<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[_] 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 001-15713
ASIAINFO HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 752506390
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4TH FLOOR, ZHONGDIAN INFORMATION TOWER
18 BAISHIQIAO ROAD, HAIDIAN DISTRICT
BEIJING 100086, CHINA
(Address of principal executive office, including zip code)
+8610 6250 1658
Registrant's telephone number, including area code
4th Floor, Ligong Science & Technology Tower
11 Baishiqiao Road, Haidian District
Beijing 100081, China
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 [_]
The number of shares outstanding of the Registrant's common stock as of
November 12, 2000 was 40,537,940
<PAGE> 2
ASIAINFO HOLDINGS, INC.
FORM 10-Q/A
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).........................................................3
a) Condensed Consolidated Statements of Operations For the
three and nine months ended September 30, 1999 and 2000..................................3
b) Condensed Consolidated Balance Sheets as of December 31, 1999
and September 30, 2000...................................................................4
c) Condensed Consolidated Statements of Cash Flows For the three
and nine months ended September 30, 1999 and 2000........................................5
d) Notes to Condensed Consolidated Financial Statements For the
nine months ended September 30, 2000.....................................................7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................................................13
Item 3 Quantitative and Qualitative Disclosure About Market Risk...............................25
PART II. OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds...............................................26
Item 5 Other Information.......................................................................26
Item 6 Exhibits and Reports on Form 8-K........................................................27
SIGNATURE ........................................................................................28
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASIAINFO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In US dollars)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
----------------------------------- -----------------------------------
1999 2000 1999 2000
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Network solutions ................... $ 21,852,312 $ 53,158,891 $ 43,672,744 $ 120,906,674
Software license .................... 1,669,310 4,909,455 4,642,523 11,144,769
------------- ------------- ------------- -------------
Total revenues ....................... 23,521,622 58,068,346 48,315,267 132,051,443
------------- ------------- ------------- -------------
Cost of revenues:
Network solutions ................... 16,219,803 48,252,719 33,531,856 111,566,209
Software license .................... 1,380 25,750 2,814 28,584
------------- ------------- ------------- -------------
Total cost of revenues .............. 16,221,183 48,278,469 33,534,670 111,594,793
------------- ------------- ------------- -------------
Gross profit ......................... 7,300,439 9,789,877 14,780,597 20,456,650
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing ................. 2,346,708 5,702,270 4,867,834 13,290,821
General and administrative .......... 2,793,578 3,499,681 6,386,453 9,273,739
Research and development ............ 895,056 1,743,171 1,993,535 4,432,965
Amortization of deferred stock
compensation ....................... 1,847,912 467,207 2,809,148 1,751,813
------------- ------------- ------------- -------------
Total operating expenses ............ 7,883,254 11,412,329 16,056,970 28,749,338
------------- ------------- ------------- -------------
Loss from operations ................ (582,815) (1,622,452) (1,276,373) (8,292,688)
------------- ------------- ------------- -------------
Other income (expense):
Interest income ..................... 203,999 2,283,139 499,018 5,503,698
Interest expense .................... (182,668) (284,876) (451,780) (894,441)
Other income, net ................... 149,302 14,310 323,632 (192,564)
------------- ------------- ------------- -------------
Total other income (expense), net ... 170,633 2,012,573 370,870 4,416,693
------------- ------------- ------------- -------------
Income (loss) before income taxes and
minority interests .................. (412,182) 390,121 (905,503) (3,875,995)
Income tax expense (benefit) ........ 121,517 (6,479) 297,271 (67,808)
------------- ------------- ------------- -------------
(Loss) income before minority
interests .......................... (533,699) 396,600 (1,202,774) (3,808,187)
Minority interests in loss of
consolidated subsidiaries .......... 21,033 18,808 84,131 18,808
Equity in loss of affiliate ......... (8,997) -- (8,997) --
------------- ------------- ------------- -------------
Net (loss) income .................... $ (521,663) $ 415,408 $ (1,127,640) $ (3,789,379)
============= ============= ============= =============
Net (loss) income per share:
Basic ............................... $ (0.04) $ 0.01 $ (0.08) $ (0.10)
============= ============= ============= =============
Diluted ............................. $ (0.04) $ 0.01 $ (0.08) $ (0.10)
============= ============= ============= =============
Shares used in computation:
Basic ............................... 14,128,275 39,841,935 13,969,317 36,133,972
============= ============= ============= =============
Diluted ............................. 14,128,275 45,456,176 13,969,317 36,133,972
============= ============= ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 4
ASIAINFO HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In US dollars)
<TABLE>
<CAPTION>
December 31, September 30,
------------- -------------
1999 2000
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ..................................... $ 25,403,884 $ 106,344,378
Restricted cash ............................................... 12,189,794 23,166,369
Short-term investment ......................................... -- 50,100,000
Accounts receivable, trade - net ............................. 21,928,036 62,099,751
Inventories ................................................... 2,908,426 1,167,401
Advance to suppliers .......................................... 228,323 782,619
Other receivables ............................................. 1,346,884 3,278,568
Deferred income taxes ......................................... 25,117 44,902
Deferred offering costs ....................................... 401,607 --
Prepaid expenses and other current assets ..................... 340,502 466,155
------------- -------------
Total current assets ........................................ 64,772,573 247,450,143
Property, plant, and equipment--net ............................. 2,183,545 5,318,671
Goodwill, at cost less accumulated amortization ................. 4,302,633 3,509,641
Deferred income taxes ........................................... 168,228 247,211
------------- -------------
Total Assets ................................................ $ 71,426,979 256,525,666
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans ......................................... $ 9,698,882 $ 19,432,837
Accounts payable .............................................. 11,867,188 51,257,586
Deferred revenue .............................................. 495,470 3,455,413
Other payables ................................................ 360,968 645,539
Accrued employee benefit ...................................... 4,810,650 9,401,634
Accrued expenses .............................................. 1,930,145 4,686,582
Other taxes payable ........................................... 2,295,030 2,020,767
Income taxes payable .......................................... 180,475 --
------------- -------------
Total current liabilities ................................... 31,638,808 90,900,358
------------- -------------
Minority interest ............................................. -- 198,589
Commitments and contingencies (Note 8)
Stockholders' Equity:
Convertible preferred stock ................................... 47,913 --
Common stock, 50,000,000 shares authorized, $0.01
par value, shares issued and outstanding: December
31, 1999, 25,532,144; September 30, 2000, 39,970,680 .......... 255,321 399,707
Additional paid-in capital ...................................... 46,118,424 173,677,702
Deferred stock compensation ................................... (3,865,373) (2,113,560)
Accumulated deficit ........................................... (2,764,854) (6,554,233)
Accumulated other comprehensive (loss) income ................. (3,260) 17,103
------------- -------------
Total stockholders' equity .................................. 39,788,171 165,426,719
------------- -------------
Total Liabilities and Stockholders' Equity .................. $ 71,426,979 $ 256,525,666
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
- 4 -
<PAGE> 5
' ASIAINFO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In US dollars)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1999 2000
------------ ------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................ $ (1,127,640) $ (3,789,379)
Adjustments to reconcile net loss to
net cash (used in) provided
by operating activities:
Depreciation ............................ 365,824 869,096
Amortization of goodwill ................ 520,719 792,992
Amortization of deferred stock
compensation ........................... 2,809,148 1,751,813
Deferred income taxes ................... (277,099) (98,769)
Minority interest in loss of consolidated
subsidiaries ........................... (84,131) (18,808)
Equity in loss of affiliate ............. (8,997) --
Gain on disposal of property, plant,
and equipment .......................... -- 90,721
Gain on sale of investment in
subsidiary ............................. (15,335) --
Provision for doubtful accounts ......... 640,103 (226,257)
Changes in operating assets and
liabilities:
Restricted cash ........................ (3,690,136) (10,944,419)
Accounts receivable .................... (660,883) (39,951,040)
Inventories ............................ 484,339 1,741,025
Advance to suppliers ................... 591,241 (554,296)
Amount due from a related party ........ 56,829 --
Other receivables ...................... 561,947 (2,118,434)
Prepaid expenses and other current
assets ................................ (758,934) (223,680)
Accounts payable ....................... (3,765,335) 39,390,398
Deferred revenue ....................... (3,655,488) 2,959,943
Other payables ......................... (8,738) (451,776)
Accrued employee benefit ............... 2,417,523 4,590,984
Accrued expenses ....................... (546,780) 2,756,437
Other taxes payable .................... 123,373 (274,263)
Income taxes payable ................... 322,343 (180,475)
------------ ------------
Net cash used in operating activities .... (5,688,113) (3,888,187)
------------ ------------
Cash flows from investing activities:
Increase in short-term investment ....... -- (50,100,000)
Purchases of property, plant, and
equipment .............................. $ (335,913) $ (4,097,065)
Increase in investment in a
subsidiary ............................. (239,000) --
Proceeds from disposal of a
subsidiary, net ........................ 33,477 --
Purchase of subsidiary-AI Zhejiang ...... (1,297,184) --
------------ ------------
Net cash used in investing activities .... (1,838,620) (54,197,065)
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements.
