered AI chatbot providers to implement robust age-verification measures, prohibit offering certain AI companions to minors, mandate clear disclosure that users are interacting with AI rather than humans and create new criminal offenses and potential civil liability for companies whose AI companions made available to minors solicit or produce sexual content or other harmful material. Although such federal legislation remains pending and may be revised or may not be enacted, similar proposals may be reintroduced or adopted at the federal or state level. If we introduce or expand AI-driven conversational or advisory features that could be characterized as AI companions or companion chatbots, these and similar laws and regulations could require us to implement additional product and safety controls, age-verification and parental-consent flows, monitoring and reporting processes and other safeguards, which could increase our costs, affect user experience and expose us to additional liability risk. The aforementioned lawsuits, any future similar legal proceedings, any future federal or state privacy or AI legislation and any government enforcement actions we may become subject to under applicable privacy, data protection or AI-related laws may cause us significant losses in addition to legal and settlement costs, and could require us to change our products, data practices and business operations, any of which could adversely affect our business, results of operations and financial condition.
Many jurisdictions have established comprehensive data privacy and cybersecurity legal frameworks with which we may need to comply. For example, the EU has adopted the General Data Protection Regulation (the “GDPR”), which requires covered businesses to comply with rules regarding the processing of personal data, including its use, protection and the ability of persons whose personal data is processed to access, correct or delete personal data about themselves. Failure to meet GDPR requirements could result in penalties of up to 4% of annual worldwide turnover from the preceding financial year or EUR 20 million (whichever is greater). Additionally, the U.K. General Data Protection Regulation (the “U.K. GDPR”) (i.e., a version of the GDPR as implemented into U.K. law) went into effect following the withdrawal of the United Kingdom from the EU. While the GDPR and the U.K. GDPR are substantially the same, there is an increasing risk of divergence in application, interpretation and enforcement of the data privacy and cybersecurity laws and regulations as between the EU and the United Kingdom, which may result in greater operational burdens, costs and compliance risks. Additionally, the GDPR and the U.K. GDPR include certain limitations and stringent obligations with respect to the transfer of personal data from the EU and the United Kingdom to third countries, and the mechanisms to comply with such obligations are in flux and may lead to greater operational burdens, costs and compliance risks.
Laws and regulations governing AI, including Generative AI, are also rapidly developing. Many jurisdictions are establishing, or considering the establishment of, AI-specific legal frameworks with which we may need to comply. For example, the EU has adopted the Artificial Intelligence Act (the “EU AI Act”), a comprehensive legal framework that seeks to regulate the design, development, importation, marketing and use of AI in the EU using a risk-based approach. AI systems deemed an unacceptable risk, such as certain AI systems that facilitate prohibited biometric categorization or social scoring, may be banned from being sold or deployed in the EU altogether, while AI systems deemed high risk may be subject to stringent regulatory obligations, such as the performance of conformity assessments and ongoing monitoring to demonstrate that the systems comply with mandated requirements. On the lower end of the risk spectrum, AI systems deemed a specific transparency risk may be subject to transparency-related requirements, such as the provision of applicable notices, and AI systems deemed a low or minimal risk may be subject to no additional legal obligations. The obligations of the EU AI Act apply to actors across the AI value chain, such as providers, importers, distributors and deployers, and providers of certain general purpose AI models with systemic risks may be subject to additional requirements. The precise classification of our AI-enabled solutions—including our virtual try-on, skin analysis and Generative AI offerings—under the EU AI Act remains uncertain and may evolve as implementing acts and guidance are issued and as regulators and courts interpret the law. If any of our solutions are deemed to be high-risk AI systems or are otherwise subject to heightened obligations, we may be required to implement additional data governance, risk-management, human oversight, documentation, testing, transparency and post-market monitoring measures, and in some cases to undergo conformity assessments, register systems in relevant databases or affix CE markings. Complying with these requirements may require substantial investments of time and resources, changes to product design and development processes and the involvement of third-party assessors or notified bodies. Failure to comply with provisions of the EU AI Act can result in administrative fines of up to €35 million or 7% of annual worldwide turnover from the preceding financial year, whichever is higher, and could also lead to orders to suspend or withdraw affected AI systems from the market, contractual disputes with customers and reputational harm. Similar AI-specific regulatory initiatives are emerging or may
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emerge in other jurisdictions, and any such frameworks could impose additional and potentially inconsistent obligations on our global operations.
The collection, processing and use of personal data in Taiwan is primarily subject to the Personal Data Protection Act (the “PDPA”) and the enforcement rules of the PDPA as well as other applicable rulings or regulations issued by the relevant competent authorities, in particular the sectoral rules on the security maintenance plans stipulated by regulators of different industries. The PDPA applies in principle to all data collection and processing activities taking place in Taiwan without regard to whether the data subjects are Taiwanese nationals or not. Pursuant to the PDPA, violating the PDPA with an intent to make unlawful profit for oneself or a third party or with an intent to damage the interest of another may lead to criminal penalties. In addition, an administrative fine may be imposed for failure to comply with the requirements under the PDPA, such as collecting or processing personal data without a statutory ground, using personal data outside of the scope of the specified purpose under which the personal data was collected, or failing to comply with restrictions on the cross-border transfer of personal data. For any failure to comply with notification requirements, marketing restrictions, information security requirements or obligations to respond to data subjects’ requests, the authority may order that correction be made by a certain deadline and impose an administrative fine if correction is not made within such deadline. Such administrative fines may range from NTD20,000 to NTD200,000 for each occurrence of a violation, with increased fines ranging from NTD150,000 to NTD15,000,000 available for certain violations of the PDPA.
The PRC regulatory and enforcement regime with regard to privacy, data security and AI is also evolving. Over the last decade, the PRC has placed great emphasis on cybersecurity administration, which is considered an essential part of national security. Various laws, regulations, measures and standards form the cybersecurity and data protection legislative framework in the PRC. Governmental authorities, including the Cyberspace Administration of China, the Ministry of Public Security and the State Administration for Market Regulation, are focusing on the enforcement of data privacy and protection laws and regulations with varying and evolving standards and interpretations. Violations of data protection laws may lead to administrative penalties, including warnings, orders for rectification, suspension or termination of related businesses issued by competent authorities, revocation of business permits or licenses, or monetary fines; civil liabilities including compensation for infringement upon legitimate rights and interests of individuals and public interest litigation by the People’s Procuratorate depending on the severity and impact of the case; and even criminal liabilities in more severe cases.
The regulatory and legal framework on AI and Generative AI services in mainland China is evolving rapidly. In recent years, PRC government authorities have released a series of laws and regulations related to AI and Generative AI services, including the Administration Provisions on Algorithmic Recommendation of Internet Information Services, the Administrative Provisions on Deep Synthesis of Internet Information Services and the Interim Measures for the Administration of Generative Artificial Intelligence Services. For certain AI services that we offer in mainland China, we are required to complete algorithm filing or registration procedures with relevant authorities and to comply with applicable requirements regarding content management, data security, transparency and user rights. While we have completed algorithm filing in July 2025, our ability to maintain and update such filing, and to respond to any future reviews, rectification orders or additional conditions, is subject to significant regulatory discretion and may require us to modify product features, data practices or technical architectures. These laws and regulations related to AI and Generative AI services are relatively new, and the competent government authorities of mainland China may introduce additional or more detailed laws and regulations, issue new standards or guidance or adjust enforcement priorities. Therefore, we may need to comply with additional or more stringent requirements in the field of AI and Generative AI, which may increase our compliance costs. We also face uncertainties with respect to such evolving laws and regulations as well as their interpretations, and our business operations and development in mainland China may be affected as a result.
As we further grow our business and expand into other markets, we will be subject to additional laws and regulations in other jurisdictions where we operate and where our brand partners and users are located. The laws, rules and regulations of other jurisdictions may be more comprehensive, detailed and nuanced in their scope, and may impose requirements and penalties that conflict with, or are more stringent than, those we encounter in our current markets. In addition, such laws, rules and regulations may restrict the transfer of data across jurisdictions, which could impose additional and substantial operational, administrative and compliance burdens on us, and may also restrict our business activities and expansion plans, as well as impede our data-driven business strategies. Complying with laws and regulations for an increasing number of jurisdictions could require significant resources and costs, including those associated with adapting our solutions, modifying our AI systems and entering into new contractual arrangements with customers and partners. Any failure, or perceived failure, by us to comply with the above and other regulatory requirements or privacy, data protection, cybersecurity or AI-related laws, rules and regulations could result in reputational damage or proceedings or actions against us by governmental entities, consumers, business partners or other parties. Such proceedings or actions
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could subject us to significant penalties and negative publicity, require us to change our data, AI and other business practices, increase our costs and severely disrupt our business or hinder our global expansion.
New and proposed laws protecting voice and likeness and addressing deceptive synthetic media may create additional liability and licensing obligations for our AI and AR offerings.
Our products transform images and, in some cases, video of users’ faces and bodies, and we are developing or may in the future offer features that generate or manipulate avatars, personas and other synthetic content. Legislators and regulators in the United States and other jurisdictions are increasingly focused on protecting individuals from unauthorized uses of their name, image, voice and likeness in AI-generated or manipulated content, as well as on preventing the misuse of “deepfakes” and other deceptive synthetic media.
Proposed federal legislation, such as so-called “NO FAKES”-type laws, and enacted or proposed state laws may create new statutory rights and remedies for individuals whose likeness or voice is used without consent in synthetic content, including statutory damages, private rights of action and enforcement by regulators. These developments could require us to implement additional consent mechanisms, disclosures, content labeling, safety filters and complaint-handling procedures, and may limit certain use cases or functionalities of our products.
If our products are alleged to have facilitated unauthorized or harmful uses of an individual’s voice or likeness, for example, where users generate images depicting real people, celebrities or influencers without permission, we may face claims under these laws, in addition to existing claims under intellectual property, privacy, consumer protection or unfair competition laws. Even if we prevail, responding to such claims could be costly and time-consuming and could require changes to our products, contractual arrangements and business practices.
If our AI skin analysis and related solutions are characterized as medical devices or software as a medical device, we could face heightened regulatory requirements that may limit features, delay launches and increase costs.
We offer AI-based skin analysis and related solutions that may be used by consumers, beauty professionals and, in some cases, med-spa operators, skincare clinics and aesthetic practices to assess skin conditions and track changes over time. Regulatory authorities in the European Union, the United States and other jurisdictions are increasingly scrutinizing software used for diagnosis, prevention, monitoring, prediction or treatment of diseases or other medical conditions, and may classify certain software as medical devices or software as a medical device (“SaMD”).
Under the European Union Medical Devices Regulation (EU) 2017/745 (“MDR”) and comparable frameworks, if any of our skin analysis or related solutions are deemed to have a medical purpose, they could be subject to requirements such as classification, conformity assessment, clinical evaluation, post-market surveillance, quality management systems and CE marking. In the United States, the U.S. Food and Drug Administration (“FDA”) regulates certain software functions as medical devices, and updated guidance may expand or clarify the scope of software and AI-enabled tools that require clearance, authorization or other regulatory oversight.
Even if we design and market our solutions for cosmetic, wellness or educational purposes, regulators may take the view that specific claims, features or usage patterns bring them within the scope of medical device regulation. In addition, our customers may use our solutions in ways that regulators consider to be medical in nature. If our products are determined to be medical devices or SaMD, we may be required to limit certain features, modify claims, conduct additional testing or clinical validation, obtain regulatory approvals, or delay new product launches. Failure to comply with applicable medical device requirements could result in warnings, fines, product recalls, orders to stop marketing or distributing affected solutions, and reputational damage, any of which could adversely affect our business and growth plans in the skin analysis segment.
Failure to comply with digital accessibility requirements under applicable laws and related standards could result in litigation, enforcement actions and remediation costs.
Our consumer-facing websites and mobile applications, as well as the virtual try-on and other experiences we provide to brand and retail customers for embedding in their own channels, must be accessible to users with disabilities in many jurisdictions. In the United States, plaintiffs and regulators have increasingly asserted that websites and mobile apps are subject to accessibility requirements under the Americans with Disabilities Act (“ADA”) and analogous state laws, often by reference to technical standards such as the Web Content Accessibility Guidelines (“WCAG”). In the European
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Union, the European Accessibility Act (“EAA”) and related national implementing legislation, together with standards such as EN 301 549, create accessibility obligations for certain digital services and products.
Although we have published an accessibility statement and have taken steps to improve the accessibility of our offerings, including monitoring and remediation efforts, there can be no assurance that our websites, apps or embedded experiences will be deemed fully compliant with all applicable standards or legal requirements at all times, particularly as these standards evolve and as we introduce new features and user interfaces. Accessibility requirements may also differ across jurisdictions and may be interpreted inconsistently by courts and regulators.
If our products or services are found to be inaccessible, or if we are the subject of claims or regulatory actions alleging non-compliance with accessibility laws, we may be required to invest in additional remediation measures, redesign certain features, or modify our development processes. We could also face monetary damages, civil penalties, settlement costs and reputational harm. Moreover, our brand and retail customers may require contractual commitments regarding accessibility, and any failure to meet such commitments could lead to disputes, indemnity claims or loss of business.
If we were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could have a material adverse effect on our business and the price of our Class A Ordinary Shares.
We believe that we are not an “investment company”, and we do not intend to become registered as an “investment company” under the Investment Company Act of 1940, as amended, or the Investment Company Act. Generally, a company is an “investment company” if it is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities or owns or proposes to own investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, unless an exception, exemption or safe harbor applies. We do not hold ourselves out as being primarily engaged, or proposing to engage primarily, in the business of investing, reinvesting or trading in securities. Rather, we are primarily engaged in the business of offering certain consumer mobile apps to end users and providing online cloud-based SaaS solutions to clients in the beauty and fashion industry. As of December 31, 2025, we believe that we do not hold any investment securities. We intend to continue to conduct our operations so that we will not be deemed an investment company.
If, at any time, we become or are determined to be primarily engaged in the business of investing, reinvesting or trading in investment securities, we could become subject to regulation under the Investment Company Act. If we were to become subject to the Investment Company Act, any violation of the Investment Company Act could subject us to material adverse consequences, including potentially significant regulatory penalties and the possibility that certain of our contracts would be deemed unenforceable. Additionally, as a foreign private issuer, we would not be eligible to register under the Investment Company Act. Accordingly, we would either have to obtain exemptive relief from the SEC, modify our contractual rights or dispose of investments in order to fall outside the definition of an investment company, each of which may have a material adverse effect on us. Furthermore, we may have to forego potential future acquisitions of interests in companies that may be deemed to be investment securities within the meaning of the Investment Company Act. Failure to avoid being deemed an investment company under the Investment Company Act could also make us unable to comply with our reporting obligations as a public company in the United States and lead to our being delisted from New York Stock Exchange, which would have a material adverse effect on the liquidity and value of our Class A Ordinary Shares. We would also be unable to raise capital through the sale of securities in the United States or to conduct business in the United States. In addition, we may be subject to SEC enforcement actions or civil litigation for alleged violations of U.S. securities laws. Defending ourselves against any such enforcement action or lawsuits would require significant attention from our management and divert resources from our existing businesses and could have a material adverse effect on our results of operations and financial condition.
Any amendments to existing tax regulations or the implementation of any new tax laws in Taiwan, the United States or other jurisdictions in which we operate our business may have an adverse effect on our business and profitability.
While we are subject to tax laws and regulations in various jurisdictions in which we operate or conduct business, our principal operations are in Taiwan, and we are exposed primarily to taxes levied by the Taiwan government. Any unfavorable changes of tax laws and regulations in this jurisdiction could increase our effective tax rate and have an adverse effect on our operating results.
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Foreign government initiatives to restrict or ban access to our products in their countries could seriously harm our business.
Foreign governments may censor or restrict access to our YouCam apps in their countries, require data localization, or impose other laws or regulations that would be difficult or even impossible for us to comply with, or would require us to rebuild our products or the infrastructure for our products. For example, our YouCam Makeup App has been banned in India since June 2020. The Indian authorities rejected our several appeals on the basis that YouCam Makeup App caused certain national security concerns under Section 69A of the Information Technology Act, 2000 of India, but they did not provide any detailed explanation for this ban or the subsequent rejections of our appeals. Any restriction on access to YouCam apps due to foreign government actions or initiatives, or any withdrawal by us from certain countries because of such actions or initiatives, would adversely affect our active subscribers, including by giving our competitors an opportunity to penetrate geographic markets that we cannot access. As a result, our consumer growth, retention, and engagement may be seriously harmed, and we may not be able to maintain or grow our revenue as anticipated and our business could be seriously harmed.
Many of our customers deploy our solutions globally and we could be held liable in some jurisdictions in which we operate for content posted by our consumers, which could expose us to damages or other legal liability.
Our platform allows our consumers to post content globally. Although relevant laws and regulations such as Section 230 of the Communications Decency Act of the United States provide immunity, subject to certain conditions, to certain online platforms from claims related to third-party content, the law relating to the liability of online service providers for others’ activities on their services may change and our current protections from liability for third-party content in the United States could decrease or change as a result. Claims may be brought against us for defamation, negligence, breach of contract, copyright and trademark infringement, unfair competition, unlawful activity, torts, fraud, or other legal theories based on the nature and content of information available on or via our platform.
We may be subject to claims by virtue of our involvement in hosting, transmitting or providing access to content created by third parties. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, or may require us to change our business in an adverse manner. If the content displayed on our platform is found to be illegal under applicable local law, we may be exposed to fines, civil penalties or consent decrees for such violations of law, which could adversely affect our revenue, reputation and results of operations.
We may be subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we violate the controls.
Since 2018, there have been political and trade tensions among a number of the world’s major economies. These tensions have resulted in the implementation of tariff and non-tariff trade barriers and sanctions, including the use of export control restrictions and sanctions against certain countries and individual companies. Any increase in the use of export control restrictions and sanctions to target certain countries and entities or any expansion of the extraterritorial jurisdiction of export control laws in relation to AI products could impact our ability to compete globally. In addition, measures adopted by an affected country to counteract impacts of another country’s actions or regulations could lead to significant legal liability to multinational corporations, including our own. For example, due to the military conflicts between Russia and Ukraine, several major economies, including the United States, the United Kingdom and the European Union imposed economic sanctions against Russia and certain Russian persons and entities. In addition, there have been sustained tension between the United States and the PRC over trade policies including tariffs and barriers on imports and exports and government incentives to onshore and/or nearshore production and supply chains to favored jurisdictions. Our current results of operations have not been materially affected by the expanded export control regulations or the novel rules or measures adopted to counteract them. Nevertheless, depending on future developments of global trade tensions, such regulations, rules, or measures may have an adverse impact on our business and operations, and we may incur significant legal liability and financial losses as a result.
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Risks Related to Doing Business in the Jurisdictions Where We Operate
Any lack of requisite approvals, licenses, permits or filings or failure to comply with any requirements of Taiwan laws, regulations and policies may materially and adversely affect our daily operations.
In accordance with the relevant Taiwan laws and regulations, our Taiwan subsidiary is required to maintain various approvals, licenses, permits and filings to operate its business. Whether such approvals, licenses, permits and filings are obtained is subject to satisfactory compliance with, among other things, the applicable laws and regulations. If our Taiwan subsidiary is unable to obtain any of such licenses and permits or extend or renew any of its current licenses or permits upon their expirations, or if it is required to incur significant additional costs to obtain or renew these licenses, permits and approvals, our daily operations could be materially and adversely affected.
Cross-Straits relationship imposes macroeconomic risks which could negatively affect our business.
We maintain our principal executive offices and a substantial amount of our assets in Taiwan, and most of our technical and product development expertise is derived from operations in Taiwan. Our business, financial condition and results of operations may be affected by potential economical and/or military issues in Taiwan.
Taiwan has a unique international political status due to historical reasons. Although significant economic and cultural relations have been established during recent years between Taiwan and the PRC, the PRC government has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. Sanctions against Taiwan entities or persons, and military blockage or actions from the PRC, may significantly harm Taiwan’s economy. Cross-Straits relations between Taiwan and the PRC have been strained in recent years for a variety of reasons, including tensions concerning arms sales to Taiwan by the United States government and visits to Taiwan by United States government officials. The financial markets have viewed certain past developments in relations between Taiwan and the PRC as occasions to depress general market prices of the securities of Taiwan companies. Any tension between Taiwan and the PRC, or between the United States and the PRC, could materially and adversely affect our business, financial condition and results of operations.
Our Taiwan subsidiary is subject to certain restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy the liquidity requirements.
As an exempted company with limited liability incorporated under the laws of the Cayman Islands structured as a holding company, we may need dividends and other distributions on equity from our Taiwan subsidiary to satisfy our liquidity requirements. Current Taiwan regulations permit our Taiwan subsidiary to pay dividends to its respective shareholders only out of its accumulated profits, if any, which shall first make up previous losses and set aside at least 10% of its accumulated profits each year. These reserves are not distributable as cash dividends. Furthermore, if our Taiwan subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the ability of our Taiwan subsidiary to distribute dividends or to make payments to us may restrict our ability to satisfy our liquidity requirements. In addition, the dividend payments by our Taiwan subsidiary to us shall be subject to a withholding tax of 21%.
Our Taiwan subsidiary is subject to foreign exchange control imposed by Taiwan authorities, which may affect paying dividends, repatriating the interest or making other payments to us.
Currently Taiwan regulates only those foreign exchange transactions that involve currency conversion from New Taiwan Dollar to foreign currency or from foreign currency to New Taiwan Dollar (collectively, “Regulated Transactions”). In general, Regulated Transactions involving NTD 500,000 or more shall be declared to the Central Bank of Taiwan. Further, for Regulated Transactions involving New Taiwan Dollar equivalent to over USD 1 million, relevant documents shall be verified by banks before such transactions can be processed. In addition, if annual accumulated settlement amount of Regulated Transactions exceeds USD 50 million, such foreign exchange settlement is subject to the approval of the Central Bank of Taiwan. The Taiwan government may impose further foreign exchange restrictions in certain emergency situations, where the Taiwan government experiences extreme difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in Taiwan. If the dividend payments or other payments by our Taiwan subsidiary to us involves the currency conversion from New Taiwan Dollar to United States Dollar, such conversion would be subject to the foregoing foreign exchange control. See “Item 4. Information on the Company — B. Business Overview — Regulation — Exchange Controls in Taiwan” for additional details.
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We may be required to obtain approvals from Taiwan authority for investment in our Taiwan subsidiary if the shareholding of Perfect reaches the threshold for such approval.
Under current Taiwan laws, regulations and policy, Perfect, the sole shareholder of our Taiwan subsidiary, will be required to obtain an approval from the Department of Investment Review, Ministry of Economic Affairs of Taiwan for its investment in its Taiwanese subsidiary if more than 30% of its capital is directly or indirectly owned by, or beneficially owned by any PRC person or it is under control by any PRC person.
As of the date of this annual report, we are not aware of any PRC person who has triggered or would trigger the requirement for such approval. If such approval is needed in the future, failure to obtain it may subject us to relevant Taiwan authority’s monetary penalty of from NTD120,000 to NTD25,000,000, and we may be ordered to rectify within a specific timeline; if Perfect still fails to apply for such approval after receiving the rectification order, the Taiwan authority may order Perfect to withdraw its investment and suspend its operation in Taiwan.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference, but have limited precedential value. The uncertainty mainly lies in two prongs. On one hand, interpretation of the laws such as the Personal Information Protection Law (“PIPL”) can be debatable, supplemental regulations are partially lacking, and the laws are issued and amended by authorities in a relatively fast fashion. On the other hand, there exist multiple authorities governing cybersecurity and data protection law enforcement simultaneously, and their focus and frequency of enforcement activities may differ, which adds up to the uncertainty. Generally speaking, both legislation and enforcement activities fairly reflect a tightening regulatory trend.
Our mobile apps are available for downloading and use in China. We have one operating subsidiary located in the PRC, and our business operations in the PRC are required to obtain and maintain applicable licenses and approvals from different regulatory authorities in order to provide its current services. Under the current PRC regulatory scheme, a number of regulatory agencies and local governments jointly regulate all major aspects of the Internet industry and AI- and AR- industries. Operators in these industries must obtain various government approvals and licenses for relevant businesses. While we believe that our PRC subsidiary has obtained and maintained all applicable licenses and approvals from the applicable regulatory authorities to provide its current services, we cannot assure you that it will not be found in violation of any law and regulations currently in effect, due to the relevant authorities’ implementation or interpretation of these laws and regulations, or any future laws and regulations. If we fail to complete, obtain or maintain any of the required licenses or approvals or make the necessary filings, or otherwise fail to comply with such laws and regulations, we may be subject to various penalties, such as the imposition of fines and the discontinuation or restriction of its operations in the PRC. Any such penalties, proceedings or actions may disrupt our business operations and materially and adversely affect our reputation, business, financial condition and results of operations and our ability to offer or continue to offer securities to investors, any of which may cause the value of our securities to significantly decline or, in extreme cases, become worthless. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
In addition, the cybersecurity review may be initiated by competent authorities where risks to national security are found, such as risks of Core Data, Important Data (both of which are defined in the Cybersecurity Review measures) and the large scale of personal information being stolen, leaked, damaged, illegally utilized, transferred outside the territory of PRC. The cybersecurity review could last from thirty (30) business days to over six (6) months if such review is initiated, and if we fail the cybersecurity review, our data processing activities in China may be ordered for termination. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have an adverse impact on our business operations. We may not be aware of any violation of these policies and rules until after such violation has occurred, which may result in substantial costs and diversion of resources and management attention. Such unpredictability, including uncertainty as to the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.
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Changes and developments in the political and economic policies of the PRC government or the prolonged economic downturn of Chinese economy may materially and adversely affect our business, financial conditions and operating results.
We have operating subsidiaries located in various jurisdictions, including one operating subsidiary located in the PRC. Accordingly, our financial condition and results of operations are affected by economic, political and legal developments in the PRC.
The PRC economy differs from the economies of most developed countries in many respects, including the level of development, growth rate, extent of government involvement, control of foreign exchange and allocation of resources. For example, the PRC government regulates industry development by imposing industrial policies. The PRC government also plays a significant role in China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies. Our financial condition and results of operations could be materially and adversely affected by government control over foreign investments or foreign exchange that are applicable to us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases, to manage the pace of economic growth and prevent the economy from overheating.
The prolonged slowdown in the Chinese economy could lead to reduced consumer confidence and lower discretionary consumer spending, which may result in decreased demand for our products, lower product prices, and negative effects on our business and results of operations. In particular, our luxury brand customers are highly vulnerable to macroeconomic fluctuations, given the sensitivity of the luxury goods industry to such conditions. A sustained economic downturn in China market may materially impact the financial condition and revenue growth of luxury brands and consequently, they may elect to allocate smaller budget or reduce their demands for our products and services. Our mobile app or web service users, facing financial pressures due to the economic downturn, may also choose to cancel or refrain from subscribing for the premium features of our apps or web services. As a result, our business, financial condition and results of operations could be adversely impacted by the above factors.
If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment applicable to our businesses in the PRC, or if we are required to take actions that are time-consuming or costly, our business, financial condition and results of operations may be materially and adversely affected.
The Internet industry is highly regulated in the PRC. Our business operations in the PRC are required to obtain and maintain applicable licenses and approvals from different regulatory authorities in order to provide our current services. Under the current PRC regulatory scheme, a number of regulatory agencies, including but not limited to the Ministry of Culture, which were consolidated with the National Tourism Administration and have been reformed and become the Ministry of Culture and Tourism, Ministry of Industry and Information Technology, the State Council Information Office, the Cyberspace Administration of China, the Central Cyberspace Affairs Commission, the National Development and Reform Commission, the Ministry of Public Security, the Ministry of State Security, the Ministry of Commerce, the State Administration for Market Regulation, and the National Radio and Television Administration, and local government, jointly regulate all major aspects of the Internet industry and AI- and AR-industries. Operators must obtain various government approvals and licenses for relevant businesses.
Considerable uncertainties exist regarding the interpretation and implementation of existing and future laws and regulations governing our current business activities, including in the PRC, and new industries or businesses we may expand into. While we believe that our PRC subsidiary has obtained and maintained all applicable licenses and approvals from the applicable regulatory authorities to provide its current services, we cannot assure you that we will not be found in violation of any law and regulations currently in effect, due to the relevant authorities’ implementation or interpretation of these laws and regulations, or any future laws and regulations. If we fail to complete, obtain or maintain any of the required licenses or approvals or make the necessary filings such as algorithm filings with Cyberspace Administration of China, or otherwise fails to comply with the laws and regulations, we may be subject to various penalties, such as the imposition of fines and the discontinuation or restriction of our operations, as well as proceedings and actions. Any such penalties, proceedings or actions may disrupt our business operations and materially and adversely affect our reputation, business, financial condition and results of operations.
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Risks Related to the Class A Ordinary Shares and Warrants
The price of Class A Ordinary Shares may be volatile, and the value of Class A Ordinary Shares may decline.
We cannot predict the prices at which Class A Ordinary Shares will trade. The price of Class A Ordinary Shares may not bear any relation to any established criteria of the value of our business and prospects. In addition, the trading price of Class A Ordinary Shares is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in Class A Ordinary Shares as you might be unable to sell your shares at or above the price you paid. Factors that could cause fluctuations in the trading price of Class A Ordinary Shares include the following:
•actual or anticipated fluctuations in our financial condition or results of operations;
•variance in our financial performance from expectations of securities analysts;
•changes in the pricing of our solutions;
•changes in laws or regulations applicable to our platform;
•announcements by us or our competitors of significant business developments, acquisitions or new offerings;
•significant data breaches, disruptions to or other incidents involving our platform;
•our involvement in litigation;
•conditions or developments affecting the SaaS industry;
•future sales of Class A Ordinary Shares by us or our shareholders;
•changes in senior management or key personnel;
•the trading volume of our securities;
•changes in the anticipated future size and growth rate of our markets;
•publication of research reports or news stories about us, our competitors or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
•general economic and market conditions; and
•other events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events.
Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may also negatively impact the market price of our Ordinary Shares. In addition, technology stocks have historically experienced high levels of volatility. In the past, companies who have experienced volatility in the market price of their securities may have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention.
Sales of a substantial number of our securities in the public market by our existing securityholders could cause the price of our Class A Ordinary Shares and Warrants to fall.
Sales of a substantial number of Class A Ordinary Shares and/or Warrants in the public market by the existing securityholders, or the perception that those sales might occur, could depress the market price of our Class A Ordinary Shares and Warrants and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our Class A Ordinary Shares and Warrants.
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Class A Ordinary Shares held by certain of our shareholders are eligible for resale, subject to, in the case of certain shareholders, volume, manner of sale and other limitations under Rule 144. In addition, pursuant to the New Registration Rights Agreement, certain shareholders have the right, subject to certain conditions, to require us to register the sale of their securities under the Securities Act. By exercising their registration rights and selling a large number of our Class A Ordinary Shares, these shareholders could cause the prevailing market price of our Class A Ordinary Shares to decline. On October 18, 2023, the SEC declared effective a registration statement on Form F-3, under which the selling securityholders identified therein or their permitted transferees may offer and sell, from time to time, up to 38,542,254 Class A Ordinary Shares, 9,350,000 Warrants and 9,350,000 Class A Ordinary Shares underlying such Warrants. These factors could also make it more difficult for us to raise additional funds through future offerings of our Class A Ordinary Shares or other securities.
If we do not meet the expectations of equity research analysts, if they do not publish research or reports about our business or if they issue unfavorable commentary or downgrade Class A Ordinary Shares, the price of Class A Ordinary Shares could decline.
The trading market for Class A Ordinary Shares will rely in part on the research and reports that equity research analysts publish about us and our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If our results of operations are below the estimates or expectations of public market analysts and investors, the price of Class A Ordinary Shares could decline. Moreover, the price of Class A Ordinary Shares could decline if one or more securities analysts downgrade Class A Ordinary Shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
Our issuance of additional share capital in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other shareholders.
We expect to issue additional share capital in the future that will result in dilution to all other shareholders. We adopted the Share Incentive Plan, which has reserved for the issuance of 5,311,310 Ordinary Shares, for the purpose of granting share-based compensation awards to our directors, officers, employees and advisors to incentivize their performance and align their interests with ours. We also adopted a Director Equity Incentive Plan for the purpose of granting Awards (as defined below) to the directors selected by the administrator. The maximum aggregate number of the Class A Ordinary Shares that may be subject to Awards (as defined below) under the Director Equity Incentive Plan is 1,000,000 Class A Ordinary Shares. A maximum of 20,849,975 Class A Ordinary Shares would be issuable upon the exercise of 20,849,975 outstanding Warrants. We have also agreed to issue a maximum of 10,000,000 Shareholder Earnout Shares and 1,175,624 Sponsor Earnout Promote Shares if relevant price targets are triggered. In addition, we may raise capital through equity financing in the future. As part of our business strategy, we may make or receive investments in companies, solutions or technologies and issue equity securities to pay for any such acquisitions or investments. Any such issuances of additional share capital may cause shareholders to experience significant dilution of their ownership interests and a decline in the per share value of Class A Ordinary Shares.
The dual-class structure of our Ordinary Shares has the effect of concentrating voting control with our CEO; this will limit or preclude your ability to influence corporate matters and could discourage others from pursuing change of control transactions that our shareholders may view as beneficial.
As of the date of this annual report, Alice H. Chang, our founder and CEO, is able to exercise voting rights with respect to 66.6% of the voting power of our outstanding Ordinary Shares through her direct and indirect holding of 597,256 Class A Ordinary Shares and 16,788,718 Class B Ordinary Shares. Therefore, she is able to control the outcome of matters submitted to our shareholders for approval, including the election of directors and any decisions related to merger, consolidation, or the sale of all or substantially all of our assets. Such control may be further concentrated given that (i) Alice H. Chang has been granted and could be further granted options under the Share Incentive Plan, and upon the vesting and exercise of these options under the Share Incentive Plan, she will be issued with Class B Ordinary Shares; and (ii) Alice H. Chang could be granted Awards (as defined below) under the Director Equity Incentive Plan, and upon the vesting of these Awards (as defined below), she will be issued with Class A Ordinary Shares. See “Item 6. Directors, Senior Management and Employees — B. Compensation — Share Incentive Plan and — Director Equity Incentive Plan” for further details.
This concentrated control may discourage, delay or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that other shareholders support, or conversely, this concentrated control may result in the consummation of such a transaction that our other shareholders do not support. Moreover, the concentration of voting
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power could deter potential investors from acquiring Class A Ordinary Shares, which carry one vote per share, compared to Class B Ordinary Shares, which carry ten votes per share, potentially affecting the trading price of Class A Ordinary Shares.
In addition, as our CEO, Ms. Chang has control over the day-to-day management and major strategic investments of our Company, subject to authorization and oversight by our Board. Upon her death, the Ordinary Shares that Ms. Chang owns will be transferred to the persons or entities that she has designated. As a Board member and officer, Ms. Chang owes a fiduciary duty to our shareholders and must act in good faith in a manner she reasonably believes to be in the best interests of our shareholders. As a shareholder, despite being a controlling shareholder, Ms. Chang is entitled to vote her Ordinary Shares in her own interests, which may not always align the interests of our shareholders generally.
Our dual-class structure may render Class A Ordinary Shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of Class A Ordinary Shares.
We cannot predict whether our dual-class structure will result in a lower or more volatile market price of Class A Ordinary Shares, negative publicity or other adverse consequences. Certain index providers have announced and implemented restrictions on including companies with multiple-class share structures in certain of their indices. For example, in July 2017, FTSE Russell announced that it would require new constituents of its indices to have more than 5% of the company’s voting rights in the hands of public shareholders, and S&P Dow Jones announced in the same month that it would no longer admit companies with multiple-class share structures to certain of its indices. Affected indices include the Russell 2000, S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together constitute the S&P Composite 1500.
Under the announced policies, our dual-class structure may render our Class A Ordinary Shares ineligible for inclusion in any of these indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices may not be investing in Class A Ordinary Shares. Therefore, the market price and liquidity of our Class A Ordinary Shares could be materially adversely affected.
We are a “controlled company” within the meaning of the rules of the NYSE and, as a result, can rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.
We are a “controlled company” as defined under the rules of the NYSE since Alice H. Chang, our founder and CEO, beneficially owns more than 50% of our total voting power. For so long as we remain a “controlled company” under this definition, we are permitted to elect to rely, and currently we intend to rely, on certain exemptions from corporate governance rules, including the exemption from the rule that a majority of our Board must be independent directors. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
We currently do not have a fixed dividend policy and, as a result, your ability to achieve a return on your investment may depend on appreciation in the price of our ordinary shares.
We currently do not have a fixed dividend policy. The amount, timing, and whether or not we actually declare or distribute dividends at all is at the discretion of our board of directors and will depend on a variety of factors, including, among others, our general financial condition, results of operations, capital requirements and surplus, contractual restrictions and other factors that our board of directors may deem relevant. We may formulate and adopt a formal dividend policy governing our dividend distribution in the future. Accordingly, you may need to rely on sales of Class A Ordinary Shares after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make Class A Ordinary Shares less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
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We will remain an emerging growth company until the earliest of: (1) the last day of the fiscal year (a) following the fifth anniversary of October 28, 2022, the date on which our Class A Ordinary Shares were offered in connection with the Business Combination, (b) in which we have total annual gross revenues of at least $1.235 billion, or (c) in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A Ordinary Shares that are held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; or (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
We cannot predict if investors will find our ordinary shares less attractive if we choose to rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares, and our share price may be more volatile.
We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
•the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
•the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
•the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant event.
In addition, foreign private issuers are not required to file their annual report on Form 20-F until the end of the fourth month after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2026. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or if we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the NYSE. As a U.S.-listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
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As we are a “foreign private issuer” and intend to follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all NYSE corporate governance requirements.
As a foreign private issuer, we have the option to follow certain home country practices, those of the Cayman Islands, for certain governance matters which may differ significantly from corporate governance listing standards for U.S. domestic issuers. Among other things, we are not required to have: (i) a majority of the board of directors consisting of independent directors; (ii) a compensation committee; (iii) a nominating committee; or (iv) regularly scheduled executive sessions with only independent directors each year. We intend to rely on the exemptions listed above. We may in the future elect to follow home country practices with regard to other matters. As a result, you may not be provided with the benefits of certain corporate governance requirements of the NYSE applicable to U.S. domestic public companies. See “Item 6. Directors, Senior Management and Employees.”
We have incurred and may continue to incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer qualified as an “emerging growth company”. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel may not be experienced in managing a public company and may be required to devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations may increase our legal and financial compliance costs and may make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company, especially when we are no longer qualified as an “emerging growth company” or the specific timing of such costs.
We have identified a material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with the applicable accounting standards, which for us, is IFRS. As a public company in the United States, we have been required, pursuant to Section 404, to furnish a report by management, among other things, on the effectiveness of our internal control over financial reporting beginning with our annual report for the fiscal year ended December 31, 2023. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company”.
In connection with the preparation of our financial statements for the fiscal year ended December 31, 2025, our management continued to identify material weakness related to lack of controls and documentation required under Section 404. In 2025, there continues to be an absence of controls and documentation pertaining to risk assessment, process narratives, and descriptions of key controls that we rely upon to establish and maintain an effective internal control over financial reporting. Therefore, our management has determined that this material weakness remains as of December 31, 2025. In 2025, our management prioritized the remediation of this material weakness by enhancing the design and documentation of internal controls, including risk assessment processes, process narratives, and descriptions of key controls. As part of these remediation efforts, our management conducted a comprehensive review of the Company’s internal control framework in accordance with the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Criteria”), including interviews with relevant departments. Risks and controls were identified across entity-level controls, information technology general controls, and significant business process cycles. Draft risk and control matrices, process narratives and flowcharts were developed to formalize the design and documentation of these controls. During this process, our management, together with its external consultants, determined that certain remediation activities require additional time and resources to complete, including controls that are currently being implemented or that require a sufficient period of operation before management can conclude on their operating effectiveness. The status of these remediation efforts is regularly reported to, and overseen by, the Audit Committee of our board of directors.
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We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. We cannot assure you that all of our existing material weaknesses have been identified, or that we will not in the future identify additional material weaknesses. If we fail to maintain the adequacy of our internal control over financial reporting in accordance with the COSO Criteria, as may be modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404.
Our management has concluded and may continue to conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a qualified report if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our remediation efforts may not enable us to avoid material weaknesses in our internal control over financial reporting in the future. In addition, as a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. As a result, we anticipate investing significant resources to enhance and maintain our financial controls, reporting system and procedures over the coming years.
If we fail to achieve and maintain an effective internal control environment, we may not be able to prepare and disclose, in a timely manner, our financial statements and other required disclosures, or comply with existing or new reporting requirements. Any failure to report our financial results on an accurate and timely basis could result in material misstatements in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our businesses, financial condition, results of operations and prospects, as well as the trading price of our issued securities, including our Ordinary Shares and Warrants, may be materially and adversely affected. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.
We are a holding company with no operations of our own and, as such, we depend on our subsidiaries for cash to fund our operations and expenses, including future dividend payments, if any.
As a holding company, our principal source of cash flow will be distributions or payments from our operating subsidiaries. Therefore, our ability to fund and conduct our business, service our debt and pay dividends, if any, in the future will depend on the ability of our subsidiaries to make upstream cash distributions or payments to us, which may be impacted, for example, by their ability to generate sufficient cash flow or limitations on the ability to repatriate funds whether as a result of currency liquidity restrictions, monetary or exchange controls or otherwise. Our operating subsidiaries are separate legal entities, and although they are directly or indirectly wholly owned and controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends or otherwise. To the extent the ability of any of our subsidiaries to distribute dividends or other payments to us is limited in any way, our ability to fund and conduct our business, service our debt and pay dividends, if any, could be harmed.
We believe that we were a “passive foreign investment company” for U.S. federal income tax purposes in fiscal year 2025.
We believe that we were a “passive foreign investment company,” or a PFIC, for U.S. federal income tax purposes in fiscal year 2025 and we may be a PFIC in fiscal year 2026 and future years. However, the determination of whether we are a PFIC is a factual determination that is made annually and thus may be subject to change. Assuming that we are a PFIC, U.S. holders of the Class A Ordinary Shares (and possibly U.S. holders of the Warrants) will be subject to special tax rules that could cause U.S. holders to be subject to adverse U.S. federal income tax consequences. See “Taxation—United States Federal Income Tax Considerations.” We do not intend to provide investors with any information to assist them in determining whether we are a PFIC. In addition, the information we are required to disclose by applicable securities laws may not be sufficient to determine whether we are a PFIC. We also do not intend to provide U.S. holders of the Class A Ordinary Shares with the information that is required to make an election to have us treated as a “qualified electing fund” for U.S. federal income tax purposes.
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We may issue additional Class A Ordinary Shares upon the exercise of outstanding Warrants, which may increase the number of shares eligible for future resale in the public market and result in dilution to our shareholders.
Our Warrants are exercisable since November 27, 2022, and expiring at 5:00 p.m., New York City time, on October 28, 2027 or earlier upon redemption or liquidation. To the extent the Warrants are exercised, additional Class A Ordinary Shares will be issued, which will result in the dilution to our shareholders and increase the number of Class A Ordinary Shares eligible for resale in the public market. The sale of a substantial number of such shares in the public market or the potential exercise of the Warrants, could adversely affect the market price of Class A Ordinary Shares.
The Warrants may never be in the money, and may expire worthless.
The exercise price of the Warrants is $11.50 per share. The likelihood that Warrant holders elect to exercise the Warrants, and consequently, the amount of cash proceeds that we would receive, is dependent upon the trading price of our Class A Ordinary Shares. If the trading price of our Class A Ordinary Shares falls below $11.50 per share, we believe Warrants holders will be unlikely to exercise their Warrants. There is no guarantee that the Warrants will be in the money prior to their expiration of no later than October 28, 2027, and as such, the Warrants may expire worthless, and we may receive no proceeds from the exercise of the Warrants.
We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
Pursuant to the terms of Warrant Agreement, as amended by the Assignment, Assumption and Amendment Agreement, we will have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of Class A Ordinary Shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading-day period ending on the third trading day prior to the date we issue notice of redemption. If and when the Warrants become redeemable by us, we may exercise the redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable federal and state securities laws.
Redemption of the outstanding Warrants could force holders to (i) exercise the Warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the Warrants at the then-current market price when the holder might otherwise wish to retain such warrants or (iii) accept the nominal redemption price, which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of such warrants. Additionally, if a significant number of Warrant holders exercise their Warrants instead of accepting the nominal redemption price, the issuance of these shares would dilute other equity holders, which could reduce the market price of Class A Ordinary Shares. The trading price of the Class A Ordinary Share may also fluctuate due to general economic conditions and forecasts, our general business condition, and the release of our financial reports.
In addition, we may redeem Warrants after they become exercisable for cash at a price of $0.10 per warrant or for a number of Class A Ordinary Shares determined based on the redemption date and the fair market value of Class A Ordinary Shares, starting at a trading price of $10.00. Since commencement of trading on October 31, 2022, the price of our Class A Ordinary Shares closed above $10.00 on certain days; however, the track record is not indicative of any future price of our Class A Ordinary Shares.
Any such redemption may have similar consequences to a redemption described above. In addition, such redemption may occur at a time when the Warrants are “out-of-the-money,” in which case holders of Warrants would lose any potential embedded value from a subsequent increase in the value of the Class A Ordinary Shares had such holders’ Warrants remained outstanding.
The warrant agreement relating to the Warrants provided that we agreed that any action, proceeding or claim against us arising out of or relating in any way to such agreement would be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and that we irrevocably submitted to such jurisdiction, which would be the exclusive forum for any such action, proceeding or claim. This exclusive forum provision could limit the ability of holders of the Warrants to obtain what they believe to be a favorable judicial forum for disputes related to such agreement.
In connection with the Business Combination, we entered into an Assignment, Assumption and Amendment Agreement on October 28, 2022, pursuant to which Provident assigned to us all of its rights, title, interests, and liabilities
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and obligations in and under the Warrant Agreement, dated as of January 7, 2021, by and between Provident and Continental. The Warrant Agreement, as amended by the Assignment, Assumption and Amendment Agreement, provided that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, would be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submitted to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We would waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Notwithstanding the foregoing, these provisions of the Warrant Agreement, as amended by the Assignment, Assumption and Amendment Agreement, will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in any of the Warrants shall be deemed to have notice of and to have consented to the forum provisions in our Warrant Agreement. If any action, the subject matter of which is within the scope of the forum provisions of the Warrant Agreement, as amended by the Assignment, Assumption and Amendment Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of the Warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the Warrant Agreement, as amended by the Assignment, Assumption and Amendment Agreement, inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and Board.
