Revenue Generation and User Engagement - The company relies heavily on a single monetization model, primarily generating revenue from virtual gifts purchased by users, which poses a risk if this model declines [27]. - Revenue growth is dependent on maintaining and increasing the paying user base and revenue per paying user; any decline in these metrics could adversely affect financial results [26]. - The company faces significant risks in retaining existing users and keeping them engaged, which is critical for sustaining revenue from live streaming services [26]. - High-quality content is essential for attracting and retaining users; failure to diversify and maintain content quality may lead to decreased viewership and engagement [28]. - The company must effectively manage relationships with talent agencies and broadcasters to ensure a steady supply of attractive content, as failure in this area could negatively impact user engagement [29]. - The company relies heavily on revenue from virtual gift sales, which is affected by user engagement and the retention of quality broadcasters [32]. - The company must adapt to a rapidly evolving market, particularly in converting non-paying users to paying users and maintaining a stable paying user base [33]. - The company’s growth strategy includes exploring new monetization avenues and developing appealing virtual gifts for users [33]. Regulatory and Compliance Risks - The company is subject to various risks related to compliance with PRC laws and regulations, which could materially affect operations and financial condition [22]. - There are uncertainties regarding the effectiveness of the company's contractual arrangements with VIEs, which could impact operational control and financial stability [21]. - The complexity and evolving nature of PRC regulations on the Internet industry create significant uncertainties for the company's operations and compliance [46]. - The company has obtained various licenses to operate in China, including an ICP License and an Internet Culture Operation License, but faces uncertainties regarding the sufficiency and renewal of these licenses [39]. - The PRC Foreign Investment Law defines foreign investment but leaves uncertainty regarding the recognition of VIE structures, which could impact the company's corporate structure [73]. - The latest negative list prohibits foreign investment in internet content services, which the company conducts through its VIEs, posing regulatory risks [73]. - The company may face civil lawsuits or regulatory actions due to user-generated content that violates PRC laws, which could lead to fines or operational restrictions [43]. - The PRC government may impose severe penalties if it deems the agreements establishing the VIE structure non-compliant with regulations, potentially leading to loss of operational rights [76]. Financial Performance and Market Conditions - In the fiscal year ended December 31, 2023, total revenues decreased by 25% compared to the fiscal year ended December 31, 2022, primarily due to a decrease in paying users and average ARPPU [33]. - The company anticipates continued increases in costs and expenses due to the need for operational improvements and workforce management [30]. - The company faces risks associated with international operations, including compliance with foreign laws and managing diverse cultures [36]. - Fluctuations in exchange rates could materially affect the company's results of operations and the value of investments [24]. - The company experiences seasonality in its business, with active users peaking in the last quarter of the year and correlating with marketing campaigns [65]. Legal and Litigation Risks - The company is exposed to risks related to litigation and potential claims, which could have adverse effects on its financial condition [19]. - The company faces potential litigation related to the use of open source software, which could impose unexpected conditions on its products and services [41]. - The company faces significant legal obstacles for overseas regulators to conduct investigations within China, which may hinder shareholder claims and regulatory actions [97]. - The company is currently not a party to any other material legal or administrative proceedings, but may face various legal disputes in the ordinary course of business [194]. Competition and Market Position - The company competes with established entertainment live streaming platforms, facing high entry barriers and intense competition for user traffic and quality broadcasters [33]. - The company faces significant competition in the mobile live streaming market from providers like Hello Group and JOYY [191]. - The company has grown its user base significantly since launching the Showself Live Streaming platform in 2014, becoming one of the leading providers in China [143]. Technology and Innovation - The company intends to continue investing in technologies such as AI, AR/VR, and big data to enhance user experience and operational efficiency [157]. - The platforms utilize AI and big data analysis to enhance user experience and improve paying ratios [189]. - The company has established strong data analytics capabilities to understand user behavior and industry trends, which is essential for driving user engagement and monetization [147]. Management and Corporate Governance - The company has a strong management team with over 20 years of experience in technology and Internet industries, which is crucial for identifying trends and seizing growth opportunities [148]. - Heshine holds 50.59% of the aggregate voting power, controlling significant shareholder actions including board elections and mergers [120]. - The dual-class share structure limits the influence of Class A shareholders and may discourage change of control transactions [122]. User Privacy and Security - The company may face challenges in addressing user privacy and security concerns, which could deter users and harm its reputation [22]. - Concerns regarding cybersecurity and data privacy could deter users and adversely affect the company's reputation and business [51]. - The company has implemented internal control measures to prevent intellectual property infringement but remains at risk of claims due to the nature of user-generated content [41]. Strategic Initiatives and Acquisitions - The company has formed a subsidiary in Dubai to expand its international operations, with a focus on Southeast Asia, the Middle East, and South America [36]. - The company has strategic plans to invest US$3 million for a 30% equity interest in DVCC TECHNOLOGY L.L.C, a metaverse company, indicating a shift towards integrating metaverse elements into its business model [153]. - The company has expanded its product lines and user base through various acquisitions, including the acquisition of Chuangda Zhihui (Beijing) Technology Co., Ltd. for RMB100,000 (US$15,692) [137]. Content Regulation and Compliance - The company must comply with strict content regulations, including prohibitions on obscenity, violence, and other illegal content [199]. - The National Radio and Television Administration mandates real-name registration for streamers and viewers on live-performance streaming platforms, with restrictions on virtual gift purchases for minors [208]. - The company is required to maintain records of live-streaming programs for at least 60 days to comply with inspection requirements from authorities [201].

Core Insights - Scienjoy Holding Corporation has launched two innovative AI products, AI Mate and AI Vision, at a high-profile event in Dubai, showcasing their potential to transform the interactive entertainment landscape [1][4]. Product Overview - **AI Mate**: A personal AI application designed to anticipate user needs through predictive personalization, offering a comprehensive daily assistant that integrates various tasks and social interactions [2]. - **AI Vision**: A platform that empowers creators to utilize proprietary visual generative models, fostering creativity and innovation by allowing users to manifest their artistic visions [3]. Company Vision and Strategy - The company aims to integrate AI technology into daily life, enhancing user experiences and promoting a creative renaissance through its innovative products [4][6]. - Scienjoy is committed to developing user-centric technologies that inspire and transform lives globally, positioning itself as a leader in the metaverse lifestyle [5][6].

BEIJING, Jan. 22, 2024 /PRNewswire/ -- Scienjoy Holding Corporation (NASDAQ: SJ) ("Scienjoy" or the "Company"), an interactive entertainment leader in the Chinese market, today announced that its Chief Financial Officer, Mr. Denny Tang, will participate and present in both group presentation and private one-on-one meetings with analysts and investors at two upcoming investor conferences. Sequire Investor Summit being held from January 23 to January 25, 2024 at Condado Vanderbilt Hotel in San Juan, Puerto R ...

Exhibit 99.1 Scienjoy Reports Second Quarter 2023 Unaudited Financial Results Second Quarter 2023 Adjusted Net Income Attributable to the Company's Shareholders up 41.3% Year Over Year BEIJING, Sept. 6, 2023 /PRNewswire/ -- Scienjoy Holding Corporation ("Scienjoy", the "Company", or "We") (NASDAQ: SJ), a leading provider of live streaming and entertainment platforms, today announced its financial results for the second quarter and first half of fiscal year 2023 ended June 30, 2023. Second Quarter 2023 Opera ...