- 5 -
<PAGE> 6
ASIAINFO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(In US dollars)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
1999 2000
------------- -------------
(unaudited)
<S> <C> <C>
Cash flows from financing activities:
Increase in short-term bank loans ........ $ 11,585,624 $ 33,367,518
Repayment of short-term bank loans ....... (8,498,943) (23,631,629)
Net proceeds from issuance of
convertible preferred stock ............ 20,000,000 --
Net proceeds on issuance of common
stock in initial public offering ...... -- 127,851,874
Proceeds on exercise of stock options .... 66,716 1,226,210
Warrants exercised ....................... 200 400
Capital contribution by minority interest -- 217,397
------------- -------------
Net cash provided by financing activities . 23,153,597 139,031,770
------------- -------------
Net (decrease) increase in cash and cash
equivalents .............................. 15,626,864 80,946,518
Cash and cash equivalents at beginning
of period ................................ 9,749,374 25,403,884
Effect of exchange rate changes on cash
and cash equivalents ..................... (22,036) (6,024)
------------- -------------
Cash and cash equivalents at end of
period ................................... $ 25,354,202 $ 106,344,378
============= =============
Supplemental cash flow information:
Cash paid during the period:
Interest ................................. $ 441,492 $ 724,581
Income taxes ............................. 457,010 188,475
============= =============
Noncash investing and financing activities:
Deferred stock compensation .............. $ 6,589,717 $ --
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
- 6 -
<PAGE> 7
ASIAINFO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, 2000
(In US dollars)
1. GENERAL AND BASIS OF PREPARATIONS
AsiaInfo Holdings, Inc. (the "Company") was incorporated in the State of Texas,
in the United States, on June 17, 1993 and was subsequently reincorporated in
the State of Delaware in June 1998. The Company currently operates through the
following subsidiaries: AsiaInfo Technologies (China), Inc. ("AI Technology")
(100% owned), Zhejiang AsiaInfo Telecommunication Technology Co., Ltd. ("AI
Zhejiang") (100% owned) and Guangdong Wang Ying Information Technology Co., Ltd.
("Wang Ying") (40% owned, but controlled by the Company), all incorporated in
the People's Republic of China ("China" or the "PRC") and Marsec Holdings, Inc.
("Marsec") (75% owned) incorporated in August 2000 in the Cayman Islands. Two
previous subsidiaries: AsiaInfo Services Inc., and AsiaInfo-CTC Network System
Inc. were dissolved in May 1999 and August 2000, respectively. In addition, the
Company previously held a 55% interest in Beijing AsiaInfo Data Communications
Technology Co., Ltd., ("AI Data") which was consolidated until the Company's
sale of a 16.5% interest in AI Data in August 1999. AI Data was subsequently
accounted for using the equity method until December 1999, when the Company sold
its remaining interest. Marsec and Wang Ying were formed in August 2000.
The consolidated financial statements of the Company include the accounts of the
Company and its subsidiaries. Investments in 50% or less owned affiliates over
which the Company exercises significant influence, but not control, are
accounted for using the equity method. Intercompany transactions and balances
have been eliminated.
In the Company's opinion, all adjustment necessary for a fair presentation of
the unaudited results of operations for the three-month and nine-month periods
ended September 30, 1999 and 2000 are included. All such adjustments are
accruals of a normal and recurring nature. The results of operations for the
periods are not necessarily indicative of the results of operations for the full
year. The financial statements are unaudited.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at December 31, 1999 and September 30, 2000
and the reported amounts of revenues and expenses during the three-month and
nine-month periods ended September 30, 1999 and 2000. Actual results could
differ from those estimates. Revenue in excess of billings on service contracts
is recorded as unbilled receivables and included in trade accounts receivable,
and amounted to $11,945,082 at December 31, 1999 and $33,907,981 at September
30, 2000. Billings in excess of revenues recognized on service contracts are
recorded as deferred income until the revenue recognition criteria are met. At
December 31, 1999 and September 30, 2000 the balance of trade account
receivables of $9,982,954 and $28,543,352, respectively, represented amounts
billed but not yet collected. All billed and unbilled amounts are expected to be
collected within 1 year.
The financial records of the Company's PRC subsidiaries are maintained in
Renminbi. The Renminbi is not fully convertible into United States dollars or
other foreign currencies. The rate of exchange quoted by the People's Bank of
China on September 30, 2000 was US$1.00=RMB8.2798. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate or at any other rate.
- 7 -
<PAGE> 8
ASIAINFO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, 2000
(In US dollars)
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which was
amended by SFAS137 and SFAS138. This statement requires companies to record all
derivatives on the balance sheet as assets or liabilities measured at fair
value. Gains and losses resulting from changes in fair market values of those
derivative instruments would be accounted for depending on the use of the
instrument and whether it qualifies for hedge accounting. SFAS No. 133 will be
effective for the Company's year ending December 31, 2001.
In December 1999, the Securities and Exchange Committee issued Staff Accounting
Bulletin ("SAB")101, "Revenue Recognition in Financial Statements". SAB 101
establishes accounting and reporting standards for the recognition of revenue.
It states that revenue generally is realized or realizable and earned when all
of the following criteria are met: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services have been rendered; (3) the
seller's price to the buyer is fixed or determinable; (4) collectibility is
reasonably assured. SAB 101 is effective no later than the fourth quarter of
fiscal years beginning after December 15, 1999. The Company does not believe
there will be significant effect, if any, on the Company's financial position,
results of operations or cash flows from the implementation of SFAS No. 133 or
SAB 101.
Information concerning the organization and business of the Company, accounting
policies followed by the Company and other information is contained in the notes
to the Company's financial statements for the year ended December 31, 1999
prepared as part of the Company's final prospectus filed with the Securities and
Exchange Commission on March 2, 2000. This report should be read in conjunction
with such financial statements.
2. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid, low-risk debt instruments with an
original maturity at the date of purchase of three months or less to be cash
equivalents. Through March 31, 2000, the Company maintained cash and cash
equivalents in deposit accounts with major banks. Upon the completion of the
initial public offering in March 2000 (see Note 6), the Company received
additional cash which is available for investment. At September 30, 2000, cash
equivalents consist primarily of money market funds with a major financial
institution.
<TABLE>
<CAPTION>
September 30, 2000
December 31, 1999 (unaudited)
------------ ------------
<S> <C> <C>
Cash and cash equivalents:
Cash .................................... $ 25,403,884 $ 81,344,378
Money market funds ...................... -- 25,000,000
------------ ------------
Total ................................... $ 25,403,884 $106,344,378
============ ============
Short-term investment:
Time deposits with original maturities of
less than twelve months ............... $ -- $ 50,100,000
============ ============
</TABLE>
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<PAGE> 9
ASIAINFO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, 2000
(In US dollars)
3. COMPREHENSIVE INCOME (LOSS)
The components of comprehensive loss for the periods presented are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 2000
----------- -----------
(unaudited)
<S> <C> <C>
Net Loss .................................. $(1,127,640) $(3,789,379)
Change in cumulative translation adjustment (40,102) 20,363
----------- -----------
Comprehensive loss ........................ $(1,167,742) $(3,769,016)
=========== ===========
</TABLE>
4. SHORT-TERM BANK LOANS
As of September 30, 2000, the Company had total short-term credit facilities
totaling $24.8 million expiring in November, 2000 and March, 2001 for working
capital purposes. At September 30, 2000, funds available under unused short-term
credit facilities were $10 million. The loans carry interest ranging from
approximately 5.58% to 6.435% per annum and are repayable within one year. The
secured bank loans and short-term credit facilities were secured by bank
deposits of $12.2 million as of December 31, 1999 and $23.2 million as of
September 30, 2000, which are presented as restricted cash in the condensed
consolidated balance sheets.
5. INCOME TAXES
The Company is subject to US federal and state income taxes. The Company's
subsidiaries incorporated in the PRC are subject to PRC income taxes. The tax
provisions (benefit) of $297,271 and $(67,808) for the nine months ended
September 30, 1999 and 2000, respectively, represent deferred income taxes.
6. CAPITAL STOCK
Initial public offering
On March 2, 2000, the Company completed an initial public offering of its common
stock. All 5.75 million shares of common stock covered by the Company's
Registration statement on Form S-1, including shares covered by an over
allotment option that was exercised, were sold by the Company at a price of
$24.00 per share, less an underwriting discount of $1.68 per share. Net proceeds
to the Company from all shares sold were approximately $127 million. Upon the
consummation of the Company's initial public offering on March 3, 2000, all of
the outstanding preferred stock automatically converted into Common Stock.
Warrants to purchase common stock
During the nine months ended September 30, 2000 warrants to purchase 40,000
share of common stock at $0.01 per share were exercised. At September 30, 2000,
no warrants to purchase shares of common stock were outstanding.
