UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-30698
| Cayman Islands | 52-2236363 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
Room 1802, United Plaza
1468 Nan Jing Road West
Shanghai 200040, China
(86-21) 6289 5678
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The number of shares outstanding of the registrant’s ordinary shares as of October 31, 2003 was 48,360,827.
SINA CORPORATION
INDEX
| Page no. | ||||
| PART I. | UNAUDITED FINANCIAL INFORMATION | |||
| Item 1. | Condensed Consolidated Financial Statements | |||
| Condensed Consolidated Balance Sheet at September 30, 2003 and December 31, 2002 | 3 | |||
| Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2003 and 2002 | 4 | |||
| Condensed Consolidated Statement of Shareholders’ Equity for the nine months ended September 30, 2003 | 5 | |||
| Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2003 and 2002 | 6 | |||
| Notes to Condensed Consolidated Financial Statements | 7 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk | 30 | ||
| Item 4. | Controls and Procedures | 30 | ||
| PART II. | OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 31 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 31 | ||
| Item 3. | Defaults Upon Senior Securities | 31 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 31 | ||
| Item 5. | Other Information | 31 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 32 | ||
| SIGNATURE | 32 |
2
PART I UNAUDITED FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SINA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
| September 30, | December 31, | |||||||||||
| 2003 | 2002 | |||||||||||
| (unaudited) | (audited) | |||||||||||
| (in U.S. dollars, in thousands) | ||||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 159,775 | $ | 53,262 | ||||||||
Short-term investments |
48,453 | 43,474 | ||||||||||
Accounts receivable, net of allowances for doubtful accounts of
$1,232,000 and $1,579,000, respectively |
16,610 | 5,847 | ||||||||||
Prepaid expenses and other current assets |
4,824 | 2,323 | ||||||||||
Total current assets |
229,662 | 104,906 | ||||||||||
Investments in marketable securities |
8,125 | 16,637 | ||||||||||
Property and equipment, net of accumulated depreciation of
$12,793,000 and $11,267,000, respectively |
8,412 | 7,599 | ||||||||||
Investments in joint ventures |
2,202 | — | ||||||||||
Intangible assets, net of accumulated amortization of
$1,424,000 and $20,513,000 , respectively |
984 | 993 | ||||||||||
Goodwill |
18,091 | — | ||||||||||
Other assets |
2,651 | 344 | ||||||||||
Total assets |
$ | 270,127 | $ | 130,479 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 927 | $ | 1,345 | ||||||||
Income taxes payable |
423 | — | ||||||||||
Accrued liabilities |
24,506 | 11,747 | ||||||||||
Total current liabilities |
25,856 | 13,092 | ||||||||||
Convertible Debt |
100,000 | — | ||||||||||
Total liabilities |
125,856 | 13,092 | ||||||||||
Commitments and contingencies (Note 10) |
||||||||||||
Shareholders’ equity: |
||||||||||||
Ordinary Shares: $0.133 par value; 75,000,000 shares authorized;
48,287,000 and 45,946,000 shares issued
and outstanding |
6,426 | 6,114 | ||||||||||
Additional paid-in capital |
234,668 | 223,358 | ||||||||||
Ordinary shares subject to subsequent issuance: 177,000 shares |
1,349 | — | ||||||||||
Notes receivable from shareholders |
— | (1,050 | ) | |||||||||
Deferred stock compensation |
(7 | ) | (554 | ) | ||||||||
Accumulated deficit |
(92,323 | ) | (114,477 | ) | ||||||||
Accumulated other comprehensive (loss) income: |
||||||||||||
Unrealized (loss) gain on investment in marketable securities |
(5,877 | ) | 4,004 | |||||||||
Cumulative translation adjustments |
35 | (8 | ) | |||||||||
Total shareholders’ equity |
144,271 | 117,387 | ||||||||||
Total liabilities and shareholders’ equity |
$ | 270,127 | $ | 130,479 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
SINA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in U.S. dollars)
(unaudited, in thousands, except per share amounts)
| Three months ended | Nine months ended | |||||||||||||||||
| September 30 | September 30 | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Net revenues: |
||||||||||||||||||
Advertising |
$ | 11,441 | $ | 6,491 | $ | 28,234 | $ | 17,325 | ||||||||||
Non-advertising |
20,473 | 3,855 | 47,781 | 8,699 | ||||||||||||||
| 31,914 | 10,346 | 76,015 | 26,024 | |||||||||||||||
Cost of revenues: |
||||||||||||||||||
Advertising |
3,767 | 2,977 | 9,832 | 8,420 | ||||||||||||||
