6-K - SE - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2020

Commission File Number: 001-38237

Sea Limited

1 Fusionopolis Place, #17-10, Galaxis

Singapore 138522

(Address of principal executive office)

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

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

INCORPORATION BY REFERENCE

This report on Form 6-K shall be deemed to be incorporated by reference into the Registration Statement of Sea Limited on Form F-3 filed on March 1, 2019 (File No. 333-230021) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

SIGNATURE

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

SEA LIMITED
By:	/s/ Forrest Xiaodong Li
Name:	Forrest Xiaodong Li
Title:	Chairman and Group Chief Executive Officer

Date: December 9, 2020

EXHIBIT INDEX

Exhibit 99.1 —Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months ended September 30, 2019 and 2020

Exhibit 99.2 —Unaudited Interim Condensed Consolidated Financial Statements for the Nine Months ended September 30, 2019 and 2020

Exhibit 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes as well as the section titled “Operating and Financial Review and Prospects” included in our Annual Report on Form 20-F for the year ended December 31, 2019 (our “Form 20-F”). The financial information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects only the financial information for the nine months ended September 30, 2019 and 2020. The discussion of annual financial information for the years ended December 31, 2017, 2018 and 2019 are included in our Form 20-F. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in our Form 20-F.

Results of Operations

The table below sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of our total revenue. This information should be read together with our consolidated financial statements and related notes as well as the section titled “Operating and Financial Review and Prospects” included in our Form 20-F. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

	For the Nine Months Ended September 30,
	2019					2020
	US		Percentage of Total Revenue			US		Percentage of Total Revenue
	(unaudited)<br> (US in thousands, except for percentages)
Selected Consolidated Statements of Operations Data:
Revenue:
Service revenue
Digital entertainment				52.4					47.1
E-commerce and other services				37.6					39.9
Sales of goods				10.0					13.0
Total revenue				100.0					100.0
Cost of revenue:
Cost of service
Digital entertainment		)		(21.2	)		)		(17.6	)
E-commerce and other services		)		(43.8	)		)		(40.3	)
Cost of goods sold		)		(10.6	)		)		(13.1	)
Total cost of revenue		)		(75.7	)		)		(71.0	)
Gross profit				24.3					29.0
Operating income (expenses):
Other operating income				0.7					4.2
Sales and marketing expenses		)		(44.9	)		)		(41.5	)
General and administrative expenses		)		(19.8	)		)		(16.7	)
Research and development expenses		)		(7.7	)		)		(8.7	)
Total operating expenses		)		(71.6	)		)		(62.7	)
Operating loss		)		(47.3	)		)		(33.7	)
Interest income				1.8					0.7
Interest expense		)		(2.2	)		)		(4.0	)
Investment gain, net				0.3					1.6
Changes in fair value of convertible notes		)		(33.3	)		)		(0.0	)
Foreign exchange gain (loss)				0.4			)		(0.3	)
Loss before income tax and share of results of equity investees		)		(80.3	)		)		(35.7	)
Income tax expense		)		(3.6	)		)		(3.5	)
Share of results of equity investees		)		(0.2	)		)		(0.0	)
Net loss		)		(84.1	)		)		(39.1	)

All values are in US Dollars.

NINE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2019

Revenue

Our total revenue increased by 100.9% from US$1,398.2 million for the nine months ended September 30, 2019 to US$2,809.1 million for the nine months ended September 30, 2020. This increase was primarily due to increase in revenue from each of the businesses as follows:

●	Digital Entertainment: Revenue increased by 80.7% from US$731.9 million for the nine months ended September 30, 2019 to US$1,322.6 million for the nine months ended<br> September 30, 2020. This increase was primarily due to the increase in our active user base as well as the deepened paying user penetration, and in particular, the continued success of our self-developed game Free Fire.
●	E-commerce and other services: Revenue increased by 113.0% from US$526.1 million for the nine months ended September 30, 2019 to US$1,120.8 million for the nine<br> months ended September 30, 2020. This increase was primarily driven by the growth of our e-commerce marketplace, and positive developments in each of our marketplace revenue streams – transaction-based fees, value-added services, and<br> advertising. It is a result of our commitment to continuously enhance our service offerings as we seek to create greater value for our platform users.
---	---
●	Sales of goods: Revenue increased by 161.1% from US$140.1 million for the nine months ended September 30, 2019 to US$365.7 million for the nine months ended September<br> 30, 2020, primarily due to the increase in our product offerings.
---	---

Our revenue in 2020 has been impacted by the outbreak of COVID-19 by, among other things, increasing demand for online digital entertainment and e-commerce, and the impact of the pandemic on cross-border transactions, as various forms of stay-at-home orders and physical restrictions have been implemented in several of our markets or the markets which are part of the supply chains of our sellers, some of which has generally rebounded. As the COVID-19 situation remains fluid and continues to evolve, its impact on our business, financial condition and results of operations cannot be reasonably estimated at this time.

Cost of Revenue

Our total cost of revenue increased by 88.4% from US$1,058.1 million for the nine months ended September 30, 2019 to US$1,993.9 million for the nine months ended September 30, 2020. Our total cost of revenue as a percentage of total revenue decreased from 75.7% for the nine months ended September 30, 2019 to 71.0% for the nine months ended September 30, 2020.

●	Digital Entertainment: Cost of revenue increased by 66.4% from US$296.8 million for the nine<br> months ended September 30, 2019 to US$494.0 million for the nine months ended September 30, 2020. The increase was largely in line with revenue growth in our digital entertainment business. Improvement in gross profit margins was largely<br> due to higher revenue contribution from our self-developed game.
●	E-commerce and other services: Cost of revenue increased by 84.7% from US$612.8 million for the nine months ended September 30, 2019 to US$1,132.1 million for the nine<br> months ended September 30, 2020. The increase was primarily due to higher costs of logistics, including expenses associated with fulfilment services we provided to sellers as part of our value-added services, and other costs incurred in<br> line with growth of our e-commerce marketplace, including, among other costs, higher bank transaction fees driven by GMV growth, as well as higher staff compensation and benefit costs.
---	---
●	Cost of goods sold: Cost of goods sold increased by 147.7% from US$148.5 million for the nine months ended September 30, 2019 to US$367.8 million for the nine months<br> ended September 30, 2020. The increase was largely in line with the increase in our product offerings.
---	---
Gross Profit
---

As a result of the foregoing, our gross profit was US$340.1 million for the nine months ended September 30, 2019 and US$815.2 million for the nine months ended September 30, 2020. We had gross margins of 24.3% and 29.0% for the nine months ended September 30, 2019 and 2020, respectively, and our digital entertainment business had gross margins of 59.5% and 62.7% for the nine months ended September 30, 2019 and 2020, respectively.

Other Operating Income

Our other operating income increased by 1,084.3% from US$9.9 million for the nine months ended September 30, 2019 to US$116.9 million for the nine months ended September 30, 2020. The increase in our other operating income was mainly due to the rebates from e-commerce related logistic services provided by third parties.

Sales and Marketing Expenses

Our sales and marketing expenses increased by 85.7% from US$627.8 million for the nine months ended September 30, 2019 to US$1,165.7 million for the nine months ended September 30, 2020 primarily due to the increased sales and marketing expenses across our businesses. The increase in the sales and marketing expenses of our digital entertainment business was primarily due to higher online marketing costs. The increase in the sales and marketing expenses of our e-commerce business was primarily attributable to the ramping up of brand marketing and marketing incentives as well as higher staff compensation and benefit costs and showed our continued improvement in growth efficiency as the market leader. The increase in the sales and marketing expenses of our digital financial services business was in line with our growth initiatives.