Scienjoy Holding Corporation Fiscal Year 2022 Financial Results [Operating and Financial Highlights](index=1&type=section&id=Fiscal%20Year%202022%20Operating%20and%20Financial%20Highlights) For the fiscal year 2022, Scienjoy reported a **17.0%** increase in total net revenues to **RMB 1,953.3 million** and a **14.8%** rise in net income to **RMB 195.2 million** compared to the previous year, despite a decline in gross profit and paying users FY 2022 Key Financial Metrics (vs. FY 2021) | Metric | FY 2022 (RMB) | FY 2021 (RMB) | Change | | :--- | :--- | :--- | :--- | | Total Net Revenues | 1,953.3 million | 1,669.4 million | +17.0% | | Gross Profit | 283.2 million | 304.5 million | -7.0% | | Net Income | 195.2 million | 170.0 million | +14.8% | | Adjusted Net Income | 181.4 million | 219.0 million | -17.2% | | Total Paying Users | 702,372 | 840,640 | -16.5% | | Cash and Cash Equivalents | 175.3 million | 240.9 million | -27.2% | - The company had **320.2 million** registered users by the end of December 31, 2022[2](index=2&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) The CEO emphasized the company's solid performance despite macroeconomic challenges and outlined a forward-looking strategy focused on enhancing content quality, investing in cutting-edge technologies like VR, AR, and AI, and developing a live streaming metaverse - CEO Victor He outlined key strategic objectives to sustain growth[3](index=3&type=chunk) - Elevate content quality and invest in technology to attract and enhance user experience[3](index=3&type=chunk) - Pursue a live streaming metaverse strategy by investing in VR, AR, and AI technologies[3](index=3&type=chunk) - Construct a robust mobile live streaming ecosystem to diversify business lines[3](index=3&type=chunk) - CFO Denny Tang noted that the **17.0%** revenue growth and **14.8%** net income growth demonstrate the success of their business scaling strategy and operational efficiency[3](index=3&type=chunk) [Detailed Financial Analysis](index=2&type=section&id=Fiscal%20Year%202022%20Financial%20Results) Fiscal year 2022 revenue grew **17.0%** to **RMB 1,953.3 million**, primarily driven by the acquisition of the Hongren platform and a **39%** increase in Average Revenue Per Paying User (ARPPU) to **RMB 2,725**, which offset a decline in the number of paying users - The **17.0%** increase in total net revenues was driven by quality content from integrated platforms, including the newly acquired Hongren platform[4](index=4&type=chunk) User Metrics (FY 2022 vs. FY 2021) | Metric | FY 2022 | FY 2021 | Change | | :--- | :--- | :--- | :--- | | Paying Users | 702,372 | 840,640 | -16.5% | | Average ARPPU (RMB) | 2,725 | 1,963 | +39% | - Cost of revenues increased by **22.4%** primarily due to a **29%** (**RMB 341.2 million**) rise in revenue sharing fees and content costs, which led to a decrease in gross margin from **18%** in 2021 to **14%** in 2022[5](index=5&type=chunk) - Total operating expenses decreased by **3.7%** to **RMB 133.4 million**, largely due to a **55.8%** reduction in sales and marketing expenses and a **6.5%** drop in general and administrative expenses[6](index=6&type=chunk) Net Income and EPS (FY 2022 vs. FY 2021) | Metric | FY 2022 (RMB) | FY 2021 (RMB) | | :--- | :--- | :--- | | Net Income | 195.2 million | 170.0 million | | Net Income Attributable to Shareholders | 193.3 million | 170.0 million | | Basic and Diluted EPS (RMB) | 4.92 | 5.51 | [Business Outlook](index=3&type=section&id=Business%20Outlook) For the first quarter of 2023, Scienjoy projects its total net revenues to be in the range of **RMB 280 million** to **RMB 330 million** - The Company expects its total net revenues to be in the range of **RMB 280 million** to **RMB 330 million** in the first quarter of 2023[15](index=15&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents the company's condensed consolidated financial statements as of December 31, 2022, including the balance sheet, income statement, and a reconciliation of GAAP net income to non-GAAP adjusted net income [Condensed Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a summary of the company's financial position, detailing assets, liabilities, and equity as of December 31, 2022 and 2021 Balance Sheet Summary (in thousands RMB) | Account | Dec 31, 2022 (thousands RMB) | Dec 31, 2021 (thousands RMB) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 175,292 | 240,947 | | Total current assets | 648,782 | 652,511 | | Total non-current assets | 853,246 | 436,844 | | **TOTAL ASSETS** | **1,502,028** | **1,089,355** | | **Liabilities & Equity** | | | | Total current liabilities | 265,533 | 221,164 | | Total non-current liabilities | 74,009 | 58,746 | | **TOTAL LIABILITIES** | **339,542** | **279,910** | | **Total equity** | **1,162,486** | **809,445** | [Condensed Consolidated Statements of Income](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20AND%20COMPREHENSIVE%20INCOME) This section outlines the company's financial performance, presenting revenues, costs, and net income for the fiscal years 2022 and 2021 Income Statement Summary (in thousands RMB) | Account | FY 2022 (thousands RMB) | FY 2021 (thousands RMB) | | :--- | :--- | :--- | | Total revenue | 1,953,257 | 1,669,358 | | Cost of revenues | (1,670,068) | (1,364,902) | | **Gross profit** | **283,189** | **304,456** | | Income from operations | 149,780 | 165,969 | | Income before income taxes | 213,292 | 175,616 | | **Net income** | **195,225** | **170,012** | | Net income attributable to shareholders | 193,333 | 170,012 | [Reconciliation of Non-GAAP Results](index=9&type=section&id=Reconciliations%20of%20Non-GAAP%20Results) This section reconciles GAAP net income to non-GAAP adjusted net income, providing insights into the company's underlying operational profitability Non-GAAP Reconciliation (in thousands RMB) | Account | FY 2022 (thousands RMB) | FY 2021 (thousands RMB) | | :--- | :--- | :--- | | Net income attributable to shareholders | 193,333 | 170,012 | | Change in fair value of contingent consideration | 13,071 | (33,584) | | Change in fair value of warrants liability | 10,776 | 16,421 | | Share based compensation | (11,954) | (31,857) | | **Adjusted net income attributable to shareholders** | **181,440** | **219,032** |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of e ...

