File Pursuant to Rule 424(b)(3)

Registration No. 333-253403

PROSPECTUS

Scienjoy Holding Corporation

713,444 Ordinary Shares

This prospectus relates to the resale of up to 713,444 shares of our ordinary shares, no par value, (the “Ordinary Shares”), issuable to White Lion Capital LLC, a Nevada limited liability company (“White Lion Capital”), a selling security holder, pursuant to a “Purchase Notice Right” under a Common Stock Purchase Agreement (the “Purchase Agreement”), dated February 23, 2021, that we entered into with White Lion Capital. The Purchase Agreement permits us to issue Purchase Notices to White Lion Capital for up to thirty million dollars ($30,000,000)(“Commitment Amount”) in our Ordinary Shares, under certain circumstances, over a period of up to six (6) months or until the date on which White Lion Capital shall have purchased shares equal to the Commitment Amount, subject to the termination of the Purchase Agreement (the “Commitment Period”). Under the Purchase Agreement, on any trading day selected by us, provided that the closing price of our Ordinary Shares upon the delivery of a purchase notice is greater than or equal to $0.25, we have the right, but not the obligation, to present White Lion Capital with a purchase notice, directing White Lion Capital (as principal) to purchase up to a certain amount shares of our Ordinary Shares (“Purchase Notice”). For Purchase Notices, the purchase price per share to be paid by White Lion Capital will be based on 87.5% of the lowest daily volume-weighted average price of our Ordinary Shares during a valuation period, which is five (5) trading days prior to the applicable closing date with respect to a regular Purchase Notice. We and White Lion Capital may also elect a negotiated fixed purchase at any time during the Commitment Period provided that the closing price of our Ordinary Shares upon delivery of such fixed purchase notice is greater than or equal to $0.25 (“Fixed Purchase Notice”). The Fixed Purchase Notice will set forth a fixed number of shares and a fixed purchase price mutually agreed by the Company and White Lion Capital. The fixed purchased price shall be greater than or equal to $0.25 but could be higher or lower than the Purchase Price for a regular Purchase Notice. White Lion Capital may sell all or a portion of the shares being offered pursuant to this Prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices.

The aggregate market value of our outstanding Ordinary Shares held by non-affiliates was approximately $20,333,163.50 based on 27,037,302 our issued and outstanding Ordinary Shares, of which 2,140,333 Ordinary Shares are held by non-affiliates, and per share price of $9.50, which was the last reported price on the NASDAQ Capital Market of our Ordinary Shares on February 22, 2021. The 713,444 Ordinary Shares being registered represent approximately 33.33% of the Ordinary Shares held by non-affiliate and approximately 2.64% of the total issued and outstanding Ordinary Shares on February 23, 2021.  

We will not receive any proceeds from the sale of shares of our Ordinary Shares by the selling security holder. However, we will receive proceeds from our sale of Ordinary Shares to the selling security holder subject to our exercise of the “Purchase Notice Right” offered by White Lion Capital. We will only pay for the audit and legal expenses of this offering, and the selling security holder will pay any other expenses, including broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.

Our Ordinary Shares are traded on the NASDAQ Capital Market (“NASDAQ”) under the symbol “SJ”. On February 22, 2021, the closing price for our Ordinary Shares was $9.50 per share as reported on NASDAQ.

Investing in our securities involves risks. See “Risk Factors” beginning on page 11.

We are both an “emerging growth company” and a “foreign private issuer” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See “Summary—Implications of Being an Emerging Growth Company” and “—Implications of Being a Foreign Private Issuer.”  

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is March 8, 2021.

TABLE OF CONTENTS

You should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus and any applicable prospectus supplement. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any applicable prospectus supplement is accurate as of any date other than the date of the applicable document. Since the respective dates of this prospectus, our business, financial condition, results of operations and prospects may have changed.

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form F-1 that we filed with the Securities and Exchange Commission (the “SEC”). This prospectus generally describes the Company and our securities. We may issue up to 713,444 Ordinary Shares under this prospectus that we may sell to White Lion Capital from time to time at our sole discretion over the Commitment Period.

A prospectus supplement with this prospectus may be delivered, to the extent appropriate, to update the information contained in this prospectus. The prospectus supplement may also add, update or change information included in this prospectus. You should read both this prospectus and any applicable prospectus supplement, together with additional information described below under the captions “Where You Can Find More Information”. We have not authorized anyone to provide you with information different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date on the front cover of the prospectus. You should not assume that the information contained in this prospectus is accurate as of any other date. No offer of the securities will be made in any jurisdiction where the offer is not permitted.

USE OF CERTAIN TERMS

As used in this prospectus, unless the context otherwise requires, references to the terms “Company,” “we,” “us” and “our” refer to Scienjoy Holding Corporation and, where applicable, our wholly-owned subsidiaries. Unless otherwise stated in this prospectus, references in this prospectus to:

This prospectus contains information and statistics relating to China’s economy and its entertainment live streaming industry derived from various publications issued by market research companies and PRC governmental entities, which have not been independently verified by us. The information in such sources may not be consistent with other information compiled in or outside China.

Translations of balances in our consolidated balance sheets, consolidated statements of income and consolidated statements of cash flows from RMB into USD (or “US$”) as of and for the year ended December 31, 2018 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.8755, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of December 28, 2018.

Translations of balances in our consolidated balance sheets, consolidated statements of income and consolidated statements of cash flows from RMB into USD (or “US$”) as of and for the year ended December 31, 2019 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.9618, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of December 28, 2019.

No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate, or at any other rate. On September 30, 2020, the noon buying rate for Renminbi was RMB6.7896 to US$1.00.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. In particular, for additional information regarding known material factors that could affect our operating results and performance, please read the section entitled “Risk Factors” in this prospectus and in any applicable prospectus supplement. Should one or more of the risks or uncertainties described in this prospectus made in connection therewith occur, or should underlying assumptions prove incorrect, actual results and plans could different materially from those expressed in any forward-looking statements.

RISK FACTORS

An investment in our securities involves a high degree of risk. Before you invest in our securities, you should carefully consider the following risks, together with all the other information in this prospectus, including our financial statements and notes thereto, as well as any risks described in any applicable prospectus supplement that we provide you in connection with an offering of securities pursuant to this prospectus. See “Where You Can Find More Information.” Additionally, the risks and uncertainties discussed in this prospectus are not the only risks and uncertainties that we face, and our business, financial condition, prospects, results of operations, cash flow and the market price of our securities could be materially adversely affected by other matters that are not known to us or that we currently do not consider to be material.

Risks Factors Relating to Our Business and Industry

We may fail to retain our existing users, keep them engaged or further grow our user base.

Our revenue primarily derives from live streaming services, and therefore our ability to maintain and increase the size of our user base and user engagement level is critical to our success. If our user base becomes smaller or our users become less active, it is possible that there would be less spending on the virtual gifts on our platforms. Smaller user base or lower user engagement would make it difficult to retain top broadcasters. Consequently, our financial condition would suffer a decline in revenue, and our business and results of operations will be materially and adversely impacted.

To continue to maintain and improve our existing user base and user engagement, we must ensure that we adequately and timely identify and respond to changes in user preferences, attract and retain enough popular broadcasters, and offer new and attractive features and content. There is no guarantee that we could meet all of these goals. A number of factors could negatively affect user growth, and engagement, including if:

Our revenue growth is primarily dependent on paying users and revenue per paying user. If we fail to continue to grow or maintain our paying user base or fail to continue to increase revenue per paying user, our live streaming revenue may not increase, which may materially and adversely affect our results of operations and financial condition.

Whether we can continue to increase our paying ratio amongst our users or revenue per paying user depends on many factors, and many of them are out of our control. We expect that our business will continue to be heavily dependent on revenue collected from paying users in the near future. Any decline in the number of paying users or revenue per paying user may materially and adversely affect our results of operations and financial condition.

We rely on a single monetization model.

Mobile live streaming platforms use three basic categories of revenue sharing models to monetize their live streaming operations: gift model, advertise model, and shopping model. We currently mainly use the gift model, generating our revenue from virtual gifts purchased by our users. Although we intend to diversify our revenue sharing models, such as by generating revenue from advertisement, there is no guarantee we will succeed. Therefore, decreases in revenues generated from the gift model will materially and adversely affect our business, results of operations and financial condition.

We may fail to offer attractive content on our platforms.

High quality live streaming content is important for us to attract, maintain and increase our user base and user engagement. Our content library is constantly evolving and growing. However, if we fail to expand and diversify our content offerings, identify trending and popular genres, or maintain the quality of our content, we may experience decreasing viewership and user engagement, which may materially and adversely affect our financial conditions and results of operations.

In addition, we largely rely on our broadcasters to create high-quality and fun live streaming content. We have in place a comprehensive incentive mechanism to encourage broadcasters and talent agencies to supply content that is attractive to viewers. Also, talent agencies cooperating with us may guide or influence broadcasters to develop content that is well received by viewers. However, if we fail to identify the latest trends and timely guide broadcasters and talent agencies accordingly, our viewer number may decline and our results of operations and financial condition may be materially and adversely affected.

Failure to attract, cultivate, and retain top broadcasters may materially and negatively affect our user engagement and thus our business and operations.

The majority of our revenue is from sale of virtual gifts to users. The charisma and the high-quality content of top broadcasters are primary contributors to user stickiness, and is difficult to be replicated by other less popular broadcasters.

Although we have made efforts to support top broadcasters in order to retain them, there is no guarantee that they will choose to stay with us. Top broadcasters tend to receive more offers with attractive terms than the other broadcasters and some of them may choose to move to other platforms. Their departure may cause a corresponding decline in our user base.

Sometimes we may face legal disputes with competing platforms from which we attract some top broadcasters. Although we are not the primary target of these legal disputes, broadcasters involved may be subject to fines or even injunctions, which may render our investment in recruiting them meaningless. Conversely, some of our top broadcasters have left our platforms for competing platforms despite still being in a contractual relationship with us, which have raised legal disputes. Even if we prevail in all such legal disputes, the departures of any top broadcaster may still have a negative impact on our user engagement and reputation. To retain top broadcasters, we must devise better compensation schemes, improve our monetization capabilities, and help the top broadcasters reach a wider audience. Although we strive to improve in these respects, there is no guarantee that the broadcasters will not leave our platforms.

In terms of broadcaster cultivation, we cannot guarantee that the performance metrics we use to track promising broadcasters will enable us to identify future top broadcasters. Some of the broadcasters we identify as promising may turn out to be underperforming, and we may also fail to spot truly promising broadcasters in the early stages of their career. In addition to a waste of resources, either one of these scenarios could prevent us from cultivating top broadcasters, which could weaken our core competitive strength against competing platforms and thus cause an outflow of users to those platforms.

If we fail to implement an effective revenue sharing fee policy, we may lose our broadcasters and our results of operations and financial condition may be materially and negatively affected.

We pay revenue sharing fees to the broadcasters and talent agencies as compensation, which are determined based on a percentage of revenue from virtual gift sales that are attributed to the broadcasters’ live streaming performance. Failure to implement a satisfactory revenue sharing fee policy may result in undesired departures of broadcasters. For example, in 2018 we lowered our revenue sharing percentage for our broadcasters, resulting in departures of a large number of our broadcasters from our platforms. As a result, our revenue was adversely affected. Since then, we adjusted our revenue sharing fee policy to increase the sharing percentage for broadcasters. However, there is no guarantee that our current and future revenue sharing fee policy will keep our broadcasters satisfied over an extended period of time.

We partner with various talent agencies to manage our broadcasters. If we are not able to maintain our relationship with talent agencies, our operations may be materially and adversely affected.

We work with talent agencies to manage and organize broadcasters on our platforms. Cooperation with talent agencies increases our operational efficiency in terms of discovering, supporting, and managing broadcasters in a more organized and structured manner, and turning amateur broadcasters into full-time broadcasters. If we fail to maintain our relationship with many of the talent agencies we are currently working with, we may not be able to retain or attract broadcasters.

Failure to effectively manage our growth and control our periodic spending to maintain such growth may materially and adversely affect our brand, and our business and results of operations may be materially and adversely affected.