General and Administrative Expenses

Our general and administrative expenses increased by 69.5% from US$276.2 million for the nine months ended September 30, 2019 to US$468.2 million for the nine months ended September 30, 2020. This increase was primarily due to higher staff compensation and benefit costs as well as provision for credit losses for our digital financial services business.

Research and Development Expenses

Our research and development expenses increased by 127.9% from US$107.2 million for the nine months ended September 30, 2019 to US$244.3 million for the nine months ended September 30, 2020, primarily due to the increase in research and development staff force.

Non-operating Income or Losses, Net

Non-operating income or losses consist of interest income, interest expense, investment gain, fair value change for 2017 convertible notes and foreign exchange gain (loss). We recorded a net non-operating loss of US$462.2 million for the nine months ended September 30, 2019 compared to a net non-operating loss of US$55.5 million for the nine months ended September 30, 2020. The net non-operating loss for the nine months ended September 30, 2019 was primarily due to fair value loss of US$466.1 million on the 2017 convertible notes as our share prices significantly exceeded the conversion prices of the 2017 convertible notes.

Income Tax Expense

We recorded income tax expense of US$49.9 million for the nine months ended September 30, 2019 and US$97.5 million for the nine months ended September 30, 2020. The income tax expense for the nine months ended September 30, 2020 was primarily due to withholding tax and corporate income tax expenses incurred by our digital entertainment segment.

Share of Results of Equity Investees

We recorded share of losses of equity investees of US$2.6 million and US$0.7 million for the nine months ended September 30, 2019 and 2020, respectively.

Net Loss

As a result of the foregoing, we recorded net losses of US$1,175.8 million and US$1,099.6 million for the nine months ended September 30, 2019 and 2020, respectively.

Segment Reporting

We have three reportable segments, namely, digital entertainment, e-commerce and digital financial services. The chief operating decision maker reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment.

Information about segments for the nine months ended September 30, 2019 and 2020 presented were as follows:

	For the Nine Months Ended September 30, 2020
	Digital Entertainment	E-commerce			Digital Financial Services			Other Services^(1)^			Unallocated expenses^(2)^			Consolidated
	(unaudited)<br> (US in thousands)
Revenue			1,324,934			36,432			125,138			—			2,809,114
Operating income (loss)			(974,638	)		(345,179	)		(34,671	)		(211,190	)		(946,000	)
Non-operating income, net															(55,454	)
Income tax expense															(97,474	)
Share of results of equity investees															(660	)
Net loss															(1,099,588	)

All values are in US Dollars.

	For the Nine Months Ended September 30, 2019
	Digital Entertainment	E-commerce			Digital Financial Services			Other Services^(1)^			Unallocated expenses^(2)^			Consolidated
	(unaudited)<br> (US in thousands)
Revenue			531,705			6,017			128,497			—			1,398,154
Operating income (loss)			(800,340	)		(65,578	)		(28,710	)		(90,524	)		(661,187	)
Non-operating loss, net															(462,204	)
Income tax expense															(49,853	)
Share of results of equity investees															(2,558	)
Net loss															(1,175,802	)

All values are in US Dollars.

(1)	A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other<br> Services”.
(2)	Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous<br> items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the chief operating decision maker as part of segment performance.
---	---

Exhibit 99.2

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br><br><br>FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2020

SEA LIMITED

INDEX TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

	Page
Unaudited Interim Condensed Consolidated Financial Statements
Unaudited Interim Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2020	1 – 4
Unaudited Interim Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2019 and 2020	5 – 6
Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss for the Nine Months Ended September 30, 2019 and 2020	7
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2020	8 – 9
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity for the Nine Months Ended September 30, 2019 and 2020	10 – 12
Notes to the Unaudited Interim Condensed Consolidated Financial Statements	13 – 40

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS<br><br>(Amounts expressed in thousands of US dollars (“$”))
		As ofDecember 31,	As ofSeptember 30,
---	---	---	---
		2019	2020
		_	_
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance for credit losses of 4,083 and 8,434, as of December 31, 2019 and September 30, 2020 respectively
Prepaid expenses and other assets, net of allowance for credit losses of 1,259 and 55,010, as of December 31, 2019 and September 30, 2020 respectively
Inventories, net
Short-term investments	5
Amounts due from related parties
Total current assets
Non-current assets
Property and equipment, net	4
Operating lease right-of-use assets, net
Intangible assets, net
Long-term investments, net of allowance for credit loss of nil and 13,429 as of December 31, 2019 and September 30, 2020 respectively	5
Prepaid expenses and other assets, net of allowance for credit losses of 885 and 13,466, as of December 31, 2019 and September 30, 2020 respectively
Restricted cash
Deferred tax assets
Goodwill	3
Total non-current assets
Total assets

All values are in US Dollars.

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”))
		As ofDecember 31,	As ofSeptember 30,
---	---	---	---
		2019	2020
		_	_
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable (including accounts payable of the Consolidated VIEs without recourse to the primary beneficiaries of 11,274 and 10,272 as of December 31, 2019 and September 30, 2020, respectively)
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiaries of 93,146 and 85,660 as of December 31, 2019 and September 30, 2020, respectively)
Advances from customers (including advances from customers of the Consolidated VIEs without recourse to the primary beneficiaries of 6,116 and 8,555 as of December 31, 2019 and September 30, 2020, respectively)
Amounts due to related parties (including amounts due to related parties of the Consolidated VIEs without recourse to the primary beneficiaries of 1,569 and 1,698 as of December 31, 2019 and September 30, 2020, respectively)
Short-term borrowings (including short-term borrowings of the Consolidated VIEs without recourse to the primary beneficiaries of 1,258 and nil as of December 31, 2019 and September 30, 2020, respectively)
Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of 8,797 and 10,289 as of December 31, 2019 and September 30, 2020, respectively)
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiaries of 133,362 and 194,774 as of December 31, 2019 and September 30, 2020, respectively)
Convertible notes (including convertible notes of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2019 and September 30, 2020, respectively)	6
Income tax payable (including income tax payable of the Consolidated VIEs without recourse to the primary beneficiaries of 5,850 and 1,852 as of December 31, 2019 and September 30, 2020, respectively)
Total current liabilities

All values are in US Dollars.

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”))
		As ofDecember 31,	As ofSeptember 30,
---	---	---	---
		2019	2020
		_	_
Non-current liabilities
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiaries of 1,357 and 1,178 as of December 31, 2019 and September 30, 2020, respectively)
Long-term borrowings (including long-term borrowings of the Consolidated VIEs without recourse to the primary beneficiaries of 358 and nil as of December 31, 2019 and September 30, 2020, respectively)
Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of 20,129 and 18,658 as of December 31, 2019 and September 30, 2020, respectively)
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiaries of 49,325 and 65,589 as of December 31, 2019 and September 30, 2020, respectively)
Convertible notes (including convertible notes of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2019 and September 30, 2020, respectively)	6
Deferred tax liabilities (including deferred tax liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2019 and September 30, 2020, respectively)
Unrecognized tax benefits (including unrecognized tax benefits of the Consolidated VIEs without recourse to the primary beneficiaries of 976 and 107 as of December 31, 2019 and September 30, 2020, respectively)
Total non-current liabilities
Total liabilities
Commitments and contingencies	13

All values are in US Dollars.