- 9 -
<PAGE> 10
ASIAINFO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, 2000
(In US dollars)
Stock options
Option activity of the Company's stock option plans is summarized as follows:
<TABLE>
<CAPTION>
Outstanding options
-------------------------
Weighted average
exercise price
Number of shares per share
---------- ------
<S> <C> <C>
Outstanding, January 1, 2000: 8,891,811 $ 2.99
Granted ....................... 2,575,150 24.03
Cancelled ..................... (484,676) (4.53)
Exercised ..................... (1,730,450) (1.76)
---------- ------
Outstanding, September 30, 2000 9,251,835 $ 9.00
========== ======
</TABLE>
7. NET INCOME (LOSS) PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted net loss per share computations:
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- -------------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) (numerator):
Net income (loss)
Basic and diluted ................. $ (521,663) $ 415,408 $ (1,127,640) $ (3,789,379)
============ ============ ============ ============
Shares (denominator):
Weighted average
Common Stock Outstanding .......... 15,635,387 39,841,935 15,231,231 36,133,972
Outstanding subject to repurchase . 1,507,112 -- 1,261,914 --
------------ ------------ ------------ ------------
Basic ............................. 14,128,275 39,841,935 13,969,317 36,133,972
============ ============ ============ ============
Diluted ............................. 14,128,275 45,456,176 13,969,317 36,133,972
============ ============ ============ ============
Net income (loss) per share:
Basic ............................. $ (0.04) $ 0.01 $ (0.08) $ (0.10)
Diluted ........................... $ (0.04) $ 0.01 $ (0.08) $ (0.10)
</TABLE>
- 10 -
<PAGE> 11
ASIAINFO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, 2000
(In US dollars)
For the three months ended September 30, 1999 and nine months ended September
30, 1999 and 2000, the Company had securities outstanding which could
potentially dilute basic EPS in the future, but were excluded in the computation
of diluted EPS in such periods, as their effect would have been antidilutive due
to the net loss reported in these periods. The effect of dilutive securities on
net income per share for the three months ended September 30, 2000 was
insignificant. Such outstanding securities consist of the following:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------------------
1999 2000
---------- ----------
(unaudited)
<S> <C> <C>
Convertible preferred stock ................ 2,160,864 --
Shares of common stock subject to repurchase 1,498,060 --
Outstanding options ........................ 7,775,400 9,251,835
Warrants ................................... 9,489,226 --
---------- ----------
20,923,550 9,251,835
========== ==========
</TABLE>
8. COMMITMENTS
Performance options--In connection with the acquisition of AI Zhejiang, the
Company has granted management and employees of AI Zhejiang performance options
if in the year 2000, AI Zhejiang's earnings before interest and taxes ("EBIT")
exceeds AI Zhejiang's EBIT for 1999 and AI Zhejiang's combined EBIT for 1999 and
2000 exceeds $3,000,000. The total number of performance options granted will
equal the amount by which AI Zheijiang's EBIT for 1999 and 2000 exceeds
$3,000,000, expressed as a percentage and multiplied by 187,500. Each
performance option will represent the right to purchase one share of the
Company's common stock at the weighted average exercise price for stock options
granted at such time. The performance options will be granted within 30 days of
the determination of AI Zhejiang's EBIT for 2000.
Marsec Holdings, Inc.--In connection with the establishment of a majority-owned
subsidiary in the network security services business, the Company entered into a
shareholders agreement as of September 15, 2000 pursuant to which the Company is
obligated to contribute $2 million to the equity capital of the subsidiary. The
subsidiary, Marsec Holdings, Inc., is 76% owned by AsiaInfo Holdings, Inc.
- 11 -
<PAGE> 12
ASIAINFO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, 2000
(In US dollars)
9. SEGMENT AND GEOGRAPHIC OPERATING INFORMATION
Information on the Company's operating segments is as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------
1999 2000
------------ ------------------------------------------
Company
Excluding
AI Zhejiang AI Zhejiang Total
<S> <C> <C> <C> <C>
Revenues net of hardware
cost:
Network solutions net of
hardware cost ....... $ 6,342,711 $ 8,315,275 $ 74,188 $ 8,389,463
Software license ..... 1,669,310 4,531,799 377,656 4,909,455
------------ ------------ ------------ ------------
Consolidated revenues
net of hardware cost 8,012,021 12,847,074 451,844 13,298,918
Consolidated cost of
sales net of hardware
cost ................ 711,582 3,132,603 376,438 3,509,041
------------ ------------ ------------ ------------
Consolidated gross
profit .............. $ 7,300,439 $ 9,714,471 $ 75,406 $ 9,789,877
============ ============ ============ ============
Gross profit:
Network Solutions .... $ 5,632,509 $ 5,198,583 $ (292,411) $ 4,906,172
Software license ..... 1,667,930 4,515,888 367,817 4,883,705
------------ ------------ ------------ ------------
Consolidated gross
profit .............. $ 7,300,439 $ 9,714,471 $ 75,406 $ 9,789,877
============ ============ ============ ============
Income (loss) from
operations:
Network Solutions .... $ 100,307 $ (833,822) $ (349,731) $ (1,183,553)
Software license ..... $ (683,122) $ (248,574) $ (190,325) $ (438,899)
------------ ------------ ------------ ------------
Consolidated loss from
operations .......... $ (582,815) $ (1,082,396) $ (540,056) $ (1,622,452)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------------------------
1999 2000
------------ -------------------------------------------
Company
Excluding
AI Zhejiang AI Zhejiang Total
<S> <C> <C> <C> <C>
Revenues net of hardware
cost:
Network solutions net of
hardware cost ....... $ 14,105,837 $ 19,028,808 $ 332,373 $ 19,361,181
Software license ..... 4,642,523 10,037,320 1,107,449 11,144,769
------------ ------------ ------------ ------------
Consolidated revenues
net of hardware cost 18,748,360 29,066,128 1,439,822 30,505,950
Consolidated cost of
sales net of hardware
cost ................ 3,967,763 8,891,212 1,158,088 10,049,300
------------ ------------ ------------ ------------
Consolidated gross
profit .............. $ 14,780,597 $ 20,174,916 $ 281,734 $ 20,456,650
============ ============ ============ ============
Gross profit:
Network Solutions .... $ 10,140,888 $ 10,154,562 $ (814,097) $ 9,340,465
Software license ..... 4,639,709 10,020,354 1,095,831 11,116,185
------------ ------------ ------------ ------------
Consolidated gross
profit .............. $ 14,780,597 $ 20,174,916 $ 281,734 $ 20,456,650
============ ============ ============ ============
Income (loss) from
operations:
Network Solutions .... $ (440,119) $ (4,967,524) $ (1,095,191) $ (6,062,715)
Software license ..... $ (836,254) $ (1,570,548) $ (659,425) $ (2,229,973)
------------ ------------ ------------ ------------
Consolidated loss from
operations .......... $ (1,276,373) $ (6,538,072) $ (1,754,616) $ (8,292,688)
============ ============ ============ ============
</TABLE>
For the three months and nine months ended September 30, 1999 and 2000, all of
the Company's revenues have been derived from sales to customers in the People's
Republic of China. Revenues are attributed to the country based on the country
of installation of hardware and performance of system integration work. Also, as
of December 31, 1999 and September 30, 2000, 99% of the Company's long-lived
assets are located in the People's Republic of China.
- 12 -
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information, the statements contained in this Quarterly
Report on Form 10-Q are 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. The Private Securities Litigation Reform Act of 1995 (the "Reform Act")
contains certain safe harbors regarding forward-looking statements. Certain of
the forward-looking statements include management's expectations, intentions and
beliefs with respect to our growth, our operating results, the nature of the
industry in which we are engaged, our business strategies and plans for future
operations, our needs for capital expenditures, capital resources and liquidity;
and similar expressions concerning matters that are not historical facts. Such
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in the
statements. All forward-looking statements included in this document are based
on information available to us on the date hereof, and we assume no obligation
to update any such forward-looking statements. These cautionary statements are
being made pursuant to the provisions of the Reform Act with the intention of
obtaining the benefits of the safe harbor provisions of the Reform Act. Among
the factors that could cause actual results to differ materially are the factors
discussed below under the heading "Factors Affecting our Business Condition."
OVERVIEW
We are a leading provider of Internet-related, IT professional services and
software products in China. We offer total network solutions and proprietary
software to meet our customers' Internet and telecommunications infrastructure
and operating needs. We offer these services in the context of total solutions,
which include systems integration and customization of our proprietary and third
party software. We have historically sold our software products as a part of our
network solutions projects, but we are increasingly selling these products on a
stand-alone basis.
We commenced our operations in 1993 as an Internet content provider. We moved
our operations from Texas to China in 1995 and began generating significant
network solutions revenues in 1996 and significant software product revenues in
1998. While we source hardware for our customers through our U.S. parent
company, AsiaInfo Holdings, Inc., we conduct the bulk of our business through
our two wholly-owned operating subsidiaries, each of which is a Chinese company.
