<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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 MARCH 31, 2000
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
----------------
SINA.COM
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
CAYMAN ISLANDS 52-2236363
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
VICWOOD PLAZA
ROOMS 1801-4
18TH FLOOR
199 DES VOEUX ROAD
CENTRAL, HONG KONG
(852) 2155-8800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
VICTOR LEE
1313 GENEVA DRIVE
SUNNYVALE, CA 94089
(408) 548-0000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
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 [ ] No [x]
The number of shares outstanding of the registrant's ordinary shares as of
April 28, 2000 was 40,687,319.
<PAGE> 2
SINA.COM
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets at March 31, 2000 and
June 30, 1999 3
Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 22
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SINA.COM
CONDENSED CONSOLIDATED BALANCE SHEET
(IN U.S. DOLLARS)
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 40,809 $ 20,571
Short-term investments ........................................ 24,677 4,037
Accounts receivable, net ...................................... 4,042 1,241
Inventories ................................................... 213 171
Prepaid expenses and other current assets ..................... 3,821 382
--------- ---------
Total current assets ................................... 73,562 26,402
Property and equipment, net ..................................... 6,355 2,194
Intangible assets, net .......................................... 13,529 18,635
Investment in joint venture ..................................... 1,151 --
Other assets .................................................... 227 351
--------- ---------
$ 94,824 $ 47,582
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable .............................................. $ 1,895 $ 828
Accrued liabilities ........................................... 6,507 1,517
--------- ---------
Total current liabilities .............................. 8,402 2,345
Minority interests .............................................. -- 119
--------- ---------
8,402 2,464
--------- ---------
Commitments and contingencies (Note 6)
Mandatorily redeemable convertible preference shares ............ 101,265 37,295
Mandatorily redeemable convertible preference share warrants .... 120 120
--------- ---------
101,385 37,415
--------- ---------
Shareholders' equity (deficit):
Ordinary shares ............................................... 1,380 947
Additional paid-in capital .................................... 54,933 38,055
Notes receivables from shareholders ........................... (1,910) --
Deferred stock compensation ................................... (18,616) (19,453)
Accumulated deficit ........................................... (50,824) (11,883)
Accumulated other comprehensive income:
Cumulative translation adjustment ........................... 74 37
--------- ---------
Total shareholders' equity (deficit) ................... (14,963) 7,703
--------- ---------
$ 94,824 $ 47,582
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
SINA.COM
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN U.S. DOLLARS)
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -----------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues:
Advertising ...................................... $ 3,076 $ 120 $ 6,104 $ 165
Software products ................................ 525 681 2,192 1,659
E-commerce ....................................... 44 -- 118 --
-------- -------- -------- --------
3,645 801 8,414 1,824
-------- -------- -------- --------
Cost of revenues:
Advertising (a) .................................. 2,463 142 5,733 287
Software products (a) ............................ 250 491 1,285 959
E-commerce ....................................... 116 -- 199 --
Stock-based compensation ......................... 168 -- 437 --
-------- -------- -------- --------
2,997 633 7,654 1,246
-------- -------- -------- --------
Gross profit ....................................... 648 168 760 578
-------- -------- -------- --------
Operating expenses:
Sales and marketing (a) .......................... 4,589 205 11,447 576
Product development (a) .......................... 2,029 277 5,004 644
General and administrative (a) ................... 1,667 324 4,971 845
Stock-based compensation ......................... 3,537 692 15,069 923
Amortization of intangible assets ................ 1,702 14 5,106 42
-------- -------- -------- --------
Total operating expenses ................. 13,524 1,512 41,597 3,030
-------- -------- -------- --------
Loss from operations ............................... (12,876) (1,344) (40,837) (2,452)
Interest income (expense), net ..................... 975 78 2,103 151
-------- -------- -------- --------
Loss before loss in equity investment
and minority interest ............................ (11,901) (1,266) (38,734) (2,301)
Minority interest in loss .......................... 27 15 119 35
Loss on equity investment .......................... (245) -- (245) --
-------- -------- -------- --------
Net loss ........................................... (12,119) (1,251) (38,860) (2,266)
Accretion on mandatorily redeemable
convertible preference shares .................... (27) (25) (81) (73)
-------- -------- -------- --------
Net loss attributable to ordinary shareholders ..... $(12,146) $ (1,276) $(38,941) $ (2,339)
======== ======== ======== ========
Basic and diluted net loss per share
attributable to ordinary shareholders ............ $ (1.41) $ (0.26) $ (4.77) $ (0.47)
======== ======== ======== ========
Shares used in computing basic and
diluted net loss per share ....................... 8,586 4,962 8,162 4,962
======== ======== ======== ========
Basic and diluted pro forma net loss per share ..... $ (0.36) $ (1.29)
======== ========
Shares used in computing pro forma
basic and diluted net loss per share ............. 34,043 30,207
======== ========
</TABLE>
----------
(a) Exclude stock-based compensation.
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
SINA.COM
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN U.S. DOLLARS)
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss attributable to ordinary
shareholders ............................................ $(38,941) $ (2,339)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interests in losses of consolidated
subsidiary ............................................ (119) (35)
Loss in equity investment ............................... 245 --
Depreciation and amortization ........................... 787 147
Stock-based compensation ................................ 15,506 923
Amortization of intangible assets ....................... 5,106 42
Accretion on mandatorily redeemable
convertible preference shares ......................... 81 73
Changes in assets and liabilities, net of effect of
Sinanet acquisition:
Accounts receivable, net .............................. (2,801) (185)
Inventories ........................................... (42) (81)
Prepaid expenses and other current assets ............. (3,439) (133)
Other assets .......................................... 124 (57)
Accounts payable ...................................... 1,067 125
Accrued liabilities ................................... 5,061 323
-------- --------
Net cash used in operating
activities ....................................... (17,365) (1,197)
-------- --------
Cash flows from investing activities:
Cash acquired upon merger with Sinanet ..................... -- 289
Acquisition of property and equipment ...................... (4,948) (293)
Investment in joint ventures ............................... (1,396) --
Purchase of short-term investment .......................... (20,640) (3,586)
-------- --------
Net cash used in investing
activities ....................................... (26,984) (3,590)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of preference shares,
net ..................................................... 63,889 --
Repayments of notes receivables from
shareholders ............................................ 562 --
Proceeds from exercise of stock options .................... 136 1
-------- --------
Net cash provided by financing
activities ....................................... 64,587 1
-------- --------
Net increase (decrease) in cash and cash
equivalents ................................................ 20,238 (4,786)
Cash and cash equivalents at beginning of year ............... 20,571 5,090
-------- --------
Cash and cash equivalents at end of year ..................... $ 40,809 $ 304
======== ========
Supplemental schedule of noncash investing and financing
activities:
Shares, warrants and options issued for
Sinanet Acquisition ................................... $ -- $ 17,269
======== ========
Ordinary shares issued for notes
receivable ............................................ $ 2,472 $ --
======== ========
Conversion of notes payable to preference
shares ................................................ $ -- $ 3,509
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
SINA.COM
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS, UNAUDITED)
1. THE COMPANY AND BASIS OF PRESENTATION
SINA.com ("SINA" or the "Company") is a leading Internet media and services
company for Chinese communities worldwide, offering a full array of
Chinese-language news, entertainment, e-commerce platforms, financial
information, and lifestyle tips. With separate Web sites in China, Hong Kong,
Taiwan and North America, SINA.com provides global content and services that
speak directly to the audience of each region, enriching the online experience
of its users.
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments, which in the opinion of management, are necessary to a
fair statement of the results for the interim periods presented. For further
information, refer to the Consolidated Financial Statements and Notes thereto
included in the Company's Registration Statement on Form F-1, as amended,
initially filed with the Securities and Exchange Commission (the "SEC") on March
27, 2000 (the "Registration Statement"). Results for the three and nine months
ended March 31, 2000 are not necessarily indicative of results for the entire
fiscal year ending June 30, 2000 or future periods. These financial statements
should be read in conjunction with the consolidated financial statements and the
accompanying notes included in the Company's Registration Statement.
2. RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities, and is effective for
fiscal years beginning after June 15, 2000, as amended by SFAS No. 137. The
Company believes the adoption of this pronouncement will have no material impact
on the Company's financial position or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain
of the SEC's views in applying generally accepted accounting principles to
revenue recognition in financial statements. In March 2000, the SEC issued SAB
No. 101A to defer for one quarter the effective date of implementation of SAB
No. 101 with earlier application encouraged. The Company is required to adopt
SAB 101 in the fourth quarter of fiscal 2000. The Company does not expect the
adoption of SAB 101 to have a material effect on its financial position or
results of operations.
3. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of the
ordinary shares outstanding during the period. Since the Company has a net loss
for all periods presented, net loss per share on a diluted basis is equivalent
to basic net loss per share because the effect of converting stock options,
warrants and mandatorily redeemable convertible preference shares would be
anti-dilutive. Pro forma basic and diluted net loss per share is computed as
described above and also gives effect, under Securities and Exchange Commission
guidance, to the automatic conversion of all outstanding mandatorily redeemable
convertible preference shares (using the if-converted method) in connection with
the Company's initial public offering in April 2000.
6
<PAGE> 7
The following table sets forth the computation of basic and diluted net loss
per share for the periods indicated (in thousands, except for per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss ............................................. $(12,119) $ (1,251) $(38,860) $ (2,266)
Accretion of mandatorily redeemable
convertible preference redemption value ........... (27) (25) (81) (73)
-------- -------- -------- --------
Net loss attributable to ordinary shareholders ....... $(12,146) $ (1,276) $(38,941) $ (2,339)
======== ======== ======== ========
Basic and diluted:
Weighted average shares used in computing
basic and diluted net loss per ordinary
share ............................................ 8,586 4,962 8,162 4,962
======== ======== ======== ========
Basic and diluted net loss per share
attributable to ordinary shareholders .......... $ (1.41) $ (0.26) $ (4.77) $ (0.47)
======== ======== ======== ========
Antidilutive securities including options,
warrants, preference shares and restricted
ordinary shares not included in net loss per
shares calculation ................................ 31,724 5,327 31,724 5,327
======== ======== ======== ========
Pro forma:
Shares used in computing basic and
diluted net loss per share ..................... 8,586 8,162
Adjustment to reflect assumed conversion of
all preference shares from date of issuance ..... 25,457 22,045
-------- --------
Shares used in computing pro forma basic and
diluted net loss per share ...................... 34,043 30,207
======== ========
Basic and diluted pro forma net loss per share ..... $ (0.36) $ (1.29)
======== ========
Antidilutive securities including restricted
ordinary shares, options and warrants not
included in pro forma net loss per share
calculation ....................................... 6,267 6,240
======== ========
</TABLE>
4. SEGMENT INFORMATION
Based on the criteria established by SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," the Company operates in two
principal business segments globally. The Internet segment develops, designs and
markets content and services through a network of SINA.com Web sites hosted in
the U.S., China, Hong Kong and Taiwan. The Software segment develops, produces
and markets software products and related services in China. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. The Company evaluates performance based on
income or loss from operations before stock compensation, amortization of
intangible assets, interest, nonrecurring gains and losses, foreign exchange
gains and losses, and income taxes. Facilities costs are allocated to the
segment's cost of revenues based on usage. Long-lived assets comprise property
and equipment.
7
<PAGE> 8
Summarized information by segment as is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
2000 1999
---- ----
INTERNET SOFTWARE INTERNET SOFTWARE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues .............................. $ 6,222 $ 2,192 $ 165 $ 1,659
Segment operating loss ................ (19,558) (137) (328) (1,159)
Segment assets ........................ 23,577 2,833 4,276 2,847
Expenditures for long-lived assets .... (4,700) (248) (250) (43)
</TABLE>
Reconciliation of segment information to financial statements:
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
2000 1999
---- ----
<S> <C> <C>
LOSS FROM OPERATIONS:
Total loss for reportable segments .......... $(19,695) $ (1,487)
Unallocated amounts:
Stock-based compensation ................. (15,506) (923)
Amortization of intangible assets ........ (5,106) (42)
Other corporate expenses, net ............ (530) --
-------- --------
Loss from operations before interest,
income taxes and minority interest ..... $(40,837) $ (2,452)
======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
2000 1999
------- -------
<S> <C> <C>
ASSETS:
Total assets for reportable segments ..... $26,410 $ 7,123
Cash and short-term investments .......... 52,460 --
Intangible assets ........................ 13,529
20,337
Other unallocable amounts ................ 2,425 --
------- -------
$94,824 $27,460
======= =======
</TABLE>
5. SUBSEQUENT EVENTS
In April 2000, the Company sold 4,600,000 ordinary shares in an underwritten
initial public offering, inclusive of 600,000 ordinary shares through the
exercise of the underwriter's over-allotment option for net proceeds of
approximately $72.7 million, before offering expenses. Simultaneously with the
closing of the public offering, all 25,496,000 outstanding preference shares
were converted to ordinary shares on a one for one basis. Additionally, all
outstanding warrants to purchase an aggregate of 12,000 ordinary shares were
exercised upon closing of the initial public offering.
6. COMMITMENTS AND CONTINGENCIES
There are uncertainties regarding the legal basis of the Company's ability
to operate an internet business and to advertise in China. The
telecommunication, information and media industries in China remain highly
regulated. Although the Company believes its business in China is in compliance
with existing Chinese laws and regulations, the Company cannot be sure that the
Chinese regulatory authorities will view such business as in compliance with
Chinese laws and regulations. Further, the Company cannot be sure that it will
be in compliance with Chinese laws and regulations that may be adopted in the
future. Therefore, the Company might be required to limit the scope of its
operations in China, and this could have a material adverse effect on the
Company's financial position and results of operations.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including, without limitation, statements regarding our expectations,
beliefs, intentions or future strategies that are signified by the words
"expect", "anticipate", "intend", "believe", or similar language. All
forward-looking statements included in this documents are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. In evaluating our business,
you should carefully consider the information set forth below under the caption
"Certain Business Risks" set forth herein. We caution you that our businesses
and financial performance are subject to substantial risks and uncertainties.
OVERVIEW
We are a leading Internet media and services company for Chinese communities
worldwide, offering a full array of Chinese-language news, entertainment,
e-commerce platforms, financial information, and lifestyle tips. One of our
subsidiaries, Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS,
a Sino-Foreign joint venture company based in Beijing, China, began operations
in December 1993 as a computer software company focused on providing solutions
to computer users wishing to communicate in Chinese. In May 1996, we launched
our online network, then called SRSnet.com, offering Chinese-language news,
information and community features such as bulletin boards and chat services
targeted at online users in China. In March 1999, we expanded our online network
by acquiring Sinanet.com, a leading Chinese-language Internet content company
with offices in California and Taiwan and two distinct Web sites targeting
Chinese users in North America and Taiwan. In July 1999, we continued our
network expansion by launching our Hong Kong destination Web site targeting
Chinese users in Hong Kong. Today, we operate separate Web sites in China, Hong
Kong, Taiwan, and North America to provide global content and services that
speak directly to the audience of each region, enriching the online experience
of their users.
We derive our revenues from several sources, including online Internet
advertising, software sales, and e-commerce. Advertising revenues are derived
principally from advertising arrangements under which we receive revenues on a
cost-per-thousand impression basis, fixed payment sponsorship from advertisers,
and design of advertising campaigns to be placed on our network. We derive our
software revenues from sales of our software products primarily in China and
Hong Kong through our network of OEM partners, value-added resellers,
distributors, retail merchants, and our direct sales force. Our e-commerce
revenues are mainly derived from transaction and setup fees paid by merchants
for selling their goods at our online mall, SINAmall.
Our overall revenues for the three and nine months ended March 31, 2000 were
$3.6 million and $8.4 million, respectively, as compared to $0.8 million and
$1.8 million for the same periods in the prior year, respectively. The increase
in revenues was primarily driven by higher growth of our Internet advertising
business.
Our net losses for the three and nine months ended March 31, 2000 were $12.1
million and $38.9 million, respectively, as compared to $1.2 million and $2.3
million for the same periods in the prior year, respectively. As of March 31,
2000, we had an accumulated deficit of $50.8 million. We have incurred
significant net losses and have had negative cash flows from operations since
our inception. These losses have been funded primarily through the issuance of
our equity securities. We intend to significantly increase our spending on
marketing and brand development, content enhancements and technology and
infrastructure. We anticipate our net losses to increase significantly in the
foreseeable future.