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”))
	As ofDecember 31,		As ofSeptember 30,
---	---	---	---	---
Note	2019		2020
	_		_
Shareholders’ equity
Class A Ordinary shares (Par value of US0.0005 per share; Authorized: 14,800,000,000 and 14,800,000,000 shares as of December 31, 2019 and September 30, 2020 respectively; Issued and outstanding: 311,068,949 and 337,424,498 shares as of December 31, 2019 and September 30, 2020, respectively)
Class B Ordinary shares (Par value of US0.0005 per share; Authorized: 200,000,000 and 200,000,000 shares as of December 31, 2019 and September 30, 2020, respectively; Issued and outstanding: 152,175,703 and 152,175,703 shares as of December 31, 2019 and September 30, 2020, respectively)
Additional paid-in capital
Accumulated other comprehensive income (loss)				)
Statutory reserves
Accumulated deficit		)		)
Total Sea Limited shareholders’ equity
Non-controlling interests
Total shareholders’ equity
Total liabilities and shareholders' equity

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<br><br>(Amounts expressed in thousands of US dollars (“$”))
		For the Nine Months endedSeptember 30,
---	---	---	---	---	---
Note		2019		2020
		_		_
Revenue
Service revenue
Digital entertainment
E-commerce and other services
Sales of goods
Total revenue
Cost of revenue
Cost of service
Digital entertainment			)		)
E-commerce and other services			)		)
Cost of goods sold			)		)
Total cost of revenue			)		)
Gross profit
Operating income (expenses)
Other operating income
Sales and marketing expenses			)		)
General and administrative expenses			)		)
Research and development expenses			)		)
Total operating expenses			)		)
Operating loss			)		)
Interest income
Interest expense			)		)
Investment gain, net
Changes in fair value of convertible notes			)		)
Foreign exchange gain (loss)					)
Loss before income tax and share of results of equity investees			)		)
Income tax expense	8		)		)
Share of results of equity investees			)		)
Net loss			)		)
Net (profit) loss attributable to non-controlling interests			)
Net loss attributable to Sea Limited’s ordinary shareholders			)		)

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
			For the Nine Months endedSeptember 30,
---	---	---	---	---	---	---
	Note		2019		2020
			_		_
Loss per share:
Basic and diluted		9		)		)
Weighted average shares used in loss per share computation:
Basic and diluted

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS<br><br>(Amounts expressed in thousands of US dollars (“$”))
	For the Nine Months endedSeptember 30,
---	---	---	---	---
	2019		2020
	_		_
Net loss		)		)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments:
Translation loss		)		)
Net change		)		)
Available-for-sale investments:
Change in unrealized loss		)		)
Net change		)		)
Total other comprehensive loss, net of tax		)		)
Total comprehensive (gain) loss attributable to non-controlling interests		)
Total comprehensive loss attributable to Sea Limited’s ordinary shareholders		)		)

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br><br>(Amounts expressed in thousands of US dollars (“$”))
	For the Nine Months endedSeptember 30,
---	---	---	---	---
	2019		2020
	_		_
Cash flows from operating activities
Net loss		)		)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for credit losses
Amortization of discount on convertible notes
Amortization of intangible assets
Changes in fair value of convertible notes
Deferred income tax		)		)
Depreciation of property and equipment
Gain on disposal of subsidiaries				)
Gain on re-measurement of previously held equity interests				)
Impairment loss on intangible asset
Impairment loss on investments
Loss on debt extinguishment
Net foreign exchange differences		)		)
Share-based compensation
Share of results of equity investees
Others
Operating cash flows before changes in working capital:		)		)
Inventories				)
Accounts receivable		)		)
Prepaid expenses and other assets		)		)
Amounts due from related parties				)
Operating lease right-of-use assets		)		)
Accounts payable
Accrued expenses and other payables
Advances from customers
Operating lease liabilities
Deferred revenue
Income tax payable
Amounts due to related parties
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property and equipment		)		)
Purchase of intangible assets		)		)
Purchase of investments		)		)
Proceeds from disposal of property and equipment
Proceeds from sale and maturity of investments
Distribution from investments
Acquisition of businesses, net of cash acquired				)
Disposal of subsidiaries, net of cash disposed
Change in prepaid expenses and other assets				)
Net cash used in investing activities		)		)

All values are in US Dollars.

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”))
	For the Nine Monthsended September 30,
---	---	---	---	---
	2019		2020
	_		_
Cash flows from financing activities
Repayment of borrowings		)		)
Proceeds from borrowings
Proceeds from issuance of ordinary shares, net
Contribution by non-controlling interest
Transaction with non-controlling interests				)
Payments for exchange and conversion of convertible notes				)
Proceeds from issuance of convertible notes, net
Change in accrued expenses and other payables				)
Net cash generated from financing activities
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of the period
Cash, cash equivalents and restricted cash at end of the period
Supplement disclosures of cash flow information:
Income taxes paid		)		)
Interest paid		)		)
Interest received
Supplement disclosures of non-cash activities:
Purchase of property and equipment included in accrued expenses and other payables		)
Purchase of intangible assets included in accrued expenses and other payables		)
Purchase of property and equipment included in prepayments				)
Purchase of intangible assets included in prepayments				)
Conversion and exchange of convertible notes into ordinary shares		)		)
Acquisition of a subsidiary by conversion of convertible notes
Proceeds from disposal of a subsidiary included in prepaid expenses and other assets

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares)
	No of ordinary shares			Ordinary shares	Additional paid-in capital	Accumulated other comprehensive income (loss)		Statutory reserves	Accumulated deficit		Total Sea Limited shareholders’ (deficit) equity		Non-controlling interests	Totalshareholders’ (deficit) equity
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
				_	_	_		_	_		_		_	_
Balance as of January 1, 2019		342,598,768								)		)			)
Comprehensive loss:
Net loss for the period		–								)		)			)
Foreign currency translation adjustments		–					)					)			)
Net change in unrealized gain on available-for-sale investments		–					)					)			)
Conversion of convertible notes into Class A ordinary shares		45,645,884
Issuance of Class A ordinary shares, net of issuance costs		69,000,000
Capital contributed by non-controlling interest		–
Shares issued to depositary bank		6,000,000
Exercise of share options		3,467,852
Restricted share awards and restricted share units issued		1,651,629
Share-based compensation		–
Settlement of share incentives with shares held by depositary bank		(5,119,481	)
Balance as of September 30, 2019		463,244,652					)			)

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares)
	No of ordinary shares			Ordinary shares	Additional paid-in capital		Accumulated other comprehensive income (loss)		Statutory reserves	Accumulated deficit		Total Sea Limited shareholders’ equity		Non-controlling interests	Totalshareholders’ equity
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
				_	_		_		_	_		_		_	_
Balance as of September 30, 2019		463,244,652						)			)
Comprehensive loss:
Net loss for the period		–									)		)			)
Foreign currency translation adjustments		–
Net change in unrealized gain on available-for-sale investments		–
Issuance of Class A ordinary shares, net of issuance costs		–
Capital contributed by non-controlling interest		–
Equity component of convertible notes		–
Purchase of capped calls related to issuance of convertible notes		–				)							)			)
Shares issued to depositary bank		–
Exercise of share options		269,124
Restricted share awards and restricted share units issued		332,010
Share-based compensation		–
Settlement of share incentives with shares held by depositary bank		(601,134	)
Balance as of December 31, 2019		463,244,652									)