Forum selection provisions in our Articles could limit the ability of holders of Class A Ordinary Shares or other securities to obtain a favorable judicial forum for disputes with us, our directors and officers and potentially others.
Our Articles provide that, unless we consent in writing to the selection of an alternative forum, the United States District Court for the Southern District of New York shall be the exclusive forum (or, if such court lacks subject matter jurisdiction over a particular dispute, the state courts in New York County, New York) for the resolution of any complaint asserting a cause of action arising out of or relating in any way to the Securities Act or the Exchange Act, as amended, regardless of whether such legal suit, action, or proceeding also involves parties other than us. However, the enforceability of similar federal court choice of forum provisions has been challenged in legal proceedings in the United States, and it is possible that a court could find this type of provision to be inapplicable, unenforceable, or inconsistent with other documents that are relevant to the filing of such lawsuits. If a court were to find the federal choice of forum provision contained in our Articles to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. If upheld, the forum selection clause in our Articles may limit a securityholder’s ability to bring a claim against us, our directors and officers and potentially others in his or her preferred judicial forum, and this limitation may discourage such lawsuits. In addition, the Securities Act provides that both federal and state courts have jurisdiction over suits brought to enforce any duty or liability under the Securities Act or the rules and regulations thereunder. Accepting or consenting to this forum selection provision does not constitute a waiver by you of compliance with federal securities laws and the rules and regulations thereunder. You may not waive compliance with federal securities laws and the rules and regulations thereunder. The exclusive forum provision in our Articles will not operate so as to deprive the courts of the Cayman Islands from having jurisdiction over matters relating to our internal affairs.
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If we do not maintain a current and effective prospectus relating to the Class A Ordinary Shares issuable upon exercise of the Perfect Public Warrants, you will only be able to exercise such Warrants on a “cashless basis”.
If we do not maintain a current and effective prospectus relating to the Class A Ordinary Shares issuable upon exercise of the Perfect Public Warrants, at the time that holders wish to exercise such Perfect Public Warrants, they will only be able to exercise them on a “cashless basis”. As a result, the number of Class A Ordinary Shares that holders will receive upon exercise of the Perfect Public Warrants will be fewer than it would have been had such holders exercised their Warrants for cash. Under the terms of the Warrant Agreement, as amended by the Assignment, Assumption and Amendment Agreement, we will agree to use our commercially reasonable efforts to maintain a current and effective prospectus relating to the Class A Ordinary Shares issuable upon exercise of the Warrants until the expiration of the Warrants. However, we cannot assure you that we will be able to do so.
General Risks
A severe or prolonged global economic downturn or unfavorable industry conditions could materially and adversely impact our business and operating results.
Given our international operations, we are highly sensitive to global economic trends. In 2025, persistent inflation, interest rate fluctuations, geopolitical instability, sustained military conflicts, and broader economic uncertainties have contributed to heightened volatility in international markets. A prolonged economic slowdown could weaken consumer spending power, reducing demand for our products and subscriptions to the premium features of our mobile apps. As a result, our revenue may be disproportionately affected by delayed or reduced AI- and AR-related technology spending by both brands and users.
We cannot accurately predict the timing, severity, or duration of any economic downturn, instability, or recovery, whether at a global level or within our specific industry. If economic conditions deteriorate further, our business, financial condition, and operating results could suffer significant adverse effects. Additionally, ongoing military conflicts could introduce further risks, disrupting supply chains, increasing operational costs, or reducing market confidence, all of which could impact our business prospects.
The potential consequences of both economic downturns and geopolitical instability are unpredictable but could be substantial. Any such disruptions may also amplify other risks described in this annual report, further exacerbating their impact on our operations and financial performance.
Any catastrophe, including natural catastrophes, outbreaks of health pandemics or other extraordinary events, could disrupt our business operations and have a materially adverse impact on our business and results of operations.
Our operations rely heavily on our network infrastructure and information technology systems.
Catastrophic events such as earthquakes, fire, floods, hail, windstorms, environmental accidents, power loss, communications failures, explosions, terrorist attacks or other similar events could cause system interruptions, delays in accessing our service and loss of critical data or could prevent us from providing our solutions to our customers.
In addition, our business could be adversely affected by the outbreak of health pandemics. For example, in response to the COVID-19 pandemic, authorities in jurisdictions where we operate, or in which our partners, customers, or others operate, have put in place quarantines, shelter-in-place orders, physical distancing requirements and similar government orders and restrictions in order to control the spread of the disease. These measures have impacted our workforce and operations, the operations and demands of our customers, and those of our respective partners and users. We cannot predict the impact that any future outbreak of viruses or other diseases could have on our business and results of operations. Outbreaks of contagious diseases may restrict the level of economic activity in affected regions, result in sporadic volatility in capital markets, and adversely affect the global economy, all of which may also adversely affect our business. There is no assurance that any future outbreak of such diseases would not have a material adverse effect on our business, financial condition and results of operations.
Some of our customers have experienced, and may continue to experience, financial hardships that could result in delayed or even uncollectible payments in the future. As a result, our business operations may be materially and adversely affected.
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Item 4. Information on the Company
A.History and Development of the Company
Perfect Corp. was incorporated as a Cayman Islands exempted company on February 13, 2015, following a spin-off from CyberLink. We are a leading AI company offering self-developed AI- and AR- powered solutions dedicated to transforming the world with digital tech innovations that make your virtual world beautiful. We run a hybrid business model of direct consumer business (B2C business) and enterprise business (B2B business). For B2C business, we offer seven mobile apps under the “YouCam” suite, along with one online editing service tool, YouCam Online Editor, featuring AI- and AR- technologies. For B2B business, we offer AI- and AR-powered solutions tailored for the beauty and fashion industry.
At the beginning, we primarily focused on the development of makeup virtual try-on solutions. From 2015 to 2017, we refined our technology based on market feedback and expanded our business into other beauty AI solutions, such as nail virtual try-on and skin diagnosis. Over the 2016 through 2017 period, we grew to a platform with over 300 million users of our mobile apps, which further provided feedback and guidance on consumer tastes and preferences. In 2017, we launched our SaaS business model to further monetize the AI technology and gain further support from large brands and retailers. With more beauty solutions such as AI hair color virtual try-on and skin diagnosis solutions being developed, our goal then moved to becoming a one-stop shop for AI- and AR-beauty, skincare, and fashion solutions. Since early 2019, we introduced beauty tech AI and formed numerous partnerships with e-commerce and social media leaders, including Alphabet (Google and YouTube), Alibaba (Taobao and Tmall) and Tencent (WeChat). Such partnerships have been critical to our growth as an omni-channel AI/AR service provider. From 2020, we started to monetize our family of YouCam mobile apps via subscriptions directly from our mobile beauty app users. In mid-2021, we expanded our path into the fashion tech area, which includes products such as virtual try-ons for jewelry, watches and eyewear and in 2025, we completed the acquisition of Wannaby, to further accelerate our business penetration into the fashion industry space with virtual try-on for shoes, bags, scarves and clothes. On October 28, 2022, we consummated the previously announced Business Combination with Provident. On October 31, 2022, our Class A Ordinary Shares and Warrants commenced trading on the NYSE under the symbols “PERF” and “PERF WS”, respectively.
Since early 2023, we began developing Generative AI technologies by fully utilizing our in-house technology development capabilities and integrating Generative AI solutions into our product portfolio, enabling our consumers to create and enhance their photos and videos with high-quality and creative outputs via our mobile apps and SaaS services. We further expanded our strategic partnerships with one of retailer giants, Walmart, to enable AR- virtual try-on experience within its shopping apps. This expansion broadened our services to a larger global audience and perfectly aligned with our strategy of delivering omni-channel virtual try-on solutions to our brand customers.
In 2024, we further upgraded our Generative AI solutions integrated into our product portfolio, powered by our in-house research and development team, to incorporate a significantly broader range of generative features, including, in addition to AI avatar, text-to-photo, AI-driven editing, etc. The Generative AI technologies and AI editing features for photos and videos, integrated into our product offerings, play a pivotal role in converting our mobile app or web service users into paid users, underscoring the critical importance of our AI roadmap to the success of our B2C business.
In 2025, we continued to advance our Generative AI roadmap by expanding our B2C mobile app offerings with a new generation of AI-powered creative tools, particularly in photo and video creation. We adopted multimodal AI solutions that unify text, image, audio, and video understanding to deliver more comprehensive and intuitive user experiences. In parallel, we integrated a broader portfolio of third-party AI models into our platform, enabling us to provide end-to-end creative and editing workflows that address diverse user needs and deliver more complete solutions. We also broadened our distribution strategy by extending our AI capabilities through an API licensing model, empowering third-party developers to incorporate our technologies into applications across a wider range of verticals. This combined approach significantly expanded our total addressable market, strengthened our position within the global developer ecosystem, and enhanced the scalability and competitiveness of our Generative AI platform.
With technological innovation at the core of our strategy, we plan to continue expanding our product portfolio and reinforcing our leadership as a provider of AI- and AR-powered solutions for the global beauty and fashion industries.
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For details of our principal capital expenditures for the previous three years ended December 31, 2025, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”
Address and Further Information
The mailing address of our principal executive office is 14F, No. 98 Minquan Road, Xindian District, New Taipei City 231, Taiwan, and our telephone number is +886-2-8667-1265. Our website address is www.perfectcorp.com. The information on our website is not a part of this annual report.
The SEC maintains a website at www.sec.gov which contains in electronic form each of the reports and other information that we have filed electronically with the SEC.
Our agent for service of process in the United States is Cogency Global Inc., 122 East 42nd Street, 18th Floor, New York, New York 10168.
B.Business Overview
Our Mission and Vision
Our mission is to make the customer journey more seamless and more fun for both consumers and brands with digital innovations (AI, AR and imaging or video technologies).
Our vision is to transform the world with digital tech innovations that make your virtual world beautiful.
We believe that our YouCam suite of mobile apps and web services plays an integral role in our user’s digital lifestyles, helping consumers create and enhance their visual artwork in selfies, photos and videos.
We believe the global consumer app market for video and photography is on the rise. By leveraging our decades of expertise in mobile app market and Generative AI solutions, we empower consumers to create high-quality photos and videos through an intuitive, automated process, unlocking new possibilities for enhanced content creation.
We believe that our platform transforms how brands and consumers interact and creates opportunities to connect that were not possible before. With our excellent, hyper-realistic virtual try-on solutions, we are disrupting the traditional online and in-store shopping journey by creating instant, seamless and engaging omni-channel shopping experiences from product discovery to personalized recommendation in multiple categories.
We believe there is also significant opportunity to further expand our market penetration in the global top luxury and fashion brands and increase market share/awareness in med-spa, skincare clinics and aesthetic beauty clinics, by continuously developing and optimizing new Generative AI solutions to be integrated into our product offerings.
We are confident that our SaaS API will enable the industry and developers to enhance their products and services by allowing them to concentrate on their core competencies while capitalizing on the innovative AI imaging solutions offered by Perfect.
We also strive to achieve environmental sustainability via beauty AI- and AR-technologies. As we re-imagine the way everyone virtually tries on products, we are reducing the environmental impact of each purchase by decreasing the amount of plastic waste and reducing the carbon footprint traditionally associated with physical testers.
Our Values
Innovative — Innovation, strategic thinking and teamwork are at the heart of everything we do. We strive to be a force for good through our product development philosophy, sustainability, long-term partnerships, creative community development, and inclusive workplace.
Passionate — We take pride in developing outstanding products that empower users to express their digital lifestyles through photos and videos, while helping brands form stronger connections with their audiences. Our in-house algorithms are created by a team of devoted engineers who prioritize inclusivity, ensuring our technologies are accessible and enjoyable for everyone, regardless of gender, age, or ethnicity.
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Trust-worthy — We are committed to building trust, excellence and customer satisfaction for all our partners. We seek to develop long-term relationships that allow us to grow together through synergistic partnerships.
Inclusivity — We have built a large inclusive online community, congregating beauty and fashion lovers from all around the world. Through our social media channels and a suite of popular YouCam mobile apps, we inspire young people to be creative, interact with art and photography, and develop appreciation for beauty and fashion, providing them with tools to express their unique personalities online.
Environmentally-Positive — Our solutions aim to make a positive impact on the planet by reducing plastic waste and other related carbon footprint emissions to a large extent.
Committed — We live and breathe our commitment to our business. During our daily life of work, we bear our Company’s mission and goals top of mind. We pour our energy into driving our business forward through dedicated hard work and passionate perseverance. We are relentless in our pursuit of excellence, constantly seeking ways to innovate and optimize our technologies. Moreover, we have an unwavering devotion to our products and services, constantly striving to be industry leaders. This steadfast commitment is the backbone of our success.
Our Company
Founded in 2015, we are a leading AI technology company focused on delivering self-developed AI- and AR-powered solutions to make your virtual world beautiful. Through a hybrid business model spanning both B2C and B2B segments, we leverage our cutting-edge expertise to transform how users and brands interact with digital experiences.
Our B2C offerings revolve around advanced AI-driven technologies, delivering a seamless user experience for photo and video editing. We offer seven mobile apps under the “YouCam” suite, including YouCam Makeup, YouCam Perfect, YouCam AI Pro, YouCam Enhance, YouCam Video, YouCam Nails and YouCam AI Chat, along with one web-based editing tool, YouCam Online Editor. Harnessing AI- and AR- technologies, our products provide real-time virtual try-ons, beauty camera or portrait retouching, photo or video enhancement, as well as state-of-the-art Generative AI capabilities such as text-to-photo, photo-to-photo, photo-to-video, and smart AI editing agent. These innovative features empower users to transform selfies and text prompts into striking personal contents.
Our B2C business demonstrated strong momentum in revenue growth, increasing from $27.7 million in 2023 to $47.0 million in 2025, representing a robust CAGR of 30.2%. As of December 31, 2025, our mobile apps had surpassed 1.1 billion cumulative downloads worldwide, underscoring our extensive market footprint and broad subscriber base. While the number of active subscribers declined modestly year over year to 908,239 as of December 31, 2025 from 1,000,612 as of December 31, 2024, this resulted from our deliberate strategic shift toward cultivating a more concentrated, higher-quality subscriber base through the introduction of higher-value Generative AI features and premium creative tools, which drove a meaningful increase in average selling price and supported our sustained revenue growth. Beyond monetization, our B2C platform serves as an innovation engine, enabling rapid validation and maturation of advanced AI and AR capabilities that are subsequently commercialized across our B2B offerings.
Capitalizing on our success in B2C business, we deliver hyper-realistic AI-driven virtual try-on solutions for enterprise clients, transforming both online and in-store shopping experiences from product discovery to personalized recommendations. Our subscription-based modules empower beauty, skincare clinics, med spas, jewelers, watchmakers, and fashion retailers to integrate virtual try-on technology across their mobile apps, websites, in-store kiosks, and third-party e-commerce platforms. Our current offerings cover makeup, nail art, hairstyling, eyewear, watch, jewelry try-ons, advanced skin diagnostics and simulation, and foundation shade matching, all powered by a robust AI recommendation engine for ultra-personalized results. As of December 31, 2025, we covered 90% of the top 20 global beauty groups and had a cumulative brand portfolio of 859 brands, offering over 982 thousand digital SKUs and enabling more than 10 billion virtual product try-ons annually. Within this B2B customer base, 135 Key Customers accounted for approximately 27.6% of our revenue in 2025.
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As of now, we have established a broad global presence, with our solutions deployed across 95 countries and regions. The following table sets forth a geographic breakdown of our revenue for the periods indicated:
| Year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||||||||||||||||||||
| (million) | % of Total | (million) | % of Total | (million) | % of Total | ||||||||||||||||||||||||||||||
Americas | $ | 29.9 | 55.9 | $ | 31.8 | 52.8 | $ | 34.3 | 49.6 | ||||||||||||||||||||||||||
Europe | 13.8 | 25.8 | 16.6 | 27.6 | 20.3 | 29.3 | |||||||||||||||||||||||||||||
Asia-Pacific(1) | 8.6 | 16.0 | 10.1 | 16.8 | 12.0 | 17.4 | |||||||||||||||||||||||||||||
| Others | 1.2 | 2.3 | 1.7 | 2.8 | 2.6 | 3.7 | |||||||||||||||||||||||||||||
| Total | $ | 53.5 | 100 | $ | 60.2 | 100 | $ | 69.2 | 100 | ||||||||||||||||||||||||||
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(1)For the years ended December 31, 2023, 2024 and 2025, revenue generated from the PRC accounted for less than 3% of our total revenue in each respective period. For a discussion of risks related to our operations in the PRC, see “Risk Factors — Risks Related to Doing Business in the PRC.”
Our Strengths
We believe we have the following competitive strengths that have been instrumental to our leading position as a leading AI company and will continue to fuel our success in the fast-growing AI- and AR-market and beyond, for both B2C and B2B businesses.
•Comprehensive Full Range of Photo and Video Consumer Apps
We position our strength in offering a comprehensive suite of mobile apps that span the entire spectrum of photo and video creation, editing, and enhancement. By combining user-friendly interfaces with advanced AI- and AR- capabilities, our mobile apps and web services serve both casual users and beauty enthusiasts, enabling everyone to transform their creative vision into high-quality outputs. From quick touch-ups and immersive beauty filters to sophisticated video enhancements and generative imaging, our solutions streamline the entire content production cycle within one cohesive ecosystem. This integrated approach not only simplifies the user journey but also enhances creative possibilities, setting us apart as a leading provider in the photo and video app market.
•Unparalleled Insights Built based on Large Set of Consumer Feedbacks
Our core strength is built on a decade of continuous innovation in the photo and video domain, enriched by extensive knowledge gained from millions of passionate beauty enthusiasts worldwide. By analyzing billions of consumer data points, we have developed unparalleled insights into user preferences, emerging trends, and the unique demands of the beauty industry. This wealth of knowledge drives our ability to create highly intuitive, personalized AI solutions, enabling us to understand users’ needs, deliver exceptional performance, and remain at the cutting edge of photo, video, and beauty technology.
•Wide Distribution of Mobile Apps User Base
The user-friendly interfaces and premium features of our YouCam family apps and web services have attracted a solid base of free users and active subscribers. Building on years of expertise in multimedia technology and AI development, our product offerings have expanded from makeup virtual try-ons and photo editing to more creative features powered by Generative AI, as well as more advanced editing, beautification, and enhancement features for photos and videos. While our freemium model attracts a large community of beauty enthusiasts to try our apps and web services, our continuous efforts to introduce new premium features have converted many free users to paying subscribers for our YouCam apps and web-based editing services. In 2024, the Generative AI technologies and AI editing features for photos and videos, integrated into our offerings, have proven to play a pivotal role in converting our free users into paying subscribers. In 2025, we further accelerated our Generative AI roadmap by enriching our B2C mobile apps with advanced AI-driven photo and video creation tools, leveraging multimodal technologies that seamlessly integrate text, image, audio,
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and video understanding, and incorporating leading third-party AI models to deliver more intuitive, powerful, and end-to-end creative workflows.
•Beauty AI- and AR-SaaS Leadership
We are the leader in the nascent beauty AI- and AR-SaaS industry. As of December 31, 2025, we cover 90% (18 out of 20) of the top 20 beauty groups worldwide, and serve global beauty brands, including Estée Lauder, MAC, COTY and Shiseido, covering the broad spectrum of brands and products from luxury to mass markets.
Aside of working directly with global beauty brands, we also work with indie brands, emerging new brands and beauty retailers around the world. These shopping channels and brands have significantly grown in popularity in recent years, primarily fueled by consumers seeking niche brands and products online.
We are a trusted partner for both global and indie brands, and our deep-rooted relationships with beauty groups consist of multi-year contracts and spread across multiple brands, channels and countries. We believe this creates substantial entry barriers for both local and international competitors, providing us with tremendous upselling opportunity and allowing us to remain the market leader in the beauty AI- and AR-SaaS space.
We focus on our in-house technology development capability in AI and AR. Being one of the pioneers in introducing AI-driven solution for beauty technologies since 2015, we continuously devote our research and development resources in creating a wide range of AI-driven solutions for beauty and fashion. This capability of building technology in-house differentiates us among competitors and enables us to offer a direct and fast delivery of our solutions to clients without external third-party dependencies.
•Omni-Channel Presence, Scalable Platform
Our omni-channel, cross-platform coverage significantly enhances consumer engagement with brands’ products. We believe that brands prefer a neutral platform such as ours, which offers deployment capabilities across all sales channels. This approach enables brands to configure a single set of SKUs once and seamlessly deploy them at scale across diverse channels, thereby ensuring a consistent consumer experience in a very cost effective way.
In addition, we are uniquely positioned as the premier global provider of omni-channel beauty AI and AR solutions. Our offerings can be deployed across a variety of channels, including brand-owned websites, in-store kiosks, retailer websites, and official mobile applications, as well as major third-party platforms such as Alphabet (Google and YouTube), Snap, Alibaba (Taobao and Tmall), and Tencent (WeChat). Through strategic partnerships with these leading technology companies, we empower brands to incorporate beauty AI and AR solutions into social, search, streaming, and e-commerce platforms, thereby ensuring worldwide consumer reach and a unified engagement and shopping experience.
•Compelling Value Proposition to Brands
We have proven to significantly deliver on brands’ ROI, both online and offline. With the true-to-life virtual try-on effects, consumers spending more time on brands’ websites, increasing purchase conversion and increasing online basket size for beauty brands are a few examples of how we assist our brand customers in improving the key operational metrics in online commerce. We also bring positive impact to the environment by helping brands reduce waste of beauty sampling and overconsumption. Many brands have testified the positive experiences we brought to them and have become our active endorsers.
We have a diverse customer base, with Key Customers accounting for approximately 27.6% of our 2025 revenue. Our brand customer retention rate has remained healthy and stable, demonstrating recurring demand and high loyalty for our platform. Brands are less likely to switch to other platforms as we provide products and services that are aligned with their value proposition.
•Superior and Proven Technology and Product Capabilities
Our technological capabilities offer highly accuracy, scalability and performance in our AI- and AR- powered business and consumer solutions. We have powerful AI technology that taps into deep and machine learning algorithms built on data from over 10 billion real-life try-ons every year around the world. We are also able to leverage these data
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collected from virtual try-ons to provide highly accurate and realistic AR makeover experiences, as well as personalized recommendations.
We have developed proprietary AI- and AR-technologies with over 3,900 real-time facial 3D live meshes backed by visual computing, which has enabled us to offer much more true-to-life effects compared to our competitors. Our technology now supports over 89,969 skin tones and 25 makeup textures, covering facial attributes across all ethnicities and ages, and offering a fully inclusive virtual try-on experience, being the most comprehensive in the industry. As of December 31, 2025, we had 43 registered patents and 22 pending patent applications in the beauty tech domain.
In 2025, we continue to follow the previously established four pillars as our primary AI development strategies to serve our brand customers and mobile app users: (1) Beauty AI - a comprehensive suite of solutions focused on color cosmetics virtual applications providing beauty virtual try-ons with high fidelity in color and textures; (2) Skin AI - a complete line of over 15 skin concern diagnostics and simulations with high-definition capability, helping consumers to identify their skin needs; (3) Fashion AI - enabling watch and jewelry brands to offer hyper realistic 3D object virtual product try-on in real time; and (4) Generative AI - leveraging on the AI-diffusion technology to create new series of AI visual enhancement and creation toolkits, helping consumers improve their photos and videos.
•Data-Enabled Product Development Strategy
Based on consumers’ try-on behaviors across our multiple channels, we are able to gain valuable insights into consumers’ behaviors and preferences, as well as popular trends emerging in the industry, which in turn accelerates the product development process to create innovative products and services that cater to what the consumers want.
Big data from over 10 billion real-life try-ons globally every year, combined with our machine learning capabilities enable us to continually refine our platform to provide highly accurate and realistic AI- and AR- powered makeover experiences and personalized recommendations. Our unique tech capabilities and extensive collection of training data sets help us solidify our product leadership in the beauty AI- and AR- industry.
As of December 31, 2025, our team of 180 technology staff, representing 51.0% of our employees, are dedicated to the constant improvement of our platform, development of new features, as well as creation of new apps. With our research and development center placed in Taiwan, we have a significant competitive advantage thanks to the easy access to cost-effective, highly motivated, top-tier tech talent. Our team has designed patented and patent-pending technologies such as AgileHand® AR and foundation shade matching, AI-powered wrist mapping, physically based rendering, and Generative AI applications to help consumer create and enhance their photos and videos in YouCam family apps and web-based editor.
•Seasoned Management Team with Proven Track Record
We are led by a seasoned yet innovative executive team, with an average of over 20 years of experience in the technology industry. The team’s passion, dedication and entrepreneurial spirit have been critical to our successful track record. Under the leadership of our CEO, Alice H. Chang, our management team has been remarkably stable, with 90% of the senior management team being with us since our inception. With a balance of beauty domain experience and technology expertise, as well as innovative, entrepreneurial minds, we are able to build up a digital platform that can transform the world.
Our Strategies
We believe the key strategies below will fuel our continued growth:
•Continue to Nurture and Grow Our YouCam Suite of Mobile Apps
We have grown our YouCam suite of apps rapidly during the past few years, with more than 1 million active subscribers using our app services and over 1.1 billion downloads globally as of December 31, 2024. Leveraging the recent development of AI- and AR- technology, we will continue to invest in technology innovation for more cutting-edge features. We aspire to launch more apps with more different functionalities to solve problems for users in more countries and regions. Furthermore, we will not only focus on bringing new users to our mobile apps, but also cross-promote our different consumer apps in YouCam franchise to existing users. By innovating new AI technologies and nurturing our user base relentlessly, we believe our YouCam offerings will provide a variety of solutions that can facilitate and enhance users’ digital lifestyles and AI journeys.
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•Develop innovative Generative AI features for B2C apps subscriptions
We are focused on harnessing the power of Generative AI to deliver engaging new features that is becoming an integral part of the premium subscription offerings for our B2C mobile apps. By integrating state-of-the-art models and algorithms, we aim to create immersive, personalized experiences that transcend beyond traditional functionality, driving user engagement and loyalty. Our strategy involves continuous research and development to refine content-generation capabilities, enabling features such as AI enhancement in photo and video as well as AI creation of personalized image and videos. Through this relentless innovation, coupled with robust user feedback and data analytics, we strive to deliver subscription-based services that offer clear and tangible value, positioning us as a leading provider of advanced image and video Generative AI solutions in the consumer market.
•Expand Our App and Web Portfolio with New Innovative Mobile Apps Powered by Advanced Generative AI Technologies
In parallel with enhancing our existing YouCam offerings, we plan to introduce additional mobile apps that leverage the latest Generative AI technologies to deliver cutting-edge functionalities. These next-generation apps will enable users to create and transform content in ways that go beyond traditional photo and video editing, enlarging our total addressable market and fueling our next phase of growth. By relentlessly pushing the boundaries of AI-driven innovation, we aim to deliver state-of-the-art mobile solutions that meet evolving consumer demands, further strengthening our leadership position in the global photo and video app market.
•Deepen Penetration with Top 20 Beauty Groups
We have deep-rooted relationships with top beauty groups. As of December 31, 2025, we cover 90% of the top 20 beauty groups. We have over 982 thousand SKUs in our database, among which approximately 632 thousand SKUs are for the top 20 beauty groups. AI- and AR-adoption among beauty groups is still at an early stage, and we believe there is still a significant runway for us to further expand our reach within the groups, specifically through cross-selling to sister brands within each of the beauty groups, upselling more modules and functions to brands and enabling more SKUs in all categories, and expanding to more countries within each brand. We believe we are well-positioned to capture the significant opportunities ahead to expand our reach within these beauty groups.
•Penetration into Global Top Luxury, Fashion Brands and Retailers
We are executing a targeted expansion strategy aimed at increasing our penetration among the world’s leading luxury and fashion brands by leveraging our cutting-edge AI- and AR- technologies. Specifically, we focus on high-end solutions that reflect each brand’s unique identity and standards of excellence, ensuring immersive and engaging consumer experiences aligned with their distinct brand identity. This combined emphasis on technological innovation and brand-centric integration underscores our commitment to becoming a leading provider of advanced AI- and AR- solutions in the global luxury and fashion market.
•Target New Growth Beyond Beauty: Expand into Skin Diagnosis, Hair, Watches, Jewelry and Aesthetic Skin Beauty Industries
Our goal is to transform the world with digital tech innovations through investing in industries beyond beauty. Our business focus has expanded into newer and broader categories, such as skincare specialty retailers, med-spas, beauty clinics, aesthetic skin beauty, and the luxury industry such as watch and jewelry brands and retailers. As a leader in virtual try-on solutions, we are able to leverage our expertise and experience in beauty industry to develop the right technologies for these new fields. We believe that our product and service quality can meet luxury market demand and help more brands to offer new virtual experiences to users. Our convenient self-service platform, offered at competitive rates, can help smaller indie brands and skin clinics easily personalize and customize their platforms to better serve their consumers. Since AI- and AR-adoption among skincare, fashion, and aesthetic skin beauty industries is at its early stage, there is still a large untapped market for us to serve. Furthermore, we will continue to offer a seamless and easy solution for indie brands and skin clinics to enhance their consumer experience, capturing the great potential for growth in the broader long-tail market.
•Pursue Strategic Investments, Acquisition and Partnership Opportunities
We are dedicated to evaluating and selectively pursing strategic alliances, investments and acquisition opportunities across categories and geographies. We intend to consider potential opportunities throughout the AI, beauty
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and fashion value chains that will enable us to consolidate and extend market leadership, accelerate our expansion into new verticals and geographies, create synergies from our technology integration, and drive revenue growth and margin expansion.
Our Business
We are a leading AI technology company operating a hybrid business model spanning both B2C and B2B segments. Our B2C business has established a strong presence in the global mobile app and web services markets by empowering users’ virtual lifestyles through immersive, AI-driven experiences that enhance personal creativity and self-expression. In parallel, our B2B business has emerged as a global leader in delivering advanced AI- and AR-powered solutions to the beauty, fashion and skincare industries, enabling brands to engage consumers more effectively across digital and omnichannel environments.
For our B2C business, we operate a family of YouCam mobile apps and web-based editing services designed for photo and video beautification, enhancement, and editing, including but not limited to real-time AR makeup application, skin diagnosis, AI photo background removal, AI selfie, AI avatar, AI text-to-image and AI image-to-video. Drawing on the latest Generative AI technologies, our apps and web services offer users with real-time, true-to-life, and personalized experiences. The suite of YouCam apps and web services also provide premium features available through paid subscriptions, demonstrating how we monetize our mobile app and web services and generate revenue in addition to our B2B business.
Capitalizing on the premium features powered by our AI- and AR- technologies, our suite of YouCam mobile apps and web services have played a pivotal role in converting a community of free users into paying subscribers and built a solid base of active subscribers. Our active subscriber base demonstrated strong growth momentum, increasing from approximately 604,000 as of December 31, 2022 to 879,000 as of December 31, 2023, and surpassing one million as of December 31, 2024. While the number of active subscribers declined modestly year over year to 908,239 as of December 31, 2025, this reflected our deliberate strategic focus on cultivating a more concentrated, higher-quality subscriber base through the introduction of higher-value Generative AI features and premium creative tools, which drove a meaningful increase in average selling price and fueled our sustained revenue growth.
In addition to the standalone success of our B2C business, the suite of YouCam mobile apps and web services play a pivotal role in driving the Company’s global expansion. Their widespread appeal and the extensive adoption by active subscribers have established a fast-growing revenue stream that complements our B2B product offerings. By constantly innovating and adapting to emerging market trends, we are able to capture new consumer segments and strengthen our global market presence. By offering a user-friendly platform combining real-time AR capabilities with cutting-edge Generative AI technologies, our YouCam suite of mobile apps and web services address evolving consumer demands in a prompt manner, fueling a surge in global adoption and bolstering our B2C growth trajectory. This not only accelerates our overall growth trajectory but also reinforces our position as a market leader in delivering advanced AI-driven experiences for photo and video creation.
For our B2B business, we empower beauty, fashion, skincare clinics, med spa, jewelry, watch, fashion, aesthetic skin beauty brands and retailers by providing subscription-based tech modules that enable them to offer beauty, skincare and fashion product virtual try-on experiences to their end consumers across multiple channels and product groups. Our current solutions include virtual try-ons for makeup, shoes, bags, scarves, nail art, hairstyles, watches, eyewear, jewelry, advanced skin diagnostic and simulation, and foundation shade finder. Brands and retailers can deploy these solutions through various channels, including mobile apps, websites, in-store kiosks, and third-party e-commerce platforms. All our solutions are paired with a powerful product recommendation engine that delivers precise and ultra-personalized options tailored to each unique consumer.
Our solutions are nested into a platform, enabling us to easily upsell and expand our offerings to existing brands, providing a swift path to market. As of December 31, 2025, we cover 90% (18 out of 20) of the top 20 global beauty groups. The number of cumulative brands within our brand portfolio increased from 645 brands as of December 31, 2023 to 732 to 859 brands as of December 31, 2025, respectively, at a CAGR of 15.4% from 2023 to 2025. Within our customer base, we had 135 Key Customers, which accounted for approximately 27.6% of our revenue in 2025. We also have a well-diversified portfolio. Aside of cooperating with top 20 beauty groups, we also engage with fashion brands, indie brands, emerging new brands and beauty retailers around the world. Our highly business model allows for flexibility to work with both small and medium-sized brands, as well as with the industry giants.
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With our extensive range of SaaS solutions, we offer the set of key digital technologies that beauty and fashion brands need to achieve a successful digital transformation, as few companies in the market provides such a comprehensive suite of services. Our platform is highly difficult for competitors to replicate and creates a high entry barrier. As a result, we are able to secure multi-year, multi-country contracts with top beauty giants, as well as build a highly engaged consumer base for our platform. The growth of our B2B business is significantly driven by our ability to attract new brands, retain existing brands, and upsell to both new and existing brands in our brand portfolio. By employing the SaaS model, our revenue grows proportionally to the volume of the digital SKUs, regional reach, and type of devices and platforms used by our brand customers. We focus on cultivating synergistic and long-term relationships with our brand customers, helping them achieve sales growth, increase in consumer engagement and build up brand strengths.
•Value Proposition to Consumers
As self-expression and creativity became increasingly important, consumers expect to have more personalized and diverse experiences when using mobile apps. Our family of YouCam apps and web-based editing services are able to offer unique and superior digital experiences with the help of our advanced technologies, such as Generative AI technologies. The special features from our apps and web services can empower users to express themselves freely and creatively on social media or other platforms using high-quality and ultra-personalized photos or videos edited or generated by YouCam apps or web services.
A key feature of YouCam family apps and web-based editor that appeals to users lies in the advanced AI- and AR- technologies that can truly solve challenges users encounter in daily life. In addition, our technologies are not only superior, but are also improved and upgraded regularly by our diligent product teams. These offerings allow users to create, edit, and enhance photos and videos, as well as try on makeup and hairstyles virtually. Users can get AI skin analysis in real time. All the functionalities can be accessed easily through mobile devices and in a cost-efficient manner. We believe that as users are satisfied with the quality of our products, they will stick to our platforms and eventually our apps and web services will become an integral part of users’ daily lives.
Our YouCam family apps and web services, powered by AI-driven tools, are substantially lowering the barriers to content creation. Integrated with state-of-the-art Generative AI technologies, our YouCam apps and web-based editor enable users to produce sophisticated visual content, from stylized selfies and animated avatars to high quality photos and videos, without requiring advanced technical skills. This ease of use not only boosts creativity but also empowers people from all walks of life to express themselves authentically. As a result, the democratization of AI-driven content creation is transforming social media aesthetics, amplifying the voice of everyday creators and opening new avenues for personal expression.
•Value Proposition to Brands
As consumers’ shopping behavior and expectations evolves rapidly, brands need to react and deliver solutions that enhance their consumers’ shopping experience and meet their new expectations. However, due to lack of resources, the vast majority of beauty brands do not have the in-house capability to undergo this kind of digital transformation on their own. We are able to bridge the gap between the brands and their consumers, providing a wide array of omni-channel solutions that are easily implemented and are able to go to market quickly. We believe our broad array of AI- and AR-beauty tech solutions is able to help beauty and fashion brands build strong brand loyalty, increase consumer satisfaction, supercharge sales, and create ultra-personalized experiences that consumers will enjoy.
We work with each brand to bring their shopping experience into the online space, deploying solutions such as virtual try-ons, skin diagnosis, and AI face analysis, paired with ultra-personalized product recommendations. Our solutions can also be deployed in physical stores, enhancing the in-person shopping experience with the latest tech. This allows brands to create the new, seamless, and cohesive shopping experiences that modern shoppers have grown to expect. As of December 31, 2025, 90% of the top 20 beauty groups have incorporated the AI- and AR-technologies from Perfect Corp. into their business.
In addition to bringing value to brands, we believe we bring positive impact to the environment by reducing waste of beauty sampling and overconsumption. Our solutions also promote brands to rethink the way they source products and design packaging, and to reduce the harmful impact on the environment. With our sustainable solutions and zero waste virtual try-on technology, we help beauty brands get closer to achieving their ESG goals, and prove to their consumers that they are worthy of such consumers’ trust. Our AI Skin Tech and AI Hair Tech solutions have been honored with the prestigious Biohackers’ Choice Beauty Awards in the Best Skincare Diagnostic and Best Haircare Diagnostic categories.
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These awards recognize the products and technologies that are pushing the boundaries of innovation, sustainability, and effectiveness in the beauty and wellness industries.
We deliver our solutions through our intuitive cloud platform, Perfect Console. Brands can seamlessly create virtual product SKUs directly on Perfect Console, where they are stored and can be instantly previewed. Brands can publish the SKUs across multiple channels and regions, including websites, mobile apps, and in-store smart mirrors. Perfect Console can also offer comprehensive product tryout insights, complete brand analysis and customer content management systems, enabling brands to effectively track, analyze, and manage consumer engagement.
•Value Proposition to Developers
Our comprehensive API business model offers developers a powerful toolkit to seamlessly integrate advanced AI technologies into their applications and platforms. By providing direct access to our proven AI skin diagnosis, AI imaging enhancement and AI content creation, developers can reduce development time and complexity, enabling faster time-to-market for new features and applications. In doing so, we empower developers to create immersive and engaging user experiences that cater to today’s ever-evolving consumer expectations.
In addition to streamlining integration, our APIs incorporate the same cutting-edge capabilities that global beauty and fashion brands rely on, giving developers access to enterprise-level, customizable functionalities. For developers, this not only increases the value they deliver to their own clients but also enhances credibility and trust through alignment with industry-leading solutions already adopted by the top beauty groups.
Moreover, our popular YouCam family of apps provides a unique feedback loop for developers: new features are rigorously tested in our consumer-facing ecosystem, and refinements informed by real user data are made before being rolled out to API clients. This process ensures a high degree of reliability and refinement for every API feature, supported by in-depth guidance and best practices derived from large-scale consumer usage. As a result, developers can be confident that each API integration stands on a firm foundation of user-centric research and continual innovation.
Ultimately, our developer-focused API platform unlocks possibilities for innovation, scalability, and sustainability, allowing developers to offer cutting-edge experiences to their clients while keeping a close pulse on evolving consumer and environmental needs. Through this approach, we position ourselves as a trusted, future-ready partner for developers who seek to build the next generation of AI-powered applications.
•Our Products and Services for Consumers and Enterprises
We provide an AI- and AR-platform that provides true-to-life virtual try-ons across multiple platforms, including brand-owned websites, in-store kiosks, retailer websites, and official mobile applications, as well as major third-party platforms such as Alphabet (Google and YouTube), Snap, Alibaba (Taobao and Tmall), and Tencent (WeChat). Specifically, we provide the following products and services through (i) our iOS and Android mobile apps and cloud platform, or (ii) licensing our customers offline SDK or AI- and AR- offline mobile apps or solutions designed based on customers’ specifications, the revenue of which is recognized in “AI- and AR- cloud solutions and subscription” and “licensing” components of our revenue, respectively. See “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Components of Results of Operations — Revenue.” We anticipate that the revenue contribution from licensing services in (ii) will become increasingly insignificant as we continue to prioritize enhancing our market leadership in offering AI- and AR-based SaaS subscription solutions for brands and consumers.
YouCam suite of Mobile Apps and Web Services
The suite of YouCam apps and web services primarily consists of seven mobile apps and one web-based editor, as described below. We offer freemium model attracting free users to download and explore various freemium features on our mobile apps and web, while at the same time, we continuously introduce and upgrade premium features, enticing free users to purchase our subscription plan so as to unlock these premium features, generating a revenue stream to our B2C business.
YouCam Makeup: an award-winning virtual beauty app that offers a full suite of virtual makeover tools, including All-in-One AI beauty agent capable of real-time AR makeup applications, selfie retouch, hair color and style retouch, skin diagnosis, and live selfie backgrounds.
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YouCam Perfect: a leading AI-powered photo-editing and beauty camera app. YouCam Perfect is an All-in-One AI Agent that creates a wide selection of stunning images, tune body shapes naturally and change image background seamlessly. It includes several popular photo-editing features, face retouch tools, filters, frames, animated effects, templates, stickers, and more. With an average rating of 4.8 on App Store and 4.4 on Google Play, YouCam Perfect is one of the most popular photo-editing apps on the market.
YouCam AI Pro: an advanced AI-powered app that generates AI images and videos from text to digital content in various styles. Transform users ideas into stunning visuals with the ultimate AI-powered tool for crafting high-quality images and videos. From text prompts to dynamic animations and generating endless creative possibilities with speed, precision, and ease.
YouCam Video: a top-tier selfie video editor that enables users to apply makeup and hair colors, retouch videos, personalize and glow up their videos with beauty filters for TikTok, YouTube, Instagram, Snapchat, etc., with just a few taps.
YouCam Enhance: a comprehensive image enhancement app that provides users with a broad range of AI-editing features, including Image-to-Video generator, AI video repair, AI video lighting, photo enhancement, object removal, background removal, background blur, background change, black-and-white photo colorization, AI avatar and AI image generator.
YouCam Nails: a unique app that brings users one step closer to the perfect manicure. With YouCam Nails, users can create hundreds of unique designs by applying polish, drawing patterns, and adding cute nail decals.
YouCam AI Chat: an All-in-One AI chat assistant that combines ease of use with powerful AI features, making it perfect for both beginners and advanced users. With preset roles, guided conversations, content creation, and AI-powered image generation, it helps you chat, create, and explore effortlessly.
YouCam Online Editor: a cloud-based photo and video creation/enhancement platform that offers a variety of AI-powered tools to enhance, create and transform images and videos.
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AI- and AR-Makeup Virtual Try-On and Foundation Finder
AI- and AR-makeup virtual try-on solution is our first SaaS tech solution for the beauty brands, launched in 2015. It has since then become one of the most popular solutions in our portfolio. We offer AI- and AR-makeup virtual try-on solutions to beauty brands around the world to help enhance consumer experience with virtual makeup try-on. Consumers can try on products in brands’ online and offline stores through our platform. Powered by our proprietary AI- and AR- technology, our solution has ultra-accurate facial mapping capability to conduct a full range of skin tone analysis for instant and realistic results.
Our ultra-realistic effects help color match to real products and provide true-to-life effects to match brands’ product characteristics. It provides realistic makeup textures, including metallic, pearly, shine effects, and many more. In 2024, we enhanced the realism of the makeup textures for newer categories such as eyeliner. Our solution covers a wide range of virtual makeup products, including, but not limited to, foundations, lipsticks, blushes, eyeliners, mascaras, and eyeshadows. In 2024, our lipstick rendering effects now support over eight types of lip pattern for even higher degree of personalization in beauty. In addition, we are able to combine multiple product try-ons to create instant makeovers of a complete look, allowing consumers to see the full effect of brands’ products instantly.
One of our flagship products under AI- and AR-makeup virtual try-on solution is the AI Foundation Shade Finder. Finding the perfect foundation shade has always been a beauty problem facing consumers and brands alike due to the complexity of identifying the accurate skin tones of individual consumers. Our solution was developed from a deep learning database with over 10 million sample models across all skin tone groups. The AI deep learning algorithm detects the full spectrum of skin tones based on around 89,970 shades with unlimited grades from light to dark and true undertones from warm to cool. It also supports various types of foundation textures such as matte and glow, and the intensities can also
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be adjusted to closely mimic the real-life coverage levels. Thus, with our AI foundation shade finder and matcher, consumers can find the perfect foundation shade in a matter of seconds and with high precision.
Beauty AI Agent
In 2025, we launched Perfect’s Beauty AI Agent represents the next evolution of intelligent, automated beauty assistance—designed to deliver personalized, real-time guidance across photo editing, virtual try-ons, and beauty enhancement workflows. Powered by our advanced multimodal AI stack, the Beauty AI Agent understands user intents, orchestrates complex editing tasks, and produces high-quality beautification outcomes with minimal user effort. It acts as a proactive, conversational assistant that helps consumers refine selfies, generate aesthetic visual content, and navigate beauty routines with unprecedented ease. By combining deep expertise in beauty and skincare analysis, cosmetic simulation, and Generative AI, the Beauty AI Agent provides a uniquely tailored experience that elevates both user satisfaction and engagement across our YouCam ecosystem.
AI Makeup Transfer
In 2024, we introduced the AI Makeup Transfer solution that empowers customers to instantly recreate any desired makeup look, from social media posts to magazine ads, on their own faces with just a quick selfie upload. The technology precisely extracts and replicates the colors, shades, and textures of the original look, thanks to advanced AI that instantly matches these attributes with the brand’s corresponding SKUs. Shoppers can virtually try an infinite range of looks, see exactly how products will appear on them, and effortlessly add those items to their carts, thereby revolutionizing the makeup selection process and increasing brand loyalty and sales.
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AI Makeup Tutorial
The AI Makeup tutorial AR-powered platform allows makeup artists to create and share interactive, step-by-step tutorials that map directly onto a customer’s face. Using a live camera approach in tandem with advanced face tracking technology, the solution accurately guides users through each phase of makeup application—across categories like eyeshadow, eyeliner, blush, lipstick, and more. The makeup tutorials can then be exported and accessed on a brand’s website or through a smart mirror for in-store customers, offering personalized guidance at every step.
