Exhibit 99.2


 
SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2021





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, 2020 and June 30, 2021
1 – 4
Unaudited Interim Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2020 and 2021
5 – 6
Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss for the Six Months Ended June 30, 2020 and 2021
7
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2021
8 – 9
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity for the Six Months Ended June 30, 2020 and 2021
10 – 12
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
13 – 41


SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts expressed in thousands of US dollars (“$”))

       
As of
December 31,
    
As of
June 30,
  
   
Note
    
2020
    
2021
  
         
$_
    
$_
  
                   
ASSETS
                  
Current assets
                  
Cash and cash equivalents
          
6,166,880
      
4,645,383
  
Restricted cash
          
859,192
      
1,328,060
  
Accounts receivable, net of allowance for credit losses of $7,978 and $4,971, as of December 31, 2020 and June 30, 2021 respectively
         
362,999
      
382,662
  
Prepaid expenses and other assets
          
1,054,229
      
1,202,889
  
Loans receivable, net of allowance for credit losses of $20,872 and $58,832, as of December 31, 2020 and June 30, 2021 respectively
     4       285,937       762,485  
Inventories, net
            
64,219
      
99,477
  
Short-term investments
    
5
      
126,099
      
962,141
  
Amounts due from related parties
            
19,449
      
14,001
  
                         
Total current assets
            
8,939,004
      
9,397,098
  
                         
Non-current assets
                        
Property and equipment, net
    

     
386,401
      
442,122
  
Operating lease right-of-use assets, net
            
234,555
      
388,073
  
Intangible assets, net
            
39,773
      
42,137
  
Long-term investments
    
5
      
190,482
      
286,372
  
Prepaid expenses and other assets
            
204,804
      
301,104
  
Loans receivable, net of allowance for credit losses of $19,612 and $15,058, as of December 31, 2020 and June 30, 2021 respectively
     4
       117,149       45,488  
Restricted cash
            
27,321
      
29,457
  
Deferred tax assets
            
99,904
      
114,862
  
Goodwill
    
3
      
216,278
      
476,334
  
                         
Total non-current assets
            
1,516,667
      
2,125,949
  
                         
Total assets
            
10,455,671
      
11,523,047
  

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

1

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Amounts expressed in thousands of US dollars (“$”))

       
As of
December 31,
    
As of
June 30,
  
   
Note
    
2020
    
2021
  
         
$_
    
$_
  
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities
                  
Accounts payable (including accounts payable of the Consolidated VIEs without recourse to the primary beneficiaries of $19,290 and $12,821 as of December 31, 2020 and June 30, 2021, respectively)
          
121,637
      
179,551
  
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiaries of $107,512 and $127,510 as of December 31, 2020 and June 30, 2021, respectively)
          
2,033,461
      
2,670,816
  
Advances from customers (including advances from customers of the Consolidated VIEs without recourse to the primary beneficiaries of $11,014 and $16,652 as of December 31, 2020 and June 30, 2021, respectively)
          
161,379
      
206,383
  
Amounts due to related parties (including amounts due to related parties of the Consolidated VIEs without recourse to the primary beneficiaries of $2,347 and $3,805 as of December 31, 2020 and June 30, 2021, respectively)
          
42,613
      
60,017
  
Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of $10,122 and $6,543 as of December 31, 2020 and June 30, 2021, respectively)
          
74,506
      
113,544
  
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiaries of $212,377 and $204,926 as of December 31, 2020 and June 30, 2021, respectively)
          
2,150,165
      
2,538,838
  
Income tax payable (including income tax payable of the Consolidated VIEs without recourse to the primary beneficiaries of $566 and $1,790 as of December 31, 2020 and June 30, 2021, respectively)
            
52,306
      
114,448
  
                         
Total current liabilities
            
4,636,067
      
5,883,597
  

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

2

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Amounts expressed in thousands of US dollars (“$”))

       
As of
December 31,
    
As of
June 30,
  
   
Note
    
2020
    
2021
  
         
$_
    
$_
  
                   
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 $1,907 and $1,738 as of December 31, 2020 and June 30, 2021, respectively)
          
36,159
      
61,036
  
Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of $16,916 and $6,642 as of December 31, 2020 and June 30, 2021, respectively)
          
177,870
      
299,476
  
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiaries of $55,200 and $70,953 as of December 31, 2020 and June 30, 2021, respectively)
          
343,297
      
396,138
  
Convertible notes (including convertible notes of the Consolidated VIEs without recourse to the primary beneficiaries of nil and nil as of December 31, 2020 and June 30, 2021, respectively)
    
6
      
1,840,406
      
1,282,496
  
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, 2020 and June 30, 2021, respectively)
            
1,526
      
1,272
  
Unrecognized tax benefits (including unrecognized tax benefits of the Consolidated VIEs without recourse to the primary beneficiaries of $107 and $107 as of December 31, 2020 and June 30, 2021, respectively)
            
107
      
107
  
                         
Total non-current liabilities
            
2,399,365
      
2,040,525
  
                         
Total liabilities
            
7,035,432
      
7,924,122
  
                         
Commitments and contingencies
    
13
      

     

 

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

3

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Amounts expressed in thousands of US dollars (“$”))

     
As of
December 31,
    
As of
June 30,
  
  Note
    
2020
    
2021
  
        $
     $  
Shareholders’ equity
                
Class A Ordinary shares (Par value of US$0.0005 per share; Authorized: 14,800,000,000 and 14,800,000,000 shares as of December 31, 2020 and June 30, 2021 respectively; Issued and outstanding: 359,755,767 and 382,489,822 shares as of December 31, 2020 and June 30, 2021, respectively)
  
 
179
      
190
  
Class B Ordinary shares (Par value of US$0.0005 per share; Authorized: 200,000,000 and 200,000,000 shares as of December 31, 2020 and June 30, 2021, respectively; Issued and outstanding: 152,175,703 and 152,175,703 shares as of December 31, 2020 and June 30, 2021, respectively)
        
76
      
76
  
Additional paid-in capital
        
8,526,571
      
9,587,617
  
Accumulated other comprehensive income (loss)
        
4,681
      
(22,989
)
Statutory reserves
        
2,363
      
1,766
  
Accumulated deficit
        
(5,150,958
)
    
(6,006,493
)
                     