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares)
	No of ordinary shares			Ordinary shares	Additional paid-in capital		Accumulated other comprehensive income (loss)		Statutory reserves	Accumulated deficit		Total Sea Limited shareholders’ equity		Non-controlling interests		Totalshareholders’ equity
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
				_	_		_		_	_		_		_		_
Balance as of January 1, 2020		463,244,652									)
Comprehensive loss:
Net loss for the period		–									)		)		)		)
Foreign currency translation adjustments		–						)					)		)		)
Net change in unrealized loss on available-for-sale investments		–						)					)				)
Acquisition of subsidiary		–
Appropriation of statutory reserves		–									)
Equity component of convertible notes		–
Purchase of capped calls related to issuance of convertible notes		–				)							)				)
Conversion and exchange of convertible notes into Class A ordinary shares		22,255,549
Transaction with non-controlling interests		–				)							)				)
Disposal of interest in a subsidiary		–													)		)
Shares issued to depositary bank		4,000,000
Exercise of share options		2,054,760
Restricted share awards and restricted share units issued		2,549,616				)
Share-based compensation		–
Settlement of share incentives with shares held by depositary bank		(4,504,376	)
Balance as of September 30, 2020		489,600,201						)			)

All values are in US Dollars.

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

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
1.	BASIS OF PRESENTATION
---	---

The unaudited interim condensed consolidated financial statements of Sea Limited (the “Company”), its subsidiaries and variable interest entities (“VIEs”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information using accounting policies that are consistent with those used in the preparation of the Company’s audited consolidated financial statements for the year ended December 31, 2019. Accordingly, these unaudited interim condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements.

In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position, operating results and cash flows of the Company for each of the periods presented. The results of operations for the nine months ended September 30, 2019 and 2020 are not necessarily indicative of results to be expected for any other interim period or for the year ending December 31, 2020. The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements, but does not include all of the disclosures required by U.S. GAAP for annual financial statements. These unaudited condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2019.

VIE disclosures

The aggregate carrying amounts of the total assets and total liabilities of the VIEs as of September 30, 2020 were $388,376 and $572,300 respectively (December 31, 2019: $598,727 and $714,034, respectively). There were no pledges or collateralization of the VIEs’ assets. Creditors of the VIEs have no recourse to the general credit of the primary beneficiaries of the VIEs, and such amounts have been parenthetically presented on the face of the consolidated balance sheets. The VIEs hold certain assets, including land, data servers and related equipment for use in their operations. The VIEs do not own any facilities except for the rental of certain office premises, warehouses and data centers from third parties under operating lease arrangements. They also hold certain value-added technology licenses, registered copyrights, trademarks and registered domain names, including the official website, which are also considered as revenue-producing assets. However, none of such assets was recorded on the Company’s unaudited interim condensed consolidated balance sheets as such assets were all acquired or internally developed with insignificant cost and expensed as incurred. In addition, the Company also hires a sales and marketing as well as a research and development workforce for its daily operations and such costs are expensed when incurred. The Company has not provided any financial or other support that it was not previously contractually required to provide to the VIEs during the periods presented.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
1.	BASIS OF PRESENTATION (continued)
---	---

VIE disclosures (continued)

The following tables represent the financial information of the VIEs whom the Company does not have majority voting interest as of December 31, 2019 and September 30, 2020 and for the nine months ended September 30, 2019 and 2020 before eliminating the intercompany balances and transactions between the VIEs and other entities within the group:

	As ofDecember 31,	As ofSeptember 30,
	2019	2020
	_	_
ASSETS:
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Prepaid expenses and other assets
Inventories, net
Short-term investments
Amounts due from related parties
Amounts due from intercompanies ^(1)^
Total current assets
Non-current assets:
Property and equipment, net
Operating lease right-of-use assets, net
Intangible assets, net
Long-term investments
Prepaid expenses and other assets
Restricted cash
Deferred tax assets
Total non-current assets
Total assets ^(2)^

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
1.	BASIS OF PRESENTATION (continued)
---	---

VIE disclosures (continued)

	As ofDecember 31,	As ofSeptember 30,
	2019	2020
	_	_
LIABILITIES:
Current liabilities:
Accounts payable
Accrued expenses and other payables
Advances from customers
Amounts due to related parties
Short-term borrowings
Operating lease liabilities
Deferred revenue
Income taxes payable
Amounts due to intercompanies ^(1)^
Total current liabilities
Non-current liabilities:
Accrued expenses and other payables
Long-term borrowings
Operating lease liabilities
Deferred revenue
Amounts due to intercompanies ^(1)^
Unrecognized tax benefits
Total non-current liabilities
Total liabilities

All values are in US Dollars.

	For the Nine Months endedSeptember 30,
	2019	2020
	_	_
Revenue
- Third party customers
- Intercompanies
Net profit (loss)			)

All values are in US Dollars.

	For the Nine Months endedSeptember 30,
	2019		2020
	_		_
Net cash (used in) generated from operating activities		)
Net cash used in investing activities		)		)
Net cash generated from financing activities

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
1.	BASIS OF PRESENTATION (continued)
---	---

VIE disclosures (continued)

^(1)^	Amounts due from or to intercompanies consist of intercompany receivables or payables to the other companies within the group arising from intercompany transactions and funds advanced for working capital purpose.
^(2)^	These assets can be used only to settle the obligations of the respective VIEs.
---	---
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---	---
(a)	Principles of consolidation
---	---

The unaudited interim condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIEs for which the Company or a subsidiary of the Company is the primary beneficiary. All significant intercompany transactions and balances between the Company, its subsidiaries and the VIEs are eliminated upon consolidation.

(b)	Use of estimates

The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the period. Areas where management uses subjective judgment include, but are not limited to, revenue recognition, estimating the useful lives and impairment assessment of long-lived assets and goodwill, accounting for and impairment assessment of investments, impairment assessment of accounts receivable and other receivables, accounting for deferred income taxes, accounting for share-based compensation arrangements and accounting for the Company’s financial instruments where the Company is the issuer. Changes in facts and circumstances may result in revised estimates. Given the global economic climate and unforeseen effects from COVID-19 pandemic, the process of estimation is becoming more challenging. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---	---
(c)	Fair value of financial instruments
---	---

Available-for-sale investments are initially recognized at acquisition cost and subsequently remeasured at the end of each reporting period with the change in fair value recognized in accumulated other comprehensive income (loss). The 2017 Convertible Notes were carried at fair value, and had been fully converted into Class A ordinary shares of the Company during the nine months ended September 30, 2020. The liability component of the other convertible notes was initially measured at fair value and subsequently amortized to its redemption amount using the effective interest rate method. The Company, with the assistance of an independent third party valuation firm, determined the estimated fair value of its non-current available-for-sale investments and convertible notes that are recognized in the consolidated financial statements.

(d)	Revenue recognition

Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to for those goods or services. Revenue is measured based on the amount of consideration that the Company expects to receive reduced by discounts, incentives and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales taxes and indirect taxes.