In 2024, the solution was further enhanced with auto-tutorial creation, minimizing artist effort in creating the content tedious process. Instead, our algorithm will analyze the patterns and layers of makeup looks, and automatically compose a series of layers and steps to facilitate consumer self-learning of makeup techniques as well as choosing the right application and tools for it.
AI Skin Diagnosis
Our skin diagnosis leverages our cutting-edge technology to detect a full suite of up to 14 different skin concerns. We developed this skincare solution alongside dermatologists based on clinical data. It can instantaneously detect skin conditions, including moisture level, oiliness level, acne, discoloration, dark spots, dryness, uneven skin, redness, wrinkles, texture, dark circles, eye bags, etc., regardless of your skin types and skin tones. We have also enhanced our technology to achieve higher precision in image detection using our HD Skincare feature. This enhancement supports Live Skin Analysis, allowing users to get real-time insights into their skin condition by overlaying specific skin concerns captured by the camera. In addition, our skin diagnosis solutions are not only used by skincare brands, but also adopted by med spa, clinics and dermatologists to provide their patients with highly accurate skin analysis results and give personalized product or treatment recommendations to patients. With the help of our AI technologies, clients can enhance their services to patients and strengthen the relationship with them, thus boosting patient engagement and driving revenue growth.
Our skin analysis was developed using over 70,000 medical grade images to build AI deep learning algorithms and is verified by skincare experts. In addition to detecting skin concerns, our AI engine can also generate visual simulation that tracks gradual improvements directly on a consumer’s face, giving users simulations of the progress they can expect to
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see over time. It can also give recommendations to consumers that can be tailored to brands’ products and clinical tests. Our skincare solution is proven to be highly accurate against dermatological tests.
AI Aesthetic and Skin and Body Simulator
Our advance AI-driven facial reshaping solution that enables aesthetics professionals to offer realistic, accurate previews of potential enhancements directly on each patient’s own face. It seamlessly integrates into both online and offline consultation channels, covering a wide range of procedures, including nose reshaping, eyelid adjustments, jaw refinement, lip fillers, cheek fillers, and eyebrow lifts. With full-spectrum customization, such as adjusting nose tip size, jaw shape, or the degree of a brow lift, it helps set clear expectations, reduce uncertainties, and boost confidence in final outcomes.
By delivering true-to-life, adjustable simulations, clinics and med spas can enhance patient communication, streamline the consultation process, and supercharge their marketing efforts. The technology’s intuitive controls enable practitioners to personalize procedures in real-time and offer clients a clear vision of their potential transformations. Ultimately, this AI-powered facial reshaping tool elevates customer satisfaction and trust, making it an invaluable asset for any practice committed to delivering personalized, high-quality aesthetic services.
The AI Skin Simulator delivers an immersive and interactive skincare retail journey by harnessing advanced AI simulation and AR technology. With this cutting-edge approach, shoppers can see detailed, accurate representations of how their skin will look before and after treatment—overlaid directly onto their own faces. By personalizing the simulation to each individual’s unique skin condition and regimen, skincare brands can offer a highly tailored experience that boosts engagement, trust, and customer satisfaction.
This AI-powered solution also gives brands the flexibility to adjust a range of variables, from the severity of skin issues to product strength and treatment duration, ensuring the simulation is both realistic and fully customizable.
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In 2025, we extended our innovation to the consumer social sphere with the launch of the AI Body Reshape feature. Designed specifically for photo editing and social sharing, this tool empowers users to intuitively retouch full-body portraits with professional-grade precision prior to posting. Users can subtly refine their silhouette, adjusting waistlines, lengthening legs, or enhancing body curves, while our advanced body-segmentation algorithms ensure the background remains undistorted. This feature brings studio-quality editing directly to mobile users, allowing them to curate their digital presence and share their best selves with confidence and ease.
AI- and AR-Hair Services
Our AI- and AR-Hair technology allows consumers to try on various hair dye products in real time, giving consumers the ultimate virtual salon experience. Our solution can apply a single hair color, ombre hair color, that simulates two-color combinations, pigment hair color with holographic hair color effects, and hair highlights. In 2024, our AI- and AR- Hair solutions were upgraded with new Generative AI capabilities, allowing users to create new hair styles, extend hair length, create hair bangs, adjust hair volume and experiment with various wavy hair effects.
Our comprehensive AI hair analysis suite combines hair length detection and hair frizz assessment to provide unparalleled personalization in haircare. The AI Hair Length Detection feature categorizes hair into five distinct lengths,
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from above-the-ear to mid-back, enabling brands to deliver precise product and styling recommendations. By analyzing vast datasets, the solution ensures accurate identification of each user’s hair length for a more personalized recommendation in style and product selection. Meanwhile, the AI Frizzy Hair Analyzer evaluates hair from multiple angles using just three photos, front, left, and right, to classify frizz levels into four categories, from smooth to extremely frizzy. This quick and hassle-free approach eliminates the need for in-person consultations, specialized hardware, or lengthy quizzes.
In 2025, we further expanded our AI- and AR-Hair capabilities by introducing AI Hair Style Generation, enabling users to create entirely new hairstyles tailored to their preferences. Leveraging advanced Generative AI, consumers can experiment with haircuts, bangs, layered styles, updos, and texture variations in real time, while preserving realistic hair movement, volume, and shine. This feature allows users to visualize creative transformations before committing to a change, offering a fully immersive virtual salon experience.
AI- and AR-Jewelry (Earrings, Rings, and Bracelets)
Our AI- and AR-Jewelry technology was introduced in December 2021 and it currently offers virtual try-on experience for earrings, necklaces, bracelets, and rings.
For earrings, rings, and necklaces, our proprietary AR 3D model with PBR technology supports high-resolution textures, material reflections, and simulated motion physics with head and body movements to present product renderings with incredible accuracy. High-resolution textures and material reflections give virtual jewelries an incredibly realistic appearance. For bracelets and rings, our proprietary AgileHand® technology utilizes PBR 3D hand models to map a full range of hand movements.
In 2024, the jewelry virtual try-on solution was upgraded to support multiple products stacking virtual try-ons and with multi-finger customization support. Consumers can try on different set of rings in multiple fingers at their own preference. The real-time live virtual try-on engine can render multiple 3D objects (eg. rings, bracelets, etc) all together.
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AR-Shoes Virtual Try-On
Our Shoes Virtual Try-On solution delivers a highly realistic, true-to-scale footwear visualization experience that enables consumers to confidently evaluate styles, colors, and fit directly from their mobile devices or web browsers. Powered by advanced 3D object rendering, precise foot detection, and real-time AR tracking, the solution offers lifelike placement and movement responsiveness, ensuring that each shoe model appears naturally integrated with the user’s foot. By reducing uncertainty in online shoe shopping, the technology helps brands significantly lower return rates, boost conversion, and deepen customer engagement. This innovative virtual try-on capability serves as a powerful tool for footwear and fashion retailers aiming to enhance digital commerce performance with an immersive, interactive shopping experience.
3D Authoring Tool
In 2024, we introduced a new cloud-based authoring workflow solution for self-service 3D asset creation, designed to help brand clients construct and configure 3D objects for virtual try-ons, such as jewelry and watches. The 3D authoring tool transforms computer-aided designs into Web 3D viewer and AR virtual try-on experiences.
This solution enables the efficient design of 3D assets with unlimited variations. It supports industry-standard 3D model files (e.g., .gltf, .obj) and allows materials to be easily applied to individual 3D parts in a well-organized manner. It also enables our brand customers to use the built-in material and texture libraries for quick 3D object creation or expand the libraries by uploading custom textures.
3D Object Viewer
Our 3D Viewer product provides brands with a high-fidelity, interactive visualization solution that allows consumers to explore products from every angle with exceptional realism and precision. Built on advanced real-time rendering technology, the viewer supports full 360-degree rotation, dynamic lighting, and detailed zoom capabilities to showcase textures, materials, and craftsmanship with outstanding clarity. This immersive experience helps consumers better understand product attributes prior to purchase, improving confidence in online decision-making and reducing the need for physical sampling. Designed for seamless integration across mobile, web, and in-store digital touchpoints, our 3D
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Viewer enhances product storytelling and elevates the overall digital shopping experience for brands in luxury, fashion, beauty, and adjacent industries.
AI- and AR- Glasses, Watches and Accessories
Our AI- and AR-accessories technology provides AR effects for watches, eyewear, headbands, hats and other accessory virtual try-ons. For AR watches, we leverage our proprietary AgileHand® technology with up to seven types of material maps effects within our PBR technologies to provide an ultra-realistic AR try-on experience. For eyewear, our 3D mapping technology allows brands to effortlessly create accurate virtual glasses using three still images, and using our auto pupillary distance detection, we can create very precise frame sizes for all.
To simplify 3D file creation for virtual try-ons, we introduced our interactive 2D image-to-virtual try on solution. Brands can effortlessly generate hyper-realistic virtual rings, watches, and accessories using simple 2D product images, bypassing costly and time-consuming 3D modeling. Our advanced algorithms create lifelike accessories and timepieces with intricate lighting effects and accurate motions. This solution ensures virtual try-on effects akin to those from 3D models, simplifying access and ensuring affordability for accessories and watch brands of all sizes.
AI- and AR-Nails
Our virtual try-ons for nails, a customizable solution that allows try-ons for different polish shades (single and multi-color), as well as a wide array of nail polish textures (e.g., cream, jelly, sheer, matte) and nail art, through our proprietary AgileHand® technology. Nail art brands can deploy the solution both online and in-store, allowing consumers to test out the latest colors and styles seamlessly, elevating the shopping experience for nail polish and nail art products.
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AI Studio, AI Avatar, AI Headshot and AI Selfie
Built with our latest Generative AI technology and customized Stable Diffusion models, AI Studio enables users to reproduce fashion magazine photo shoots by simply inputting one single photo of themselves. AI Avatar offers a unique platform for users to upload their selfie images and create more than 71 styles of digital avatars for every occasion. These digital twins allow users to creatively express themselves and stand out on social media and online platforms. For each avatar style, users can enjoy a personalized and dynamic avatar creation journey, showcasing their unique identities in the virtual world. AI Headshot empowers users to transform their everyday photos into professional photos that can be presented in various postures.
By integrating Generative AI technology into development, AI Selfie transforms users’ photos into artworks, offering a wide selection of 91 distinct artistic styles ranging from Watercolor, Graffiti, Anime, Manga to Pop Art, and even styles inspired by Van Gogh. As Generative AI becomes an integral tool for photo editing and beautification, these
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features allow users to unlock new possibilities for creative expression and artistry, aligning with the evolving trend for more personalized and expressive digital content.
AI Text-to-Image
AI Text-to-Image feature is the highlight of the newly launched mobile app YouCam AI Pro. Capitalizing on the Generative AI technologies, it allows users to easily transform text descriptions into high-resolution digital images. This AI-based tool is capable of generating images in up to 100 artistic styles, including Van Gogh, Pop Art, Anime, Pixel Art, and Cartoon. Users can visualize their ideas without complex design skills. With the help of this feature, users are able to create visual masterpieces in just a moment, both for work and for entertainment.
AI Photo and Video Editing Tools:
AI Remove Background, AI Blur Background, AI Object Removal, AI Image Extender, AI Replacement, and AI Photo/Video Enhancement
We have launched a set of Generative AI-powered tools for photo editing in 2023, including AI Remove Background, AI Blur Background, AI Object Removal, AI Image Extender, AI Replacement, and AI Photo/Video Enhancement, which offers users more powerful tools to enhance, beautify, and upgrade photos. AI Remove Background allows users to not only remove backgrounds in seconds, but also create transparent or colored backgrounds. AI Blur Background enables users to quickly add depth and blur photos to highlight focused subjects. AI Object Removal employs advanced algorithms to provide users with an easy way to erase objects and remove unwanted people, text, and watermarks in just a few clicks. With AI Image Extender, users can expand their photos beyond their original borders, with our
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advanced AI technology ensuring the expanded areas blend seamlessly with the original photos. AI Replacement is another powerful tool that allows users to replace any object from photos easily and in just a few clicks.
We have also launched a series of AI Photo/Video Enhancement products that can instantly fix blurry photos, upscale and enhance image resolution and sharpness, eliminate noise, colorize black-and-white photos with different color styles, and brighten low-digit images without compromising quality and details.
In 2024, we further upgraded our Generative AI solutions to incorporate a significantly broader range of generative features, including, in addition to AI avatar, text-to-photo, AI-driven editing, etc. The Generative AI technologies and AI editing features for photos and videos, integrated into our product offerings, play a pivotal role in converting our app and web users into paying subscribers, underscoring the critical importance of our AI roadmap to the success of our B2C business. We intend to continue to enhance the functionalities of our AI editing tools to meet users’ needs and solve their problems in photo/video beautification, enhancement, and editing.
AI Remove Background (Sample illustration of effect)
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AI Background Generation and Blur (Sample illustration of effect)
AI Object Removal (Sample illustration of effect)
AI Image Extender (Sample illustration of effect)
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AI Replacement (Sample illustration of effect)
AI Colorize (Sample illustration of effect)
AI Lighting for Video and Photo (Sample illustration of effect)
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AI Denoise for Video (Sample illustration of effect)
AI Photo/Video Enhance (Sample illustration of effect)
AI Video-to-Video
Perfect’s AI Video-to-Video feature enables users to transform existing video footage into entirely new visual styles and expressions using advanced generative transformation models. By combining motion-preserving AI technology with frame-by-frame aesthetic enhancement, the system retains the original video’s structure, pacing, and subject identity while re-rendering it with new artistic looks, makeup styles, lighting conditions, or creative themes. Users can seamlessly convert raw clips into polished, stylized, or beauty-enhanced videos—ideal for social content, storytelling, or commercial use—without requiring professional editing skills. This capability dramatically expands creative flexibility, allowing users to reimagine their videos with consistent, cinematic quality while maintaining natural motion and visual coherence across every frame.
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AI Image Generator from Text and Image
Perfect’s AI Image Generator from Text and Image enables users to create high-quality, photorealistic or stylized visuals using advanced generative AI models. By combining text-to-image generation with image-guided transformation, the system can produce entirely new images from descriptive prompts or intelligently enhance and modify existing images while preserving key elements such as subject identity, pose, and composition. Leveraging diffusion-based models and semantic alignment technology, it accurately translates natural language instructions into coherent visual results, supporting applications such as virtual try-on, background replacement, style transfer, and beauty enhancement. This capability streamlines content production, reduces reliance on traditional photoshoots, and allows creators to generate scalable, campaign-ready visuals efficiently and consistently.
AI Video Generator from Text, Image and Video
Perfect’s AI Video Generator from Text, Image, and Video enables users to create dynamic, high-quality video content using advanced generative AI models. By integrating text-to-video synthesis with image- and video-guided generation, the system can produce entirely new video sequences from descriptive prompts, animate static images into lifelike motion, or transform existing footage with enhanced styles, visual effects, or thematic elements. The technology preserves subject identity, structural coherence, and natural movement across frames while accurately translating creative instructions into cinematic results. This capability empowers creators to efficiently generate engaging, production-ready
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videos for marketing, social media, and commercial applications without complex editing workflows or extensive production resources.
AI Clothes
Perfect’s AI Clothes leverages advanced Generative AI to virtually transfer clothing from any source image onto a user’s photo, creating realistic try-on results without the need for 3D modeling or physical fitting. By intelligently mapping fabric patterns, textures, and garment shapes to the user’s body while preserving pose, proportions, and lighting, the technology generates visually convincing results that allow consumers to experiment with outfits instantly. This capability empowers users to explore fashion choices, mix and match styles, and visualize clothing on themselves in a highly personalized way. For brands and retailers, AI Cloth enhances online engagement, drives purchase confidence, and reduces return rates by offering a scalable, AI-powered solution for interactive virtual try-on experiences.
AI Music Generator
In 2025, we introduced AI Music Generator is a next-generation creative engine designed to empower users to produce high-quality, royalty-free music tailored to their unique style and content needs. Leveraging advanced Generative AI models trained on diverse musical structures, instruments, and production techniques, the system intelligently composes melodies, harmonies, and rhythms that align with the user’s desired mood, genre, or aesthetic direction. Integrated directly into our consumer app ecosystem, the AI Music Generator enables effortless soundtrack creation for social posts, short-form videos, vlogs, and personalized media projects, removing the traditional barriers of music production. By combining intuitive controls with sophisticated audio-generation architecture, it delivers a seamless, on-demand music-creation experience that enhances creative expression and broadens our value proposition across the expanding landscape of user-generated content.
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AI Video Expression
Perfect’s AI Video Expression introduces a powerful new capability that brings photos to life by animating facial expressions with natural, emotionally rich movement. Built on advanced facial motion modeling, AI-based animation engines, and high-fidelity expression-mapping algorithms, this technology can transform a static portrait into a dynamic video where the subject smiles, blinks, talks, or expresses a range of nuanced emotions—all while preserving identity, aesthetics, and photorealism. Users can effortlessly generate short animated clips, reaction videos, or expressive social content by selecting from a curated set of emotions or custom prompts. AI Video Expression elevates static imagery into engaging, shareable video experiences that deepen personalization and expand the creative possibilities across our YouCam ecosystem.
Photo Editing AI Agent
Perfect’s Photo Editing AI Agent is an intelligent, task-oriented assistant designed to streamline and elevate the entire photo enhancement workflow. Powered by a fusion of LLM reasoning, advanced computer vision, and AI-based generative editing, the agent can understand user intent, analyze image characteristics, and autonomously execute multi-step editing sequences with professional precision. Whether users want to retouch a selfie, adjust lighting, remove unwanted objects, apply beautification, change backgrounds, or create stylized visual effects, the AI Agent manages the process end-to-end, offering options, refinements, and context-aware recommendations. This agent-driven approach transforms complex photo editing into a natural, conversational experience—dramatically reducing effort while delivering consistent, high-quality results that align with each user’s personal aesthetic.
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AI Face Attributes and AI Product Recommendation
The new AI Face Analyzer offers an all-in-one solution that detects over 70 facial attributes, categorizes personal color palettes, and now evaluates face ratios. By combining advanced image recognition technology with an extensive training set across diverse genders, ages, and ethnicities, the system delivers precise, personalized insights—from face, eye, and nose shape to hair, lip, and skin color. This enables brands and beauty practitioners to provide tailored product recommendations and aesthetic guidance.
In 2024, we introduced a new feature in this family. The new face ratio assessment, the AI Face Analyzer calculates key proportions inspired by the golden ratio, taking into account eye placement, eyebrow arch, nose aspect, lip balance, and more. These insights help professionals offer personalized styling tips and product suggestions that harmonize a customer’s natural features. Ultimately, the solution streamlines the shopping journey by combining in-depth facial attribute detection, color matching, and proportional analysis with brand-specific product mapping, leading to a high-impact, data-driven consumer experience.
YouCam Online Editor API Services
Perfect’s YouCam Online Editor API provide brands, developers, and partners with direct access to our advanced AI capabilities through a flexible, scalable, and easy-to-integrate API platform. By exposing core functionalities such as AI Skincare, AI Hair-styles, AI-driven photo and video enhancement, generative image and video creation, the APIs allow third parties to embed cutting-edge visual intelligence into their own apps, websites, or e-commerce platforms. This approach empowers brands to offer immersive, personalized experiences to their consumers without the need for in-house AI development, reducing time-to-market and leveraging our proven technology stack.
Our API services are designed with both versatility and scalability in mind, supporting high-volume usage across multiple industries and geographies. Through modular endpoints and usage-based pricing, clients can select and pay for only the features they need, from beautification and makeup simulation to AI-driven hairstyle generation and video animation. By providing reliable, high-performance AI capabilities as a service, YouCam AI APIs enable partners to enhance consumer engagement, increase conversion rates, and deliver differentiated experiences while tapping into the latest Generative AI and AR advancements developed within our ecosystem.
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Our Strategic Partners
•Strategic Partners
We not only offer enterprise SaaS solutions to multiple notable beauty or fashion accessory brand owners, but have also formed strategic partnerships with world-class tech giants, including Alphabet (Google and YouTube) and Snap, as well as Asia tech platforms, such as Alibaba (Taobao and Tmall). These partnerships provide us with a wide reach to promote our virtual try-on solutions.
Alibaba: Since 2019, we have natively integrated our makeup AR solutions into Alibaba’s Tmall and Taobao platforms (the largest e-commerce sites in China). Brands that already use our platform are able to utilize the same set of SKUs that is already configured for other channels, and directly “switch on” a similar try-on experience in the brand’s official stores in Tmall and Taobao.
Alphabet: Similarly, our partnership with Alphabet (Google and YouTube) since 2020 allows brands to fully leverage the pre-configured SKU assortment and provide consumers with virtual try-on experience on YouTube (via brands interactive AR advertisements, under brands product videos and interactive AR advertisements) and in Google Search (when a particular brand or product is searched).
Tencent: Since 2020, we have partnered with Tencent to integrate our virtual try-on and AI skincare solutions into WeChat Mini Programs. Brands leveraging our platform can seamlessly deploy their pre-configured SKU assortments and skincare analysis modules within their official WeChat Mini Programs, enabling consumers to access real-time AR try-on and personalized skin diagnostics directly inside the WeChat ecosystem. This native integration allows brands to activate interactive beauty experiences within social commerce, CRM engagement flows, and private domain traffic operations, creating a seamless path from product discovery and virtual testing to in-app consultation and purchase conversion.
In all of these partnerships, we are one of the few third parties that are allowed to integrate our codes and modules directly into that of the large tech platforms, which makes the consumer experience via our AI- and AR-engine much more seamless. Our omni-channel, cross-platform coverage significantly increases the brand’s engagement with consumers. We believe beauty and fashion brands naturally prefer a neutral platform such as us which has deployment capabilities across
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all sales channels and social networks, as it provides brands with the peace of mind that the same set of SKUs only needs to be configured once and can then be flexibly deployed across sales channels for consistent consumer experience.
Research and Development
The success of our broad range of AI- and AR-powered solutions is reliant on our technology. We invested significant time, resources and expense into research and development. Innovation is part of our core values, and we are continuously pushing the frontiers of technology to develop AI- and AR-technology and provide new beauty, skincare, fashion tech products integrated with Generative AI solutions. As of December 31, 2025, we primarily offered seven mobile apps, one web-based editing service and 47 AI/SaaS technology solutions. We have 221 AI- and AR-specialists who drive the development of our technology.
Our technology highlights include:
•Generating around 3,900 real-time facial 3D live meshes backed by visual computing;
•Supporting over 25 different makeup textures (e.g., matte and metallic);
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•Supporting over 36 common skin concerns diagnosis;
•Recognizing nearly 90,000 skin tones;
•Employing over 10 million data sets to train AI deep-learning algorithms for the excellent performance across all ethnicities and skin tones; and
•Protecting our intellectual property with 43 patents and 22 pending patent applications as of December 31, 2025.
Our flagship technologies are:
Generative AI development capabilities: In 2025, we achieved a significant milestone in our Generative AI capabilities, further solidifying our leadership in the Generative AI landscape. Advancing beyond experimental development, we successfully operationalized next-generation AI architectures to deliver high-performance creative tools across our platforms. Our strategy to support multiple models framework represented a step-change in our visual synthesis capabilities. Through the adoption of this state-of-the-art architecture, we achieved meaningful gains in image fidelity and semantic understanding, with performance that materially exceeds prior-generation models such as SDXL and Flux. Concurrently, we introduced a suite of context-aware AI agents designed to automate and optimize complex creative workflows. By leveraging advanced large language and vision-language models, including GPT-5.x and Gemini 3.0, we deployed specialized Editing, Beauty, and Video Editing Agents with enhanced reasoning and contextual awareness, enabling sophisticated semantic-level creation and editing that was previously unattainable. Importantly, our agile engineering execution enabled the rapid conversion of these technological advances into tangible user and commercial value. Through an API-first integration strategy, we efficiently embedded large-model capabilities into our core product portfolio, ensuring timely and seamless access to the latest AI innovations across our ecosystem.
True-to-life AI- and AR-technology: Our patented AI- and AR-technology employs 3D renderings, skin tone analysis, texture matching, and light balancing to power realistic facial mappings for accurate makeup trials. These hyper-realistic technologies not only ensure lifelike makeup effects but can also be utilized for hair color try-ons, applying photo-realistic hair colors generated by AI to the entire head. Additionally, they enable true-to-life trials of 3D accessories, including shoes, bags, jewelry, eyewear, and hairbands.
Highly accurate facial AI- and AR-rendering power: Our AI- and AR-face technology projects around 3,900 3D meshes in real time, which allows high-performance, high-precision and high-definition facial live AR effects. Furthermore, our AI Face technology ensures that makeup effects remain realistic and adapt to the consumer’s facial muscles, regardless of the angle or expression. This results in highly accurate and lifelike trials that closely replicate the experience of using real products. We are able to perform facial makeup effects to a high level of precision, which leads to a fully inclusive virtual try-on experience, encompassing facial attributes across all ethnicities and ages. We have so far accumulated experience in simulating all makeup product categories (e.g., lip, eye, face, and hair) covering all ethnic groups.
Advanced AI Optimization for Aesthetic Imaging: We have developed specialized capabilities in optimizing AI models to deliver superior performance in aesthetic imaging, with a focus on human faces, body and beauty-related visuals. By fine-tuning open-source and proprietary diffusion models using domain-specific datasets and custom training objectives, we enhance realism in skin tones, makeup textures, lighting coherence, and overall visual appeal. Our optimization framework also integrates advanced post-processing and model-compression techniques to ensure high-quality, editorial-grade outputs while significantly reducing inference cost and latency. These innovations allow us to exceed the quality of generic models and deliver highly differentiated, beauty-centric AI imaging across our product ecosystem.
AI and machine learning capabilities: We leverage cutting-edge deep learning and transformer-based architectures, powered by data from over 10 billion real-life try-ons annually across the globe. This extensive data pool allows us to deliver unparalleled realism in AR makeovers and highly personalized recommendations. For makeup virtual try-on, our advanced AI ensures ultra-precise color matching, giving consumers full confidence that the shade they try on-screen accurately represents the physical product. Meanwhile, our skin-focused offerings utilize sophisticated computer vision, neural networks, and real-time analytics to detect and analyze all aspects of skin health, from texture and wrinkles to spots and dark circles. This approach provides the ability to track changes over time, enabling users to monitor the
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effectiveness of skincare routines with ease. By integrating the latest advances in AI-driven personalization, we provide an immersive, data-backed experience that stands at the forefront of modern beauty technology.
Precise hand tracking technology: Our AgileHand® technology employs physically based rendering method and enhanced environmental lighting to illustrate true-to-life live hand AR effects. We simulate real-life physics, including built materials, textures, micro-reflections, and light scattering, together with enhanced environmental lighting developed with proprietary visual computing algorithmic to mimic natural lighting and apply realistic effects on the virtual products. This allows us to illustrate true-to-life live virtual try-on effects for rings, bracelets, watches, nail polish, etc. AgileHand® technology is trained on real-hand models with a complete array of gestures, skin tones, and textures, as well as hand and finger sizes to encompass all unique personal traits. It is able to determine wrist and finger sizes automatically and impose AR objects seamlessly on hands instantly, creating a fully immersive shopping experience.
Precise foot tracking technology: Building on the same core computer vision and rendering architecture, our foot tracking technology delivers precise detection of foot contours, orientation, and dimensions to enable photorealistic shoe VTO experiences. The system identifies key anatomical landmarks, estimates foot dimensions, and aligns 3D footwear models accurately over live foot images, even during movement. With physically based rendering and consistent lighting simulation, users can evaluate fit, proportion, and appearance with a level of realism that closely mirrors in-store try-on, thereby enhancing confidence and conversion for footwear purchases.
Intellectual Property
Intellectual property is fundamental to us. With some of the most advanced beauty tech AI- and AR- solutions on the market, we make every effort to protect our intellectual property. We rely on a combination of patent, trademark, copyright, unfair competition, and trade secret laws, as well as confidentiality procedures and contractual restrictions to establish, maintain and protect our proprietary rights.
As of December 31, 2025, we have 43 patents registered and 22 applications pending. We intend to continue to regularly assess opportunities for seeking patent protection for our technology, which we believe provides a meaningful competitive advantage.
Regulation
•Data Privacy
Privacy and data protection laws play a significant role in our business, as they restrict our storage, use, processing, disclosure, transfer and protection of personal information provided to us by end consumers. Laws, regulations and industry standards related to the collection of consumers’ data are constantly evolving in various jurisdictions in which we conduct business or where we may expand, including, without limitation, the following:
United States
In the United States, there are various laws and regulations concerning privacy and data protection, and federal and state regulators, including the FTC, have adopted, or are considering adopting, regulations concerning privacy and data protection. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal laws, and such laws may differ from one another. For example, the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect on January 1, 2020, defines “personal information” broadly enough to include online identifiers provided by individuals’ devices, and imposes more stringent obligations on companies regarding the level of information and control they provide to users about the collection and sharing of their data. Additionally, California passed the California Privacy Rights Act (the “CPRA”), the substantive amendments of which entered into effect on January 1, 2023. The process of implementing regulations for the CPRA is ongoing, with the first set of CPRA regulations being finalized in March 2023. The CPRA significantly modifies the CCPA, including adding new privacy rights relating to the use, collection and disclosure of personal information by covered businesses and creating a new enforcement agency, the California Privacy Protection Agency (the “CPPA”). It remains unclear how various provisions of the CCPA and CPRA will be interpreted and enforced, and we may be required to modify our data practices and policies and incur substantial costs in an effort to comply. Other states have also passed comprehensive privacy laws, such as the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Connecticut Data Privacy Act, the Utah Consumer Privacy Act, and similar laws have been passed or are being considered in other states as well as at the federal level.
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European Union and the United Kingdom
The GDPR, together with national legislation, regulations and guidelines, including the U.K. GDPR and the Data Protection Act 2018, govern the processing of personal data and impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data in the European Union and the United Kingdom. In particular, the GDPR and the U.K. GDPR include obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications, and the security and confidentiality of personal data. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements.
On December 15, 2020, the European Commission (“EC”) proposed two legislative initiatives to upgrade rules governing digital services in the EU: the DSA and the DMA. The DSA entered into force on November 16, 2022, which seeks to update the rules concerning e-commerce, for instance, by providing for enforceable obligations and increased accountability rules for all digital services that connect consumers to goods, services, or content, in relation to, for example, users’ safety and trust, harmful/illegal online content, content moderation and removal, and advertisement targeting. The EC adopted its first designation decisions under the DSA on April 25, 2023, naming very large online platforms and very large online search engines, as defined under certain criteria, which must comply with the DSA within a period of four months. The DMA entered into force on November 1, 2022, which seeks to address market imbalances associated with large online platforms acting as gatekeepers, defined under certain criteria (e.g., Facebook, Google, Apple or Amazon). The EU Data Act, which took effect in September 2025, establishes rules and general conditions for data sharing between businesses and imposes measures to boost fairness and competition in the European cloud market. Additionally, the EU Data Act safeguards companies from unfair contractual terms related to data sharing imposed by dominant market players. The United Kingdom has also introduced an analogous new regulatory regime for the digital sector, including the Online Safety Act, which became law on October 26, 2023. Legal and regulatory frameworks that govern AI may also impose obligations and restrictions with respect to privacy and data protection. For example, the EU AI Act will subject AI systems considered high risk to data governance standards for data that is used to train, validate and test such AI systems. In addition, deployers of AI systems considered a specific transparency risk that uses emotion recognition systems or biometric categorization systems must inform natural persons about the operations of such AI systems and process personal data in accordance with other applicable EU laws.
Legal and regulatory frameworks that govern AI may also impose obligations and restrictions with respect to privacy and data protection. For example, the EU AI Act will subject AI systems considered high risk to data governance standards for data that is used to train, validate and test such AI systems. In addition, deployers of AI systems considered a specific transparency risk that uses emotion recognition systems or biometric categorization systems must inform natural persons about the operations of such AI systems and process personal data in accordance with other applicable EU laws.
Taiwan
The collection, processing and use of personal data in Taiwan are primarily subject to the PDPA and the enforcement rules of the PDPA as well as other applicable rules or regulations issued by the relevant competent authorities, in particular the sectoral rules on the security maintenance plans stipulated by the regulator of different industries. In July 2018, the National Development Council established the Personal Data Protection office in response to the implementation of the GDPR and to ensure a coherent enforcement of the PDPA. Since January 2019, the National Development Council took over the power and function of the Ministry of Justice, and has become the authority that is in charge of interpreting the PDPA and the internal coordination among different government authorities with regard to the relevant matters. The amendments to the PDPA were passed by the Legislative Yuan on May 16, 2023 and came into effect on June 2, 2023. Article 1-1 of the amended PDPA stipulates that the PDPC will act as the competent authority of the PDPA, and integrate central competent authorities, the local government authorities, and the NDC from the date of establishment of the PDPC. The PDPC was subsequently established on December 5, 2023 and is tasked with overseeing the enforcement of the PDPA and carrying out certain regulatory functions in Taiwan. Article 48 of the amended PDPA sets forth that if there are certain violations of the PDPA, such as violations of the PDPA’s data processing requirements or notification requirements following a data breach, the central competent authorities in charge of the relevant industries and local government authorities may impose an administrative fine against a non-government agency in an amount ranging from NTD20,000 to NTD2,000,000, if the non-government agency fails to rectify the violation within a specified time period. Additionally, Paragraphs 2 and 3, Article 48 of the amended PDPA set forth that if the non-government agency fails to rectify certain PDPA violations within such time limit or if the violation is material, the aforesaid administrative fine can be raised to between NTD150,000 and NTD15,000,000.
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China
Chinese governmental authorities, in particular the Cybersecurity Administration of China, are putting great focus on data protection enforcement. The Cybersecurity Law of the People’s Republic of China (the “CSL”) forms the backbone of cybersecurity and data privacy protection legislation in the PRC. The Data Security Law of the People’s Republic of China (the “DSL”) is the fundamental law in the data security area that widely covers data security mechanisms, obligations, and liabilities at both state administration and data handler levels. The Personal Information Protection Law of the People’s Republic of China (the “PIPL”) represents a new era of personal information protection as well as corporate compliance in the PRC. The DSL, the PIPL and the CSL constitute the three fundamental pillars of Chinese data protection legislation, and together with various systematic supplemental regulations, measures, and standards, form the cybersecurity and data protection legislative framework in China.
Furthermore, on July 7, 2022, the Cyberspace Administration of China promulgated the Security Assessment Measures for Outbound Data Transfer, effective from September 1, 2022, to regulate outbound data transfer activities, protect the rights and interests of personal information, safeguard national security and social public interests, and promote the cross-border security and free flow of data. Furthermore, on December 8, 2022, the Ministry of Industry and Information Technology of the PRC released the Administrative Measures for Data Security in Industry and Information Technology Sectors (Trial), effective from January l, 2023, which, among other things, impose specific data security management requirements and certain filing and reporting obligations on processors of important data and core data in industry and information technology sectors.
In addition, the PRC has continued to refine and strengthen its regulatory framework governing cross-border data transfers. Under the PIPL and its implementing rules, cross-border transfers of personal information may generally be conducted through one of several legally recognized mechanisms, including (i) passing a security assessment organized by the Cyberspace Administration of China, (ii) entering into a standard contract with the overseas recipient and completing the relevant filing procedures with the competent authority, or (iii) obtaining personal information protection certification from an accredited certification body, subject to applicable conditions.
These mechanisms impose different compliance thresholds depending on factors such as the volume and sensitivity of personal information involved, whether the data constitutes “important data,” and the nature of the data processing activities. In practice, compliance with PRC cross-border data transfer requirements may require data localization, prior regulatory approval or filing, ongoing risk assessments, and enhanced contractual and technical safeguards. Failure to comply with such requirements could result in regulatory enforcement actions, restrictions on data transfers, administrative penalties, or other adverse consequences for business operations in China.
Our Effort of Privacy Protection
We are committed to protecting personal data. For mobile apps, we publish a privacy policy for using our platform through our mobile apps. In countries where applicable data privacy laws are in place, we provide consumers with notice about our collection and use of data, and ask consumers for their consent to the use of data via a separate tick-box with respect to each purpose of using consumer data. For solutions offered to brand consumers and retailers, we do not receive the personal information of consumers in most cases. Still, we cooperate with brands and retailers to comply with relevant laws and protect data privacy, including assessing the effectiveness of privacy protection of brands and retailers before entering into contracts with them, allocating the privacy protection responsibilities through contractual arrangements, and continuously improving our internal data protection mechanisms. We deliver company-wide privacy training regularly, and review and adjust our privacy policies in accordance with the changes of laws and regulations.
Certification and Compliance
Adhering to the highest standards in protecting the data of both the brands that we work with and the end users of our solutions is our core commitment. We design our solutions with safety at the center stage, and take every step necessary in safeguarding sensitive data. Our dedication to this matter is reflected in the number of safety certification and compliance our solutions have received to date and we strive to guarantee best practices when it comes to making sure all of our partners’ and users’ data remain secure at all times.
•AI/Generative AI Regulations
Our business increasingly relies on AI, including Generative AI, to enhance the performance and functionality of our solutions. At the same time, the regulatory framework governing the development and use of AI continues to evolve
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globally, with increased scrutiny from regulators. These developments may impose additional compliance obligations, require changes to our products, operations and governance practices, increase compliance costs, and expose us to regulatory enforcement, litigation and reputational risks.
United States
In the United States, AI is regulated through a combination of federal oversight and an expanding body of state and local laws. While there is currently no comprehensive federal AI statute of general application, U.S. regulators have indicated that existing consumer protection, civil rights and data protection laws may apply to AI-enabled products, including with respect to transparency, fairness and algorithmic bias. At the state and local level, a growing number of jurisdictions have enacted or proposed AI-related legislation addressing automated decision-making, algorithmic discrimination, and biometric data. Certain of these laws may be relevant to our AI- and AR-enabled features, particularly those involving facial imagery or personalization. For example, states like California and New York have introduced specific laws addressing data privacy, algorithmic bias, and automated decision-making. As these requirements continue to develop, we may be required to implement additional compliance measures, modify product features in specific jurisdictions, or incur higher operational and compliance costs.
Europe
The EU Artificial Intelligence Act (“EU AI Act”) entered into force across all member states in August 2024, establishing a comprehensive, risk-based governance framework for artificial intelligence in the EU market. The EU AI Act applies to companies that develop, use and/or provide artificial intelligence in the EU and includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose artificial intelligence and foundation models, and proposes fines for breach of up to 7% of worldwide annual turnover. The EU AI Act will continue to have a material impact on the way artificial intelligence is regulated in the EU, and together with developing guidance and/or decisions in this area, may affect our use of artificial intelligence and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, operations and financial condition.
•Exchange Controls in Taiwan
Under applicable laws and regulations in Taiwan, the inflow and outflow of foreign currency that do not involve the exchange of New Taiwan Dollar is free, while currency conversion between New Taiwan Dollar and foreign currency is subject to exchange transactions declarations pursuant to the Taiwan Foreign Exchange Control Act. Hence, receipts and disbursements involving the currency conversion from New Taiwan Dollar to foreign currency or from foreign currency to New Taiwan Dollar (collectively, “Regulated Transactions”) are subject to declaration obligations imposed by Taiwan authority. In general, Regulated Transactions involving NTD 500,000 or more shall be declared to the Central Bank of Taiwan. Further, for Regulated Transactions involving New Taiwan Dollar equivalent to over USD 1 million, relevant documents shall be verified by banks before such transactions can be processed. In addition, if the annual accumulated settlement amount of Regulated Transactions exceeds USD 50 million, such foreign exchange settlement is subject to the approval of the Central Bank of Taiwan. The Taiwan government may impose further foreign exchange restrictions in certain emergency situations, where the Taiwan government experiences extreme difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in Taiwan.
For each of the three years ended December 31, 2025, our revenue subject to foreign exchange controls in Taiwan represented less than 1.0% of our total revenue, and our revenue denominated in NTD was fully used for our Taiwan subsidiary’s operation. If our Taiwan subsidiary needs to pay Perfect, for the purpose of dividend distribution or otherwise, we expect the payment to be funded by our Taiwan subsidiary’s revenue denominated in USD, which is generally not subject to foreign exchange control in Taiwan.
Sales and Marketing
•Sales and Marketing for our B2C Business
Our sales and marketing efforts for mobile apps and web-based editing services rely on digital marketing, including blogs, search engine optimization (SEO), app store optimization (ASO), social media, and paid advertising. Our marketing team closely monitors the latest market trends on the Internet and captivating blogs or posts that are shared on
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our website and social media. By refining keywords, optimizing titles, and regularly updating metadata, we ensure that our apps stand out in both Apple App Store and Google Play Store. Simultaneously, we tailor our website and blog content to rank higher on search engines, driving a continuous flow of organic traffic to our offerings. As a result, we achieve stronger brand visibility, attract more potential users, and ultimately increase conversions from free-trial downloads to paid subscribers, solidifying our position as a leader in AI-driven content creation.
Once users are directed to Apple Store or Google Play to download our YouCam apps, or directed to our web-based editor. Our freemium model allows them to choose free-trial to try out different functionalities and premium features. After users have tried our fun and unique features, they are highly likely to pay and become our subscribers upon the end of the free-trial period.
•Sales and Marketing for Our B2B Business
Our sales team spans across nine cities on three continents and has led us to closing deals with 859 cumulative brands as of December 31, 2025 and servicing 90% of the world’s top 20 beauty groups. By employing the SaaS model, our revenue grows proportionally to the volume of the digital SKUs, regional reach, and type of devices and platforms used by our brand customers. We focus on cultivating synergistic and long-term relationships with our brand customers, helping them achieve sales growth, increase in engagement with consumers, and build up brand strengths.
We employ a wide range of marketing activities to engage with existing and potential enterprise partners. These include regular press releases, social media campaigns across all major channels, including Facebook, Instagram, X (formerly Twitter), YouTube, and LinkedIn, targeted email marketing, online and offline advertising, and industry event participation.
We drive solution adoption through a comprehensive lead generation system, encompassing both inbound and outbound strategies. Inbound sources include client referrals, digital marketing (search engine optimization (SEO), pay-per-click (PPC)), and online events (webinars and podcasts). Outbound efforts involve networking at trade shows, proactive outreach through various databases, and industry newsletters. After securing leads, our sales team works closely with potential clients, focusing on their needs, recommending suitable services, and ultimately finalizing deals.
Seasonality
Our B2C business seasonality typically aligns with traditional consumer holiday shopping seasons, as consumers tend to purchase the latest smartphone and upgrade the apps along with their new devices.
Our B2B business is subject to seasonal fluctuations in spending by brands. Historically, the fourth quarter has typically been the quarter with the largest bookings of our solutions from brands and retailers which affects our business, revenue, and operating results. We expect this seasonality trend to continue.
Competition
We have established a leading market position across AI- and AR-powered solutions serving both consumers and brand customers in the beauty and fashion industries. We are widely recognized as a global leader in beauty and fashion technology, offering a comprehensive, highly differentiated portfolio of solutions. Our market leadership is further reinforced by strong organic user adoption, high customer retention, positive endorsements from brand partners, and broad industry recognition through numerous awards.
With regards to mobile apps that we offer, we directly compete with several market players, including PicsArt, FaceApp, BeautyPlus, AirBrush, Creati, SeaArt, PhotoRoom, Videoleap, Capcut, AI Marvels, FaceTune, Remini, and Davinci. These competing mobile apps focus on Generative AI, photo-editing, beautifying, and retouching features, similar to our YouCam Makeup, YouCam Perfect, YouCam AI Pro, YouCam Video and YouCam Enhance apps.
With regards to online website services that we offer, we directly compete with several market players, including Fotor, Picwish, Cutout.pro, Photoroom, PicsArt, Myedit, Leonardo.ai and Pixlr. These competing websites focus on Generative AI, photo-editing and video-editing features, similar to our YouCam Online Editor.
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With regards to the SaaS services that we offer, Modiface Inc., Revieve, Holition, Banuba and Haut.ai can be considered our closest competitors, though they are limited with regards to their product offerings.
We believe we compete favorably against our direct competitors across mobile applications, web-based services, and SaaS solutions based on a number of key competitive strengths:
•continuous technological innovation;
•scalable product and solution design;
•robust omni-channel presence across consumer and enterprise touchpoints;
•comprehensive portfolio of solutions;
•intuitive user experience, high reliability and consistent performance; and
•strong and experienced research and development team.
Employees and Human Capital
Our global team is spread across four continents. We have 321, 342 and 353 employees globally, as of December 31, 2023, December 31, 2024 and December 31, 2025, respectively. Our research and development center is located in Taiwan, which gives us easy access to a world-class, cost-effective pool of engineering talent, adding to our strong competitive advantage. None of our employees are represented by a labor union.
The following table sets forth the number of our employees categorized by function as of December 31, 2025.
| Number of Employees | Percentage (%) | ||||||||||
| Sales and Marketing | 149 | 42.2 | |||||||||
| Research and Development | 180 | 51.0 | |||||||||
| General and Administrative | 24 | 6.8 | |||||||||
| Total | 353 | 100.0 | |||||||||
We have a strong depth of knowledge amongst our technology team. Our team has obtained their education at the top universities from around the world. The vast majority (86%) of our research and development team hold a master’s degree, and 2% hold a doctorate degree. 39% of the team have amassed over 10 years of industry experience, with another 26% being in the business for five to ten years. We are also dedicated to nurturing young talent, with 16% of our team were hired fresh out of university. These talents bring energy, excitement and out-of-the-box ideas that help us keep innovating and staying on top of industry trends.
We respect everyone equally and hire employees based on talent only. Our diverse global team is composed of talented individuals of various ethnic groups and LGBTQ+ identities, of which 58% are men and 42% are women, with 28% of our managers and executives being female, including the CEO.
We have a dedicated, seasoned, and stable senior management team that has worked together for over a decade to grow the Company since the very early stage. Our management team is composed of top industry experts and visionaries, all with over two decades of industry experience. We are a team that is able to be extremely agile and adapt to the dynamically changing market, given our flat hierarchical structure. This also allows us to quickly make decisions, pivot if needed, and accurately execute strategies.