Total Sea Limited shareholders’ equity
         3,382,912       3,560,167  
Non-controlling interests
        
37,327
      
38,758
  
                     
Total shareholders’ equity
        
3,420,239
      
3,598,925
  
                     
Total liabilities and shareholders' equity
        
10,455,671
      
11,523,047
  

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

4

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in thousands of US dollars (“$”))

     
For the Six Months ended
June 30,
  
 Note
    
2020
    
2021
  
          
$_
    
$_
  
                 
Revenue
                
Service revenue
                
Digital entertainment
        
753,629
      
1,805,602
  
E-commerce and other services
        
631,264
      
1,772,040
  
                     
Sales of goods
        
212,061
      
466,550
  
                     
Total revenue
        
1,596,954
      
4,044,192
  
                     
Cost of revenue
                    
Cost of service
                    
Digital entertainment
        
(299,231
)
    
(540,936
)
E-commerce and other services
        
(673,815
)
    
(1,491,286
)
                     
Cost of goods sold
        
(216,282
)
    
(435,667
)
                     
Total cost of revenue
        
(1,189,328
)
    
(2,467,889
)
                     
Gross profit
        
407,626
      
1,576,303
  
                     
Operating income (expenses)
                    
Other operating income
        
57,925
      
147,095
  
Sales and marketing expenses
        
(694,665
)
    
(1,600,284
)
General and administrative expenses
        
(271,480
)
    
(491,850
)
Research and development expenses
        
(139,933
)
    
(313,693
)
                     
Total operating expenses
        
(1,048,153
)
    
(2,258,732
)
                     
Operating loss
        
(640,527
)
    
(682,429
)
Interest income
        
15,206
      
14,969
  
Interest expense
        
(67,927
)
    
(49,606
)
Investment gain (loss), net
        
58,968
      
(19,770
)
Changes in fair value of convertible notes
        
(87
)
    
–
  
Foreign exchange gain
        
12,687
      
6,094
  
                     
Loss before income tax and share of results of equity investees
        
(621,680
)
    
(730,742
)
Income tax expense
8
      
(51,058
)
    
(126,216
)
Share of results of equity investees
        
(1,588
)
    
1,198
  
                     
Net loss
        
(674,326
)
    
(855,760
)
                     
Net profit attributable to non-controlling interests
        
(148
)
    
(372
)
                     
Net loss attributable to Sea Limited’s ordinary shareholders
        
(674,474
)
    
(856,132
)

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

5

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)

       
For the Six Months ended
June 30,
  
   
Note
    
2020
    
2021
  
         
$_
    
$_
  
                   
Loss per share:
                  
Basic and diluted
    
9
      
(1.45
)
    
(1.65
)
                         
Weighted average shares used in loss per share computation:
                        
Basic and diluted
            
464,344,956
      
519,037,660
  

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

6

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts expressed in thousands of US dollars (“$”))

 
For the Six Months ended
June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
             
Net loss
    
(674,326
)
    
(855,760
)
                 
Other comprehensive loss, net of tax:
                
Foreign currency translation adjustments:
                
Translation loss
    
(11,694
)
    
(25,758
)
                 
Net change
    
(11,694
)
    
(25,758
)
                 
Available-for-sale investments:
                
Change in unrealized loss
    
(5,400
)
    
(3,406
)
                 
Net change
    
(5,400
)
    
(3,406
)
                 
Total other comprehensive loss, net of tax
    
(17,094
)
    
(29,164
)
                 
Less: total comprehensive loss attributable to non-controlling interests
    
1,336
      
831
  
                 
Total comprehensive loss attributable to Sea Limited’s ordinary shareholders
    
(690,084
)
    
(884,093
)

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

7

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in thousands of US dollars (“$”))

 
For the Six Months
ended June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
             
Cash flows from operating activities
            
Net loss
    
(674,326
)
    
(855,760
)
Adjustments to reconcile net loss to net cash used in operating activities:
                
Allowance for credit losses
    
24,189
      
45,941
  
Amortization of discount on convertible notes
    
40,805
      
42,311
  
Amortization of intangible assets
    
5,695
      
7,811
  
Deferred income tax
    
(16,515
)
    
(17,512
)
Depreciation of property and equipment
    
74,526
      
111,256
  
Gain on disposal of subsidiary
    
(75,831
)
    
–
  
Gain on re-measurement of equity interests
    
(3,003
)
    
–
  
Impairment loss on investments
    
8,856
      
–
  
Net loss (gain) on debt extinguishment
    
12,158
      
(11,427
)
Net foreign exchange differences
    
(19,041
)
    
(16,993
)
Share-based compensation
    
117,186
      
214,560
  
Share of results of equity investees
    
1,588
      
(1,198
)
Unrealised loss on marketable equity securities
     –       21,118  
Others
    
2,943
      
2,764
  
                 
Operating cash flows before changes in working capital:
    
(500,770
)
    
(457,129
)
                 
Inventories
    
(36,408
)
    
(40,037
)
Accounts receivable
    
(63,383
)
    
(21,017
)
Prepaid expenses and other assets
    
(213,859
)
    
(188,670
)
Amounts due from related parties
    
(12,675
)
    
8,346
  
Operating lease right-of-use assets
    
(16,199
)
    
(155,440
)
Accounts payable
    
29,737
      
56,874
  
Accrued expenses and other payables
    
324,992
      
493,408
  
Advances from customers
    
36,269
      
50,179
  
Operating lease liabilities
    
12,361
      
162,612
  
Deferred revenue
    
488,206
      
490,938
  
Income tax payable
    
16,621
      
37,401
  
Amounts due to related parties
    
9,554
      
13,261
  
                 
Net cash generated from operating activities
    
74,446
      
450,726
  
                 
Cash flows from investing activities
                
Purchase of property and equipment
    
(103,961
)
    
(242,866
)
Purchase of intangible assets and capitalized software costs
    
(8,086
)
    
(13,594
)
Purchase of investments
    
(41,114
)
    
(980,296
)
Proceeds from disposal of property and equipment
    
980
      
227
  
Proceeds from sale and maturity of investments
    
3,644
      
28,047
  
Distribution from investments
    
386
      
–
  
Acquisition of businesses, net of cash acquired
    
(90,994
)
    
17,888
  
Disposal of subsidiary, net of cash disposed
    
15,380
      
–
  
Change in loans receivable
    
(87,047
)
    