The Company evaluates revenue from services and sales of goods to determine if it controls such services and goods to be the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). The key indicators that the Company evaluates in determining gross versus net treatment include, but are not limited to, (i) which party is primarily responsible for fulfilling the promise to provide the specified good or service; (ii) which party bears inventory risks before the specified good or service has been transferred to a customer; and (iii) which party has discretion in establishing the price for the specified good or service.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---	---
(e)	Goodwill
---	---

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of the Company's acquisitions of interests in its subsidiary and consolidated VIEs. During the measurement period, which does not exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon conclusion of the measurement period, any adjustments are recorded in the consolidated statements of operations.

Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company applies a one-step quantitative test and record the amount of goodwill impairment as the excess of a goodwill allocated to the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

No impairment of goodwill was recorded in the nine months ended September 30, 2019 and 2020.

(f)	Allowance for credit losses

On January 1, 2020, the Company adopted the ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments with the cumulative effect of adoption recorded as an adjustment to the beginning accumulated deficit. The amendments require the measurement of credit losses for financial assets measured at amortized cost based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale investments to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the investment.

The adoption of the new accounting standard on January 1, 2020 does not result in a material adjustment to the beginning accumulated deficit.

Receivables

The Company has also elected the practical expedients permitted under the new accounting standard, which amongst other things, allowed the use of fair value of collateral at the reporting date when recording the net carrying amount of the receivables and determining the allowance for credit losses for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the Company’s assessment as of the reporting date (collateral-dependent financial asset).

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
---	---
(f)	Allowance for credit losses (continued)
---	---

Receivables (continued)

The Company has established a provision matrix that based on its historical credit loss experience, adjusted for forward-looking factors specific to the receivable and economic environment. It reflects the probability-weighted outcome, time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. The allowances for credit losses are calculated on an aggregate basis for various customer segments that are considered to have similar credit characteristics and risk of loss. The above-mentioned provision matrix has also been used to determine allowances for credit losses for off-balance sheet loan commitments.

Available-for-sale investments

The Company compares the present value of cash flows expected to be collected from the investment with the amortized cost basis of the security to determine if a credit loss exists. If the present value of cash flows expected to be collected is less than the amortized cost basis of the investment, a credit loss exists and an allowance for credit losses are recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis.

(g)	Recent accounting pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting For Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), which simplifies the accounting and disclosures for convertible instruments and contracts in an entity's own equity. The Company will adopt ASU 2020-06 in its first quarter of 2022. The Company is currently evaluating the impact ASU 2020-06 will have on its consolidated financial statements.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
3.	ACQUISITIONS AND DISPOSALS
---	---
(a)	Acquisitions
---	---

During the nine months ended September 30, 2020, the Company acquired two companies and their underlying subsidiaries for an aggregate consideration of $259,960. As a result, both acquisitions were consolidated as subsidiaries of the Company from the date of acquisition.

The allocation of the purchase price as of the date of acquisition is summarized as follows:


Cash and cash equivalent
Prepaid expense and other assets, net of allowance for credit losses of 21,471
Long-term investments
Identifiable intangible assets (i)
Others
Total assets acquired
Accrued expenses, payables and liabilities	)
Borrowings	)
Others	)
Total liabilities assumed	)
Net assets acquired
Fulfilled by:
Cash consideration
Fair value of non-controlling interests (ii)
Fair value of previously held interests (iii)
Goodwill

All values are in US Dollars.

(i)	Acquired intangible assets had estimated amortization periods not exceeding eight years.
(ii)	Fair value of non-controlling interests was estimated with reference to the recent purchase price per share as of the acquisition date.
---	---
(iii)	Fair value of previously held interests was estimated based on the purchase consideration payable to similar instruments and recorded a gain of $3,003 in the consolidated statements of operations for the period ended September 30, 2020.
---	---

The goodwill, which is not tax deductible, is primarily attributable to synergies expected to be achieved from the acquisitions.

The revenue and results since the acquisition date included in the consolidated statement of comprehensive loss for the period ended September 30, 2020 were insignificant. The Company’s revenue and results for the period would not be materially different should the acquisitions have otherwise occurred on January 1, 2020.

The related transaction costs of the acquisitions were not material to the Company’s consolidated financial statements.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
3.	ACQUISITIONS AND DISPOSALS (continued)
---	---
(b)	Disposals
---	---

During the nine months ended September 30, 2020, the Company lost control over certain subsidiaries. As a result, the Company derecognized goodwill of $15,247 and recognized a gain of disposal in the consolidated statements of operations as “Investment gain, net”, which includes gain from remeasurement of remaining interest of $37,083. The remaining interest in a former subsidiary was measured at fair value, estimated with reference to the recent selling price per share as of the disposal date and considered a related party after deconsolidation.

4.	PROPERTY AND EQUIPMENT, NET
	As of
---	---	---	---	---
	December 31,		September 30,
	2019		2020
	_		_
Computers
Office equipment, furniture and fittings
Leasehold improvements
Motor vehicles
Warehouse equipment
Land use right
Building
Construction-in-progress

Less: accumulated depreciation		)		)

All values are in US Dollars.

Depreciation expenses recognized for the nine months ended September 30, 2019 and 2020 were $83,718 and $118,992, respectively, and were included in the following captions:

	For the Nine Months endedSeptember 30,
	2019	2020
	_	_
Cost of revenue
Sales and marketing expenses
General and administrative expenses
Research and development expenses

All values are in US Dollars.

No impairment loss had been recognized during the nine months ended September 30, 2019 and 2020, respectively.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
5.	INVESTMENTS
---	---
(a)	Short-term investments
---	---

Held to maturity investments

The Company’s short-term held to maturity investments comprise time deposits placed with financial institutions and medium term notes with maturity of more than three months. The carrying amount of the Company’s short-term deposits was $30,324 and $7,374 as of December 31, 2019 and September 30, 2020, respectively.

The carrying amount of the Company’s medium term notes was nil and $6,712 and the fair value (Level 1) was nil and $6,712 as of December 31, 2019 and September 30, 2020, respectively. No allowance for credit loss had been recognized during the nine months ended September 30, 2019 and 2020, respectively.

Available-for-sale investments

The Company’s short-term available-for-sale investments comprise convertible loan, exchangeable loan and corporate bonds. The carrying amount of the Company’s available-for-sale investments was $72,000 and $28,234 as of December 31, 2019 and September 30, 2020, respectively.

No allowance for credit loss had been recognized during the nine months ended September 30, 2019 and 2020, respectively. The net unrealized fair value loss of nil and $4 related to the short-term available-for-sale investments had been recognized in the consolidated statements of comprehensive loss as “Other comprehensive loss” during the nine months ended September 30, 2019 and 2020, respectively.

(b)	Long-term investments

Held to maturity investments

The Company’s long-term held to maturity investments comprise time deposits and sovereign bonds placed with financial institutions with maturity of more than twelve months. The carrying amount of the Company’s long-term time deposits was $216 and nil as of December 31, 2019 and September 30, 2020, respectively.

The carrying amount of the Company’s sovereign bonds was nil and $64,455 and the fair value (Level 1) was nil and $64,313 as of December 31, 2019 and September 30, 2020, respectively. No allowance for credit loss had been recognized during the nine months ended September 30, 2019 and 2020, respectively.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
5.	INVESTMENTS (continued)
---	---
(b)	Long-term investments (continued)
---	---

Available-for-sale investments

The carrying amount of the Company’s long-term available-for-sale investments was $56,418 and $42,582 as of December 31, 2019 and September 30, 2020, respectively. An allowance for credit loss of nil and $13,429 had been recognized in the consolidated statements of operations as “Investment gain, net” during the nine months ended September 30, 2019 and 2020, respectively. The net unrealized fair value loss of $16,580 and $5,282 related to the long-term available-for-sale investments had been recognized in the consolidated statements of comprehensive loss as “Other comprehensive loss” during the nine months ended September 30, 2019 and 2020, respectively.