On April 5, 1999, we acquired AI Zhejiang, a leading Chinese producer of
wireless customer management and billing software. The acquisition reflects our
strategy of expanding the scope and size of our software operations. AI Zhejiang
was one of the earliest entrants in the market for wireless customer management
and billing software. We acquired AI Zhejiang for $2 million in cash and the
issuance of 437,500 shares of common stock to AI Zhejiang's senior management
for their past services. A wholly-owned subsidiary of AsiaInfo, AI Zhejiang's
financial results have been consolidated in our financial statements since the
date of acquisition.
We expect our business to continue to evolve as the Internet and
telecommunications markets in China change and expand. In particular, we are
investing substantial personnel and financial resources to expand our software
business, which we expect will account for a significantly greater portion of
our revenues and operating expenses in the future. Moreover, we intend to
establish arrangements with foreign companies to distribute our software
products outside of China.
We also believe that there are opportunities for us to expand into new business
areas. In particular, we plan to become an application infrastructure provider
(AIP), and have invested $0.5 million in research and development and sales and
marketing in connection with the AIP model in the third quarter of this year. We
anticipate that we will begin recognizing significant sales activity, operating
costs and revenues from the AIP business in 2001. We have also committed to
invest $2 million as a capital injection into our majority-owned network
security business called Marsec, which will focus on high-end security services
for our customers. We anticipate that Marsec will generate sales orders of
approximately $0.5 million in the fourth quarter of this year and more than
$3 million in 2001. Other areas of focus for our business development team
include Internet Data Center technologies and Wireless Data technologies and
products. In view of these recent and potential future changes
- 13 -
<PAGE> 14
to our business, our historical financial data may not be a meaningful basis
upon which to evaluate us and our prospects.
Most of our revenues are derived from customer's orders under contracts for
software licenses, systems integration services and hardware pass through costs.
These contracts constitute our backlog at any given time. Revenue for hardware,
system integration services and software products is recognized during the
course of the project. We have generated a significant portion of our historical
revenues from a limited number of customers, particularly various provincial
entities of the China Telecom system and China Unicom. At September 30, 2000,
approximately 44% of our backlog was attributable to orders placed by various
entities of the China Telecom system and China Unicom, 52% were from China
Netcom and China Mobile, and the remainder were from non-telcom customers. Of
our growing software license revenues, 44% were from non-telcom customers in the
third quarter of 2000. We believe that these figures demonstrate that the
customer base for our products and services is broadening.
We generate revenues from our two principal business lines: network solutions
and proprietary software products. Software revenues have accounted for an
increasing portion of total revenues, increasing from 2.1% of total revenues in
1997 to 8.5% of total revenues for the nine months ended September 30, 2000. We
expect that software revenues will account for a growing portion of our revenues
in the future. Network solutions revenues consist of hardware sales for
equipment procured by us on behalf of our customers from hardware vendors and
services for planning, design, systems integration, training and customization
of our proprietary and third party software. Network solutions revenues also
include fees that we earn under service contracts to maintain and upgrade
installed software. Software license revenues consist of fees received from
customers for licenses to use our products in perpetuity up to a specified
maximum number of users. Substantially all of our software revenues are derived
from our IP billing, wireless customer management and billing, and messaging
software products. Total revenue includes the costs of hardware equipment for
internet backbone construction projects, a cost that is passed on to the
customer. Our revenues from network solutions is subject to significant
fluctuation from quarter to quarter, depending on the timing of hardware
deliveries in large internet backbone projects.
Although we account for our network solutions revenues on a gross basis that
includes hardware sales, we manage our business internally based on total
revenues net of hardware costs, which is consistent with our strategy of
focusing on providing our customers with high value IT professional services,
while gradually outsourcing lower end services such as hardware installation.
This strategy may result in lower growth rates for total revenues as against
prior periods, but should not adversely impact revenues net of hardware costs.
The following table shows our revenue breakdown by business line on this basis:
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
--------------------------------------------------- -------------------
1995 1996 1997 1998 1999 2000
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Business Line
Network solutions net of hardware costs 100% 89% 93% 88% 74% 63%
Software license ...................... -- 11% 7% 12% 26% 37%
--- --- --- --- --- ---
Total revenues net of hardware costs 100% 100% 100% 100% 100% 100%
=== === === === === ===
</TABLE>
RESULTS OF OPERATIONS
REVENUES
Our total revenues were $58.1 million and $132.1 million, respectively, in the
three- and nine-month periods ended September 30, 2000, representing increases
of
- 14 -
<PAGE> 15
$34.5 million (or 147%) and $83.7 million (or 173%), respectively, over the
comparable periods in fiscal 1999. Network solutions revenues totaled $53.2
million and $120.9 million, respectively, in the three- and nine-month periods
ended September 30, 2000, representing increases of $31.3 million (or 143%) and
$77.2 million (or 177%), respectively, over the comparable periods in fiscal
1999. The increases in total revenue and network revenue during these periods
are partially attributable to high hardware pass-through costs related to our
backbone construction project for China Unicom, and to other regional backbone
construction projects. In addition, these increases represent an overall
expansion in our sales of network solutions.
Software revenues were $4.9 million and $11.1 million, respectively, in the
three- and nine-month periods ended September 30, 2000, representing increases
of $3.2 million (or 194%) and $6.5 million (or 140%), respectively, over the
comparable periods in 1999. The growth in software revenues during these periods
reflected greater demand for our products and faster development and
installation of those products. We sold, in total, $17 million in licenses for
our customer care and billing software and $3.6 million in messaging software
licenses during the quarter ended September 30, 2000. In addition, AI Zhejiang,
which we acquired in April 1999, contributed revenues of $1,851,479 for the nine
months ended September 30, 2000, 60% of which was software revenues. Recently, a
successful benchmark testing was completed on our customer care and billing
software in Tokyo on Sun Mircrosystem's platform. We believe that the high
quality of our software products has fueled software license sales and revenues.
We anticipate that our total revenues will continue to grow and that net
revenues for the fourth quarter of 2000 will increase approximately 100-110
percent over the comparable period in 1999. We expect software revenues for the
fourth quarter to grow at a rate of 160-170 percent over the comparable period
in 1999.
COST OF REVENUES
Cost of revenues consist primarily of the hardware costs we pass through to our
customers. Our cost of revenues was $48.3 million and $111.6 million,
respectively, in the three- and nine-month periods ended September 30, 2000,
representing increases of $32.1 million (or 198%) and $78.1 million (or 233%)
over the comparable periods in fiscal 1999. The increases were primarily due to
our overall business expansion. As a result of the completion of our Internet
backbone project for China Unicom, we anticipate that hardware pass-through
costs will be significantly lower in the fourth quarter of 2000.
GROSS PROFIT
Gross profit was $9.8 million and $20.5 million, respectively, for the three-
and nine-month periods ended September 30, 2000, representing increases of $2.5
million (or 34%) and $5.7 million (or 38%), respectively, over the comparable
periods in 1999. The increase in our gross profit is attributable to the
expansion of our higher-margin software business and our strategy of outsourcing
low-end system integration delivery services.
OPERATING EXPENSES
Operating expenses were $11.4 million and $28.7 million, respectively, in the
three- and nine-month periods ended September 30, 2000, representing increases
of $3.5 million (or 45%) and $12.7 million (or 79%) over the comparable periods
in 1999. The increases were primarily due to the overall expansion of our
business, and increased investments in sales and marketing and personnel
development activities. Relative to the comparable periods in 1999, operating
expenses as a percentage of revenues decreased from 34% to 20% and from 33% to
22%, respectively, in the three- and nine-month periods ended September 30,
2000. This decrease in operating expenses as a percentage of revenues is
attributable to the decreasing rate of growth in our spending on sales and
marketing and research and development. We have invested aggressively in sales
and marketing and research and development during the past two years in order to
grow our business, but we anticipate that our spending in these areas will
decrease as a percentage of revenues in the future.
Sales and marketing expenses were $5.7 million and $13.3 million, respectively,
in the three- and nine-month periods ended September 30, 2000, representing
increases of $3.4 million (or 143%) and $8.4 million (or 173%), respectively,
over the
- 15 -
<PAGE> 16
comparable periods in 1999. These increases were primarily attributable
to the implementation of new marketing activities, the hiring of additional
personnel and higher compensation levels.
Research and development expenses were $1.7 million and $4.4 million,
respectively, in the three- and nine-month periods ended September 30, 2000,
representing increases of $0.8 million (or 95%) and $2.4 million (or 122%),
respectively, over the comparable periods in 1999. These increases were
primarily due to increased spending associated with the expansion of our
software business, the hiring of additional personnel and higher compensation
levels.