[Introduction and Forward-Looking Information](index=5&type=section&id=INTRODUCTION%20FORWARD-LOOKING%20INFORMATION) This section provides an introduction to the report and outlines forward-looking statements and associated risks [PART I](index=9&type=section&id=PART%20I) This part provides an overview of the company's business, financial data, risk factors, corporate structure, and operational details [ITEM 1. Identity of Directors, Senior Management and Advisers](index=9&type=section&id=ITEM%201.%20Identity%20of%20Directors,%20Senior%20Management%20and%20Advisers) Information on the identity of directors, senior management, and advisers is not applicable - Information on the identity of directors, senior management, and advisers is not applicable for this item[19](index=19&type=chunk) [ITEM 2. Offer Statistics and Expected Timetable](index=9&type=section&id=ITEM%202.%20Offer%20Statistics%20and%20Expected%20Timetable) Information on offer statistics and expected timetable is not applicable - Information on offer statistics and expected timetable is not applicable for this item[19](index=19&type=chunk) [ITEM 3. Key Information](index=9&type=section&id=ITEM%203.%20Key%20Information) This section provides selected financial data, capitalization and indebtedness, reasons for the offer and use of proceeds, and a comprehensive overview of risk factors affecting the company's business, corporate structure, and operations in China [A. Selected Financial Data](index=9&type=section&id=A.%20Selected%20Financial%20Data) The company's selected financial data for 2018, 2019, and 2020 shows consistent revenue growth and increasing net income, with key balance sheet and cash flow figures also provided Summary of Consolidated Statements of Income (Amounts in thousands of RMB and USD) | Indicator | 2018 RMB | 2019 RMB | 2020 RMB | 2020 USD | |:---|:---|:---|:---|:---| | Total revenue | 743,018 | 914,626 | 1,222,183 | 187,308 | | Gross profit | 148,934 | 193,989 | 262,244 | 40,191 | | Income from operations | 109,881 | 155,851 | 194,707 | 29,841 | | Net income | 106,740 | 149,918 | 176,100 | 26,988 | Summary Combined and Consolidated Balance Sheets (Amounts in thousands of RMB and USD) | Indicator | As of December 31, 2019 RMB | As of December 31, 2020 RMB | 2020 USD | |:---|:---|:---|:---|\ | Total current assets | 269,525 | 466,742 | 71,531 | | Total non-current assets | 10,473 | 345,095 | 52,889 | | TOTAL ASSETS | 279,998 | 811,837 | 124,420 | | Total current liabilities | 105,472 | 277,477 | 42,524 | | Total liabilities | 105,472 | 352,322 | 53,995 | | Total shareholder's equity | 174,526 | 459,515 | 70,425 | Summary Combined and Consolidated Cash Flow Data (Amounts in thousands of RMB and USD) | Indicator | 2018 RMB | 2019 RMB | 2020 RMB | 2020 USD | |:---|:---|:---|:---|:---|\ | Net cash provided by operating activities | 107,286 | 228,886 | 155,441 | 23,820 | | Net cash used in investing activities | (553) | (5,457) | (40,934) | (6,274) | | Net cash used in financing activities | (170,886) | (151,372) | (23,332) | (3,576) | | Net (decrease) increase in cash and cash equivalents | (64,153) | 72,057 | 87,417 | 13,397 | | Cash and cash equivalents at end of the year | 65,294 | 137,351 | 224,768 | 34,447 | [B. Capitalization and Indebtedness](index=10&type=section&id=B.%20Capitalization%20and%20Indebtedness) Information regarding capitalization and indebtedness is not applicable - Information on capitalization and indebtedness is not applicable for this item[24](index=24&type=chunk) [C. Reasons for the Offer and Use of Proceeds](index=10&type=section&id=C.%20Reasons%20for%20the%20Offer%20and%20Use%20of%20Proceeds) Information on reasons for the offer and use of proceeds is not applicable - Information on reasons for the offer and use of proceeds is not applicable for this item[24](index=24&type=chunk) [D. Risk Factors](index=10&type=section&id=D.%20Risk%20Factors.) The company faces significant risks including user retention, reliance on a single monetization model, attracting broadcasters, regulatory compliance in China, and corporate structure challenges with VIEs - The company's revenue growth is highly dependent on retaining existing users, keeping them engaged, and growing its user base, particularly **paying users** and **average revenue per paying user (ARPPU)**. Failure to do so could materially and adversely affect financial condition[25](index=25&type=chunk)[27](index=27&type=chunk) - The company primarily relies on a **single monetization model (virtual gifts)** and faces risks if it fails to diversify revenue streams or offer attractive content and retain **top broadcasters**[28](index=28&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk) - Operating in China's highly regulated internet industry, the company faces uncertainties regarding **license maintenance**, compliance with **evolving laws** (e.g., content monitoring, real-name registration), and potential **penalties for violations**, which could disrupt operations[56](index=56&type=chunk)[69](index=69&type=chunk)[76](index=76&type=chunk) - The company's corporate structure relies on **Variable Interest Entities (VIEs)** due to PRC foreign ownership restrictions. Any failure of **contractual arrangements** or changes in **PRC regulations** could lead to loss of control over operations and assets, or severe penalties[141](index=141&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - The **COVID-19 pandemic** did not have a material net impact on financial positions and operating results for the fiscal year **2020**, but its future impact on **2021 operations**, financial condition, and liquidity remains highly uncertain and unpredictable[140](index=140&type=chunk)[415](index=415&type=chunk) [ITEM 4. Information on the Company](index=36&type=section&id=ITEM%204.%20Information%20on%20the%20Company) This section details the company's history, business overview, organizational structure, and property, plants, and equipment [A. History and Development of the Company](index=36&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Scienjoy Holding Corporation was formed on May 7, 2020, through a business combination, acquiring Scienjoy Inc., and expanded its platform portfolio through the BeeLive Acquisition in August 2020 - Scienjoy Holding Corporation was formed on May 7, 2020, through a business combination with Wealthbridge Acquisition Limited, acquiring **100%** of Scienjoy Inc[9](index=9&type=chunk)[234](index=234&type=chunk) - Scienjoy Inc. launched its first live streaming APP, Showself Live Streaming, in 2014, followed by Lehai (2015) and Haixiu (2016)[235](index=235&type=chunk) - In August 2020, the company acquired BeeLive businesses, adding BeeLive Chinese (MiFeng) and BeeLive International platforms, expanding into Southeast Asia and the Middle East[242](index=242&type=chunk)[275](index=275&type=chunk) - On February 23, 2021, the company entered into a Common Stock Purchase Agreement with White Lion Capital LLC to sell up to **$30,000,000** in Ordinary Shares over a period of up to six months[244](index=244&type=chunk)[1012](index=1012&type=chunk) [B. Business Overview](index=39&type=section&id=B.%20Business%20Overview) Scienjoy is a leading mobile live streaming platform in China, operating five platforms, primarily generating revenue from virtual gift sales, with strategic plans for content enhancement, global expansion, and business diversification - Scienjoy is a leading provider of mobile live streaming platforms in China, operating **five platforms**: Showself, Lehai, Haixiu, BeeLive Chinese (MiFeng), and BeeLive International[257](index=257&type=chunk)[283](index=283&type=chunk) - The company's primary revenue source is virtual gifts purchased by users for broadcasters, with free access to live streaming rooms[261](index=261&type=chunk) User Metrics (as of December 31, 2020) | Metric | Value | |:---|:---|\ | Active Show Broadcasters | 192,389 | | Registered Users | 250.0 million | | Paying Users | 904,568 | | Annual ARPPU (2020) | RMB 1,345 | | Paying Ratio (2020) | 2.7% | - Strategic plans include providing more engaging and professional content, expanding mobile live streaming in China and overseas (Southeast Asia, Middle East, South America), diversifying business into advertising, value-added services, and e-commerce, investing in AR/VR and AI technologies, and pursuing M&A[271](index=271&type=chunk)[272](index=272&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) - The company holds **186 copyrights**, **17 domain names**, **8 patents** for live streaming technology, and **88 trademarks** in China as of April 26, 2021[324](index=324&type=chunk) [C. Organizational Structure](index=61&type=section&id=C.