Non-advertising |
5,790 | 1,076 | 13,912 | 2,540 | ||||||||||||||
Stock-based compensation |
5 | 28 | 31 | 88 | ||||||||||||||
| 9,562 | 4,081 | 23,775 | 11,048 | |||||||||||||||
Gross profit |
22,352 | 6,265 | 52,240 | 14,976 | ||||||||||||||
Operating expenses: |
||||||||||||||||||
Sales and marketing |
5,613 | 3,076 | 15,153 | 9,038 | ||||||||||||||
Product development |
1,733 | 1,437 | 4,561 | 4,598 | ||||||||||||||
General and administrative |
2,923 | 2,091 | 8,130 | 6,507 | ||||||||||||||
Stock-based compensation* |
88 | 461 | 516 | 1,454 | ||||||||||||||
Amortization of intangible assets |
415 | — | 1,334 | 1,687 | ||||||||||||||
Write-off of intangible assets |
— | — | 903 | — | ||||||||||||||
Total operating expenses |
10,772 | 7,065 | 30,597 | 23,284 | ||||||||||||||
Income (loss) from operations |
11,580 | (800 | ) | 21,643 | (8,308 | ) | ||||||||||||
Interest income |
845 | 552 | 1,901 | 2,337 | ||||||||||||||
Amortization of convertible debt issuance cost |
(170 | ) | — | (170 | ) | — | ||||||||||||
Loss on equity investments |
(175 | ) | (311 | ) | (797 | ) | (453 | ) | ||||||||||
Income (loss) before income taxes |
12,080 | (559 | ) | 22,577 | (6,424 | ) | ||||||||||||
Provision for income taxes |
(423 | ) | — | (423 | ) | — | ||||||||||||
Net income (loss) |
$ | 11,657 | $ | (559 | ) | $ | 22,154 | $ | (6,424 | ) | ||||||||
Basic net income (loss) per share |
$ | 0.24 | $ | (0.01 | ) | $ | 0.47 | $ | (0.14 | ) | ||||||||
Diluted net income (loss) per share |
$ | 0.21 | $ | (0.01 | ) | $ | 0.42 | $ | (0.14 | ) | ||||||||
*Stock-based compensation was related to the
operating expense categories as follows: |
||||||||||||||||||
Sales and marketing |
$ | 3 | $ | 14 | $ | 16 | $ | 44 | ||||||||||
Product development |
28 | 147 | 166 | 465 | ||||||||||||||
General and administrative |
57 | 300 | 334 | 945 | ||||||||||||||
| $ | 88 | $ | 461 | $ | 516 | $ | 1,454 | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SINA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in U.S. dollars)
(unaudited, in thousands)
| Ordinary | |||||||||||||||||||||
| Shares | Notes | ||||||||||||||||||||
| Ordinary Shares | Additional | Subject to | Receivable | ||||||||||||||||||
| Paid-in | Subsequent | from | |||||||||||||||||||
| Shares | Amount | Capital | Issuance | Shareholders | |||||||||||||||||
Balances at December 31, 2002 |
45,946 | $ | 6,114 | $ | 223,358 | $ | — | $ | (1,050 | ) | |||||||||||
Issuance of ordinary shares pursuant to
stock plans, net of repurchases |
1,397 | 186 | 4,223 | — | — | ||||||||||||||||
Repayments of notes
receivable from shareholders |
— | — | — | — | 1,050 | ||||||||||||||||
Amortization of deferred
stock-based compensation |
— | — | — | — | — | ||||||||||||||||
Business acquisition |
944 | 126 | 7,087 | 1,349 | — | ||||||||||||||||
Comprehensive income: |
|||||||||||||||||||||
Net income |
— | — | — | — | — | ||||||||||||||||
Unrealized loss on investments in
marketable securities |
— | — | — | — | — | ||||||||||||||||
Currency translation adjustments |
— | — | — | — | — | ||||||||||||||||
Comprehensive income |
|||||||||||||||||||||
Balances at September 30, 2003 |
48,287 | $ | 6,426 | $ | 234,668 | $ | 1,349 | $ | — | ||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
| Total | |||||||||||||||||||||
| Deferred Stock | Accumulated | Shareholders' | Comprehensive | ||||||||||||||||||
| Compensation | Deficit | Others | Equity | Income | |||||||||||||||||
Balances at December 31, 2002 |
$ | (554 | ) | $ | (114,477 | ) | $ | 3,996 | $ | 117,387 | |||||||||||
Issuance of ordinary shares pursuant to
stock plans, net of repurchases |
— | — | — | 4,409 | |||||||||||||||||
Repayments of notes
receivable from shareholders |
— | — | — | 1,050 | |||||||||||||||||
Amortization of deferred
stock-based compensation |
547 | — | — | 547 | |||||||||||||||||
Business acquisition |
— | — | — | 8,562 | |||||||||||||||||
Comprehensive income: |
|||||||||||||||||||||
Net income |
— | 22,154 | — | 22,154 | $ | 22,154 | |||||||||||||||
Unrealized loss on investments in
marketable securities |
— | — | (9,881 | ) | (9,881 | ) | $ | (9,881 | ) | ||||||||||||
Currency translation adjustments |
— | — | 43 | 43 | 43 | ||||||||||||||||
Comprehensive income |
$ | 12,316 | |||||||||||||||||||
Balances at September 30, 2003 |
$ | (7 | ) | $ | (92,323 | ) | $ | (5,842 | ) | $ | 144,271 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SINA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in U.S. dollars)
(unaudited, in thousands)