General and administrative expenses increased 25% to $3.5 million and 45% to
$9.3 million for the three- and nine-month periods ended September 30, 2000,
from $2.8 million for the quarter ended September 30, 1999 and $6.4 million from
the nine-month period ended September 30, 1999. The increase in general and
administrative expenses was lower than the increases in other operating expenses
as a result of our cost control efforts in this area. General and administrative
expenses as a percentage of net revenues was 29% for the nine-months ended
September 30, 2000, but we expect these expenses to decrease as a percentage of
net revenues in the future as we achieve increasing administrative efficiency.
OTHER INCOME AND EXPENSES
Other income and expenses (net), consisting primarily of net interest income and
expense, totaled $2 million and $4.4 million for the three- and nine-month
periods ended September 30, 2000, as compared to net income of $170,633 and net
income of $370,870, respectively, for the corresponding periods in 1999. This
increase is primarily due to the investment of the funds we received upon
completion of our initial public offering in March. Interest income rose to $2.3
million and to $5.5 million for the three- and nine-month periods ended
September 30, 2000, compared to $203,999 and $499,018 for the comparable periods
in 1999. Net interest income was $2 million and $4.6 million, respectively, for
the three-and nine-month periods ended September 30, 2000.
NET INCOME (LOSS)
We recorded net income of $415,408, or $0.01 per share, for the quarter ended
September 30, 2000 and a net loss of $3.8 million, or $0.10 per share for the
nine-month period ended September 30, 2000. This is in comparison to a net loss
of $0.5 million or $0.04 per share in the quarter ended September 30, 1999 and a
net loss of $1.1 million or $0.08 per share for the nine-month period ended
September 30, 1999. Our net income for the three months ended September 30, 2000
was primarily driven by the growth of our software business and the interest
income from our cash position. We are anticipating similar results for the
fourth quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
In March 2000, we completed an initial public offering of our common stock, from
which we derived net proceeds of approximately $127 million. Total contributed
shareholder capital at September 30, 2000 was $165.4 million.
Our capital requirements are primarily working capital requirements related to
hardware sales and costs associated with the expansion of our business, such as
research and development and sales and marketing expenses. We have historically
financed our working capital and other financing requirements through careful
management of our network solutions billing cycle, private placements of equity
securities, our initial public offering in March of 2000 and, to a limited
extent, bank loans.
Our accounts receivable at September 30, 2000 were $62.1 million, consisting of
$28.2 million in billed receivables and $33.9 million in unbilled receivables.
Our unbilled receivables are based on revenue we have booked through the
percentage completion method, but for which we have not yet billed the customer.
Our billed receivables are based on revenue we have booked and billed. The
process of billing receivables in China is somewhat different than in the United
States, as customers typically do not make full payment until complete
satisfaction of the project. Despite these longer receivable cycles, since our
inception we have provided less than 1% of our accounts receivable as bad debt.
- 16 -
<PAGE> 17
Of the $28.2 million in billed receivables at September 30, 2000, 76% were under
30 days old. Our cash position increased significantly in the three month period
ended September 30, 2000 due to our well-managed collection process for a large
Internet backbone project.
We have a $10.0 million working capital line of credit with the Bank of China's
New York branch and lines of credit totalling $14.8 million with local Chinese
banks in the PRC, secured by bank deposits of $17.7 million. We have borrowed
$14.8 million under these lines of credit. As of September 30, 2000, we had
available a total of $10 million under these lines. In addition, as of September
30, 2000 we had borrowings of $4.1 million, secured by bank deposits of $5.5
million from local banks. AI Zhejiang has also drawn $500,000 on a credit line
guaranteed by AI Technology. The lines of credit and loans carry interest
ranging from 5.58% to 6.435% per annum and are repayable within one year.
We anticipate that the net proceeds of our initial public offering, together
with available funds and cash flows generated from operations and the proceeds
of our private placements, will be sufficient to meet our anticipated needs for
working capital, capital expenditures and business expansion through 2001. We
may need to raise additional funds in the future, however, in order to fund
acquisitions, to develop new or enhanced services or products, to respond to
competitive pressures to compete successfully for larger projects involving
higher levels of hardware purchases, or if our business otherwise grows more
rapidly than we currently predict. We plan to raise additional funds, if
necessary, through new issuances of shares of our equity securities through one
or more public offerings, or private placements, or through credit facilities
extended by lending institutions.
In the event that we decide to pay dividends to our shareholders, our ability to
pay dividends will depend in part on our ability to receive dividends from our
operating subsidiaries in China. Foreign exchange and other regulations in China
may restrict our ability to distribute retained earnings from our operating
subsidiaries in China or convert those payments from Renminbi into foreign
currencies.
FACTORS AFFECTING OUR BUSINESS CONDITION
In addition to the other information in this report, the following factors
should be considered in evaluating our business and our future prospects:
THE GROWTH OF OUR BUSINESS IS DEPENDENT ON GOVERNMENT BUDGETARY POLICY,
PARTICULARLY THE ALLOCATION OF FUNDS TO SUSTAIN THE GROWTH OF THE
TELECOMMUNICATIONS INDUSTRY AND THE INTERNET IN CHINA.
Virtually all of our large customers are directly or indirectly owned or
controlled by the government of the People's Republic of China (the PRC).
Accordingly, their business strategies, capital expenditure budgets and spending
plans are largely decided in accordance with government policies, which, in
turn, are determined on a centralized basis at the highest level by the State
Planning Commission of the PRC. As a result, the growth of our business is
heavily dependent on government policies for telecommunications and Internet
infrastructure.
Despite the high priority currently accorded by the government to the
development of telecommunications industry and Internet infrastructure and a
high level of funding allocated by the government to these sectors in 1999, we
believe that our customers' capital spending for Internet infrastructure was
lower in 1999 than
- 17 -
<PAGE> 18
1998 due to a variety of factors, particularly the current restructuring of the
telecommunications industry. Insufficient government allocation of funds to
sustain the growth of the telecommunications industry and the Internet in China
could reduce the demand for our products and services and thus have a material
adverse effect on our ability to maintain the current level of revenue and grow
our business.
LAWS AND REGULATIONS APPLICABLE TO THE INTERNET IN CHINA REMAIN UNSETTLED AND
COULD HAVE A MATERIAL ADVERSE EFFECT ON THE INTERNET'S GROWTH AND THEREBY HAVE
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Growth of the Internet in China could be materially adversely affected by
governmental regulation of the industry. Due to the increasing popularity and
use of the Internet and other online services, new regulations have been, and
may continue to be adopted with respect to the Internet or other online
services. The Ministry of Information Industries (MII) has recently promulgated
the "Internet Information Services Administrative Measures" and related
implementing regulations. Among other things, the "Internet Information Services
Administrative Measures":
- require ICPs to obtain approval from MII before they can list
securities overseas or obtain foreign investment;
- require ICPs to obtain licenses from various ministries, depending on
the nature of the content they provide; and
- require ICPs to police their content in order to prevent restricted
material from appearing on their websites.
Because we are engaged in Internet infrastructure development and
Internet-related software development and licensing, we do not expect these new
regulations to have a direct impact on us. However, we cannot guarantee that the
adoption of these regulations or other regulations will not slow the growth of
the Internet or other online services in China. In particular, the prohibitions
against a broad but vague range of information on the Internet (such as
information that is damaging to national security, national interest, and social
order), the relevant monitoring, record-keeping, reporting and other
administrative burdens imposed on Internet access and content providers, and the
severe penalties for violations of these regulations could have a chilling
effect on ICPs and Internet users and could lead to increased compliance costs
for ICPs. Any slow-down in the growth of the Internet in China could in turn
lead to reduced Internet traffic, a decrease in the demand for our network
solutions and Internet-related software products and increases in our cost of
doing business.
OUR CUSTOMER BASE IS HIGHLY CONCENTRATED AND THE LOSS OF ONE OR MORE OF OUR
CUSTOMERS COULD CAUSE OUR BUSINESS TO SUFFER SIGNIFICANTLY.
We have derived and believe that we will continue to derive a significant
portion of our revenues from a limited number of large customers, such as the
China Telecom system and China Unicom. Although various provincial and local
entities of the China Telecom system are separate legal entities and generally
make purchasing decisions independent of the Directorate General of
Telecommunications, or DGT, their business decisions may nonetheless be affected
by the DGT. Entities of the China Telecom system accounted for almost all of our
revenues in 1997, 1998 and 1999. At September 30, 2000, entities of the China
Telecom system and China Unicom accounted for approximately 44% of our backlog.
In the future, we expect to derive an increasing portion of our revenues from
China Unicom, China Mobile and China Netcom. The loss of the China Telecom
system, whose provincial and local entities have historically accounted for a
major portion of our business, or cancellation or deferral of any large contract
by any of our large customers would have a material adverse effect on our
revenues, and consequently our profits.