(459,233
)
                 
Net cash used in investing activities
    
(310,812
)
    
(1,649,827
)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
8

SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Amounts expressed in thousands of US dollars (“$”))

 
For the Six Months
ended June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
             
Cash flows from financing activities
            
Repayment of borrowings and finance lease obligations
    
(31,824
)
    
(35
)
Proceeds from borrowings
    
1,224
      
–
  
Proceeds from issuance of ordinary shares, net
    
6,234
      
18,953
  
Transaction with non-controlling interests
    
(19,042
)
    
–
  
Payments for exchange and conversion of convertible notes
    
(50,000
)
    
(1,929
)
Proceeds from issuance of convertible notes, net
    
1,005,662
      
–
  
Change in accrued expenses and other payables
    
(125,417
)
    
163,369
  
                 
Net cash generated from financing activities
    
786,837
      
180,358
  
                 
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
    
8,695
      
(31,750
)
Net increase (decrease) in cash, cash equivalents and restricted cash
    
559,166
      
(1,050,493
)
Cash, cash equivalents and restricted cash at beginning of the period
    
3,570,578
      
7,053,393
  
                 
Cash, cash equivalents and restricted cash at end of the period
    
4,129,744
      
6,002,900
  
                 
                 
Supplement disclosures of cash flow information:
                
Income taxes paid
    
(54,545
)
    
(81,586
)
Interest paid
    
(12,422
)
    
(22,383
)
                 
Supplement disclosures of non-cash activities:
                
Purchase of property and equipment included in accrued expenses and other payables
    
12,495
      
18,717
  
Purchase of intangible assets included in accrued expenses and other payables
    
3
      
(334
)
Purchase of property and equipment included in prepayments
    
312
      
(87,387
)
Purchase of intangible assets included in prepayments
    
(6,974
)
    
(3,095
)
Conversion and exchange of convertible notes into ordinary shares
    
(136,322
)
    
(588,007
)
Acquisition of subsidiaries by conversion of convertible notes or issuance of shares
    
72,000
      
252,960
  
Proceeds from disposal of a subsidiary included in prepaid expenses and other assets
    
38,430
      
–
  
Transfers of loans receivable to prepaid expenses and other assets     8,068       186  

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

9

SEA LIMITED

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(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
    
Total
shareholders’ equity
  
         
$_
    
$_
    
$_
    
$_
    
$_
    
$_
    
$_
    
$_
  
                                                       
Balance as of January 1, 2020
    
463,244,652
      
230
      
4,687,284
      
5,449
      
46
      
(3,530,585
)
    
1,162,424
      
10,228
      
1,172,652
  
                                                                         
Comprehensive loss:
                                                                        
Net loss for the period
    
–
      
–
      
–
      
–
      
–
      
(674,474
)
    
(674,474
)
    
148
      
(674,326
)
Foreign currency translation adjustments
    
–
      
–
      
–
      
(10,210
)
    
–
      
–
      
(10,210
)
    
(1,484
)
    
(11,694
)
Net change in unrealized loss on available-for-sale investments
    
–
      
–
      
–
      
(5,400
)
    
–
      
–
      
(5,400
)
    
–
      
(5,400
)
Acquisition of subsidiary     –       –       –       –       –       –       –       37,511       37,511  
Appropriation of statutory reserves
     –       –       –       –       66       (66 )     –       –       –  
Equity component of convertible notes
     –       –       284,727       –       –       –       284,727       –       284,727  
Purchase of capped calls related to issuance of convertible notes
     –       –       (135,700 )     –       –       –       (135,700 )     –       (135,700 )
Conversion and exchange of convertible notes into Class A ordinary shares
    
14,949,659
      
8
      
136,314
      
–
      
–
      
–
      
136,322
      
–
      
136,322
  
Transaction with non-controlling interests
    
–
      
–
      
(20,771
)
    
–
      
–
      
–
      
(20,771
)
    
1,729
      
(19,042
)
Disposal of interest in a subsidiary
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
(11,971
)
    
(11,971
)
Shares issued to depositary bank
    
2,000,000
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Exercise of share options
    
1,122,088
      
–
      
6,262
      
–
      
–
      
–
      
6,262
      
–
      
6,262
  
Restricted share awards and restricted share units issued
    
1,785,359
      
1
      
(1
)
    
–
      
–
      
–
      
–
      
–
      
–
  
Share-based compensation
    
–
      
–
      
110,613
      
–
      
–
      
–
      
110,613
      
2,481
      
113,094
  
Settlement of share incentives with shares held by depositary bank
    
(2,807,447
)
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
                                                                         
Balance as of June 30, 2020
    
480,294,311
      
239
      
5,068,728
      
(10,161
)
    
112
      
(4,205,125
)
    
853,793
      
38,642
      
892,435
  

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

10


SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)
(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
(loss) income
    
Statutory reserves
    
Accumulated deficit
    
Total Sea Limited shareholders’ equity
    
Non-controlling interests
    
Total
shareholders’ equity
  
         
$_
    
$_
    
$_
    
$_
    
$_
    
$_
    
$_
    
$_
  
                                                       
Balance as of July 1, 2020
    
480,294,311
      
239
      
5,068,728
      
(10,161
)
    
112
      
(4,205,125
)
    
853,793
      
38,642
      
892,435
  
                                                                         
Comprehensive loss:
                                                                        
Net loss for the year
    
–
      
–
      
–
      
–
      
–
      
(943,582
)
    
(943,582
)
    
(6,249
)
    
(949,831
)
Foreign currency translation adjustments
    
–
      
–
      
–
      
13,813
      
–
      
–
      
13,813
      
413
      
14,226
  
Net change in unrealized gain on available-for-sale investments
    
–
      
–
      
–
      
981
      
–
      
–
      
981
      
26
      
1,007
  
Acquisition of subsidiaries     –       –       –       –       –       –       –       2,083       2,083  
Appropriation of statutory reserves
     –       –       –       –       2,251       (2,251 )     –       –       –  
Conversion of convertible notes into Class A ordinary shares
     12,457,159       6       328,602       –       –       –       328,608       –       328,608  
Issuance of Class A ordinary shares, net of issuance costs
    
15,180,000
      
8
      
2,908,291
      
–
      
–
      
–
      
2,908,299
      
–
      
2,908,299
  
Capital contributed by non-controlling interest
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
4,631
      
