Sea Limited (the “Company”) is a limited liability company incorporated in the Cayman Islands on May 8, 2009 and conducts its business primarily through its subsidiaries and variable interest entities (“VIEs”) in markets including Singapore, Thailand, Taiwan, Vietnam, Indonesia, Malaysia and the Philippines. The Company is principally engaged in the digital entertainment, e-commerce and digital financial service businesses in the region.

Entity	Date of Incorporation/ Acquisition	Place of incorporation	Percentage of direct ownership by the Company		Principal activities
			2019	2020

Garena Online Private Limited (“Garena Online”)	May 8, 2009	Singapore	100	100	Game operations and software development

Shopee Limited (formerly known as Shopee Southeast Asia Limited)	January 16, 2015	Cayman Islands	100	100	Investment holding company

Shopee Singapore Private Limited	February 5, 2015	Singapore	100	100	Online platform

PT Shopee International Indonesia	August 5, 2015	Indonesia	100	100	Online platform

Pursuant to the loan agreements, the primary beneficiary has granted loans to the VIE Shareholders that may only be used for the purpose of acquiring equity interests in or contributing to the registered capital of these VIEs. The loans may be repaid only by transferring all of the VIE Shareholders’ equity interests in the VIE to the primary beneficiary or their respective designee upon exercise of the option under the exclusive option agreement. The loan agreements also prohibit the VIE Shareholders from assigning or transferring to any third party, or from creating or causing any security interest to be created on, any part of their equity interests in these entities. In the event that the respective VIE Shareholders sell their equity interests to the primary beneficiary or their respective designee at a price which is equal to or lower than the principal amount of the loan, the loan will be interest-free. If the price is higher than the principal amount of the loans, the excess amount will be deemed to be interest on the loans payable by the VIE Shareholders to the primary beneficiary.

In order to ensure that the Company is able to acquire all of the equity interests in the VIEs at its discretion, the primary beneficiary has entered into exclusive option agreements with the respective VIE Shareholders. Each option is exercisable by the primary beneficiary at any time, provided that doing so is not prohibited by law. The exercise price under each option is the minimum amount required by law and any proceeds obtained by the respective VIE Shareholders through the transfer of their equity interests in these VIEs shall be used for the repayment of the loan provided in accordance with the loan agreements.

During the terms of the exclusive option agreements, the VIE Shareholders will not grant a similar right or transfer any of the equity interests in these VIEs to any party other than the primary beneficiary or their respective designee, nor will it pledge, create or permit any security interest or similar encumbrance to be created on any of the equity interests. The VIEs cannot declare any profit distributions or grant loans in any form without the prior consent of the primary beneficiary. The VIE Shareholders must remit in full any funds received from the VIEs to the primary beneficiary or their respective designee in the event any distributions are made by the VIEs.

In order to ensure that the Company is able to make all of the decisions concerning the VIEs, the primary beneficiary has entered into powers of attorney with the shareholders of these VIEs. Pursuant to the powers of attorney, each VIE Shareholder has irrevocably appointed the primary beneficiary as their attorney-in-fact to act for all matters pertaining to such shareholding in these VIEs and to exercise all of their rights as shareholders, including but not limited to attending shareholders’ meetings and designating and appointing directors, supervisors, the chief executive officer and other senior management members of these entities, and selling, transferring, pledging or disposing the shares of these entities. The primary beneficiary may authorize or assign its rights to any other person or entity at its sole discretion without prior notice to or prior consent from the VIE Shareholders of these VIEs.

In order to secure the performance of the VIEs and the VIE Shareholders under the contractual arrangements, each of the VIE Shareholders of the VIEs has pledged all of their shares to the primary beneficiary. These pledges secure the contractual obligations and indebtedness of the VIE Shareholders, including all penalties, damages and expenses incurred by the primary beneficiary in connection with the contractual arrangements, and all other payments due and payable to the primary beneficiary by the respective VIEs under the exclusive business cooperation agreements and by the VIE Shareholders under the loan agreements, exclusive option agreements, and powers of attorney. Should the VIEs or their respective VIE Shareholders breach or default under any of the contractual arrangements, the primary beneficiary has the right to require the transfer of the respective VIE Shareholders’ pledged equity interests in the VIEs to the primary beneficiary or their respective designee, to the extent permitted by laws, or require a sale of the pledged equity interests and has priority in any proceeds from the auction or sale of such pledged interests. Moreover, the primary beneficiary has the right to collect any and all dividends in respect of the pledged equity interests during the term of the pledge.