%20Organizational%20Structure) Scienjoy operates in China through a Variable Interest Entity (VIE) structure, comprising a WFOE and VIEs, maintained by contractual arrangements to comply with PRC foreign ownership restrictions - The company operates in China through a Variable Interest Entity (VIE) structure, comprising WFOE (Sixiang Wuxian (Beijing) Technology Co., Ltd.) and Scienjoy VIEs (Zhihui Qiyuan (Beijing) Technology Co., Ltd. and its subsidiaries)[394](index=394&type=chunk)[397](index=397&type=chunk) - The VIE structure is maintained through contractual arrangements, including Exclusive Option Agreements, Power of Attorney Agreements, and Share Pledge Agreements, which grant WFOE effective control over the VIEs and their economic benefits[397](index=397&type=chunk)[398](index=398&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)[404](index=404&type=chunk) - The contractual arrangements are designed to comply with PRC restrictions on foreign ownership in internet and other related businesses[397](index=397&type=chunk)[799](index=799&type=chunk) [D. Property, Plants and Equipment](index=64&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company leases approximately 2000 square meters for its principal executive offices in Beijing, China, with additional office space in Beijing and Xinjiang - The company leases approximately **2000 square meters** for its principal executive offices in Beijing, China[407](index=407&type=chunk) - An additional **1000 square meters** of office space is leased in Beijing and Xinjiang Uyghur Autonomous Region[407](index=407&type=chunk) [ITEM 4A. Unresolved Staff Comments](index=64&type=section&id=ITEM%204A.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments applicable to the company - There are no unresolved staff comments[407](index=407&type=chunk) [ITEM 5. Operating and Financial Review and Prospects](index=65&type=section&id=ITEM%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section discusses the company's financial condition and results of operations, including operating results, liquidity, capital resources, and key performance factors [A. Operating Results](index=65&type=section&id=A.%20Operating%20Results) The company experienced significant revenue growth in 2020, driven by increased paying users and engagement, with net income growing by 17.5% - Total revenues increased by **34%** from **RMB914.6 million** in 2019 to **RMB1,222.2 million** in 2020, driven by increased paying users and user engagement[442](index=442&type=chunk) Revenue by Type (Amounts in thousands of RMB and USD) | Revenue Type | 2018 RMB | 2019 RMB | 2020 RMB | 2020 USD | |:---|:---|:---|:---|:---|\ | Live streaming - consumable virtual items revenue | 716,561 | 884,385 | 1,187,431 | 181,982 | | Live streaming - time based virtual item revenue | 26,432 | 26,812 | 29,596 | 4,536 | | Technical services | 25 | 3,429 | 5,156 | 790 | | **Total revenue** | **743,018** | **914,626** | **1,222,183** | **187,308** | Revenue by Platform (Amounts in thousands of RMB and USD) | Platform | 2018 RMB | 2019 RMB | 2020 RMB | 2020 USD | |:---|:---|:---|:---|:---|\ | Showself | 466,460 | 530,111 | 549,763 | 84,256 | | Lehai | 190,121 | 181,626 | 180,112 | 27,603 | | Haixiu | 86,412 | 199,460 | 321,468 | 49,267 | | Beelive | - | - | 165,684 | 25,392 | | Technical services | 25 | 3,429 | 5,156 | 790 | | **TOTAL** | **743,018** | **914,626** | **1,222,183** | **187,308** | Paying Users by Platform (in thousands) | Platform | 2018 | 2019 | 2020 | |:---|:---|:---|:---|\ | Showself | 354,213 | 390,315 | 391,258 | | Lehai | 113,737 | 78,890 | 132,477 | | Haixiu | 60,507 | 228,270 | 319,403 | | Beelive | - | - | 61,430 | | **TOTAL** | **528,457** | **697,475** | **904,568** | - Net income increased by **17.5%** from **RMB149.9 million** in 2019 to **RMB176.1 million** in 2020[449](index=449&type=chunk) [B. Liquidity and Capital Resources](index=81&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily from operating activities and financing, with cash and cash equivalents increasing to RMB224.8 million by December 31, 2020, sufficient for future needs - Cash and cash equivalents increased to **RMB224,768 thousand (US$34,447 thousand)** as of December 31, 2020, from **RMB137,351 thousand** as of December 31, 2019[22](index=22&type=chunk)[518](index=518&type=chunk) Summary of Cash Flow Data (Amounts in thousands of RMB and USD) | Cash Flow Activity | 2018 RMB | 2019 RMB | 2020 RMB | 2020 USD | |:---|:---|:---|:---|:---|\ | Net cash provided by operating activities | 107,286 | 228,886 | 155,441 | 23,820 | | Net cash used in investing activities | (553) | (5,457) | (40,934) | (6,274) | | Net cash used in financing activities | (170,886) | (151,372) | (23,332) | (3,576) | - The company expects its current cash, operating activities, and financing to be sufficient for working capital and capital expenditures for at least the next **12 months**[516](index=516&type=chunk) [C. Research and Development, Patents and Licenses, etc.](index=94&type=section&id=C.%20Research%20and%20Development,%20Patents%20and%20Licenses,%20etc.) This section refers to the detailed information on the company's technology, patents, and licenses provided in the 'Business Overview' section - Details on research and development, patents, and licenses are provided in the 'Business Overview' section (Item 4.B)[527](index=527&type=chunk) [D. Trend Information](index=84&type=section&id=D.%20Trend%20Information) The company is not aware of any new material adverse trends, uncertainties, demands, commitments, or events beyond those already disclosed - No new material adverse trends, uncertainties, demands, commitments, or events are identified beyond those already disclosed in the report[528](index=528&type=chunk) [E. Off-Balance Sheet Arrangements](index=84&type=section&id=E.%20Off-Balance%20Sheet%20Arrangements) The company has not entered into any off-balance sheet arrangements, including financial guarantees or derivative contracts - The company has no off-balance sheet arrangements, including financial guarantees, commitments to third parties, or derivative contracts indexed to its shares[529](index=529&type=chunk) [F. Tabular Disclosure of Contractual Obligations](index=84&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2020, the company's primary contractual obligation is related to operating leases, totaling RMB18,649 thousand Contractual Obligations as of December 31, 2020 (in RMB Thousands) | Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |:---|:---|:---|:---|:---|:---|\ | Operating Lease Obligations | 18,649 | 4,927 | 8,983 | 4,739 | - | [G. Safe Harbor](index=84&type=section&id=G.%20Safe%20Harbor) This section directs readers to the 'Forward-Looking Information' for details on forward-looking statements and associated risks - This section directs readers to the 'Forward-Looking Information' for details on forward-looking statements and associated risks[532](index=532&type=chunk) [ITEM 6. Directors, Senior Management and Employees](index=85&type=section&id=ITEM%206.%20Directors,%20Senior%20Management%20and%20Employees) This section provides information on the company's directors, executive officers, their compensation, board practices, employee breakdown, and share ownership [A. Directors and Executive Officers](index=85&type=section&id=A.%20Directors%20and%20Executive%20Officers) The company's senior management and board of directors include key executives and independent directors, with a six-year Voting Agreement dictating director designations Senior Management and Directors | Name | Age | Position | |:---|:---|:---|\ | Xiaowu He | 44 | Director, Chief Executive Officer, and Chairman of the Board | | Bo Wan | 44 | Director, Chief Operating Officer | | Denny Tang | 50 | Chief Financial Officer | | Yongsheng Liu | 50 | Director, Vice Chairman of the Board | | Jining Li | 62 | Independent Director | | Huifeng Chang | 54 | Independent Director | | Jian Sun | 38 | Independent Director | | Yibing Liu | 47 | Independent Director | - A six-year Voting Agreement grants Lavacano and WBY the right to designate **2-3 directors** and **3 independent directors**, while Sponsor can designate **1 director** and **1 independent director**[544](index=544&type=chunk) [B. Compensation of Directors and Executive Officers](index=87&type=section&id=B.%20Compensation%20of%20Directors%20and%20Executive%20Officers) For FY2020, aggregate cash compensation to directors and executive officers was RMB2.26 million (US$0.34 million), and an equity incentive plan was approved for future awards - Aggregate cash compensation to directors and executive officers for FY2020 was **RMB2.26 million (US$0.34 million)**[546](index=546&type=chunk) - An equity incentive plan (2021 Plan) was approved on February 8, 2021, authorizing up to **3,000,000 ordinary shares** for awards, but no awards have been granted as of the report date[548](index=548&type=chunk) [C. Board Practices](index=88&type=section&id=C.%20Board%20Practices) The Board of Directors consists of seven members with staggered terms and three standing committees (Audit, Nominating, Compensation) all composed of independent directors - The Board of Directors has **seven members**, with a staggered board structure and rotational retirement every two years[552](index=552&type=chunk)[637](index=637&type=chunk) - Three standing committees exist: Audit, Nominating, and Compensation, all comprised of independent directors[556](index=556&type=chunk) - Executive officers have employment agreements with operating subsidiaries, including non-compete and confidentiality clauses, while non-executive directors have service agreements[554](index=554&type=chunk)[555](index=555&type=chunk) [D. Employees](index=100&type=section&id=D.