We recorded cumulative deferred stock compensation of approximately $38.1
million, net through March 31, 2000, which represents the difference between the
exercise price of options granted through March 31, 2000 and the fair market
value of the underlying stock at the date of grant. Deferred stock compensation
is amortized on an accelerated basis over the vesting period of the applicable
options, which is generally four years. The amortization of deferred
compensation was $3.7 million in fiscal 1999. We expect the amortization of
deferred compensation to approximate $19.0 million for fiscal 2000, $8.5 million
for fiscal 2001, $4.6 million for fiscal 2002, $2.1 million for fiscal 2003 and
$0.2 million for fiscal 2004.
On March 29, 1999, we acquired Sinanet.com. The fair value of the total
consideration paid in the acquisition, including assumed liabilities of
approximately $4.3 million and acquisition costs of $0.1 million, was $21.7
million. The $4.3 million in liabilities that we assumed included $3.5 million
of notes payable which were subsequently converted into our preference shares.
We accounted for the acquisition as a purchase. We recorded goodwill and other
intangible assets of approximately $20.3 million as a result of this
transaction, which are being amortized over a three-year period.
9
<PAGE> 10
On August 31, 1999, we entered into an agreement with AdForce, Inc. and
Compuserve Consultants, Ltd. to form a joint venture to provide outsourced,
centralized advertising management and delivery services on the Internet for
customers primarily using the Chinese language in China, Hong Kong, Taiwan and
Singapore. In December 1999, we invested $1.4 million in cash for a 35.4%
interest in the joint venture. We account for our investment in the joint
venture using the equity method of accounting. During the nine months ended
March 31, 2000, we recorded $245,000 loss from our investment in the joint
venture.
In April 2000, the Company sold 4,600,000 ordinary shares in an underwritten
initial public offering, inclusive of 600,000 ordinary shares through the
exercise of the underwriter's over-allotment option for net proceeds of
approximately $72.7 million, before offering expenses.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUES
Advertising. We began to generate revenues from Internet advertising in the
second quarter of fiscal 1999. Advertising revenues were insignificant for the
three and nine months ended March 31,1999. We generated $3.1 million and $6.1
million in advertising revenues for the three and nine months ended March 31,
2000, respectively. We recorded no barter revenues during the three months ended
March 31, 2000. For the nine months ended March 31, 2000, barter revenues
accounted for 2.2% of our total advertising revenues. The increase in
advertising revenues for the three months and nine months ended March 31, 2000
compared to the same periods in fiscal 1999 was primarily due to the increase in
number of advertisers and amount of advertising contracts. For the three months
and nine months ended March 31, 2000, advertising revenues accounted for 84.4%
and 72.5% of our total revenues, respectively. We expect our advertising
revenues to increase in dollar amount in the future.
Software. Our software revenues decreased by 22.9% from $0.7 million for the
three months ended March 31, 1999 to $0.5 million for the three months ended
March 31, 2000. The decrease in software revenues was mainly due to the decrease
in unit selling price of software products. For the nine months ended March 31,
2000, software revenues increased 32.1% to $2.2 million from $1.7 million for
the nine months ended March 31, 1999. The increase was due to an increase in
sales of bundled software products to OEM partners during the first two quarters
of fiscal 2000 compared to the same period in the fiscal 1999. Bundled software
products incorporate software products from other vendors and have a higher unit
selling price than the unbundled software products. We expect our revenues from
software sales to remain relatively flat in the future.
E-commerce. Our e-commerce revenues for the three and nine months ended March
31, 2000 were $44,000 and $118,000, respectively, and were primarily
attributable to the operations of Sinanet.com, which we acquired in March 1999.
We expect our e-commerce revenues to increase in dollar amount in the future.
COST OF REVENUES
Advertising. Our cost of advertising revenues increased significantly from
$0.1 million and $0.3 million for the three and nine months ended March 31,
1999, respectively, to $2.5 million and $5.7 million for the three and nine
months ended March 31, 2000, respectively. Our cost of advertising revenues
consists of costs associated with the production of our Web site. These costs
primarily consist of fees paid to third parties for Internet connection, content
and services, and compensation related costs and equipment depreciation expense.
Compared to the same periods in the prior year, the increase in cost of
advertising revenues to support our rapidly growing internet user traffic was
primarily due to an increase in personnel of our production department
associated with the continued expansion in China, our acquisition of
Sinanet.com, and the establishment of our Web site in Hong Kong. Secondarily the
expenses increase was due to an increase in Internet connection costs, such as
bandwidth expansion and server co-location cost to support increased Internet
traffic on our Web sites, and an increase in content and service provider fees
to expand our Web site contents and to support the increased advertisement
impressions. We expect our cost of advertising revenues to increase in dollar
amount but to decrease as a percentage of our advertising revenues in the
future.
Software. Our cost of software revenues decreased by 49.1% from $0.5 million
for the three months ended March 31,1999 to $0.3 million for the three months
ended March 31, 2000. The decrease was primarily due to a higher percentage of
the software revenues attributable to licensing arrangements which involved
minimal costs. For the nine months periods ended March 31, 1999 and March 31,
2000, our cost of software revenues increased by 34.0% from $1.0 million to $1.3
million. The increase was primarily due to the increase in software sales.
10
<PAGE> 11
E-commerce. We had not incurred any e-commerce related costs until we
acquired Sinanet.com on March 29, 1999. For the three months and nines months
ended March 31, 2000, our cost of e-commerce revenues amounted to $0.1 million
and $0.2 million, respectively. We expect our cost of e-commerce will continue
to increase in dollar amount in the future as we expand our e-commerce
activities at all locations.
SALES AND MARKETING EXPENSES
Our sales and marketing expenses increased from $0.2 million, or 25.6% of net
revenues and $0.6 million, or 31.6% of net revenues for the three and nine
months ended March 31, 1999, respectively, to $4.6 million, or 125.9% of net
revenues and $11.4 million, or 136.0% of net revenues for the three and nine
months ended March 31, 2000, respectively. Sales and marketing expenses consist
primarily of compensation expenses, sales commissions, advertising and promotion
expenditures and travel expenses. The increase in dollar amounts was mainly
attributable to an increase in advertising costs associated with our
brand-building strategy, an increase in compensation expense associated with the
growth in our direct sales force and marketing personnel, and an increase in
sales commissions associated with the increased revenues. We expect our sales
and marketing expenses to increase in dollar amount in the future as we continue
to build our brand name and expand our direct sales force.
PRODUCT DEVELOPMENT EXPENSES
Our product development expenses increased from $0.3 million, or 34.6% of net
revenues and $0.6 million, or 35.3% of net revenues for the three and nine
months ended March 31, 1999, respectively, to $2.0 million, or 55.7% of net
revenues and $5.0 million, or 59.5% of net revenues for the three and nine
months ended March 31, 2000, respectively. Product development expenses consist
primarily of payroll and related expenses incurred for enhancement to and
maintenance of our Web sites as well as engineering costs related to develop our
software products. The increase in dollar amount was attributable to increased
staffing and associated support for engineers for developing and enhancing our
online network. We expect that product development expenses to increase in
dollar amount in the future as we continue to expand and enhance our service
offerings.
GENERAL AND ADMINISTRATIVE EXPENSES
Our general and administrative expenses increased from $0.3 million, or 40.4%
of net revenues and $0.8 million, or 46.3% of net revenues for the three and
nine months ended March 31, 1999, respectively, to $1.7 million, or 45.7% of net
revenues and $5.0 million, or 59.1% of net revenues for the three and nine
months ended March 31, 2000, respectively. The increase was mainly due to the
increase in general business activities as a result of business expansion and
building our administrative infrastructure. We expect our general and
administrative expenses to increase in dollar amount in the future.
STOCK-BASED COMPENSATION EXPENSE
For the three months ended March 31, 2000, we recognized $3.7 million of
expense related to amortization of deferred stock compensation. For the nine
months ended March 31, 2000, we recognized $15.5 million of expense related to
amortization of deferred stock compensation.
AMORTIZATION OF INTANGIBLE ASSETS
As a result of the acquisition of Sinanet.com in March 1999, we recorded
goodwill and other intangible assets of $20.3 million, which are being amortized
over three years. The amortization expense for the three and nine months ended
March 31, 2000 was $1.7 million and $5.1 million, respectively.
INTEREST INCOME (EXPENSE), NET
Interest income, net increased from $78,000 and $151,000 for the three and
nine months ended March 31, 1999, respectively, to $975,000 and $2,103,000 for
the three and nine months ended March 31, 2000, respectively. The increase in
interest income was primarily due to higher cash and short-term investment
balances as a result of the proceeds from our sale of Series B preference shares
in April 1999 and Series C preference shares in October and November 1999.