Our rapid growth has placed, and continues to place, a significant strain on our management and resources. We may need to establish and expand our capacities in all aspects of our business, such as operations, research and development, sales and marketing, and general administration, in order to meet the increasing needs from a rapidly evolving market. We cannot assure you that our current level of growth will be sustainable. We believe that our continued growth will depend on our ability to attract and retain viewers and top broadcasters, to develop an infrastructure to service and support an expanding body of viewers and broadcasters, to explore new monetization avenues, and to convert non-paying users to paying users and increase user engagement levels. We cannot assure you that we will be successful in any of the above.

We expect our costs and expenses to continue to increase in the future as we anticipate that we will need to continue to implement, from time to time, a variety of new and upgraded operational, informational and financial systems, procedures and controls on an as-needed basis, including the continued improvement of our accounting and other internal management systems. We will also need to expand, train, manage and motivate our workforce and manage our relationships with viewers, talent agencies, broadcasters, and other business partners. All of these endeavors involve risks and will require substantial management efforts and skills and significant additional expenditures. We expect to continue to invest in our infrastructure in order to provide our services rapidly and reliably to viewers and broadcasters. Continued growth could end up straining our ability to maintain reliable service levels for all of our viewers and broadcasters, to develop and improve our operational, financial, legal and management controls, and to enhance our reporting systems and procedures. Managing our growth will require significant expenditures and the allocation of valuable management resources. If we fail to achieve the necessary level of efficiency in our organization as we grow, our business, results of operations, and financial condition could be harmed.

We may fail to successfully implement our monetization strategies.

Our streaming platforms are free to access, and we generate revenues primarily from live streaming and sales of virtual gifts. As a result, our revenue is affected by our ability to increase user engagement and convert non-paying users into paying users, which in turn depends on our ability to retain quality broadcasters, innovate attractive content, and offer virtual gifts and other services. If we are not successful in enhancing our ability to monetize our existing services or developing new approaches to monetization, we may not be able to maintain or increase our revenues and profits or recover any associated costs. We monitor market developments and may adjust our monetization strategies accordingly from time to time, which may result in decreases of our overall revenue or revenue contributions from some monetization channels. In addition, we may in the future introduce new services to diversify our revenue streams, including services with which we have little or no prior development or operating experience. If these new or enhanced services fail to engage customers or platform partners, we may fail to generate sufficient revenues to justify our investments, and our business and operating results and financial condition may suffer as a result.

Our past growth may not be indicative of our future performance due to our limited operation history with a relatively new business model in a relatively new market.

We commenced business operations in 2012 and has experienced growth in the number of active and paying users and total revenue since 2014 (despite a decline in 2018 due to our lowering our revenue sharing percentage for our broadcasters). However, our past growth may not be indicative of our future performance, as the markets for our live streaming platforms and the related products and services are relatively new and rapidly developing. We must adapt ourselves to overcome challenges in a constantly evolving new market, especially in terms of converting non-paying users to paying users, maintaining a stable paying user base and attracting new paying users. Our business plan relies heavily upon an expanding user base and the resulting increased revenue from live streaming, as well as our ability to explore other monetization avenues. However, our past experience and performance would not guarantee any future success if we are not able to adapt rapidly to the evolving market.

As live streaming industry in China is relatively young, there are few proven methods of projecting user demand or available industry standards on which we can rely. Currently we derive our revenue primarily from sales of virtual gifts on our platforms. Although we intend to expand our monetization avenue, we cannot assure you that our attempts to monetize our viewers and broadcasters will continue to be successful, profitable or accepted, and therefore the income potential of our business is difficult to gauge.

Our growth prospects should be considered in light of the risks and uncertainties that fast-growing early-stage companies with limited operating histories in evolving industries may encounter, including, among others, risks and uncertainties regarding our ability to

Addressing these risks and uncertainties will require significant capital expenditures and allocation of valuable management and employee resources. If we fail to successfully address any of the above risks and uncertainties, the size of our user base, our revenue and operating margin may decline.

We mainly compete with other established entertainment live streaming platforms. If we are unable to compete effectively, our business and operating results may be materially and adversely affected.

Since running a successful live streaming platform requires capital outlay and a large team of quality broadcasters who remain in short supply due to the fact that most have signed contracts with existing platforms, there are high entry barriers for the entertainment live streaming industry. As a result, our major competitors are streaming platforms with an established presence in the industry. We must compete with these established players for user traffic and quality broadcasters and the competition remains intense.

In order to remain competitive, we may be required to spend additional resources, which may adversely affect our profitability. We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including:

Furthermore, if we involved in disputes with any of our competitors that result in negative publicity to us, such disputes, regardless of their veracity or outcome, may harm our reputation or brand image and in turn lead to reduced number of viewers and broadcasters. Our competitors may unilaterally decide to adopt a wide range of measures targeted at us, including approaching our top broadcasters or attacking our platforms. Any legal proceedings or measures we take in response to competition and disputes with our competitors may be expensive, time-consuming, and disruptive to our operations and divert our management’s attention.

If we fail to compete effectively against other entertainment medium, our results of operations and financial condition may be materially and adversely affected.

Our users have a vast array of entertainment choices. Other forms of entertainment, such as traditional PC and console games, online video services, social media, as well as more traditional mediums such as television, movies, and sports events, are much more well-established in mature markets and may be perceived by users to offer greater variety, affordability, interactivity, and enjoyment. Our platforms compete against these other forms of entertainment for discretionary time and spending of our users. If we are unable to sustain sufficient interest of users in our platforms in comparison to other forms of entertainment, including new forms of entertainment that may emerge in the future, our business model may no longer be viable.

We may fail to expand our business into overseas markets successfully.

Our business objective includes expanding our business into overseas markets in Southeast Asia, the Middle East and South America. As we continue to expand our international footprint, it will be increasingly susceptible to the risks associated with international operations. We have a limited operating history outside of China and the ability to manage our international operations successfully requires significant resources and management attention and is subject to particular challenges of supporting a rapidly growing business in an environment of diverse cultures, languages, customs, legal systems, alternative dispute systems and economic, political and regulatory systems. In addition, we expect to incur significant costs associated with expanding our international operations, including hiring personnel internationally. The risks and challenges associated with doing business internationally and our international expansion include:

Our business depends on a strong brand, and any failure to maintain, protect, and enhance our brand would hurt our ability to retain or expand our user base, or our ability to increase their level of engagement.

We operate five platforms under the brands “Showself” (秀色直播),“Lehai”(乐嗨) and “Haixiu” (嗨秀), BeeLive Chinese (“MiFeng” 蜜疯直播) and BeeLive International. Our business and financial performance is highly dependent on the strength and the market perception of our brands and services. A well-recognized brand is critical to increasing our user base and, in turn, facilitating our efforts to monetize our services and enhancing our attractiveness to users. From time to time, we conduct marketing activities across various media to enhance our brand image and to guide public perception of our brands and services. In order to create and maintain brand awareness and brand loyalty, to influence public perception and to retain existing and attract new mobile users, customers and platform partners, we may need to substantially increase our marketing expenditures. Since we operate in a highly competitive market, brand maintenance and enhancement directly affect our ability to maintain our market position. In addition, we must exercise strict quality control of our platforms to ensure that our brand image is not tarnished by substandard products or services. Any misuse of our platforms and any governmental adverse actions against our platforms may harm our brand and reputation.

We must also find ways to distinguish our platforms from those of our competitors. If for any reason we are unable to maintain and enhance our brand recognition, or if we incur excessive expenses in this effort, our business, results of operations, and prospects may be materially and adversely affected.

Our core values of focusing on user experience and user satisfaction first and acting for the long-term may conflict with the short-term operating results of our business.

At this time we are mainly focusing on user experience and satisfaction, which we believe is essential to our success and serves the best, long-term interests of our company and our shareholders. We may adopt strategies that we think will benefit our users, even if such strategies may negatively impact our operating results in the short-term. We believe that a high quality user experience on our platforms helps us expand and maintain our current user base and create better monetizing potential in the long-term.

If we fail to obtain or maintain the required licenses and approvals or if we fail to comply with laws and regulations applicable to our industry, our business, results of operations, and financial condition may be materially and adversely affected.

In order to conduct and develop business in China, we have obtained the following valid licenses through our PRC variable interest entities: ICP License for provision of Internet information services, Internet Culture Operation License for online performance and music, entertainment and game product provision, Commercial Performance License for providing streamer agency services and License for producing radio and television program.

However, the Internet industry is highly regulated in China. Due to the uncertainties of interpretation and implementation of existing and future laws and regulations, the licenses we currently hold may be deemed insufficient by governmental authorities. In addition, as all licenses are subject to periodic renewal, even though we have successfully renewed such licenses in the past, there is no guarantee that we will be able to continue to do so in the future. These uncertainties may in the future restrain our ability to expand our business scope and may subject us to fines or other regulatory actions by relevant regulators if our practice is deemed as violating relevant laws and regulations. As we develop and expand our business scope, we may need to obtain additional qualifications, permits, approvals, or licenses. Moreover, we may be required to obtain additional licenses or approvals if the PRC government adopts more stringent policies or regulations for our industry. If we fail to obtain, hold, or maintain any of the required licenses or permits or fail to make the necessary filings on time or at all, we may be subject to various penalties, such as confiscation of the net revenues that have been generated through the deemed unlicensed activities, the imposition of fines, and the discontinuation or restriction of our operations. Any such penalties may disrupt our operations and materially and adversely affect our results of operations and financial condition. 

We may be subject to intellectual property infringement claims or other allegations by third parties for information or content displayed on, retrieved from or linked to our platforms, or distributed to our users, or for proprietary information appropriated by former employees, which may materially and adversely affect our business, financial condition and prospects.

Companies in the Internet, technology, and media industries are frequently involved in intellectual property infringement litigation. In China, the validity, enforceability, and scope of protection of intellectual property rights in Internet-related industries, especially in the evolving live streaming industry, are uncertain. We have been and may in the future be subject to intellectual property infringement claims or other allegations by third parties for information or content displayed on, retrieved from or linked to, recorded, stored or make accessible on our platforms, or otherwise distributed to our users, including in connection with the music, movies, video and games played, recorded or make accessible on our platforms during streaming. For example, we face, from time to time, allegations that we have featured pirated or illegally downloaded music and movies on our platforms, and that we have infringed on the trademarks and copyrights of third parties, including our competitors, or allegations that we are involved in unfair trade practices. As we face increasing competition and as litigation becomes a more common method for resolving commercial disputes in China, we face a higher risk of being the subject of intellectual property infringement claims or other legal proceedings.

We permit broadcasters to upload text and graphics to our platforms and permit our users to share them. Our platforms also permit broadcasters or users to choose their username and profile photo. Under relevant PRC laws and regulations, online service providers, which provide storage space for users to upload content or links to other services or content, could be held liable for copyright infringement under various circumstances, including situations where the online service provider knows or should reasonably have known that the relevant content uploaded or linked to on our platforms infringes upon the copyright of others and the online service provider failed to take necessary actions to prevent such infringement.

We have implemented internal control measures to ensure that the design of our platforms and the content that is streamed on our platforms does not infringe on valid intellectual properties, such as patents and copyrights held by third parties. We also license certain intellectual properties from third parties to implement certain functions available on our platforms.

Some of our employees were previously employed at other competing companies, including our current and potential competitors. To the extent that these employees are involved in the development of content or technology similar to ours at their former employers, we may become subject to claims that such employees or we may have appropriated proprietary information or intellectual properties of the former employers of our employees. If we fail to successfully defend such claims, our results of operations may be materially and adversely affected.

Defending claims is costly and can impose a significant burden on our management and employees, and there can be no assurances that favorable final outcomes will be obtained in all cases. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, or changes required to our platforms to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and prospects.

Unauthorized use of our intellectual property and the expenses incurred in protecting our intellectual property rights may materially and adversely affect our business.

We consider our copyrights, trademarks, and other intellectual properties to be critical to our success, and rely on a combination of trademark and copyright laws, trade secrets protection, restrictions on disclosure and other agreements that restrict the use of our intellectual property to protect these rights. Although we enter into confidentiality agreements and intellectual property ownership agreements with our employees, these confidentiality agreements could be breached and we might not have adequate remedies for any breach. As a result, our proprietary technology, know-how or other intellectual property could otherwise become known to third parties. In addition, third parties may independently discover trade secrets and proprietary information, limiting our ability to assert any trade secret rights against such parties.