%20Employees) The company's total employee count increased from 197 in 2019 to 249 in 2020, with all employees located in China - Total employees increased from **197** in 2019 to **249** in 2020, all located in China[561](index=561&type=chunk) Employee Breakdown by Function | Functions | As of December 31, 2019 Number (%) | As of December 31, 2020 Number (%) | |:---|:---|:---|\ | General Operations | 70 (35.5%) | 89 (35.8%) | | Research and Development | 58 (29.4%) | 70 (28.1%) | | Sales and Marketing | 18 (9.1%) | 18 (7.2%) | | Legal and Internal Audit | 2 (1.1%) | 1 (0.4%) | | General Administration | 35 (17.8%) | 46 (18.5%) | | Product | 14 (7.1%) | 25 (10.0%) | | **Total** | **197 (100%)** | **249 (100%)** | [E. Share Ownership](index=90&type=section&id=E.%20Share%20Ownership) As of April 26, 2021, Lavacano Holdings Limited is the controlling shareholder with 58.41% of ordinary shares, with directors and officers owning 20.29% as a group Beneficial Ownership of Ordinary Shares (as of April 26, 2021) | Name of Beneficial Owners | Percentage of Outstanding Shares | |:---|:---|\ | Lavacano Holdings Limited | 58.41% | | Cosmic Soar Limited | 14.07% | | WBY Entertainment Holdings Ltd. | 14.60% | | Oriental Holdings Limited | 5.28% | | All directors and officers as a group | 20.29% | - Lavacano Holdings Limited is the controlling shareholder, holding **58.41%** of the ordinary shares[567](index=567&type=chunk) - The percentages are based on **30,764,592 ordinary shares** and **6,023,800 warrants** outstanding as of April 26, 2021[565](index=565&type=chunk) [ITEM 7. Major Shareholders and Related Party Transactions](index=91&type=section&id=ITEM%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details the company's major shareholders and various transactions with related parties, including insider share agreements, private placements, and earn-out shares [A. Major Shareholders](index=91&type=section&id=A.%20Major%20Shareholders) This section refers to the 'Share Ownership' section (Item 6.E) for details on major shareholders - Information on major shareholders is provided in 'Item 6.E. Share Ownership'[569](index=569&type=chunk) [B. Related Party Transactions](index=102&type=section&id=B.%20Related%20Party%20Transactions) The company has engaged in various related party transactions, including founder shares, private placements, extension loans, and earn-out shares, with oversight by the Code of Conduct and Audit Committee - Founder shares were issued to Initial Shareholders, and Private Units were purchased by the Sponsor, with specific lock-up and transfer restrictions[572](index=572&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk) - Scienjoy provided an unsecured promissory note of **$575,000** for a business combination extension, which converted into **50,600 Ordinary Shares** and **12,650 warrants** for Lavacano and WBY[576](index=576&type=chunk) - Additional earn-out shares were issued: **3,000,000 ordinary shares** to Lavacano and WBY for achieving 2020 net income targets, and **540,960 ordinary shares** to Cosmic Soar Limited for BeeLive's 2020 revenue target[589](index=589&type=chunk)[598](index=598&type=chunk)[1015](index=1015&type=chunk)[1016](index=1016&type=chunk) Purchases from Related Parties (Amounts in thousands of RMB) | Related Party | Type of Expense | 2018 RMB | 2019 RMB | 2020 RMB | |:---|:---|:---|:---|:---|\ | Beijing WanPu Century Technology Co Ltd | Market promotion expenses | 16 | 16 | - | | Sixiang Times (Beijing) Technology Co., Ltd. | Rental and service fees | 8,399 | 986 | 2,106 | Balances with Related Parties (Amounts in thousands of RMB and USD) | Account | As of December 31, 2019 RMB | As of December 31, 2020 RMB | 2020 USD | |:---|:---|:---|:---|\ | Loan receivables - related parties | 500 | - | - | | Amount due from related parties | 7 | 7 | 1 | | Loan payables - related parties | 5,525 | - | - | | Amount due to related parties | 8,482 | - | - | - The company's Code of Conduct and Ethics and Audit Committee are responsible for reviewing and approving related party transactions to avoid conflicts of interest[612](index=612&type=chunk) [C. Interests of Experts and Counsel](index=99&type=section&id=C.%20Interests%20of%20Experts%20and%20Counsel) Information regarding the interests of experts and counsel is not applicable - Information on the interests of experts and counsel is not applicable for this item[613](index=613&type=chunk) [ITEM 8. Financial Information](index=100&type=section&id=ITEM%208.%20Financial%20Information) This section refers to the company's audited consolidated financial statements and discusses its dividend policy, noting no current plans to pay dividends and restrictions from PRC subsidiaries [A. Consolidated Statements and Other Financial Information](index=100&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) Audited consolidated financial statements are included in Item 18, and the company has no material legal proceedings or current plans to pay dividends, retaining earnings for expansion - Audited consolidated financial statements are included in Item 18 of this annual report[615](index=615&type=chunk) - The company is not a party to any material legal or administrative proceedings[616](index=616&type=chunk) - The company has no present plans to pay dividends, intending to retain earnings for business expansion. Dividends from PRC subsidiaries are subject to PRC accounting standards and statutory reserve requirements[617](index=617&type=chunk)[619](index=619&type=chunk) [B. Significant Changes](index=100&type=section&id=B.%20Significant%20Changes) No significant changes have occurred since the date of the audited consolidated financial statements, beyond those already disclosed - No significant changes have occurred since the date of the audited consolidated financial statements, beyond those already disclosed[620](index=620&type=chunk) [ITEM 9. The Offer and Listing](index=101&type=section&id=ITEM%209.%20The%20Offer%20and%20Listing) The company's ordinary shares are listed on Nasdaq Capital Market under 'SJ' and Public Warrants on OTC under 'SJOYW', with other offer and listing sub-items not applicable - The company's ordinary shares are listed on the Nasdaq Capital Market under the symbol 'SJ'[621](index=621&type=chunk) - Public Warrants are traded on OTC under the symbol 'SJOYW'[621](index=621&type=chunk) - Sub-items A, B, D, E, and F regarding offer and listing details, plan of distribution, selling shareholders, dilution, and expenses of the issue are not applicable[621](index=621&type=chunk) [ITEM 10. Additional Information](index=101&type=section&id=ITEM%2010.%20Additional%20Information) This section provides additional corporate information, including share capital, Memorandum and Articles of Association, material contracts, exchange controls, and taxation in the BVI, PRC, and US [A. Share Capital](index=101&type=section&id=A.%20Share%20Capital) The company is authorized to issue an unlimited number of no par value ordinary shares, with 30,764,592 outstanding as of April 26, 2021, conferring equal voting and dividend rights - The company is authorized to issue an unlimited number of no par value ordinary shares[623](index=623&type=chunk) - As of April 26, 2021, **30,764,592 ordinary shares** were issued and outstanding[623](index=623&type=chunk) - Ordinary shares confer one vote per share, equal dividend rights, and equal rights in surplus asset distribution upon liquidation[624](index=624&type=chunk) [B. Memorandum and Articles of Association](index=101&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company's governance is based on its BVI Memorandum and Articles of Association and BVI Act, with key differences from Delaware corporate law in areas like director fiduciary duties and amendment procedures [Voting Rights](index=112&type=section&id=Voting%20Rights) Each ordinary share grants one vote at shareholder meetings, with voting typically by show of hands and requiring a simple majority - Each ordinary share confers one vote at shareholder meetings[628](index=628&type=chunk) - Voting is by show of hands unless a poll is demanded, and a simple majority of votes cast is usually required[628](index=628&type=chunk)[630](index=630&type=chunk) - The company's Memorandum and Articles of Association do not provide for cumulative voting for director elections[629](index=629&type=chunk) [Dividend Rights](index=112&type=section&id=Dividend%20Rights) Each ordinary share has an equal right to any dividend, which directors can authorize if the company's assets exceed liabilities and it remains solvent - Each ordinary share has an equal right to any dividend paid by the company[631](index=631&type=chunk) - Directors can authorize dividends if the company's assets exceed liabilities and it remains solvent after the