- 18 -
<PAGE> 19
THE LONG AND VARIABLE SALES CYCLES FOR OUR PRODUCTS AND SERVICES CAN CAUSE OUR
REVENUES AND OPERATING RESULTS TO VARY SIGNIFICANTLY FROM PERIOD TO PERIOD AND
MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR COMMON STOCK.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. A customer's decision to
purchase our services and products involves a significant commitment of its
resources and an extended evaluation. As a result, our sales cycle tends to be
lengthy. We spend considerable time and expense educating and providing
information to prospective customers about features and applications of our
services and products. Because our major customers operate large and complex
networks, they usually expand their networks in large increments on a sporadic
basis. The combination of these factors can cause our revenues and results of
operations to vary significantly and unexpectedly. Other factors that may affect
us include the following:
- fluctuation in demand for our products and services as a result of
budgetary cycles of our large customers, particularly state-owned
enterprises;
- the reduction, delay, interruption or termination of one or more
infrastructure projects; and
- our ability to introduce, develop and deliver new software products
that meet customer requirements in a timely manner.
A large part of the contract amount of a network solutions project usually
relates to hardware procurement. Since we recognize most of the revenues
relating to hardware plus a portion of contract services revenues at the time of
hardware delivery, the timing of hardware delivery can cause our quarterly
revenues to fluctuate significantly.
Due to the foregoing factors, we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance and
should not be relied upon. It is likely that our operating results in some
periods may be below the expectations of public market analysts and investors.
In this event, the price of our common stock will probably decline, perhaps
significantly more in percentage terms than the decline in operating results.
OUR WORKING CAPITAL REQUIREMENTS MAY INCREASE SIGNIFICANTLY.
We typically purchase hardware for our customers as part of our turnkey total
solutions services. We generally require our customers to pay 90% of the invoice
value of the hardware upon delivery. We place orders for hardware only against a
back-to-back order from customers and seek favorable payment terms from hardware
vendors. This policy has historically minimized our working capital
requirements. However, for certain large and strategically important projects,
we have agreed to payment of less than 90% of the invoice value of the hardware
upon delivery in order to maintain competitiveness. Wider adoption of less
favorable payment terms or delays in hardware deliveries would require us to
increase our working capital needs.
Our working capital requirements may also increase significantly in order to
fund more rapid expansion and acquisitions, to develop new or enhanced services
or products, to respond to competitive pressure to compete successfully for
larger projects involving higher levels of hardware purchases or otherwise if
our business grows more rapidly than we currently predict. An increase in our
working capital needs may require that we raise additional funding sooner than
we presently expect.
- 19 -
<PAGE> 20
WE HAVE SUSTAINED LOSSES IN PRIOR YEARS AND MAY INCUR SLOWER EARNINGS GROWTH,
EARNINGS DECLINES OR NET LOSSES IN THE FUTURE.
Although we made a net profit in 1996 and 1998, we have sustained losses in
1997, 1999 and prior years, and for the nine months ended September 30, 2000.
There are no assurances that we can regain or sustain profitability or avoid net
losses in the future. We continue to expect to increase our operating expenses
as our business grows. The level of these expenses will be largely based on
anticipated organizational growth and revenue trends and a high percentage will
be fixed. As a result, any delays in expanding sales volume and generating
revenue could result in substantial operating losses. Any such developments
could cause the market price of shares of our common stock to decline.
MANAGEMENT'S ABILITY TO IMPLEMENT ADEQUATE CONTROL SYSTEMS WILL BE CRITICAL TO
MANAGE SUCCESSFULLY OUR FUTURE GROWTH.
In recent years, we have been expanding our operations rapidly, both in size and
scope. Our growth places a significant strain on our management systems and
resources. Our ability to market our products successfully and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We will need to continue to improve our financial,
managerial and operational controls and reporting systems, and to expand, train
and manage our work force. We may not be able to implement adequate control
systems in an efficient and timely manner.
WE FACE A COMPETITIVE LABOR MARKET IN CHINA FOR SKILLED PERSONNEL AND THEREFORE
ARE HIGHLY DEPENDENT ON THE SKILLS AND SERVICES OF OUR EXISTING KEY SKILLED
PERSONNEL AND OUR ABILITY TO HIRE ADDITIONAL SKILLED EMPLOYEES.
Competition for highly skilled software design, engineering and sales and
marketing personnel is intense in China. Failure to attract, assimilate or
retain qualified personnel to fulfill our current or future needs could impair
our growth. Competition for skilled personnel comes primarily from a wide range
of foreign companies active in China, many of which have substantially greater
resources than us. Limitations on our ability to hire and train sufficient
number of personnel at all levels would limit our ability to undertake projects
in the future and could cause us to lose market share. We may need to increase
the levels of our employee compensation more rapidly than in the past in order
to remain competitive. These additional costs could reduce our profitability and
cause losses.
SINCE OUR BUSINESS HAS BEEN EVOLVING, OUR HISTORICAL FINANCIAL INFORMATION MAY
NOT BE AN APPROPRIATE BASIS ON WHICH TO EVALUATE US OR OUR PROSPECTS.
We moved our operations from Texas to China in 1995 and began generating
significant network solutions revenue in 1996 and significant software product
revenues in 1998. We expect our business to continue to evolve as the Internet
and telecommunications markets in China change and expand. In particular, we are
currently investing substantial personnel and financial resources in expanding
our software business, which we expect to account for a significantly greater
portion of our operating expenses and revenues than in the past. As a result,
our historical financial data may not provide a meaningful basis upon which
investors may evaluate us and our prospects. You should consider the risks and
difficulties encountered by companies like ours in a new and rapidly evolving
market. Our ability to sell products and the level of success, if any, we
achieve depends, among other things, on the level of demand for
Internet-related, professional IT services and software products in China.
WE EXTEND WARRANTIES TO OUR NETWORK SOLUTIONS CUSTOMERS THAT EXPOSE US TO
POTENTIAL LIABILITIES.
We customarily provide our customers with one to three year warranties, under
which we agree to maintain the installed systems at no additional cost to our
customers. The maintenance services cover both hardware and our proprietary and
third party software products. Although we seek to arrange back-to-back
- 20 -
<PAGE> 21
warranties with hardware and software vendors, we have the primary
responsibility to maintain the installed hardware and software. Our contracts do
not have disclaimers or limitations on liability for special, consequential and
incidental damages nor do we cap the amounts recoverable for damages. In
addition, we do not currently maintain any insurance policy with respect to our
exposure to warranty claims. Although to date we have not incurred any liability
for special, consequential or incidental damages, failure of our installed
projects to operate properly could give rise to substantial claims against us
that in turn could materially and adversely affect us, particularly because our
customers are primarily large telecommunication service providers.
WE SELL OUR LARGE SYSTEMS INTEGRATION PROJECTS ON A FIXED PRICE, FIXED-TIME
BASIS WHICH EXPOSES US TO RISKS ASSOCIATED WITH COST OVERRUNS AND DELAYS.
We sell substantially all our systems integration projects on a fixed-price,
fixed-time basis. Failure to complete a fixed-price, fixed-time project within
budget and the required time frame would expose us to cost overruns and
penalties that could have a material adverse effect on our business, operating
results and financial condition. In contracts with our customers, we typically
agree to pay late completion fines up to 5% of the total contract value. In
large scale Internet infrastructure projects, there are many factors beyond our
control which could cause delays or cost overruns. In this event, we would be
exposed to cost overruns and liable for late completion fines. A part of our
network solutions business is installing Internet network hardware. If we are
unable to obtain access to such equipment in a timely manner or on acceptable
commercial terms, our business, particularly our relationships with our
customers, may be materially and adversely affected.
WE MAY BECOME LESS COMPETITIVE IF WE ARE UNABLE TO DEVELOP OR ACQUIRE NEW
PRODUCTS OR ENHANCEMENTS TO OUR SOFTWARE PRODUCTS THAT ARE MARKETABLE ON A
TIMELY AND COST-EFFECTIVE BASIS.
We continually develop new services and proprietary software products.
Unexpected technical, operational, distribution or other problems could delay or
prevent the introduction of one or more of these products or services or any
products or services that we may plan to introduce in the future. Moreover, we
cannot be sure that any of these products and services will achieve widespread
market acceptance or generate incremental revenue.
OUR PROPRIETARY RIGHTS MAY BE INADEQUATELY PROTECTED AND THERE IS A RISK OF POOR
LAW ENFORCEMENT.
Our success and ability to compete depend substantially upon our intellectual
property rights, which we protect through a combination of copyright, trade
secret law and trademark law. We have filed trademark applications with the
United States Trademark Office and the Trademark Bureau of the State
Administration of Industry and Commerce in China. We have also been granted
copyrights by the State Copyright Bureau in China with respect to
Internet-related software products although we have not applied for copyright
protection elsewhere (including the United States). Despite these precautions,
the legal regime protecting intellectual property rights in China is weak.
Because the Chinese legal system in general and the intellectual property regime
in particular are relatively weak, it is often difficult to enforce intellectual
property rights in China. In addition, there are other countries where effective
copyright, trademark and trade secret protection may be unavailable or limited,
and the global nature of the Internet makes it virtually impossible to control
the ultimate destination of our products.