The measures we use to protect our proprietary rights may not be adequate to prevent the infringement or misappropriation of our intellectual property. In addition, we cannot assure you that any of our trademark applications will ultimately proceed to registration or will result in registration with adequate scope for our business. Some of our pending applications or registrations may be successfully challenged or invalidated by others. If our trademark applications are not successful, we may have to use different marks for affected products or services, or seek to enter into arrangements with any third parties who may have prior registrations, applications, or rights, which might not be available on commercially reasonable terms, if at all.

Enforcement of intellectual property laws in China has historically been lacking, primarily because of ambiguities in the laws and difficulties in enforcement. Accordingly, intellectual property rights protection in China may not be as effective as in other jurisdictions with a more developed legal framework regulating intellectual property rights. Policing unauthorized use of our proprietary technology, trademarks, and other intellectual property is difficult and expensive, and litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our resources, and could disrupt our business, as well as materially adversely affect our results of operations and financial condition.

Some of our products and services contain open source software, which may pose a particular risk to our proprietary software, products, and services in a manner that negatively affects our business.

We use open source software in some of our products and services and will continue to use open source software in the future. There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we may face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we have developed using such software. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully.

Furthermore, because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely. As a result, we may be unable to prevent our competitors or others from using such software source code contributed by us.

Our content monitoring system may not be effective in preventing misconduct by our users and misuse of our platforms.

We operate entertainment live streaming platforms that provide real-time streaming and interactions. Because we do not have full control over how and what broadcasters or viewers will use our platforms to communicate, our platforms may be misused by individuals or groups of individuals to engage in immoral, disrespectful, fraudulent or illegal activities. We have implemented control procedures to detect and block illegal or inappropriate content and illegal or fraudulent activities conducted through the misuse of our platforms, but such procedures may not prevent all such content from being broadcasted or posted or activities from being carried out. Moreover, real time streaming renders it harder for us to filter illegal or inappropriate speeches, conduct, and behavior from our platforms prior to airing. As a result, we may face civil lawsuits or other actions initiated by the affected viewer, or governmental or regulatory actions against us. In response to allegations of illegal or inappropriate activities conducted through our platforms, PRC government authorities may intervene and hold us liable for non-compliance with PRC laws and regulations concerning the dissemination of information on the Internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue some of the features and services provided on our websites and mobile applications, or even revoke our licenses or permits to provide Internet content services. We endeavor to ensure all broadcasters are in compliance with relevant regulations, but we cannot guarantee that all broadcasters will comply with all PRC laws and regulations. Therefore, our live streaming service may be subject to investigations or subsequent penalties if content displayed on our platforms is deemed to be illegal or inappropriate under PRC laws and regulations.

As of the date of this prospectus, our platform “Showself” (秀色直播) has, since our operation commencement in 2014, received 6 administrative penalties from Beijing Cultural Market Administrative Enforcement Department, all of which are minor penalties of fine, for the inappropriate conducts of broadcasters. The other two platforms of our, “Haixiu” (嗨秀秀场) and “Lehai” (乐嗨秀场), received 1 and 2 administrative penalties, respectively, from the same Department for the same reason. “Beelive Chinese version (“Mifeng” 蜜疯直播) received 2 administrative penalty from Beijing Cultural Market Administrative Enforcement Department and 1 administrative penalty from Beijing Haidian Security Bureau. All above mentioned defects have been timely remedied by the platforms and all remedial measures have been reported to the Department for its review and approval.

We may be held liable for information or content displayed on, retrieved from or linked to our platforms, or distributed to our users if such content is deemed to violate any PRC laws or regulations, and PRC authorities may impose legal sanctions on us.

Our users are able to exchange information, generate content and engage in various other online activities on our live streaming platforms. We require our broadcasters and users to agree to our terms of use upon account registration. The terms of use set out types of content strictly prohibited on our platforms. However, signing the terms of use does not guarantee the broadcasters and users will comply with these terms.

In addition, because a majority of the video and audio communications on our platforms is conducted in real time, the content generated by our broadcasters and users on air cannot be filtered before they are streamed on our platforms. Therefore, users may engage in illegal conversations or activities, including the publishing of inappropriate or illegal content on our platforms that may be unlawful under PRC laws and regulations.

Although we have also developed a robust content monitoring system and use our best efforts to monitor content on our platforms, we cannot detect every incident of inappropriate content on our platforms due to the immense quantity of user-generated content. As such, government authorities may hold us liable for inappropriate or illegal content on our platforms and may subject us to fines or other disciplinary actions, including in serious cases suspension or revocation of the licenses necessary to operate our platforms, if we are deemed to have facilitated the appearance of inappropriate content placed by third parties on our platforms under PRC laws and regulations.

Application stores may temporarily take down our applications if the content was deemed to violate relevant PRC laws or regulations.

Meanwhile, we may face claims for defamation, libel, negligence, copyright, patent or trademark infringement, other unlawful activities or other theories and claims based on the nature and content of the information delivered on or otherwise accessed through our platforms. Defending any such actions could be costly and require significant time and attention of the management and other resources, which would materially and adversely affect our business.

The complexity, uncertainties, and changes in PRC regulation of the Internet industry and companies may materially and adversely affect our business and financial condition.

The Internet industry is highly regulated in China, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the Internet industry. These Internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. As a result, sometimes it may be difficult to evaluate the legal risks involved in certain actions or omissions. Issues, risks, and uncertainties relating to PRC regulation of the Internet business include, but are not limited to, the following:

Increases in the costs of content on our platforms may have an adverse effect on our business, results of operations, and financial condition.

To maintain and increase user base and user paying ratio, we must continue offering attractive and engaging content on our platforms. We provide such content mainly through our broadcasters. In order to attract and retain top broadcasters, we need to have an attractive revenue sharing policy and provide marketing resources to support them. If competitor platforms offer higher compensation, our costs to retain our broadcasters may increase. As our business and user base further expand, we also need to continue updating and producing content and activities to meet the more diversified interest of a larger user group. We also need to innovate the content on our platforms to capture and follow the market trends, resulting in higher costs of the contents on our platforms. If we are not able to continue to retain our broadcasters and produce high quality content on our platforms at commercially acceptable costs, our business, financial condition, and results of operations would be adversely impacted.

Our failure to anticipate or successfully implement new technologies could render our proprietary technologies or platforms unattractive or obsolete, and reduce our revenues and market share.

Our technological capabilities and infrastructure underlying our live streaming platforms are critical to our success. The Internet industry is subject to rapid technological changes and innovation. We need to anticipate the emergence of new technologies and assess their market acceptance. We also need to invest significant resources, including financial resources, in research and development to keep pace with technological advances in order to make our development capabilities, our platforms and our services competitive in the market. However, development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our development results. Our significant expenditures on research and development may not generate corresponding benefits. Given the fast pace with which the Internet technology has been and will continue to be developed, we may not be able to timely upgrade our streaming technology, our engines or the software framework for our platforms’ development in an efficient and cost-effective manner, or at all. New technologies in programming or operations could render our technologies, our platforms or products or services that we are developing or expect to develop in the future obsolete or unattractive, thereby limiting our ability to recover related product development costs, outsourcing costs and licensing fees, which could result in a decline in our revenues and market share.

The proper functioning of our platforms is essential to our business. Any disruption to our IT systems could materially affect our ability to maintain the satisfactory performance of our platforms.

Disruptive and malfunctioned platforms will drive away frustrated users of ours and reduce our user base. Smooth and proper functioning of our platforms relies on our IT systems. However, our technology or infrastructure may not function properly at all times. Any system interruptions caused by telecommunications failures, computer viruses, hacking or other attempts to harm our systems could result in the unavailability or slowdown of our platforms and limit the attractiveness of content provided on our platforms. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, website or mobile app slowdown or unavailability or loss of data. Any of such occurrences could cause severe disruption to our daily operations. As a result, our business and results of operations may be materially and adversely affected and our market share could decline.

Any compromise to the cyber security of our platforms could materially and adversely affect our business, reputation, and results of operations.

On November 7, 2016, the Standing Committee of the National People’s Congress released the PRC Cyber Security Law, which took effect on June 1, 2017. The PRC Cyber Security Law requires network operators to fulfill certain obligations to safeguard security in the cyberspace and enhance network information management.

Our products and services are generally provided through the Internet and involve the storage and transmission of users’ information. Any security breach would expose us to a risk of loss of information and result in litigation and potential liability. As the techniques used to obtain unauthorized access, disable or degrade Internet services or sabotage operating systems change frequently and often are not recognized until launched against a target, we may not be able to anticipate such techniques or implement adequate preventative measures. Upon a security breach, our technical team will be notified immediately and coordinate with the local support staff to diagnose and solve the technical problems. As of the date of this prospectus, we have not experienced any material incidents of security breach.

Despite the security measures we have implemented, our facilities, systems, procedures, and those of our third-party providers, may be vulnerable to security breaches, act of vandalism, software viruses, misplaced or lost data, programming or human errors or other similar events which may disrupt our delivery of services or expose the confidential information of our users and others. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed, and we may lose current and potential users and be exposed to legal and financial risks, including legal claims, regulatory fines and penalties, which in turn could adversely affect our business, reputation, and results of operations.

Concerns about the collection, use, and disclosure of personal data and other privacy-related and security matters could deter customers and users from using our services and adversely affect our reputation and business.

Concerns about our practices with regard to the collection, use, or disclosure of personal information or other privacy-related and security matters, even if unfounded, could damage our reputation and operations. The PRC Constitution, the PRC Criminal Law, the General Principles of the PRC Civil Law and the PRC Cyber Security Law protect individual privacy in general, which require certain authorization or consent from Internet users prior to collection, use, or disclosure of their personal data and also protection of the security of the personal data of such users. In particular, Amendment 7 to the PRC Criminal Law prohibits institutions, companies, and their employees in the telecommunications and other industries from selling or otherwise illegally disclosing a citizen’s personal information obtained during the course of performing duties or providing services. Our internal policy requires our employees to protect the personal data of our users, and employees who violate such policy are subject to disciplinary actions, including dismissal. While we strive to comply with all applicable data protection laws and regulations, as well as our own privacy policies, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or private individuals, which could have an adverse effect on our business. Moreover, failure or perceived failure to comply with applicable laws and regulations related to the collection, use, or sharing of personal information or other privacy-related and security matters could result in a loss of confidence in us by customers and users, which could adversely affect our business, results of operations and financial condition.

Our operations depend on the performance of the Internet infrastructure and fixed telecommunications networks in China, which may experience unexpected system failure, interruption, inadequacy, or security breaches.

Almost all access to the Internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. Moreover, we primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and Internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s Internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. Web traffic in China has experienced significant growth during the past few years. Effective bandwidth and server storage at Internet data centers in large cities such as Beijing are scarce. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platforms. We cannot assure you that the Internet infrastructure and the fixed telecommunications networks in China can support the demands associated with the continued growth in Internet usage. If we cannot increase our capacity to deliver our online services, we may not be able to satisfy the increases in traffic we anticipate from our expanding user base, and the adoption of our services may be hindered, which could adversely impact our business and profitability.

In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and Internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if Internet access fees or other charges to Internet users increase, some users may be prevented from accessing the mobile Internet and thus cause the growth of mobile Internet users to decelerate. Such deceleration may adversely affect our ability to continue to expand our user base.

We use third-party services and technologies in connection with our business, and any disruption to the provision of these services and technologies to us could result in adverse publicity and a slowdown in the growth of our users, which could materially and adversely affect our business, results of operations, and financial condition.

Our business depends upon services and software provided by third parties. For example, our user data is encrypted and saved on the storage cloud provided by a third-party cloud services company. We are relying on the security measures of such third party cloud services company for data protection, and our disaster recovery system to minimize the possibility of data loss or breach ability. If such third-party cloud services company has a system disruption and is not able to recover quickly, our business and operations may be adversely affected.

Our overall network relies on broadband connections provided by third-party operators and we expect this dependence on third parties to continue. The networks maintained and services provided by such third parties are vulnerable to damage or interruption, which could impact our results of operations. See “—Our operations depend on the performance of the Internet infrastructure and fixed telecommunications networks in China, which may experience unexpected system failure, interruption, inadequacy or security breaches.”