Facilities
Our corporate headquarters, as well as our core research and development team, is based in New Taipei City, Taiwan. We maintain offices in Taiwan, Japan, the United States, France and China to serve our geographically diverse customer base.
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We lease all of our offices. For additional information about the lease, see “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Related Party Transactions with CyberLink and Its Affiliates — Rental Agreements.” We do not own any real property. We believe our current facilities are adequate to meet our immediate needs.
Legal Proceedings
From time to time, we are involved in legal proceedings incidental to the conduct of our business. In certain cases, we may choose to settle disputes with brand customers or business partners if the benefits of preserving long-term business relationships outweigh the costs of litigation. Such settlements may involve financial obligations, modifications to contractual terms, or other concessions to maintain strategic partnerships and operational stability.
As of now, we are not a party to any legal proceedings that we believe would have a material adverse impact on our consolidated business prospects, financial condition, liquidity, results of operations, cash flows, or capital levels. However, given the evolving regulatory landscape and the competitive nature of our industry, we cannot rule out the possibility of future legal disputes that could pose financial or reputational risks. We continue to monitor and manage our legal exposure to mitigate potential disruptions to our business. See “Risk Factors — Risks Related to Our Technology, Data Privacy and Intellectual Property — We may be subject to intellectual property infringement claims or other allegations by third parties, which may cause substantial costs and materially and adversely affect our business operations” and “Risk Factors — Risks Related to Our Technology, Data Privacy and Intellectual Property — From time to time, we may become involved in litigation, regulatory investigations, administrative proceedings, or other legal disputes that could have a material and adverse impact on our business.”
Corporate Social Responsibility
The Perfect CyberLink Education Foundation (the “Foundation”) is an independent non-profit organization jointly established by Perfect Corp. and CyberLink to support educational outreach and charitable initiatives. The Foundation’s programs are designed to enhance digital literacy, creative capabilities, and aesthetic awareness among underserved communities.
Over the past three years, the Foundation served approximately 1,300 participants annually through project-based digital storytelling and media creation programs and invested approximately $60,000 per year in program delivery. Program activities have included training in photography, interviewing, scriptwriting, and video and photo editing using widely available digital creativity tools, including Perfect and CyberLink software.
The Foundation also supports broader community needs through initiatives such as annual blood donation drives and the collection and redistribution of second-hand goods, as well as scholarships and in-kind support for community safety. The Foundation currently intends to continue these initiatives and to expand outreach where feasible; however, the scope and timing of these activities may vary over time.
C.Organizational Structure
As of the date of this annual report, we own 100% equity interest in the following companies directly:
•Perfect Corp. (Shanghai), a company incorporated in the PRC
•Perfect Corp., a company incorporated in Japan
•Perfect Mobile Corp., a company incorporated in Taiwan
•Perfect Mobile Corp., a company incorporated in the British Virgin Islands
•Perfect Corp., a company incorporated in the State of California, the United States
In addition, Perfect Taiwan directly owns (i) 100% equity interest in Perfect Corp., a company incorporated in France, and (ii) 100% equity interests in Wannaby, a corporation incorporated in the State of Delaware, the United States
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which directly owns 100% equity interests in Wannaby UAB, a private limited liability company incorporated in Republic of Lithuania.
D.Property, Plants and Equipment
Please refer to “— B. Business Overview — Facilities” for a discussion of our property, plants and equipment.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. This discussion and analysis should be read together with the audited historical consolidated financial statements and related notes that are included elsewhere in this annual report. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. For more information about forward-looking statements, see “Forward-Looking Statements”. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information — D. Risk Factors” and elsewhere in this annual report.
A.Operating Results
Company Overview
Founded in 2015, we are a leading AI technology company focused on delivering self-developed AI- and AR- powered solutions to make your virtual world beautiful. Operating with a hybrid model that spans both B2C and B2B segments, we leverage our cutting-edge expertise to transform how users and brands interact with digital experiences.
Our B2C offerings revolve around advanced AI-driven technologies, delivering a seamless user experience for photo and video editing and creation. We offer seven mobile apps under the “YouCam” suite, YouCam Makeup, YouCam Perfect, YouCam AI Pro, YouCam Video, YouCam Enhance, YouCam Nails and YouCam AI Chat, along with one web-based editing tool, YouCam Online Editor. Harnessing AI- and AR- technologies, our products enable real-time virtual try-ons, beauty camera or portrait retouching, photo or video enhancement, editing and creation, as well as state-of-the-art Generative AI capabilities such as image-to-image, image-to-video, text-to-video, text-to-photo, avatar creation, and intelligent editing. These innovative features empower users to transform selfies images and text prompts into striking personal contents. Our active subscriber base demonstrated strong growth momentum, increasing from approximately 604,000 as of December 31, 2022 to 879,000 as of December 31, 2023, and surpassing one million as of December 31, 2024. While the number of active subscribers declined modestly year over year to 908,239 as of December 31, 2025, this reflected a deliberate strategic shift toward higher-value generative AI features and premium creative tools, which drove a meaningful increase in average selling price and fueled our sustained revenue growth. Our B2C segment also functions as a dynamic platform for new AI- and AR- functionalities, enabling us to fine-tune cutting-edge solutions that can later be integrated into our B2B offerings.
Capitalizing on our success in B2C business, we deliver hyper-realistic AI-driven virtual try-on solutions for enterprise clients, transforming both online and in-store shopping experiences from product discovery to personalized recommendations. Our subscription-based modules empower beauty, skincare clinics, med spas, jewelers, watchmakers, and fashion retailers to integrate virtual try-on technology across their mobile apps, websites, in-store kiosks, and third-party e-commerce platforms. Our current offerings cover makeup, nail art, hairstyling, eyewear, watch, jewelry try-ons, advanced skin diagnostics and simulation, and foundation shade matching, all powered by a robust AI recommendation engine for ultra-personalized results. As of December 31, 2025, our cumulative customer base included 859 brand clients, offering over 982 thousand digital SKUs for makeup, haircare, skincare, shoes, bags, eyewear, watches and jewelry products, compared to 732 brand clients and over 822 thousand digital SKUs as of December 31, 2024.
In January 2025, we have completed our first strategic acquisition of Wannaby, a pioneer in AR and computer vision technologies, specializing in virtual try-on solutions for the fashion industry. The acquisition enables Perfect to
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expand its offering to include real-time virtual try-on for products such as shoes and bags and high quality 3D viewer for online shopping. This strategic transaction further solidifies Perfect Corp’s position as a leading beauty and fashion AI company and expands the Company’s capabilities, product offerings and customer reach.
We have achieved significant scale and steady growth since our inception in 2015. We have achieved a double-digit revenue growth of 14.9% in total revenue, reaching $69.2 million in 2025, up from $60.2 million in 2024. This increase is primarily driven by the robust momentum in the revenue growth of YouCam mobile app and web service subscriptions, increasing consumer interest in Generative AI technologies and AI editing features for photos and videos, and the stable demand for the Company’s online virtual product try-on solutions from brand customers.
We recorded a net income of $5.0 million in 2024 and $4.6 million in 2025. Our sustained reduction of operating loss from 2023 through 2025 demonstrated the steady growth of our business and the improvement of our overall financial and business situation. In addition, our total operating expenses as a percentage of our revenue decreased from 83.2% in 2024 to 79.9% in 2025, highlighting the continued improvement of our operational efficiency, as the scale of our business grows.
Completion of Business Combination
On October 28, 2022, we completed the Business Combination. On October 31, 2022, our Class A Ordinary Shares and Warrants commenced trading on the NYSE under the symbols “PERF” and “PERF WS”, respectively.
Key Factors Affecting Our Results of Operations
Our results of operations are affected by the following factors:
Our ability to effectively monetize our premium features and expand our B2C business
Our results of operations are significantly driven by our ability to sustain a steady growth in our B2C business, which in turn, depends on our success in expanding and retaining subscriptions to the premium features offered through our YouCam suite of mobile applications and web-based services.
In managing our B2C business, we continuously monitor key performance indicators, such as the number of active subscribers. We also benchmark product ratings and functionalities against primary competitors to identify and prioritize features that serve as core drivers in converting free users to paying subscribers. As of December 31, 2025, our mobile apps had surpassed 1.1 billion cumulative downloads worldwide, underscoring our extensive market footprint and broad subscriber base. While the number of our active subscribers declined modestly from 1,000,612 as of December 31, 2024 to 908,239 as of December 31, 2025, this was as a result of our deliberate strategic shift toward cultivating a more concentrated, higher-quality subscriber base through the introduction of higher-value generative AI features and premium creative tools, which drove a meaningful increase in average selling price and supported sustained revenue growth. Revenue from mobile app and web service subscriptions increased to $44.3 million in 2025, compared to $36.6 million in 2024, representing 64.0% and 60.8% of total revenue in 2025 and 2024, respectively. We attribute this growth primarily to continued revenue generation from our YouCam suite of applications and web-based editing platforms, highlighting our effectiveness in driving the conversion of free users into paying subscribers and the monetization of our core digital offerings.
As consumers increasingly rely on mobile technology for digital content creation and personal expression, we have observed growing demand for advanced, feature-rich mobile apps and web services. In response to this trend, we have introduced and remain committed to continuously introducing a range of innovative mobile apps and web services embedded with newly developed and enhanced premium features powered by cutting-edge Generative AI technologies. These innovative offerings elevate the user experience by supporting a broad spectrum of functionality, including skin and body retouching, hairstyle modifications, makeup simulations, and AI-assisted content creation, as well as improving the efficiency of content editing. The robust functionality fuels increased consumer engagement and sustained demand for paid offerings, seamlessly embedded into everyday use, ranging from casual touch-ups to professional-level production workflows. The increased consumer engagement supports our monetization efforts, driving conversion of free users to paying subscribers, leading to an increase in overall customer lifetime value and resulting in strong recurring revenue growth.
We believe the continued integration of advanced Generative AI capabilities will unlock new possibilities in visual content creation. In line with this vision, we see ongoing opportunities to expand our footprint across mobile and
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web-based platforms by delivering updated apps and web services powered by next-generation Generative AI features. To support this strategy, we remain committed to advancing our AI- and AR- technologies with the goal of launching market-differentiating products and premium offerings powered that align with evolving consumer preferences.
Our ability to continuously introduce market competitive offerings that drive user interest
Our results of operations rely heavily on our ability to consistently develop and periodically launch new premium features and product offerings that resonate with our app and web service users and adapt to evolving market dynamics. Our continued investment in research and development underpins our ability to drive innovation and maintain product relevance. Expanding our total addressable market by identifying and engaging new target user groups also plays a significant role in maintaining our steady growth in B2C business and enhancing our market competitiveness. Technological shifts, changes in platform policies, and intensifying market competition may impact the adoption of our new product offerings. By proactively monitoring these factors and aligning our development strategies with user needs, we seek to preserve the quality and appeal of our products while effectively navigating an increasingly dynamic industry environment.
Adoption of AI- and AR-technologies and expansion into new verticals
Our operating performance is closely linked to the overall adoption of AI and AR technologies in the beauty and fashion industries, which depends on brand demand and the pace of digital transformation. Although industry-wide digitization has accelerated in recent years, penetration of AI- and AR-powered solutions remains relatively limited, presenting a meaningful growth opportunity. Leveraging our deep domain expertise, proprietary technology, and established customer network, we aim not only to drive broader adoption within beauty and fashion, but also to expand into adjacent and complementary verticals. We have already extended our presence into luxury categories such as jewelry, eyewear, watches, and accessories, and are exploring new segments including hair salons, med-spa, skin clinics, and aesthetic non-surgical treatments. Our ability to integrate industry-leading facial and hand AR capabilities across these categories—such as enabling simultaneous virtual jewelry try-on and virtual makeup—positions us to deliver differentiated, cross-category solutions that are difficult to replicate.
Our ability to create sustainable growth of our B2B business and retain our customer base
Revenue from brand customers remained stable at $22.2 million in 2025, compared to $22.4 million in 2024, representing 32.1% and 37.2% of total revenue in 2025 and 2024, respectively. Our ability to achieve sustained B2B growth depends on retaining existing brand customers, increasing recurring revenue per brand, and acquiring new customers across geographies and verticals. We provide a comprehensive suite of AI- and AR-powered solutions deployable across brand-owned channels and major third-party platforms, enabling scalable and multi-channel monetization. Revenue concentration among Key Customers remains a core performance indicator, although the number of Key Customers declined from 151 in 2024 to 135 in 2025 due to customer downgrades and macroeconomic-driven churn in the beauty and luxury sectors. Despite this, total brand customer revenue remained relatively stable year-over-year. Going forward, we intend to drive sustainable growth through cross-selling across sister brands and regions, upselling additional SKUs and modules, and expanding solution adoption within large beauty and luxury groups, supported by strong customer engagement and the scalability of our platform.
In managing our B2B business, our management vigilantly monitors the revenue contribution from our Key Customers, as these metric provide reliable insights into the growth of our B2B business, for the reasons that: (i) revenue from Key Customers accounted for approximately 32.5% and 27.6% of our total revenue in 2024 and 2025, respectively; and (ii) revenue from Key Customers represented 87.2% and 86.2% of our total revenue from our total B2B business in 2024 and 2025, respectively. In addition to the Key Customers, which are major brand customers, we also generate revenue from other long-tail brand customers which is the non-Key Customer brands. The total non-Key Customer brands revenue represented 12.8% and 13.8% of our total brand business for the years ended December 31, 2024 and 2025, respectively.
Our ability to manage and improve operating efficiency
Our results of operations partially depend on our ability to effectively manage our costs and expenses. We recognized operating expenses of $55.3 million in 2025, up from $50.1 million in 2024. The increase was primarily driven by higher research and development spending, as well as elevated sales and marketing expenses associated with the growth in subscriptions to our mobile applications and web-based services, which was partially offset by a reduction in general and administrative expenses.
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As we scale our business and advance our technology, we expect our customer acquisition efforts to benefit from our strong brand recognition and word-of-mouth referrals. Our continued investment in technology is also expected to drive operational efficiency, enabling the same number of employees to deliver higher productivity over time. In addition, we believe that we will continue to benefit from economies of scale as we continue to actively manage the level of our general and administrative expenses.
Our people and technology
We are committed to investing in our people and technology, as these are essential for delivering innovative solutions and services that meet the evolving needs of users and brands, expanding our active subscriber and brand customer base, and maintaining our market leadership in the consumer beauty and AI mobile apps as well as in the beauty and fashion AI- and AR- industry.
We have invested significant resources in our people, recruiting talents from renowned universities and academic institutions across various regions. We have developed a comprehensive talent development program that includes diverse training programs featuring lectures, senior experience sharing, study groups, and participation in conferences and external forums. We also foster a working environment that motivates employees to raise questions and adopts a problem-solving mindset. Our ultimate goal is to retain these talents in the long term and turn them into valuable asset for our business success.
We have also invested a substantial portion of our resources in technology development, recognizing it as the cornerstone of our business success. By collaborating with prestigious universities and research labs, we bring emerging talents and cutting-edge technologies from academic institutions to our Company, bridging the gap between academic research and commercial application. This collaboration offers us unique opportunities to access innovative ideas and the latest technology developments at an early stage, allowing us for proactive planning. Additionally, we are committed to continually improving and upgrading our technologies to ensure the highest quality to our users and brand customers. We believe these efforts are crucial to our business, as the success of our AI- and AR-powered solutions relies on technology that provides exceptional accuracy, scalability, and performance.
Basis of Presentation
Our consolidated financial statements have been prepared in accordance with IFRS. All intercompany accounts and transactions have been eliminated on consolidation. For the purposes of presenting consolidated financial statements, our assets and liabilities and our foreign operations (including subsidiaries in other countries that use currencies which are different from our functional currency) are translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.
Components of Results of Operations
Revenue
Our revenue sources include two major components: AI- and AR- cloud solutions and subscription and licensing. We would anticipate the revenue contribution from licensing becoming increasingly insignificant, as we progressively allocate fewer resources to this area and instead focus on strengthening our market leadership in the consumer beauty and AI mobile apps as well as in the beauty and fashion AI- and AR- industry.
(1)AI- and AR- cloud solutions and subscription
For AI- and AR- cloud solutions and subscription, we provide online cloud-based solutions to our customers, primarily including premium feature subscriptions for our app and web service users and virtual try-on solutions for our brand customers.
In terms of the premium features on our mobile apps and web services to which users subscribe through Apple App Store and Google Play and our website, we currently offer monthly and annual subscription plans, with subscription price varying by countries and regions. We recognize revenue from such services based on the fulfilled contract obligations for each month.
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Our typical contract terms with brand customers range from three months to multiple years, with one-year term being the most common. Our contract consideration is fixed and determined by the following factors: (i) the functionality of the modules (e.g., makeup, skincare, shade finder, jewelry); (ii) the duration of the contract period; (iii) the geographical coverage, such as the number of countries or regions for module deployment or the number of website domains for integration into our modules; (iv) the maximum number of SKUs that a brand can utilize at the same time; and (v) any additional manpower hours required for customization, if any.
Furthermore, depending on the nature of the products and services provided, the charges of brand customers can be further divided to one-time fees, recurring fees, or a combination of both. One-time fees are made up of service setup fee, customization fee, and console base fee, which allow brands to create a brand console account on our platform for uploading and managing SKUs. Recurring fees are related to granting brand customers access to the modules throughout the contract period. These fees are recurring as the service is time-limited and scope-limited, requiring renewal upon the expiration of the service term.
(2)Licensing
We collect licensing fees from (i) licensing self-developed technologies, which include offline SDK and AI- and AR- offline solutions to brand customers, and (ii) licensing customized mobile apps designed and created based on customers’ specifications that do not require continuous support from our backend cloud computing infrastructure. In this scenario, the mobile apps are operated by customers on their own infrastructure, with no additional supporting services required from us after delivery to customers.
Furthermore, depending on the type of the licensing services provided, brand customers may elect to renew licensing agreements with us, as the right to use our intellectual property is only granted to them for a specific period. We collect recurring revenue from the renewal of licensing agreements by customers. We generate recurring revenue from renewals of these licensing agreements by customers.
In addition of above two revenue sources, we also generate revenue from the sale of virtual points, a pay-as-you-go consumption model that allows users to purchase credits which are stored in their accounts and redeemed for access to selected generative AI features within our mobile apps and web services. Unlike subscription plans that provide time-based access to premium features, virtual points are usage-based and are deducted upon each utilization of designated AI functionalities, such as advanced image or video generation services. Virtual points are typically purchased through in-app payment channels or our website in predefined packages, with pricing varying by region and platform. Revenue is recognized upon the consumption of the virtual points, as the performance obligation is satisfied when the corresponding AI service is rendered to the user. Unused virtual points are recorded as contract liabilities until redeemed or expired in accordance with the applicable terms and conditions.
For further details on our revenue recognition, see Note 4 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this annual report.
Cost of Sales and Services
Our cost of sales and services primarily consists of kiosk hardware cost, certain research and development personnel-related expenses allocated to cost of sales and services which are directly related to revenue and services activities, warranty provision as well as third-party payment processing fees for distribution partners such as Google Play and Apple App Store. We expect that our cost of sales and services will increase in absolute dollars in tandem with the growth of our businesses in the foreseeable future, as we continue to invest and broaden our product offerings and scale up our business operations.
Sales and Marketing Expenses
Our sales and marketing expenses consist of personnel-related expenses for salaries, employee benefits, and stock-based compensation for employees engaged in sales and marketing, advertising and promotional fees, cloud-hosting fees as well as allocated facilities and information technology costs. We plan to continue to invest in sales and marketing to grow our user and brand customer base and increase our brand awareness. As such, we expect sales and marketing expenses to increase in absolute dollars. In the near term, we anticipate fluctuations in sales and marketing expenses as a percentage of revenue due to our investments in accelerating market adoption of our AI- and AR-technologies.
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General and Administrative Expenses
Our general and administrative expenses primarily consist of personnel-related expenses for employees involved in general corporate operations, including administration, legal, human resources, accounting and finance. Personnel-related expenses primarily include salaries, benefits, and share-based compensation. In addition, general and administrative expenses also include allocated facilities costs, such as rent, depreciation expenses, professional service fees and other general corporate expenses.
Furthermore, we have incurred and expect to continue incurring expenses as a result of becoming a public company since October 2022, including costs for complying with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. In 2025, our general and administrative expenses have decreased primarily due to reduction in corporate insurance premium and reduced external professional service fee.
Research and Development Expenses
Our research and development expenses primarily consist of salaries and benefits, including share-based compensation, for our technology and product development personnel, and depreciation and other associated corporate costs.
We expect our research and development expenses to increase in the future as we expand our team of technology and product development professionals and continue to invest in technology infrastructure and innovative AI- and AR-solutions to enhance and broaden our product offerings.
Interest Income
Our interest income primarily consists of interests earned on bank deposits and financial assets at amortized costs.
Other Income
Our other income primarily consists of subsidies from local government and VAT adjustments. We do not expect material subsidies from local government in the foreseeable future.
Other Gains and Losses
Our other gains and losses primarily consist of losses on financial liabilities at fair value through profit or loss (“FVTPL”) and foreign exchange gains and losses. The FVTPL is primarily associated with our outstanding Warrants.
Finance Costs
Our finance costs primarily consist of interest expenses on our lease liabilities.
Income Tax Expense
Our income tax expense primarily consists of current income tax expenses. As a global company, we are subject to income taxes in the jurisdictions where we do business. These foreign jurisdictions have different statutory tax rates. Accordingly, our effective tax rate will vary depending on the relative proportion of income derived in each jurisdiction, use of tax credits, changes in the valuation of our deferred tax assets and liabilities as well as changes in tax laws. Currently, the applicable tax rate in our headquarters in Taiwan is 20% while the tax rate for unappropriated earnings is 5%.
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Results of Operations
Our results of operations for the years ended December 31, 2023, 2024 and 2025 are presented below:
| Years ended December 31, | ||||||||||||||||||||||||||||||||
| ($ in thousands, unless otherwise stated) | 2023 | 2024 | 2025 | 2024 % Change | 2025 % Change | |||||||||||||||||||||||||||
| Revenue | $ | 53,505 | $ | 60,202 | $ | 69,154 | 12.5 | % | 14.9 | % | ||||||||||||||||||||||
| Cost of sales and services | (10,400) | (13,258) | (15,630) | 27.5 | % | 17.9 | % | |||||||||||||||||||||||||
| Gross profit | 43,105 | 46,944 | 53,524 | 8.9 | % | 14.0 | % | |||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| Sales and marketing expenses | (25,725) | (28,213) | (30,811) | 9.7 | % | 9.2 | % | |||||||||||||||||||||||||
| General and administrative expenses | (11,582) | (8,501) | (6,996) | (26.6) | % | (17.7) | % | |||||||||||||||||||||||||
| Research and development expenses | (11,458) | (12,000) | (15,405) | 4.7 | % | 28.4 | % | |||||||||||||||||||||||||
| Expected credit losses | — | (1,373) | (75) | (100.0) | % | (94.5) | % | |||||||||||||||||||||||||
| Impairment loss on goodwill | — | — | (1,965) | — | % | (100.0) | % | |||||||||||||||||||||||||
| Total operating expenses | (48,765) | (50,087) | (55,252) | 2.7 | % | 10.3 | % | |||||||||||||||||||||||||
| Operating loss | (5,660) | (3,143) | (1,728) | (44.5) | % | (45.0) | % | |||||||||||||||||||||||||
| Non-operating income and expenses | ||||||||||||||||||||||||||||||||
| Interest income | 9,498 | 7,708 | 6,134 | (18.8) | % | (20.4) | % | |||||||||||||||||||||||||
| Other income | 33 | 55 | 28 | 66.7 | % | (49.1) | % | |||||||||||||||||||||||||
| Other gains and losses | 1,675 | (316) | 1,319 | (118.9) | % | 517.4 | % | |||||||||||||||||||||||||
| Finance costs | (15) | (18) | (16) | 20.0 | % | (11.1) | % | |||||||||||||||||||||||||
| Total non-operating income and expenses | 11,191 | 7,429 | 7,465 | (33.6) | % | 0.5 | % | |||||||||||||||||||||||||
| Income before income tax | 5,531 | 4,286 | 5,737 | (22.5) | % | 33.9 | % | |||||||||||||||||||||||||
| Income tax benefit (expense) | (115) | 735 | (1,094) | (739.1) | % | 248.8 | % | |||||||||||||||||||||||||
| Net income | $ | 5,416 | $ | 5,021 | $ | 4,643 | (7.3) | % | (7.5) | % | ||||||||||||||||||||||
Comparison of December 31, 2024 to December 31, 2025
Revenue
Total revenue increased by $9.0 million, or 14.9%, from $60.2 million for the year ended December 31, 2024 to $69.2 million for the year ended December 31, 2025. The steady increase was primarily driven by a 13.5% rise in revenue from our AI and AR cloud solutions and subscriptions, which grew from $53.8 million for the year ended December 31, 2024, to $61.1 million for the same period in 2025. This growth was fueled by continued revenue growth in YouCam mobile app and web services subscriptions, increasing consumer interest in Generative AI technologies and AI-powered photo and video editing features, and sustained demand from brand customers for the Company’s online virtual product try-on solutions. We expect the licensing revenue will become increasingly insignificant, as we continue to focus on strengthening our market leadership in the consumer beauty and AI mobile apps as well as in the beauty and fashion AI- and AR- industry.
With respect to geographical contribution, revenue from the Americas has increased by 7.7% from $31.8 million for the year ended December 31, 2024 to $34.3 million for the same period in 2025, revenue from Europe has increased by 22.3% from $16.6 million for the year ended December 31, 2024 to $20.3 million for the same period in 2025, and revenue from Asia-Pacific has increased by 18.9% from $10.1 million for the year ended December 31, 2024 to $12.0 million for the same period in 2025. Revenue outside of these three major regions has grown by 52.5% from $1.7 million for the year ended December 31, 2024 to $2.6 million for the same period in 2025.
Cost of Sales and Services
Cost of sales and services increased by $2.4 million, or 17.9%, from $13.3 million for the year ended December 31, 2024, to $15.6 million for the same period in 2025. The increase was primarily attributable to higher third-party
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payment processing fees paid to digital distribution partners-such as the Apple App Store and Google Play-driven by the continued growth in mobile app and web service subscription revenue. In addition, rising AI server computing costs, spurred by the increased demand for premium features powered by Generative AI technologies, also contributed to the overall increase.
Gross Profit
Gross profit increased by $6.6 million, or 14.0%, from $46.9 million for the year ended December 31, 2024 to $53.5 million for the same period in 2025. Despite the continuous increase in gross profit, our gross margin slightly decreased by 0.6% from 78.0% for the year ended December 31, 2024 to 77.4% for the year ended December 31, 2025. The slight decrease in gross margin was primarily due to the increase in third-party payment processing fees paid to digital distribution partners, such as Google and Apple, driven by the steady growth in our YouCam mobile app subscription revenue. In addition, the increases in AI server computing cost, resulting from the growing demand for premium features powered by generative AI services, also contributed to the decrease in gross margin.
Total Operating Expenses
Total operating expenses increased by $5.2 million, or 10.3%, from $50.1 million for the year ended December 31, 2024 to $55.3 million for the same period in 2025. The increase was primarily associated with higher research and development expenses and sales and marketing expenses, which were partially offset by a decline in general and administrative expenses. In addition, we recognized a non-cash impairment loss on goodwill of $2.0 million arising from the acquisition of Wannaby into our operating expense in 2025.
Sales and Marketing Expenses
Sales and marketing expenses increased by $2.6 million, or 9.2%, from $28.2 million for the year ended December 31, 2024 to $30.8 million for the same period in 2025. The increase was primarily due to the increase in marketing events and advertising costs related to our mobile apps and web service subscriptions.
General and Administrative Expenses
General and administrative expenses decreased by $1.5 million, or 17.7%, from $8.5 million for the year ended December 31, 2024 to $7.0 million for the same period in 2025. The decrease was primarily due to reduced corporate insurance premium and external professional service fees.
Research and Development Expenses
Research and development expenses increased by $3.4 million, or 28.4%, from $12.0 million for the year ended December 31, 2024 to $15.4 million for the same period in 2025. The increase was primarily driven by higher compensation expenses due to an increase in research and development headcount following the acquisition of Wannaby.
Impairment Loss on Goodwill
An impairment loss of US$2.0 million was recognized for the year ended December 31, 2025 in relation to the Wannaby cash‑generating unit. No impairment was recorded for the same period in 2024. Following the acquisition, the unit’s operating performance was affected by a challenging macroeconomic environment, including more cautious customer spending and extended decision‑making cycles, resulting in revenue growth below initial expectations.
Total Non-operating income and expenses
Total non-operating income and expenses increased by $0.04 million, or 0.5%, from $7.4 million for the year ended December 31, 2024 to $7.5 million for the same period in 2025. The increase was primarily attributable to a decrease in the fair value of warrant liabilities, which resulted in gains recognized on financial liabilities, which was partially offset by a decline in interest income.
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Interest Income
Interest income decreased by $1.6 million, or 20.4%, from $7.7 million for the year ended December 31, 2024 to $6.1 million for the same period in 2025. The decrease was primarily driven by a decline in interest rates.
Other Gains and Losses
We record other gains of $1.3 million for the year ended December 31, 2025 and other losses of $0.3 million for the same period in 2024. The change was primarily attributable to a decrease in the fair value of warrant liabilities, which resulted in gains recognized on financial liabilities.
Net Income
As a result of the foregoing, our net income for the year ended December 31, 2025 was $4.6 million, compared to $5.0 million for the same period in 2024. The 2025 net income reflects the recognition of a $2.0 million non-cash impairment loss on goodwill.
Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2024
For the discussion covering items for the fiscal year ended December 31, 2024 and a comparison between the fiscal year ended December 31, 2024 and 2023, please refer to “Item 5. — Operating and Financial Review and Prospects — A. Operating Results — Results of Operations” of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with SEC on March 28, 2025.
B.Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through equity contributions from our shareholders and revenue generated from our business operations. As of December 31, 2025, we had cash and cash equivalents of $126.0 million, which primarily consisted of checking accounts, demand deposits and time deposits. Our cash and cash equivalents are primarily denominated in U.S. dollars, and we do not currently enter into any hedging arrangements. In addition, we have 6-month time deposits of $36.3 million classified as current financial assets at amortized cost according to IFRS as of December 31, 2025. Furthermore, we had U.S. Treasuries of $10.2 million, classified as non-current financial assets at amortized cost under IFRS and we do not have any loan and bank borrowings as of the same date. Our net income decreased from $5.0 million for the year ended December 31, 2024 to $4.6 million for the year ended December 31, 2025.
We believe that our cash and cash equivalents will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from the date of this annual report and sufficient to fund our operations. As of the date of this annual report, there has been no material change to our liquidity position since December 31, 2025. To the extent that our current resources are insufficient to satisfy our cash requirements in the future, we may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or we may delay, scale back or abandon all or part of our growth strategy, which could have an adverse impact on our business and financial prospects.
Our cash requirements as of December 31, 2025 and any subsequent interim period primarily include our capital expenditure, lease obligations, contractual obligations and other commitments. Our capital expenditures are primarily related to purchase of certain servers in our ordinary course of business and ERP system upgrade, which are immaterial from a dollar amount perspective. From January 1, 2025 through December 31, 2025, we incurred capital expenditure of less than $0.5 million. Our lease obligations consist of the commitments under the rental agreements for our office premises. Our contractual obligations primarily consist of minimum commitments for marketing activities. From a dollar amount perspective, both lease obligations and contractual obligations are immaterial. In addition, we will consume cash for additional expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. We expect these items to be the primary part of our short-term cash requirements, and we currently do not expect any material capital expenditures in the foreseeable future. Furthermore, as part of our growth strategy, we plan to increase investment in research and development, upgrade AI- and AR- technologies, expand the suite of product offerings and premium features, broaden our user and brand customer base, and expand into synergistic segments such as the luxury sector. These new developments and expansions may generate long-term cash requirements. We intend to continue to fund
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our future material cash requirements with net proceeds in connection with equity contributions from our shareholders and revenue generated from our business operations. We will continue to make cash commitments, including capital expenditures, to support the growth of our business.
We would receive the proceeds from any exercise of any outstanding Warrants that are exercised in cash pursuant to their terms. Assuming the exercise for cash of all of the 20,849,975 Warrants, consisting of 11,499,975 Perfect Public Warrants, 6,600,000 Perfect Private Placement Warrants and 2,750,000 Perfect Forward Purchase Warrants, we would receive an aggregate of approximately $239.8 million, but would not receive any proceeds from the resale of Class A Ordinary Shares issuable upon such exercise. We will have broad discretion over the use of proceeds from the exercise of these Warrants. To the extent that any of these Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of these Warrants will decrease. Any proceeds from the exercise of the Warrants would increase our liquidity, but our ability to fund our operations is not dependent upon receipt of cash proceeds from the exercise of the Warrants.
There is no assurance that our Warrants will be in the money prior to their expiration or that the holders of the Warrants will elect to exercise any or all of such Warrants. The likelihood that Warrant holders will exercise their Warrants, and therefore any cash proceeds that we may receive in relation to the exercise of the issued and outstanding Warrants, will be dependent on the trading price of our Class A Ordinary Shares. If the market price for our Class A Ordinary Shares is less than the exercise price of our Warrants, which is $11.50 per share, we believe Warrant holders will be unlikely to exercise their Warrants. As the closing price of our Class A Ordinary Shares was $1.39 as of March 12, 2026, we believe that holders of the Warrants are currently unlikely to exercise their Warrants. Accordingly, we do not expect to rely on the cash exercise of Warrants to fund our operations.
On October 18, 2023, the SEC declared effective a registration statement on Form F-3, under which the selling securityholders identified therein or their permitted transferees may offer and sell, from time to time, up to 38,542,254 Class A Ordinary Shares, 9,350,000 Warrants and 9,350,000 Class A Ordinary Shares underlying such Warrants. Given the substantial number of Class A Ordinary Shares registered for potential resale by the selling securityholders, the sale of shares by the selling securityholders, or the perception in the market that the selling securityholders holding a large number of shares intend to sell their shares, could increase the volatility of the market price of our Class A Ordinary Shares or result in a significant decline in the public trading price of our Class A Ordinary Shares. These sales, or the possibility that these sales may occur, and any related volatility or decrease in market price of our Class A Ordinary Shares and Warrants, might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Cash Flows Summary
Presented below is a summary of our operating, investing, and financing cash flows:
| Year ended December 31, | ||||||||||||||||||||
| ($ in thousands, unless otherwise stated) | 2023 | 2024 | 2025 | |||||||||||||||||
| Cash flows from (used in) operating activities | $ | 13,578 | $ | 13,003 | $ | 13,305 | ||||||||||||||
| Cash flows from (used in) investing activities | (637) | (8,879) | (14,063) | |||||||||||||||||
| Cash flows from (used in) financing activities | (51,499) | (525) | (562) | |||||||||||||||||
| Effects of exchange rates changes on cash and cash equivalents | (187) | (349) | 175 | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (38,745) | $ | 3,250 | $ | (1,145) | ||||||||||||||
Cash Flows Generated from (Used in) Operating Activities
Cash flows generated from or used in operating activities primarily relate to the collection of accounts receivables, payment of provision and payables, net interest received and income tax paid. Our business primarily operates in a prepaid service subscription model, enabling us to collect cash in advance upon the subscription of product plans or signing of contract and then deliver services pursuant to terms and conditions of subscriptions or relevant contracts.
Net cash generated from operating activities increased by $0.3 million, or 2.3%, from $13.0 million for the year ended December 31, 2024 to $13.3 million for the year ended December 31, 2025. The Company continues to invest in growth while maintaining a healthy cash flow to support business operations underscoring the Company’s operational health and sustainability.
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Cash Flows Generated from (Used in) Investing Activities
Cash flows generated from or used in investing activities primarily relates to acquisition of financial assets, proceeds from disposal of financial assets, acquisition of businesses, acquisition of property, plant and equipment, acquisition of intangible assets, and changes in guarantee deposits paid.
Net cash used in investing activities was $14.1 million for the year ended December 31, 2025 and net cash used in investing activities was $8.9 million for the year ended December 31, 2024. The increase in net cash used in investing activities was primarily attributable to the Company’s acquisition of Wannaby.
Cash Flows Generated from (Used in) Financing Activities
Net cash used in financing activities was $0.6 million for the year ended December 31, 2025, consisting of $0.6 million in the repayment of the principal portion of lease liabilities.
Net cash used in financing activities was $0.5 million for the year ended December 31, 2024, consisting of $0.5 million in the repayment of the principal portion of lease liabilities.
Net cash used in financing activities was $51.5 million in 2023, primarily consisting of $51.1 million representing the payments to repurchase Class A Ordinary Shares through our share repurchase program and tender offer, both launched by us in 2023, and $0.4 million in the repayment of the principal portion of lease liabilities.
Material Contractual Obligations and Commitments
During the periods presented, we did not have any material contractual obligations and commitments other than two office leases entered into by and between Perfect Taiwan and CyberLink for two years starting from June 1, 2025 and December 1, 2025, respectively.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.
Recent Accounting Pronouncements
For a discussion of our new or recently adopted accounting pronouncements, see Note 3 “Application of New Standards, Amendments and Interpretations” to our consolidated financial statements included in this annual report.
C.Research and Development
See “Item 4. Information on the Company — B. Business Overview — Research and Development” and “Item 4. Information on the Company — B. Business Overview — Intellectual Property.”
D.Trend Information
In our B2C app business, we have observed evolving user consumption patterns driven by the rapid advancement and mainstream adoption of generative AI technologies. User engagement remains closely tied to the pace of innovation in AI-powered features, competitive dynamics within mobile app marketplaces and user acquisition costs across digital advertising channels. While demand for AI-driven creative tools and beauty-related applications continues to demonstrate structural growth potential, monetization performance is influenced by subscription conversion rates, retention levels, in-app purchase behavior (including Virtual Point consumption), and the overall mobile app ecosystem environment. We continue to invest in product innovation, user experience optimization, and diversified monetization models to enhance recurring revenue stability and expand our global user base.
Enterprise spending conditions remained challenging in 2025, reflecting ongoing macroeconomic uncertainty, persistent inflationary pressures, foreign exchange volatility, and geopolitical instability. These factors have contributed to continued budget scrutiny and decision-making caution among enterprise customers, resulting in a prolonged elongation of
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B2B sales cycles that began in the second half of 2022 and continued through 2023 and 2024. While we have experienced periods of increased B2B opportunity activity, such activity has not resulted in a meaningful or sustained improvement in conversion timelines, and visibility into the timing or extent of a recovery in enterprise demand remains limited. Accordingly, we believe that constrained enterprise spending and extended sales cycles may persist for an extended period.
In response to these combined B2B and B2C market conditions, we remain focused on disciplined cost management, continued product development, targeted customer acquisition, revenue diversification, and further operational efficiency initiatives, while maintaining a cautious outlook regarding the pace, timing, and sustainability of future growth. Other than as disclosed above and elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments, or events for the period from January 1, 2025 to December 31, 2025, that are reasonably likely to have a material effect on our net sales or revenue, income from continuing operations, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E.Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with IFRS. The preparation of our consolidated financial statements requires us to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue, expenses and related disclosures. See Note 5 “Critical Accounting Judgments, Estimates and Key Sources of Assumption Uncertainty” to our consolidated financial statements elsewhere in this annual report for additional information on our critical accounting estimates.
Item 6. Directors, Senior Management and Employees
A.Directors and Senior Management
The following table sets forth certain information relating to our executive officers and directors as of the date of this annual report. Our Board is comprised of six directors.
| Name | Age | Position(s) | ||||||||||||
| Alice H. Chang | 64 | CEO and Chairwoman of the Board | ||||||||||||
| Michael Aw | 50 | Non-executive Director | ||||||||||||
| Jau-Hsiung Huang | 66 | Non-executive Director | ||||||||||||
| Meng-Shiou (Frank) Lee | 64 | Independent Non-executive Director | ||||||||||||
| Philip Tsao | 65 | Independent Non-executive Director | ||||||||||||
| Chung-Hui (Christine) Jih | 64 | Independent Non-executive Director | ||||||||||||
| Pin-Jen (Louis) Chen | 47 | Executive Vice President and Chief Strategy Officer | ||||||||||||
| Wei-Hsin Tsen (Johnny Tseng) | 58 | Senior Vice President and Chief Technology Officer | ||||||||||||
| Weichuan (Wayne) Liu | 56 | Chief Growth Officer and President of Americas | ||||||||||||
| Hsiao-Chuan (Iris) Chen | 57 | Vice President and Head of Finance and Accounting | ||||||||||||
The business address of each director and executive officer is 14F, No. 98 Minquan Road, Xindian District, New Taipei City 231, Taiwan.
Executive Officers
Alice H. Chang is our founder and has served as the CEO and Chairwoman of the Board since our inception in June 2015. Prior to founding the Company, Ms. Chang served as chief executive officer of CyberLink from October 1997 to May 2015, which under her leadership became a publicly listed Taiwan-based multimedia software company with offices globally. Prior to that, Ms. Chang was the chief financial officer and executive vice president of Trend Micro Incorporated (TSE: 4704), where she led the capital markets and fund-raising activities. Prior to that, Ms. Chang held various positions in Citicorp across investment banking functions. Ms. Chang holds an MBA from the University of California, Los Angeles, and a B.Sc. from National Taiwan University.
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We believe that Ms. Chang is well qualified to serve as the Chairwoman of our Board based on the unique experiences and perspectives she brings as our founder and CEO since our inception, complemented by her strong passion and extensive operational expertise across the technology and beauty industries.
Pin-Jen (Louis) Chen has served as our Executive Vice President and Chief Strategy Officer since March 2022, where he leads the Company’s corporate development, strategic partnerships and marketing efforts. Mr. Chen joined us at our inception in June 2015 as the Vice President of Business Development and Marketing. Prior to joining us, Mr. Chen spent 12 years at CyberLink, where he served as the Vice President of Business Development and Marketing, Head of Consumer Business, and as a development engineer. Mr. Chen holds an M.Sc. and a B.Sc. in computer science from National Taiwan University.
Wei-Hsin Tsen (Johnny Tseng) has served as our Senior Vice President and Chief Technology Officer since January 2019. Dr. Tseng also served as our director from July 2018 to October 2022. Dr. Tseng joined us at our inception in June 2015 as the Senior Vice President of Research and Development, leading the Company’s engineering efforts. Prior to joining Perfect, Dr. Tseng spent 18 years at CyberLink, where he served as the Senior Vice President of its Research and Development Department, and was a director and manager of its Architecture Department. Dr. Tseng holds a Ph.D. and a B.Sc. in computer science as well as an EMBA from National Taiwan University.
Weichuan (Wayne) Liu has served as our Chief Growth Officer and President of Americas since March 2022. Mr. Liu joined us at our inception in June 2015 as the Vice President of Business Development and Marketing and the General Manager of the Company’s U.S. subsidiary. Prior to joining us, Mr. Liu served as the Associate Vice President of Business Development at CyberLink from October 2009 to May 2015. From January 2003 to September 2009, Mr. Liu worked as a senior engineering manager at NVIDIA Corporation (Nasdaq: NVDA). Mr. Liu holds an MBA from Santa Clara University, an M.Sc. from Case Western Reserve University, a B.Sc. from National Tsing Hua University, and a Ph.D. degree in electrical engineering from University of Southern California.
Hsiao-Chuan (Iris) Chen has served as our Vice President and Head of Finance and Accounting since January 2022 and oversees corporate finance and accounting activities of the Company. Prior to joining us, Ms. Chen spent 22 years at CyberLink since February 2000, with her last two roles being the special assistant of the CEO since March 2021 and the Head of Finance and Accounting since February 2000. Prior to joining CyberLink, Ms. Chen worked at Deloitte from September 1994 to August 1997. Ms. Chen holds an MBA from National Taiwan University and a B.Sc. in agricultural economics from National Chung-Hsing University.
Directors
Alice H. Chang is our CEO and chairwoman of the Board since our inception in June 2015. For details, please see “— Executive Officers” below.
Michael Aw has served as our non-executive director since October 2022. Mr. Aw served as Provident’s Director, chief executive officer and chief financial officer since its inception on October 28, 2020 and is a founding partner of Provident Growth, a leading growth stage fund focused on technology investments in Southeast Asia. Mr. Aw has over 20 years of investing and investment banking experience. Mr. Aw has served on the board of directors at Pomelo Fashion Company Limited, a technology-driven modern fashion brand in Southeast Asia since October 2017. In addition, Mr. Aw has been a board observer of Traveloka Services Private Limited Company, an online travel agency with a strong presence in Southeast Asia and Australia, and an ESG board advisor of CARRO, a leading Singapore car marketplace. Prior to founding Provident Growth in January 2018, Mr. Aw was the Managing Director at Provident Capital Partners and Managing Director and Head of Technology, Media and Telecommunications, Asia, Investment Banking Division at UBS Group AG. Mr. Aw holds a B.A. in accounting and finance from the University of Manchester and a M.Phil. in management studies from the University of Cambridge. Mr. Aw was also a Cambridge Chevening Scholar.
Jau-Hsiung Huang has served as our non-executive director since July 2019. Dr. Huang founded CyberLink in February 1996 and has served as its chairman of the board of directors since January 2001 and its CEO since September 2015. Dr. Huang has led the product development team to deliver a full suite of software applications, including video and photo-editing, multimedia playback, file conversion as well as various mobile apps. Under his leadership, CyberLink grew from a small start-up to a publicly listed Taiwan-based multimedia software company with offices globally. From August 1988 to July 2005, Dr. Huang was a professor in the computer science department at National Taiwan University and was the co-founder of the Communications and Multimedia Lab at National Taiwan University, from which he subsequently received a series of awards, including the Distinguished Alumni Award and the Electronic Research and Service
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Organization (“ERSO”) Award. Dr. Huang holds a Ph.D. in computer science from the University of California, Los Angeles, and a B.Sc. in electrical engineering from National Taiwan University.
Meng-Shiou (Frank) Lee has served as our non-executive director since October 28, 2022 and has extensive experience in the accounting and finance industry. Mr. Lee currently serves as the CEO at First Elite CAPs & Co., a Taiwan-based accounting company, and is a Professor-level Part-time Technical Expert of National Taipei University of Business and Vice-Chairman of the Board at Taiwan Province CPA Association. Mr. Lee has served on the board of directors at several publicly listed companies, including Mechema Chemicals International Company Limited (TWSE: 4721) since June 2017, and TOPCO Technologies Corp. (TWSE: 3388) since May 2020. Mr. Lee has been practicing as a Certified Public Accountant since 1988. His accounting experience includes working as a Certified Public Accountant at Deloitte CPA firm in its Taiwan office from July 1988 to July 1997 and at First Elite CAPs & Co since July 1997. Mr. Lee holds an M.A. in accounting from National Chengchi University and a B.A. in accounting from National Taiwan University.