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LOSS ON EQUITY INVESTMENT
In December 1999, we contributed $1.4 million in cash for a 35.4% interest in
a joint venture with Adforce, Inc. and Compuserve Consultants, Ltd. We account
for our investment in the joint venture using the equity method of accounting.
During the three and nine months ended March 31, 2000, we recorded $245,000 loss
from our investment in the joint venture.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations principally through private sales of our
preference shares. From inception through March 31, 2000, we have raised net
proceeds of $97.4 million through the sale of preference shares. As of March 31,
2000, we had $65.5 million in cash and cash equivalents and short-term
investments.
Net cash used in operating activities was $17.4 million for the nine months
ended March 31, 2000 and was primarily attributable to our net loss of $38.9
million, largely offset by the non-cash stock-based compensation expense of
$15.5 million and amortization expense of $5.1 million related to goodwill and
other intangible assets resulting from the acquisition of Sinanet.com. Net cash
used in operating activities was $1.2 million for the nine months ended March
31, 1999 and was primarily attributable to our net loss of $2.4 million offset
by non-cash stock-based compensation of $0.9 million.
Net cash used in investing activities was $27.0 million for the nine months
ended March 31, 2000, primarily due to the purchase of short-term investments of
$20.7 million, purchase of capital equipment of $5.0 million and the investment
in a joint venture of $1.4 million. Net cash used in investing activities was
$3.6 million for the nine months ended March 31, 1999 primarily due to the
purchase of short-term investments.
Net cash provided by financing activities was $64.6 million for the nine
months ended March 31, 2000, primarily related to the net proceeds of $63.9
million received from the Series C preference share issuance in October and
November 1999. The remaining cash provided by the financing activities was from
the proceeds of exercising stock options and preference share warrants. We
received net proceeds of $72.7 million, before offering expenses from our
initial public offering in April 2000.
Our principal commitments consist of obligations outstanding under various
operating leases for our facilities. Since our acquisition of Sinanet.com in
March 1999, we have experienced an increase in our capital expenditures and
operating lease arrangements, consistent with the growth in our operations and
staffing. We anticipate that this will continue for the foreseeable future.
We expect to experience significant growth in our operating expenses,
particularly in sales and marketing expenses, for the foreseeable future. We
anticipate operating expenses and purchases of equipment will constitute the
majority of the future use of our cash resources. In addition, we may use our
cash resources to acquire or make investments in complementary products,
technologies or businesses. We believe that the net proceeds from our initial
public offering, plus our current cash resources, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for the next
eighteen months. Beyond this period, we may seek additional equity or debt
financing prior to that time. The sale of additional equity could result in
additional dilution to our shareholders. The incurrence of indebtedness would
result in increased fixed obligations and could result in operating covenants
that would restrict our operations. We cannot assure you that financing will be
available in amounts or on terms acceptable to us, if at all.
Chinese regulations limit our ability to convert renminbi into foreign
currency for capital items. We currently anticipate that our Chinese operations
will continue to be a net user of cash, but to the extent that we contribute any
cash to our Chinese operations we may be restricted in our ability to use this
cash to fund our business activities outside of China. See "Certain Business
Risks--Currency fluctuations and restrictions on currency exchange may adversely
affect our business, including limiting our ability to convert Chinese renminbi
into foreign currencies and, if renminbi were to decline in value, reducing our
revenues in U.S. dollar terms."
CERTAIN BUSINESS RISKS
BECAUSE OUR OPERATING HISTORY IS LIMITED AND THE REVENUE AND INCOME POTENTIAL OF
OUR BUSINESS AND MARKETS ARE UNPROVEN, WE CANNOT PREDICT WHETHER WE WILL MEET
INTERNAL OR EXTERNAL EXPECTATIONS OF FUTURE PERFORMANCE.
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From our inception through September 1998, our revenues consisted entirely of
sales of our RichWin software products and licenses to copy and use these
products. We continued our software sales during fiscal 1999, but with the
launch of our online network in May 1996 and our acquisition of Sinanet.com in
March 1999, we began to devote our resources primarily to developing our online
Chinese-language network. We believe that our future success depends on our
ability to significantly increase revenue from our Internet advertising and
electronic commerce operations, for which we have a limited operating history.
Accordingly, our prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in an early stage of
development. These risks include our ability to: attract advertisers; attract a
larger audience to our network; respond effectively to competitive pressures and
address the effects of strategic relationships or corporate combinations among
our competitors; maintain our current, and develop new, strategic relationships;
increase awareness of the SINA.com brand and continue to build user loyalty;
attract and retain qualified management and employees; upgrade our technology to
support increased traffic and expanded services; and expand the content and
services on our network.
WE HAVE A HISTORY OF LOSSES AND WE ANTICIPATE FUTURE LOSSES.
We have never been profitable. As of March 31, 2000, we had an accumulated
deficit of approximately $50.8 million. We anticipate that we will continue to
incur operating losses for the foreseeable future due to increased sales and
marketing costs, additional personnel hires and our continuing branding
campaign. As a result, we cannot be certain when or if we will achieve
profitability. If we do not achieve or sustain profitability, the market price
of our ordinary shares may decline.
WE ARE RELYING ON ADVERTISING SALES AS A SIGNIFICANT PART OF OUR FUTURE REVENUE,
BUT THE INTERNET HAS NOT BEEN PROVEN AS A SOURCE OF SIGNIFICANT ADVERTISING
REVENUE IN GREATER CHINA.
Our revenue growth is dependent on increased revenue from the sale of
advertising space on our network and the acceptance and use of electronic
commerce. Online advertising in Greater China is an unproven business and many
of our current and potential advertisers have limited experience with the
Internet as an advertising medium, have not traditionally devoted a significant
portion of their advertising expenditures or other available funds to Web-based
advertising, and may not find the Internet to be effective for promoting their
products and services relative to traditional print and broadcast media. Our
ability to generate and maintain significant advertising revenue will therefore
depend on a number of factors, many of which are beyond our control, including:
the development of a large base of users possessing demographic characteristics
attractive to advertisers; downward pressure on online advertising prices; the
development of independent and reliable means of verifying levels of online
advertising and traffic; and the effectiveness of our advertising delivery,
tracking and reporting systems.
If the Internet does not become more widely accepted as a medium for
advertising, our ability to generate increased revenue will be negatively
affected.
WE ARE RELYING ON ELECTRONIC COMMERCE AS A SIGNIFICANT PART OF OUR FUTURE
REVENUE, BUT THE INTERNET HAS NOT YET BEEN PROVEN AS AN EFFECTIVE COMMERCE
MEDIUM IN GREATER CHINA.
Our revenue growth depends on the increasing acceptance and use of electronic
commerce in Greater China. The Internet may not become a viable commercial
marketplace in Asia for various reasons, many of which are beyond our control,
including: inexperience with the Internet as a sales and distribution channel;
inadequate development of the necessary infrastructure to facilitate electronic
commerce; concerns about security, reliability, cost, ease of deployment,
administration and quality of service associated with conducting business over
the Internet; and inexperience with credit card usage or with other means of
electronic payment in China.
If the Internet does not become more widely accepted as a medium for
electronic commerce, our ability to generate increased revenue will be
negatively affected.
UNDERDEVELOPED TELECOMMUNICATIONS INFRASTRUCTURE HAS LIMITED AND MAY CONTINUE TO
LIMIT THE GROWTH OF THE INTERNET MARKET IN CHINA WHICH, IN TURN, COULD LIMIT OUR
ABILITY TO GROW OUR BUSINESS.
The telecommunications infrastructure in China is not well developed.
Although private sector ISPs exist in China, almost all access to the Internet
is accomplished through ChinaNet, China's primary commercial network, which is
owned and operated by China Telecom, a state-owned enterprise directly
controlled by China's Ministry of Information Industry. The underdeveloped
Internet infrastructure in China has limited the growth of Internet usage in
China. If the necessary Internet infrastructure is not developed, or is not
developed on a timely basis, future growth of the Internet in China will be
limited and our business could be harmed.
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WE MUST RELY ON THE CHINESE GOVERNMENT TO DEVELOP CHINA'S INTERNET
INFRASTRUCTURE AND IF IT DOES NOT DEVELOP THIS INFRASTRUCTURE OUR ABILITY TO
GROW OUR BUSINESS WILL BE HINDERED.
The Chinese government's interconnecting, national networks connect to the
Internet through government-owned international gateways, which are the only
channels through which a domestic Chinese user can connect to the international
Internet network. We rely on this backbone and China Telecom to provide data
communications capacity primarily through local telecommunications lines.