We also sell a significant portion of our products and services through third-party online payment systems. If any of these third-party online payment systems suffers security breaches, users may lose confidence in such payment systems and refrain from purchasing our virtual gifts online, in which case our results of operations would be negatively impacted.

We exercise no control over the third parties with whom we have business arrangements. For some of services and technologies such as online payment systems, we rely on a limited number of third-party providers with limited access to alternative networks or services in the event of disruptions, failures, or other problems. If such third parties increase their prices, fail to provide their services effectively, terminate their service or agreements, or discontinue their relationships with us, we could suffer service interruptions, reduced revenues or increased costs, any of which may have a material adverse effect on our business, results of operations, and financial condition.

User growth and engagement depend upon effective interoperation with operating systems, networks, mobile devices, and standards that we do not control.

We offer access to our platforms across a variety of PC and mobile operating systems and devices. We are dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control, such as Windows, Android, and iOS. Any such operating systems or devices that decide to degrade the functionality of our services or give preferential treatment to competitive services could adversely affect usage of our services. In order to deliver high quality services, it is important that our services work well across a range of mobile operating systems, networks, mobile devices, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing services that operate effectively with these operating systems, networks, devices and standards. Any difficulties for users and broadcasters in accessing and using our platforms would harm our user growth and user engagement and in turn would adversely affect our results of operations and financial condition.

We rely on our mobile application and PC application to provide services to our users and broadcasters which, if inaccessible, may have material adverse impact on our business and results of operations.

We rely on third-party mobile application and PC application distribution channels such as Apple’s App Store, various Android application stores, and websites to distribute our applications to users and broadcasters. We expect a substantial number of downloads of our mobile applications and PC applications will continue to be derived from these distribution channels. The promotion, distribution, and operation of our applications are subject to such distribution platforms’ standard terms and policies for application developers, and such distribution channels have discretion to determine whether we comply with their terms and policies. If any of such distribution channels determines to take down our applications or terminate the relationship with us, our business, results of operations, and financial condition may be materially and adversely affected.

Continuing efforts of our executive officers, key employees, and qualified personnel are essential to our business and the loss of their services may adversely and negatively impact our business and results of operations.

Our future success depends substantially on the continued efforts of our executive officers and key employees. If one or more of our executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all. Since live streaming industry is characterized by high demand and intense competition for talent, we cannot assure you that we will be able to attract or retain qualified staffs or other highly skilled employees. In addition, as we are relatively young, our ability to train and integrate new employees into our operations may not meet the growing demands of our business, which may materially and adversely affect our ability to grow our business and hence our results of operations.

If any of our executive officers or key employees joins a competitor or forms a competing company, we may lose users, know-how and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement and a non-compete agreement with us. However, certain provisions under the non-compete agreement may be deemed invalid or unenforceable under PRC law. If any dispute arises between our executive officers and key employees and us, we cannot assure you that we would be able to enforce these non-compete agreements in China, where these executive officers reside, in light of uncertainties with China’s legal system.

We are subject to risks relating to litigation.

We have been involved in and may be subject to litigation and claims of various types, including litigation alleging infringement of intellectual property rights and unfair competition, claims and disputes involving broadcasters, customers, our employees and suppliers. Litigation is expensive, subjects us to the risk of significant damages, requires significant management time and attention and could have a material and adverse effect on our business, results of operations, and financial condition.

We may be the subject of allegations, harassing, or other detrimental conduct by third parties, which could harm our reputation and cause it to lose market share, users, and customers.

We have been subject to allegations by third parties, negative Internet postings and other adverse public exposure on our business, operations and staff compensation. We may also become the target of harassment or other detrimental conduct by third parties or disgruntled former or current employees. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies, media or other organizations. We may be subject to government or regulatory investigation or other proceedings as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time or at a commercially reasonable cost, or at all. Additionally, allegations, directly or indirectly against us, may be posted on the Internet, including social media platforms by anyone, whether or not related to us, on an anonymous basis. Any negative publicity on us or our management can be quickly and widely disseminated. Social media platforms and devices immediately publish the content of their subscribers and participants post, often without filters or checks on the accuracy of the content posted. Information posted may be inaccurate and adverse to us, and it may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose market share, users or customers.

The appointed Temporary Receiver of Link Motion Inc. (f/k/a NQ Mobile Inc.) may bring an action to restore Link Motion Inc.’s senior position in the Showself businesses, which may result in claims against us.  

On December 13, 2018, a shareholder plaintiff filed a derivative lawsuit on behalf of, and against Link Motion Inc. (“LKM”) and three individual defendants, including the chairman of the board of directors of LKM, in the United States District Court for Southern District of New York. In this lawsuit, the shareholder plaintiff alleged certain wrong doing by the individual defendants in connection with the sales of LKM’s corporation assets, including the sale of a 65% equity interest in the Showself businesses (currently is conducted via Zhihui Qiyuan) to Tongfang Investment Fund Series SPC (“TF”) pursuant to a share purchase agreement dated as of March 30, 2017. On February 1, 2019, the court issued a Preliminary Injunction Order which preliminarily enjoins the defendants to take corrective action as necessary to restore LKM’s senior position in the underlying assets of the Showself businesses and appointed a temporary receiver for LKM during the pendency of this action. The temporary receiver has certain statutory powers and specified delineated powers, including but not limited to, commence, continue and/or control any action on behalf of LKM in the U.S., the PRC, or elsewhere. Although we believe that Scienjoy’s equity securities are owned by its sellers, it is possible that we could be sued in connection with these ongoing proceedings, which could be costly to defend, and a judgment against us could result in significant damages. As of the date of this prospectus and to our knowledge, the temporary receiver has yet brought any claims in any jurisdiction to restore LKM’s 65% equity interest in the Showself businesses. However we cannot guarantee that such claims will not be brought in the future.

Negative publicity may materially and adversely affect our brand, reputation, business, and growth prospects.

Negative publicity involving us, our broadcasters, our users, our management, our live streaming platforms, or our business model may materially and adversely harm our brand and our business. We cannot assure you that we will be able to defuse negative publicity about us, our management and/or our services to the satisfaction of our investors, users and broadcasters, customers and platform partners. There has been negative publicity about us and the misuse of our services, which has adversely affected our brand, public image, and reputation. Such negative publicity, especially when it is directly addressed against us, may also require us to engage in defensive media campaigns. This may cause us to increase our marketing expenses and divert our management’s attention and may adversely impact our business and results of operations.

Contractual disputes with our talent agencies may harm our reputation, and may be costly or time-consuming to resolve.

We enter into contractual arrangements with talent agencies. Pursuant to these contracts, talent agencies are responsible for recruiting and training broadcasters and providing content for our platforms. We share with the talent agencies a certain percentage of the revenue generated by the broadcasters they manage. Talent agencies will in turn enter into compensation arrangement with the broadcasters they manage. From time to time, there may be contractual disputes between broadcasters and talent agencies, and/or between talent agencies and us. Any such disputes may not only be costly and time-consuming to solve, but may also be detrimental to the quality of the content produced by the broadcasters, or even causing broadcasters to leave our platforms.

We enter into exclusivity agreements with certain of our top broadcasters, pursuant to which such top broadcasters agree not to work for other live streaming platforms in exchange for additional support and resources from us. Although these top broadcasters are required to pay a certain amount of fees if they breach the exclusivity agreements, we cannot guarantee that such exclusivity agreements will be an effective measure to deter these top broadcasters from leaving our platforms.

Key performance metrics used by us, such as QAUs, paying users, ARPPU and paying ratio, may overstate the number of our active and paying users, which may lead to an inaccurate interpretation of our revenue metrics and our business operations by our management and by investors, and may even misleadingly affect management’s business judgment of our operations.

For performance tracking purposes, we monitor metrics such as the number of registered user accounts, active users, and paying users. We calculate certain operating metrics in the following ways: (a) the number of registered users, which refers to the number of users that has registered and logged onto our platforms at least once since registration; (b) the number of active users, which refers to the number of users that has visited our platforms through PC or mobile app at least once in a given period; (c) the number of paying users, which refers to the number of users that has purchased virtual currencies on our platforms at least once in a given period. The actual number of individual users, however, is likely to be lower than that of registered users, active users, and paying users potentially significantly, due to various reasons such as fraudulent representation or improper registration. Some of the user accounts may also be created for specific purposes such as to increase virtual gifting for certain performers in various contests, but the number of registered users, active users, and paying users do not exclude user accounts created for such purposes. We have limited ability to validate or confirm the accuracy of information provided during the user registration process to ascertain whether a new user account created was actually created by an existing user who is registering duplicative accounts. The respective number of our registered users, active users, and paying users may overstate the number of individuals who register on our platforms, sign onto our platforms, purchase virtual gifts or other products and services on our platforms, which may lead to an inaccurate interpretation of our operating metrics. Additionally, a user needs to register a separate account for each our platform to access such platform. When calculating our total numbers of QAUS as a whole, a user with multiple accounts with us may be counted more than once and such numbers may be higher than the actual numbers of users. Additionally, we are able to measure unique users only to the extent that these users are registered using the same identification method. Since we allow a user to register an account on our platforms with the user’s mobile number, Wechat account or QQ account, our ability to identify unique users is limited.  

If the tracked growth in the number of our registered users, active users, and paying users is higher than the actual growth in the number of individuals registered, active, or paying users, our user engagement level, sales, and business may not grow as quickly as we expect. In addition, such overstatement may cause inaccurate evaluation of our operations by our management and by investors, which may also materially and adversely affect our business and results of operations.

The security of operations of, and fees charged by, third-party online payment platforms may have a material adverse effect on our business and results of operations.

Currently, we use third-party online payment platforms, such as China UnionPay, WeChat Pay, and Alipay, to receive a large part of the cash proceeds from sales of our products and services through direct purchases on our platforms. Any scheduled or unscheduled interruption in the ability of our users to use these and other online payment platforms could adversely affect our payment collection, and in turn, our revenue. In addition, in online payment transactions, secure transmission of user information, such as debit and credit card numbers and expiration dates, personal information and billing addresses, over public networks, is essential to user privacy protection and maintaining their confidence in our platforms.

We do not have control over the security measures of our third-party payment platforms, and their security measures may not be adequate at present or may not be adequate with the expected increased usage of online payment platforms. We could be exposed to litigation and possible liability if online transaction safety of our users is compromised in transactions involving payments for our products and services, which could harm our reputation and our ability to attract users and may materially adversely affect our business. We also rely on the stability of such payment transmissions to ensure the continued payment services provided to our users. If any of these third-party online payment platforms fails to process or ensure the security of users’ payments for any reason, our reputation will be damaged and we may lose our paying users and discourage the potential purchases, which in turn, will materially and adversely affect our business, financial condition, and prospects.

Our users may suffer third-party fraud when purchasing our virtual currency and we may suffer fraud when selling virtual currency to users.

We offer our users multiple options to purchase our virtual currency. Users can purchase these virtual currencies directly on web streaming portal, or make in-app purchases using third-party payment channels including China Union Pay, WeChat pay, Alipay and Apple’s App Store. Users can also purchase virtual currencies through third-party sales agencies officially authorized by us. Other than the above-mentioned purchase channels, there are no other means to purchase our virtual currency. However, from time to time, certain third parties fraudulently claim that they are sales agencies authorized by us and users can purchase our virtual currency through them. If our users choose to purchase our virtual currency from such unauthorized third parties, they may suffer losses from such fraudulent activities by third parties. Although we are not directly responsible for the losses in such case, our user experience may be adversely affected and users may choose to leave our platforms as a result. Such fraudulent activities by third parties might also generate negative publicity, disputes, or even legal claims. The measures we take in response to such negative publicity, disputes, or legal claims may be expensive, time consuming, and disruptive to our operations and divert our management’s attention.

Additionally, there is a risk that even our duly authorized third-party sales agencies may fail to deliver virtual currencies to users after users make payment. In this case, we are responsible to deliver such virtual currencies to users. We may in turn demand payment from the authorized third-party sale agencies but there is no guarantee that we may recover the full payment.