distribution[631](index=631&type=chunk) [Preemption Rights](index=112&type=section&id=Preemption%20Rights) Neither BVI laws nor the company's articles provide for statutory preemption rights applicable to the issuance of new shares - There are no preemption rights applicable to the issuance of new shares under BVI laws or the company's Memorandum and Articles of Association[632](index=632&type=chunk) [Liquidation Rights](index=112&type=section&id=Liquidation%20Rights) A voluntary liquidator can be appointed by a resolution of shareholders or, under specific BVI Act provisions, by a resolution of directors - A voluntary liquidator can be appointed by a resolution of shareholders or, subject to BVI Act section 199(2), by a resolution of directors[632](index=632&type=chunk) [Transfer of Shares](index=113&type=section&id=Transfer%20of%20Shares) Shares can be transferred by a written instrument, subject to SEC and securities law compliance, in a standard or director-approved form - Shares can be transferred by a written instrument, subject to SEC and securities law compliance[633](index=633&type=chunk) - The transfer instrument must be in a standard form or one approved by directors[633](index=633&type=chunk) [Share Repurchases and Redemptions](index=113&type=section&id=Share%20Repurchases%20and%20Redemptions) The company can repurchase, redeem, or acquire its shares, provided directors confirm the company's solvency immediately following such transactions - The company can repurchase, redeem, or acquire its shares[634](index=634&type=chunk) - Directors must confirm the company's solvency immediately following any such transaction[634](index=634&type=chunk) [Board of Directors](index=113&type=section&id=Board%20of%20Directors) The Board has seven directors, with a minimum of two, who can incur indebtedness and set their own emoluments, with a quorum of one-half of total directors - The Board has **seven directors**, with a minimum of two and no maximum limit[635](index=635&type=chunk) - Directors can incur indebtedness and set their own emoluments[635](index=635&type=chunk)[636](index=636&type=chunk) - A quorum for board meetings is one-half of the total directors, or two if there are only two[635](index=635&type=chunk) [Staggered Board of Directors](index=113&type=section&id=Staggered%20Board%20of%20Directors) The Board has a staggered structure with two classes of directors, subject to rotational retirement every two years, preventing simultaneous re-election of all directors - The Board has a staggered structure with two classes of directors[637](index=637&type=chunk) - Directors are subject to rotational retirement every two years, preventing all directors from being re-elected simultaneously[637](index=637&type=chunk) [Meetings of Shareholders](index=113&type=section&id=Meetings%20of%20Shareholders) Directors can convene shareholder meetings with 7 days' notice, or upon request by shareholders holding 30% or more of voting rights, with a 50% quorum requirement - Directors can convene shareholder meetings with a minimum of **7 days'** written notice[638](index=638&type=chunk) - Shareholders holding **30%** or more of voting rights can request a meeting[638](index=638&type=chunk) - A quorum for shareholder meetings requires at least **50%** of voting shares present in person or by proxy[640](index=640&type=chunk) [Differences in Corporate Law](index=114&type=section&id=Differences%20in%20Corporate%20Law) The BVI Act and company's articles offer flexibility, resulting in differences from Delaware corporate law in director fiduciary duties, amendment processes, and shareholder consent [Director's Fiduciary Duties](index=114&type=section&id=Director's%20Fiduciary%20Duties) BVI law requires directors to act honestly, in good faith, and in the company's best interests, exercising reasonable care, diligence, and skill, differing from Delaware's specific duties of care and loyalty - BVI law requires directors to act **honestly**, in **good faith**, and in the company's **best interests**, exercising **reasonable care, diligence, and skill**, which differs from Delaware's duty of care and loyalty[643](index=643&type=chunk) - Delaware law imposes fiduciary duties of care (good faith, prudent person, disclosure) and loyalty (best interests of corporation, no personal gain, no self-dealing)[642](index=642&type=chunk) [Amendment of Governing Documents](index=114&type=section&id=Amendment%20of%20Governing%20Documents) The company's Memorandum and Articles of Association can generally be amended by a majority shareholder vote or board resolution, with certain exceptions, offering more flexibility than Delaware law - The company's Memorandum and Articles of Association can be amended by a **majority shareholder vote** or by a **board resolution**, with specific limitations[644](index=644&type=chunk) - Delaware corporate law generally requires a shareholder vote to amend the certificate of incorporation[644](index=644&type=chunk) [Written Consent of Directors](index=115&type=section&id=Written%20Consent%20of%20Directors) A written consent of directors requires a majority signature under BVI law and the company's Articles, unlike Delaware law which typically requires unanimity - A written consent of directors requires a **majority signature** under BVI law and the company's Articles[647](index=647&type=chunk) - Delaware corporate law generally requires **unanimous written consent** for directors' actions[647](index=647&type=chunk) [Written Consent of Shareholders](index=115&type=section&id=Written%20Consent%20of%20Shareholders) Shareholder resolutions can be approved by written consent of a majority (over 50%) of voting ordinary shares, differing from Delaware law's minimum necessary votes - Shareholder resolutions can be approved by written consent of a **majority (over 50%) of voting ordinary shares**[648](index=648&type=chunk) - Delaware law allows written consent by holders of at least the minimum votes required at a fully attended meeting[648](index=648&type=chunk) [Shareholder Proposals](index=115&type=section&id=Shareholder%20Proposals) Directors must convene a shareholder meeting if requested by shareholders holding at least 30% of voting rights, while Delaware law allows proposals at annual meetings but may restrict special meeting calls - Directors must convene a shareholder meeting if requested by shareholders holding at least **30%** of voting rights[649](index=649&type=chunk) - Delaware law allows shareholders to make proposals at annual meetings, but special meeting calls may be restricted[649](index=649&type=chunk) [Dissolution; Winding Up](index=115&type=section&id=Dissolution;%20Winding%20Up) Dissolution can occur by shareholder resolution or, under specific BVI Act provisions, by director resolution, differing from Delaware law's typical 100% shareholder approval - Dissolution can occur by shareholder resolution or, under BVI Act section 199(2), by director resolution[650](index=650&type=chunk) - Delaware law generally requires **100% shareholder approval** for dissolution unless initiated by the board, which then requires a simple majority[650](index=650&type=chunk) [Redemption of Shares](index=115&type=section&id=Redemption%20of%20Shares) Shares can be repurchased or redeemed with director confirmation of solvency and shareholder consent (unless terms specify otherwise), while Delaware law permits redemption at various options - Shares can be repurchased or redeemed with director confirmation of solvency and shareholder consent (unless terms specify otherwise)[651](index=651&type=chunk) - Delaware law permits redemption at various options, provided shares with full voting power remain outstanding[651](index=651&type=chunk) [Compulsory Acquisition](index=116&type=section&id=Compulsory%20Acquisition) BVI Act allows 90% of voting shareholders to compel redemption of remaining shares, with dissenters receiving fair value, differing from Delaware law's 'short form' merger provisions - BVI Act allows **90% of voting shareholders** to compel redemption of remaining shares, with dissenters receiving fair value[654](index=654&type=chunk) - Delaware law's 'short form' merger permits a **90% parent** to merge a subsidiary without shareholder vote, granting appraisal rights to minority shareholders[653](index=653&type=chunk) [Variation of Rights of Shares](index=116&type=section&id=Variation%20of%20Rights%20of%20Shares) Share class rights can be varied with consent or resolution from at least 50% of shares in that class, while Delaware law typically requires majority approval of the affected class - Share class rights can be varied with consent or resolution from at least **50%** of shares in that class[655](index=655&type=chunk) - Delaware law typically requires majority approval of the affected class, unless otherwise specified[655](index=655&type=chunk) [Election of Directors](index=116&type=section&id=Election%20of%20Directors) Directors are elected by shareholder resolution or, if permitted, by director resolution, differing from Delaware law's general plurality vote requirement - Directors are elected by shareholder resolution or, if permitted, by director resolution[656](index=656&type=chunk) - Delaware law generally requires a plurality vote for director elections[656](index=656&type=chunk) [Removal of Directors](index=116&type=section&id=Removal%20of%20Directors) Directors can be removed with or without cause by a 75% shareholder vote, or with cause by a director resolution, differing from Delaware law's typical majority shareholder approval for classified boards - Directors can be removed with or without cause by a **75% vote** shareholder vote, or with cause by a director resolution[657](index=657&type=chunk) - Delaware law generally requires majority shareholder approval for removal for cause for classified boards[657](index=657&type=chunk) [Mergers](index=117&type=section&id=Mergers) BVI mergers/consolidations require director-approved written plans and shareholder authorization, while Delaware mergers require board adoption and majority shareholder approval of an agreement - BVI mergers/consolidations require director-approved written plans and shareholder authorization[660](index=660&type=chunk) - Delaware mergers require board adoption and majority shareholder approval of an agreement, with the surviving entity assuming all assets and liabilities[659](index=659&type=chunk) [Inspection of Books and Records](index=117&type=section&id=Inspection%20of%20Books%20and%20Records) BVI shareholders can inspect memorandum, articles, registers, and meeting minutes upon notice, with directors able to limit inspection if contrary to company interests, differing from Delaware law's proper purpose requirement - BVI shareholders can inspect memorandum, articles, registers of members/directors, and shareholder meeting minutes upon written notice[662](index=662&type=chunk) - Directors may limit inspection if it's deemed contrary to the company's interests[664](index=664&type=chunk) - Delaware law grants shareholders the right to inspect stock ledger, shareholder lists, and other records for proper purposes[662](index=662&type=chunk) [Conflict of Interest](index=118&type=section&id=Conflict%20of%20Interest) BVI directors must disclose interests in company transactions to the board and can vote on them if BVI Act is complied with, while Delaware law permits contracts with interested directors if disclosed and approved by disinterested parties - BVI directors must disclose interests in company transactions to the board; interested directors can vote on them if BVI Act is complied with[668](index=668&type=chunk) - Delaware law permits contracts with interested directors/officers if disclosed and approved by disinterested parties or if fair to the corporation[667](index=667&type=chunk) [Transactions with Interested Shareholders](index=118&type=section&id=Transactions%20with%20Interested%20Shareholders) BVI law requires transactions with significant shareholders to be in the company's best interests and not to defraud minority shareholders, while Delaware law restricts business combinations with 'interested shareholders' for three years - BVI law requires transactions with significant shareholders to be in the company's best interests and not to defraud minority shareholders[670](index=670&type=chunk) - Delaware law restricts business combinations with 'interested shareholders' (**15%+ ownership**) for three years, unless board-approved[669](index=669&type=chunk) [Independent Directors](index=119&type=section&id=Independent%20Directors) Neither Delaware corporate law nor the BVI Act requires a majority of directors to be independent - Neither Delaware corporate law nor the BVI Act requires a majority of directors to be independent[672](index=672&type=chunk) [Cumulative Voting](index=119&type=section&id=Cumulative%20Voting) Cumulative voting for director elections is not provided for in the company's Memorandum and Articles of Association, differing from Delaware law which requires explicit statement in the certificate - Cumulative voting for director elections is not provided for in the company's Memorandum and Articles of Association[673](index=673&type=chunk) - Delaware law permits cumulative voting only if explicitly stated in the certificate of incorporation[673](index=673&type=chunk) - The company's governance is based on its BVI Memorandum and Articles of Association and BVI Act[622](index=622&type=chunk)[626](index=626&type=chunk) - Shareholders have one vote per share, and resolutions typically require a simple majority. Directors can authorize dividends if the company is solvent[628](index=628&type=chunk)[630](index=630&type=chunk)[631](index=631&type=chunk) - Key differences from Delaware corporate law exist in areas such as director fiduciary duties, amendment procedures, shareholder consent, and director removal, with BVI law generally offering more flexibility[641](index=641&type=chunk)[642](index=642&type=chunk)[644](index=644&type=chunk)[647](index=647&type=chunk)[648](index=648&type=chunk)[657](index=657&type=chunk) [Shareholders' Rights under British Virgin Islands Law Generally](index=119&type=section&id=Shareholders'%20Rights%20under%20British%20Virgin%20Islands%20Law%20Generally) The BVI Act provides shareholders with remedies such as restraining orders, derivative actions, and the right to apply for a liquidator if company affairs are oppressive - BVI Act allows shareholders to seek restraining/compliance orders for company conduct violating the Act or articles[674](index=674&type=chunk) - Shareholders can bring derivative, personal, and representative actions, and apply for a liquidator if company affairs are oppressive[674](index=674&type=chunk) - Dissenting shareholders are entitled to fair value for their shares in cases of mergers, consolidations, or significant asset dispositions[675](index=675&type=chunk) [Rights of Non-resident or Foreign Shareholders and Disclosure of Substantial Shareholdings](index=119&type=section&id=Rights%20of%20Non-resident%20or%20Foreign%20Shareholders%20and%20Disclosure%20of%20Substantial%20Shareholdings) No limitations exist on non-resident or foreign shareholders' rights to hold or exercise voting rights, and no ownership threshold for disclosure of substantial shareholdings is specified - No limitations exist on non-resident or foreign shareholders' rights to hold or exercise voting rights[677](index=677&type=chunk) - No ownership threshold for disclosure of substantial shareholdings is specified in the articles[677](index=677&type=chunk) [Anti-Money Laundering — British Virgin Islands](index=119&type=section&id=Anti-Money%20Laundering%20—%20British%20Virgin%20Islands) The company must maintain anti-money laundering procedures and may require identity verification from subscribers/transferees, with BVI residents reporting suspicious activities to the Financial Investigation Agency - The company must maintain anti-money laundering procedures and may require identity verification from subscribers/transferees[678](index=678&type=chunk)[679](index=679&type=chunk) - Failure to provide verification information may lead to refusal of applications or register amendments[679](index=679&type=chunk) - BVI residents suspecting money laundering or terrorist financing must report it to the Financial Investigation Agency[681](index=681&type=chunk) [C. Material Contracts](index=110&type=section&id=C.%20Material%20Contracts) No material contracts outside the ordinary course of business, other than those disclosed in Item 4 and Item 7, have been entered into - No material contracts outside the ordinary course of business, other than those disclosed in Item 4 and Item 7, have been entered into[682](index=682&type=chunk) [D. Exchange Controls](index=110&type=section&id=D.%20Exchange%20Controls) British Virgin Islands laws do not limit capital import/export or dividend payments to non-resident shareholders - British Virgin Islands laws do not limit capital import/export or dividend payments to non-resident shareholders[683](index=683&type=chunk) [E. Taxation](index=110&type=section&id=E.