Although the Chinese government has announced plans to develop aggressively the
national information infrastructure, we cannot assure you that this
infrastructure will be developed. In addition, we have no guarantee that we will
have access to alternative networks and services in the event of any disruption
or failure. If the necessary infrastructure standards or protocols or
complementary products, services or facilities are not developed by the Chinese
government, the growth of our business will be hindered.
YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE PERFORMANCE BECAUSE OUR RESULTS OF OPERATIONS ARE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.
We may experience significant fluctuations in our quarterly operating results
due to a variety of factors, many of which are outside our control. Factors that
may cause our quarterly operating results to fluctuate include: our ability to
retain existing users, attract new users at a steady rate and maintain user
satisfaction; the announcement or introduction of new or enhanced services,
content and products by us or our competitors; dependence on a limited number of
advertisers, the majority of which have agreements with us that are cancelable
upon a specified notice period, and the loss of any major advertiser;
significant news events that increase traffic to our Web sites; technical
difficulties, system downtime or Internet failures; demand for advertising space
from advertisers; the amount and timing of operating costs and capital
expenditures relating to expansion of our business, operations and
infrastructure; governmental regulation; seasonal trends in Internet use; a
shortfall in our revenues relative to our forecasts and a decline in our
operating results due to our inability to adjust our spending quickly; and
general economic conditions and economic conditions specific to the Internet,
electronic commerce and the Greater China market.
As a result of these and other factors, you should not rely on
quarter-to-quarter comparisons of our operating results as indicators of likely
future performance. Our operating results may be below the expectations of
public market analysts and investors in one or more future quarters. If that
occurs, the price of our ordinary shares could decline and you could lose part
or all of your investment.
POLITICAL AND ECONOMIC CONDITIONS IN GREATER CHINA ARE UNPREDICTABLE AND MAY
DISRUPT OUR OPERATIONS IF THESE CONDITIONS BECOME UNFAVORABLE TO OUR BUSINESS.
We expect to derive a substantial percentage of our revenues from the Greater
China market. Changes in political or economic conditions in the region are
difficult to predict and could adversely affect our operations or cause the
Greater China market to become less attractive to advertisers, which could
reduce our revenues. We maintain a strong local identity and presence in each of
the regions in the Greater China market and we cannot be sure that we would be
able to maintain effectively this local identity if political conditions were to
change. Furthermore, many countries in Asia have experienced significant
economic downturns since the middle of 1997, resulting in slower real gross
domestic product growth for the entire region as a result of higher interest
rates and currency fluctuations. If declining economic growth rates persist,
expenditures for Internet access, infrastructure improvements and advertising
could decrease, which would negatively affect our business and our profitability
over time. In addition, the economic downturn in Asia could also lead to a
devaluation of the currency of China, Taiwan or Hong Kong, which would decrease
our revenues for the Greater China region in U.S. dollar terms.
In addition, economic reforms in the region could affect our business in ways
that are difficult to predict. For example, since the late 1970s, the Chinese
government has been reforming the Chinese economic system to emphasize
enterprise autonomy and the utilization of market mechanisms. Although we
believe that these reforms measures have had a positive effect on the economic
development in China, we cannot be sure that they will be effective or that they
will benefit our business.
WE MAY BE ADVERSELY AFFECTED BY CHINESE GOVERNMENT REGULATION OF INTERNET
COMPANIES.
China has recently begun to regulate its Internet sector by making
pronouncements or enacting regulations regarding the legality of foreign
investment in the Chinese Internet sector, the existence and enforcement of
content restrictions on the Internet and the availability of securities
offerings by companies operating in the Chinese Internet sector. In the opinion
of our Chinese counsel, the ownership of BSRS and its businesses comply with
existing Chinese laws and regulations. There are, however, substantial
uncertainties regarding the proper interpretation of current and future Chinese
Internet laws and regulations.
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Issues, risks and uncertainties relating to China government regulation of
the Chinese Internet sector include the following:
A prohibition of foreign investment in businesses providing value-added
telecommunication services, including computer information services or
electronic mail box services, may be applied to Internet businesses such as
ours. Some officials of the Chinese Ministry of Information, or MII, have taken
the position that foreign investment in the Internet sector is prohibited.
The MII has also stated recently that it intends to adopt new laws or
regulations governing foreign investment in the Chinese Internet sector in the
near future. If these new laws or regulations forbid foreign investment in the
Internet sector, our business will be severely impaired.
According to press reports, under the agreement reached in November 1999
between China and the United States concerning the United States' support of
China's entry into the World Trade Organization, or WTO, foreign investment in
Chinese Internet services will be liberalized to allow for 49% foreign ownership
in key telecommunication services, including Chinese Internet ventures, for the
first two years after China's entry into the WTO and 50% thereafter. Even if the
terms of this agreement are as reported, the agreement is still subject to
approval by the U.S. Congress and faces domestic opposition from trade unions,
environmentalists and human rights organizations.
The MII has also stated recently that the activities of Internet content
providers are also subject to regulation by various Chinese government
authorities, depending on the specific activities conducted by the Internet
content provider. According to press reports, various government authorities are
in the process of preparing new laws and regulations that will govern these
activities. The areas of regulation may include online advertising and online
news reporting. In addition, the new laws and regulations may require various
Chinese government approvals for securities offerings by companies engaged in
the Internet sector in China.
The interpretation and application of existing Chinese laws and regulations,
the stated positions of the MII and the possible new laws or regulations have
created substantial uncertainties regarding the legality of existing and future
foreign investments in, and the businesses and activities of, Chinese Internet
businesses, including our business.
Accordingly, it is possible that the relevant Chinese authorities could, at
any time, assert that any portion or all of our existing or future ownership
structure and businesses, or this offering, violates existing or future Chinese
laws and regulations. It is also possible that the new laws or regulations
governing the Chinese Internet sector that may be adopted in the future will
prohibit or restrict foreign investment in, or other aspects of, any of our
current or proposed businesses and operations or require governmental approvals
for this offering. In addition, these new laws and regulations may be
retroactively applied to us.
If we are found to be in violation of any existing or future Chinese laws or
regulations, the relevant Chinese authorities would have broad discretion in
dealing with such a violation, including, without limitation, the following:
levying fines; revoking our business license; requiring us to restructure our
ownership structure or operations; and requiring us to discontinue any portion
or all of our Internet business. Any of these actions could cause our business
to suffer and the price of our common stock to decline.
WE HAVE ATTEMPTED TO COMPLY WITH THE STRICT LICENSING AND REGISTRATION
REQUIREMENTS OF THE PRC GOVERNMENT BY ENTERING INTO AGREEMENTS WITH TWO CHINESE
ENTITIES MAJORITY OWNED BY OUR EMPLOYEES; IF THE PRC GOVERNMENT FINDS THAT THESE
AGREEMENTS DO NOT COMPLY WITH THE LICENSING REQUIREMENTS, OUR BUSINESS IN THE
PRC WILL BE ADVERSELY AFFECTED.
Because the Chinese government restricts foreign investment in
Internet-related businesses, we have restructured our China Internet operations
by forming two Chinese entities to acquire appropriate government licenses to
conduct our business there. The legal uncertainties associated with the Chinese
government regulation may be summarized as follows: whether the Chinese
government may view our restructuring as being in compliance with their
regulations; whether the Chinese government may revoke such business licenses;
whether the Chinese government may impose additional regulatory requirements
with which we may not be in compliance; whether the Chinese government will
permit the Chinese entities to acquire future licenses necessary in order to
conduct operations in China; and whether the Chinese government will restrict or
prohibit the distribution of content over the Internet.
The Chinese government regulates Internet access and the distribution of news
and other information through strict business licensing and registration
requirements and other governmental regulation. With respect to licensing, our
subsidiary Beijing Stone Rich Sight Information Technology Co. Ltd., or BSRS, is
currently licensed to operate as a software company. BSRS has entered into
agreements with two Chinese entities: Beijing SINA Interactive Advertising Co.,
Ltd., a Chinese advertising company that is 75% owned by Zhidong Wang, our
president and chief executive officer, and 25% owned by BSRS, and which we refer
to as the Ad Company, and Beijing SINA Internet Information Services Co., Ltd.,
a Chinese Internet content provider that is 70% owned by
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Zhidong Wang and 30% owned by Yan Wang, our general manager of China operations,
and which we refer to as the ICP Company. To address Chinese regulatory
concerns, Zhidong Wang will transfer his share ownership in the Ad Company to
Yan Wang. Both entities are limited liability companies incorporated in China.