Restrictions on virtual currency may adversely affect our revenues.

Due to the relatively short history of virtual currencies in China, the regulatory framework governing the industry is still under development. On June 4, 2009, the Ministry of Culture and the Ministry of Commerce jointly issued Notice on the Strengthening of the Administration of Online Game Virtual Currency (the “Virtual Currency Notice”), which defines what a virtual currency is and requires that entities obtain the approval from the competent culture administrative department before issuing virtual currency and engaging in transactions using virtual currencies in connection with online games. The Virtual Currency Notice regulates that virtual currency may only be used to purchase services and products provided by the online service provider that issues the virtual currency, and also prohibit businesses that issue online game virtual currency from issuing virtual currency to game players through means other than purchases with legal currency, and from setting game features that involve the direct payment of cash or virtual currency by players for the chance to win virtual gifts or virtual currency based on random selection through a lucky draw, wager, or lottery. These restrictions on virtual currency may result in lower sales of online virtual currency.

Currently, the PRC government has not promulgated any specific rules, laws, or regulations to directly regulate virtual currencies, except for the above-mentioned Virtual Currency Notice. Although the term “virtual currency” is widely used in live streaming industry, we believe that the “virtual currency” used in our live streaming communities does not fall into a “virtual currency” as defined under the Virtual Currency Notice, and we are not subject to any online game virtual currency laws or regulations for our live streaming business. We have obtained the approval from the competent culture administrative department for issuing a virtual currency for online games (which is set forth in the Internet Culture Operation Licenses that we have acquired). So far, we have not issued any virtual currency for online games as defined under the Virtual Currency Notice. However, due to the uncertainties of the interpretation and implementation of the law and regulation, we cannot assure you that the PRC regulatory authorities will not take a different view, in which case we may be required to obtain additional approvals or licenses or change our current business model and may be subject to fines or other penalties, which could adversely affect our business.

Our results of operations are subject to quarterly fluctuations due to seasonality.

We experience seasonality in our business, reflecting seasonal fluctuations in Internet usage. For example, the number of active users tends to be higher during the last quarter of the year while lower near Chinese New Year season. Furthermore, the number of paying users of our online live streaming platforms correlate with our marketing campaigns and promotional activities, which may coincide with popular western or Chinese festivals. As a result, comparing our operating results on a period-to-period basis may not be meaningful.

We do not currently have business insurance to cover our main assets and business. Any uninsured occurrence of business disruption, litigation, or natural disaster could expose us to significant costs, which could have an adverse effect on our results of operations.

We currently do not have any business liability or disruption insurance to cover our operations. Any uninsured occurrence of business disruption, litigation, or natural disaster, or significant damages to our uninsured equipment or facilities could disrupt our business operations, requiring us to incur substantial costs and divert our resources, which could have an adverse effect on our results of operations and financial condition.

If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of our shares may be materially and adversely affected.

If we are not be able to maintain on an ongoing basis an effective internal control over financial reporting, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations and lead to a decline in the trading price of our shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject it to potential delisting from the stock exchange on which we are listed, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

We may grant share-based awards in the future, which may result in increased share-based compensation expenses and have an adverse effect on our future profit. Exercise of the options or restricted shares granted will increase the number of our shares in circulation, which may adversely affect the market price of our shares.

We adopted an equity incentive plan on February 8, 2021, or the “2021 Plan”, for the purpose of providing additional incentives to employees, directors and consultants and to promote the success of the Company’s business. The maximum aggregate number of ordinary shares we are authorized to issue pursuant to all awards under the 2021 Share Incentive Plan is 3,000,000 ordinary shares. As of the date of this prospectus, no award to purchase Ordinary Shares under the 2021 Plan have yet been granted. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. Furthermore, exercise of the awards granted under the 2021 Plan by our employs will increase the number of our shares in circulation, which may have an adverse impact on our share price.

Non-compliance on the part of our employees or third parties involved in our business could adversely affect our business.

Our compliance controls, policies, and procedures may not protect us from acts committed by our employees, agents, contractors, or collaborators that violate the laws or regulations of the jurisdictions in which we operate, which may adversely affect our business.

In addition, our business partners or other third parties involved in our business through our business partners (such as contractors, talent agencies, or other third parties entered into business relationship with our third- party business partners) may be subject to regulatory penalties or punishments because of their regulatory compliance failures, which may, directly or indirectly, disrupt our business. When we enter into a business relationship with a third party partner, we cannot be certain whether such third party business partner has infringed or will infringe any other third parties’ legal rights or violate any regulatory requirements or rule out the likelihood of incurring any liabilities imposed on us due to any regulatory failures by such third party business partner. In addition, for those third parties actively involved in our business through our business partners, we cannot assure you that our business partners will be able to supervise and administrate those third parties. The legal liabilities and regulatory actions on our business partners or other third parties involved in our business may affect our business activities and reputation and in turn, our results of operations.

We may not be able to ensure compliance with United States economic sanctions laws.

The U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, administers laws and regulations that generally prohibit U.S. persons and, in some instances, foreign entities owned or controlled by U.S. persons, from conducting activities or transacting business with certain countries, governments, entities or individuals that are targets of U.S. economic sanctions. We do not and will not use any of our funds for any activities or business with any country, government, entity, or individual in violation of U.S. economic sanctions.

While we believe that we have been, and that we continue to be, in compliance with applicable U.S. economic sanctions, our current safeguards may fail to prevent broadcasters and users located in countries that are targets of U.S. economic sanctions from accessing our platforms. Non-compliance with applicable U.S. economic sanctions could subject us to adverse media coverage, investigations, and severe administrative, civil and possibly criminal sanctions, expenses related to remedial measures, and legal expenses, which could materially adversely affect our business, results of operations, financial condition and reputation.

Spammers and malicious software and applications may affect user experience, which could reduce our ability to attract users and materially and adversely affect our business, results of operations, and financial condition.

Spammers may use our streaming platforms to send spam messages to users, which may affect user experience. As a result, users may reduce using our products and services or stop using them altogether. In spamming activities, spammers typically create multiple user accounts for the purpose of sending a high volume of repetitive messages. Although we attempt to identify and delete accounts created for spamming purposes, we may not be able to effectively eliminate all spam messages from our platforms in a timely fashion. Any spamming activities could have a material and adverse effect on our business, results of operations, and financial condition.

In addition, malicious software and applications may interrupt the operations of our websites, our PC clients or mobile apps and pass on such malware to our users which could adversely hinder user experience. Although we have been successfully blocking these attacks in the past, we cannot guarantee that this will always be the case, and in the incident if users experience a malware attack by using our platforms, users may associate the malware with our websites, our PC clients or mobile apps, and our reputation, business, and results of operations would be materially and adversely affected.

Our leased property interests may be defective and our right to lease the properties affected by such defects may be challenged, which could adversely affect our business.

Under PRC laws, all lease agreements are required to be registered with local housing authorities. We lease several premises in China. We cannot assure whether or not all landlords of these premises have registered the relevant lease agreements with the government authorities, or have completed registration of their ownership rights to the premises. Furthermore, we cannot assure that some of the premises do not have a defective title. We may be subject to monetary fines due to failure by the landlords to complete the required registrations.

We may also be forced to relocate our operations if the landlords do not obtain valid title to or complete the required registrations with local housing authorities in a timely manner or at all. We might not be able to locate desirable alternative sites for our operations in a timely and cost-effective manner which may adversely affect our business.

Future strategic alliances or acquisitions may have a material and adverse effect on our business, reputation, and results of operations.

We may enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose from time to time. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

In addition, when appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. In addition to possible shareholders’ approval, we may also have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable PRC laws and regulations, which could result in increased delay and costs, and may derail our business strategy if it fails to do so. Furthermore, past and future acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquired assets or businesses may not generate the expected financial results. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

The coronavirus pandemic in China may have an adverse impact on our result of operation and financial condition for the fiscal year 2020.

The coronavirus pandemic has caused significant disruptions to business operations and economic activities in China and will likely have a negative impact on China’s economy at least in the short term. In the first few months of the fiscal year 2020, there has been no material adverse impact on our results of operation and financial condition. However, we expect that Chinese consumers’ spending momentum may weaken, in general. As a result, the users of our platforms may be unwilling to pay for live streaming shows. Operation-wise, the prolonged nationwide work-from-home policy may decrease the overall productivity and morale of our employees, all of whom are located in China. In addition, due to restrictions on transportation, the broadcasters’ access to broadcast studios are more limited and will need to perform their shows remotely without stage decoration, lighting, music, attire, and costumes, which usually would have been provided by the talent agents in their studios. These factors may reduce the attractiveness of content provided on our platforms. If the coronavirus pandemic continues to affect China for longer than 6 months, we expect an adverse impact on our results of operation and financial condition for the fiscal year 2020. Furthermore, although we do not have operations in the U.S., the uncertainty about the coronavirus impact on the global economy has caused and may continue to cause unforeseen and unprecedented volatility in the U.S. capital markets, which may adversely affect the market for our ordinary shares.

Risk Factors Relating to Our Corporate Structure

We rely on contractual arrangements with Zhihui Qiyuan (Scienjoy VIE) and its registered shareholders for our operations in China, which may not be as effective in providing operational control as direct ownership.

Due to PRC restrictions or prohibitions on foreign ownership of Internet and other related businesses in China, we operate our business in China through the Scienjoy VIEs, in which we have no ownership interest. We rely on a series of contractual arrangements with Zhihui Qiyuan (the Scienjoy VIE) and its registered shareholders, including the powers of attorney, to control and operate business of the Scienjoy VIEs (namely, Zhihui Qiyuan and its subsidiaries). These contractual arrangements are intended to provide us with effective control over the Scienjoy VIEs and allow us to obtain economic benefits from them. See “Corporate History and Structure—Contractual Arrangements with the Scienjoy VIEs and their Respective Registered Shareholders” for more details about these contractual arrangements. In particular, our ability to control the Scienjoy VIEs depends on the powers of attorney, pursuant to which WX (our indirect wholly-owned subsidiary in China) can vote on all matters requiring shareholder approval in the Scienjoy VIEs. We believe these powers of attorney are legally enforceable but may not be as effective as direct equity ownership.

Any failure by Zhihui Qiyuan (the Scienjoy VIE) and its registered shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.

We rely on a series of contractual arrangements with Zhihui Qiyuan (the Scienjoy VIE) and its registered shareholders, including the powers of attorney, to control and operate business of the Scienjoy VIEs (namely, Zhihui Qiyuan and its subsidiaries). If Zhihui Qiyuan or its shareholders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend substantial resources to enforce our rights. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws.

All these contractual arrangements are governed by and interpreted in accordance with PRC law, and disputes arising from these contractual arrangements will be resolved through arbitration in China. However, the legal system in China, particularly as it relates to arbitration proceedings, is not as developed as the legal system in many other jurisdictions, such as the United States. There are very few precedents and little official guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of arbitration should legal action become necessary. These uncertainties could limit our ability to enforce these contractual arrangements. In addition, arbitration awards are final and can only be enforced in PRC courts through arbitration award recognition proceedings, which could cause additional expenses and delays. In the event we are unable to enforce these contractual arrangements or we experience significant delays or other obstacles in the process of enforcing these contractual arrangements, it may not be able to exert effective control over the Scienjoy VIEs and may lose control over the assets owned by the Scienjoy VIEs. As a result, it may be unable to consolidate the financial results of such entities in our combined and consolidated financial statements, our ability to conduct our business may be negatively affected, and our operations could be severely disrupted, which could materially and adversely affect our results of operations and financial condition.

If the PRC government deems that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations on foreign investment in Internet and other related businesses, or if these regulations or their interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, and may need to reorganize our current corporate structure to comply with PRC laws and regulations.

PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in Internet and other related businesses (usually defined as “value-added telecommunication business” under relevant PRC authorities), including the provision of Internet content and online service operations, which fell under the catalogue of negative list published and updated by PRC Ministry of Commerce from time to time. Specifically, foreign ownership is prohibited in industries of online audio and video program services and Internet cultural business (excluding music), foreign ownership of an Internet content provider may not exceed 50%, and the major foreign investor is required to have a record of good performance and operating experience in managing value-added telecommunications business. We are a company registered in the British Virgin Islands and WX (our indirect wholly-owned subsidiary in China) is a foreign-invested enterprise (or called “wholly foreign-owned enterprise”, the “WFOE”) under PRC laws and regulations. To comply with PRC laws and regulations, we have to conduct our business in China mainly through WX and Zhihui Qiyuan (the Scienjoy VIE) and their respective subsidiaries, based on a series of contractual arrangements by and among WX, Zhihui Qiyuan, and its registered shareholders. As a result of these contractual arrangements, we exert control over the Scienjoy VIEs (namely, Zhihui Qiyuan and its subsidiaries) and consolidate their financial results in our financial statements under U.S. GAAP. The Scienjoy VIEs (namely, Zhihui Qiyuan and its subsidiaries) hold the licenses, approvals, and key assets that are essential for our operations.

In the opinion of our PRC counsel, Feng Yu Law Firm, based on its understanding of the relevant PRC laws and regulations, each of the contracts among WX, Zhihui Qiyuan and its registered shareholders is valid, binding, and enforceable in accordance with its terms. However, we have been further advised by our PRC counsel that there are substantial uncertainties regarding the interpretation and application of current or future relevant PRC laws and regulations. Thus, the PRC government may ultimately take a view contrary to the opinion of our PRC counsel. In addition, PRC government authorities may deem that foreign ownership is directly or indirectly involved in each of the Scienjoy VIEs’ shareholding structure. If our group companies (including our WFOE and its subsidiaries and the Scienjoy VIEs) are found in violation of any PRC laws or regulations, or if the contractual arrangements among WX, Zhihui Qiyuan and its registered shareholders are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation:

The imposition of any of these penalties may result in a material and adverse effect on our ability to conduct our business operations. In addition, if the imposition of any of these penalties causes us to lose the rights to direct the activities of our consolidated affiliated entities or the right to receive their economic benefits, we would no longer be able to consolidate their financial results.

We may lose the ability to use and enjoy assets held by the Scienjoy VIEs that are important to our business if the Scienjoy VIEs declare bankruptcy or become subject to a dissolution or liquidation proceeding.

The Scienjoy VIEs hold certain assets that are important to our operations, including the ICP License, SP License, the Internet Culture Operation Permit, the Commercial Performance License, and Radio and Television Program Production and Operating Permit. Under our contractual arrangements, the shareholders of the Scienjoy VIEs may not voluntarily liquidate the Scienjoy VIEs or approve them to sell, transfer, mortgage, or dispose of their assets or legal or beneficial interests in the business in any manner without our prior consent. However, in the event that the shareholders breach this obligation and voluntarily liquidate the Scienjoy VIEs, or the Scienjoy VIEs declare bankruptcy, or all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, results of operations, and financial condition. Furthermore, if the Scienjoy VIEs undergo a voluntary or involuntary liquidation proceeding, their shareholders or unrelated third-party creditors may claim rights to some or all of its assets, hindering our ability to operate our business, which could materially and adversely affect our business, financial condition, and results of operations.

Contractual arrangements may be subject to scrutiny by the PRC tax authorities. A finding that we owe additional taxes could negatively affect our financial condition and the value of your investment.

Pursuant to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by PRC tax authorities. We may be subject to adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among WX, Zhihui Qiyuan, and its registered shareholders are not on an arm’s length basis and therefore constitute favorable transfer pricing. As a result, the PRC tax authorities could require that Scienjoy VIEs adjust their taxable income upward for PRC tax purposes. Such an adjustment could increase Scienjoy VIEs’ tax expenses without reducing the tax expenses of WX, subject the Scienjoy VIEs to late payment fees and other penalties for under-payment of taxes, and result in the loss of any preferential tax treatment WX may have. As a result, our consolidated results of operations may be adversely affected.

We may rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of our ordinary shares.

We and our Hong Kong subsidiary are holding companies, and we may rely on dividends to be paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to the holders of the ordinary shares a and service any debt it may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

Under PRC laws and regulations, a wholly foreign-owned enterprise in China, such as WX, may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, according to current effective PRC laws and regulations regarding foreign investment which may be updated following the effectiveness of PRC Foreign Investment Law, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital. At the discretion of the board of directors of the wholly foreign-owned enterprise, it may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Substantial uncertainties exist with respect to whether the foreign investor’s controlling PRC onshore variable interest entities via contractual arrangements will be recognized as “foreign investment” and how it may impact the viability of our current corporate structure and operations.

On March 15, 2019, the National People’s Congress of the PRC adopted the PRC Foreign Investment Law, which will come into force on January 1, 2020. The PRC Foreign Investment Law defines the “foreign investment” as the investment activities in China conducted directly or indirectly by foreign investors in the following manners: (i) the foreign investor, by itself or together with other investors establishes a foreign invested enterprises in China; (ii) the foreign investor acquires shares, equities, asset tranches, or similar rights and interests of enterprises in China; (iii) the foreign investor, by itself or together with other investors, invests and establishes new projects in China; (iv) the foreign investor invests through other approaches as stipulated by laws, administrative regulations or otherwise regulated by the State Council. The PRC Foreign Investment Law keeps silent on how to define and regulate the “variable interest entities,” while adding a catch-all clause that “other approaches as stipulated by laws, administrative regulations or otherwise regulated by the State Council” can fall into the concept of “foreign investment,” which leaves uncertainty as to whether the foreign investor’s controlling PRC onshore variable interest entities via contractual arrangements will be recognized as “foreign investment.” Pursuant to the PRC Foreign Investment Law, PRC governmental authorities will regulate foreign investment by applying the principle of pre-entry national treatment together with a “negative list,” which will be promulgated by or promulgated with approval by the State Council or its authorized governmental department such as Ministry of Commerce. Foreign investors are prohibited from making any investments in the industries which are listed as “prohibited” in such negative list; and, after satisfying certain additional requirements and conditions as set forth in the “negative list,” are allowed to make investments in the industries which are listed as “restricted” in such negative list. For any foreign investor that fails to comply with the negative list, the competent authorities are entitled to ban its investment activities, require such investor to take measures to correct its non-compliance and impose other penalties.

The Internet content service, Internet audio-visual program services and online culture activities that we conducts through our consolidated variable interest entities are subject to foreign investment restrictions/prohibitions set forth in the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2019) issued by Ministry of Commerce.

The PRC Foreign Investment Law leaves leeway for future laws, administrative regulations or provisions of the State Council and its departments to provide for contractual arrangements as a form of foreign investment. It is therefore uncertain whether our corporate structure will be seen as violating foreign investment rules as we are currently using the contractual arrangements to operate certain businesses in which foreign investors are currently prohibited from or restricted to investing. Furthermore, if future laws, administrative regulations or provisions of the State Council and its departments mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. If we fail to take appropriate and timely measures to comply with any of these or similar regulatory compliance requirements, our current corporate structure, corporate governance and business operations could be materially and adversely affected.

If the custodians or authorized persons of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations may be materially and adversely affected.

In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our PRC subsidiaries and the Scienjoy VIEs are generally held securely by the personnel designated or approved by us in accordance with our internal control procedures. To the extent those chops are not kept safe, are stolen, or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. If any of our authorized personnel obtains, misuses, or misappropriates our chops for whatever reason, we could experience disruptions in our operations. We may also have to take corporate or legal action, which could require significant time and resources to resolve while distracting management from our operations. Any of the foregoing could adversely affect our business and results of operations.

Sales of our Ordinary shares to White Lion Capital may cause substantial dilution to our existing shareholders and the sale of our Ordinary shares acquired by White Lion Capital could cause the price of our Ordinary shares to decline.

This prospectus relates to the offering of 713,444 Ordinary Shares that we may issue and sell from time to time to White Lion Capital pursuant to the Purchase Agreement. It is anticipated that shares offered to White Lion Capital in this offering will be sold from time to time during a period of up to six (6) months or until the date on which White Lion Capital shall have purchased shares equal to the Commitment Amount, subject to the termination of the Purchase Agreement. The number of shares ultimately offered for sale to White Lion Capital under this prospectus is dependent upon the number of shares we elect to sell to White Lion Capital under the Purchase Agreement. Depending upon market liquidity at the time, sales of shares of our Ordinary Shares under the Purchase Agreement may cause the trading price of our Ordinary Shares to decline.

After White Lion Capital has acquired shares under the Purchase Agreement, it may sell all, some or none of those shares. Sales to White Lion Capital by us pursuant to the Purchase Agreement under this prospectus may result in substantial dilution to the interests of other holders of our Ordinary Shares. The sale of a substantial number of our Ordinary Shares to White Lion Capital in this offering, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to White Lion Capital.

Under the Purchase Agreement, on any trading day selected by us, provided that the closing price of our Ordinary Shares upon the delivery of a purchase notice is greater than or equal to $0.25, we have the right, but not the obligation, to present White Lion Capital with a purchase notice, directing White Lion Capital (as principal) to purchase up to a certain amount shares of our Ordinary Shares (“Purchase Notice”). The maximum number of Ordinary Shares to be sold under each Purchase Notice shall be determined by the lesser of (i) 300% of the average daily trading volume during the five (5) trading days immediately prior to the delivery of the Purchase Notice, or (ii) $1,000,000 divided by the highest closing price of our Ordinary Shares during the five (5) trading days immediately prior to the delivery of the Purchase Notice, which calculation amount may be increased to $2,000,000 once White Lion Capital has funded $5,000,000 to the Company at the mutual consent of the Company and White Lion Capital. Notwithstanding the foregoing, we and White Lion Capital may elect a negotiated fixed purchase at any time during the Commitment Period provided that the closing price of our Ordinary Shares upon delivery of such fixed purchase notice is greater than or equal to $0.25 (“Fixed Purchase Notice”).

For Purchase Notices, the purchase price per share to be paid by White Lion Capital will be 87.5% of the lowest daily volume-weighted average price of our Ordinary Shares during a valuation period, which is five (5) trading days prior to the applicable closing date with respect to a regular Purchase Notice (“Purchase Price”). The Fixed Purchase Notice will set forth a fixed number of shares and a fixed purchase price mutually agreed by the Company and White Lion Capital. The fixed purchased price shall be greater than or equal to $0.25 but could be higher or lower than the Purchase Price for a regular Purchase Notice. In the event that the fixed purchase price is substantially lower than the regular Purchase Price, which is 87.5% of the lowest daily volume-weighted average price of our Ordinary Shares during a valuation period, the equity value of the existing shareholders might be significantly diluted.

We may not have access to the full amount available under the Purchase Agreement with White Lion Capital.

Our ability to draw down funds and sell shares under the Purchase Agreement with White Lion Capital requires that the registration statement of which this prospectus forms a part to be declared effective and continue to be effective. The registration statement of which this prospectus forms a part registers the resale of 713,444 shares issuable under the Purchase Agreement with White Lion Capital, and our ability to sell any remaining shares issuable under the Purchase Agreement with White Lion Capital is subject to our ability to prepare and file one or more additional registration statements registering the resale of these Ordinary Shares. These registration statements may be subject to review and comment by the staff of the Securities and Exchange Commission, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements cannot be assured. The effectiveness of these registration statements is a condition precedent to our ability to sell all of our Ordinary Shares to White Lion under the Purchase Agreement. Even if we are successful in causing one or more registration statements registering the resale of some or all of the Ordinary Shares issuable under the Purchase Agreement with White Lion Capital to be declared effective by the Securities and Exchange Commission in a timely manner, we may not be able to sell the shares unless certain other conditions are met. There is no guarantee that we will be able to draw down any portion or all of the proceeds of $30,000,000 under the Purchase Agreement with White Lion Capital.

Certain restrictions on the extent of Purchase Notices and the delivery of advance notices may have little, if any, effect on the adverse impact of our issuance of Ordinary Shares in connection with the Purchase Agreement with White Lion Capital, and as such, White Lion Capital may sell a large number of Ordinary Shares, resulting in substantial dilution to the value of Ordinary Shares held by existing stockholders.