4,631
  
Transactions with non-controlling interests
    
–
      
–
      
477
      
48
      
–
      
–
      
525
      
(2,219
)
    
(1,694
)
Shares issued to depositary bank
    
4,000,000
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Exercise of share options
    
1,739,081
      
1
      
55,686
      
–
      
–
      
–
      
55,687
      
–
      
55,687
  
Restricted share awards and restricted share units issued
    
1,462,633
      
1
      
(1
)
    
–
      
–
      
–
      
–
      
–
      
–
  
Share-based compensation
    
–
      
–
      
164,788
      
–
      
–
      
–
      
164,788
      
–
      
164,788
  
Settlement of share incentives with shares held by depositary bank
    
(3,201,714
)
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
                                                                         
Balance as of December 31, 2020
    
511,931,470
      
255
      
8,526,571
      
4,681
      
2,363
      
(5,150,958
)
    
3,382,912
      
37,327
      
3,420,239
  

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

11


SEA LIMITED
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)
(Amounts expressed in thousands of US dollars (“$”) except for number of shares)


 
  Note    
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
    
Total
Shareholders’ equity
  
                $      $      $      $      $      $      $      $   
                                                                             
Balance as of January 1, 2021
          
511,931,470
      
255
      
8,526,571
      
4,681
      
2,363
      
(5,150,958
)
    
3,382,912
      
37,327
      
3,420,239
  
                                                                               
Comprehensive loss:
                                                                              
Net loss for the year
          
–
      
–
      
–
      
–
      
–
      
(856,132
)
    
(856,132
)
    
372
      
(855,760
)
Foreign currency
translation adjustments
          
–
      
–
      
–
      
(24,462
)
    
–
      
–
      
(24,462
)
    
(1,296
)
    
(25,758
)
Net change in unrealized loss on available-for-sale investments
          
–
      
–
      
–
      
(3,499
)
    
–
      
–
      
(3,499
)
    
93
      
(3,406
)
Acquisition of subsidiaries
     3       1,000,000
       1
       252,959
       –
       –
       –
       252,960
       –
       252,960
  
Appropriation of statutory reserves
            
–
      
–
      
–
      
–
      
(597
)
    
597
      
–
      
–
      
–
  
Conversion of convertible notes
into Class A ordinary shares
            
14,734,055
      
7
      
588,000
      
–
      
–
      
–
      
588,007
      
–
      
588,007
  
Transaction with non-controlling interests
            
–
      
–
      
(2,553
)
    
291
      
–
      
–
      
(2,262
)
    
2,262
      
–
  
Shares issued to depositary
bank
            
7,000,000
      
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
Exercise of share options
            
4,006,975
      
2
      
18,951
      
–
      
–
      
–
      
18,953
      
–
      
18,953
  
Restricted share awards and restricted share units issued
            
2,250,704
      
1
      
(1
)
    
–
      
–
      
–
      
–
      
–
      
–
  
Share-based compensation
            
–
      
–
      
203,690
      
–
      
–
      
–
      
203,690
      
–
      
203,690
  
Settlement of share
incentives with shares held by depositary bank
            
(6,257,679
)
    
–
      
–
      
–
      
–
      
–
      
–
      
–
      
–
  
                                                                                 
Balance as of June 30, 2021
            
534,665,525
      
266
      
9,587,617
      
(22,989
)
    
1,766
      
(6,006,493
)
    
3,560,167
      
38,758
      
3,598,925
  

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

12
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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, 2020. 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 six months ended June 30, 2020 and 2021 are not necessarily indicative of results to be expected for any other interim period or for the year ending December 31, 2021. The condensed consolidated balance sheet as of December 31, 2020 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, 2020.


VIE disclosures

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.

13
SEA LIMITED

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



The following tables represent the financial information of the VIEs whom the Company does not have majority voting interests as of December 31, 2020 and June 30, 2021 and for the six months ended June 30, 2020 and 2021 before eliminating the intercompany balances and transactions between the VIEs and other entities within the group:

 
As of
December 31,
    
As of
June 30,
  
   
2020
    
2021
  
   
$
    
$
  
             
ASSETS:
            
Current assets:
            
Cash and cash equivalents
    
94,502
      
97,396
  
Amounts due from intercompanies (1)
    
44,928
      
141,878
  
Others
    79,484       66,892  
                 
Total current assets
    
218,914
      
306,166
  
                 
Non-current assets:
                
Property and equipment, net
    
35,453
      
33,988
  
Long-term investments
    
16,080
      
17,313
  
Deferred tax assets
    
47,948
      
48,776
  
Others
    37,662       23,682  
                 
Total non-current assets
    
137,143
      
123,759
  
                 
Total assets
    
356,057
      
429,925
  

14
SEA LIMITED

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



  
As of
December 31,
    
As of
June 30,
  
   
2020
    
2021
  
   
$
    
$
  
LIABILITIES:
            
Current liabilities:
            
Accrued expenses and other payables
    
91,186
      
112,185
  
Deferred revenue
    
212,377
      
204,926
  
Amounts due to intercompanies (1)
    
70,019
      
116,898
  
Others
    31,104       28,104  
                 
Total current liabilities
    
404,686
      
462,113
  
                 
Non-current liabilities:
                
Deferred revenue
    
55,200
      
70,953
  
Amounts due to intercompanies (1)
    
15,710
      
30,910
  
Others
    18,418       6,759  
                 
Total non-current liabilities
    
89,328
      
108,622
  
                 
Total liabilities
    
494,014
      
570,735
  

 
For the Six Months ended
June 30,
  
   
2020
    
2021
  
   
$
    
$
  
             
Revenue
            
- Third party customers
    
262,801
      
333,847
  
- Intercompanies
    
70,363
      
84,876
  
                 
Net loss
    
(28,770
)
    
(19,089
)

   
For the Six Months ended
June 30,
  
   
2020
    
2021
  
   
$
    
$
  
             
Net cash generated from (used in) operating activities
    
59,030
      
(12,218
)
Net cash (used in) generated from investing activities
    
(25,122
)
    
500
  
Net cash generated from financing activities
    
32,220
      
14,025
  


(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.