Philip Tsao has served as our non-executive director since October 28, 2022. Mr. Tsao has served on the board of directors at several publicly listed companies, including SinoPac Financial Holdings Company Limited (TWSE: 2890) since May 2020 and China Everbright Greentech Limited (SEHK: 1257) since April 2017. He has also been a director of Bank SinoPac since May 2018 and started to serve as the Chairman of Bank SinoPac since July 2022. Mr. Tsao has held various senior positions in global and regional financial institutions, most recently as Consultant to Fubon Bank from April 2016 to March 2017, Managing Director at Barclays Capital Asia Limited from June 2011 to May 2015, Managing Director at Morgan Stanley Asia Limited, Executive Vice President at China Development Financial Holdings (TWSE: 2883), President of China Development Industrial Bank, Managing Director at UBS Asia Limited, and Executive Director at Goldman Sachs (Asia) LLC. Prior to that, Mr. Tsao also worked at Citibank for nine years across various functions. Mr. Tsao holds an MBA from National Taiwan University and a B.Sc. from Tsinghua University. He is also a Chartered Financial Analyst Charterholder.
Chung-Hui (Christine) Jih has served as our non-executive director since October 28, 2022. Ms. Jih has been serving as an independent director at CTBC Securities Company Limited, a Taiwan-based financial holding company, since May 2020. From January 2007 to August 2019, Ms. Jih was the chairwoman and CEO of BNP Paribas Asset Management Taiwan Company Limited. From July 2003 to January 2007, Ms. Jih served as the General Manager of Fidelity Security Investment Trust Company (Taiwan) Limited and Spokesperson of Fidelity Securities Company (Taiwan) Limited. From September 2002 to July 2003, Ms. Jih was chief financial officer of CyberLink. Prior to that, Ms. Jih also served as a financial consultant at Merrill Lynch Securities (Taiwan) Limited and Vice President and Head of Audit and Compliance at Citibank Taiwan Limited and held various roles at professional bodies, including Governor of the Board and Co-Chair of Asset Management Committee at The American Chamber of Commerce in Taiwan, and Supervisor at Securities Investment Trust & Consulting Association of Taiwan. Ms. Jih holds an MBA from Indiana University and a BBA from National Chengchi University.
Family Relationships
Jau-Hsiung Huang and Alice H. Chang are husband and wife. There are no other familial relationships among our directors and executive officers.
B.Compensation
For the year ended December 31, 2025, we paid an aggregate of $3.1 million in cash and benefits to our executive officers and directors, including $0.3 million in share-based compensation related to previously granted stock options that remain unvested and vested stock options that remain unexercised. For the year ended December 31, 2025, (i) options to purchase 35,000 Class A Ordinary Shares were granted to our directors and executive officers under the Share Incentive Plan at an exercise price of $1.84 per Class A Ordinary Share, and (ii) no Award (as defined below) has been granted under the Director Equity Incentive Plan to our directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Employment Agreements
Alice H. Chang is a party to a service agreement with us dated September 26, 2019 and as amended on January 24, 2022. Under the service agreement, Ms. Chang agreed to serve as our CEO, until her appointment is terminated by Ms.
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Chang’s death, disability or a termination by a decision of the Board. The service agreement also includes certain restrictive covenants, which include confidentiality and non-disclosure restrictions and non-competition restrictions that apply during the term and for certain periods following specified terminations of service.
Share Incentive Plan
Our Share Incentive Plan was first approved and adopted by our Board on December 13, 2021, and was amended by our Board on October 25, 2022 in connection with the Business Combination. The Share Incentive Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, to our or our affiliates’ employees, directors, agents, consultants or service providers as selected by the administrator. We have registered an aggregate of 5,311,310 Ordinary Shares available for issuance under the Share Incentive Plan in the registration statement on Form S-8 (File No. 333-268059) filed with the SEC on October 28, 2022.
For the year ended December 31, 2025, options to purchase 35,000 Class A Ordinary Shares were granted to our directors and executive officers under the Share Incentive Plan at an exercise price of $1.84 per Class A Ordinary Share.
The following sets forth a summary of material terms of the Share Incentive Plan, which are qualified in their entirety by the Share Incentive Plan filed as Exhibits 4.14 and 4.15 to this annual report.
Authorized Shares. Subject to the adjustment provisions in the Share Incentive Plan, the maximum aggregate number of the Ordinary Shares that may be issued upon exercise of all options to be granted under the Share Incentive Plan shall be 5,311,310 Ordinary Shares; up to 5,311,310 Ordinary Shares may be issued under the Share Incentive Plan to participants who are citizens of the U.S., residents of the U.S. or are otherwise subject to the federal income tax laws of the U.S. (the “U.S. Taxpayer Participants”). Under the Share Incentive Plan, shares to be issued upon the exercise of options shall be Class B Ordinary Shares if the participant of the Share Incentive Plan is one of the Founder Parties; otherwise, shares to be issued upon exercise of options shall be Class A Ordinary Shares.
If an award of option should expire or become unexercisable for any reason without having been exercised in full, or if the Ordinary Shares issued under the Share Incentive Plan are later forfeited due to the failure to vest, the unissued or forfeited shares shall, unless the Share Incentive Plan shall have been terminated, remain or become available for future issuance pursuant to subsequent awards and grants under the Share Incentive Plan.
Plan Administration. Our Board or any senior officer(s) designated by our Board from time to time will have authority to administer the Share Incentive Plan, and their decision (save as otherwise provided herein) shall be final and binding on all parties. Our Board shall have such powers and authorizations related to the administration of the Share Incentive Plan as are consistent with our Articles and applicable laws. Our Board shall have the full power and authority to take all actions and to make all determinations required or provided for under the Share Incentive Plan, and to amend or terminate the Share Incentive Plan and adopt a new plan, as long as the participants’ economic interests that he or she would be otherwise entitled to are not adversely affected.
If our Board proposes any amendment to the Share Incentive Plan that will have a material adverse effect on the economic interest of the participants, such amendment will take effect after the approval of the option holders representing a majority of then-granted options.
Types of Awards. The Share Incentive Plan permits the awards of options.
Eligibility. Our or our affiliates’ employees, directors, agents, consultants or service providers are eligible to participate in the Share Incentive Plan.
Grant Notices. Awards of options granted under the Share Incentive Plan are evidenced by grant notices that set forth, consistent with the Share Incentive Plan, the terms, conditions and limitations for each award.
Conditions of Awards. The administrator determines the provisions, terms and conditions of each award granted under the Share Incentive Plan, including, but not limited to, the vesting schedule, exercise price, exercise periods and any restriction or limitation regarding the awards.
Vesting Schedule. Subject to exceptions in the event of retirement, death, or permanent injury due to occupational hazards during the employment as provided in the Share Incentive Plan, no options will be vested in the first two years
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from the grant date; following the end of such two-year period, 50% of the options will be vested; following the end of the third anniversary of the grant date, 75% of the options cumulatively will be vested; and on the date of the fourth anniversary of the grant date, 100% of the options cumulatively will be vested.
Exercise Price. The exercise price will be not less than the par value per share. Notwithstanding the foregoing, the exercise price of options granted to U.S. Taxpayer Participants who own shares representing more than 10% of the voting power of all classes of our shares at the time of grant shall be no less than 110% of the fair market value, as determined pursuant to the Share Incentive Plan on the date of grant. For all other U.S. Taxpayer Participants, the exercise price of options will be no less than 100% of such fair market value on the date of grant.
Exercise Period. The term of each option will be five years from the grant date, subject to exceptions as provided in the Share Incentive Plan. Any options not exercised during the term will be cancelled and forfeited.
Non-Transferability of Awards. Other than by will or the laws of descent and distribution, the participants may not sell, transfer, assign, pledge or otherwise dispose of any option granted under the Share Incentive Plan, unless approved by the CEO or other senior officer(s) designated by the Board.
Dissolution or Liquidation. In the event of our dissolution or liquidation, each award will terminate immediately prior to the consummation of such action, unless otherwise determined by the CEO or other senior officer(s) designated by the Board.
Change in Control. In the event of a change of control as defined in the Share Incentive Plan, each outstanding award (vested or unvested) will be treated as the CEO or other senior officer(s) designated by our Board determines, which determination may be made without the consent of any participant and need not treat all outstanding awards (or portion thereof) in an identical manner. The determination may, without limitation, provide for one or more of the following in the event of a change of control: (i) the termination or continuation of such outstanding awards by us (if Perfect is the surviving corporation); (ii) the assumption of such outstanding awards by the surviving corporation or its parent; or (iii) the substitution by the surviving corporation or its parent of new options or equity awards for such awards. If the award is continued, our Board, CEO or other senior officer(s) designated by our Board may make further adjustments in accordance with the adjustment provisions under the Share Incentive Plan.
Termination. The term for the Share Incentive Plan is ten years, commencing from December 13, 2021, being the date on which the Share Incentive Plan was approved and adopted by our Board. After this period, no further options shall be granted, but the provisions of the Share Incentive Plan shall remain in full force and effect to the extent necessary to give effect to the exercise of any options granted prior to the termination or otherwise as may be required in accordance with the provisions of the Share Incentive Plan.
Director Equity Incentive Plan
Our Director Equity Incentive Plan was approved and adopted by our Board on October 23, 2023, for the purpose of attracting, retaining, and motivating Directors, aligning their interests with stockholders, and promoting the success of the Company. The Director Equity Incentive Plan provides for the grant of restricted share awards, restricted share units and other share-based awards or cash-based awards (“Awards”) in compliance with the requirements of Section 409A of the Internal Revenue Code of 1986 to the directors selected by the administrator. All directors are eligible to participate in this Director Equity Incentive Plan.
For the year ended December 31, 2025, no options to purchase Class A Ordinary Shares were granted to our directors under the Director Equity Incentive Plan.
The following sets forth a summary of material terms of the Director Equity Incentive Plan, which are qualified in their entirety by the Director Equity Incentive Plan filed as Exhibits 4.25 to this annual report.
Authorized Shares. Subject to the adjustment provisions in the Director Equity Incentive Plan, the maximum aggregate number of the Class A Ordinary Shares that may be subject to Awards under the Director Equity Incentive Plan shall be 1,000,000 Class A Ordinary Shares.
If an Award is forfeited, repurchased, expired, or settled in cash, the related Class A Ordinary Shares will be available for future grants or sales under the Director Equity Incentive Plan (unless it has terminated). However, Class A
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Ordinary Shares that have already been issued will not be returned to the Director Equity Incentive Plan or available for future distribution.
Plan Administration. Our Board, the CEO or any other executive officer(s) designated by our Board from time to time (the “administrator”) will have authority to administer the Director Equity Incentive Plan, and the administrator’s decision (save as otherwise provided herein) shall be final and binding on all parties. The administrator will have authority, in its discretion, to (i) select directors eligible for Awards, (ii) determine the number of shares to be covered by each Award, (iii) approve forms of award agreements or amend any outstanding award agreement, (iv) determine the terms and conditions of the Awards, including vesting and restrictions, (v) construe, interpret the terms of or reconcile any inconsistency in this Director Equity Incentive Plan, and (vi) exercise all powers granted under the Director Equity Incentive Plan, prescribe, amend and rescind rules and regulations relating thereto.
Types of Awards. The Director Equity Incentive Plan permits the grant of the grant of restricted share awards, restricted share units and other share-based awards or cash-based awards.
Eligibility. Only our directors are eligible for the Director Equity Incentive Plan.
Award Agreement. Each Award will be evidenced by an award agreement that will specify the period of restriction (if any), the number of shares granted, and such other terms and conditions as the administrator, in its sole discretion, will determine.
Term of the Plan. The Director Equity Incentive Plan will terminate on the day before the tenth anniversary of October 23, 2023, unless otherwise terminated earlier in accordance with the Director Equity Incentive Plan. The administrator may at any time amend, alter, suspend or terminate this Director Equity Incentive Plan.
Vesting Schedule. Subject to the terms and conditions set forth in the award agreement, the shares covered the Award shall vest in accordance with the vesting schedule set forth on the cover page of the award agreement. The administrator may accelerate vesting of restricted stock awards or restricted stock units.
Non-Transferability of Awards. Unless otherwise determined by the administrator, Awards may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, the administrator may permit, under such terms and conditions that it deems appropriate in its sole discretion, a participant to transfer any Award to any person or entity that the administrator so determines.
Change in Control. In the event of a change of control as defined in the Director Equity Incentive Plan, each outstanding Award will be treated as the Administrator determines without a participant’s consent.
Termination. The administrator may at any time amend, alter, suspend or terminate this Director Equity Incentive Plan. No amendment, alteration, suspension or termination of this Director Equity Incentive Plan will materially impair the rights of any participant, unless mutually agreed otherwise between the participant and the administrator, which agreement must be in writing and signed by the participant and the Company. Termination of this Director Equity Incentive Plan will not affect the administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under this Director Equity Incentive Plan prior to the date of such termination.
Insurance and Indemnification
To the extent permitted under Cayman Islands law, we are empowered to indemnify our directors against any liability they incur by reason of their directorship. We have obtained directors’ and officers’ insurance to insure such persons against certain liabilities. Insofar as indemnification of liabilities arising under the Securities Act may be permitted to the Board, executive officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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C.Board Practices
Board of Directors
Our Board consists of six directors as of the date of this annual report. Of these six directors, three are independent. These three independent directors were selected and approved by our current nominating committee through a process that sought to find diversity of experience, expertise and perspectives, as well as deep understandings of different businesses, practices and markets relevant to our operations. A director may vote in respect of any contract or transaction in which he/she is interested provided that the nature of the interest of any director in any such contract or transaction is disclosed at or prior to its consideration and any vote thereon, and such director may be counted in the quorum at any meeting of directors at which any such contract or transaction is considered. A director who is interested in a contract or proposed contract with us must declare the nature of his interest at a meeting of the directors. None of our non-employee directors has a service contract with us that provides for benefits upon termination of service.
Duties of Directors
Under the laws of the Cayman Islands, our directors owe fiduciary duties to our Company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our Company a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our Articles, as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. In certain limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.
Our Board has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our Board include, among others:
•convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings;
•declaring dividends and distributions;
•appointing officers and determining the term of office of the officers;
•exercising the borrowing powers of our Company and mortgaging the property of our Company; and
•approving the transfer of shares in our Company, including the registration of such shares in our register of members.
Terms of Directors and Executive Officers
Our Board is divided into three classes: Class I, Class II and Class III. The number of directors in each class shall be as nearly equal as possible. On October 28, 2022, our Board adopted a resolution that Philip Tsao be classified as a Class I Director, each of Michael Aw and Chung-Hui (Christine) Jih be classified as a Class II Director, and each of Alice H. Chang, Jau-Hsiung Huang and Meng-Shiou (Frank) Lee be classified as a Class III Director. The Class I directors shall stand appointed for a term expiring at our first annual general meeting, the Class II directors shall stand appointed for a term expiring at our second annual general meeting, and the Class III directors shall stand appointed for a term expiring at our third annual general meeting. Commencing at our first annual general meeting, and at each annual general meeting thereafter, directors appointed to replace those directors whose terms expire shall be appointed for a term of office to expire at the third succeeding annual general meeting after their appointment. If no replacement directors are appointed, the existing directors shall be automatically re-appointed for a further term of office to expire at the third succeeding annual general meeting after their re-appointment.
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Our officers are elected by and serve at the discretion of the Board. Their terms shall be decided by the Board.
Board Committees
Our Board has an audit committee. The audit committee’s members and functions are described below.
Audit Committee
The audit committee consists of three directors, Meng-Shiou (Frank) Lee, Philip Tsao and Chung-Hui (Christine) Jih. Philip Tsao is the chairperson of the audit committee. Mr. Meng-Shiou (Frank) Lee satisfies the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Each of the audit committee members satisfies the requirements for an “independent director” within the meaning of the NYSE listing rules and the criteria for independence set forth in Rule 10A-3 of the Exchange Act.
The audit committee oversees our accounting and financial reporting processes. The audit committee is responsible for, among other things:
•the quality and integrity of our financial statements,
•internal control over financial reporting and disclosure controls and procedures,
•our compliance with legal and regulatory requirements,
•our independent registered public accounting firm’s qualifications and independence,
•the performance of our internal audit function, and
•the performance of our independent registered public accounting firm.
Director Nominations
Our Board will consider director candidates recommended for nomination by our shareholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of shareholders (or, if applicable, a special meeting of shareholders). Our shareholders that wish to nominate a director for election to our Board should follow the procedures set forth in our Articles.
In general, in identifying and evaluating nominees for directors, our Board considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, character, and the ability to exercise sound judgment, and relevant skills and experience, including financial literacy, and experience in the context of the needs of our Board.
D.Employees
See “Item 4. Information on the Company — B. Business Overview — Employees and Human Capital.”
E.Share Ownership
Except as specifically noted, the following table sets forth information regarding the beneficial ownership of Ordinary Shares to the extent known to us as of March 6, 2026 by:
•each person who beneficially owns 5.0% or more of the outstanding Ordinary Shares;
•each person who is our executive officer or director; and
•all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to, or the power to receive the economic benefit of ownership of, the securities. In computing the
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number of shares beneficially owned by a person and the percentage ownership of that person, shares that the person has the right to acquire within 60 days are included, including through the exercise of any option or other right or the conversion of any other security. However, these shares are not included in the computation of the percentage ownership of any other person. Each holder of Class A Ordinary Shares is entitled to one vote per share, and each holder of Class B Ordinary Shares is entitled to ten (10) votes per share.
The total number of Ordinary Shares outstanding as of March 6, 2026 is 101,848,671 shares, consisting of 85,059,953 Class A Ordinary Shares and 16,788,718 Class B Ordinary Shares.
| Beneficial Owners | Class A Ordinary Shares | % of Class† | Class B Ordinary Shares | % of Class† | % of voting power†† | |||||||||||||||||||||||||||
| Directors and Executive Officers: | ||||||||||||||||||||||||||||||||
Alice H. Chang(1) | 597,256 | 0.7 | % | 16,788,718 | 100 | % | 66.6 | % | ||||||||||||||||||||||||
| Wei-Hsin Tsen (Johnny Tseng) | 762,330 | 0.9 | % | — | — | 0.3 | % | |||||||||||||||||||||||||
| Weichuan (Wayne) Liu | 353,471 | 0.4 | % | — | — | 0.1 | % | |||||||||||||||||||||||||
| Pin-Jen (Louis) Chen | 118,062 | 0.1 | % | — | — | 0.1 | % | |||||||||||||||||||||||||
| Jau-Hsiung Huang | 148,274 | 0.2 | % | — | — | 0.01 | % | |||||||||||||||||||||||||
| Hsiao-Chuan (Iris) Chen | 69,932 | 0.1 | % | — | — | 0.03 | % | |||||||||||||||||||||||||
| Michael Aw | — | — | — | — | — | |||||||||||||||||||||||||||
| Meng-Shiou (Frank) Lee | — | — | — | — | — | |||||||||||||||||||||||||||
| Philip Tsao | 5,311 | (2) | 0.01 | % | — | — | 0.00 | % | ||||||||||||||||||||||||
| Chung-Hui (Christine) Jih | — | — | — | — | — | |||||||||||||||||||||||||||
| All directors and executive officers as a group | 2,054,636 | 2.4 | % | 16,788,718 | 100 | % | 67.2 | % | ||||||||||||||||||||||||
| Five Percent or More Shareholders: | ||||||||||||||||||||||||||||||||
| GOLDEN EDGE CO., LTD. | — | — | 10,622,620 | (1) | 63.3 | % | 42.0 | % | ||||||||||||||||||||||||
| DVDonet.com. Inc | — | — | 4,669,346 | (1) | 27.8 | % | 18.5 | % | ||||||||||||||||||||||||
| CyberLink International | 36,960,961 | (3) | 43.5 | % | — | — | 14.6 | % | ||||||||||||||||||||||||
| Provident Acquisition Holdings Ltd. | 14,491,467 | (4) | 15.6 | % | — | — | 5.7 | % | ||||||||||||||||||||||||
Yi-Chen Huang | 4,567,425 | (5) | 5.4 | % | — | — | 1.8 | % | ||||||||||||||||||||||||
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† For each person or group, percentage of class is calculated by dividing the number of Class A Ordinary Shares or Class B Ordinary Shares beneficially owned by such person or group by the total Class A Ordinary Shares or Class B Ordinary Shares, respectively. The percentages are calculated based on 85,059,953 Class A Ordinary Shares and 16,788,718 Class B Ordinary Shares.
†† For each person or group, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of Class A Ordinary Shares and Class B Ordinary Shares. Each holder of Class A Ordinary Shares is entitled to one vote per share and each holder of Class B Ordinary Shares is entitled to ten votes per share on all matters submitted to them for a vote.
(1)Alice H. Chang beneficially owns (a) 10,622,620 Class B Ordinary Shares held by GOLDEN EDGE CO., LTD., a British Virgin Islands company in which Alice H. Chang has a controlling interest, (b) 4,669,346 Class B Ordinary Shares held by DVDonet.com. Inc., a British Virgin Islands company wholly owned by World Speed Company Limited, which is a British Virgin Islands company wholly owned by Alice H. Chang, (c) 523,008 Class B Ordinary Shares held by World Speed Company Limited, a British Virgin Islands company wholly owned by Alice H. Chang, (d) 973,744 Class B Ordinary Shares held by Alice H. Chang, and (e) 597,256 Class A Ordinary Shares held by Alice H. Chang.
(2)Represents Class A Ordinary Shares indirectly held by Philip Tsao through Perfect AA Corp.
(3)The above information is based on the Schedule 13D filed by CyberLink, among others, on February 13, 2023.
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(4)Represents (i) 4,891,467 Class A Ordinary Shares issued as entitlement shares for the cancellation of 5,327,500 Provident Class B Ordinary Shares previously held by the Sponsor, (ii) 3,000,000 Class A Ordinary Shares consisting of (a) 2,000,000 Class A Ordinary Shares converted from 2,000,000 Provident Class A Ordinary Shares acquired by an affiliate of the Sponsor in connection with the FPA Investment, and (b) 1,000,000 Class A Ordinary Shares issuable upon the exercise of 1,000,000 Perfect Forward Purchase Warrants acquired by an affiliate of the Sponsor in connection with the FPA Investment, and (iii) 6,600,000 Class A Ordinary Shares issuable upon the exercise of 6,600,000 Warrants converted from 6,600,000 Private Placement Warrants previously held by the Sponsor. The number of Class A Ordinary Shares disclosed herein does not include 1,175,624 Sponsor Earnout Promote Shares issuable to the Sponsor upon the occurrence of certain milestones. In accordance with Rule 13d-3(d)(1)(i) under the Exchange Act, Class A Ordinary Shares not outstanding which are subject to Warrants owned by the Sponsor and its affiliate shall be deemed to be outstanding for the purpose of computing their percentage ownership of outstanding Class A Ordinary Shares but shall not be deemed to be outstanding for the purpose of computing the percentage ownership of Class A Ordinary Shares by any other person.
(5)Yi-Chen Huang beneficially owns (a) 4,333,816 Class A Ordinary Shares held by Ideal Max Management Limited, a British Virgin Islands company wholly owned by Mr. Yi-Chen Huang and (b) 233,609 Class A Ordinary Shares held by Yi-Chen Huang. The above information is based on the Schedule 13G filed by Yi-Chen Huang, among others, on February 2, 2024.
To our knowledge, as of March 6, 2026, 41,405,708 Class A Ordinary Shares, or 48.67% of the total outstanding Class A ,Ordinary Shares, were held by three record holders in the United States (including Cede & Co., the nominee of the Depository Trust Company). Because a portion of these shares are held by brokers or other nominees, we cannot ascertain the exact number of Class A Ordinary Shares ultimately held by holders in the United States. As of March 6, 2026, none of our Class B Ordinary Shares was held by record holders in the United States.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of the Company.
F.Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
There was no erroneously awarded compensation that was required to be recovered pursuant to the Company’s clawback policy during the fiscal year ended December 31, 2025.
Item 7. Major Shareholders and Related Party Transactions
A.Major Shareholders
Please refer to “Item 6. Directors, Senior Management and Employees — E. Share Ownership.”
B.Related Party Transactions
Agreements Related to the Business Combination
In connection with the Business Combination, certain agreements were entered into between Perfect, Provident and certain related parties following the Business Combination. These agreements include:
Sponsor Letter Agreement
On March 3, 2022, Perfect, Provident and the Sponsor entered into the Sponsor Letter Agreement. Subject to the terms and conditions contemplated by the Sponsor Letter Agreement, upon the occurrence of a Sponsor Earnout Event (as defined below) during the period from October 28, 2022 to October 28, 2027 (the “Earnout Period”), Perfect will issue up to 1,175,624 Class A Ordinary Shares (the “Sponsor Earnout Shares”) to Sponsor, with (i) 50% of the Sponsor Earnout Shares issuable if over any twenty (20) trading days within any 30-trading-day period during the Earnout Period the daily volume-weighted average price of the Class A Ordinary Shares is greater than or equal to $11.50, and (ii) 50% of the Sponsor Earnout Shares issuable if over any 20 trading days within any 30-trading-day period during the Earnout Period
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the daily volume-weighted average price of the Class A Ordinary Shares is greater than or equal to $13.00 (each, a “Sponsor Earnout Event”). In the event that, during the Earnout Period, there is a Change of Control (as defined in the Sponsor Letter Agreement) (or a definitive agreement providing for a Change of Control has been entered into prior to the expiration of the Earnout Period and such Change of Control is ultimately consummated) or any liquidation, bankruptcy or similar proceeding of Perfect, then any Sponsor Earnout Shares that have not been previously issued by Perfect (whether or not previously earned) will be deemed earned and will be issued by Perfect to the Sponsor upon such event, unless in the case of a Change of Control, the value of the consideration to be received by the holders of Ordinary Shares in such transaction is less than the share price threshold applicable to the applicable Sponsor Earnout Event.
New Registration Rights Agreement
On October 28, 2022, Perfect, the Sponsor and certain shareholders of Perfect entered into a New Registration Rights Agreement containing customary registration rights for the Sponsor and the shareholders of Perfect who are parties thereto.
Forward Purchase Agreements — FPA Investment
In connection with the Provident Initial Public Offering, Provident entered into a Forward Purchase Agreements and a joinder agreement with the FPA Investors, pursuant to which, the FPA Investors purchased from Provident an aggregate of 5,500,000 Provident Class A Ordinary Shares and an aggregate of 2,750,000 Forward Purchase Warrants for an aggregate purchase price of $55,000,000 on October 27, 2022. In connection with the Business Combination, each Provident Class A Ordinary Share and Forward Purchase Warrant issued in the FPA Investment was cancelled in exchange for one Class A Ordinary Share and one Warrant, respectively.
Assignment, Assumption and Amendment Agreement
On October 28, 2022, Perfect, Provident, and Continental entered into an Assignment, Assumption and Amendment Agreement, pursuant to which, Provident assigned to Perfect all of its rights, interests, and obligations in and under the Warrant Agreement, and the terms and conditions of such Warrant Agreement were amended to reflect Perfect’s assumption of the Provident Warrants.
Related Party Transactions with CyberLink and Its Affiliates
Licensing Agreements
Cross License Agreement and Assignment Agreement — PerfectCam
On August 8, 2017, Perfect Corp. entered into a cross license agreement with CyberLink (the “PerfectCam Cross License Agreement”), pursuant to which, (i) Perfect grants to CyberLink a non-exclusive and non-transferable worldwide license to use its AR technology of facial feature detection and makeup generation to be embedded into CyberLink’s PerfectCam software, and CyberLink may sublicense its own developed SDK of PerfectCam software derived from Perfect’s AR technology to its customers and other third parties; and (ii) CyberLink grants to Perfect a non-exclusive and non-transferable worldwide license to use, reproduce, distribute and sell PerfectCam software and the derivative work created and developed by or on behalf of CyberLink based on the AR technology provided by us under the PerfectCam Cross License Agreement. CyberLink shall share 25% of the net revenue from the sales of PerfectCam and 50% of the net revenue from the sublicense of the SDK of PerfectCam software. The term of the PerfectCam Cross License Agreement is three years, commencing from August 8, 2017 and will automatically renew for an additional three years, unless either party provides a written notice of termination to the other party at least one year prior to the expiration of relevant term.
On January 1, 2018, Perfect Corp., Perfect Taiwan, a wholly-owned subsidiary of Perfect, and CyberLink entered into an assignment agreement, pursuant to which, Perfect agreed to assign all its rights and obligations under the PerfectCam Cross License Agreement to Perfect Taiwan, and as a result, Perfect Corp. was released of all liabilities accrued thereunder, and Perfect Taiwan succeeded Perfect Corp. and undertook all the rights and obligations under the PerfectCam Cross License Agreement.
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License Agreement — YouCam
On November 30, 2019, Perfect Taiwan entered into a license agreement with CyberLink (the “YouCam License Agreement”), pursuant to which, Perfect Taiwan grants to CyberLink a non-exclusive, non-transferable and non-sublicensable worldwide license to use its AR technology to be embedded into CyberLink’s YouCam software and the SDK thereof. CyberLink shall pay to Perfect Taiwan (i) a royalty calculated based on 12% of net revenue of sales of YouCam and (ii) a royalty fee of $1 for each copy of YouCam software sold. The term of the YouCam License Agreement is three years, commencing from November 30, 2019 and will automatically renew for an additional one year, unless either party provides written notice of termination to the other party at least one year prior to the expiration of relevant term. The YouCam License Agreement was automatically renewed for an addition one-year term each year from 2022 and remains in effect for the 2025-2026 term.
Services Outsourcing Agreement
On January 1, 2019, Perfect Taiwan entered into a services outsourcing agreement with CyberLink, pursuant to which CyberLink agrees to provide support and assistance in legal services, network infrastructure and equipment maintenance services, marketing activity support, and employee training programs to Perfect Taiwan at an hourly rate of NTD1,000, NTD900, NTD750, and NTD700, respectively. The initial term of this services outsourcing agreement is one year commencing from January 1, 2019, and will automatically renew for an additional one year on each anniversary, unless either party provides written notice of termination to the other party at least 30 days prior to the expiration of the relevant term.
Rental Agreements
On June 1, 2017, Perfect Taiwan entered into a property lease agreement with CyberLink, pursuant to which, Perfect Taiwan will lease premises located on the 14th floor of No. 98, No. 98-1, No. 100 and No. 100-1, Minquan Rd., Xindian Dist., New Taipei City 231, Taiwan, at a monthly rent of NTD538,842, for the use as office space. The initial lease term was for two years, commencing from June 1, 2017, with rent paid to CyberLink on a monthly basis. In 2019, 2021,2023 and 2025, Perfect Taiwan renewed this agreement under the same terms as the original agreement, respectively.
On November 26, 2021, Perfect Taiwan entered into another property lease agreement with CyberLink, pursuant to which, Perfect Taiwan will lease premises located on 6F-1, No. 98, Minquan Rd., Xindian Dist., New Taipei City 231, Taiwan, at a monthly rent of NTD116,530, for the use as office space. The initial lease term was for two years, commencing from December 1, 2021, with rent paid to CyberLink on a monthly basis. In 2023 and 2025, Perfect Taiwan renewed this agreement under the same terms as the original agreement, respectively.
On May 15, 2024, Perfect Taiwan entered into a property lease agreement with ClinJeff Corp., pursuant to which, Perfect Taiwan will lease premises located on 4F-1, No. 98, Minquan Rd., Xindian Dist., New Taipei City 231, Taiwan, at a monthly rent of NT$ 116,530, for the use as office space. The lease term was for two years, commencing from May 15, 2024 to April 30, 2026, and will not automatically renew, unless both parties negotiate the leasing terms three months prior to the expiration of this agreement, and sign a written lease agreement one month prior to the expiration of this agreement. The rent shall be paid to ClinJeff Corp. on a monthly basis.
On January 1, 2020, Perfect Corp. (Japan), a wholly-owned subsidiary of Perfect, organized and existing under the laws of Japan (“Perfect Japan”), entered into an office sharing agreement, with CyberLink Inc., a wholly-owned subsidiary of CyberLink, organized and existing under the laws of Japan (“CyberLink Japan”), pursuant to which, Perfect Japan will share a portion of CyberLink Japan’s premises at a monthly sharing fee of JPY805,407. The initial term was for one year commencing from January 1, 2020, and will automatically renew for an additional one year on each anniversary, unless either party provides written notice of termination to the other party at least 30 days prior to the expiration of the relevant term. The monthly sharing fee shall be paid to CyberLink Japan on a quarterly basis. On June 1, 2021, Perfect Japan entered into an amendment to this agreement, pursuant to which the monthly sharing fee was adjusted from JPY805,407 to JPY978,128.
Other Related Party Transactions
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees — B. Compensation.”
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Share Incentive Plan
See “Item 6. Directors, Senior Management and Employees — B. Compensation — Share Incentive Plan.”
Director Equity Incentive Plan
See “Item 6. Directors, Senior Management and Employees — B. Compensation — Director Equity Incentive Plan.”
Shareholders Agreement
Perfect Corp., certain of its shareholders and Alice H. Chang entered into the Second Amended and Restated Shareholders Agreement on December 18, 2020 (the “SHA”), which was further amended by Amendment No. 1 to the Second Amended and Restated Shareholders Agreement of Perfect Corp. on October 5, 2021. A copy of the SHA and its amendment is filed as Exhibits 10.2 and 10.16 of the Form F-4 filed by us on September 19, 2022, respectively. According to the SHA and its amendment, our Fourth Amended and Restated Memorandum and Articles of Association shall provide that, subject to certain requirements of shareholding percentage, each of (i) Ningbo New Summit Private Equity Fund I L.P., (ii) Taobao China Holdings Limited, (iii) CyberLink International, and (iv) Goldman Sachs (as defined in the SHA, comprising of Goldman Sachs Asia Strategic II Pte. Ltd., StoneBridge 2020, L.P. and StoneBridge 2020 Offshore Holdings II, L.P.) may appoint one (1) director. Such director appointment rights were reflected in our Fourth Amended and Restated Memorandum and Articles of Association as well as our Fifth Amended and Restated Memorandum and Articles of Association. We have adopted the Articles which no longer contains such rights.
Director and Officer Indemnification
We have entered into indemnification agreements with our directors and executive officers. These agreements will require us to indemnify these individuals to the fullest extent permitted by Cayman Islands law against liabilities that may arise by reason of their directorship, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
C.Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
A.Consolidated Statements and Other Financial Information
We have appended our consolidated financial statements filed as part of this annual report on Form 20-F.
B.Legal Proceedings
See “Item 4. Information on the Company — B. Business Overview — Legal Proceedings.”
C.Dividend Policy
We have not declared or paid dividends in the past. We may declare and distribute dividends in the future, but we currently do not have a fixed dividend policy. The amount, timing, and whether or not we actually declare or distribute dividends at all is at the discretion of our board of directors and will depend on a variety of factors, including, among others, our general financial condition, results of operations, capital requirements and surplus, contractual restrictions and other factors that our board of directors may deem relevant. We may formulate and adopt a formal dividend policy governing our dividend distribution in the future.
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The directors may from time to time declare dividends (including interim dividends) and other distributions on our shares in issue and authorize payment of the same out of our funds lawfully available therefor. In addition, our shareholders may declare dividends by ordinary resolution, but no dividend may exceed the amount recommended by the directors. Under the laws of the Cayman Islands, dividends may be paid out of either profit or share premium account; provided that in no circumstances may a dividend be paid if this would result in us being unable to pay our debts as they fall due in the ordinary course of business.
As an exempted company with limited liability incorporated under the laws of the Cayman Islands structured as a holding company, we may need dividends and other distributions on equity from our Taiwan subsidiary to satisfy our liquidity requirements. Current Taiwan regulations permit our Taiwan subsidiary to pay dividends to its respective shareholders only out of its accumulated profits, if any, which shall first make up previous losses and set aside at least 10% of its accumulated profits each year. These reserves are not distributable as cash dividends. Furthermore, if our Taiwan subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the ability of our Taiwan subsidiary to distribute dividends or to make payments to us may restrict our ability to satisfy our liquidity requirements. In addition, the dividend payments by our Taiwan subsidiary to us shall be subject to a withholding tax of 21%. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in Taiwan — Our Taiwan subsidiary is subject to certain restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy the liquidity requirements.”
D.Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements which is included in this annual report.
Item 9. The Offer and Listing
A.Offering and Listing Details
Since October 31, 2022, our Class A Ordinary Shares and Warrants have been listed on the NYSE under the symbols “PERF” and “PERF WS,” respectively.
B.Plan of Distribution
Not applicable.
C.Markets
Since October 31, 2022, our Class A Ordinary Shares and Warrants have been listed on the NYSE under the symbols “PERF” and “PERF WS,” respectively.
D.Selling Shareholders
Not applicable.
E.Dilution
Not applicable.
F.Expenses of the Issue
Not applicable.
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Item 10. Additional Information
A.Share Capital
Not applicable.
B.Memorandum and Articles of Association
By special resolutions passed on October 25, 2022, our shareholders adopted our Articles, effective on and from October 28, 2022. The information called for by this Item is set forth in Exhibit 2.5 to this annual report and incorporated by reference herein. With respect to the powers of our directors, please refer to “Item 6. Directors, Senior Management and Employees — C. Board Practices — Duties of Directors.”
C.Material Contracts
On December 23, 2024, Perfect Taiwan, our wholly-owned subsidiary, entered into an securities purchase agreement with Farfetch US Holdings, Inc. (“Farfetch”), pursuant to which, Perfect Taiwan agreed to acquire 100% of the issued and outstanding equity interests in Wannaby owned by Farfetch, for a consideration in the range of $5.5 million to $6.0 million. On January 7, 2025, we completed the acquisition of Wannaby. Wannaby, along with its wholly-owned subsidiary, Wannaby UAB, now became wholly-owned subsidiaries of Perfect.
Other than the above, for the two years immediately preceding the date of this annual report, we have not entered into any additional material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions” or elsewhere in this annual report.
D.Exchange Controls
Exchange Controls in Cayman Islands
There is no exchange control legislation under Cayman Islands law and accordingly there are no exchange control regulations imposed under Cayman Islands law. There are no exchange controls restrictions on payment of dividends, interest or other payments to shareholders. Cayman law and our Sixth Amended and Restated Memorandum and Articles of Association do not impose any material limitations on the right of non-residents or foreign owners to hold or vote our ordinary shares.
Exchange Controls in Taiwan
See “Item 4. Information on the Company — B. Business Overview — Regulation — Exchange Controls in Taiwan.”
E.Taxation
United States Federal Income Tax Considerations
This section describes the material United States federal income tax consequences to a U.S. holder (as defined below) of owning and disposing of our Class A Ordinary Shares and Warrants (the “Securities”). It applies to you only if you hold your Securities as capital assets for tax purposes. This section addresses only United States federal income taxation and does not discuss all of the tax consequences that may be relevant to you in light of your individual circumstances, including foreign, state or local tax consequences, estate and gift tax consequences, and tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax. This section does not apply to you if you are a member of a special class of holders subject to special rules, including:
•a dealer in securities,
•a trader in securities that elects to use a mark-to-market method of accounting for securities holdings,
•a tax-exempt organization,
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•a financial institution,
•an insurance company,
•a person that actually or constructively owns 10% or more of the combined voting power of our voting stock or of the total value of our stock,
•a person that holds Securities as part of a straddle or a hedging or conversion transaction,
•a person that purchases or sells Securities as part of a wash sale for tax purposes, or
•a person whose functional currency is not the U.S. dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect. These authorities are subject to change, possibly on a retroactive basis. There is currently no comprehensive income tax treaty between the United States and Cayman Islands.
If an entity or arrangement that is treated as a partnership for United States federal income tax purposes holds the Securities, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the Securities should consult its tax advisor with regard to the United States federal income tax treatment of an investment in the Securities.
You are a U.S. holder if you are a beneficial owner of Securities and you are, for United States federal income tax purposes:
•an individual citizen or resident of the United States,
•a domestic corporation,
•an estate whose income is subject to United States federal income tax regardless of its source, or
•a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.
You should consult your own tax advisor regarding the United States federal, state and local and other tax consequences of owning and disposing of Securities in your particular circumstances.
Tax Treatment of Class A Ordinary Shares
PFIC Classification
The tax consequences of holding and disposing of your Class A Ordinary Shares depends upon whether we are a passive foreign investment company, or PFIC, for United States federal income tax purposes. For the reasons discussed below, we believe that we were a PFIC in fiscal year 2025 and we may be a PFIC in fiscal year 2026 and future years. However, the determination of whether we are a PFIC is a factual determination that is made annually and thus may be subject to change.
In general, we will be a PFIC for a taxable year if, after applying certain look-through rules:
•at least 75% of our gross income for the taxable year is passive income or
•at least 50% of the value, generally determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income.
Passive income generally includes dividends, interest, gains from the sale or exchange of investment property, rents and royalties (other than certain rents and royalties derived in the active conduct of a trade or business) and certain other specified categories of income. In addition, cash and other assets readily convertible into cash are generally considered passive assets. If a foreign corporation owns at least 25% by value of the stock of another corporation, the
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foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.
Because most of our assets are assets that produce passive income, we believe that we were a PFIC in fiscal year 2025 and we may be a PFIC in fiscal year 2026 and future years. Except as described below under “—Tax Consequences If We Are Not a PFIC,” the discussion below assumes that we are and will continue to be a PFIC, and that your Class A Ordinary Shares will accordingly be subject to the special rules governing stock in a PFIC.
The tax consequences to you of holding and disposing of our Class A Ordinary Shares depends upon whether you make a mark-to-market election with respect to your Class A Ordinary Shares. Accordingly, the discussion below separately addresses the tax consequences if you do not make such an election and the tax consequences if you do make such an election.
Because we do not intend to provide certain required information, you will not be able to make an election to have us treated as a “qualified electing fund” for United States federal income tax purposes.
If you own Class A Ordinary Shares during any year that we are a PFIC with respect to you, you will generally be required to file Internal Revenue Service, or IRS, Form 8621, subject to a de minimis exception.
Tax Consequences If You Do Not Make a Mark-to-Market Election
This section describes the tax consequences if you do not make the mark-to-market election described below under “—Tax Consequences If You Make a Mark-to-Market Election.”
Dividends. The tax treatment of distributions with respect to the Class A Ordinary Shares depends upon whether the distribution is an “excess distribution” under the rules described below. The discussion in this subsection only applies to distributions that are not excess distributions under the rules described below.
The gross amount of any distribution we pay out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) is subject to United States federal income taxation as ordinary dividend income. The dividend is taxable to you when you receive the dividend, actually or constructively, and will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. In addition, the dividend will not be eligible for the preferential tax rates that apply to qualified dividend income received by non-corporate U.S. holders. Dividends will be income from sources outside the United States and will generally be “passive” income for purposes of computing the foreign tax credit allowable to you.
Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of your tax basis in the Class A Ordinary Shares and thereafter as gain from the sale or disposition of the Class A Ordinary Shares. However, we do not maintain calculations of our earnings and profits in accordance with United States federal income tax accounting principles. You should therefore assume that any distribution with respect to our Class A Ordinary Shares will be reported as ordinary dividend income.
Sale or Other Disposition of Class A Ordinary Shares. If you sell or otherwise dispose of your Class A Ordinary Shares, you will generally recognize gain or loss equal to the difference between the U.S. dollar value of the amount you realize and your tax basis, determined in U.S. dollars, in your Class A Ordinary Shares. Any such gain will be subject to the rules with respect to excess distributions described below and thus will be subject to tax at the rates applicable to ordinary income, while any such loss will be a capital loss. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. For purposes of the excess distribution rules described below, you will generally be treated as having disposed of your Class A Ordinary Shares if you pledge your Class A Ordinary Shares as security for a loan, unless you would recognize a loss for United States federal income purposes upon a disposition of your Class A Ordinary Shares.
Excess Distributions. Any distributions to you during a single taxable year (other than any amounts you receive during the first year of your holding period in the Class A Ordinary Shares) that are greater than 125% of the average annual distributions received by you in respect of the Class A Ordinary Shares during the three preceding taxable years or, if shorter, your holding period for the Class A Ordinary Shares that preceded the taxable year in which you receive the distribution, will be treated as excess distributions. This rule will apply irrespective of whether the distribution exceeds our current and accumulated earnings and profits. Additionally, any gain you realize on the sale or other disposition of your Class A Ordinary Shares will be treated as an excess distribution. Excess distributions are subject to the following special rules:
•the excess distribution will be allocated ratably over your holding period for the Class A Ordinary Shares,
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•the amount allocated to the taxable year in which you received the excess distribution and any year in which we were not a PFIC with respect to you will be taxed as ordinary income,
•the amount allocated to each other prior year will be taxed at the highest tax rate in effect for that year,
•the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such prior year, and
•special rules apply in determining the foreign tax credit limitation for any foreign taxes that are imposed with respect to any excess distributions that you realize with respect to your Class A Ordinary Shares.
Except to the extent inconsistent with the rules described above, the discussion under “—Dividends” above will apply to distributions that are treated as excess distributions.
If we are a PFIC for any taxable year, to the extent any of our subsidiaries are also PFICs, you will generally be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in the proportion which the value of our shares that you own bears to the value of all of our shares, and you will generally be subject to the tax consequences described above (including the Form 8621 requirement described above) with respect to the shares of such lower-tier PFICs you would be deemed to own. As a result, if we receive a distribution from any lower-tier PFIC or sell shares in a lower-tier PFIC, you will generally be subject to tax under the excess distribution rules described above in the same manner as if you had held your proportionate share of the lower-tier PFIC stock directly, even if we do not distribute such amounts to you. However, if you are treated as receiving an excess distribution in respect of a lower-tier PFIC, you would increase your tax basis in your shares by the amount of such distribution. In addition, if we distribute such amount to you with respect to your shares, you would not include the distribution in income but you would rather reduce your tax basis in your shares by the amount of the distribution. The application of the PFIC rules to your indirect ownership of any lower-tier PFIC that we hold is complex and uncertain, and you should therefore consult your tax advisor regarding the application of such rules to your ownership of our shares.