The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost bases.

Subsequent to September 30, 2020, the Company has written off its long term available-for-sale investments amounting to $37,571 as the amount is no longer expected to be recoverable.

Equity securities

The carrying amount of the Company’s equity security investments was $21,665 and $19,038 as of December 31, 2019 and September 30, 2020, respectively. An impairment loss of nil and $6,845 had been recognized during the nine months ended September 30, 2019 and 2020, respectively.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
5.	INVESTMENTS (continued)
---	---
(b)	Long-term investments (continued)
---	---

Investment in equity investees

Set out below are movement of the investment in equity investees during the nine months ended September 30, 2019 and 2020 and full year ended December 31, 2019.

	_
Balance at January 1, 2019
Additions
Share of results		)
Share of other comprehensive loss		)
Distribution from investment		)
Disposal		)
Balance at September 30, 2019
Additions
Share of results		)
Share of other comprehensive income
Distribution from investment		)
Impairment		)
Balance at December 31, 2019
Additions
Retained interest in a former subsidiary
Share of results		)
Share of other comprehensive income
Distribution from investment		)
Impairment		)
Balance at September 30, 2020

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
6.	CONVERTIBLE NOTES
---	---
	As of
---	---	---
	December 31,	September 30,
	2019	2020
	_	_
Current:
2017 Convertible Notes
Non-current:
2018 Convertible Notes
2019 Convertible Notes
2020 Convertible Notes

All values are in US Dollars.

(a)	2017 Convertible Notes

During the year ended December 31, 2017, the Company issued the convertible promissory notes (the “2017 Convertible Notes”), in the aggregate principal amount of $675,000, at an interest rate of 5% per annum, compounded annually on the unconverted and unpaid principal amount until the first to occur of (i) the maturity date, subject to further extension at investors’ election, (ii) the last day of the lockup period related to the initial public offering (“IPO”), (iii) the date of any conversion of the convertible promissory note in full, and (iv) the date of any other repayment or redemption of the convertible promissory note in full. The 2017 Convertible Notes will mature on their respective third anniversary dates.

The noteholders have the right, at their option, to convert the outstanding principal amount of the 2017 Convertible Notes in whole or in part of a minimum of 50%, into fully paid and non-assessable ordinary shares of the Company at any time following the IPO closing date up to the maturity date if an IPO occurs, at a conversion price ranging from $13.13 to $14.26 calculated according to an agreed-upon formula which stipulates a discount to the IPO price based on a discount rate and the time period between the issuance dates of the relevant 2017 Convertible Notes and the IPO pricing date, subject to certain anti-dilution adjustments.

Following the closing of the IPO on October 20, 2017, the American Depositary Shares (“ADSs”) representing the underlying Class A ordinary shares are publicly traded and the Conversion Option is subject to derivative accounting. The Company elected to use the fair value option which would require the hybrid instrument to be measured at fair value with any changes in fair value recognized in earnings.

During the nine months ended September 30, 2019, and 2020, certain noteholders had converted the outstanding principal amount of the 2017 Convertible Notes totalling $615,000 and $10,000 into Class A ordinary shares. The 2017 Convertible Notes had been fully converted into Class A ordinary shares of the Company during the nine months ended September 30, 2020.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
6.	CONVERTIBLE NOTES (continued)
---	---
(b)	2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes
---	---

The Company also issued the following convertible notes and the terms are as follow:

	2018 Convertible Notes	2019 Convertible Notes	2020 Convertible Notes
Issuance date	June 18, 2018	November 18, 2019	May 22, 2020
Maturity date	July 1, 2023	December 1, 2024	December 1, 2025
Principal amount	$575,000	$1,150,000	$1,150,000
Interest rate	2.25%	1.00%	2.38%
Initial conversion rate	50.5165 ADSs per $1 principal amount, equivalent to $19.80 per ADS	19.9475 ADSs per $1 principal amount, equivalent to $50.13 per ADS	11.0549 ADSs per $1 principal amount, equivalent to $90.46 per ADS
Agreed conversion date	January 1, 2023	June 1, 2024	September 1, 2025

The 2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes holders (the “Holders”) have the right, at their option, to convert the outstanding principal amount of the convertible notes, in whole or in part in integral multiples of $1 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business day immediately preceding the agreed conversion date; or (ii) anytime on or after the agreed conversion date until the close of business on the second scheduled trading day immediately preceding the maturity date (the “Conversion Option”).

The conversion is subject to the anti-dilution and make-whole fundamental change adjustments. Upon conversion, the Company has the right, at its option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to the Holders.

If certain events of default, changes in tax laws of the relevant taxing jurisdiction or fundamental change, optional redemption or clean up redemption as defined in the indenture were to occur, of which the optional redemption and clean up redemption only applies to the 2019 Convertible Notes and 2020 Convertible Notes, the outstanding obligations under the respective convertible notes could be immediately due and payable (the “Contingent Redemption Options”).

The Company evaluated the Conversion Option and Contingent Redemption Options in accordance with ASC 815 to determine if these features require bifurcation. The Conversion Option was not required to be bifurcated because it was indexed to the Company’s ADSs and meets all additional conditions for equity classification. The Contingent Redemption Options were not required to be bifurcated because they were considered to be clearly and closely related to the debt host, as the convertible notes were not issued at a substantial discount and are redeemable at par.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
6.	CONVERTIBLE NOTES (continued)
---	---
(b)	2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes (continued)
---	---

The 2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes were accounted for under ASC 470-20 Cash Conversion Subsections as follow:

	2018 Convertible Notes			2019 Convertible Notes			2020 Convertible Notes
Liability component	$	410,926		$	897,918		$	856,635
Effective interest rate		9.38	%		6.03	%		8.21	%
Equity component	$	152,714		$	240,582		$	284,727
Debt issuance cost, allocated in proportion to the allocation of proceeds	$	11,360		$	11,500		$	8,638

The liability component was measured at fair value and subsequently amortized to its redemption amount using the effective interest method. The residual value was allocated to the equity component, classified within “Additional paid-in capital” and not subsequently remeasured.

During the nine months ended September 30, 2019 and 2020, the Company recognized total interest expense for coupon interest of $9,703 and $25,480, respectively and amortization of discount on the liability component amounted to $20,856 and $65,111, respectively.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
6.	CONVERTIBLE NOTES (continued)
---	---
(b)	2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes (continued)
---	---

Capped call transactions

In connection with the offering of 2019 Convertible Notes and 2020 Convertible Notes, the Company entered into separately negotiated capped call transactions with certain counterparties (collectively, the “Capped Calls”). The details of the Capped Calls are as follows:

	2019 Convertible Notes		2020 Convertible Notes
Initial strike price per share	$	50.13	$	90.46
Initial cap price per share	$	70.36	$	136.54

The Capped Calls are generally intended to reduce or offset the potential economic dilution of approximately 22,940,000 and 12,713,000 shares to our Class A ordinary shares upon any conversion of the 2019 Convertible Notes and 2020 Convertible Notes, respectively, with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Calls are considered indexed to the Company’s own stock and are equity classified, they are recorded in shareholders’ equity and are not accounted for as derivative. The costs of $97,060 and $135,700 incurred in connection with the Capped Calls of the 2019 Convertible Notes and 2020 Convertible Notes, respectively, were recorded as reductions to additional paid-in capital. Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive under treasury stock method.