Pursuant to these agreements, the ICP Company is responsible for operating
www.sina.com.cn in connection with its Internet content company license and will
sell advertising space on www.sina.com.cn to the Ad Company. The Ad Company, in
turn, will sell advertisements in this space to third parties under its
advertising license. In addition, BSRS has licensed intellectual property and
transferred equipment to the ICP Company, and acts as the ICP Company's provider
of technical services, all in exchange for fees or other payments. BSRS will
also be a consultant and service provider to the Ad Company for its domestic
Chinese customers.
We cannot be sure that these and other corporate activities carried out by us
will be viewed by Chinese regulatory authorities as in compliance with
applicable licensing requirements. Our business in China will be adversely
affected if our business license is revoked as a result of non-compliance. In
addition, we cannot be sure that we will be able to obtain all of the licenses
we may need in the future or that future changes in Chinese government policies
affecting the provision of information services, including the provision of
online services and Internet access, will not impose additional regulatory
requirements on us or our service providers or otherwise harm our business.
WE DEPEND UPON CONTRACTUAL ARRANGEMENTS WITH THE AD COMPANY AND THE ICP COMPANY
FOR THE SUCCESS OF OUR OPERATIONS IN CHINA AND THESE ARRANGEMENTS MAY NOT BE AS
EFFECTIVE IN PROVIDING OPERATIONAL CONTROL AS DIRECT OWNERSHIP OF THESE
BUSINESSES.
Because we are restricted by the Chinese government from providing Internet
and advertising services directly in China, we are dependent on the Ad Company,
of which we own 25% and the ICP Company, of which we have no ownership interest,
to provide such services through contractual agreements between the parties.
This arrangement may not be as effective in providing control over advertising
and Internet content operations in China as direct ownership of these
businesses. For example, the Ad Company or ICP Company could fail to take
actions required for our business, such as entering into advertising contracts
with potential customers or failing to maintain our China Web site. The ICP
Company will also be able to transact business with third parties not affiliated
with BSRS. If the Ad Company or ICP fails to perform its obligations under these
agreements, we would potentially have to rely on legal remedies under Chinese
law, which we cannot be sure would be effective.
The ICP Company is controlled by Zhidong Wang, our president and chief
executive officer. As a result, our contractual relationships with the ICP
Company would be viewed as entrenching his management position or transferring
certain value to him, especially if any conflict arose with him.
WE MAY NOT BE IN COMPLIANCE WITH CHINESE GOVERNMENT REGULATIONS RELATING TO
FOREIGN INVESTMENT PROHIBITIONS AND, IF SO DETERMINED, THE CHINESE GOVERNMENT
COULD CAUSE US TO DISCONTINUE OUR OPERATIONS IN CHINA.
In September 1999, a minister of China's Ministry of Information Industry
stated that Chinese government policy prohibits foreign investment in the
telecommunications services industry, which he has defined to include
Internet-related businesses. While we believe that we are in compliance with
current Chinese government policies, we cannot be sure that the government will
view our business as in compliance with these policies or any policies that may
be made in the future. If we are not viewed as complying with these policies or
any regulations that may be created relating to foreign ownership of
Internet-related businesses, the Chinese government could require us to
discontinue our operations in China or take other actions that could harm our
business.
EVEN IF WE ARE IN COMPLIANCE WITH CHINESE GOVERNMENTAL REGULATIONS RELATING TO
LICENSING AND FOREIGN INVESTMENT PROHIBITIONS, THE CHINESE GOVERNMENT MAY
PREVENT US FROM DISTRIBUTING, AND WE MAY BE SUBJECT TO LIABILITY FOR, CONTENT
THAT IT BELIEVES IS INAPPROPRIATE.
China has enacted regulations governing Internet access and the distribution
of news and other information. In the past, the Chinese government has stopped
the distribution of information over the Internet that it believes to violate
Chinese law, including content that is obscene, incites violence, endangers
national security, is contrary to the national interest or is defamatory. In
addition, we may not publish certain news items, such as news relating to
national security, without permission from the Chinese government. Furthermore,
the Ministry of Public Security has the authority to cause any local Internet
service provider to block any Web site maintained outside China at its sole
discretion. Even if we comply with Chinese governmental regulations relating to
licensing and foreign investment prohibitions, if the Chinese government were to
take any action to limit or prohibit the distribution of information through our
network or to limit or regulate any current or future content or services
available to users on our network, our business would be harmed.
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We are also subject to potential liability for content on our Web sites that
is deemed inappropriate and for any unlawful actions of our subscribers and
other users of our systems under regulations promulgated by the Chinese Ministry
of Information and Industry. Furthermore, we are required to delete content that
clearly violates the laws of China and report content that we suspect may
violate Chinese law. It is difficult to determine the type of content that may
result in liability for us, and if we are wrong, we may be prevented from
operating our Web sites.
WE MAY HAVE TO REGISTER OUR ENCRYPTION SOFTWARE WITH CHINESE REGULATORY
AUTHORITIES, AND IF THEY REQUEST THAT WE CHANGE OUR ENCRYPTION SOFTWARE, OUR
BUSINESS OPERATIONS WILL BE DISRUPTED AS WE DEVELOP OR LICENSE REPLACEMENT
SOFTWARE.
Pursuant to the Regulations for the Administration of Commercial Encryption
promulgated at the end of 1999, foreign and domestic Chinese companies operating
in China are required to register and disclose to Chinese regulatory authorities
the commercial encryption products they use. Because these regulations have just
recently been adopted and because they do not specify what constitutes
encryption products, we are unsure as to whether or how they apply to us and the
encryption software we utilize. We may be required to register, or apply for
permits with the relevant Chinese regulatory authorities for, our current or
future encryption software. If Chinese regulatory authorities request that we
change our encryption software, we may have to develop or license replacement
software, which could disrupt our business operations.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE, AND WE MAY BE UNABLE TO
COMPETE SUCCESSFULLY AGAINST NEW ENTRANTS AND ESTABLISHED INDUSTRY COMPETITORS,
MANY OF WHICH HAVE GREATER FINANCIAL RESOURCES THAN WE DO OR CURRENTLY ENJOY A
SUPERIOR MARKET POSITION THAN WE DO.
The Asian market for Internet content and services is competitive and rapidly
changing. Barriers to entry are minimal, and current and new competitors can
launch new Web sites at a relatively low cost. Many companies offer Chinese
language content and services, including informational and community features,
and email and electronic commerce services in the Greater China market that may
be competitive with our future offerings. We also face competition from
providers of software and other Internet products and services that incorporate
search and retrieval features into their offerings. In addition, entities that
sponsor or maintain high-traffic Web sites or that provide an initial point of
entry for Internet users, such as ISPs, including large, well-capitalized
entities such as Microsoft (MSN), Yahoo!, Cable & Wireless HKT (Netvigator) and
AOL, currently offer and could further develop or acquire content and services
that compete with those that we offer. We expect that as Internet usage in
Greater China increases and the Greater China market becomes more attractive to
advertisers and for conducting electronic commerce, large global competitors may
increasingly focus their resources on the Greater China market. We also compete
for advertisers with traditional media companies, such as newspapers, television
networks and radio stations, that have a longer history of use and greater
acceptance among advertisers. In addition, providers of Chinese language
Internet tools and services may be acquired by, receive investments from or
enter into other commercial relationships with large, well- established and
well-financed Internet, media or other companies. For example, America Online
Inc. and Xinhua News Agency, one of our content suppliers, are major
shareholders of Chinadotcom, Intel Corporation is a major shareholder of
Sohu.com, and News Corp Ltd. is a major shareholder of Netease.com.
A number of our current and potential future competitors have greater name
recognition, larger customer bases and greater financial and other resources
than we have, and may be able to more quickly react to changing consumer
requirements and demands, deliver competitive services at lower prices and more
effectively respond to new Internet technologies or technical standards.
Increased competition could result in reduced page views, loss of market
share and lower profit margins from reduced pricing for Internet-based services.
IF WE FAIL TO DEVELOP SUCCESSFULLY AND INTRODUCE NEW PRODUCTS AND SERVICES, OUR
COMPETITIVE POSITION AND ABILITY TO GENERATE REVENUES WILL BE HARMED.
We are developing new products and services. The planned timing or
introduction of new products and services is subject to risks and uncertainties.