Tax Consequences If You Make a Mark-to-Market Election
If we are a PFIC and our Class A Ordinary Shares are treated as marketable stock, you may make a mark-to-market election with respect to your Class A Ordinary Shares. Our Class A Ordinary Shares will be treated as marketable stock if regularly traded on a national securities exchange that is registered with the SEC, including the NYSE (on which the Class A Ordinary Shares are listed).
Our Class A Ordinary Shares will be considered regularly traded during any calendar year during which they are traded (other than in de minimis quantities) on at least 15 days during each calendar quarter.
You can make a mark-to-market election with respect to your Class A Ordinary Shares (assuming the requirements described above for making an election are satisfied) by filing an IRS Form 8621 with your federal income tax return for the first taxable year in which you make the election. The election will continue to be in effect for all taxable years in which we are a PFIC and our Class A Ordinary Shares are treated as marketable stock, and you may not revoke the mark-to-market election without the consent of the IRS.
Consequences of Making a Mark-to-Market Election. If you make a mark-to-market election with respect to your Class A Ordinary Shares, distributions and gain from the sale or disposition of Class A Ordinary Shares will generally be treated as described above under “—Tax Consequences If You Do Not Make a Mark-to-Market Election,” except that such distributions and gain will not be subject to the excess distribution rules described above. Instead, in general, you will include as ordinary income in each year that we are a PFIC the excess, if any, of the fair market value of your Class A Ordinary Shares at the end of the taxable year over your adjusted tax basis in your Class A Ordinary Shares. These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. You will also recognize an ordinary loss in each year that we are a PFIC in respect of the excess, if any, of the adjusted tax basis of your Class A Ordinary Shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). Your tax basis in the Class A Ordinary Shares will be adjusted to reflect any such income or loss amounts.
In each year that we are a PFIC any gain you recognize on the sale or other disposition of your shares will be treated as ordinary income and any loss will be ordinary loss to the extent of the net amount of previously included income as a result of the mark-to-market-election, and thereafter will be capital loss.
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Because a mark-to-market election cannot be made for equity interests in any lower-tier PFICs we own, you will continue to be subject to the excess distribution rules with respect to any of our subsidiaries that are PFICs. The interaction of the mark-to-market rules and the rules governing lower-tier PFICs is complex and uncertain, and you should therefore consult your tax advisor regarding the application of such rules to your ownership of our shares.
Tax Consequences If We Are Not a PFIC
If we are not a PFIC in a taxable year, the tax treatment of your Class A Ordinary Shares will depend upon whether the “once a PFIC, always a PFIC” rule applies to your Class A Ordinary Shares. Specifically, under the “once a PFIC, always a PFIC” rule, as long as we were a PFIC at any time during your holding period of the Class A Ordinary Shares, your Class A Ordinary Shares will be treated as stock in a PFIC in a taxable year even if we are not a PFIC in such taxable year, unless (a) you had a valid mark-to-market election in effect during all taxable years in which you held our Class A Ordinary Shares and we were a PFIC or (b) you made a special “purging election” with respect to your Class A Ordinary Shares that effectively removes the PFIC taint from your Class A Ordinary Shares. U.S. holders are urged to consult their tax advisors regarding the application of the “once a PFIC, always a PFIC” rule to their Class A Ordinary Shares and the mechanics and tax consequences of making the purging election described above.
If we are not a PFIC in a taxable year and the “once a PFIC, always a PFIC” rule does not apply to your Class A Ordinary Shares, distributions and gain from the sale or disposition of Class A Ordinary Shares will generally be treated as described above under “—Tax Consequences If You Do Not Make a Mark-to-Market Election,” except that such distributions and gain will not be subject to the excess distribution rules described above. In addition, subject to the following sentence, if you are a non-corporate U.S. holder, dividends will generally be qualified dividend income and will be taxable to you at the preferential rates applicable to long-term capital gains, provided that you hold the Class A Ordinary Shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. However, if we are a PFIC with respect to you in the year prior to the year in which the dividend is paid, the dividend will not be qualified dividend income eligible for the preferential tax rates.
In addition, if you sell or otherwise dispose of Class A Ordinary Shares, the gain you recognize will be capital gain or loss for United States federal income tax purposes. Capital gain of a non-corporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The deductibility of capital losses is subject to limitations.
If we are not a PFIC in a taxable year but the “once a PFIC, always a PFIC” rule applies to your Class A Ordinary Shares in such year, then the rules described above for taxable years in which we are a PFIC will continue to apply to your Class A Ordinary Shares.
Tax Treatment of Warrants
Although not entirely clear, it is likely that under current law the Warrants will not be subject to the PFIC rules even if we are classified as a PFIC. It is possible, however, that the IRS could finalize current proposed regulations with a retroactive effective date that could cause the Warrants to be subject to the PFIC rules for periods prior to the issuance of such regulations if we are classified as a PFIC. In addition, it is possible that the IRS could issue final regulations with a future effective date that could cause the Warrants to be subject to the PFIC rules if we are classified as a PFIC either in the current taxable year or a future taxable year. You should consult your tax advisors regarding the potential application of the PFIC rules to Warrants if we are classified as a PFIC. Except as described below under “—Tax Consequences if the Warrants Are Subject to PFIC Rules,” the remainder of the discussion below assumes that the Warrants will not be subject to any special PFIC rules.
Exercise, Lapse, Redemption or Disposition of a Warrant
Except as discussed below with respect to the cashless exercise of a Warrant, you generally will not recognize gain or loss upon the acquisition of a Class A Ordinary Share on the exercise of a Warrant. Your tax basis in a Class A Ordinary Share received upon exercise of the Warrant generally will be an amount equal to the sum of your tax basis in the Warrant exchanged therefor and the exercise price. It is unclear whether your holding period for the Class A Ordinary Share received will commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant; in either case, the holding period will not include the period during which you held the Warrant. If a Warrant is allowed to lapse unexercised, you generally will recognize a capital loss equal to your tax basis in the Warrant.
The tax consequences of a cashless exercise of a Warrant are not clear under current law. A cashless exercise may not be taxable, either because the exercise is not a realization event or because the exercise is treated as a “recapitalization” for U.S. federal income tax purposes.
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In either tax-free situation, your tax basis in the Class A Ordinary Shares received generally would equal your tax basis in the Warrants. If the cashless exercise is not treated as a realization event, it is unclear whether your holding period for the Class A Ordinary Share will commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant. In either case, the holding period will not include the period during which you held the Warrant. If the cashless exercise is treated as a recapitalization, the holding period of the Class A Ordinary Shares would include the holding period of the Warrants.
It is also possible that a cashless exercise may be treated in part as a taxable exchange in which gain or loss would be recognized. In such event, a portion of the Warrants to be exercised on a cashless basis could, for U.S. federal income tax purposes, be deemed to have been surrendered in consideration for the exercise price of the remaining Warrants, which would be deemed to be exercised. For this purpose, you may be deemed to have surrendered a number of Warrants having an aggregate value equal to the exercise price for the total number of Warrants to be deemed exercised. You would recognize capital gain or loss in an amount equal to the difference between the fair market value of the total number of Warrants deemed surrendered and your tax basis in such Warrants. In this case, your aggregate tax basis in Class A Ordinary Shares received would equal the sum of your initial investment in the Warrants deemed exercised and the exercise price of such Warrants. It is unclear whether your holding period for the Class A Ordinary Shares would commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant.
Because of the absence of authority on the U.S. federal income tax treatment of a cashless exercise, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, you should consult your own tax advisor regarding the tax consequences of a cashless exercise.
If we redeem Warrants for cash or purchase Warrants in an open market transaction, such redemption or purchase generally will be treated as a taxable disposition to you. In such an event, or upon an actual sale or other disposition of your Warrants, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the amount that you realize and your tax basis in your Warrants. Capital gain of a noncorporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.
Possible Constructive Distributions
The terms of each Warrant provide for an adjustment to the number of Class A Ordinary Shares for which the Warrant may be exercised or to the exercise price of the Warrant in certain events. An adjustment which has the effect of preventing dilution generally is not taxable. You would, however, be treated as receiving a constructive distribution from us if, for example, the adjustment increases your proportionate interests in our assets or earnings and profits (e.g., through an increase in the number of Class A Ordinary Shares that would be obtained upon exercise or through a decrease to the exercise price of a Warrant) as a result of a distribution of cash or other property to the holders of Class A Ordinary Shares which is taxable to the U.S. holders of such Class A Ordinary Shares as described under “Tax Treatment of Class A Ordinary Shares” above. Such constructive distribution would be subject to tax as described under that section in the same manner as if you received a cash distribution from us equal to the fair market value of such increased interest, and would increase your adjusted tax basis in your Warrants to the extent that such distribution is treated as a dividend.
Tax Consequences if the Warrants Are Subject to PFIC Rules
As discussed above, although not entirely clear, it is likely that under current law the Warrants will not be subject to the PFIC rules even if we are classified as a PFIC. If, however, the PFIC rules apply to the Warrants, a U.S. holder may not make a mark-to-market election with respect to its Warrants. As a result, if the PFIC rules apply to the Warrants and a U.S. holder sells or otherwise disposes of such Warrants (other than upon exercise of such Warrants), and we were a PFIC at any time during the U.S. holder’s holding period of such Warrants, any gain recognized generally will be treated as an excess distribution, taxed as described above under “Tax Treatment of Class A Ordinary Shares—Tax Consequences If You Do Not Make a Mark-to-Market Election— Excess Distributions”. In addition, if the PFIC rules apply to the Warrants, the holding period of Class A Ordinary Shares acquired upon exercise of the Warrants would, for purposes of the PFIC rules described above, include the period in which the Warrants were held.
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Cayman Islands Tax Considerations
The following summary contains a description of certain Cayman Islands income tax consequences of the acquisition, ownership and disposition of ordinary shares, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase ordinary shares. The summary is based upon the tax laws of Cayman Islands and regulations thereunder as of the date hereof, which are subject to prospective and retroactive change.
The following discussion is not intended as tax advice, does not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands law. Prospective investors should consult their professional advisers on the possible tax consequences of buying, holding or selling any shares under the laws of their country of citizenship, residence or domicile.
Current Cayman Islands Laws
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation, and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us or holders of the Class A Ordinary Shares levied by the government of the Cayman Islands, except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our Company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of the Class A Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the Class A Ordinary Shares, nor will gains derived from the disposal of the Class A Ordinary Shares be subject to Cayman Islands income or corporation tax.
We have been incorporated under the laws of the Cayman Islands as an exempted company with limited liability and, as such, have obtained undertakings from the Governor in Cabinet of the Cayman Islands in the following form:
The Tax Concessions Law
Undertaking as to Tax Concessions
In accordance with section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, the following undertaking is hereby given to Perfect:
(a) that no law which is thereafter enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to Perfect Corp. or its operations; and
(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable:
(i) on or in respect of the shares, debentures or other obligations of Perfect Corp.; or
(ii) by way of the withholding in whole or part, of any relevant payment as defined in Section 6(3) of the Tax Concessions Act (As Revised).
These concessions shall be for a period of 20 years from August 10, 2022.
F.Dividends and Paying Agents
Not applicable.
G.Statement by Experts
Not applicable.
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H.Documents on Display
We have filed this annual report, including exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.
You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices in New York, New York, and Chicago, Illinois. You can also request copies of this annual report, including the exhibits incorporated by reference in this annual report, upon payment of a duplicating fee, by writing to the SEC’s Public Reference Room for information.
The SEC also maintains a website that contains reports, proxy statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov. The information on that website is not a part of this annual report.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
I.Subsidiary Information
Not applicable.
J.Annual Report to Security Holders
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to various risks in relation to financial instruments. The main types of risks are foreign currency risk and interest rate risk. While we may enter into hedging contracts from time to time, any change in the fair value of the contracts could be offset by changes in the underlying value of the transactions being hedged. Furthermore, we do not have foreign-exchange hedging contracts in place with respect to all currencies in which we do business.
Foreign Currency Risk
We are exposed to foreign exchange risk on transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases, receivables and borrowings that are denominated in a currency other than the respective functional currencies of our entities. Our sales are substantially denominated in U.S. dollars, but the functional currencies of our entities also include NT Dollars, Euros, RMB and Japanese yen. Accordingly, changes in exchange rates are reflected in reported income and loss from our international businesses included in our consolidated statements of operations. A continued strengthening of the U.S. dollar would therefore reduce reported revenue and expenses from our international businesses included in our consolidated statements of operations.
Interest on external borrowings is denominated in the currency of the borrowing. Generally, our entities’ external borrowings are denominated in currencies that match the cash flows generated by the underlying operations, which is also the currency of the country in which the entity operates.
For the year ended December 31, 2025, we had $43 thousand of other comprehensive income generated from the exchange differences arising on translation of foreign operations, whereas for the same period in 2024, we had $0.2 million of other comprehensive loss generated from the same.
A hypothetical 10% change in foreign currency exchange rates on our monetary assets and liabilities would not be material to our financial condition or results of operations.
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Based on the above, we believe we are not exposed to significant currency transactional foreign currency risk. While we have not engaged in the hedging of our foreign currency transactions to date and do not enter into any hedging contracts for trading or speculative purposes, we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations.
Interest Rates Risk
Given that we have no indebtedness as of the date of this annual report, the risk arising from the fluctuation of interest rates should only be limited to interest income from interest-bearing assets such as cash and cash-equivalent assets that bear variable interest rates.
Credit Risk
Credit risk refers to the risk of financial loss to us arising from default by the customers or counterparties of financial instruments on the contract obligations. Our main credit risk was that counterparties could not repay in full the accounts receivable based on the agreed terms.
We actively monitor and manage our credit risk by performing credit checks and monitoring credit limits. With respect to banks and financial institutions, we only accept independently rated parties with a minimum rating of “A.” With respect to our customers, our local entities are responsible for managing and analyzing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by our Board.
Liquidity Risk
We manage liquidity risk by monitoring and maintaining a level of cash deemed adequate to finance our operations and mitigate the effects of fluctuations in cash flows. We have sufficient cash and liquidity to finance our operations.
Item 12. Description of Securities Other Than Equity Securities
A.Debt Securities
Not applicable.
B.Warrants and Rights
For a summary of the material provisions governing the Warrants, please refer to Exhibit 2.5 filed as an exhibit to this annual report.
C.Other Securities
Not applicable.
D.American Depositary Shares
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
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Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this annual report, an evaluation has been carried out under the supervision and with the participation of our management, including our CEO and head of finance and accounting, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the U.S. Exchange Act. Based on that evaluation, our management has concluded that, due to the outstanding material weakness described below under “— Internal Control over Financial Reporting,” as of December 31, 2025, our disclosure controls and procedures were not effective. We have begun the remedial steps to address the material weakness in our disclosure controls and procedures as set forth below under “Internal Control over Financial Reporting.”
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our management, with the participation of our CEO and head of finance and accounting, evaluated the effectiveness of our internal control over financial reporting based on the COSO Criteria. Due to the absence of controls and documentation required by COSO Criteria, resulting in a material weakness as described below under “— Internal Control over Financial Reporting,” our management has concluded that our internal control over financial reporting was not effective as of December 31, 2025. Nevertheless, we believe that the consolidated financial statements included in this annual report fairly present our financial position, results of operations and cash flows for the fiscal years covered thereby in all material respects.
Internal Control over Financial Reporting
In connection with the preparation of our financial statements for the fiscal year ended December 31, 2025, our management continued to identify material weakness related to lack of controls and documentation required under Section 404. In 2025, there continues to be an absence of controls and documentation pertaining to risk assessment, process narratives, and descriptions of key controls that we rely upon to establish and maintain an effective internal control over financial reporting. Therefore, our management has determined that this material weakness remains as of December 31, 2025. In 2025, our management prioritized the remediation of this material weakness by enhancing the design and documentation of internal controls, including risk assessment processes, process narratives, and descriptions of key controls. As part of these remediation efforts, our management conducted a comprehensive review of the Company’s internal control framework in accordance with the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Criteria”), including interviews with relevant departments. Risks and controls were identified across entity-level controls, information technology general controls, and significant business process cycles. Draft risk and control matrices, process narratives and flowcharts were developed to formalize the design and documentation of these controls. During this process, our management, together with its external consultants, determined that certain remediation activities require additional time and resources to complete, including controls that are currently being implemented or that require a sufficient period of operation before management can conclude on their operating effectiveness. The status of these remediation efforts is regularly reported to, and overseen by, the Audit Committee of our board of directors.
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. We cannot assure you that all of our existing material weaknesses have been identified, or that we will not in the future identify additional material weaknesses. If we fail to maintain the adequacy of our internal control over financial reporting in accordance with the COSO Criteria, as may be modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. See “Item 3. Key Information — D. Risk Factors — Risks Related to the Class A Ordinary Shares and Warrants — We have identified a material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal controls in the
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future, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.”
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our registered public accounting firm. For as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404.
Changes in Internal Control over Financial Reporting
Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our Board has determined that Mr. Meng-Shiou (Frank) Lee, who is an independent non-executive director, satisfies the criteria of an audit committee financial expert as defined in Item 16A of the instruction to Form 20-F. Mr. Meng-Shiou (Frank) Lee satisfies the requirements for an “independent director” within the meaning of the NYSE listing rules and the criteria for independence set forth in Rule 10A-3 of the Exchange Act.
Item 16B. Code of Ethics
We have adopted a code of business conduct on October 28, 2022 that applies to all directors, executive officers and employees which is available on our website at https://ir.perfectcorp.com/corporate-governance/governance/default.aspx. Copies of the code of business conduct will be provided without charge upon request from us and an electronic copy has been posted on our website. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our Internet website.
Item 16C. Principal Accountant Fees and Services
PricewaterhouseCoopers, Taiwan served as our independent auditor for the fiscal years ended December 31, 2024 and 2025. A description of the fees billed to us by our principal accountants for professional services in each of the last two fiscal years is set forth below:
| For the Year Ended December 31, | |||||||||||
| 2024 | 2025 | ||||||||||
| (In thousands of US dollars) | |||||||||||
Audit Fees(1) | $ | 393 | $ | 414 | |||||||
Tax Fees(2) | 19 | 19 | |||||||||
| Total | $ | 412 | $ | 433 | |||||||
________________________________
(1)“Audit fee” represents the aggregate fees for each of the fiscal years listed for professional services rendered by our independent public accountant for the audit of our annual financial statements and assistance with and review of documents filed with the SEC and other statutory and regulatory filings.
(2)Tax fees include the aggregate fees in the fiscal period listed for professional services rendered by our principal external auditors for tax compliance and tax advice.
The policy of our audit committee is to pre-approve all audit and non-audit services provided by PricewaterhouseCoopers, including audit services and non-audit services as described above. Also audit committee adopts appropriate procedures to examine independence of PricewaterhouseCoopers to ensure the whole engagement is in compliance with relevant rules.
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Item 16D. Exemptions from the Listing Standards for Audit Committees
None.
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the Exchange Act), and are listed on the NYSE. Under Section 303A of the New York Stock Exchange Listed Company Manual, or the NYSE Manual, New York Stock Exchange listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the New York Stock Exchange with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the New York Stock Exchange.
Under the NYSE Manual, U.S. domestic listed companies are required to have a majority of the board consisting of independent directors and have a compensation committee and a nominating/corporate governance committee, each composed entirely of independent directors, which are not required under the Companies Act (Revised) of the Cayman Islands, our home country. Currently, our Board is composed of six members, only three of whom are independent directors. We do not have a compensation committee or nominating and corporate governance committee. In addition, the NYSE Manual requires shareholder approval for certain matters, such as requiring that shareholders must be given the opportunity to vote on all equity compensation plans and material revisions to those plans, which is not required under the Cayman Islands law. We intend to follow the home country practice in determining whether shareholder approval is required.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J. Insider Trading Policies
We have adopted an insider trading policy (the “Insider Trading Policy”) which, among others, governs the purchase, sale, and other dispositions of our securities by our directors, senior management and employees, that are reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and the NYSE listing standards. A copy of our Insider Trading Policy is filed as Exhibit 11.1 to this annual report.
Item 16K. Cybersecurity
We have a cross-departmental approach to addressing cybersecurity risk, including employees and the Board. The Board, Audit Committee, and senior management devote significant resources to cybersecurity and risk management processes, ensuring we adapt to the evolving cybersecurity landscape and respond to emerging threats in a timely and effective manner. Our information security risk assessment is conducted at least once a year or more frequently upon the occurrence of the following events: (i) there are significant changes to information equipment or services that may impact the Company’s information security; (ii) the development of new technologies may affect the Company’s information
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security; (iii) changes in relevant laws may affect the Company’s information security; or (iv) there are feedback or requests from regulatory authorities or relevant stakeholders. We regularly assess the threat landscape and take a comprehensive approach to address cybersecurity risks, implementing a layered cybersecurity strategy focused on prevention, detection and mitigation. Our information security team reviews enterprise-level cybersecurity risks annually. In addition, we have a set of company-wide policies and procedures governing cybersecurity matters, including an information security manual as well as other policies that directly or indirectly relate to cybersecurity, such as policies related to encryption standards, antivirus protection, remote access, multifactor authentication, confidential information and the use of the Internet, email and wireless devices. These policies have gone through an internal review process and are approved by appropriate members of management.
The Company’s Chief Technology Officer is responsible for developing and implementing our information security program and reporting on cybersecurity matters to the Board. With over 20 years of experience in cybersecurity oversight, our Chief Technology Officer leads the effort, supported by other members of our information security team who hold relevant cybersecurity experience and certifications. We consider cybersecurity a shared responsibility, and we periodically perform simulations and tabletop exercises at the management level, incorporating external resources and advisors as needed. All employees are required to complete cybersecurity trainings and have access to online courses for continuous cybersecurity trainings. We also require employees in specific roles to complete additional specialized role-based cybersecurity trainings.
We have continued to increase our investments in information security, including the adoption of enhanced end-user training, the implementation of layered defenses, identification and protection of critical assets, improved monitoring and alerting, and the engagement of third-party experts. We regularly test defenses by performing simulations and drills at both a technical level (including penetration tests) and by reviewing our operational policies and procedures with third-party experts. At the management level, our information security team consistently monitors alerts and hold meetings to discuss threat levels, trends and remediation. The team also prepares a risk assessment scorecard, regularly collects data on cybersecurity threats and risk areas and conducts an annual risk assessment. Further, we conduct periodic vulnerability assessment and external penetration tests to assess our processes and procedures and the threat landscape. These tests and assessments are useful tools for maintaining a robust cybersecurity program to protect our investors, customers, employees, vendors, and intellectual property.
Our internal cybersecurity team is required to conduct and document user access reviews on our platform at least annually and obtain from the third-party vendors a System and Organization Controls (“SOC”) 1 or SOC 2 report. If a third-party vendor is unable to provide a SOC 1 or SOC 2 report, we take additional steps to assess their cybersecurity preparedness and evaluate our relationship with the third-party vendor based on this assessment. Our assessment of risks associated with use of third-party vendors is an integral part of our overall cybersecurity risk management framework.
The Audit Committee and the full Board actively engage in discussions with management and among themselves regarding cybersecurity risks. The Audit Committee performs an annual review of the Company’s cybersecurity program, which includes discussions of management’s actions to identify and detect threats, as well as planned actions in the event of a response or recovery situation. The Audit Committee’s annual review also includes review of recent enhancements to the Company’s defenses and management’s progress on its cybersecurity strategic roadmap. In addition, the Board regularly receives cybersecurity reports, which include a review of key performance indicators, test results and related prevention, detection, mitigation and remediation of cybersecurity incidents, such as summaries of recent threats and how the Company is managing those threats.
As of the date of this annual report, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.
PART III
Item 17. Financial Statements
We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.
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Item 18. Financial Statements
The audited Consolidated Financial Statements as required under Item 18 are attached hereto starting on page F-1 of this Form 20-F.
Item 19. Exhibits
| Exhibit Number | Description | |||||||
| 1.1 | ||||||||
| 2.1 | ||||||||
| 2.2 | ||||||||
| 2.3 | ||||||||
| 2.4 | ||||||||
| 2.5 | ||||||||
4.1# | ||||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
4.4# | ||||||||
| 4.5 | ||||||||
| 4.6 | ||||||||
| 4.7 | ||||||||
| 4.8 | ||||||||
4.9# | ||||||||
4.10# | ||||||||
4.11# | ||||||||
127
| Exhibit Number | Description | |||||||
| 4.12 | ||||||||
| 4.13 | ||||||||
| 4.14 | ||||||||
| 4.15 | ||||||||
| 4.16 | ||||||||
| 4.18 | ||||||||
| 4.19 | ||||||||
| 4.20 | ||||||||
| 4.21 | ||||||||
| 4.22 | ||||||||
| 4.23 | ||||||||
| 4.25 | ||||||||
| 4.28 | ||||||||
| 4.29 | ||||||||
| 4.30* | ||||||||
| 4.31* | ||||||||
8.1* | ||||||||
| 11.1 | ||||||||
| 12.1* | ||||||||
| 12.2* | ||||||||
| 13.1** | ||||||||
| 13.2** | ||||||||
128
| Exhibit Number | Description | |||||||
15.1* | ||||||||
| 97 | ||||||||
| 101.INS* | Inline XBRL Instance Document—this instance document does not appear in the Interactive Data File because its XBRL tags embedded within the Inline XBRL document. | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
________________________________
*Filed with this annual report on Form 20-F.
**Furnished with this annual report on Form 20-F.
# Portions of this exhibit have been omitted in accordance with Instruction 4 to Item 19 of Form 20-F.
129
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| PERFECT CORP. | ||||||||
| By: | /s/ Alice H. Chang | |||||||
| Name: Alice H. Chang | ||||||||
| Title: Chief Executive Officer | ||||||||
Date: March 13, 2026 | ||||||||
130
INDEX TO FINANCIAL STATEMENTS
| Audited Consolidated Financial Statements: | Page(s) | ||||
Independent Registered Public Accounting Firm’s Report (PCAOB ID: 1345) | F-2 | ||||
F-3 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
F-8 | |||||
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Perfect Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Perfect Corp. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2025, including 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated 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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits 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.
/s/ PricewaterhouseCoopers, Taiwan
Taipei, Taiwan
Republic of China
March 13, 2026
We have served as the Company’s auditor since 2015.
F-2
PERFECT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2024 AND 2025
(Expressed in thousands of United States dollars)
| December 31, 2024 | December 31, 2025 | |||||||||||||||||||
| Assets | Notes | Amount | Amount | |||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | 6(1) | $ | 127,121 | $ | 125,976 | |||||||||||||||
| Current financial assets at fair value through profit or loss | 6(2) | 2,746 | — | |||||||||||||||||
| Current financial assets at amortized cost | 6(3) | 36,000 | 36,300 | |||||||||||||||||
| Current contract assets | 6(18) | 977 | 968 | |||||||||||||||||
| Accounts receivable | 6(4) | 7,902 | 7,567 | |||||||||||||||||
| Other receivables | 352 | 358 | ||||||||||||||||||
| Current income tax assets | 271 | 22 | ||||||||||||||||||
| Inventories | 18 | 17 | ||||||||||||||||||
| Other current assets | 6(5) | 2,522 | 2,138 | |||||||||||||||||
| Total current assets | 177,909 | 173,346 | ||||||||||||||||||
| Non-current assets | ||||||||||||||||||||
| Non-current financial assets at amortized cost | 6(3) | — | 10,173 | |||||||||||||||||
| Property, plant and equipment | 6(6) | 554 | 695 | |||||||||||||||||
| Right-of-use assets | 6(7) and 7 | 485 | 659 | |||||||||||||||||
| Intangible assets | 6(8) | 32 | 4,421 | |||||||||||||||||
| Deferred income tax assets | 6(25) | 2,047 | 2,483 | |||||||||||||||||
| Guarantee deposits paid | 146 | 193 | ||||||||||||||||||
| Total non-current assets | 3,264 | 18,624 | ||||||||||||||||||
| Total assets | $ | 181,173 | $ | 191,970 | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
PERFECT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
DECEMBER 31, 2024 AND 2025
(Expressed in thousands of United States dollars)
| December 31, 2024 | December 31, 2025 | |||||||||||||||||||
| Liabilities and Equity | Notes | Amount | Amount | |||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Current contract liabilities | 6(18) | $ | 17,218 | $ | 21,902 | |||||||||||||||
| Other payables | 6(11) | 11,656 | 12,831 | |||||||||||||||||
| Other payables – related parties | 7 | 46 | 72 | |||||||||||||||||
| Current tax liabilities | 649 | 996 | ||||||||||||||||||
| Current provisions | 6(12) | 1,899 | 1,061 | |||||||||||||||||
| Current lease liabilities | 6(7) and 7 | 402 | 444 | |||||||||||||||||
| Other current liabilities | 341 | 359 | ||||||||||||||||||
| Total current liabilities | 32,211 | 37,665 | ||||||||||||||||||
| Non-current liabilities | ||||||||||||||||||||
| Non-current financial liabilities at fair value through profit or loss | 6(10) | 1,793 | 419 | |||||||||||||||||
| Deferred income tax liabilities | 6(25)(28) | — | 488 | |||||||||||||||||
| Non-current lease liabilities | 6(7) and 7 | 108 | 239 | |||||||||||||||||
| Net defined benefit liability, non-current | 6(13) | 46 | 64 | |||||||||||||||||
| Total non-current liabilities | 1,947 | 1,210 | ||||||||||||||||||
| Total liabilities | 34,158 | 38,875 | ||||||||||||||||||
| Equity | ||||||||||||||||||||
| Capital stock | 6(15) | |||||||||||||||||||
Perfect Class A Ordinary Shares, $0.1 (in dollars) par value | 8,506 | 8,506 | ||||||||||||||||||
Perfect Class B Ordinary Shares, $0.1 (in dollars) par value | 1,679 | 1,679 | ||||||||||||||||||
| Capital surplus | 6(16) | |||||||||||||||||||
| Capital surplus | 512,990 | 514,400 | ||||||||||||||||||
| Retained earnings | 6(17) | |||||||||||||||||||
| Accumulated deficit | (375,420) | (370,793) | ||||||||||||||||||
| Other equity interest | ||||||||||||||||||||
| Other equity interest | (740) | (697) | ||||||||||||||||||
| Total equity | 147,015 | 153,095 | ||||||||||||||||||
| Total liabilities and equity | $ | 181,173 | $ | 191,970 | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
PERFECT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2023, 2024 AND 2025
(Expressed in thousands of United States dollars)
| Years ended December 31 | ||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | ||||||||||||||||||||||||
| Items | Notes | Amount | Amount | Amount | ||||||||||||||||||||||
| Revenue | 6(18) and 7 | $ | 53,505 | $ | 60,202 | $ | 69,154 | |||||||||||||||||||
| Cost of sales and services | 6(13)(23)(24) | (10,400) | (13,258) | (15,630) | ||||||||||||||||||||||
| Gross profit | 43,105 | 46,944 | 53,524 | |||||||||||||||||||||||
| Operating expenses | 6(4)(6)(7)(8)(13) (23)(24) and 7 | |||||||||||||||||||||||||
| Sales and marketing expenses | (25,725) | (28,213) | (30,811) | |||||||||||||||||||||||
| General and administrative expenses | (11,582) | (8,501) | (6,996) | |||||||||||||||||||||||
| Research and development expenses | (11,458) | (12,000) | (15,405) | |||||||||||||||||||||||
| Expected credit losses | 6(4)(23) and 12(2) | — | (1,373) | (75) | ||||||||||||||||||||||
| Impairment loss on goodwill | 6(9) | — | — | (1,965) | ||||||||||||||||||||||
| Total operating expenses | (48,765) | (50,087) | (55,252) | |||||||||||||||||||||||
| Operating loss | (5,660) | (3,143) | (1,728) | |||||||||||||||||||||||
| Non-operating income and expenses | ||||||||||||||||||||||||||
| Interest income | 6(19) | 9,498 | 7,708 | 6,134 | ||||||||||||||||||||||
| Other income | 6(20) | 33 | 55 | 28 | ||||||||||||||||||||||
| Other gains and losses | 6(2)(10)(21) | 1,675 | (316) | 1,319 | ||||||||||||||||||||||
| Finance costs | 6(7)(22) and 7 | (15) | (18) | (16) | ||||||||||||||||||||||
| Total non-operating income and expenses | 11,191 | 7,429 | 7,465 | |||||||||||||||||||||||
| Income before income tax | 5,531 | 4,286 | 5,737 | |||||||||||||||||||||||
| Income tax benefit (expense) | 6(25) | (115) | 735 | (1,094) | ||||||||||||||||||||||
| Net income | $ | 5,416 | $ | 5,021 | $ | 4,643 | ||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||
| Components of other comprehensive income (loss) that will not be reclassified to profit or loss | ||||||||||||||||||||||||||
| Actuarial gains (losses) on defined benefit plans | 6(13) | $ | (4) | $ | 31 | $ | (16) | |||||||||||||||||||
| Components of other comprehensive income (loss) that will be reclassified to profit or loss | ||||||||||||||||||||||||||
| Exchange differences arising on translation of foreign operations | (116) | (217) | 43 | |||||||||||||||||||||||
| Other comprehensive income (loss), net | $ | (120) | $ | (186) | $ | 27 | ||||||||||||||||||||
| Total comprehensive income | $ | 5,296 | $ | 4,835 | $ | 4,670 | ||||||||||||||||||||
| Net income attributable to: | ||||||||||||||||||||||||||
| Shareholders of the parent | $ | 5,416 | $ | 5,021 | $ | 4,643 | ||||||||||||||||||||
| Total comprehensive income attributable to: | ||||||||||||||||||||||||||
| Shareholders of the parent | $ | 5,296 | $ | 4,835 | $ | 4,670 | ||||||||||||||||||||
| Earnings per share (in dollars) | 6(26) | |||||||||||||||||||||||||
| Basic earnings per share of Class A and Class B Ordinary Shares | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||||||||||||||
| Diluted earnings per share of Class A and Class B Ordinary Shares | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
PERFECT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023, 2024 AND 2025
(Expressed in thousands of United States dollars)
| Equity attributable on owners of the parent | |||||||||||||||||||||||||||||||||||||||||||||||
| Capital surplus | Other equity interest | ||||||||||||||||||||||||||||||||||||||||||||||
| Notes | Capital stock | Additional paid-in capital | Other | Accumulated deficit | Exchange differences arising on translation of foreign operations | Treasury shares | Total | ||||||||||||||||||||||||||||||||||||||||
| Year 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | 11,826 | $ | 554,209 | $ | 2,220 | $ | (385,884) | $ | (407) | $ | — | $ | 181,964 | |||||||||||||||||||||||||||||||||
| Net income for 2023 | — | — | — | 5,416 | — | — | 5,416 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss for 2023 | 6(13) | — | — | — | (4) | (116) | — | (120) | |||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | — | 5,412 | (116) | — | 5,296 | ||||||||||||||||||||||||||||||||||||||||
| Share-based payment transactions | 6(14) | — | — | 3,210 | — | — | — | 3,210 | |||||||||||||||||||||||||||||||||||||||
| Shares repurchased and retired | 6(15)(16) | (1,634) | (76,475) | 27,235 | — | — | (190) | (51,064) | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | 10,192 | $ | 477,734 | $ | 32,665 | $ | (380,472) | $ | (523) | $ | (190) | $ | 139,406 | |||||||||||||||||||||||||||||||||
| Year 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | 10,192 | $ | 477,734 | $ | 32,665 | $ | (380,472) | $ | (523) | $ | (190) | $ | 139,406 | |||||||||||||||||||||||||||||||||
| Net income for 2024 | — | — | — | 5,021 | — | — | 5,021 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for 2024 | 6(13) | — | — | — | 31 | (217) | — | (186) | |||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | — | 5,052 | (217) | — | 4,835 | ||||||||||||||||||||||||||||||||||||||||
| Share-based payment transactions | 6(14) | — | — | 2,774 | — | — | — | 2,774 | |||||||||||||||||||||||||||||||||||||||
| Shares retired | 6(15)(16) | (7) | (319) | 136 | — | — | 190 | — | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 10,185 | $ | 477,415 | $ | 35,575 | $ | (375,420) | $ | (740) | $ | — | $ | 147,015 | |||||||||||||||||||||||||||||||||
| Year 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | 10,185 | $ | 477,415 | $ | 35,575 | $ | (375,420) | $ | (740) | $ | — | $ | 147,015 | |||||||||||||||||||||||||||||||||
| Net income for 2025 | — | — | — | 4,643 | — | — | 4,643 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for 2025 | 6(13) | — | — | — | (16) | 43 | — | 27 | |||||||||||||||||||||||||||||||||||||||
| Total comprehensive income | — | — | — | 4,627 | 43 | — | 4,670 | ||||||||||||||||||||||||||||||||||||||||
| Share-based payment transactions | 6(14) | — | — | 1,410 | — | — | — | 1,410 | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | 10,185 | $ | 477,415 | $ | 36,985 | $ | (370,793) | $ | (697) | $ | — | $ | 153,095 | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
PERFECT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2024 AND 2025
(Expressed in thousands of United States dollars)
| Years ended December 31 | |||||||||||||||||||||||
| Notes | 2023 | 2024 | 2025 | ||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||||||||
| Profit before tax | $ | 5,531 | $ | 4,286 | $ | 5,737 | |||||||||||||||||
| Adjustments to reconcile profit (loss) | |||||||||||||||||||||||
| Depreciation expense | 6(6)(7)(23) | 638 | 747 | 871 | |||||||||||||||||||
| Amortization expense | 6(8)(23) | 75 | 51 | 145 | |||||||||||||||||||
| Expected credit losses | 6(4)(23) and 12(2) | — | 1,373 | 75 | |||||||||||||||||||
| Interest income | 6(19) | (9,498) | (7,708) | (6,134) | |||||||||||||||||||
| Interest expense | 6(7)(22) | 15 | 18 | 16 | |||||||||||||||||||
| Net gains on financial assets at fair value through profit or loss | 6(2)(21) | — | — | (51) | |||||||||||||||||||
| Net (gains) losses on financial liabilities at fair value through profit or loss | 6(9)(21) | (1,641) | 227 | (1,532) | |||||||||||||||||||
| Share-based payment transactions | 6(14) | 3,210 | 2,774 | 1,410 | |||||||||||||||||||
| Impairment loss on goodwill | 6(9) | — | — | 1,965 | |||||||||||||||||||
| Changes in operating assets and liabilities | |||||||||||||||||||||||
| Accounts receivable | 759 | (2,300) | 480 | ||||||||||||||||||||
| Current contract assets | 866 | 1,789 | 12 | ||||||||||||||||||||
| Other receivables | 3 | — | — | ||||||||||||||||||||
| Inventories | 12 | 15 | — | ||||||||||||||||||||
| Other current assets | 662 | 1,514 | 444 | ||||||||||||||||||||
| Current contract liabilities | 2,366 | 1,949 | 4,565 | ||||||||||||||||||||
| Other payables | 1,050 | 1,362 | 1,074 | ||||||||||||||||||||
| Other payables – related parties | (12) | (2) | 27 | ||||||||||||||||||||
| Current provisions | 565 | (449) | (849) | ||||||||||||||||||||
| Other current liabilities | 27 | 80 | 16 | ||||||||||||||||||||
| Net defined benefit liability, non-current | 3 | 3 | — | ||||||||||||||||||||
| Cash inflow generated from operations | 4,631 | 5,729 | 8,271 | ||||||||||||||||||||
| Interest received | 9,464 | 7,699 | 6,122 | ||||||||||||||||||||
| Interest paid | (15) | (18) | (16) | ||||||||||||||||||||
| Income tax paid | (502) | (407) | (1,072) | ||||||||||||||||||||
| Net cash flows from operating activities | 13,578 | 13,003 | 13,305 | ||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||||||
| Acquisition of financial assets at fair value through profit or loss | 6(2) | — | (2,773) | (6,143) | |||||||||||||||||||
| Proceeds from disposal of financial assets at fair value through profit or loss | 6(2) | — | — | 8,940 | |||||||||||||||||||
| Acquisition of financial assets at amortized cost | 6(3) | (196,100) | (80,574) | (82,718) | |||||||||||||||||||
| Proceeds from disposal of financial assets at amortized cost | 6(3) | 195,800 | 74,874 | 72,300 | |||||||||||||||||||
| Acquisition of subsidiaries, net of cash acquired | 6(28) | — | — | (5,981) | |||||||||||||||||||
| Acquisition of property, plant and equipment | 6(6) | (289) | (392) | (425) | |||||||||||||||||||
| Proceeds from disposal of property, plant and equipment | 6(6) | — | — | 3 | |||||||||||||||||||
| Acquisition of intangible assets | 6(8) | (33) | (6) | — | |||||||||||||||||||
| Increase in guarantee deposits paid | (15) | (8) | (39) | ||||||||||||||||||||
| Net cash flows used in investing activities | (637) | (8,879) | (14,063) | ||||||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||||||||
| Repayment of principal portion of lease liabilities | 6(7)(27) | (435) | (525) | (562) | |||||||||||||||||||
| Payments to acquire treasury shares | 6(15) | (51,064) | — | — | |||||||||||||||||||
| Net cash flows used in financing activities | (51,499) | (525) | (562) | ||||||||||||||||||||
| Effects of exchange rates changes on cash and cash equivalents | (187) | (349) | 175 | ||||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (38,745) | 3,250 | (1,145) | ||||||||||||||||||||
| Cash and cash equivalents at beginning of year | 162,616 | 123,871 | 127,121 | ||||||||||||||||||||
| Cash and cash equivalents at end of year | $ | 123,871 | $ | 127,121 | $ | 125,976 | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
PERFECT CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023, 2024 AND 2025
(Expressed in thousands of United States dollars, except as otherwise indicated)
1. History and Organization
Perfect Corp. (the “Company” or “Perfect”), is a Cayman Islands exempted company with limited liability, which was incorporated on February 13, 2015 with registered address PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company and its subsidiaries (collectively referred to herein as the “Group”) are SaaS technology companies offering AR/AI solution dedicated to the beauty and fashion industry as well as mobile applications to consumers. The principal place of business is at 14F, No. 98 Minquan Road, Xindian District, New Taipei City 231, Taiwan.
On October 28, 2022, the Company consummated a previously announced merger transaction pursuant to the business combination agreement dated as of March 3, 2022, and the Company became a publicly traded company on the New York Stock Exchange (“NYSE”) on October 31, 2022. The merger transaction (“2022 Business Combination”) pursuant to the business combination agreement was accounted for as a recapitalization.
On December 23, 2024, Perfect Mobile Corp. (Taiwan), the Company’s wholly owned subsidiary, entered into a securities purchase agreement with Farfetch US Holdings, Inc. (“Farfetch”), pursuant to which, Perfect Mobile Corp. (Taiwan) agreed to acquire 100% of the issued and outstanding equity interests in Wannaby Inc. (“Wannaby”), a digital company known for its virtual try-on technology and digitalization solutions for the fashion industry. This acquisition enables the Group to expand its offerings into new luxury market segments, including shoes, bags and apparel.
On January 7, 2025, the Group completed the acquisition of Wannaby (“2025 Business Combination”) for $6,473. As a result of transaction, Wannaby, along with its wholly owned subsidiary, Wannaby UAB, became an indirect wholly owned subsidiary of Perfect.
2. The Date of Authorization for Issuance of the Financial Statements and Procedures for Authorization
These consolidated financial statements were authorized for issuance by the Board of Directors on March 13, 2026.
3. Application of New Standards, Amendments and Interpretations
3(1) New and amended International Financial Reporting Standards (“IFRS Accounting Standards”) adopted by the Group
New standards, interpretations and amendments issued by International Accounting Standards Board (the “IASB”) and became effective from 2025 are as follows:
| New Standards, Interpretations and Amendments | Effective date by IASB | |||||||
| Amendments to IAS 21, ‘Lack of exchangeability’ | January 1, 2025 | |||||||
The above standards and interpretations had no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.
3(2) New and amended IFRS Accounting Standards not yet adopted
New standards, interpretations and amendments which have been published by IASB but are not mandatory for the financial period ended December 31, 2025 are listed below:
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| New Standards, Interpretations and Amendments | Effective date by IASB | |||||||
| Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ | To be determined by IASB | |||||||
| Specific provisions of Amendments to IFRS 9 and IFRS 7, ‘Amendments to the classification and measurement of financial Instruments’ | January 1, 2026 | |||||||
| Amendments to IFRS 9 and IFRS 7, ‘Contracts referencing nature-dependent electricity’ | January 1, 2026 | |||||||
| Annual Improvements to IFRS Accounting Standards - Volume 11 | January 1, 2026 | |||||||
| IFRS 18, ‘Presentation and disclosure in financial statements’ | January 1, 2027 | |||||||
| Amendments to IAS 21, ‘Translation to a Hyperinflationary Presentation Currency’ | January 1, 2027 | |||||||
Except for the following, the above standards and interpretations are not expected to have significant impact to the Group’s financial position and financial performance based on the Group’s assessment.
IFRS 18, ‘Presentation and disclosure in financial statements’
IFRS 18, ‘Presentation and disclosure in financial statements’ replaces IAS 1. The standard introduces a defined structure of the statement of profit or loss, disclosure requirements related to management-defined performance measures, and enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes.
4. Summary of Material Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
4(1) Compliance statement
The consolidated financial statements of the Group have been prepared in accordance with IFRS Accounting Standards as issued by the IASB.
4(2) Basis of preparation
A.Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
(a)Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(b)Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation.
B.The preparation of financial statements in conformity with IFRS Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
4(3) Basis of consolidation
A.Basis for preparation of consolidated financial statements:
(a)All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the
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Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
(b)Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c)When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.