We do not own any patents and have not filed any patent applications, as we do
not believe that the benefits of patent protection outweigh the costs of filing
and updating patents for our software products. We enter into confidentiality
agreements with our employees and consultants, and control access to and
distribution of our documentation and other licensed information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use our licensed services or technology without authorization, or to develop
- 21 -
<PAGE> 22
similar technology independently. Policing unauthorized use of our licensed
technology is difficult and there can be no assurance that the steps taken by us
will prevent misappropriation or infringement of our proprietary technology. In
addition, litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others, which could result in substantial
costs and diversion of our resources.
WE ARE EXPOSED TO CERTAIN BUSINESS AND LITIGATION RISKS WITH RESPECT TO
TECHNOLOGY RIGHTS HELD BY THIRD PARTIES.
We currently license technology from third parties and intend to do so
increasingly in the future. As we introduce services that require new
technology, we will probably need to license additional third party technology.
We cannot assure you that these technology licenses will be available to us on
commercially reasonable terms, if at all. Our inability to obtain any of these
licenses could delay or compromise our ability to introduce new services. In
addition, we may or may allegedly breach the technology rights of others and
incur legal expenses and damages, which, in the aggregate, could be substantial.
INVESTORS MAY NOT BE ABLE TO ENFORCE JUDGMENTS BY UNITED STATES COURTS AGAINST
US.
We are incorporated in the State of Delaware. However, a majority of our
directors, executive officers and shareholders live outside the United States,
principally in Beijing, China and Hong Kong. Also, all or most of our assets are
located outside the United States. As a result, you may not be able to:
- effect service of process upon us or these persons within the United
States, or
- enforce against us or these persons judgments obtained in United States
courts, including judgments relating to the federal securities laws of
the United States.
WE DO NOT INTEND TO PAY AND MAY BE RESTRICTED FROM PAYING DIVIDENDS ON OUR
COMMON STOCK.
We have never declared or paid any dividends on our capital stock and we do not
intend to declare any dividends. We currently intend to retain future earnings
to fund growth. Furthermore, if we decide to pay dividends, foreign exchange and
other regulations in China may restrict our ability to distribute retained
earnings from China or convert these payments from Renminbi into foreign
currencies. In addition, loan agreements and contractual arrangements we enter
into in the future may also restrict our ability to pay dividends.
THE FACT THAT OUR BUSINESS IS CONDUCTED IN BOTH U.S. DOLLARS AND RENMINBI MAY
SUBJECT US TO CURRENCY EXCHANGE RATE RISK DUE TO FLUCTUATIONS IN THE EXCHANGE
RATE BETWEEN THESE TWO CURRENCIES.
Substantially all of our revenues, expenses and liabilities are denominated in
either U.S. dollars or Renminbi. As a result, we are subject to the effects of
exchange rate fluctuations between these currencies. The contracts we enter into
with our customers provide for price adjustments reflecting foreign exchange
fluctuations; however, we cannot guarantee that future contracts will contain
such provisions. As a result of the unitary exchange rate system introduced in
China on January 1, 1994, the official bank exchange rate for conversion of
Renminbi to U.S. dollars experienced a devaluation of approximately 50%. We
report our financial results in U.S. dollars, therefore, any future devaluation
of the Renminbi against the U.S. dollar may have an adverse effect upon our
reported net income.
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<PAGE> 23
THE MARKETS IN WHICH WE SELL OUR SERVICES AND PRODUCTS ARE HIGHLY COMPETITIVE
AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The information technology services market for Internet infrastructure in China
is new and rapidly changing. Our competitors in the market mainly include
domestic systems integrators such as Suntek and Aotian. Although we are a
leading player in this market, there are many large multinational companies with
substantial, existing information technology operations in other markets in
China, such as IBM and Hewlett-Packard, that have significantly greater
financial, technological, marketing and human resources. Should they decide to
enter the information technology services market for Internet infrastructure,
this could hurt our profitability and erode our market share.
In the customer management and billing market, we compete with both
international and local software providers. In the online billing segment, we
compete primarily with Portal Software Inc. and Suntek, and in the wireless
billing segment, we compete with more than ten local competitors. The messaging
software sector is highly competitive. Our principal competitors in this sector
are Software.com and Netease. Currently, due in part to a stringent approval
system for providers of wireless billing software in China and competitive
pricing offered by domestic companies, some multinational information technology
companies have been deterred from entering this market. In view of the gradual
deregulation of the Chinese telecommunications industry and China's pending
entry into the WTO, we anticipate the entrance of new competitors into the
customer management and billing software market.
Our competitors, some of whom have greater financial, technical and human
resources than us, may be able to respond more quickly to new and emerging
technologies and changes in customer requirements or devote greater resources to
the development, promotion and sale of new products or services. It is possible
that competition in the form of new competitors or alliances, joint ventures or
consolidation among existing competitors may decrease our market share.
Increased competition could result in lower personnel utilization rates, billing
rate reductions, fewer customer engagements, reduced gross margins and loss of
market share, any one of which could materially and adversely affect our profits
and overall financial condition.
POLITICAL AND ECONOMIC POLICIES OF THE CHINESE GOVERNMENT COULD AFFECT OUR
INDUSTRY IN GENERAL AND OUR COMPETITIVE POSITION IN PARTICULAR.
Since the establishment of the PRC in 1949, the Communist Party has been the
governing political party in China. The highest bodies of leadership are the
Politburo, the Central Committee and the National Party Congress. The State
Council, which is the highest institution of government administration, reports
to the National People's Congress and has under its supervision various
commissions, agencies and ministries, including The Ministry of Information
Industries, the telecommunications regulatory body of the Chinese government.
Since the late 1970s, the Chinese government has been reforming the Chinese
economic system. Although we believe that economic reform and the macroeconomic
measures adopted by the Chinese government have had and will continue to have a
positive effect on the economic development in China, there can be no assurance
that the economic reform strategy will not from time to time be modified or
revised. Such modifications or revisions, if any, could have a material adverse
effect on the overall economic growth of China and investment in the Internet
and the telecommunications industry in China. Such developments could reduce,
perhaps significantly, the demand for our products and services. There is no
guarantee that the Chinese government will not impose other economic or
regulatory controls that would have a material adverse effect on our business.
Furthermore, changes in political, economic and social conditions in China,
adjustments in policies of the Chinese government or changes in laws and
regulations could adversely affect our industry in general and our competitive
position in particular.
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<PAGE> 24
THE FAILURE OF CHINA TO GAIN ENTRY INTO THE WTO COULD NEGATIVELY IMPACT THE
CHINESE ECONOMY AND OUR GROWTH.
Failure by China to join the World Trade Organization, as expected, could slow
down China's economic growth and could result in lower than forecasted spending
in the telecommunications sector in China, which in turn could adversely affect
the demand for our products and services from our large customers.
UNCERTAINTIES WITH RESPECT TO THE CHINESE LEGAL SYSTEM COULD ADVERSELY AFFECT
US.
Our subsidiaries are wholly foreign owned enterprises, which are enterprises
incorporated in China and wholly-owned by foreign investors. They are subject to
laws and regulations applicable to foreign investment in China in general and
laws applicable to wholly foreign owned enterprises in particular. The
legislation and regulations over the past 20 years have significantly enhanced
the protections afforded to various forms of foreign investment in China.
However, since the Chinese legal system is still evolving, the interpretations
of many laws, regulations and rules are not always uniform and enforcement of
these laws, regulations and rules involve uncertainties, which may limit
remedies available to us.
FLUCTUATIONS IN EXCHANGE RATES COULD ADVERSELY AFFECT THE VALUE OF OUR SHARES.
Substantially all our revenues and expenses relating to hardware sales are
denominated in U.S. dollars, and substantially all our revenues and expenses
relating to the service component of our network solutions business and software
business are denominated in Renminbi. Although, in general, our exposure to
foreign exchange risks should be limited, the value in our shares may be
affected by the foreign exchange rate between the U.S. dollar and the Renminbi
because the value of our business is effectively denominated in Renminbi, while
our shares are traded in U.S. dollars. Furthermore, a decline in the value of
the Renminbi could reduce the U.S. dollar value of earnings from and our
investment in our subsidiaries in China.
HIGH TECHNOLOGY AND EMERGING MARKET SHARES HAVE HISTORICALLY EXPERIENCED EXTREME
VOLATILITY AND MAY SUBJECT YOU TO LOSSES.
The trading price of our shares may be subject to significant market volatility
due to:
- investor perceptions of us and investments relating to China and Asia;
- developments in the Internet and telecommunications industries;
- variations in our operating results from period to period due to
project timing; and
- announcements of new products or services by us or by our competitors.
In addition, the high technology sector of the stock market frequently
experiences extreme price and volume fluctuations, which have particularly
affected the market prices of many Internet and computer software companies and
which have often been unrelated to the operating performance of these companies.
FUTURE SALES OF SHARES BY OUR COMPANY OR EXISTING SHAREHOLDERS COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO FALL.