White Lion Capital has agreed to refrain from holding an amount of shares which would result in White Lion Capital or its affiliates owning more than 4.99% of the number of Ordinary Shares outstanding immediately prior to the issuance of shares of Ordinary Shares issuable pursuant to a Purchase Notice at any one time(“Beneficial Ownership Limitation”). Notwithstanding the foregoing, upon mutual agreement of the Company and White Lion Capital, expressed in writing upon not less than 61 days’ prior written notice, the Beneficial Ownership Limitation may be increased to 9.99% of the number of shares of the Ordinary Shares outstanding immediately prior to the issuance of Ordinary Shares issuable pursuant to a Purchase Notice.

Risk Factors Relating to Doing Business in China

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

The PRC legal system is based on written statutes where prior court decisions have limited value as precedents. Our PRC subsidiaries and the Scienjoy VIEs, in particular WX, a wholly foreign-owned enterprises, are subject to laws and regulations applicable to foreign-invested enterprises as well as various Chinese laws and regulations generally applicable to companies incorporated in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations, and rules are not always uniform, and enforcement of these laws, regulations, and rules involves uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we may receive. Furthermore, the PRC legal system is based in part on government policies and internal rules that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.

Regulation and censorship of information disseminated over the mobile and Internet in China may adversely affect our business and subject us to liability for streaming content or content posted on our platforms.

Internet companies in China are subject to a variety of existing and new rules, regulations, policies, and license and permit requirements. In connection with enforcing these rules, regulations, policies, and requirements, relevant government authorities may suspend services by, or revoke licenses of, any Internet or mobile content service provider that is deemed to provide illicit content online or on mobile devices, and such activities may be intensified in connection with any ongoing government campaigns to eliminate prohibited content online. For example, in 2016, the Office of the Anti-Pornography and Illegal Publications Working Group, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the Ministry of Culture and the Ministry of Public Security jointly launched a “Clean Up the Internet 2016” campaign. Based on publicly available information, the campaign aims to eliminate pornographic information and content in the Internet information services industry by, among other things, holding liable individuals and corporate entities that facilitate the distribution of pornographic information and content. Publicly traded Chinese Internet companies voluntarily initiated self-investigations to filter and remove content from their websites and cloud servers.

We endeavor to eliminate illicit content from our platforms. We have made substantial investments in resources to monitor content that broadcasters generate on our platforms and the way in which our users engage with each other through our platforms. We use a variety of methods to ensure our platforms remain a healthy and positive experience for our users. Although we employ these methods to filter content posted on our platforms, we cannot be sure that our internal content control efforts will be sufficient to remove all content that may be viewed as indecent or otherwise non-compliant with PRC law and regulations. Government standards and interpretations as to what constitutes illicit online content or behavior are subject to interpretation and may change in a manner that could render our current monitoring efforts insufficient. The Chinese government has wide discretion in regulating online activities and, irrespective of our efforts to control the content on our platforms, government campaigns and other actions to reduce illicit content and activities could subject us to negative press or regulatory challenges and sanctions, including fines, suspension or revocation of our licenses to operate in China or a suspension or ban on our mobile or online platform, including suspension or closure of one or more parts of or our entire business. Further, our senior management could be held criminally liable if we are deemed to be profiting from illicit content on our platforms. Although our business and operations have not been materially and adversely affected by government campaigns or any other regulatory actions in the past, there is no assurance that our business and operations will be immune from government actions or sanctions in the future. If government actions or sanctions are brought against us, or if there are widespread rumors that government actions or sanctions have been brought against us, our reputation could be harmed and we may lose users and customers. As a result, our revenues and results of operations may be materially and adversely affected and the value of our ordinary shares could be dramatically reduced.

Adverse changes in global or China’s economic, political or social conditions or government policies could have a material adverse effect on our business, results of operations and financial condition.

Our revenues are substantially sourced from China. Accordingly, our results of operations, financial condition and prospects are influenced by economic, political, and legal developments in China. Economic reforms begun in the late 1970s have resulted in significant economic growth. However, any economic reform policies or measures in China may from time to time be modified or revised. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past 40 years, growth has been uneven across different regions and among different economic sectors and the rate of growth has been slowing.

China’s economic conditions are sensitive to global economic conditions. The global financial markets have experienced significant disruptions since 2008 and the United States, Europe, and other economies have experienced periods of recession. The global macroeconomic environment is facing new challenges and there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies. Recent international trade disputes, including tariff actions announced by the United States, the PRC, and certain other countries, and the uncertainties created by such disputes may cause disruptions in the international flow of goods and services and may adversely affect the Chinese economy as well as global markets and economic conditions. There have also been concerns about the economic effect of military conflicts and political turmoil or social instability in the Middle East, Europe, Africa, and other places. Any severe or prolonged slowdown in the global economy may adversely affect the Chinese economy which in turn may adversely affect our business and operating results.

The PRC government exercises significant control over China’s economic growth through strategically allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Although the PRC economy has grown significantly in the past decade, that growth may not continue, as evidenced by the slow-down of the growth of the PRC economy since 2012. Any adverse changes in economic conditions in China, in the policies of the PRC government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, lead to a reduction in demand for our services and adversely affect our competitive position.

Currently, there is no law or regulation specifically governing virtual asset property rights and therefore it is not clear what liabilities, if any, live streaming platform operators may have for virtual assets.

While participating on our platforms, our users acquire, purchase, and accumulate some virtual assets, such as gifts or certain status. Such virtual assets can be important to users and have monetary value and, in some cases, are sold for actual money. In practice, virtual assets can be lost for various reasons, often through other users’ unauthorized use of another user account and occasionally through data loss caused by delay of network service, network crash, or hacking activities. Currently, there is no PRC law or regulation specifically governing virtual asset property rights. As a result, there is uncertainty as to who the legal owner of virtual assets is, whether and how the ownership of virtual assets is protected by law, and whether an operator of live streaming platform such as us would have any liability, whether in contract, tort or otherwise, to users or other interested parties, for loss of such virtual assets. Based on recent PRC court judgments, the courts have typically held online platform operators liable for losses of virtual assets by platform users and ordered online platform operators to return the lost virtual items to users or pay damages and losses. In case of a loss of virtual assets, we may be sued by our users and held liable for damages, which may negatively affect our reputation and business, results of operations, and financial condition.

Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.

Under the PRC enterprise income tax law that became effective on January 1, 2008 and other related rules and regulations published by PRC State Taxation Administration, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on our worldwide income. On April 22, 2009, the State Taxation Administration, or the SAT, issued the Circular Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Further to SAT Circular 82, on August 3, 2011, the State Taxation Administration issued the Administrative Measures of Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, which became effective on September 1, 2011, to provide more guidance on the implementation of SAT Circular 82.

According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered a PRC tax resident enterprise by virtue of having our “de facto management body” in China and will be subject to PRC enterprise income tax on our worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of our daily operations function have their presence mainly in the PRC; (b) our financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) our major assets, accounting books, company seals, and minutes and files of our board and shareholders’ meetings are located or kept in the PRC; and (d) not less than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC. SAT Bulletin 45 provides further rules on residence status determination, post-determination administration as well as competent tax authorities procedures.

Although SAT Circular 82 and SAT Bulletin 45 apply only to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise group and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect SAT’s general position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals, or foreigners.

We do not meet all of the conditions set forth in SAT Circular 82. Therefore, we believe that we should not be treated as a “resident enterprise” for PRC tax purposes even if the standards for “de facto management body” prescribed in the SAT Circular 82 applied to us. For example, our minutes and files of the resolutions of our board of directors and the resolutions of our shareholders are maintained outside the PRC.

However, it is possible that the PRC tax authorities may take a different view. If the PRC tax authorities determine that we or any Hong Kong subsidiary is a PRC resident enterprise for PRC enterprise income tax purposes, our world-wide income could be subject to PRC tax at a rate of 25%, which could reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Although dividends paid by one PRC tax resident to another PRC tax resident should qualify as “tax-exempt income” under the enterprise income tax law, we cannot assure you that dividends paid by our PRC subsidiary to us or any of our Hong Kong subsidiaries will not be subject to a 10% withholding tax if we or our Hong Kong subsidiary were treated as a PRC resident enterprise. The PRC foreign exchange control authorities, which enforce the withholding tax on dividends, and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.

If we are treated as a resident enterprise, non-PRC resident shareholders may also be subject to PRC withholding tax on dividends paid by us and PRC tax on gains realized on the sale or other disposition of our ordinary shares, if such income is sourced from within the PRC. The tax would be imposed at the rate of 10% in the case of non-PRC resident enterprise shareholders and 20% in the case of non-PRC resident individual holders. In the case of dividends, we would be required to withhold the tax at source. Any PRC tax liability may be reduced under applicable tax treaties or similar arrangements, but it is unclear whether a non-PRC shareholders company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Although we are incorporated in the British Virgin Islands, it remains unclear whether dividends received and gains realized by our non-PRC resident shareholders will be regarded as income from sources within the PRC if we are classified as a PRC resident enterprise. Any such tax will reduce the returns on your investment in us.

There are uncertainties with respect to indirect transfers of PRC taxable properties outside a public stock exchange.

We face uncertainties on the reporting and consequences on private equity financing transactions, private share transfers and share exchange involving the transfer of shares in our company by non-resident investors. According to the Notice on Several Issues Concerning Enterprise Income Tax for Indirect Share Transfer by Non-PRC Resident Enterprises, issued by the State Taxation Administration on February 3, 2015, or SAT Circular 7, an “indirect transfer” of assets of a PRC resident enterprise, including a transfer of equity interests in a non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable properties, if such transaction lacks reasonable commercial purpose and was undertaken for the purpose of reducing, avoiding or deferring PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and tax filing or withholding obligations may be triggered, depending on the nature of the PRC taxable properties being transferred. According to SAT Circular 7, “PRC taxable properties” include assets of a PRC establishment or place of business, real properties in the PRC, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining if there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise derives from PRC taxable properties; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable properties have a real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable properties; and the tax situation of such indirect transfer outside China and its applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business of a foreign enterprise, the resulting gain is to be included with the annual enterprise filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to PRC real properties or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payer fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the competent tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Currently, SAT Circular 7 does not apply to the sale of shares by investors through a public stock exchange where such shares were acquired in a transaction on a public stock exchange.

We cannot assure you that the PRC tax authorities will not, at their discretion, adjust any capital gains and impose tax return filing and withholding or tax payment obligations and associated penalties with respect to any internal restructuring, and our PRC subsidiary may be requested to assist in the filing. Any PRC tax imposed on a transfer of our ordinary shares not through a public stock exchange, or any adjustment of such gains would cause us to incur additional costs and may have a negative impact on the value of your investment in us.

Implementation of the new labor laws and regulations in China may adversely affect our business and results of operations.

Pursuant to the labor contract law that took effect in January 2008, its implementation rules that took effect in September 2008 and its amendment that took effect in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. Due to lack of detailed interpretative rules and uniform implementation practices and broad discretion of the local competent authorities, it is uncertain as to how the labor contract law and its implementation rules will affect our current employment policies and practices. Our employment policies and practices may violate the labor contract law or its implementation rules, and we may thus be subject to related penalties, fines, or legal fees. Compliance with the labor contract law and its implementation rules may increase our operating expenses, in particular its personnel expenses. In the event that we decide to terminate some of its employees or otherwise change its employment or labor practices, the labor contract law and its implementation rules may limit its ability to affect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations. On October 28, 2010, the Standing Committee of the National People’s Congress promulgated the PRC Social Insurance Law, or the Social Insurance Law, which became effective on July 1, 2011. According to the Social Insurance Law and related rules and regulations, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, and maternity insurance and the employers must, together with their employees or separately, pay the social insurance premiums for their employees. If the company has not fully paid such social insurance based on employee’s actual salaries, it may face relevant authorities’ investigation and examination, and subject to penalties or fines.

We expect our labor costs to increase due to the implementation of these laws and regulations, as updated from time to time. As the interpretation and implementation of these laws and regulations are still evolving and become stricter, PRC tax authorities, for example, may become the governmental agencies for collection and examination of each company’s withholding and payment of social insurance after 2019 according to related rules and policies. We cannot assure you that our employment practice will at all times be deemed in full compliance with labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If our PRC subsidiaries are deemed to have violated relevant labor laws and regulations, they can be required to provide additional compensation to their employees and our business, results of operations, and financial condition could be materially and adversely affected.