B.Subsidiaries included in the consolidated financial statements:
| Ownership (%) | ||||||||||||||||||||||||||
| Name of investor | Name of subsidiary | Main business activities | December 31, 2024 | December 31, 2025 | ||||||||||||||||||||||
| The Company | Perfect Mobile Corp. (Taiwan) | Design, development, marketing and sales of AR/AI SaaS solution and mobile applications. | 100% | 100% | ||||||||||||||||||||||
| The Company | Perfect Corp. (USA) | Marketing and sales of AR/AI SaaS solution. | 100% | 100% | ||||||||||||||||||||||
| The Company | Perfect Corp. (Japan) | Marketing and sales of AR/AI SaaS solution. | 100% | 100% | ||||||||||||||||||||||
| The Company | Perfect Corp. (Shanghai) | Marketing and sales of AR/AI SaaS solution. | 100% | 100% | ||||||||||||||||||||||
| The Company | Perfect Mobile Corp.(B.V.I.) | Investment activities. | 100% | 100% | ||||||||||||||||||||||
| Perfect Mobile Corp. (Taiwan) | Perfect Corp. (France) | Marketing and service center for sales of AR/AI SaaS solution. | 100% | 100% | ||||||||||||||||||||||
| Perfect Mobile Corp. (Taiwan) | Wannaby Inc. | Design, development, marketing and sales of AR/AI SaaS solution and mobile applications. | Not applicable | 100% (Note) | ||||||||||||||||||||||
| Wannaby Inc. | Wannaby UAB | Design and development of AR/AI SaaS solution and mobile applications. | Not applicable | 100% (Note) | ||||||||||||||||||||||
Note: As a result of 2025 Business Combination, Wannaby, along with its wholly owned subsidiary, Wannaby UAB, became an indirect wholly owned subsidiary of Perfect.
C.Subsidiaries not included in the consolidated financial statements:
None.
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D.Adjustments for subsidiaries with different balance sheet dates:
None.
E.Significant restrictions:
None.
F.Subsidiaries that have non-controlling interests that are material to the Group:
None.
4(4) Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in United States dollars, which is the Company’s functional and the Group’s presentation currency.
A.Foreign currency transactions and balances
(a)Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.
(b)Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c)Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d)All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains and losses’.
B.Translation of foreign operations
The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(a)Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
(b)Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
(c)All resulting exchange differences are recognized in other comprehensive income.
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C.When there is a change in an entity’s functional currency, the entity shall apply the translation procedures applicable to the new functional currency accordingly from the date of the change.
4(5) Classification of current and non-current items
A.Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a)Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
(b)Assets held mainly for trading purposes;
(c)Assets that are expected to be realized within twelve months from the reporting period;
(d)Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities for at least twelve months after the reporting period.
B.Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a)Liabilities that are expected to be settled within the normal operating cycle;
(b)Liabilities arising mainly from trading activities;
(c)Liabilities that are to be settled within twelve months after the reporting period;
(d)It does not have the right at the end of the reporting period to defer settlement of the liability at least twelve months after the reporting period.
4(6) Cash equivalents
Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits with a maturity of 3 months or less, meeting the definition above and are held for the purpose of meeting short-term cash commitments in operations, are classified as cash equivalents.
4(7) Financial assets at fair value through profit or loss
A.Financial assets at fair value through profit or loss are financial assets that are not measured at amortized cost or fair value through other comprehensive income.
B.On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.
C.At initial recognition, the Group measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.
4(8) Financial assets at amortized cost
A.Financial assets at amortized cost are those that meet all of the following criteria:
(a)The objective of the Group’s business model is achieved by collecting contractual cash flows.
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(b)The assets’ contractual cash flows represent solely payments of principal and interest.
B.On a regular way purchase or sale basis, financial assets at amortized cost are recognized and derecognized using trade date accounting.
C.At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognized in profit or loss when the asset is derecognized or impaired.
D.The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.
4(9) Accounts receivable
A.Accounts receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B.The short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
4(10) Impairment of financial assets
For financial assets at amortized cost, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.
4(11) Derecognition of financial assets
The Group derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.
4(12) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale.
4(13) Property, plant and equipment
A.Property, plant and equipment are initially recorded at cost.
B.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C.Property, plant and equipment apply cost model and are depreciated using the straight-line method, except that the accelerated depreciation method is used by the US subsidiary, to allocate their cost over their
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estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D.The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:
| Leasehold improvements | 2~3 | years (or the lesser of the contract period of the lease) | ||||||
| Machinery | 3 | years | ||||||
| Office equipment | 5 | years | ||||||
4(14) Leasing arrangements (lessee) — right-of-use assets/ lease liabilities
A.Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of low-value assets, lease payments are recognized as an expense on a straight-line basis over the lease term.
B.Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of fixed payments, less any lease incentives receivable.
The Group subsequently measures the lease liability at amortized cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.
C.At the commencement date, the right-of-use asset is stated at cost comprising the amount of the initial measurement of lease liability.
The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.
4(15) Intangible assets
A.Goodwill
Goodwill arises in a business combination accounted for by applying the acquisition method.
B.Unpatented technology
Unpatented technology is acquired in a business combination and recognized at its fair value on the acquisition date. It is amortized on a straight-line basis over its estimated useful life of 15 years.
C.Computer software
Computer software is stated at cost and amortized on a straight-line basis over its estimated useful life of 3 years.
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D.Other intangible assets, mainly composed of royalties paid for program source code and intellectual property rights, are amortized on a straight-line basis over their estimated useful lives of 3 years.
4(16) Impairment of non-financial assets
A.The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been recognized.
B.The recoverable amounts of goodwill are evaluated periodically. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall not be reversed in the following years.
C.For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the lowest level of cash-generating units (CGU) within the entity, and this level does not exceed that of an operating segment.
4(17) Accounts payable
A.Accounts payable are liabilities for purchases of goods or services.
B.The short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
4(18) Financial liabilities at fair value through profit or loss
A.Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges or financial liabilities at fair value through profit or loss. Financial liabilities that meet one of the following criteria are designated as financial liabilities at fair value through profit or loss on initial recognition:
(a)Hybrid (combined) contracts; or
(b)They eliminate or significantly reduce a measurement or recognition inconsistency; or
(c)They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.
As part of 2022 Business Combination, warrants were converted to Perfect Warrants, and as part of 2025 Business Combination, an earnout payment based on defined revenue shall be paid to Farfetch. These warrants and the earnout are classified as financial liabilities measured at fair value through profit or loss.
B.At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognized in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognized in profit or loss.
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C.If the credit risk results in fair value changes in financial liabilities designated as at fair value through profit or loss, they are recognized in other comprehensive income in the circumstances other than avoiding accounting mismatch or recognizing in profit or loss for loan commitments or financial guarantee contracts.
4(19) Derecognition of financial liabilities
A financial liability is derecognized when the obligation specified in the contract is either discharged or cancelled or expires.
4(20) Provisions
Provisions (warranties) are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the initial estimated amount as the effect of discounting is immaterial.
4(21) Employee benefits
A.Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expense in that period when the employees render service.
B.Pensions
(a)Defined contribution plans
For defined contribution plans, the contributions are recognized as pension expense when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.
(b)Defined benefit plan
i.Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.
ii.Remeasurements arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.
4(22) Employee share-based payment
A.For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-vesting conditions. Compensation
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cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognized is based on the number of equity instruments that eventually vest.
B.If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the amount recognized for services received over the period from the modification date until the date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized over the remainder of the original vesting period.
4(23) Income tax
A.The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.
B.The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities.
C.Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
D.Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
E.Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current income tax assets against current income tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.
4(24) Share capital
A.Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.
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B.Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders.
4(25) Revenue recognition
A.The Group has two major revenue streams: (1) Licensing; (2) AR/AI cloud solutions and Subscription which constitute our core SaaS solutions.
B.In terms of Licensing, it could be divided into the following two categories:
(a)Designing and developing apps to brand customers
The Group delivers services based on customers’ requests. Once the customer accepts and the customized apps or licenses have been transferred, no further upgrade or revise service would be made by the Group. The customer receives and consumes the benefits provided by the Group at the point the customized apps or licenses have been transferred to them. Those services are only created for the specific customer without alternative use to the Group, as a result, revenue is recognized at a point in time when the customized apps or licenses are transferred to the customers.
(b)Granting license of self-developed technologies to brand customers
The Group promises to provide a right to use the Group’s intellectual property as that intellectual property exists at the point in time at which the license is granted to the customer. The licensing includes licensing offline technology SDK (Software Development Kit) and AR/AI offline solutions. The SDK is to implement virtual try-on function to apps of brand customers which allow app users visiting. The AR/AI offline solutions is to implement virtual try-on function to applications which used in retail store. Once the function is implemented, the Group has fulfilled its performance obligation without further update. The brand customer can direct the use of, and obtain substantially all of the remaining benefits from the license at the point in time at which the license transfers.
C.In terms of AR/AI cloud solutions and Subscription, the AR/AI cloud solutions are provided to brand customers, and the Subscription is provided to individual customers. Customers simultaneously receive and consume the benefits provided by the Group’s performance.
(a)For AR/AI cloud solutions:
The AR/AI cloud solutions are to implement virtual try-on function to websites of customers which allow internet users to visit. Internet users are able to use virtual try-on such as makeup, skincare, hair, nail, etc. The AR/AI cloud solutions are consecutively provided by the Group include future updates to its customers throughout the contract period.
The typical contract terms of providing AR/AI cloud solutions to customers range from three months to multi-years, among which one year term is the most, the contract consideration was fixed and determined by the following factors: 1) functionality of the modules (eg. makeup, skincare, shade finder, jewelry, etc); 2) length of the contract period; 3) geographical coverage such as the number of countries/region to deploy the modules or the number of website domains to integrate our modules; 4) maximum numbers of product SKUs that a brand can utilize at the same time; and 5) additional manpower hours used for conducting the customization, if any.
Once the contract is agreed by customers and the Group, the performance obligations among the contract is fixed with a stand ready feature. The Group then provides services to customers based on the contract.
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The Group applied output methods to recognize revenue on the straight-line basis through the contract period. Those services provided by the Group would be realized evenly during the contract period. The control of the services transfers from the Group to customers through the contract period, the performance obligation satisfied over time. As a result, revenue is recognized over time.
(b)For Subscription:
The Subscription is the Group provides premium functions in apps to customers which allow customers to subscribe through Apple App store and Google Play store. Customers who subscribe the premium functions are allowed to use the complete additional functions in the apps, remove watermarks and ad-free editing, etc. The Group currently offer monthly and yearly subscription plans (price varies by country) for such premium functions service.
Apple App store and Google Play store act as platform providers for the Group to list its apps on their platforms. The Group is considered as a principal on providing premium functions in apps to customers given that the Group is obliged to provide service to its customers and the Group has the right to determine the selling price of the service. Apple App store and Google Play store also charge the Group a commission based on the revenue generated from providing premium functions. The commission expenses are recognized as cost of sales and services.
The control of the services transfers from the Group to customers through the contract period, as the performance obligation satisfied over time. As a result, revenue is recognized over time.
D.In addition to the two major revenue streams mentioned above, the Group generates additional revenue from (1) virtual points: the Group provides AI-powered functionalities to customers through the Apple App Store, Google Play Store, and the Group’s website. Customers may purchase virtual points, which can subsequently be redeemed for AI-powered services available through the Group’s applications or website, such as AI-driven image and video generation. The Group currently offers both pay-as-you-go purchase options and subscription-based plans (monthly or yearly) for its AI-powered services. The Apple App Store and Google Play Store act as platform providers that facilitate the distribution of the Group’s applications. The Group is considered the principal in providing virtual points and the related AI-powered services, as it is primarily responsible for fulfilling the services to customers and has discretion in establishing pricing. Platform providers charge commissions based on revenue generated from virtual point transactions, which are recognized as cost of sales and services. Virtual points represent a prepayment for future AI-powered services and are initially recorded as contract liabilities. Control of the AI-powered services transfers to the customer when virtual points are redeemed, at which point the related performance obligation is satisfied. Accordingly, revenue is recognized at a point in time upon redemption of virtual points; (2) advertisements displayed in it apps through advertisement network service providers (ad networks). The consideration of such service is determined based on the frequency of click or impression (usage-based) of the advertisement, which is treated as variable consideration. The number of advertisements is delivered and the associated fees are tracked on a daily basis, and the Group recognized revenue on a monthly basis based on the daily collected information.
E.When the Group enters into contracts which contain multiple performance obligations through B to D, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling price is the price at which the Group sells a good or service separately to a customer.
4(26) Cost of sales and services
Cost of sales and services primarily consists of costs related to platform commission fees paid to platform owners, payroll costs directly related to sales and services activities, AI server computing cost, accrued provision and costs of sales for products.
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4(27) Government grants
Government grants are recognized at their fair value only when there is reasonable assurance that the Group will comply with any conditions attached to the grants and the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes expenses for the related costs for which the grants are intended to compensate.
4(28) Business combinations
A.The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
B.The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquiree recognized and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognized directly in profit or loss on the acquisition date.
4(29) Operating segments
Operating segments are reported in a manner consistent with the economic characteristics as well as types of products and services from which each operating segment derives its revenues, and the internal reporting provided to the chief operating decision maker. The Group’s chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the CEO (who is also the chairman of the Board of Directors) that makes strategic decisions.
The Group’s CEO evaluates the business on a consolidated basis and does not review financial information at any lower level. As a result, the Group operates as one operating segment and reports a single reportable operating segment.
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5. Critical Accounting Judgments, Estimates and Key Sources of Assumption Uncertainty
The preparation of these consolidated financial statements requires management to make critical judgments in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:
5(1) Critical judgments in applying the Group’s accounting policies:
Revenue recognition at a point in time or over time
The Group recognizes the revenue by determining whether the performance obligations are satisfied at a point in time or over time. In terms of Licensing, the Group recognized revenue at the point when customized apps or licenses are transferred to its customers, which customers obtain control over the customized apps or licenses simultaneously with no further maintenance or other services to be provided by the Group. In terms of AR/AI cloud solutions and Subscription, the Group delivers services to its customers and recognized revenue within the contract period on a straight-line basis. The Group grants access of its server or apps to its customers and is obliged to maintain the services operational through the contract period. The access is terminated once the contract expires and no further extension were made by both parties. After termination of the contract, the customers can no longer have access to the server or apps.
As a result, based on the different feature of the services, the Group recognized revenue at a point in time or overtime, respectively.
5(2) Critical accounting estimates and assumptions:
A.Realizability of deferred tax assets
Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Assessment of the realizability of deferred tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future revenue growth rate and profit rate, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred tax assets.
As of December 31, 2025, the Group recognized deferred tax assets amounting to $2,483.
B.Impairment assessment of goodwill
The impairment assessment of goodwill relies on the Group’s subjective judgment, including identifying cash-generating units, allocating assets and liabilities as well as goodwill to related cash-generating units, and determining the recoverable amounts of related cash-generating units. Please refer to Note 6(8) for the information of goodwill impairment.
As of December 31, 2025, the Group recognized goodwill, net of impairment loss, amounting to $2,774.
F-21
6. Details of Significant Accounts
6(1) Cash and cash equivalents
| December 31, 2024 | December 31, 2025 | ||||||||||
| Checking accounts | $ | 3,651 | $ | 3,006 | |||||||
| Demand deposits | 17,246 | 25,010 | |||||||||
| Time deposits | 106,000 | 97,700 | |||||||||
| Others | 224 | 260 | |||||||||
| $ | 127,121 | $ | 125,976 | ||||||||
A.The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. As of December 31, 2025, the majority of our cash and cash equivalents, 88%, are denominated in U.S. Dollars.
B.The Group has no cash and cash equivalents pledged to others.
6(2) Financial assets at fair value through profit or loss
| December 31, 2024 | December 31, 2025 | ||||||||||
| Current items: | |||||||||||
| Financial assets mandatorily measured at fair value through profit and loss | |||||||||||
| Money market funds | $ | 2,746 | $ | — | |||||||
A.Amounts recognized in profit or loss in relation to financial assets at fair value through profit or loss are as follows:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Financial assets mandatorily measured at fair value through profit and loss | |||||||||||||||||
| Money market funds | $ | — | $ | — | $ | 51 | |||||||||||
B.The Group has no financial assets at fair value through profit or loss pledged to others.
C.Information relating to credit risk of financial assets at fair value through profit or loss is provided in Note 12(2).
6(3) Financial assets at amortized cost
| December 31, 2024 | December 31, 2025 | ||||||||||
| Current items: | |||||||||||
| Time deposits with maturities over three months | $ | 36,000 | $ | 36,300 | |||||||
| Non-current items: | |||||||||||
| US Treasury | $ | — | $ | 10,173 | |||||||
F-22
A.Amounts recognized in profit or loss in relation to financial assets at amortized cost are listed below:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Interest income from financial assets at amortized cost | $ | 5,309 | $ | 1,898 | $ | 1,541 | |||||||||||
B.The counterparties of the Group's time deposits are financial institutions with high credit quality, so the Group expects that the probability of counterparty default is remote. As of December 31, 2025, 100% of current financial assets at amortized cost are denominated in U.S. Dollars.
C.As at December 31, 2024 and 2025, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortized cost held by the Group was $36,000 and $46,473, respectively.
D.The Group has no financial assets at amortized cost pledged to others.
E.Information relating to credit risk of financial assets at amortized cost is provided in Note 12(2).
6(4) Accounts receivable
| December 31, 2024 | December 31, 2025 | ||||||||||
| Accounts receivable | $ | 8,168 | $ | 7,748 | |||||||
| Less: Allowance for expected credit losses (Note) | (266) | (181) | |||||||||
| $ | 7,902 | $ | 7,567 | ||||||||
Note. For movements in the allowance for expected credit losses, please refer to Note 12(2) Credit risk for details.
A.The aging analysis of accounts receivable is as follows:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Not past due | $ | 7,535 | $ | 7,124 | |||||||
| Up to 30 days | 261 | 75 | |||||||||
| 31 to 90 days | 213 | 149 | |||||||||
| 91 to 180 days | 65 | 286 | |||||||||
| Over 181 days | 94 | 114 | |||||||||
| Less: Allowance for expected credit losses | (266) | (181) | |||||||||
| $ | 7,902 | $ | 7,567 | ||||||||
The above aging analysis was based on days overdue.
B.As at December 31, 2024 and 2025, accounts receivable were all from contracts with customers. And as at January 1, 2024, the balance of receivables from contracts with customers amounted to $6,992.
C.As at December 31, 2024 and 2025, without taking into account other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s accounts receivable was $7,902 and $7,567, respectively.
D.The Group has no accounts receivable pledged to others.
E.Information relating to credit risk of accounts receivable is provided in Note 12(2).
F-23
6(5) Other current assets
| December 31, 2024 | December 31, 2025 | ||||||||||
| Prepaid expenses | $ | 2,433 | $ | 2,041 | |||||||
| Others | 89 | 97 | |||||||||
| $ | 2,522 | $ | 2,138 | ||||||||
6(6) Property, plant and equipment
| 2024 | |||||||||||||||||||||||
| Leasehold improvements | Machinery | Office equipment | Total | ||||||||||||||||||||
| At January 1 | |||||||||||||||||||||||
| Cost | $ | 675 | $ | 729 | $ | 53 | $ | 1,457 | |||||||||||||||
| Accumulated depreciation | (553) | (488) | (36) | (1,077) | |||||||||||||||||||
| $ | 122 | $ | 241 | $ | 17 | $ | 380 | ||||||||||||||||
| Opening net book amount | $ | 122 | $ | 241 | $ | 17 | $ | 380 | |||||||||||||||
| Additions | 69 | 323 | — | 392 | |||||||||||||||||||
| Depreciation expense | (70) | (142) | (6) | (218) | |||||||||||||||||||
| Closing net book amount | $ | 121 | $ | 422 | $ | 11 | $ | 554 | |||||||||||||||
| At December 31 | |||||||||||||||||||||||
| Cost | $ | 744 | $ | 1,052 | $ | 53 | $ | 1,849 | |||||||||||||||
| Accumulated depreciation | (623) | (630) | (42) | (1,295) | |||||||||||||||||||
| $ | 121 | $ | 422 | $ | 11 | $ | 554 | ||||||||||||||||
| 2025 | |||||||||||||||||||||||
| Leasehold improvements | Machinery | Office equipment | Total | ||||||||||||||||||||
| At January 1 | |||||||||||||||||||||||
| Cost | $ | 744 | $ | 1,052 | $ | 53 | $ | 1,849 | |||||||||||||||
| Accumulated depreciation | (623) | (630) | (42) | (1,295) | |||||||||||||||||||
| $ | 121 | $ | 422 | $ | 11 | $ | 554 | ||||||||||||||||
| Opening net book amount | $ | 121 | $ | 422 | $ | 11 | $ | 554 | |||||||||||||||
| Additions | — | 422 | 3 | 425 | |||||||||||||||||||
| Acquired from business combinations | — | 28 | — | 28 | |||||||||||||||||||
| Cost of disposals | — | (14) | — | (14) | |||||||||||||||||||
| Accumulated depreciation on disposals | — | 11 | — | 11 | |||||||||||||||||||
| Depreciation expense | (83) | (223) | (4) | (310) | |||||||||||||||||||
| Net exchange differences | — | 1 | — | 1 | |||||||||||||||||||
| Closing net book amount | $ | 38 | $ | 647 | $ | 10 | $ | 695 | |||||||||||||||
| At December 31 | |||||||||||||||||||||||
| Cost | $ | 744 | $ | 1,568 | $ | 56 | $ | 2,368 | |||||||||||||||
| Accumulated depreciation | (706) | (921) | (46) | (1,673) | |||||||||||||||||||
| $ | 38 | $ | 647 | $ | 10 | $ | 695 | ||||||||||||||||
Note. Business combinations please refer to Note 6(28) for details.
F-24
The Group has no property, plant and equipment pledged to others.
6(7) Leasing arrangements — lessee
A.The Group leases various assets including buildings and business vehicles. Rental contracts are typically made for periods of 2 to 3 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leased assets cannot be used as collateral for borrowing purposes and are prohibited from being subleased, sold or lent to others or corporations under any circumstances.
B.Short-term leases with a lease term of 12 months or less include offices located in United States, Japan, China, France and Lithuania.
C.The movements of right-of-use assets of the Group are as follows:
| 2024 | |||||||||||||||||
| Buildings | Business vehicles | Total | |||||||||||||||
| At January 1 | |||||||||||||||||
| Cost | $ | 942 | $ | 202 | $ | 1,144 | |||||||||||
| Accumulated depreciation | (237) | (60) | (297) | ||||||||||||||
| $ | 705 | $ | 142 | $ | 847 | ||||||||||||
| Opening net book amount | $ | 705 | $ | 142 | $ | 847 | |||||||||||
| Additions | 82 | 85 | 167 | ||||||||||||||
| Depreciation expense | (422) | (107) | (529) | ||||||||||||||
| Closing net book amount | $ | 365 | $ | 120 | $ | 485 | |||||||||||
| At December 31 | |||||||||||||||||
| Cost | $ | 1,024 | $ | 287 | $ | 1,311 | |||||||||||
| Accumulated depreciation | (659) | (167) | (826) | ||||||||||||||
| $ | 365 | $ | 120 | $ | 485 | ||||||||||||
| 2025 | |||||||||||||||||
| Buildings | Business vehicles | Total | |||||||||||||||
| At January 1 | |||||||||||||||||
| Cost | $ | 1,024 | $ | 287 | $ | 1,311 | |||||||||||
| Accumulated depreciation | (659) | (167) | (826) | ||||||||||||||
| $ | 365 | $ | 120 | $ | 485 | ||||||||||||
| Opening net book amount | $ | 365 | $ | 120 | $ | 485 | |||||||||||
| Additions | 620 | 123 | 743 | ||||||||||||||
| Cost of derecognition | — | (151) | (151) | ||||||||||||||
| Derecognized accumulated depreciation | — | 143 | 143 | ||||||||||||||
| Depreciation expense | (439) | (122) | (561) | ||||||||||||||
| Closing net book amount | $ | 546 | $ | 113 | $ | 659 | |||||||||||
| At December 31 | |||||||||||||||||
| Cost | $ | 1,644 | $ | 259 | $ | 1,903 | |||||||||||
| Accumulated depreciation | (1,098) | (146) | (1,244) | ||||||||||||||
| $ | 546 | $ | 113 | $ | 659 | ||||||||||||
F-25
D.Lease liabilities relating to lease contracts:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Total lease liabilities | $ | 510 | $ | 683 | |||||||
| Less: current portion (shown as ‘current lease liabilities’) | (402) | (444) | |||||||||
| $ | 108 | $ | 239 | ||||||||
E.The information on profit and loss accounts relating to lease contracts is as follows:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Items affecting profit or loss | |||||||||||||||||
| Interest expense on lease liabilities | $ | 15 | $ | 18 | $ | 16 | |||||||||||
| Expense on short-term lease contracts | 352 | 348 | 306 | ||||||||||||||
| $ | 367 | $ | 366 | $ | 322 | ||||||||||||
F.For the years ended December 31, 2023, 2024 and 2025, the Group’s total cash outflow for leases were $802, $891 and $884, respectively, including the interest expense on lease liabilities amounting to $15, $18 and $16, expense on short-term lease contracts amounting to $352, $348 and $306, and repayments of principal portion of lease liabilities amounting to $435, $525 and $562, respectively.
6(8) Intangible assets
| 2024 | |||||||||||||||||
| Software | Other intangible assets | Total | |||||||||||||||
| At January 1 | |||||||||||||||||
| Cost | $ | 137 | $ | 89 | $ | 226 | |||||||||||
| Accumulated amortization | (68) | (81) | (149) | ||||||||||||||
| $ | 69 | $ | 8 | $ | 77 | ||||||||||||
| Opening net book amount | $ | 69 | $ | 8 | $ | 77 | |||||||||||
| Additions | 6 | — | 6 | ||||||||||||||
| Cost of disposals | (29) | (74) | (103) | ||||||||||||||
| Accumulated amortization on disposals | 29 | 74 | 103 | ||||||||||||||
| Amortization charge | (46) | (5) | (51) | ||||||||||||||
| Closing net book amount | $ | 29 | $ | 3 | $ | 32 | |||||||||||
| At December 31 | |||||||||||||||||
| Cost | $ | 114 | $ | 15 | $ | 129 | |||||||||||
| Accumulated amortization | (85) | (12) | (97) | ||||||||||||||
| $ | 29 | $ | 3 | $ | 32 | ||||||||||||
F-26
| 2025 | |||||||||||||||||||||||||||||
| Goodwill | Unpatented technology | Software | Other intangible assets | Total | |||||||||||||||||||||||||
| At January 1 | |||||||||||||||||||||||||||||
| Cost | $ | — | $ | — | $ | 114 | $ | 15 | $ | 129 | |||||||||||||||||||
| Accumulated amortization and impairment | — | — | (85) | (12) | (97) | ||||||||||||||||||||||||
| $ | — | $ | — | $ | 29 | $ | 3 | $ | 32 | ||||||||||||||||||||
| Opening net book amount | $ | — | $ | — | $ | 29 | $ | 3 | $ | 32 | |||||||||||||||||||
| Acquired from business combinations | 4,739 | 1,760 | — | — | 6,499 | ||||||||||||||||||||||||
| Cost of disposals | — | — | (43) | (15) | (58) | ||||||||||||||||||||||||
| Accumulated amortization on disposals | — | — | 43 | 15 | 58 | ||||||||||||||||||||||||
| Amortization charge | — | (117) | (25) | (3) | (145) | ||||||||||||||||||||||||
| Impairment loss | (1,965) | — | — | — | (1,965) | ||||||||||||||||||||||||
| Closing net book amount | $ | 2,774 | $ | 1,643 | $ | 4 | $ | — | $ | 4,421 | |||||||||||||||||||
| At December 31 | |||||||||||||||||||||||||||||
| Cost | $ | 4,739 | $ | 1,760 | $ | 71 | $ | — | $ | 6,570 | |||||||||||||||||||
| Accumulated amortization and impairment | (1,965) | (117) | (67) | — | (2,149) | ||||||||||||||||||||||||
| $ | 2,774 | $ | 1,643 | $ | 4 | $ | — | $ | 4,421 | ||||||||||||||||||||
Note. Business combinations please refer to Note 6(28) for details.
A.Details of amortization on intangible assets are as follows:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Cost of sales and services | $ | — | $ | — | $ | 117 | |||||||||||
| Research and development expenses | 75 | 51 | 28 | ||||||||||||||
| $ | 75 | $ | 51 | $ | 145 | ||||||||||||
B.Please refer to 6(9) Impairment of non-financial assets for the impairment loss on goodwill.
6(9) Impairment of non-financial assets
A.The Group recognized impairment loss for the year ended December 31, 2025 was $1,965. Details of such loss is as follow:
| Year ended December 31, 2025 | |||||||||||
| Recognized in profit or loss | Recognized in other comprehensive income | ||||||||||
| Impairment loss on goodwill | $ | 1,965 | $ | — | |||||||
B.Goodwill is allocated to the Group’s cash‑generating units that are expected to benefit from the acquisition. Management assessed the expected synergies and concluded that they were limited to Wannaby only. Accordingly, the goodwill arising from the acquisition of Wannaby was fully allocated to the Wannaby
F-27
cash-generating unit, which represents the smallest identifiable group of assets that generates cash inflows largely independent from other assets or groups of assets.
Subsequent to the acquisition, the Group’s business of serving brand customers in the fashion industries continued to be affected by a challenging macroeconomic environment, including cautious spending and longer decision cycles, the actual growth in Wannaby’s operating revenue was not as expected. Based on the Group’s assessment, an impairment loss of $1,965 was recognized for the goodwill due to the recoverable amount being less than the carrying amount.
The recoverable amount was determined based on value-in-use calculations. These calculations use after-tax cash flow projections based on financial budgets covering a five-year period.
Management determined budgeted gross margin based on past performance and its expectations of market development. The perpetual growth rate applied is 2%, and the discount rate used is 20.2% (pre-tax), reflecting the specific risks associated with the relevant CGU. The value in use of the Wannaby CGU is sensitive to changes in the discount rate. A 0.5% decrease (increase) in the discount rate would increase (decrease) the value in use by approximately $170 ($161), respectively.
| Discount rates | |||||||||||
Decrease 0.5% | Increase 0.5% | ||||||||||
| December 31, 2025 | |||||||||||
| Effects on value in use | $ | 170 | $ | (161) | |||||||
6(10) Financial liabilities at fair value through profit or loss
| December 31, 2024 | December 31, 2025 | ||||||||||
| Financial liabilities designated as at fair value through profit or loss | |||||||||||
| Non-current items: | |||||||||||
| Warrant liabilities | $ | 1,793 | $ | 419 | |||||||
A. Amounts recognized in profit or loss in relation to financial liabilities at fair value through profit or loss are as follows:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Net gains (losses) recognized in profit or loss | |||||||||||||||||
| Warrant liabilities | $ | 1,641 | $ | (227) | $ | 1,374 | |||||||||||
| Earnout liabilities (Note) | — | — | 158 | ||||||||||||||
| $ | 1,641 | $ | (227) | $ | 1,532 | ||||||||||||
The amounts presented above are recognized under “Gains (losses) on financial liabilities at fair value through profit or loss” and included within other gains and losses. See Note 6(21) for further details and reconciliation.
Note: Earnout liabilities please refer to Note 6(28) for details of business combinations.
B. Warrant liabilities
(a)Each warrants entitles the holder to purchase one Class A Ordinary Share at a price of $11.50 (in dollars) per share.
F-28
(b)As of December 31, 2025 there were 20,850 thousand warrants outstanding, consisting of 20,850 thousand Public Warrants, each warrant is exercisable for one Perfect Class A Ordinary Share, in accordance with its terms.
(c)For the year ended December 31, 2025 and 2024, no additional warrants were issued, exercised, forfeited or expired..
(d)Redemption of warrants when the price per Perfect Class A Ordinary Shares equal or exceed $18.00 (in dollars).
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
(i) in whole and not in part (ii) at a price of $0.01 (in dollars) per warrant (iii) upon not less than 30 days’ prior written notice of redemption to each warrant holder (the “30-day redemption period”) and (iv) if, and only if, the last reported sale price of the Perfect Class A Ordinary Shares for any 20 trading days within a 30-trading day period ending business days before the Company sends the notice of redemption to the warrant holders (which the Company refers to as the “Reference Value”) equals or exceeds $18.00 (in dollars) per share.
(e)Redemption of warrants when the price per Perfect Class A Ordinary Share equals or exceeds $10.00 (in dollars).
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
(i) in whole and not in part (ii) at $0.10 (in dollars) per warrant upon a minimum of 30 days’ prior written notice of redemption (iii) provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the “fair market value” of Perfect Class A Ordinary Shares (iv) if, and only if, the Reference Value equals or exceeds $10.00 (in dollars) per share and (v) if the Reference Value is less than $18.00 (in dollars) per share.
6(11) Other payables
| December 31, 2024 | December 31, 2025 | ||||||||||
| Employee bonus | $ | 4,593 | $ | 5,325 | |||||||
| Payroll | 2,441 | 2,958 | |||||||||
| Promotional fees | 1,496 | 1,759 | |||||||||
| Platform fees | 969 | 951 | |||||||||
| Professional service fees | 1,198 | 756 | |||||||||
| Remuneration to directors | 115 | 115 | |||||||||
| Sales VAT payables | 204 | 157 | |||||||||
| Post and telecommunications expenses | 271 | 291 | |||||||||
| Others | 369 | 519 | |||||||||
| $ | 11,656 | $ | 12,831 | ||||||||
F-29
6(12) Provisions
| 2024 | 2025 | ||||||||||
| Warranty | Warranty | ||||||||||
| At January 1 | $ | 2,394 | $ | 1,899 | |||||||
| Additional provisions | 581 | 405 | |||||||||
| Used during the year | (1,030) | (1,254) | |||||||||
| Net exchange differences | (46) | 11 | |||||||||
| At December 31 | $ | 1,899 | $ | 1,061 | |||||||
Analysis of total provisions:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Current | $ | 1,899 | $ | 1,061 | |||||||
The Group enters into the contracts with customers with warranties on services provided. The warranties (loss indemnification) provide customers with assurance that the related services will function as mutually agreed. Provision for warranty is estimated based on historical warranty data, other known events and management’s judgment. The Group recognizes such expenses within ‘Cost of sales and services’ when related services are provided. Any changes in industry circumstances might affect the provisions. Provisions are settled when the payment is actually claimed.
6(13) Pensions
A.Defined benefit plan
(a)The Group’s subsidiary, Perfect Mobile Corp. (Taiwan), was incorporated in Taiwan, which has a defined benefit pension plan in accordance with the Labor Standards Act, covering all regular foreign employees’ service years. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. Perfect Mobile Corp. (Taiwan) contributes to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, Perfect Mobile Corp. (Taiwan) would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, Perfect Mobile Corp. (Taiwan) will fund the deficit by the following March.
(b)The amounts recognized in the balance sheet are as follows:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Present value of defined benefit obligations | $ | (61) | $ | (83) | |||||||
| Fair value of plan assets | 15 | 19 | |||||||||
| Net defined benefit liability | $ | (46) | $ | (64) | |||||||
F-30
(c)Movements in net defined benefit liability are as follows:
| 2024 | |||||||||||||||||
| Present value of defined benefit obligations | Fair value of plan assets | Net defined benefit liability | |||||||||||||||
| At January 1 | $ | (92) | $ | 13 | $ | (79) | |||||||||||
| Current service cost | (4) | — | (4) | ||||||||||||||
| Interest (expense) income | (1) | — | (1) | ||||||||||||||
| (97) | 13 | (84) | |||||||||||||||
| Remeasurements: | |||||||||||||||||
| Return on plan assets | — | 1 | 1 | ||||||||||||||
| Change in demographic assumptions | 5 | — | 5 | ||||||||||||||
| Change in financial assumptions | 5 | — | 5 | ||||||||||||||
| Experience adjustments | 20 | — | 20 | ||||||||||||||
| 30 | 1 | 31 | |||||||||||||||
| Pension fund contribution | — | 2 | 2 | ||||||||||||||
| Net exchange differences | 6 | (1) | 5 | ||||||||||||||
| At December 31 | $ | (61) | $ | 15 | $ | (46) | |||||||||||
| 2025 | |||||||||||||||||
| Present value of defined benefit obligations | Fair value of plan assets | Net defined benefit liability | |||||||||||||||
| At January 1 | $ | (61) | $ | 15 | $ | (46) | |||||||||||
| Current service cost | (1) | — | (1) | ||||||||||||||
| Interest (expense) income | (1) | — | (1) | ||||||||||||||
| (63) | 15 | (48) | |||||||||||||||
| Remeasurements: | |||||||||||||||||
| Return on plan assets | — | 1 | 1 | ||||||||||||||
| Change in demographic assumptions | (4) | — | (4) | ||||||||||||||
| Change in financial assumptions | (4) | — | (4) | ||||||||||||||
| Experience adjustments | (9) | — | (9) | ||||||||||||||
| (17) | 1 | (16) | |||||||||||||||
| Pension fund contribution | — | 2 | 2 | ||||||||||||||
| Net exchange differences | (3) | 1 | (2) | ||||||||||||||
| At December 31 | $ | (83) | $ | 19 | $ | (64) | |||||||||||
(d)The Bank of Taiwan was commissioned to manage the Fund of Perfect Mobile Corp. (Taiwan)’s defined benefit pension plan in accordance with the Fund’s annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund” (Article 6: The scope of utilization for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilization of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. Perfect Mobile Corp. (Taiwan) has no right to participate in managing and operating that fund and hence Perfect
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Mobile Corp. (Taiwan) is unable to disclose the classification of plan assets fair value in, accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2024 and 2025 is given in the Annual Labor Retirement Fund Utilization Report announced by the government.
(e)The principal actuarial assumptions used were as follows:
| Years ended December 31, | |||||||||||
| 2024 | 2025 | ||||||||||
| Discount rate | 1.80 | % | 1.55 | % | |||||||
| Future salary increases | 3.00 | % | 3.00 | % | |||||||
Future mortality rate was estimated based on the 6th Taiwan Standard Ordinary Experience Mortality Table.
Because the main actuarial assumption may change (mainly on discount rate and future salary increase rate), the present value of defined benefit obligation is affected. The analysis was as follows:
| Discount rate | Future salary increases | ||||||||||||||||||||||
| Increase | Decrease | Increase | Decrease | ||||||||||||||||||||
| 0.25% | 0.25% | 0.25% | 0.25% | ||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Effect on present value of defined benefit obligation | $ | (3) | $ | 4 | $ | 4 | $ | (3) | |||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Effect on present value of defined benefit obligation | $ | (4) | $ | 5 | $ | 5 | $ | (4) | |||||||||||||||
The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analyzing sensitivity and the method of calculating net pension liability in the balance sheet are the same.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.
(f)Expected contributions to the defined benefit pension plans of Perfect Mobile Corp. (Taiwan) for the year ending December 31, 2026 amount to $7.
(g)As of December 31, 2025, the weighted average duration of the retirement plan is 22 years. The expected timing of the future pension payment was as follows:
| Within 1 year | $ | — | |||
| 1-5 year(s) | — | ||||
| Over 5 years | 118 | ||||
| $ | 118 | ||||
B.Defined contribution plans
(a)Perfect Mobile Corp. (Taiwan) has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act, covering all regular employees with R.O.C. nationality. Under the New Plan, Perfect Mobile Corp. (Taiwan) contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum when employees retire.
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(b)The pension costs under defined contribution pension plan of Perfect Mobile Corp. (Taiwan) for the years ended December 31, 2023, 2024 and 2025 were $527, $567, and $673, respectively.
(c)The pension costs under local government law of other foreign subsidiaries for the years ended December 31, 2023, 2024 and 2025 were $175, $182, and $180, respectively.
6(14) Share-based payment
A.Share Incentive Plan
On December 13, 2021, the Board approved and adopted the Share Incentive Plan. On October 25, 2022, the Board has approved and adopted an amendment to the Share Incentive Plan in response to the recapitalization. Going forward one unit option is eligible for one Perfect Ordinary Share. The maximum number of Perfect Ordinary Shares that can be issued upon exercise of all options under the Share Incentive Plan are 5,311 thousand shares.
(a)For the years ended December 31, 2024 and 2025, the Group’s Share Incentive Plan’s terms and condition are as follows:
| Plan | Type of arrangement | Settled by | Maximum terms of option granted | Vesting conditions | ||||||||||||||||||||||
| Share Incentive Plan | Employee stock options | Equity | Five years | 2 years’ service: exercise 50% | ||||||||||||||||||||||
3 years’ service: exercise 75% | ||||||||||||||||||||||||||
4 years’ service: exercise 100% | ||||||||||||||||||||||||||
(b)Movements of outstanding options under Share Incentive Plan are as follows:
| 2024 | 2025 | ||||||||||||||||||||||
| No. of options (units in thousands) | Weighted- average exercise price per share (in dollars) | No. of options (units in thousands) | Weighted- average exercise price per share (in dollars) | ||||||||||||||||||||
| Options outstanding at January 1 | 4,073 | $ | 4.47 | 3,877 | $ | 4.44 | |||||||||||||||||
| Options granted | 50 | 2.21 | 35 | 1.84 | |||||||||||||||||||
| Options forfeited | (246) | 4.48 | (214) | 4.50 | |||||||||||||||||||
| Options outstanding at December 31 | 3,877 | 4.44 | 3,698 | 4.42 | |||||||||||||||||||
| Options exercisable at December 31 | 894 | 3.95 | 2,230 | 4.37 | |||||||||||||||||||
(c)As of December 31, 2024 and 2025, the range of exercise prices of stock options outstanding were $2.13 ~ $7.20 and $1.84 ~ $7.20 (in dollars) per share, respectively; the weighted-average remaining contractual period was 2.06 ~ 4.98 years and 1.06 ~ 4.33 years, respectively.
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(d)The fair value of stock options granted on grant date is measured using the Black-Scholes option-pricing model. Relevant information is as follows:
| Plan | Grant date | Units granted (in thousands) | Stock price per share (in dollars) | Exercise price per share (in dollars) | Expected price volatility (Note ii) | Expected option life | Expected dividends | Risk-free interest rate | Fair value per unit (in dollars) | |||||||||||||||||||||||||||||||||||||||||||||||
| Share Incentive Plan | 2022.01.21 (Note i) | 2,143 | $ | 5.39 | $ | 3.95 | 53.75% | 3.88 | 0.00% | 1.46% | $ | 2.7637 | ||||||||||||||||||||||||||||||||||||||||||||
| 2023.01.03 | 8 | 7.20 | 7.20 | 64.85% | 3.87 | 0.00% | 4.07% | 3.7198 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2023.05.23 | 2,260 | 4.93 | 4.93 | 69.15% | 3.88 | 0.00% | 3.90% | 2.6615 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2023.08.21 | 7 | 4.00 | 3.916 | 70.65% | 3.88 | 0.00% | 4.64% | 2.2411 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2023.11.02 | 5 | 2.43 | 2.43 | 70.37% | 3.88 | 0.00% | 4.77% | 1.3487 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2024.05.27 | 5 | 2.13 | 2.13 | 72.67% | 3.88 | 0.00% | 4.65% | 1.2069 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2024.12.23 | 45 | 2.26 | 2.22 | 74.64% | 3.87 | 0.00% | 4.46% | 1.3100 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2025.05.01 | 35 | 1.84 | 1.84 | 79.57% | 3.88 | 0.00% | 3.77% | 1.0973 | ||||||||||||||||||||||||||||||||||||||||||||||||
Note i: Stock price, exercise price and fair value of stock option granted on January 21, 2022 were adjusted in connection with the recapitalization. All amounts in the table are presented on a consistent adjusted basis.
Note ii: Expected price volatility is estimated based on the daily historical stock price fluctuation data of the Company and guideline companies of the last five years before the grant date.
B.Expenses incurred on share-based payment transactions are shown below:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Equity settled | $ | 3,268 | $ | 2,774 | $ | 1,410 | |||||||||||
C.In 2022, the Group has service agreements with its Board of Directors to grant them awards of the Company’s Ordinary Shares at a fixed monetary value. In the future, the Group may compensate directors either entirely in cash or partially in cash and partially in equity.
D.Shareholder Earnout
In connection with the merger transaction in 2022, the Company executed additional capitalization by way of the potential issuance of Earnout Shares for Perfect shareholders. In accordance with Shareholder Earnout terms and conditions contemplated by the business combination agreement, 3,000 thousand, 3,000 thousand and 4,000 thousand of the Shareholder Earnout Shares are issuable if over any 20 trading days within any 30-trading-day period during the Earnout Period when the daily volume-weighted average price of the Perfect Class A Ordinary Shares is greater than or equal to $11.50 (in dollars), $13.00 (in dollars) and $14.50 (in dollars), respectively. None of these conditions had been met in the period up through December 31, 2025.
Shareholder Earnout Shares are considered a potential contingent payment agreement with Shareholders, based on a market condition without link to service. The expense related to these instruments was previously recorded in connection with the merger in 2022.
E.Sponsor Earnout
In connection with the business combination agreement, the Company entered into a Sponsor Letter Agreement pursuant to which it agreed to issue Earnout shares to the Sponsors. Subject to the terms and conditions contemplated by the Sponsor Letter Agreement, upon the occurrence of specific Sponsor
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Earnout Event (as defined below) from October 28, 2022 to October 28, 2027 (“Earnout Period”), Perfect will issue Perfect Class A Ordinary Shares of up to 1,175,624 Class A Ordinary Shares(the “Sponsor Earnout Promote Shares”) to Sponsor, with (a) 50% of the Sponsor Earnout Promote Shares issuable if over any 20 trading days within any 30-trading-day period during the Earnout Period the daily volume-weighted average price of the Perfect Class A Ordinary Shares is greater than or equal to $11.50 (in dollars), and (b) 50% of the Sponsor Earnout Promote Shares issuable if over any twenty (20) trading days within any 30-trading-day period during the Earnout Period the daily volume-weighted average price of the Perfect Class A Ordinary Shares is greater than or equal to $13.00 (in dollars). None of these conditions had been met in the period up through December 31, 2025.
6(15) Share capital
A.As of December 31, 2025, the Company’s authorized capital is $82,000 consisting of 700,000 thousand shares of Class A Ordinary Shares, 90,000 thousand shares of Class B Ordinary Shares, 30,000 thousand shares of classes reserved and may determine by Board of Directors. The paid-in capital was $10,185, including 85,060 thousand Class A Ordinary Shares after the retirement of 16,388 thousand treasury shares and 27 thousand shares surrendered by a shareholder, and 16,789 thousand Class B Ordinary Shares. All proceeds from shares issued have been collected.
Perfect Class A Ordinary shares
Perfect Class A Ordinary shares have a par value of $0.1 (in dollars). Amounts received above the par value are recorded as share premium. Each holder of Perfect Class A Ordinary shares will be entitled to one vote per share. Class A Ordinary Shares are listed on NYSE under the trading symbol “PERF”.