15
SEA LIMITED

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




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 loans 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 has become more challenging. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.
16
SEA LIMITED

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

(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. Marketable equity securities, investments carried at fair value, certain other assets and share appreciation rights are measured at fair value with corresponding changes in the investments and liabilities’ fair values reflected in consolidated statements of operations. Convertible notes consist of 2023 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes as defined in Note 6 of the consolidated financial statements. For the 2023 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes, the liability component of the 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 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.

17
SEA LIMITED

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



(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. In testing goodwill for impairment, the Company evaluates whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, 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 six months ended June 30, 2020 and 2021.

(f)
Leases


Leases are classified at the inception date as either a finance lease or an operating lease. As the lessee, a lease is a finance lease if any of the following conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the asset’s estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased asset to the lessor at the inception date.


Finance lease assets are included in property and equipment, net, and finance lease liabilities are included in accrued expenses and other payables, current and non-current.


18
SEA LIMITED

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




All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective leases. Operating leases (with an initial term of more than 12 months) are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities (current), and operating lease liabilities (non-current) in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company utilizes a market-based approach to estimate the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease prepayments, reduced by lease incentives and accrued rent. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.


The Company has lease agreements with lease and non-lease components. The Company has elected to account for lease and non-lease components as a single lease component for data center leases only. In addition, leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain lease agreements contain rent holidays and escalating rent are considered when determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the lease property for purposes of recognizing lease incentives.

19
SEA LIMITED

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



3.
ACQUISITIONS

During the six months ended June 30, 2021, the Company acquired three companies and its underlying subsidiaries for an aggregate consideration of $282,639. As a result, these companies were consolidated as subsidiaries of the Company from the date of acquisition. These acquisitions support the growth of the Company.

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

 
$_
  
       
Cash and cash equivalent
     42,294  
Others
     5,219  
Total assets acquired
     47,513  
         
Income tax payable
     (25,682 )
Others
     (1,976 )
Total liabilities assumed
     (27,658 )
Net assets acquired
     19,855  
         
Fulfilled by:
        
Share consideration(1)
    252,960  
Cash consideration
     29,679  
Goodwill
     262,784  

(1)
Measured based on the fair value of the Company's ordinary shares on the date of acquisition.

The goodwill, which is not tax deductible, is mainly attributable to synergies expected to be achieved from the acquisition. The goodwill is allocated within the Digital Entertainment, Digital Financial Services and Other services segments.

The revenue and results since the acquisition date included in the consolidated statement of comprehensive loss for the period ended June 30, 2021 were insignificant. The Company’s revenue and results for the period would not be materially different should the acquisition has otherwise occurred on January 1, 2021.

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

20
SEA LIMITED

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



4.
LOANS RECEIVABLE, NET



Loans receivable represents loans granted to commercial and consumer customers. The Company monitors credit quality for all loans receivable on a recurring basis by evaluating the customer’s prior repayment history available internally and external sources information, where applicable. The Company uses delinquency status and trends to assist in making new and ongoing credit decisions, and to plan our collection practices and strategies. The following table presents the loans receivable by each of the loan portfolio:


   
As of
  
   
December 31,
2020
    
June 30,
2021
  
    $      $   
                 
Commercial
    
183,710
      
171,619
  
Consumer
    
259,860
      
710,244
  
     
443,570
      
881,863
  
Allowance for credit losses
    
(40,484
)
    
(73,890
)
     
403,086
      
807,973
  

21
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
   
As of June 30, 2021
  
   
Year of origination
        
   
2021
    
2020
    
2019
    
2018
    
2017
    
Prior
    
Total
  
Commercial
   $      $      $      $      $      $      $   
Delinquency:
                                                        
Current
    
19,522
      
106,345
      
16,132
      
5,217
      
3,812
      
1,607
      
152,635
  
Past due
                                                        
-          1 to 30 days
    
668
      
4,365
      
585
      
2,974
      
100
      
11
      
8,703
  
-          31 to 60 days
    
340
      
3,162
      
276
      
61
      
128
      
2
      
3,969
  
-          61 to 90 days
    
31
      
287
      
348
      
112
      
7
      
70
      
855
  
-          More than 90 days
    
–
      
5,017
      
228
      
131
      
34
      
47
      
5,457
  
     
20,561
      
119,176
      
17,569
      
8,495
      
4,081
      
1,737
      
171,619
  
                                                         
Consumer
                                                        
Delinquency:
                                                        
Current
    
633,129
      
7,871
      
12,325
      
9,461
      
5,989
      
1,313
      
670,088
  
Past due
                                                        
-          1 to 30 days
    
10,899
      
866
      
585
      
513
      
134
      
37
      
13,034
  
-          31 to 60 days
    
6,483
      
506
      
1,000
      
1,676
      
734
      
119
      
10,518
  
-          61 to 90 days
    
4,260
      
1,286
      
130
      
271
      
64
      
13
      
6,024
  
-          More than 90 days
    
7,101
      
2,962
      
246
      
88
      
25
      
158
      
10,580
  
     
661,872
      
13,491
      
14,286
      
12,009
      
6,946
      
1,640
      
710,244
  


22
SEA LIMITED

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




An analysis of the loans receivable’s allowance for credit losses by portfolio segment is as follows:


   
Commercial
    
Consumer
    
Total
  
    $      $      $   
Balance at January 1, 2020
    
–
      
–
      
–
  
Acquisition of subsidiaries
    
14,721
      
6,750
      
21,471
  
(Reversal) Charged to expenses
    
(1,687
)
    
12,944
      
11,257
  
Write-off of loans receivable
    
(3,911
)
    
(6,115
)
    
(10,026
)
Exchange differences
    
(915
)
    
(201
)
    
(1,116
)
                         
Balance at June 30, 2020
    
8,208
      
13,378
      
21,586
  
Acquisition of subsidiaries
    
2,335
      
2,604
      
4,939
  
Charged to expenses
    
27,750
      
12,061
      
39,811
  
Write-off of loans receivable
    
(10,890
)
    
(16,460
)
    
(27,350
)
Exchange differences
    
921
      
577
      
1,498
  
                         
Balance at December 31,2020
    
28,324
      
12,160
      
40,484
  
Charged to expenses
    
11,001
      
36,695
      
47,696
  
Write-off of loans receivable
    
(9,757
)
    
(2,544
)
    
(12,301
)
Exchange differences
    
(951
)
    
(1,038
)
    
(1,989
)
                         
Balance at June 30, 2021
    
28,617
      
45,273
      
73,890
  



Additions to the Company’s allowance for credit losses were recorded within general and administrative expenses.