Actual timing may differ materially from original plans. Unexpected technical,
operational, distribution or other problems could delay or prevent the
introduction of one or more of our new products or services. Moreover, we cannot
be sure that any of our new products and services will achieve widespread market
acceptance or generate incremental revenue.
WE HAVE CONTRACTED WITH THIRD PARTIES TO PROVIDE CONTENT AND SERVICES FOR OUR
PORTAL NETWORK AND TO DISTRIBUTE OUR SOFTWARE, AND WE MAY LOSE USERS AND REVENUE
IF THESE ARRANGEMENTS ARE TERMINATED.
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We have arrangements with a number of third parties to provide content and
services to our Web sites and to distribute our software. In the area of
content, we have relied and will continue to rely almost exclusively on third
parties for content that we publish under the SINA brand. Although no single
third party content provider is critical to our operations, if these parties
fail to develop and maintain high-quality and successful media properties, or if
a large number of our existing relationships are terminated, we could lose users
and advertisers and our brand could be harmed.
In the area of Web-based services, we have contracted with AltaVista and
OpenFind for integrated Web search technology to complement our directory and
navigational guide, Critical Path for our email services and third-party
providers for our principal Internet connections. If we experience significant
interruptions or delays in service, or if these agreements terminate or expire,
we may incur additional costs to develop or secure replacement services and our
relationship with our users could be harmed.
In addition, in August 1999, we entered into a joint venture agreement with
AdForce, an Internet advertising management and delivery service, pursuant to
which we will jointly provide centralized Internet advertising management and
delivery services in Greater China. We depend on AdForce's proprietary and
licensed advertising serving technology to deliver advertisements to our
network. If AdForce chooses not to continue to support this technology or if its
services fail to meet the advertising needs of our customers, our advertising
revenue would decline.
In order to create traffic for our online properties and make them more
attractive to advertisers and consumers, we have entered into distribution
agreements and informal relationships with ISPs and personal computer
manufacturers for the distribution of our software. These distribution
arrangements typically are non-exclusive, and may be terminated upon little or
no notice. If our software distributors were to terminate or modify their
distribution arrangements, our ability to promote our network and generate
revenue could be harmed.
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL THAT ARE IN HIGH DEMAND.
We depend upon the continued contributions of our senior management and other
key personnel, many of whom are difficult to replace. The loss of the services
of any of our executive officers or other key employees could harm our business.
We have experienced changes to our executive management team. Following our
acquisition of Sinanet.com, James Sha served as our chief executive officer from
March 1999 to August 1999. Mr. Sha resigned as chief executive officer on August
31, 1999 and resigned as a member of our Board of Directors on September 26,
1999. In August 1999, Zhidong Wang, who has served as our president since
October 1997, was promoted to the position of chief executive officer. Mark
Fagan served as our chief financial officer from September 1997 to June 1999, at
which time Riley Willcox was appointed chief financial officer. Mr. Willcox
resigned from this position on August 31, 1999 and Mr. Fagan served as our
interim chief financial officer until September 11, 1999. In November 1999,
Victor Lee joined us as chief financial officer. Our future success will also
depend on our ability to attract and retain highly skilled technical,
managerial, editorial, marketing and customer service personnel, especially
qualified personnel for our international operations in Greater China. In
particular, we have experienced difficulty in hiring and retaining qualified
personnel for our Hong Kong office and may experience similar problems in our
other regional offices. Qualified individuals are in high demand, and we may not
be able to successfully attract, assimilate or retain the personnel we need to
succeed.
WE MAY NOT BE ABLE TO MANAGE OUR EXPANDING OPERATIONS EFFECTIVELY, WHICH COULD
HARM OUR BUSINESS.
We anticipate significant expansion of our business as we address growth in
our customer base and market opportunities. In addition, the geographic
dispersion of our operations requires significant management resources that our
locally-based competitors do not need to devote to their operations. In order to
manage the expected growth of our operations and personnel, we will be required
to improve existing and implement new operational and financial systems,
procedures and controls, and to expand, train and manage our growing employee
base. Further, our management will be required to maintain and expand our
relationships with various other Web sites, Internet and other online service
providers and other third parties necessary to our business. We cannot assure
you that our current and planned personnel, systems, procedures and controls
will be adequate to support our future operations.
CONCERNS ABOUT THE SECURITY OF ELECTRONIC COMMERCE TRANSACTIONS AND
CONFIDENTIALITY OF INFORMATION ON THE INTERNET MAY REDUCE USE OF OUR NETWORK AND
IMPEDE OUR GROWTH.
A significant barrier to electronic commerce and communications over the
Internet in general has been public concern over security and privacy,
especially the transmission of confidential information. If these concerns are
not adequately addressed, they may inhibit the growth of the Internet and other
online services generally, especially as a means of conducting commercial
transactions. If a
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well-publicized Internet breach of security were to occur, general Internet
usage could decline, which could reduce traffic to our destination sites and
impede our growth.
CURRENCY FLUCTUATIONS AND RESTRICTIONS ON CURRENCY EXCHANGE MAY ADVERSELY AFFECT
OUR BUSINESS, INCLUDING LIMITING OUR ABILITY TO CONVERT CHINESE RENMINBI INTO
FOREIGN CURRENCIES AND, IF RENMINBI WERE TO DECLINE IN VALUE, REDUCING OUR
REVENUES IN U.S. DOLLAR TERMS.
We generate revenues and incur expenses and liabilities in Chinese renminbi,
Taiwan dollars, Hong Kong dollars, and U.S. dollars. We generated most of our
revenues for fiscal 1999 in renminbi since all of our revenues were derived from
our China operations until our acquisition of Sinanet.com in March 1999. In the
future, we may also conduct business in additional foreign countries and
generate revenues and incur expenses and liabilities in other foreign
currencies. As a result, we are subject to the effects of exchange rate
fluctuations with respect to any of these currencies. For example, the value of
the renminbi depends to a large extent on China's domestic and international
economic and political developments, as well as supply and demand in the local
market. Since 1994, the official exchange rate for the conversion of renminbi to
U.S. dollars has generally been stable and the renminbi has appreciated slightly
against the U.S. dollar. However, given recent economic instability and currency
fluctuations in Asia, we can offer no assurance that the renminbi will continue
to remain stable against the U.S. dollar or any other foreign currency. Our
results of operations and financial condition may be affected by changes in the
value of renminbi and other currencies in which our earnings and obligations are
denominated. We have not entered into agreements or purchased instruments to
hedge our exchange rate risks, although we may do so in the future.
Although Chinese governmental policies were introduced in 1996 to allow the
convertibility of renminbi into foreign currency for current account items,
conversion of renminbi into foreign exchange for capital items, such as foreign
direct investment, loans or security, requires the approval of the State
Administration of Foreign Exchange, or SAFE, which is under the authority of the
People's Bank of China. These approvals, however, do not guarantee the
availability of foreign currency. We cannot be sure that we will be able to
obtain all required conversion approvals for our operations or that Chinese
regulatory authorities will not impose greater restrictions on the
convertibility of the renminbi in the future. Because a significant amount of
our future revenues may be in the form of renminbi, our inability to obtain the
requisite approvals or any future restrictions on currency exchanges will limit
our ability to utilize revenue generated in renminbi to fund our business
activities outside China.
OUR OPERATIONS COULD BE DISRUPTED BY UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY
SYSTEM FAILURES, NATURAL DISASTERS OR UNAUTHORIZED TAMPERINGS WITH OUR SYSTEMS.
The continual accessibility of our Web sites and the performance and
reliability of our network infrastructure are critical to our reputation and our
ability to attract and retain users, advertisers and merchants. Any system
failure or performance inadequacy that causes interruptions in the availability
of our services or increases the response time of our services could reduce our
appeal to advertisers and consumers. Factors that could significantly disrupt
our operations include: system failures and outages caused by fire, floods,
earthquakes, power loss, telecommunications failures and similar events;
software errors; computer viruses, break-ins and similar disruptions from
unauthorized tampering with our computer systems; and security breaches related
to the storage and transmission of proprietary information, such as credit card
numbers or other personal information.
We have limited backup systems and redundancy. Recently, we experienced an
unauthorized tampering of the mail server of our China Web site which briefly
disrupted our operations. Future disruptions or any of the foregoing factors
could damage our reputation, require us to expend significant capital and other
resources and expose us to a risk of loss or litigation and possible liability.
We do not carry sufficient business interruption insurance to compensate for
losses that may occur as a result of any of these events. Accordingly, our
revenues and results of operations may be adversely affected if any of the above
disruptions should occur.