If our stockholders sell substantial amounts of our common stock in the public
market, including shares issued upon the exercise of outstanding options and
warrants, the market price of our common stock could fall. Such sales also might
make it more difficult for us to sell equity or equity-related securities in the
future at a time and price that we deem appropriate.
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<PAGE> 25
A SMALL NUMBER OF SHAREHOLDERS CONTROLS US.
Our seven largest shareholders, Warburg-Pincus Ventures, ChinaVest Group,
Fidelity International and Intel Pacific, Inc., and their affiliates, as well as
Edward Tian, one of our directors, James Ding, our Chief Executive Officer, and
Louis Lau, our Chairman, in the aggregate, control approximately 70% of our
voting stock. As a result, these shareholders are able to control all matters
requiring shareholder approval, including election of directors and approval of
significant corporate transactions, such as a sale of our assets and the terms
of future equity financings. The combined voting power of our large shareholders
could have the effect of delaying or preventing a change in control.
WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT A CHANGE OF
CONTROL OF ASIAINFO AND PREVENT YOU FROM REALIZING A PREMIUM ON YOUR INVESTMENT.
The board of directors has the authority to issue up to 10,000,000 shares of
preferred stock. Without any further vote or action on the part of the
stockholders, the board of directors has the authority to determine the price,
rights, preferences, privileges and restrictions of the preferred stock. This
preferred stock, if it is ever issued, may have preference over and harm the
rights of the holders of common stock. Although the issuance of this preferred
stock will provide us with flexibility in connection with possible acquisitions
and other corporate purposes, this issuance may make it more difficult for a
third party to acquire a majority of our outstanding voting stock.
We currently have authorized the size of our board of directors to be not less
than three nor more than nine directors. The terms of the office of the
seven-member board of directors have been divided into three classes: Class I,
whose term will expire at the annual meeting of the stockholders to be held in
2003; Class II, whose term will expire at the annual meeting of stockholders to
be held in 2001; and Class III, whose term will expire at the annual meeting of
stockholders to be held in 2002. This classification of the board of directors
may have the effect of delaying or preventing changes in control or management
of AsiaInfo.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date when the person became
an interested stockholder unless, subject to exceptions, the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to interest-rate risk primarily associated with our underlying
liabilities. To date, we have not entered into any types of derivatives to hedge
against interest-rate changes, nor do we speculate in foreign currency. However,
we do maintain a significant portion of our cash deposits in U.S. dollars to
avoid currency risk related to Renminbi. A portion of these U.S. dollar deposits
are used to collateralize Renminbi-denominated loans from Chinese banks.
Because substantially all of our revenues and expenses relating to hardware
sales are denominated in U.S. dollars, and substantially all of our revenues and
expenses relating to the service component of our network solutions business and
software business are denominated in Renminbi, we do not have significant
exposure to either U.S. dollar or Renminbi. Thus, we do not believe that it is
necessary to enter into derivatives contracts to hedge our exposures to either
currency.
We have historically been exposed to market risk related to changing interest
rates. Our primary exposure to interest-rate risk relates to the lines of credit
and short term loans described above under "Liquidity and Capital Resources."
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<PAGE> 26
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 2, 2000, our Registration Statement on Form S-1 covering the offering
of 5,000,000 shares of our common stock (No. 333-93199) was declared effective.
The underwriters in the offering exercised an over-allotment option to purchase
an additional 750,000 shares of our common stock. The total price to the public
for the shares offered and sold was $138,000,000. The net proceeds of the
offering (after deducting expenses) was approximately $126,608,884. From the
effective dates of the Registration Statement, the net proceeds have been used
for the following purposes:
<TABLE>
<S> <C>
Construction of plant, building and facilitates --
Purchase and installation of machinery and
equipment 3,744,711
Purchase of real estate --
Acquisition of other business (including
transaction costs) --
Repayment of indebtedness --
Working capital --
Temporary investments, including cash and
cash equivalents 122,719,224
Other purposes (investment in joint venture) 144,949
---------------
126,608,884
===============
</TABLE>
All of the foregoing payments were direct or indirect payments to persons other
than (i) directors, officers or their associates; (ii) persons owning ten
percent (10%) or more of the Company's common stock; or (iii) affiliates of the
Company.
ITEM 5. OTHER INFORMATION
We held our Annual Meeting of Shareholders on October 18, 2000. For more
information on the following proposals, please refer to our definitive proxy
statement dated September 15, 2000, the relevant portions of which are
incorporated herein by reference.
(1) Our shareholders elected each of the two nominees to our Board of
Directors for a three-year term:
<TABLE>
<CAPTION>
DIRECTOR FOR WITHHELD
-------- --- --------
<S> <C> <C>
James Ding 33,645,301 36,140
Alan Bickell 33,646,136 35,305
</TABLE>
(2) Our shareholders ratified the appointment of Deloitte Touche Tohmatsu
as independent auditors:
<TABLE>
<S> <C>
For 33,642,920
Against 11,208
Abstain 27,313
----------------
Total 33,681,441
</TABLE>
(3) Our shareholders approved the adoption of our 2000 Stock Option Plan:
<TABLE>
<S> <C>
For 28,653,229
Against 1,934,608
Abstain 93,343
Broker No Vote 3,000,261
----------------
Total 33,681,441
</TABLE>
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<PAGE> 27
(4) Our shareholders approved the Amendment to our Certificate of
Incorporation increasing our total number of authorized shares of
common stock to 100,000,000:
<TABLE>
<S> <C>
For 33,226,865
Against 399,469
Abstain 55,107
----------------
Total 33,681,441
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as a part of this Report.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibits
-------------- -----------------------
<S> <C>
3.1 Certificate of Incorporation of AsiaInfo, dated June
8, 1998/*/
3.2 Bye-Laws of AsiaInfo, dated June 8, 1998/*/
3.3 Certificate of Amendment to Certificate of
Incorporation of AsiaInfo, dated August 27, 1999/*/
4.1 Specimen Share Certificate representing AsiaInfo
shares of common stock/*/
10.1 2000 Stock Option Plan, approved and adopted as of
October 18, 2000
10.2 Certificate of Merger of HTC Investments, Inc., a
Delaware corporation, with and into AsiaInfo, a
Delaware corporation, dated October 13, 1999/*/
10.3 Shareholders' Agreement of Marsec Holdings Inc.,
dated as of September 15, 2000, by and among AsiaInfo
Holdings, Inc. and the Founders (as defined therein)
of Marsec Holdings, Inc.
10.4 Warrant to purchase Series A Preferred Shares of
Marsec Holdings, Inc., issued to AsiaInfo Holdings,
Inc. as of September 15, 2000
10.5 Lease of AsiaInfo's headquarters at 18 Baishiqiao
Road, Beijing, dated August 31, 1999/*/
11.1 Statement regarding computation of per share earnings
(included in Note 7 to AsiaInfo's Condensed
Consolidated Financial Statements)
27.1 Financial Data Schedules
/*/ Incorporated by reference to the same numbered
exhibit previously filed with our Registration
Statement on Form S-1 (No. 333-93199).
</TABLE>
(b) Reports on form 8-K
None.
- 27 -
<PAGE> 28
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, AsiaInfo
Holdings, Inc. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AsiaInfo Holdings, Inc.
Date: November 17, 2000 By: /s/ Ying Han
--------------------------
Ying Han
Chief Financial Officer
(duly authorized officer
and principal financial officer)
- 28 -
<PAGE> 29
INDEX TO EXHIBITS
The following exhibits are filed as a part of this Report.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<S> <C>
3.1 Certificate of Incorporation of AsiaInfo, dated June 8,
1998/(*)/
3.2 Bye-Laws of AsiaInfo, dated June 8, 1998/*/
3.3 Certificate of Amendment to Certificate of Incorporation of
AsiaInfo, dated August 27, 1999/*/
4.1 Specimen Share Certificate representing AsiaInfo shares of
common stock/*/
10.1 2000 Stock Option Plan, approved and adopted as of October 18,
2000
10.2 Certificate of Merger of HTC Investments, Inc., a Delaware
corporation, with and into AsiaInfo, a Delaware corporation,
dated October 13, 1999/*/
10.3 Shareholders' Agreement of Marsec Holdings Inc., dated as of
September 15, 2000, by and among AsiaInfo Holdings, Inc. and
the Founders (as defined therein) of Marsec Holdings, Inc.
10.4 Warrant to purchase Series A Preferred Shares of Marsec
Holdings, Inc., issued to AsiaInfo Holdings, Inc. as of
September 15, 2000
10.5 Lease of AsiaInfo's headquarters at 18 Baishiqiao Road,
Beijing, as supplemented, dated August 31, 1999/*/
11.1 Statement regarding computation of per share earnings
(included in Note 7 to AsiaInfo's Condensed Consolidated
Financial Statements)
27.1 Financial Data Schedules
/*/ Incorporated by reference to the same numbered exhibit
previously filed with the Company's Registration Statement on
Form S-1 (No. 333-93199).
</TABLE>
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