23
SEA LIMITED

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



5.
INVESTMENTS



The following table sets forth a breakdown of the categories of short-term and long-term investments held by the Company:


   
As of
  
   
December 31,
2020
    
June 30,
2021
  
   
$
   
$
 
Short-term investments
                
                 
Debt securities:
                
   Held to maturity
    
28,330
      
718,517
  
   Available-for-sale
    
21,769
      
168,091
  
Equity securities
    
76,000
      
75,533
  
                 
     
126,099
      
962,141
  
Long-term investments
                
                 
Debt securities:
                
   Held to maturity
    
68,854
      
67,463
  
   Available-for-sale
    
5,276
      
45,385
  
Equity securities
    
21,419
      
42,684
  
Equity method investments
    
94,933
      
108,848
  
Investments carried at fair value
    
–
      
21,992
  
                 
     
190,482
      
286,372
  



Held to maturity investments includes time deposits placed with financial institutions, medium-term notes and sovereign bonds. Available-for-sale securities includes sovereign bonds, exchangeable loan, convertible loan and corporate bonds.



Short-term equity securities represent investment in marketable equity securities and warrant. The unrealized fair value loss of nil and $21,118 related to the marketable equity securities had been recognized in the consolidated statements of operations as "Investment gain (loss), net" during the six months ended June 30, 2020 and 2021, respectively.



Investments carried at fair value represents unquoted equity securities which are accounted for in accordance with ASC 946 Financial Services—Investment Companies.


24
SEA LIMITED

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




The following table summarizes the cost or amortized cost, gross unrecognized gains and losses, gross unrealized gains and losses, and fair value of the Company’s debt securities and investments carried at fair value as of December 31, 2020 and June 30, 2021 are shown as below:


   
As of December 31, 2020
  
   
Cost or Amortized cost
    
Gross unrecognized
gains
    
Gross unrecognized losses
    
Gross unrealized gains
    
Gross unrealized losses
    
Fair value
  
     $      $      $      $      $      $  
Short-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
28,330
      
–
      
(1
)
    
–
      
–
      
28,329
  
   Available-for-sale
    
20,859
      
–
      
–
      
910
      
–
      
21,769
  
                                                 
Long-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
68,854
      
3,197
      
(23
)
    
–
      
–
      
72,028
  
   Available-for-sale
    
5,174
      
–
      
–
      
102
      
–
      
5,276
  
                                                 
     
123,217
      
3,197
      
(24
)
    
1,012
      
–
      
127,402
  


   
As of June 30, 2021
  
   
Cost or Amortized cost
    
Gross unrecognized
gains
    
Gross unrecognized losses
    
Gross unrealized gains
    
Gross unrealized losses
    
Fair value
  
     $      $      $      $      $      $  
Short-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
718,517
      
–
      
–
      
–
      
–
      
718,517
  
   Available-for-sale
    
170,872
      
–
      
–
      
77
      
(2,858
)
    
168,091
  
                                                 
Long-term investments
                                                
Debt securities:
                                                
   Held to maturity
    
67,463
      
2,123
      
(495
)
    
–
      
–
      
69,091
  
   Available-for-sale
    
45,003
      
–
      
–
      
426
      
(44
)
    
45,385
  
Investments carried at fair value
    
21,992
      
–
      
–
      
–
      
–
      
21,992
  
                                                 
     
1,023,847
      
2,123
      
(495
)
    
503
      
(2,902
)
    
1,023,076
  
25
SEA LIMITED

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



6.
CONVERTIBLE NOTES

 
As of
  
   
December 31,
    
June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
                 
2023 Convertible Notes
    
41,263
      
29,190
  
2024 Convertible Notes
    
916,560
      
348,137
  
2025 Convertible Notes
    
882,583
      
905,169
  
                 
     
1,840,406
      
1,282,496
  


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

2023 Convertible Notes
2024 Convertible Notes
2025 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%
2.375%
Initial conversion rate
50.5165 American Depositary Shares (“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 2023 Convertible Notes, 2024 Convertible Notes and 2025 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”).

26
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
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 2024 Convertible Notes and 2025 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.

The 2023 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes were accounted for under ASC 470-20 Cash Conversion Subsections as follow:

 
2023 Convertible
Notes
    
2024 Convertible
Notes
    
2025 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
  

27
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
The liability component was initially 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-up Capital” and not subsequently remeasured. The following table presents the carrying amount of the liability components of the 2023 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes:

 
  
December 31, 2020
    
June 30, 2021
  
   
2023 Convertible Notes
    
2024 Convertible Notes
    
2025 Convertible Notes
    
Total
    
2023 Convertible Notes
    
2024 Convertible Notes
    
2025 Convertible Notes
    
Total
  
    $      $      $      $      $      $      $      $   
                                                                 
Principal
    
49,000
      
1,112,320
      
1,149,500
      
2,310,820
      
33,530
      
412,402
      
1,149,500
      
1,595,432
  
Less: unamortized issuance cost and debt discount
    
(7,737
)
    
(195,760
)
    
(266,917
)
    
(470,414
)
    
(4,340
)
    
(64,265
)
    
(244,331
)
    
(312,936
)
                                                                 
Net carrying amount
    
41,263
      
916,560
      
882,583
      
1,840,406
      
29,190
      
348,137
      
905,169
      
1,282,496
  

During the six months ended June 30, 2020 and 2021, the Company recognized total interest expense for coupon interest of $14,849 and $18,715, respectively and amortization of discount on the liability component amounted to $40,805 and $42,311, respectively.

The if-converted value of 2023, 2024 and 2025 Convertible Notes exceeded the principal amount by $443,710, $3,304,202 and $1,379,949, as of December 31, 2020, respectively and $431,592, $1,846,564 and $2,340,009 as of June 30, 2021, respectively.

28
SEA LIMITED

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



Capped call transactions

In connection with the offering of 2024 Convertible Notes and 2025 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:


 
2024 Convertible
Notes
    
2025 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 to our Class A ordinary shares upon any conversion of the 2024 Convertible Notes and 2025 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 2024 Convertible Notes and 2025 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.