THE LAW OF THE INTERNET REMAINS LARGELY UNSETTLED, WHICH SUBJECTS OUR BUSINESS
TO LEGAL UNCERTAINTIES THAT COULD HARM OUR BUSINESS.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services covering issues such as
user privacy, pricing, content, copyrights, distribution, antitrust and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for electronic commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on
companies conducting business online. The adoption of any additional laws or
regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our products and services and
increase our cost of doing business.
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Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states in
the U.S. are currently reviewing the appropriate tax treatment of companies
engaged in electronic commerce, and new state tax regulations may subject us to
additional state sales and income taxes. Any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could significantly
disrupt our operations.
WE MAY BE SUBJECT TO CLAIMS BASED ON THE CONTENT WE PROVIDE OVER OUR NETWORK AND
THE PRODUCTS AND SERVICES SOLD ON OUR NETWORK, WHICH, IF SUCCESSFUL, COULD CAUSE
US TO PAY SIGNIFICANT DAMAGE AWARDS.
As a publisher and distributor of content and a provider of services over the
Internet, we face potential liability for: defamation, negligence, copyright,
patent or trademark infringement and other claims based on the nature and
content of the materials that we publish or distribute; the selection of
listings that are accessible through our branded products and media properties,
or through content and materials that may be posted by users in our classifieds,
message board and chat room services; losses incurred in reliance on any
erroneous information published by us, such as stock quotes, analyst estimates
or other trading information; unsolicited email, lost or misdirected messages,
illegal or fraudulent use of email or interruptions or delays in email service;
and product liability, warranty and similar claims to be asserted against us by
end users who purchase goods and services through our SinaMall and any future
electronic commerce services we may offer.
We may incur significant costs in investigating and defending any potential
claims, even if they do not result in liability. Although we carry general
liability insurance, our insurance may not cover potential claims of this type
or be adequate enough to indemnify us against all potential liabilities.
PRIVACY CONCERNS MAY PREVENT US FROM SELLING DEMOGRAPHICALLY TARGETED
ADVERTISING IN THE FUTURE AND MAKE US LESS ATTRACTIVE TO ADVERTISERS.
We collect personal data from our user base in order to understand better our
users and their needs and to help our advertisers target specific demographic
groups. If privacy concerns or regulatory restrictions prevent us from selling
demographically targeted advertising, we may become less attractive to
advertisers. For example, as part of our future advertisement delivery system,
we may integrate user information such as advertisement response rate, name,
address, age or email address, with third-party databases to generate
comprehensive demographic profiles for individual users. In Hong Kong, however,
we would be in violation of the Hong Kong Personal Data Ordinance unless
individual users expressly consented to this integration of their personal
information. The Ordinance provides that an Internet company may not collect
information on its users, analyze the information for a profile of the user's
interests and sell or transmit the profiles to third parties for direct
marketing purposes without the user's consent. If we are unable to construct
demographic profiles for Internet users because they refuse to give consent, we
will be less attractive to advertisers and our business will suffer.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WHICH COULD
CAUSE US TO BE LESS COMPETITIVE.
We rely on a combination of copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy or otherwise obtain and use our technology. Monitoring unauthorized use
of our products is difficult and costly, and we cannot be certain that the steps
we have taken will prevent misappropriations of our technology, particularly in
foreign countries where the laws may not protect our proprietary rights as fully
as in the United States. From time to time, we may have to resort to litigation
to enforce our intellectual property rights, which could result in substantial
costs and diversion of our resources.
WE MAY BE EXPOSED TO INFRINGEMENT CLAIMS BY THIRD PARTIES, WHICH, IF SUCCESSFUL,
COULD CAUSE US TO PAY SIGNIFICANT DAMAGE AWARDS.
Third parties may initiate litigation against us alleging infringement of
their proprietary rights. In the event of a successful claim of infringement and
our failure or inability to develop non-infringing technology or license the
infringed or similar technology on a timely basis, our business could be harmed.
In addition, even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of
operations.
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WE MAY BE CLASSIFIED AS A PASSIVE FOREIGN INVESTMENT COMPANY OR AS A FOREIGN
PERSONAL HOLDING COMPANY, WHICH COULD RESULT IN ADVERSE U.S. TAX CONSEQUENCES TO
YOU.
Based upon the nature of our income and assets, we may be classified as a
passive foreign investment company, or PFIC, or as a foreign personal holding
company, or FPHC, by the United States Internal Revenue Service for U.S. federal
income tax purposes. This characterization could result in adverse U.S. tax
consequences to you. For example, if we are a PFIC, our U.S. investors will
become subject to increased tax liabilities under U.S. tax laws and regulations
and will become subject to more burdensome reporting requirements. We believe
that we were not a PFIC or an FPHC for 1999 or previous years, and we do not
expect to be either in the future. However, the determination of whether or not
we are a PFIC or an FPHC is made on an annual basis, and those determinations
depend on the composition of our income and assets, in the case of the PFIC
rules, and income and shareholders, in the case of the FPHC rules, from time to
time. Although in the past we have operated our business, and in the future we
intend to operate our business so as to minimize the risk of PFIC or FPHC
treatment, you should be aware that certain factors that could affect our
classification as PFIC or FPHC are out of our control. For example, the
calculation of assets for purposes of the PFIC rules depends in large part upon
the amount of our goodwill, which in turn is based, in part, on the then market
value of our shares, which is subject to change. Similarly, the composition of
our income and assets is affected by the extent to which we spend the cash we
have raised on acquisitions and capital expenditures. Therefore, we cannot be
sure that we will not be a PFIC or an FPHC for the current or any future taxable
year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
INTEREST RATE RISK
The Company's investment policy requires the Company to invest its excess
cash in government or quasi-government securities and in high-quality corporate
securities and limits the amount of credit exposure to any one issuer. The
Company protects and preserves its invested funds by limiting default, market
and reinvestment risk. Due to the fact that majority of our investments are in
short-term instruments, we have concluded that there is no material market risk
exposure in this area.
FOREIGN CURRENCY EXCHANGE RATE RISK
The majority of the Company's revenues derived and expenses and liabilities
incurred were in Chinese renminbi, Taiwan dollars and Hong Kong dollars. Thus,
our revenues and operating results may be impacted by exchange rate fluctuations
in the currencies of China, Taiwan and Hong Kong. See "Certain Business
Risks--Currency fluctuations and restrictions on currency exchange may adversely
affect our business, including limiting our ability to convert Chinese renminbi
into foreign currencies and, if renminbi were to decline in value, reducing our
revenue in U.S. dollar terms." We have not tried to reduce our exposure to
exchange rate fluctuations by using hedging transactions. However, we may choose
to do so in the future. We may not be able to do this successfully. Accordingly,
we may experience economic losses and negative impacts on earnings and equity as
a result of foreign exchange rate fluctuations.
PART II---OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending or, to our knowledge,
threatened against us.
Item 2. Changes in Securities and Use of Proceeds
The effective date of the Registration Statement for the Company's initial
public offering, filed on Form F-1 under the Securities Act of 1933 (File No.
333-11718), was April 12, 2000. The class of securities registered was Ordinary
Shares. The offering commenced on April 13, 2000. The managing underwriters for
the offering were Morgan Stanley Dean Witter, China International Capital
Corporation, Chase H&Q, and Robertson Stephens.
Pursuant to the Registration Statement, the Company sold 4,600,000 shares
of its Ordinary Shares for an aggregate offering price of $78.2 million.
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The Company incurred expenses of approximately $9.1 million, of which $5.5
million represented underwriting discounts and commissions and approximately
$3.6 million represented other expenses related to the offering. The net
offering proceeds to the Company after total expenses were $ 69.1 million.
We plan to use the net proceeds for working capital and other general
corporate purposes. A portion of the net proceeds may be used for the
acquisition of businesses, products and technologies that are complementary to
our own. The remaining net proceeds have been invested in cash, cash equivalents
and short-term investments. The use of the proceeds from the offering does not
represent a material change in the use of proceeds described in the prospectus.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.1: Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by SINA.com during the quarter ended
March 31, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SINA.com
Dated: May 30, 2000 By: /s/ Victor Lee
-------------------------------------
Victor Lee
Chief Financial Officer (Principal
Financial Officer)
Dated: May 30, 2000 By: /s/ Charles Chao
-------------------------------------
Charles Chao
Vice President, Finance (Principal
Accounting Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