Unless the respective VIEs have fully performed all of their obligations in accordance with the exclusive business cooperation agreements and the pledged equity interests have been fully transferred to the primary beneficiary or their respective designee in accordance with the exclusive option agreements and the loan agreements, the equity interest pledge agreements will continue to remain in effect.

Under the spousal consent letters, each spouse of the married VIE Shareholders of the VIEs unconditionally and irrevocably agreed that the equity interest in the respective VIE held by and registered in the name of their spouse will be disposed of pursuant to the contractual arrangements. Each spouse agreed not to assert any rights over the equity interest in these VIEs held by their spouse. In addition, in the event that the spouses obtain any equity interest in these VIEs held by their spouse for any reason, they agreed to be bound by the contractual arrangements.

In order to ensure that the Company receives the economic benefits of the VIEs, the primary beneficiary has entered into exclusive business cooperation agreements with these VIEs under which the primary beneficiary has the exclusive right to provide or to designate any third party to provide, among other things, technical support, consulting services, intellectual property licenses and other services to these VIEs, and these VIEs agree to accept all services provided by the primary beneficiary or their respective designee. Without the primary beneficiary’s prior written consent, the VIEs are prohibited from directly or indirectly engaging any third party to provide the same or any similar services under these agreements or establishing similar cooperative relationships with any third party regarding the matters contemplated by these agreements. In addition, the primary beneficiary shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of the exclusive business cooperation agreements.

The VIEs agree to pay a monthly fee to the primary beneficiary at an amount determined at the primary beneficiary’s sole discretion after taking into account factors including the complexity and difficulty of the services provided, the level of and time consumed by its employees or third party service providers designated by the primary beneficiary providing the services, the content and value of services and licenses provided and the market price of the similar type of services or licenses.

The exclusive business cooperation agreements will remain effective unless terminated in accordance with their provisions or terminated in writing by the primary beneficiary. Unless otherwise required by applicable laws, these VIEs do not have any right to terminate the exclusive business cooperation agreements in any event.

In order to ensure that the VIEs have sufficient cash flow to fund their daily operations and/or to set off any losses incurred in such operations, the primary beneficiary has entered into financial support confirmation letters with each of these VIEs. Under the financial support confirmation letters, the primary beneficiary pledges to provide continuous financial support to these VIEs by itself or their respective designee and agreed to forego its right to seek repayment in the event these entities are unable to repay such financial support or the primary beneficiary becomes liable for the liabilities of these VIEs. These VIEs agree to accept such financial support and pledge to only use such support to develop their respective businesses. To the extent permitted by law, the financial support the primary beneficiary provides to these VIEs may take the form of loans, borrowings or guarantees.

Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between the primary beneficiary and their respective VIEs, through the irrevocable power of attorney agreements, whereby the VIE Shareholders effectively assigned all of the voting rights underlying their equity interest in the respective VIEs to the primary beneficiary. Furthermore, pursuant to the loan agreements, exclusive option agreements and equity interest pledge agreements, the primary beneficiary obtained effective control over the respective VIEs, through the ability to exercise all the rights of the VIE Shareholders and therefore the power to govern the activities that most significantly impact the economic performance of the VIEs. The primary beneficiary demonstrates its ability and intention to continue to absorb substantially all the expected losses through the financial support confirmation letters. The primary beneficiary also demonstrates its ability to receive substantially all of the economic benefits of the VIEs through the exclusive business cooperation agreements. Thus, the Company consolidates these VIEs and their subsidiaries under SEC Regulation SX-3A-02 and ASC 810-10, Consolidation: Overall.

In the opinion of the Company’s management and external legal counsels, the ownership structure of our VIEs are generally in compliance with the local laws or regulations that are currently in effect, and each of the agreements among the primary beneficiary, the VIEs and/or the VIE Shareholders is valid, binding and enforceable, and do not and will not result in any violation of such laws or regulations that are currently in effect.