Conversion of convertible notes
 
During the six months ended June 30, 2021, a total principal amount of $715,388 convertible notes were converted by certain Holders. These conversions were satisfied through Class A ordinary shares or a combination of cash and Class A ordinary shares settlement.

Subsequent to June 30, 2021, certain Holders converted a total principal amount of $181,252 convertible notes. These conversions were satisfied through Class A ordinary shares settlement.

The conversion completed during the six months ended June 30, 2021 resulted in a net gain on debt extinguishment of $11,427 recorded in the consolidated statements of operations as “Interest expense”.

29
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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, January 1, 2020 and January 1, 2021, the maximum number of shares which may be issued pursuant to all awards under the Plan increased to 100,129,938, 103,129,938, 123,292,170 and 148,888,743 Class A ordinary shares.

During the six months ended June 30, 2020 and 2021, the Company granted 5,806,825 options, 4,010,828 RSUs and 78,595 SARs, and 4,162,121 options, 2,220,693 RSUs and 32,635 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 2021
  
       
Risk-free interest rates
    
0.74%~1.07%

Expected term
  
5.6~7.5 years
  
Expected volatility
    
32.1%~33.0%

Expected dividend yield
    
–
  
Fair value of share options
  

$71.70~$84.14
  


30
SEA LIMITED

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



Total compensation expense relating to options, RSAs, RSUs and SARs granted to Eligible Persons after deducting forfeitures recognized for the six months ended June 30, 2020 and 2021, respectively, is as follows:

 
For the Six Months ended
June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
             
Share options:
            
Cost of revenue
    
65
      
247
  
Sales and marketing expenses
    
31
      
5
  
General and administrative expenses
    
74,363
      
109,351
  
Research and development expenses
    
213
      
33
  
                 
     
74,672
      
109,636
  
                 
RSAs and RSUs:
                
Cost of revenue
    
1,993
      
3,845
  
Sales and marketing expenses
    
4,306
      
9,562
  
General and administrative expenses
    
14,299
      
27,697
  
Research and development expenses
    
17,824
      
52,950
  
                 
     
38,422
      
94,054
  
                 
SARs:
                
Cost of revenue
    
980
      
2,471
  
Sales and marketing expenses
    
1,898
      
4,707
  
General and administrative expenses
    
1,078
      
3,029
  
Research and development expenses
    
136
      
663
  
                 
     
4,092
      
10,870
  
                 
Total
    
117,186
      
214,560
 

31
SEA LIMITED

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

Income tax expense comprises:

 
For the Six Months ended
June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
             
Income tax
    
45,477
      
120,369
  
Deferred tax
    
(16,515
)
    
(17,512
)
Withholding tax expense
    
22,096
      
23,359
  
                 
     
51,058
      
126,216
  

9.
LOSS PER SHARE

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

 
For the Six Months ended
June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
             
Numerator:
            
Net loss attributable to ordinary shareholders
    
(674,474
)
    
(856,132
)
                 
Denominator:
                
Weighted-average number of shares outstanding - basic and diluted
    
464,344,956
      
519,037,660
  
                 
Basic and diluted loss per share:
    
(1.45
)
    
(1.65
)

The following potential common shares were excluded from calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

   
For the Six Months ended
June 30,
  
   
2020
    
2021
  
             
Share options
    
51,828,665
      
50,245,808
  
RSAs/RSUs
    
9,994,971
      
8,896,838
  
Convertible notes
    
55,682,148
      
22,627,815
  
                 
     
117,505,784
      
81,770,461
  

32
SEA LIMITED

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



The denominator for diluted loss per share for the six months ended June 30, 2020 and 2021 does not include any effect from the Capped Calls (Note 6) because it would be anti-dilutive. In the event of conversion of any or all of the 2024 Convertible Notes and 2025 Convertible Notes, the shares that would be delivered to the Company under the Capped Calls are designed to neutralize the dilutive effect of the shares that the Company would issue under the convertible notes.

During the six months ended June 30, 2020 and 2021, respectively, the Company issued 2,000,000 and 7,000,000 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 six months ended June 30, 2020 and 2021, respectively, 2,807,447 and 6,257,679 issued Class A ordinary shares were used to settle the exercise of share incentive awards.

33
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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
   
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 six months ended June 30, 2020 and 2021.

(b)
The Company had the following significant related party transactions for the six months ended June 30, 2020 and 2021, respectively:

 
Six months ended
June 30,
  
   
2020
    
2021
  
   
$
    
$_
  
             
Royalty fee and license fee to:
            
- Tencent
    
53,931
      
69,128
  
                 
Services provided by:
                
- Tencent
    
11,369
      
9,935
  

   

     

 

(c)
The Company had the following significant related party balances as of December 31, 2020 and June 30, 2021:

 
As of
  
   
December 31,
    
June 30,
  
   
2020
   
2021
 
   
$_
    
$_
  
Amounts due to related parties:
                
- Tencent
    
38,416
      
57,082
  

34
SEA LIMITED

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



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 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 and loans 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”.

35
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)
Information about segments for the six months ended June 30, 2020 and 2021 presented were as follows:

 
For the Six Months ended June 30, 2020
  
   
Digital
Entertainment
    
E-Commerce
    
Digital Financial
Services
    
Other
Services
    
Unallocated
expenses (1)
    
Consolidated
  
     $     $
 
 		  $
    $
    $
    $
 
Revenue
    
753,629
      
706,230
      
22,032
      
115,063
      
–
      
1,596,954
  
                                                 
Operating income (loss)
    
341,064
      
(636,541
)
    
(193,612
)
    
(23,632
)
    
(127,806
)
    
(640,527
)
Non-operating income, net
                                            
18,847
Income tax expense
                                            
(51,058
)
Share of results of equity investees
                                            
(1,588
)
                                                 
Net loss
                                            
(674,326
)

 
For the Six Months ended June 30, 2021
  
   
Digital
Entertainment
    
E-Commerce
    
Digital Financial
Services
    
Other
Services
    
Unallocated
expenses (1)
    
Consolidated
  
     $     $
    $
    $
    $
    $
 
Revenue
    
1,805,602
      
2,077,487
      
140,039
      
21,064
      
–
      
4,044,192
  
                                                 
Operating income (loss)
    
1,029,577
      
(1,084,139
)
    
(316,648
)
    
(84,582
)
    
(226,637
)
    
(682,429
)
Non-operating loss, net
                                            
(48,313
)
Income tax expense
                                            
(126,216
)
Share of results of equity investees
                                            
1,198
                                                 
Net loss
                                            
(855,760
)

(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.