%20Taxation) This section outlines the tax implications for the company and its shareholders in the British Virgin Islands, PRC, and United States, including potential PRC resident enterprise classification and PFIC rules for U.S. Holders [People's Republic of China Taxation](index=120&type=section&id=People's%20Republic%20of%20China%20Taxation) PRC subsidiaries are subject to a 25% Corporate Income Tax, with some qualifying for preferential rates, and uncertainty exists regarding the company's classification as a PRC 'resident enterprise' - PRC subsidiaries are subject to a **25% Corporate Income Tax (CIT)**[948](index=948&type=chunk) - Some subsidiaries (SG, HX, LH, CX) qualify as High and New Technology Enterprises (HNTE) for a preferential **15% tax rate**[951](index=951&type=chunk) - Subsidiaries in Holgus X and Kashgar Times regions are entitled to a **0% preferential tax rate** for five consecutive years[952](index=952&type=chunk) - Uncertainty exists regarding the company's classification as a PRC 'resident enterprise,' which could lead to worldwide income taxation and withholding taxes on dividends and gains for non-PRC resident shareholders[689](index=689&type=chunk)[690](index=690&type=chunk) - Indirect transfers of PRC taxable properties by non-PRC resident enterprises may be re-characterized and subject to PRC enterprise income tax (**10%**)[691](index=691&type=chunk) [British Virgin Islands Taxation](index=122&type=section&id=British%20Virgin%20Islands%20Taxation) British Virgin Islands levies no taxes on individuals or corporations based on profits, income, gains, or appreciation, and no withholding tax on dividends or capital payments - British Virgin Islands levies **no taxes** on individuals or corporations based on profits, income, gains, or appreciation[693](index=693&type=chunk) - No inheritance tax or estate duty is imposed in the BVI[693](index=693&type=chunk) - Dividends and capital payments on ordinary shares are not subject to BVI taxation or withholding[694](index=694&type=chunk) [United States Federal Income Taxation](index=122&type=section&id=United%20States%20Federal%20Income%20Taxation) This section details U.S. federal income tax consequences for U.S. Holders of ordinary shares, covering dividends, dispositions, and the complex Passive Foreign Investment Company (PFIC) rules [Material Tax Consequences Applicable to U.S. Holders of Our Ordinary Shares](index=123&type=section&id=Material%20Tax%20Consequences%20Applicable%20to%20U.S.%20Holders%20of%20Our%20Ordinary%20Shares) This section outlines U.S. federal income tax consequences for U.S. Holders of ordinary shares held as capital assets with U.S. dollar functional currency - This section outlines U.S. federal income tax consequences for U.S. Holders of ordinary shares held as capital assets with U.S. dollar functional currency[696](index=696&type=chunk)[697](index=697&type=chunk) - The information is based on current tax laws and interpretations, which are subject to change[696](index=696&type=chunk) [Taxation of Dividends and Other Distributions on Our Ordinary Shares](index=123&type=section&id=Taxation%20of%20Dividends%20and%20Other%20Distributions%20on%20Our%20Ordinary%20Shares) Dividends received by U.S. Holders are generally ordinary income, potentially qualifying for lower capital gains rates if certain conditions are met and the company is not a PFIC - Gross distributions are generally includable in gross income as dividend income to the extent of current or accumulated earnings and profits[698](index=698&type=chunk) - Non-corporate U.S. Holders may receive qualified dividend income taxed at lower capital gains rates if shares are readily tradable on a U.S. market or an approved tax treaty exists, and the company is not a PFIC[699](index=699&type=chunk) - Dividends are considered 'passive category income' for foreign tax credit limitation purposes[701](index=701&type=chunk) [Taxation of Dispositions of Ordinary Shares](index=124&type=section&id=Taxation%20of%20Dispositions%20of%20Ordinary%20Shares) U.S. Holders recognize taxable capital gain or loss on the sale or disposition of shares, calculated as the difference between the amount realized and their tax basis - Taxable capital gain or loss is recognized on the sale or disposition of shares, calculated as the difference between amount realized and tax basis[702](index=702&type=chunk) - Long-term capital gains for non-corporate U.S. Holders may qualify for reduced tax rates[702](index=702&type=chunk) - Gains or losses are generally treated as U.S. source income or loss for foreign tax credit limitation purposes[702](index=702&type=chunk) [Passive Foreign Investment Company ("PFIC")](index=124&type=section&id=Passive%20Foreign%20Investment%20Company%20(%22PFIC%22)) A non-U.S. corporation is a PFIC if 75% of its gross income is passive or 50% of its assets produce passive income, potentially leading to adverse tax treatment for U.S. Holders - A non-U.S. corporation is a PFIC if **75%** of its gross income is passive or **50%** of its assets are passive-income producing[703](index=703&type=chunk) - If the company is a PFIC, U.S. Holders face special adverse tax rules on 'excess distributions' and gains, which are allocated ratably over the holding period and subject to the highest tax rate plus interest[707](index=707&type=chunk) - U.S. Holders can mitigate PFIC adverse effects by making a 'mark-to-market' election (if shares are marketable) or a 'qualified electing fund' election (if the company provides necessary information, which it does not currently intend to do)[709](index=709&type=chunk)[711](index=711&type=chunk) - PFIC status can prevent a step-up in basis for inherited shares under IRC Section 1014(a)[714](index=714&type=chunk) [Information Reporting and Backup Withholding](index=126&type=section&id=Information%20Reporting%20and%20Backup%20Withholding) Dividend payments and sale proceeds may be subject to U.S. information reporting and 24% backup withholding, unless an exemption applies - Dividend payments and sale proceeds may be subject to U.S. information reporting and **24% backup withholding**[715](index=715&type=chunk) - Backup withholding is not an additional tax and can be avoided by providing a correct taxpayer identification number or claiming exemption[715](index=715&type=chunk)[716](index=716&type=chunk) - Certain U.S. Holders are required to report information on foreign financial assets using Form 8938[717](index=717&type=chunk) - The company, as a BVI holding company, gains substantial income from PRC subsidiaries, which may be subject to **PRC withholding tax (10%)** on dividends if the company is deemed a 'non-resident enterprise'[685](index=685&type=chunk) - If classified as a PRC 'resident enterprise', the company's **worldwide income** could be subject to **25% PRC tax**, and non-PRC resident shareholders might face **10-20% PRC withholding tax** on dividends and gains[191](index=191&type=chunk)[686](index=686&type=chunk)[690](index=690&type=chunk) - British Virgin Islands levies **no taxes** on corporate profits, income, gains, or appreciation, and **no withholding tax** on dividends or capital payments[693](index=693&type=chunk)[694](index=694&type=chunk) - U.S. Holders face potential **Passive Foreign Investment Company (PFIC) rules**, which could lead to **adverse tax consequences** on excess distributions and gains, unless a mark-to-market or qualified electing fund election is made[703](index=703&type=chunk)[707](index=707&type=chunk)[709](index=709&type=chunk)[711](index=711&type=chunk) [F. Dividends and Paying Agents](index=116&type=section&id=F.%20Dividends%20and%20Paying%20Agents) Information on dividends and paying agents is not applicable - Information on dividends and paying agents is not applicable for this item[717](index=717&type=chunk) [G. Statement by Experts](index=116&type=section&id=G.%20Statement%20by%20Experts) Information on statements by experts is not applicable - Information on statements by experts is not applicable for this item[717](index=717&type=chunk) [H. Documents on Display](index=117&type=section&id=H.%20Documents%20on%20Display) The company files reports with the SEC as a foreign private issuer, including annual reports on Form 20-F, accessible on the SEC's website and the company's investor relations website - The company files reports with the SEC as a foreign private issuer, including annual reports on Form 20-F[719](index=719&type=chunk) - Reports are accessible on the SEC's website (www.sec.gov) and the company's investor relations website (ir.scienjoy.com)[720](index=720&type=chunk) - Hard copies of the annual report are available to shareholders free of charge upon request[720](index=720&type=chunk) [I. Subsidiary Information](index=117&type=section&id=I.%20Subsidiary%20Information) Information on subsidiary information is not applicable - Information on subsidiary information is not applicable for this item[720](index=720&type=chunk) [ITEM 11. Quantitative and Qualitative Disclosures About Market Risk](index=117&type=section&id=ITEM%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to various market risks, including interest rate risk, credit risk, and foreign currency exchange rate risk [Interest Rate Risk](index=117&type=section&id=Interest%20Rate%20Risk) Interest rate risk primarily relates to interest income from interest-bearing bank deposits, with no derivative financial instruments used for management - Interest rate risk primarily relates to interest income from interest-bearing bank deposits[721](index=721&type=chunk) - The company has not used derivative financial instruments for interest rate risk management and does not anticipate material risks[721](index=721&type=chunk) [Credit Risk](index=117&type=section&id=Credit%20Risk) Financial instruments subject to credit risk include cash and cash equivalents, accounts receivable, and other receivables, with cash deposited in high-quality PRC financial

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38799 WEALTHBRIDGE ACQUISITION LIMITED (Exact name of registrant as specified in its charter) BritishVirginIslands N/A | --- | --- | | ...