Perfect Class B Ordinary shares
Perfect Class B Ordinary shares have a par value of $0.1 (in dollars). Perfect Class B Ordinary Shares have the same rights as Perfect Class A Ordinary Shares except for voting and conversion rights. Each Perfect Class B Ordinary Shares is entitled to 10 votes and is convertible into Perfect Class A Ordinary Shares at any time by the holder thereof. Each Class B Ordinary Share is convertible into one Class A Ordinary Share at any time at the option of the holder thereof. The right to convert shall be exercisable by the holder of the Class B Ordinary Share delivering a written notice to the Company that such holder elects to convert a specified number of Class B Ordinary Shares into Class A Ordinary Shares. Each Class B Ordinary Share shall, automatically and immediately, without any further action from the holder thereof, convert into one Class A Ordinary Share when it ceases being beneficially owned by any of the Principals. Class A Ordinary Shares are not convertible into Class B Ordinary Shares under any circumstances.
B.Movements for the Company’s share capital are as follows:
| Perfect Class A Ordinary Shares | Perfect Class B Ordinary Shares | Total | ||||||||||||||||||||||||||||||||||||
| Note | Shares (in thousand) | Amount | Shares (in thousand) | Amount | Amount | |||||||||||||||||||||||||||||||||
| At January 1, 2023 | 101,475 | $ | 10,147 | 16,789 | $ | 1,679 | $ | 11,826 | ||||||||||||||||||||||||||||||
| Shares retired | (b) | (16,347) | (1,634) | — | — | (1,634) | ||||||||||||||||||||||||||||||||
| At December 31, 2023 | (a) | 85,128 | 8,513 | 16,789 | 1,679 | 10,192 | ||||||||||||||||||||||||||||||||
| Shares retired | (b) | (68) | (7) | — | — | (7) | ||||||||||||||||||||||||||||||||
| At December 31, 2024 | (a) | 85,060 | 8,506 | 16,789 | 1,679 | 10,185 | ||||||||||||||||||||||||||||||||
| At December 31, 2025 | 85,060 | $ | 8,506 | 16,789 | $ | 1,679 | $ | 10,185 | ||||||||||||||||||||||||||||||
(a)As of December 31, 2023, the Company’s authorized capital is $82,000 consisting of 700,000 thousand shares of Class A Ordinary Shares, 90,000 thousand shares of Class B Ordinary Shares, 30,000 thousand shares of classes reserved and may determine by Board of Directors. The
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paid-in capital was $10,192, consisting of 85,128 thousand Class A Ordinary Shares and 16,789 thousand Class B Ordinary Shares with a par value of $0.1 (in dollars) per share. All proceeds from shares issued have been collected.
As of December 31, 2024, the Company’s authorized capital is $82,000 consisting of 700,000 thousand shares of Class A Ordinary Shares, 90,000 thousand shares of Class B Ordinary Shares, 30,000 thousand shares of classes reserved and may determine by Board of Directors. The paid-in capital was $10,185, consisting of 85,060 thousand Class A Ordinary Shares and 16,789 thousand Class B Ordinary Shares with a par value of $0.1 (in dollars) per share. All proceeds from shares issued have been collected.
As of December 31, 2024, the Company’s authorized capital is $82,000 consisting of 700,000 thousand shares of Class A Ordinary Shares, 90,000 thousand shares of Class B Ordinary Shares, 30,000 thousand shares of classes reserved and may determine by Board of Directors. The paid-in capital was $10,185, consisting of 85,060 thousand Class A Ordinary Shares and 16,789 thousand Class B Ordinary Shares with a par value of $0.1 (in dollars) per share. All proceeds from shares issued have been collected.
(b)On October 26, 2023, the Company completed the retirement of 191 thousand of Class A Ordinary shares. These retired shares were acquired as part of the share repurchase plan announced on May 4, 2023.
On November 29, 2023, a shareholder surrendered 27 thousand of Class A Ordinary shares for personal reason, and those ordinary shares were canceled.
On December 29, 2023, the Company completed the retirement of 16,129 thousand of Class A Ordinary shares. These retired shares were acquired from the tender offer announced on November 27, 2023.
On February 7, 2024, the Company completed the retirement of 68 thousand of Class A Ordinary shares. These retired shares were acquired as part of the share repurchase plan announced on May 4, 2023.
The reconciliation of the capital surplus due to shares repurchased and retired is provided in Note 6(16).
C.Share Repurchase Plan
On May 4, 2023, the Board of Directors approved a share repurchase plan authorizing the Company may repurchase up to $20,000 of its Class A Ordinary shares over the next 12-month period. During this plan, the Company repurchased 259 thousand of Class A Ordinary shares with a total consideration amounting to $1,064. The Company retired 191 thousand shares repurchased from this plan in 2023 and retired the remaining of 68 thousand shares in 2024.
D.Tender Offer
On November 24, 2023, the Board of Directors approved a tender offer, which commenced on November 27, 2023, and withdrawal rights expired on December 26, 2023, to purchase up to 16,129 thousand shares of Class A Ordinary at a price of $3.10 (in dollars) per share for an aggregate purchase price of approximately $50,000. The Company completed the repurchase, and all the purchased shares were retired on December 29, 2023.
6(16) Capital surplus
Except as required by the Company’s Articles of Incorporation or Cayman’s law, capital surplus shall not be used for any other purpose but covering accumulated deficit. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.
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The following tables illustrates the detail of capital surplus:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Additional paid-in capital | $ | 477,415 | $ | 477,415 | |||||||
| Other: | |||||||||||
| Employees’ stock option cost | 8,204 | 9,614 | |||||||||
| Retirement of treasury shares | 27,371 | 27,371 | |||||||||
| Subtotal | 35,575 | 36,985 | |||||||||
| $ | 512,990 | $ | 514,400 | ||||||||
6(17) Accumulated deficits
Under the Company’s Articles of Incorporation, distribution of earnings would be based on the Company’s operating and capital needs.
6(18) Revenue
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Revenue from contracts with customers | $ | 53,505 | $ | 60,202 | $ | 69,154 | |||||||||||
A.Disaggregation of revenue from contracts with customers
(a)The Group derives revenue from the transfer of goods and services over time and at a point in time in the following geographical regions:
| 2023 | United States | Americas_ Others | Europe | Asia-Pacific | Others | Total | |||||||||||||||||||||||||||||
| Revenue from external customer contracts | $ | 24,992 | $ | 4,937 | $ | 13,777 | $ | 8,553 | $ | 1,246 | $ | 53,505 | |||||||||||||||||||||||
| Timing of revenue recognition: | |||||||||||||||||||||||||||||||||||
| At a point in time | $ | 4,380 | $ | 1 | $ | 1,555 | $ | 1,530 | $ | 122 | $ | 7,588 | |||||||||||||||||||||||
| Over time | 20,612 | 4,936 | 12,222 | 7,023 | 1,124 | 45,917 | |||||||||||||||||||||||||||||
| $ | 24,992 | $ | 4,937 | $ | 13,777 | $ | 8,553 | $ | 1,246 | $ | 53,505 | ||||||||||||||||||||||||
| 2024 | United States | Americas_ Others | Europe | Asia-Pacific | Others | Total | |||||||||||||||||||||||||||||
| Revenue from external customer contracts | $ | 25,142 | $ | 6,669 | $ | 16,586 | $ | 10,109 | $ | 1,696 | $ | 60,202 | |||||||||||||||||||||||
| Timing of revenue recognition: | |||||||||||||||||||||||||||||||||||
| At a point in time | $ | 2,751 | $ | 119 | $ | 1,116 | $ | 1,858 | $ | 273 | $ | 6,117 | |||||||||||||||||||||||
| Over time | 22,391 | 6,550 | 15,470 | 8,251 | 1,423 | 54,085 | |||||||||||||||||||||||||||||
| $ | 25,142 | $ | 6,669 | $ | 16,586 | $ | 10,109 | $ | 1,696 | $ | 60,202 | ||||||||||||||||||||||||
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| 2025 | United States | Americas_ Others | Europe | Asia-Pacific | Others | Total | |||||||||||||||||||||||||||||
| Revenue from external customer contracts | $ | 25,978 | $ | 8,285 | $ | 20,284 | $ | 12,021 | $ | 2,586 | $ | 69,154 | |||||||||||||||||||||||
| Timing of revenue recognition: | |||||||||||||||||||||||||||||||||||
| At a point in time | $ | 3,275 | $ | 156 | $ | 1,717 | $ | 2,250 | $ | 89 | $ | 7,487 | |||||||||||||||||||||||
| Over time | 22,703 | 8,129 | 18,567 | 9,771 | 2,497 | 61,667 | |||||||||||||||||||||||||||||
| $ | 25,978 | $ | 8,285 | $ | 20,284 | $ | 12,021 | $ | 2,586 | $ | 69,154 | ||||||||||||||||||||||||
Note. “Americas_Others” includes North and South America, excluding the United States.
(b)Alternatively, the disaggregation of revenue could also be distinct as follows:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| AR/AI cloud solutions and Subscription | $ | 44,755 | $ | 53,795 | $ | 61,071 | |||||||||||
| Licensing | 7,546 | 5,220 | 5,308 | ||||||||||||||
| Others | 1,204 | 1,187 | 2,775 | ||||||||||||||
| $ | 53,505 | $ | 60,202 | $ | 69,154 | ||||||||||||
(c)The revenue generated from AR/AI cloud solutions was $18,238, $17,192, and $16,768 for the years ended December 31, 2023, 2024 and 2025, respectively.
B.Contract assets and liabilities
(a)The Group has recognized the following revenue-related contract assets mainly arose from unbilled receivables and contract liabilities mainly arose from sales contracts with receipts from customers in advance. Generally, the contract period is one year, the contract liabilities are reclassified as revenue within the following one year after the balance sheet date.
| December 31, 2024 | December 31, 2025 | ||||||||||
| Contract assets: | |||||||||||
| Unbilled revenue | $ | 977 | $ | 968 | |||||||
| Contract liabilities: | |||||||||||
| Advance sales receipts | $ | 17,218 | $ | 21,902 | |||||||
(b)Revenue recognized that was included in the contract liability balance at the beginning of the period
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Revenue recognized that was included in the contract liability balance at the beginning of the period | |||||||||||||||||
| Advance sales receipts | $ | 12,738 | $ | 15,270 | $ | 17,161 | |||||||||||
(c)Unsatisfied contracts
Aggregate amount of the transaction price allocated to contracts that are partially or fully unsatisfied as of December 31, 2024 and 2025, amounting to $ 26,675 and $ 29,926, respectively. The Group expects that 93% of the transaction price allocated to the unsatisfied contracts as of December 31, 2025, are
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expected to be recognized as revenue less than one year. The remaining 7% is expected to be recognized as revenue from 2027 to 2029.
6(19) Interest income
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Interest income from bank deposits | $ | 4,188 | $ | 5,799 | $ | 4,592 | |||||||||||
| Interest income from financial assets at amortized cost | 5,309 | 1,898 | 1,541 | ||||||||||||||
| Others | 1 | 11 | 1 | ||||||||||||||
| $ | 9,498 | $ | 7,708 | $ | 6,134 | ||||||||||||
The nature of interest income from financial assets at amortized cost was time deposits with maturities over three months.
6(20) Other income
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Subsidy from government | $ | 21 | $ | 34 | $ | 22 | |||||||||||
| Others | 12 | 21 | 6 | ||||||||||||||
| $ | 33 | $ | 55 | $ | 28 | ||||||||||||
6(21) Other gains and losses
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Foreign exchange gains (losses) | $ | 34 | $ | (89) | $ | (265) | |||||||||||
| Gains on financial assets at fair value through profit or loss | — | — | 51 | ||||||||||||||
| Gains (losses) on financial liabilities at fair value through profit or loss | 1,641 | (227) | 1,532 | ||||||||||||||
| Others | — | — | 1 | ||||||||||||||
| $ | 1,675 | $ | (316) | $ | 1,319 | ||||||||||||
Please refer to Note 6(2) for details of gains on financial assets at fair value through profit or loss and Note 6(10) for details of gains (losses) on financial liabilities at fair value through profit or loss.
6(22) Finance costs
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Interest expense – lease liabilities | $ | 15 | $ | 18 | $ | 16 | |||||||||||
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6(23) Costs and expenses by nature
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Cost of goods sold | $ | 3 | $ | 13 | $ | — | |||||||||||
| Employee benefit expenses | 27,956 | 28,237 | 31,782 | ||||||||||||||
| Platform fees | 8,708 | 11,671 | 13,997 | ||||||||||||||
| Promotional fees | 9,565 | 11,531 | 13,649 | ||||||||||||||
| Professional service fees | 6,888 | 4,748 | 3,278 | ||||||||||||||
| Impairment loss on goodwill | — | — | 1,965 | ||||||||||||||
| Insurance expenses | 2,102 | 1,417 | 1,066 | ||||||||||||||
| Warranty cost | 677 | 581 | 405 | ||||||||||||||
| Depreciation of right-of-use assets | 441 | 529 | 561 | ||||||||||||||
| Depreciation of property, plant and equipment | 197 | 218 | 310 | ||||||||||||||
| Amortization of intangible assets | 75 | 51 | 145 | ||||||||||||||
| Expected credit losses | — | 1,373 | 75 | ||||||||||||||
| Others | 2,553 | 2,976 | 3,649 | ||||||||||||||
| $ | 59,165 | $ | 63,345 | $ | 70,882 | ||||||||||||
Please refer to Note 6(9) for details of impairment loss on goodwill.
6(24) Employee benefit expenses
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Wages and salaries | $ | 21,263 | $ | 21,814 | $ | 26,660 | |||||||||||
| Remuneration to directors | 553 | 600 | 600 | ||||||||||||||
| Employee insurance fees | 1,349 | 1,409 | 1,487 | ||||||||||||||
| Pension costs | 707 | 754 | 855 | ||||||||||||||
| Employee stock options | 3,268 | 2,774 | 1,410 | ||||||||||||||
| Other personnel expenses | 816 | 886 | 770 | ||||||||||||||
| $ | 27,956 | $ | 28,237 | $ | 31,782 | ||||||||||||
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6(25) Income tax
A.Income tax expense
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Current income tax: | |||||||||||||||||
| Current tax expense recognized for the current period | $ | 144 | $ | 1,076 | $ | 1,248 | |||||||||||
| Tax on undistributed surplus earnings | — | — | 73 | ||||||||||||||
| Prior year income tax underestimation | — | 6 | 242 | ||||||||||||||
| Total current tax | 144 | 1,082 | 1,563 | ||||||||||||||
| Deferred income tax: | |||||||||||||||||
| Origination and reversal of temporary differences | (29) | (1,817) | (469) | ||||||||||||||
| Total deferred income tax | (29) | (1,817) | (469) | ||||||||||||||
| Income tax expense (benefit) | $ | 115 | $ | (735) | $ | 1,094 | |||||||||||
B.Reconciliation between income tax expense and accounting loss:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Tax calculated based on profit (loss) before tax and statutory tax rate (Note i) | $ | (221) | $ | 29 | $ | (87) | |||||||||||
| Effects from items disallowed by tax regulation | 18 | 24 | 54 | ||||||||||||||
| Effects from non-deductible offshore income tax | 6 | 6 | 11 | ||||||||||||||
| Temporary difference not recognized as deferred income tax assets | 702 | 94 | 389 | ||||||||||||||
| Prior year income tax underestimation | — | 6 | 242 | ||||||||||||||
| Taxable loss not recognized as deferred income tax assets | 1,732 | 1,842 | 925 | ||||||||||||||
| Effect from investment tax credits (Note iii) | — | (357) | (480) | ||||||||||||||
| Change in assessment of realization of deferred income tax assets (Note ii) | (2,139) | (2,377) | (26) | ||||||||||||||
| Tax on undistributed earnings | — | — | 73 | ||||||||||||||
| Effects from other states apart from where United States subsidiary registered | 8 | 8 | 8 | ||||||||||||||
| Others | 9 | (10) | (15) | ||||||||||||||
| Income tax (benefit) expense | $ | 115 | $ | (735) | $ | 1,094 | |||||||||||
Note i: As a Cayman Islands corporation, the Company’s domestic statutory income tax rate is 0.0%. Hence, there was no tax impact to the Company. The difference between the Company’s domestic statutory income tax rate and its income tax expense is due to the effect of the tax rates in the other jurisdictions in which the Group operates. The basis for computing the applicable tax rate are the rates applicable in the respective countries where the Group entities operate.
Note ii: The change in assessment of the realization of deferred income tax assets mainly consists of the use of net operating loss (NOL) and temporary difference. These temporary difference mainly consist of unrealized expenses, including stock-based payments, warranty provisions, and unused paid leave. The Taiwan subsidiary began generating profits in 2023 and fully utilized all loss carryforwards by 2024, and it's expected to remain profitable in the foreseeable future.
Note iii: The Taiwan subsidiary is profitable and has utilized part of the investment tax credits.
F-41
The following table illustrates the statutory tax rates for significant jurisdictions that the Company operates:
| Years ended December 31, | ||||||||||||||||||||
| Jurisdictions | 2023 | 2024 | 2025 | |||||||||||||||||
| United States (Federal/State) | 21%/8.84% | 21%/8.84% | 21%/8.84% | |||||||||||||||||
| Japan | 34.60 | % | 36.86 | % | 34.60 | % | ||||||||||||||
| Taiwan | 20 | % | 20 | % | 20 | % | ||||||||||||||
C.Amounts of deferred income tax assets or liabilities as a result of temporary differences and tax losses are as follows:
| 2024 | |||||||||||||||||||||||||||||
| January 1 | Recognized in profit or loss | Net exchange differences | Business Combination | December 31 | |||||||||||||||||||||||||
| Deferred income tax assets: | |||||||||||||||||||||||||||||
| – Temporary differences: | |||||||||||||||||||||||||||||
| Unrealized expenses | $ | 256 | $ | 1,820 | $ | (26) | $ | — | $ | 2,050 | |||||||||||||||||||
| Allowance for bad debts | — | 13 | — | — | 13 | ||||||||||||||||||||||||
| Unrealized exchange losses | — | (14) | — | — | (14) | ||||||||||||||||||||||||
| Others | 1 | (2) | (1) | — | (2) | ||||||||||||||||||||||||
| $ | 257 | $ | 1,817 | $ | (27) | $ | — | $ | 2,047 | ||||||||||||||||||||
| 2025 | |||||||||||||||||||||||||||||
| January 1 | Recognized in profit or loss | Net exchange differences | Business Combination | December 31 | |||||||||||||||||||||||||
| Deferred income tax assets: | |||||||||||||||||||||||||||||
| – Temporary differences: | |||||||||||||||||||||||||||||
| Unrealized expenses | $ | 2,050 | $ | 217 | $ | 2 | $ | — | $ | 2,269 | |||||||||||||||||||
| Allowance for bad debts | 13 | (12) | — | — | 1 | ||||||||||||||||||||||||
| Unrealized exchange losses | (14) | 2 | — | — | (12) | ||||||||||||||||||||||||
| Others | (2) | 227 | — | — | 225 | ||||||||||||||||||||||||
| $ | 2,047 | $ | 434 | $ | 2 | $ | — | $ | 2,483 | ||||||||||||||||||||
| Deferred income tax liabilities: | |||||||||||||||||||||||||||||
| – Temporary differences: | |||||||||||||||||||||||||||||
| Unpatented technology | $ | — | $ | 35 | $ | — | $ | (523) | $ | (488) | |||||||||||||||||||
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D.Expiration dates of unused taxable losses primarily originating from the losses of U.S. subsidiary, and amounts of unrecognized deferred income tax assets are as follows:
| December 31, 2025 | ||||||||||||||||||||||||||
| Year incurred | Amount filed/assessed | Unused amount | Unrecognized deferred income tax assets | Expiry year | ||||||||||||||||||||||
| 2016 | $ | 4,867 | $ | 4,043 | $ | 4,043 | 2036 | |||||||||||||||||||
| 2017 | 3,601 | 3,601 | 3,601 | 2037 | ||||||||||||||||||||||
| 2018 | 1,888 | 1,888 | 1,888 | no expiration | ||||||||||||||||||||||
| 2021 | 6,416 | 6,416 | 6,416 | no expiration | ||||||||||||||||||||||
| 2022 | 4,094 | 4,094 | 4,094 | 2027~no expiration | ||||||||||||||||||||||
| 2023 | 9,355 | 9,342 | 9,342 | 2028~no expiration | ||||||||||||||||||||||
| 2024 | 9,274 | 9,274 | 9,274 | 2029~no expiration | ||||||||||||||||||||||
| 2025 | 2,980 | 2,980 | 2,980 | 2030~no expiration | ||||||||||||||||||||||
| $ | 42,475 | $ | 41,638 | $ | 41,638 | |||||||||||||||||||||
E.The amounts of deductible temporary difference that are not recognized as deferred income tax assets are as follows:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Deductible temporary differences | $ | 769 | $ | 7,385 | |||||||
6(26) Earnings per share
| Year ended December 31, 2023 | |||||||||||||||||
| Amount after tax | Weighted average number of ordinary shares outstanding (shares in thousands) | Earnings per share (in dollars) | |||||||||||||||
| Basic earnings per share | |||||||||||||||||
| Profit attributable to ordinary shareholders of the parent | $ | 5,416 | 118,024 | $ | 0.05 | ||||||||||||
| Dilutive earnings per share | |||||||||||||||||
| Profit attributable to ordinary shareholders of the Group plus assumed conversion of all dilutive potential ordinary shares | $ | 5,416 | 118,024 | $ | 0.05 | ||||||||||||
| Year ended December 31, 2024 | |||||||||||||||||
| Amount after tax | Weighted average number of ordinary shares outstanding (shares in thousands) | Earnings per share (in dollars) | |||||||||||||||
| Basic earnings per share | |||||||||||||||||
| Profit attributable to ordinary shareholders of the parent | $ | 5,021 | 101,849 | $ | 0.05 | ||||||||||||
| Dilutive earnings per share | |||||||||||||||||
| Profit attributable to ordinary shareholders of the Group plus assumed conversion of all dilutive potential ordinary shares | $ | 5,021 | 101,849 | $ | 0.05 | ||||||||||||
F-43
| Year ended December 31, 2025 | |||||||||||||||||
| Amount after tax | Weighted average number of ordinary shares outstanding (shares in thousands) | Earnings per share (in dollars) | |||||||||||||||
| Basic earnings per share | |||||||||||||||||
| Profit attributable to ordinary shareholders of the parent | $ | 4,643 | 101,849 | $ | 0.05 | ||||||||||||
| Dilutive earnings per share | |||||||||||||||||
| Profit attributable to ordinary shareholders of the Group plus assumed conversion of all dilutive potential ordinary shares | $ | 4,643 | 101,849 | $ | 0.05 | ||||||||||||
Note. Warrant liabilities, Employee stock options, Shareholder Earnout and Sponsor Earnout were excluded from the calculation of diluted earnings per share as they are anti-dilutive, given that the fair value of the stocks is lower than the exercise price for the years ended December 31, 2023, 2024 and 2025. As of December 31, 2024 and 2025, the potentially dilutive instruments are as follows:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Potentially dilutive instruments (shares in thousands) | |||||||||||
| Warrant liabilities | 20,850 | 20,850 | |||||||||
| Employee stock options | 3,877 | 3,698 | |||||||||
| Shareholder Earnout | 10,000 | 10,000 | |||||||||
| Sponsor Earnout | 1,176 | 1,176 | |||||||||
| 35,903 | 35,724 | ||||||||||
6(27) Changes in liabilities from financing activities
| 2023 | |||||||||||||||||
| Non-current financial liabilities at fair value through profit or loss | Lease liabilities (including current portion) | Liabilities from financing activities-gross | |||||||||||||||
| At January 1 | $ | 3,207 | $ | 338 | $ | 3,545 | |||||||||||
| Changes in cash flow from financing activities | — | (435) | (435) | ||||||||||||||
| Change in fair value through profit and loss | (1,641) | — | (1,641) | ||||||||||||||
| Changes in other non-cash items – additions | — | 1,012 | 1,012 | ||||||||||||||
| Changes in other non-cash items – lease modification | — | (47) | (47) | ||||||||||||||
| At December 31 | $ | 1,566 | $ | 868 | $ | 2,434 | |||||||||||
| 2024 | |||||||||||||||||
| Non-current financial liabilities at fair value through profit or loss | Lease liabilities (including current portion) | Liabilities from financing activities-gross | |||||||||||||||
| At January 1 | $ | 1,566 | $ | 868 | $ | 2,434 | |||||||||||
| Changes in cash flow from financing activities | — | (525) | (525) | ||||||||||||||
| Change in fair value through profit and loss | 227 | — | 227 | ||||||||||||||
| Changes in other non-cash items – additions | — | 167 | 167 | ||||||||||||||
| At December 31 | $ | 1,793 | $ | 510 | $ | 2,303 | |||||||||||
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| 2025 | |||||||||||||||||
| Non-current financial liabilities at fair value through profit or loss | Lease liabilities (including current portion) | Liabilities from financing activities-gross | |||||||||||||||
| At January 1 | $ | 1,793 | $ | 510 | $ | 2,303 | |||||||||||
| Changes in cash flow from financing activities | — | (562) | (562) | ||||||||||||||
| Change in fair value through profit and loss | (1,374) | — | (1,374) | ||||||||||||||
| Changes in other non-cash items – additions | — | 743 | 743 | ||||||||||||||
| Changes in other non-cash items – lease modification | — | (8) | (8) | ||||||||||||||
| At December 31 | $ | 419 | $ | 683 | $ | 1,102 | |||||||||||
6(28) Business combinations
A.On January 7, 2025, the Group acquired 100% of the share capital of Wannaby for $6,473 and obtained the control over Wannaby, a digital company known for its virtual try-on technology and digitalization solutions for the fashion industry. This acquisition enables the Group to expand its offerings into new luxury market segments, including shoes, bags, and apparel.
B.The following table summarizes the consideration paid for Wannaby and the fair values of the assets acquired and liabilities assumes at the acquisition date:
| January 7, 2025 | |||||
| Purchase consideration | |||||
| Cash paid | $ | 6,473 | |||
| Contingent consideration-Earnout liabilities (Note) | 158 | ||||
| 6,631 | |||||
| Fair value of the identifiable assets acquired and liabilities assumed | |||||
| Cash | 492 | ||||
| Accounts receivable | 221 | ||||
| Other receivables | 50 | ||||
| Other current assets | 51 | ||||
| Property, plant and equipment | 28 | ||||
| Intangible assets | 1,760 | ||||
| Guarantee deposits paid | 5 | ||||
| Current contract liabilities | (115) | ||||
| Other payables | (77) | ||||
| Deferred income tax liabilities | (523) | ||||
| Total identifiable net assets | 1,892 | ||||
| Goodwill | $ | 4,739 | |||
Note. No later than April 30, 2026, the Group shall pay Farfetch, Inc. an earnout based on defined revenue for the year ended December 31, 2025, not exceeding $500. As the defined revenue for the year ended December 31, 2025 was not achieved, the Group determined that no earnout would be payable and therefore reversed the related contingent consideration liability to zero. Please refer to Note 6(10) for details of gains (losses) on financial liabilities at fair value through profit or loss.
F-45
| Year ended December 31, 2025 | |||||
| Cash and cash equivalent balances acquired | $ | 492 | |||
| Cash paid | (6,473) | ||||
| Net cash outflow | $ | (5,981) | |||
C.The operating revenue contributed by Wannaby and included in the consolidated statement of comprehensive income since January 7, 2025, was $1,304. Wannaby also incurred a loss before income tax of $1,488 over the same period. Had Wannaby been consolidated as of January 1, 2025, the consolidated statement of comprehensive income would have reflected operating revenue of $69,154 and profit before income tax of $5,703.
D.Please refer to 6(9) Impairment of non-financial assets for the qualitative descriptions of the factors that make up the recognized goodwill.
7. Related Party Transactions
7(1) Names of related parties and relationship
| Names of related parties | Relationship with the Group | |||||||
| CyberLink Corp. (CyberLink) | Other related party (Significant influence (Note) over the Company) | |||||||
| CyberLink Inc. (CyberLink-Japan) | Other related party (Subsidiary of CyberLink) | |||||||
| ClinJeff Corp. (ClinJeff) | Other related party (Major shareholder of CyberLink) | |||||||
Note. CyberLink owns more than 36% of the Company’s issued and outstanding ordinary shares.
7(2) Significant related party transactions
A.Revenue
| Years ended December 31, | |||||||||||||||||||||||
| Description | 2023 | 2024 | 2025 | ||||||||||||||||||||
| CyberLink | Revenue-others (service revenue) | $ | 32 | $ | 37 | $ | 30 | ||||||||||||||||
Sales of services are negotiated with related parties based on agreed-upon agreement and the conditions and payment terms are same as those offered to third parties.
B.Other payables
| December 31, 2024 | December 31, 2025 | ||||||||||
| CyberLink | $ | 22 | $ | 46 | |||||||
| CyberLink-Japan | 24 | 26 | |||||||||
| $ | 46 | $ | 72 | ||||||||
Other payables are mainly expenses from professional service, rental and payments on behalf of others.
C.Operating expenses
| Years ended December 31, | |||||||||||||||||||||||
| Description | 2023 | 2024 | 2025 | ||||||||||||||||||||
| CyberLink | Management service fee | $ | 48 | $ | 41 | $ | 45 | ||||||||||||||||
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CyberLink provides support and assistance in legal services, network infrastructure and equipment maintenance services, marketing activity support and employee training programs. The service fees are calculated based on the agreed-upon hourly rate. The conditions and payment terms are same as those offered to third parties.
D.Lease transactions — lessee/rent expense
(a)The Group leases offices from CyberLink, ClinJeff and CyberLink-Japan. Rental contracts are typically made for periods of 1~2 years. Rent was paid to CyberLink and ClinJeff on a monthly basis and to CyberLink-Japan on a quarterly basis.
(b)Rent expense
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| CyberLink-Japan | $ | 84 | $ | 78 | $ | 78 | |||||||||||
(c)Acquisition of right-of-use assets:
(d)Lease liabilities
i.Outstanding balance:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Total lease liabilities | $ | 202 | $ | 407 | |||||||
| Less: Current portion (shown as ‘current lease liabilities’) | (189) | (260) | |||||||||
| $ | 13 | $ | 147 | ||||||||
ii.Interest expense
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| CyberLink | $ | 6 | $ | 6 | $ | 7 | |||||||||||
| ClinJeff | — | 1 | 1 | ||||||||||||||
| $ | 6 | $ | 7 | $ | 8 | ||||||||||||
7(3) Key management compensation
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Salaries and other short-term employee benefits | $ | 2,484 | $ | 2,668 | $ | 2,825 | |||||||||||
| Share-based payment | 552 | 467 | 249 | ||||||||||||||
| Post-employment benefits | 10 | 10 | 10 | ||||||||||||||
| $ | 3,046 | $ | 3,145 | $ | 3,084 | ||||||||||||
The unpaid portion of the aforementioned information were $115 and $115 for December 31, 2024 and 2025.
F-47
8. Pledged Assets
None.
9. Significant Contingent Liabilities and Unrecognized Contract Commitments
9(1) Contingencies
None.
9(2) Commitments
Except for Notes 6(7), 6(10) and 7(2), there is no other significant commitments.
10. Significant Disaster Loss
None.
11. Significant Events After the Balance Sheet Date
None.
12. Others
12(1) Capital management
The Group’s objectives of capital management are to ensure the Group’s sustainable operation and to maintain an optimal capital structure to reduce the cost of capital and provide returns for shareholders. In order to maintain or adjust to optimal capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total liabilities divided by total equity.
As of December 31, 2024 and 2025, the Group’s gearing ratios are as follows:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Total liabilities | $ | 34,158 | $ | 38,875 | |||||||
| Total equity | $ | 147,015 | $ | 153,095 | |||||||
| Gearing ratio | 0.23 | 0.25 | |||||||||
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12(2) Financial instruments
A.Financial instruments by category
| December 31, 2024 | December 31, 2025 | ||||||||||
| Financial assets | |||||||||||
| Financial assets at fair value through profit or loss | |||||||||||
| Financial assets mandatorily measured at fair value through profit or loss | $ | 2,746 | $ | — | |||||||
| Financial assets at amortized cost | |||||||||||
| Cash and cash equivalents | $ | 127,121 | $ | 125,976 | |||||||
| Current financial assets at amortized cost | 36,000 | 36,300 | |||||||||
| Accounts receivable | 7,902 | 7,567 | |||||||||
| Other receivables | 352 | 358 | |||||||||
| Non-current financial assets at amortized cost | — | 10,173 | |||||||||
| Guarantee deposits paid | 146 | 193 | |||||||||
| $ | 171,521 | $ | 180,567 | ||||||||
| December 31, 2024 | December 31, 2025 | ||||||||||
| Financial liabilities | |||||||||||
| Financial liabilities at fair value through profit or loss | |||||||||||
| Warrant liabilities | $ | 1,793 | $ | 419 | |||||||
| Financial liabilities at amortized cost | |||||||||||
| Other payables (including related parties) | $ | 11,702 | $ | 12,903 | |||||||
| Lease liabilities | $ | 510 | $ | 683 | |||||||
B.Financial risk management policies
(a)The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial position and financial performance.
(b)Risk management is carried out by the Group’s finance department under policies approved by the management team. The Group’s finance department identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units.
C.Significant financial risks and degrees of financial risks
(a)Market risk
Foreign exchange risk
i.The Group operates internationally and is exposed to exchange rate risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD, JPY, RMB and EUR. Exchange rate risk arises from future commercial transactions and recognized assets and liabilities.
ii.The Group’s business involves some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: USD; other certain subsidiaries’ functional currency:
F-49
JPY, RMB and EUR). The information of and sensitivity analysis for significant financial assets and liabilities denominated in foreign currencies illustrate as follows:
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Sensitivity analysis | |||||||||||||||||||||||||||||||||||
| Foreign currency amount (in thousands) | Exchange rate | Functional currency | Book value (USD) | Degree of variation | Effect on profit or loss | ||||||||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||||||||
| Monetary items | |||||||||||||||||||||||||||||||||||
| NTD:USD | $ | 103,569 | 0.0305 | $ | 3,159 | $ | 3,159 | 1 | % | $ | 32 | ||||||||||||||||||||||||
| EUR:USD | 298 | 1.0411 | 310 | 310 | 1 | % | 3 | ||||||||||||||||||||||||||||
| JPY:USD | 201,668 | 0.0064 | 1,291 | 1,291 | 1 | % | 13 | ||||||||||||||||||||||||||||
| USD:RMB | 320 | 7.3225 | 2,343 | 320 | 1 | % | 3 | ||||||||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||||||||||||||
| Monetary items | |||||||||||||||||||||||||||||||||||
| EUR:USD | 197 | 1.0411 | 205 | 205 | 1 | % | 2 | ||||||||||||||||||||||||||||
| USD:JPY | 100 | 156.22 | 15,622 | 100 | 1 | % | 1 | ||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Sensitivity analysis | |||||||||||||||||||||||||||||||||||
| Foreign currency amount (in thousands) | Exchange rate | Functional currency | Book value (USD) | Degree of variation | Effect on profit or loss | ||||||||||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||||||||||||||
| Monetary items | |||||||||||||||||||||||||||||||||||
| NTD:USD | $ | 252,844 | 0.0318 | $ | 8,040 | $ | 8,040 | 1 | % | $ | 80 | ||||||||||||||||||||||||
| EUR:USD | 403 | 1.1740 | 473 | 473 | 1 | % | 5 | ||||||||||||||||||||||||||||
| JPY:USD | 406,761 | 0.0064 | 2,603 | 2,603 | 1 | % | 26 | ||||||||||||||||||||||||||||
| USD:RMB | 327 | 6.9907 | 2,286 | 327 | 1 | % | 3 | ||||||||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||||||||||||||
| Monetary items | |||||||||||||||||||||||||||||||||||
| EUR:USD | 240 | 1.174 | 282 | 282 | 1 | % | 3 | ||||||||||||||||||||||||||||
| USD:JPY | 98 | 156.52 | 15,339 | 98 | 1 | % | 1 | ||||||||||||||||||||||||||||
iii.The total exchange gain (loss), including realized and unrealized, arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2023, 2024 and 2025, amounted to $34, $(89) and $(265), respectively.
(b)Credit risk
i.Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms and the contract cash flow of financial assets at amortized cost and at fair value through profit or loss.
ii.The Group’s credit risk was mainly arising from bank deposits, trade receivables, other financial assets and deposits. The Company adopted a policy of only dealing with creditworthy counterparties and financial institutions to mitigate the risk of financial loss from defaults. The majority of cash and cash equivalents as well as current financial assets at amortized cost and at fair value through profit or loss are held with financial institutions with a rating of ‘A’.
F-50
iii.The default occurs when the contract payments are past due over 180 days.
iv.The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:
If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
v.The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i)It becomes probable that the issuer will enter bankruptcy or other financial reorganisation due to their financial difficulties;
(ii)The disappearance of an active market for that financial asset because of financial difficulties;
(iii)Default or delinquency in interest or principal repayments;
(iv)Adverse changes in national or regional economic conditions that are expected to cause a default.
vi.The following indicators are used to determine whether the credit impairment of accounts receivable has occurred:
(i)It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii)Default or delinquency in principal repayments.
vii.The Group classifies customers’ accounts receivable in accordance with geographic area and credit rating of customer. The Group applies the modified approach to estimate expected credit loss under the provision matrix basis.
viii.The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.
ix.The Group used the territory economic forecasts to adjust historical and timely information to assess the default possibility of accounts receivable.
x.As of December 31, 2024 and 2025, the provision matrix is as follows:
| December 31, 2024 | Not past due | Up to 30 days past due | 31~90 days past due | 91~180 days past due | Over 181 days past due | Total | ||||||||||||||||||||||||||||||||
| rate | 0.11%~0.32% | 6.48%~30.86% | 8.36%~42.53% | 22.69%~97.44% | 100% | |||||||||||||||||||||||||||||||||
| Total book value | $ | 7,535 | $ | 261 | $ | 213 | $ | 65 | $ | 94 | $ | 8,168 | ||||||||||||||||||||||||||
| Loss allowance | 12 | 49 | 76 | 35 | 94 | 266 | ||||||||||||||||||||||||||||||||
F-51
| December 31, 2025 | Not past due | Up to 30 days past due | 31~90 days past due | 91~180 days past due | Over 181 days past due | Total | ||||||||||||||||||||||||||||||||
| rate | 0%~0.20% | 0.15%~15.58% | 0.31%~33.48% | 0.63%~100.00% | 100% | |||||||||||||||||||||||||||||||||
| Total book value | $ | 7,124 | $ | 75 | $ | 149 | $ | 286 | $ | 114 | $ | 7,748 | ||||||||||||||||||||||||||
| Loss allowance | 3 | 6 | 38 | 20 | 114 | 181 | ||||||||||||||||||||||||||||||||
xi.Movements in relation to the Group applying the modified approach to provide loss allowance for accounts receivable is as follows:
| 2024 | 2025 | ||||||||||
| Accounts receivable | Accounts receivable | ||||||||||
| At January 1 | $ | — | $ | 266 | |||||||
| Provision for impairment | 1,373 | 75 | |||||||||
| Write-offs | (1,107) | (160) | |||||||||
| At December 31 | $ | 266 | $ | 181 | |||||||
xii.The loss amounts of accounts receivable allowance using simplified method were de minimis, thus, the loss was not recognized as at December 31, 2023.
xiii.The Group used the territory economic forecasts to adjust historical and timely information to assess the default possibility of debt instruments. As of December 31, 2025, the Group assessed the expected credit losses of its debt instruments measured at amortized cost in accordance with IFRS 9. The assessment indicated that the credit risk of these instruments remained low and no significant increase in credit risk had occurred during the reporting periods.
(c)Liquidity risk
i.Cash flow forecasting is performed in the operating entities of the Group and aggregated by the Group’s finance department. The Group’s finance department monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs.
ii.Surplus cash held by the operating entities over and above balance required for working capital management are managed by the Group’s finance department. The Group’s finance department invests surplus cash in interest bearing current accounts and time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. As at December 31, 2024 and 2025, the Group held demand deposits, time deposits and money market position of $161,992 and $159,010, respectively. The Group manages liquidity risk by ensuring that these balances are available to meet short-term cash needs. Time deposits withdrawn early receive a lower interest rate through the withdrawal date compared to the stated interest rate applicable on the nominal maturity date. However, there are no significant risk of change in value as a result of an early withdrawal for time deposits classified as cash equivalents.
iii.The table below analyses the Group’s non-derivative financial liabilities based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
| Non-derivative financial liabilities: December 31, 2024 | Less than 1 year | Between 1-5 years | Over 5 years | |||||||||||||||||
| Financial liabilities at fair value through profit or loss | $ | — | $ | 1,793 | $ | — | ||||||||||||||
| Other payables (including related parties) | 11,702 | — | — | |||||||||||||||||
| Lease liabilities (Note) | 409 | 109 | — | |||||||||||||||||
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| Non-derivative financial liabilities: December 31, 2025 | Less than 1 year | Between 1-5 years | Over 5 years | |||||||||||||||||
| Financial liabilities at fair value through profit or loss | $ | — | $ | 419 | $ | — | ||||||||||||||
| Other payables (including related parties) | 12,903 | — | — | |||||||||||||||||
| Lease liabilities (Note) | 456 | 240 | — | |||||||||||||||||
Note. The amount included the interest of estimated future payments.
12(3) Fair value information
A.The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in money market funds is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
B.Financial instruments not measured at fair value
(a)Except for those listed in the table below, the carrying amounts of the Group’s financial instruments not measured at fair value (including cash and cash equivalents, current financial assets at amortized cost, accounts receivable, other receivables (including related parties), guarantee deposits paid, other payables (including related parties) and lease liabilities) are approximate to their fair values.
| December 31, 2025 | ||||||||||||||||||||||||||
| Fair value | ||||||||||||||||||||||||||
| Financial assets: | Book value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||
| Financial assets at amortized cost | ||||||||||||||||||||||||||
| US Treasury | $ | 10,173 | $ | 10,070 | $ | — | $ | — | ||||||||||||||||||
(b)The methods and assumptions of fair value estimate are as follows:
i.US Treasury: They are measured at quoted price in active markets.
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C.The related information of financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2024 and 2025 are as follows:
(a)The related information of natures of the liabilities is as follows:
| December 31, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Recurring fair value measurements | ||||||||||||||||||||||||||
| Financial assets at fair value through profit or loss | ||||||||||||||||||||||||||
| Money market funds | $ | 2,746 | $ | — | $ | — | $ | 2,746 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Recurring fair value measurements | ||||||||||||||||||||||||||
| Financial liabilities at fair value through profit or loss | ||||||||||||||||||||||||||
| Compound instrument: | ||||||||||||||||||||||||||
| Warrant liabilities | $ | 1,793 | $ | — | $ | — | $ | 1,793 | ||||||||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Recurring fair value measurements | ||||||||||||||||||||||||||
| Financial liabilities at fair value through profit or loss | ||||||||||||||||||||||||||
| Compound instrument: | ||||||||||||||||||||||||||
| Warrant liabilities | $ | 419 | $ | — | $ | — | $ | 419 | ||||||||||||||||||
(b)The methods and assumptions the Group used to measure fair value are as follows:
i.Except those mentioned in point (ii) ~ (iii) below, the carrying amounts of the Group’s financial instruments not measured at fair value (including cash and cash equivalents, current financial assets at amortized cost, accounts receivable, other receivables (including related parties), guarantee deposits paid, other payables (including related parties) and lease liabilities) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(2).
ii.The instruments the Group used market quoted price as their fair values (that is, Level 1) are listed below by characteristics:
| Open-end fund | Perfect Public Warrants | ||||||||||
| Market quoted price | Net asset value | Closing price | |||||||||
iii.Fair value of the Perfect Public Warrants is determined based on market quotation price.
D.All Private Placement Warrants and Forward Purchase Warrants were converted into Public Warrants during 2024. As Public Warrants are valued based on quoted prices in active markets, the Company transferred their fair value classification from Level 2 to Level 1 in 2024. For the year ended December 31, 2025, there were no transfers between Level 1 and Level 2
E.For the years ended December 31, 2024 and 2025, there was no transfer into or out from Level 3.
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13. Segment Information
13(1) General information
The Group's chief operating decision maker who allocates resources and assesses performance of the Group as a whole, has identified that the Group has only one reportable operating segment.
13(2) Geographical information
The Group derives revenue by geographical location for the years ended December 31, 2023, 2024 and 2025 is as follows:
| Years ended December 31, | |||||||||||||||||
| 2023 | 2024 | 2025 | |||||||||||||||
| Revenue | Revenue | Revenue | |||||||||||||||
| United States | $ | 24,992 | $ | 25,142 | $ | 25,978 | |||||||||||
| Americas_Others (Note) | 4,937 | 6,669 | 8,285 | ||||||||||||||
| Europe | 13,777 | 16,586 | 20,284 | ||||||||||||||
| Asia-Pacific | 8,553 | 10,109 | 12,021 | ||||||||||||||
| Others | 1,246 | 1,696 | 2,586 | ||||||||||||||
| $ | 53,505 | $ | 60,202 | $ | 69,154 | ||||||||||||
Note. Americas_Others includes in North and South America, excluding the United States.
Geographical information on the revenue shows the location in which sales were generated.
The Group’s non-current assets, including property, plant and equipment, right-of-use assets and intangible assets, by geographical location as of December 31, 2024 and 2025 are as follows:
| December 31, 2024 | December 31, 2025 | ||||||||||
| Non-current assets | Non-current assets | ||||||||||
| United States | $ | 5 | $ | 4,896 | |||||||
| Asia-Pacific | 1,066 | 1,349 | |||||||||
| Europe | — | 2 | |||||||||
| $ | 1,071 | $ | 6,247 | ||||||||
As of December 31, 2025, the Group’s non‑current assets in Taiwan mainly comprise property, plant and equipment, right‑of‑use assets and intangible assets. In the United States, the non‑current assets primarily consist of goodwill and unpatented technology recognized from the acquisition of Wannaby in 2025.
13(3) Major customer information
There is no major customer of the Group (exceed 10% of revenue) for the years ended December 31, 2023, 2024 and 2025.
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