36
SEA LIMITED

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



Revenue from external customers is classified based on the geographical locations where the services were provided.

 
For the Six Months
ended June 30,
  
   
2020
    
2021
  
   
$_
    
$_
  
Revenue
            
             
Southeast Asia
    
992,331
      
2,541,824
  
Latin America
    
300,830
      
776,728
  
Rest of Asia
    
256,911
      
560,012
  
Rest of the world
    
46,882
      
165,628
  
                 
Consolidated revenue
    
1,596,954
      
4,044,192
  

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, marketable equity securities investments, investments carried at fair value, certain other assets, derivative instruments and SARs at fair value. The liability component of the 2023 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes is measured at fair value on its issuance and extinguishment date. Cash equivalents are classified within Level 1 because they are valued using quoted market prices in active markets for identical assets and liabilities.

37
SEA LIMITED

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

Derivative instruments are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.



As of December 31, 2020 and June 30, 2021, Level 3 assets and liabilities of the Company included investments in exchangeable and convertible loan, investments in sovereign bonds, investments carried at fair value and preference shares of investees and other assets.

Investments in debt securities - for short-term investment in debt securities, the carrying amount approximates fair value due to its short-term nature.

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


2023 Convertible Notes, 2024 Convertible Notes and 2025 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 taking into 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.



Investments carried at fair value – the Company used a combination of valuation methodologies, including market and income approaches based on the Company’s best estimate, which is determined by using information including but not limited to the pricing of recent rounds of financing of the investees, future cash flow forecasts, liquidity factors and multiples of a selection of comparable companies.

38
SEA LIMITED

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



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


 
Fair value measurement at December 31, 2020
  
   
Quoted prices in
active markets for
identical assets
(Level 1)
$
    
Significant other
observable
inputs
(Level 2)
$
    
Unobservable
inputs
(Level 3)
$
    
Total
$
  
                         
Cash equivalents
    
74,272
      
–
      
–
      
74,272
  
Held to maturity investments     100,071
       –
       286
       100,357
  
Available-for-sale investments
    
5,688
      
–
      
21,357
      
27,045
  
Equity securities     76,000
       –
       –
       76,000
  
Other assets     –
       –
       19,024
       19,024
  
Share appreciation rights
    
(11,640
)
    
–
      
–
      
(11,640
)
                                 
     
244,391
      
–
      
40,667
      
285,058
  


 
Fair value measurement at June 30, 2021
  
   
Quoted prices in
active markets for
identical assets
(Level 1)
$
    
Significant other
observable
inputs
(Level 2)
$
    
Unobservable
inputs
(Level 3)
$
    
Total
$
  
                         
Cash equivalents
    
575,601
      
–
      
–
      
575,601
  
Held to maturity investments
     787,122
       –
       486
       787,608
  
Available-for-sale investments
    
49,017
      
–
      
164,459
      
213,476
  
Equity securities
     55,533
       –
       –
       55,533
  
Investments carried at fair value
     –
       –
       21,992
       21,992
  
Other assets
    –       –       16,221       16,221  
Derivative assets(1)
     –
       67
       –
       67
  
Derivative liabilities (2)
     –
       (1,204 )     –
       (1,204 )
Share appreciation rights
    
(18,038
)
    
–
      
–
      
(18,038
)
                                 
     
1,449,235
      
(1,137
)
    
203,158
      
1,651,256
  

    (1) Included in prepaid expenses and other assets in the consolidated balance sheets and not designated as hedges.
    (2) Included in accrued expenses and other payables in the consolidated balance sheets and not designated as hedges.

39
SEA LIMITED

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



    Reconciliations of assets and liabilities categorized within Level 3 under the fair value hierarchy are as follow:  
     $  
Assets:
      
Available-for-sale investments
      
Balance at January 1, 2020
    
128,418
  
Impairments
 		    (13,429 )
Conversion into ordinary shares of investees
 		    (72,000 )
Fair value loss included in other comprehensive income
 		    (5,400 )
         
Balance at June 30, 2020     37,589
 		 
Addition
 		    20,429
 		 
Impairments     (37,571 )
Fair value loss included in other comprehensive income     910
 		 
       
Balance at December 31, 2020
   21,357
 		 
Addition
   146,871
 		 
Fair value loss included in other comprehensive income     (3,769 )
         
Balance as at June 30, 2021
    
164,459
  

Investments carried at fair value
  
 
Balance at January 1, 2020, June 30, 2020 and December 31, 2020     –
 		 
Addition     21,992  
         
Balance at June 30, 2021
     21,992
 		 

Other assets
      
Balance at January 1, 2020
    
–
  
Acquisition of subsidiary
    
8,718
  
Additions
    
10,928
  
Disposals
    
(45
)
Exchange differences
    
(373
)
         
Balance at June 30, 2020
    
19,228
  
Acquisition of subsidiary
     142
  
Additions     2,412
  
Disposals     (318 )
Write-down     (3,713 )
Exchange differences     1,273
  
         
Balance at December 31, 2020     19,024
  
Additions     186
  
Disposals     (1,989 )
Write-down     (441 )
Exchange differences     (559 )
         
Balance at June 30, 2021     16,221
  

The Company’s valuation techniques used to measure the fair value were derived from management’s assumptions of estimations.

40
SEA LIMITED

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 $165,717 and $219,496, committed licensing fee payable for the licensing of game titles of $2,799 and $6,015 and commitment to invest in certain companies of $30,136 and $89,121 as of December 31, 2020 and June 30, 2021, 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, 2020 and June 30, 2021, the minimum guarantee commitment amounted to $24,473 and $23,043 respectively, for its launched games and licensed but yet launched games.

Operating lease commitments

The Company has entered into commercial operating and finance leases for the use of computers, offices, warehouses and data centers 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, 2020 and June 30, 2021, the Company has additional operating leases, primarily for offices, warehouses and data centers, that have not yet commenced of $30,404 with lease terms not exceeding 5 years and $410,751 with lease terms not exceeding 10 years.

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, 2020 and June 30, 2021, the undrawn credit facilities and interest receivables on non-performing assets amounted to $6,533 and $176 and $2,295 and $2,961, respectively.


41