(c)	Exchange and conversion of 2018 Convertible Notes

During the nine months ended September 30, 2020, a total principal amount of $439,016 convertible notes were exchanged or converted by certain 2018 Convertible Notes holders. These exchanges or conversions were satisfied through a combination of cash and Class A ordinary shares settlement.

Subsequent to September 30, 2020, certain 2018 Convertible Notes holders exchanged or converted a total principal amount of $86,979 convertible notes. These exchanges or conversions were satisfied through a combination of cash and Class A ordinary shares settlement.

The exchange and conversion completed during the nine months ended September 30, 2020 resulted in a loss on debt extinguishment of $22,647 recorded in the consolidated statements of operations as “Interest expense”.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
7.	SHARE BASED COMPENSATION
---	---

The Company amended its 2009 share incentive plan (the “Plan”) in July 2019. Under the Plan, the Company may grant options, restricted share award (“RSA”), restricted share unit (“RSU”) or share appreciation right (“SAR”) to its officers, employees, directors and other eligible persons (collectively known as “Eligible Persons”) of up to 83,000,000 Class A ordinary shares. The Plan is administered by an authorized administrator appointed by the Board of Directors of the Company set forth in the Plan (the “Plan Administrator”).

The maximum number of shares which may be issued pursuant to all awards under the Plan will increase on January 1 of each of 2019, 2020, 2021 and 2022 by 5% of the total number of ordinary shares of all classes of the Company outstanding on that day immediately before such annual increase pursuant to the Plan. With effect on January 1, 2019, July 25, 2019 and January 1, 2020, the maximum number of shares which may be issued pursuant to all awards under the Plan increased to 100,129,938, 103,129,938 and 123,292,170 Class A ordinary shares.

During the nine months ended September 30, 2020, the Company granted 5,809,024 options, 4,598,613 RSUs and 83,617 SARs to the Eligible Persons. All options granted have a contractual term of ten years. The options vest according to the stated vesting period in the grantee’s option agreement. The RSUs and SARs generally vest 25% on the first anniversary year from the stated vesting commencement date and the remaining 75% will vest in 12 substantially equal quarterly instalments.

The Company calculated the estimated fair value of the options on the respective grant dates using the Black-Scholes option pricing model with the following assumptions.

	Granted in 2020
Risk-free interest rates		0.39% – 1.66
Expected term	5.5 – 7.5 years
Expected volatility		32.4% – 33.7
Expected dividend yield		–
Fair value of share options	$	13.81 – 50.58

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
7.	SHARE BASED COMPENSATION (continued)
---	---

Total compensation expense relating to options, RSAs, RSUs and SARs granted to Eligible Persons after deducting forfeitures recognized for the nine months ended September 30, 2019 and 2020, respectively, is as follows:

	For the Nine Months endedSeptember 30,
	2019	2020
	_	_
Share options:
Cost of revenue
Sales and marketing expenses
General and administrative expenses
Research and development expenses

RSAs and RSUs:
Cost of revenue
Sales and marketing expenses
General and administrative expenses
Research and development expenses

SARs:
Cost of revenue
Sales and marketing expenses
General and administrative expenses
Research and development expenses

Total

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
8.	INCOME TAX EXPENSE
---	---

The Company recorded an income tax expense of $49,853 and $97,474, respectively, for the nine months ended September 30, 2019 and 2020, respectively.

Income tax expense comprises:

	For the Nine Months endedSeptember 30,
	2019		2020
	_		_
Income tax
Deferred tax		)		)
Withholding tax expense

All values are in US Dollars.

9.	LOSS PER SHARE

Basic and diluted loss per share for each of the periods presented is calculated as follows:

	For the Nine Months endedSeptember 30,
	2019		2020
	_		_
Numerator:
Net loss attributable to ordinary shareholders		)		)
Denominator:
Weighted-average number of shares outstanding - basic and diluted
Basic and diluted loss per share:		)		)

All values are in US Dollars.

The potentially dilutive securities such as share based payments and convertible notes were not included in the calculation of dilutive loss per share because of their anti-dilutive effect.

During the nine months ended September 30, 2019 and 2020, respectively, the Company issued 6,000,000 and 4,000,000 Class A ordinary shares to its share depositary bank which will be used to settle share incentive awards. No consideration was received by the Company for this issuance of Class A ordinary shares. These Class A ordinary shares are legally issued and outstanding but are treated as escrowed shares for accounting purposes and therefore, have been excluded from the computation of loss per share. Any Class A ordinary shares not used in the settlement of share incentive awards will be returned to the Company.

During the nine months ended September 30, 2019 and 2020, respectively, 5,119,481 and 4,504,376 issued Class A ordinary shares were used to settle the exercise of share incentive awards.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
10.	RELATED PARTY TRANSACTIONS
---	---
(a)	Related parties ^(1)^
---	---
Name of related parties	Relationship with the Company
---	---
i) Tencent Limited and its affiliates (“Tencent”)	A shareholder of the Company
^(1)^	These are the related parties that have engaged in significant transactions with the Company for the nine months ended September 30, 2019 and 2020.
---	---
(b)	The Company had the following significant related party transactions for the nine months ended September 30, 2019 and 2020, respectively:
---	---
	Nine Months endedSeptember 30,
---	---	---
	2019	2020
	_	_
Royalty fee and license fee to:
- Tencent
Royalty fee and license fee from:
- Tencent
Rack rental income from:
- Tencent
Services provided by:
- Tencent
Interest expense to:
- Tencent
Conversion of convertible notes (principal amount) by:
- Tencent

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
10.	RELATED PARTY TRANSACTIONS (continued)
---	---
(c)	The Company had the following significant related party balances as of December 31, 2019 and September 30, 2020:
---	---
	As of
---	---	---
	December 31,	September 30,
	2019	2020
	_	_
Amounts due from related parties:
Current:
- Tencent
Amounts due to related parties:
Current:
- Tencent

All values are in US Dollars.

11.	SEGMENT REPORTING

The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The Chief Operating Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating financial performance of each segment.

Description of Reportable Segments:

Digital entertainment – Garena’s platform offers mobile and PC online games across the region and develops mobile games for the global market. Garena is the global leader in eSports, it also provides access to other entertainment content and social features, such as live streaming of gameplay, user chat and online forums.

E-commerce – Shopee’s platform is a mobile-centric, social-focused marketplace. It provides users with a convenient, safe, and trusted shopping environment with integrated payment, logistics infrastructure and comprehensive seller services. Products from manufacturers and third parties are also purchased and sold directly to buyers on Shopee’s platform.

Digital financial services – SeaMoney provides a variety of payment services to individuals and businesses. It is an important payment infrastructure supporting the Company’s digital entertainment and e-commerce businesses. In addition, SeaMoney also integrates with third party merchant partners and covers a broad set of consumption use cases.