However, there are substantial uncertainties regarding the interpretation and application of current and future local laws and regulations. Accordingly, the Company cannot be assured that the local regulatory authorities will not ultimately take a contrary view to its opinion. If the current ownership structure of the Company and its contractual arrangements with the VIEs are found to be in violation of any existing or future local laws and regulations, the Company may be required to restructure its ownership structure and operations in certain countries to comply with the changing and new local laws and regulations. To the extent that changes and new local laws and regulations prohibit the Company’s VIE arrangements from complying with the principles of consolidation, the Company would have to deconsolidate the financial position and results of operations of its VIEs. In the opinion of management, the likelihood of loss in respect of the Company’s current ownership structure or the contractual arrangements with the VIEs is remote based on current facts and circumstances.

The aggregate carrying amounts of the total assets and total liabilities of the VIEs as of December 31, 2020 were $356,057 and $494,014, respectively (2019: $598,727 and $714,034). There were no pledges or collateralization of the VIEs’ assets. Creditors of the VIEs have no recourse to the general credit of the primary beneficiaries of the VIEs, and such amounts have been parenthetically presented on the face of the consolidated balance sheets. The VIEs hold certain assets, including land, data servers and related equipment for use in their operations. The VIEs do not own any facilities except for the rental of certain office premises, warehouses and data centers from third parties under operating lease arrangements. They also hold certain value-added technology licenses, registered copyrights, trademarks and registered domain names, including the official website, which are also considered as revenue-producing assets. However, none of such assets was recorded on the Company’s consolidated balance sheets as such assets were all acquired or internally developed with insignificant cost and expensed as incurred. In addition, the Company also hires a sales and marketing as well as a research and development workforce for its daily operations and such costs are expensed when incurred. The Company has not provided any financial or other support that it was not previously contractually required to provide to the VIEs during the periods presented.

The following tables represent the financial information of the VIEs whom the Company does not have majority voting interest as of December 31, 2019 and 2020 and for the years ended December 31, 2018, 2019 and 2020 before eliminating the intercompany balances and transactions between the VIEs and other entities within the group:

	As of December 31,
	2019 $		2020 $
ASSETS:
Current assets:
Cash and cash equivalents		111,831		94,502
Restricted cash		237,874		2,574
Accounts receivable, net		8,672		10,537
Prepaid expenses and other assets		25,586		40,822
Inventories, net		6,517		16,264
Short-term investments		30,324		9,287
Amounts due from related parties		286		–
Amounts due from intercompanies⁽¹⁾		34,432		44,928

Total current assets		455,522		218,914

Non-current assets:
Property and equipment, net		54,092		35,453
Operating lease right-of-use assets, net		27,637		25,265
Intangible assets, net		300		492
Long-term investments		13,961		16,080
Prepaid expenses and other assets		14,312		11,905
Deferred tax assets		32,903		47,948

Total non-current assets		143,205		137,143

Total assets		598,727		356,057

	As of December 31,
	2019 $		2020 $
LIABILITIES:
Current liabilities:
Accounts payable		11,274		16,183
Accrued expenses and other payables		93,146		91,186
Advances from customers		6,116		2,192
Amounts due to related parties		1,569		2,347
Short-term borrowings		1,258		–
Operating lease liabilities		8,797		9,787
Deferred revenue		133,362		212,377
Income tax payable		5,850		595
Amounts due to intercompanies⁽¹⁾		367,537		70,019

Total current liabilities		628,909		404,686

Non-current liabilities:
Accrued expenses and other payables		1,357		1,784
Long-term borrowings		358		–
Operating lease liabilities		20,129		16,527
Deferred revenue		49,325		55,200
Amounts due to intercompanies⁽¹⁾		12,980		15,710
Unrecognized tax benefits		976		107

Total non-current liabilities		85,125		89,328

Total liabilities		714,034		494,014

	For the Years Ended December 31,
	2018 $			2019 $			2020 $
Net cash generated from (used in) operating activities		67,275			(77,708	)		134,060
Net cash used in investing activities		(27,434	)		(69,181	)		(27,399	)
Net cash generated from (used in) financing activities		97,398			199,406			(13,023	)