A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other services”.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
11.	SEGMENT REPORTING (continued)
---	---

Information about segments for the nine months ended September 30, 2019 and 2020 presented were as follows:

	For the Nine Months ended September 30, 2019
	DigitalEntertainment	E-Commerce		Digital Financial Services		OtherServices		Unallocatedexpenses (1)		Consolidated
Revenue
Operating income (loss)			)		)		)		)		)
Non-operating loss, net											)
Income tax expense											)
Share of results of equity investees											)
Net loss											)

All values are in US Dollars.

	For the Nine Months ended September 30, 2020
	DigitalEntertainment	E-Commerce		Digital Financial Services		OtherServices		Unallocatedexpenses (1)		Consolidated
Revenue
Operating income (loss)			)		)		)		)		)
Non-operating loss, net											)
Income tax expense											)
Share of results of equity investees											)
Net loss											)

All values are in US Dollars.

^(1)^ Unallocated expenses are mainly relating to share-based compensation, general and corporate administrative costs, such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segments results as they are not reviewed by the CODM as part of segment performance.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

11. SEGMENT REPORTING (continued)

Revenue from external customers is classified based on the geographical locations where the services were provided. With the continuous growth of the business, the revenue’s segment reporting was revised in the last annual consolidated financial statements to better reflect the contribution from each region.

	For the Nine Months endedSeptember 30,
	2019	2020
	_	_
Revenue
Southeast Asia
Latin America
Rest of Asia
Rest of the world
Consolidated revenue

All values are in US Dollars.

No single customer accounted for 10 percent or more of the Company’s total revenue for the nine months ended September 30, 2019 and 2020.

12.	FAIR VALUE MEASUREMENTS

ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

In accordance with ASC 820, the Company measures cash equivalents, restricted cash, available-for-sale investments and 2017 Convertible Notes at fair value. The liability component of the 2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes is measured at fair value on its issuance date. Cash equivalents are classified within Level 1 because they are valued using a quoted market prices in active markets for identical assets and liabilities.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

12. FAIR VALUE MEASUREMENTS (continued)

As of December 31, 2019 and September 30, 2020, Level 3 assets and liabilities of the Company included investments in convertible loans, exchangeable loan and preference shares of investees, 2017 Convertible Notes and other current assets.

Investments in debt securities - for long term investment in debt securities, the Company used the Market approach to determine the equity value of the investees. The fair value of debt securities was then derived from the equity value of the investees taking into account business risk, volatility and discount rates which requires the Company to make complex and subjective judgments. For short-term investment in debt securities, the carrying amount is approximate fair value due to its short-term nature.

2017 Convertible Notes – the Company used a binomial tree model to determine the fair value of the 2017 Convertible Notes. The binomial pricing model traces the evolution of the 2017 Convertible Notes’ key underlying variables in discrete-time. This is done by means of a binomial lattice (tree), for a number of time steps between the end of reporting period, which was December 31, 2019. The valuation model requires the Company to make complex and subjective judgments on certain underlying inputs applied to the valuation models including the expected volatility of its share price and estimated credit spread as of December 31, 2019.

Other current assets – the Company used Market approach to determine the fair value of foreclosed assets by comparing to the sale and purchase transactions of comparable assets in the market, adjusted with differences such as size, physical condition, location etc.

2018 Convertible Notes, 2019 Convertible Notes and 2020 Convertible Notes – the Company used discounted cash flow method to determine the fair value of the liability component (non-recurring, Level 3). The discounted cash flow took into account the present value of expected future cash flows from coupon interest and redemption amount, discounted by the credit yield as at issuance date with reference to similar instruments that did not have associated convertible features.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
12.	FAIR VALUE MEASUREMENTS (continued)
---	---

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

	Fair value measurement at December 31, 2019
	Quoted prices inactive markets for identical assets(Level 1)		Significant otherobservableinputs(Level 2)	Unobservableinputs(Level 3)		Total
Cash equivalents
Money market funds
Short-term investments
Time deposits – non-current
Available-for-sale investments – non-current
2017 Convertible Notes					)		)
Share appreciation rights		)					)

All values are in US Dollars.

	Fair value measurement at September 30, 2020
	Quoted prices inactive markets for identical assets(Level 1)		Significant otherobservableinputs(Level 2)	Unobservableinputs(Level 3)	Total
Cash equivalents
Short-term investments
Available-for-sale investments – non-current
Other current assets
Share appreciation rights		)				)

All values are in US Dollars.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

12. FAIR VALUE MEASUREMENTS (continued)

	Level 3instrumentsmeasured at fairvalue on arecurring basis
Assets:
Available-for-sale investments
Current:
Balance at January 1, 2019
Investment during the year
Balance at December 31, 2019
Conversion into ordinary shares of investee		)
Addition
Balance at September 30, 2020
Non-current:
Balance at January 1, 2019
Impairment loss		)
Fair value loss included in other comprehensive loss		)
Balance at September 30, 2019
Fair value gain included in other comprehensive loss
Balance at December 31, 2019
Allowance for credit loss		)
Fair value loss included in other comprehensive loss		)
Balance at September 30, 2020

All values are in US Dollars.

Other current assets
Balance at January 1, 2019 and December 31, 2019	–
Acquisition of subsidiary	8,718
Additions	10,309
Disposals	(227	)
Write-down	(1,329	)
Exchange differences	(183	)
Balance at September 30, 2020	17,288

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
12.	FAIR VALUE MEASUREMENTS (continued)
---	---
	Level 3instrumentsmeasured at fairvalue on arecurring basis
---	---	---
Liabilities:
2017 Convertible Notes
Balance at January 1, 2019		)
Fair value loss		)
Conversion into Class A ordinary shares
Balance at September 30, 2019		)
Fair value loss		)
Balance at December 31, 2019		)
Fair value loss		)
Conversion into Class A ordinary shares
Balance at September 30, 2020

All values are in US Dollars.

The Company’s valuation techniques used to measure the fair value were derived from management’s assumptions of estimations. Changes in the fair value of the available-for-sale investments is recorded in the accumulated other comprehensive income (loss). Changes in the fair value of the 2017 Convertible Notes and other current assets are recorded in the consolidated statement of operations.

SEA LIMITED<br><br><br><br>NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br><br>(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
13.	COMMITMENTS AND CONTINGENCIES
---	---

Purchase commitments

The Company has commitments to purchase property and equipment of $12,357 and $143,153, committed licensing fee payable for the licensing of game titles of $1,900 and $3,536 and commitment to invest in certain companies of $24,056 and $31,922 as of December 31, 2019 and September 30, 2020, respectively.

Minimum guarantee commitments

The Company has commitments to pay minimum guarantee of royalty fee to game developers for certain online games it licensed from those game developers. As of December 31, 2019 and September 30, 2020, the minimum guarantee commitment amounted to $31,733 and $25,713 respectively, for its launched games, as well as licensed but yet to be launched games.

Operating lease commitments

The Company has entered into commercial operating and finance leases for the use of computers, offices and warehouses as lessee. These leases have original terms not exceeding 10 years. These leases have varying terms, escalation clauses and renewal rights. As of December 31, 2019 and September 30, 2020, the Company has additional operating leases, primarily for offices, that have not yet commenced of $12,968 with lease terms not exceeding 5 years and $29,167 with lease terms not exceeding 6 years, respectively.

Others

The Company has commitments to extend credit to customers on demand and interest receivables on non-performing assets which is not accrued. As of December 31, 2019 and September 30, 2020, the unused credit facilities and interest receivables on non-performing assets are amounted to nil and $26,491 and nil and $2,101, respectively.