Further, labor disputes, work stoppages or slowdowns at our company or any of our third-party service providers could significantly disrupt our daily operation or our expansion plans and have a material adverse effect on our business.

China’s M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and other recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that PRC Ministry of Commerce (or previously called “MOFCOM”) be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the PRC Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress effective as of August 1, 2008 and its related rules and regulations require that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB 400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB 2 billion, and at least two of these operators each had a turnover of more than RMB 400 million within China) must be cleared by the anti-monopoly enforcement authority before they can be completed. In addition, on February 3, 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, also known as Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, effective as of September 1, 2011, to implement Circular 6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to a security review, it will submit it to the Inter-Ministerial Panel, an authority established under Circular 6 led by the National Development and Reform Commission, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the Internet content or mobile games business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review. In addition, following the effectiveness of the PRC Foreign Investment Law, we cannot assure that aforementioned foreign M&A rules, regulations and policies will have extensive and substantial changes.

In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. We believe that it is unlikely that our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited.

PRC regulations relating to offshore investment activities by PRC residents may limit the ability of WX (our indirect wholly-owned subsidiary in China) to increase our registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.

The State Administration of Foreign Exchange (SAFE) promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 and related rules and regulations that require PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name, and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by the SAFE, local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1, 2015.

If our shareholders or beneficial owners who are PRC residents or entities (as applicable) do not complete their registration with the local SAFE branches, our PRC subsidiary (in particular, the WFOE) may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary (in particular, the WFOE). Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary (in particular, the WFOE), could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit us to make additional capital contributions or loans to our PRC subsidiaries.

We are an offshore holding company conducting our operations in China through our PRC subsidiaries and the Scienjoy VIEs. We may make loans to our PRC subsidiary and the Scienjoy VIEs or it may make additional capital contributions to our PRC subsidiaries.

Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiaries (in particular, the WFOE), are subject to PRC regulations. For example, none of our loans to a PRC subsidiary (in particular, the WFOE) can exceed the difference between our total amount of investment and our registered capital approved under relevant PRC laws, or certain amount calculated based on elements including capital or net assets and the cross-border financing leverage ratio and the loans must be registered with the local branch of SAFE and the competent departments of State Development and Reform Commission in case of any external debts of more than one year. Our capital contributions to our PRC subsidiaries (in particular, the WFOE) must be approved by or filed with the MOFCOM, SAFE, or their respective local counterpart.

On March 30, 2015, SAFE issued the Circular on the Reforming of the Management Method of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect on June 1, 2015. Under SAFE Circular 19, a foreign-invested enterprise, within the scope of business, may choose to convert its registered capital from foreign currency to RMB on a discretionary basis, and the RMB capital so converted can be used for equity investments within PRC, provided that such usage shall fall into the scope of business of the foreign-invested enterprise, which will be regarded as the reinvestment of foreign-invested enterprise.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary registration or obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary registration or obtain the necessary approval, our ability to make loans or equity contributions to our PRC subsidiaries (in particular, the WFOE) may be negatively affected, which could adversely affect the liquidity of our PRC subsidiaries and their ability to fund their working capital and expansion projects and meet their obligations and commitments.

Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.

The value of the RMB against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and RMB internationalization, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that the RMB will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policies may impact the exchange rate between the RMB and the U.S. dollar in the future.

There remains significant international pressure on the Chinese government to adopt a flexible currency policy to allow the RMB to appreciate against the U.S. dollar, especially under the current circumstance of the Sino-US trade conflicts. Significant revaluation of the RMB may have a material adverse effect on your investment. Substantially all of our revenues and costs are denominated in RMB. Any significant revaluation of RMB may materially and adversely affect our revenues, earnings, and financial position. To the extent that we need to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings or the US dollar amount available to us.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes control on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments, and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval by complying with certain procedural requirements, but may be subject to internal rules of related PRC subsidiary’s bank (in particular, the WFOE’s capital funds account open in bank), which is also under the monitor of SAFE. Therefore, our PRC subsidiaries (in particular, the WFOE) is able to pay dividends in foreign currencies to us without prior approval from SAFE, but should still comply with bank’s related rules. However, approval from or registration with appropriate government authorities (including formalities in the bank) is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our directors, executive officers, and other employees who are PRC citizens or who are non-PRC residents residing in PRC for a continuous period of not less than one year, subject to limited exceptions, and who have been granted incentive share awards by us, may follow the Circular on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, or the SAFE Circular 7, promulgated by the SAFE in 2012. Pursuant to the SAFE Circular 7, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options will be subject to these regulations upon consummation of the Business Combination. Failure to complete the SAFE registrations may subject them to fines and legal sanctions, and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers, and employees under PRC law.

We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our securities less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. We may remain an “emerging growth company” until the fiscal year ended February 8, 2024. However, if our non-convertible debt issued within a three-year period exceeds $1.0 billion or an annual revenue exceeds $1.07 billion, or the market value of its ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we are not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, have reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates. As a result, potential investors may be less likely to invest in our securities.

Lavacano will control the outcome of our shareholder actions.

Assuming none of the shares will be issued under the Purchase Agreement and none of the outstanding warrants has been exercised, Lavacano holds 57.59% of our ordinary shares. Lavacano’s voting power gives it the power to control actions that require shareholder approval under British Virgin Islands law, our memorandum and articles of association and Nasdaq requirements, including the election and removal of a majority of our board of directors, approval of significant mergers and acquisitions and other business combinations, and changes to our memorandum and articles of association.

Lavacano’s control may cause transactions to occur that might not be beneficial to direct or indirect holders of our ordinary shares and may prevent transactions that would be beneficial to you. For example, Lavacano’s voting control may prevent a transaction involving a change of control of us, including transactions in which you as a holder of our ordinary shares might otherwise receive a premium for your securities over the then-current market price. In addition, Lavacano is not prohibited from selling a controlling interest in us to a third party and may do so without your approval and without providing for a purchase of your ordinary shares. If Lavacano is acquired or otherwise undergoes a change of control, any acquirer or successor will be entitled to exercise the voting control and contractual rights of Lavacano, and may do so in a manner that could vary significantly from that of Lavacano.

We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

Assuming none of the outstanding warrants has been exercised, we are a “controlled company’’ as defined under the Nasdaq Stock Market Rules because Lavacano controls more than 50% of our voting rights. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and will rely, on certain exemptions from corporate governance rules, including:

As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

Our contemplated dual-class share structure with different voting rights and conversion of certain ordinary shares will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of ordinary shares may view as beneficial. 

We are a Foreign Private Issuer and we plan to use our reasonable best efforts to adopt a dual-class share structure, which includes reclassification of existing ordinary shares into class A ordinary shares with one vote per share and authorization and issuance of class B ordinary shares with ten votes per share. Additionally, together with the adoption of a dual-class share structure, part of the ordinary shares held by Lavacano will be converted into class B ordinary shares. While the adoption of a dual-class structure requires our shareholders approval, Lavacano is holding more than fifty percent of the voting rights and it is likely that the proposal to adopt a dual-class structure will be approved. Adoption of the dual-class structure and the conversion of certain ordinary shares held by Lavacano into class B ordinary shares will result in further concentration of ownership held by Lavacano. Consequently, Lavacano will have considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Lavacano may also take actions that are not in the best interest of the Company or the Company’s other shareholders. In addition to limiting your ability to influence corporate matters, this concentration of ownership may discourage, delay or prevent a change in control of the Company, which could have the effect of depriving the Company’s other shareholders of the opportunity to receive a premium for their shares as part of a sale of the Company and may reduce the price of our ordinary shares.  

Our contemplated dual-class structure of ordinary shares may adversely affect the trading market for our ordinary shares. 

S&P Dow Jones and FTSE Russell have recently announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our ordinary shares may prevent the inclusion of our ordinary shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our ordinary shares. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our ordinary shares.  

Certain provisions of the Third Amended and Restated Memorandum and Articles of Association may be deemed to have an antitakeover effect.  

The Third Amended and Restated Memorandum and Articles of Association may have the effect of delaying, deferring or preventing or rendering more difficult a change in control of the Company that a shareholder might consider in his or her best interest, including the following:  

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

On June 30, 2020, we have made the determination that we qualify as a foreign private issuer under the Exchange Act and filed Form 8-K on July 1, 2020 to announce our determination. Effective immediately after the filing of this Form 8-K, we began reporting under the Exchange Act as a foreign private issuer. As a foreign private issuer, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

We may be subject to additional reporting requirements if we lose our status as a foreign private issuer.

If we lose our status as a foreign private issuer at some future time, then we will no longer be exempt from such rules and, among other things, will be required to file periodic reports and financial statements as if we were a company incorporated in the United States. The costs incurred in fulfilling these additional regulatory requirements could be substantial.

As a company incorporated in the British Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from NASDAQ corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with NASDAQ corporate governance listing standards.

As a BVI company listed on NASDAQ, we are subject to NASDAQ corporate governance listing standards. However, NASDAQ rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the British Virgin Islands, which is our home country, may differ significantly from NASDAQ corporate governance listing standards. For example, neither the BVI Business Companies Act, 2004 (as amended) of the British Virgin Islands nor our memorandum and articles of association requires a majority of our directors to be independent and we could include non-independent directors as members of our compensation committee and nominating committee, and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. To the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under NASDAQ corporate governance listing standards applicable to U.S. domestic issuers.

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2020 on a historical basis.

The information in this table should be read in conjunction with the financial statements and notes thereto and other financial information incorporated by reference into this prospectus and any prospectus supplement. Our historical results do not necessarily indicate our expected results for any future periods.

(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”), except share and per share data or otherwise stated)

USE OF PROCEEDS

We will not receive any proceeds from the sale of our Ordinary Shares by the selling security holders. However, we may receive up to $30,000,000 in aggregate gross proceeds under the Purchase Agreement from sales of Ordinary Shares we may make to White Lion Capital. We estimate that the net proceeds to us from the sale of our Ordinary Shares to White Lion Capital pursuant to the Purchase Agreement will be up to approximately, but not exceeding, $30,000,000 over the Commitment Period, assuming that we sell the full amount of our Ordinary Shares that we have the right, but not the obligation, to sell to White Lion Capital under the Purchase Agreement, and after estimated fees and expenses. Because we are not obligated to sell any shares of our Ordinary Shares under the Purchase Agreement, the actual total offering amount and proceeds to us, if any, are not determinable at this time. There can be no assurance that we will receive any proceeds under or fully utilize the Purchase Agreement. See “Plan of Distribution” elsewhere in this prospectus for more information.

We intend to use the net proceeds from this offering for the expansion of working capital, supporting the operations of BeeLive International and other general corporate purposes.

DILUTION

If you invest in our Ordinary Shares, your interest will be diluted immediately to the extent of the difference between the public offering price per share and the adjusted net tangible book value per share of our Ordinary Shares immediately after this offering.

Our net tangible book value on September 30, 2020 was approximately $320,000 in deficit, or deficit of $0.01 per share. “Net tangible book value” is total assets minus the sum of liabilities and intangible assets and goodwill. “Net tangible book value per share” is net tangible book value divided by the total number of Ordinary Shares outstanding.

After giving effect to the sale of the 713,444 Ordinary Shares at an assumed offering price of $8.31 per share, which is 87.5% of $9.50, the last reported sale price of our Ordinary Shares on The Nasdaq Capital Market on February 22, 2021, our adjusted net tangible book value as of September 30, 2020 would have been $5,928,719.64 , or $0.21 per Ordinary Share. This represents an immediate increase in net tangible book value of $0.22 per share to our existing security holders and an immediate decrease in net tangible book value of $8.10 per share to investors participating in this offering. The following table illustrates this dilution per share to investors participating in this offering:

The above discussion and table are based on 27,037,302 Ordinary Shares issued and outstanding as of February 23, 2021, and excludes, as of such date, 3,010,000 Ordinary Shares issuable upon exercise of the warrants outstanding.

To the extent that any of our outstanding warrants are exercised, we grant options or awards under any equity incentive plan or issue additional warrants, or we issue additional Ordinary Shares in the future, there may be further dilution.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

We are providing the following unaudited pro forma combined financial information to aid you in your analysis of the financial aspects of the BeeLive Acquisition.

The unaudited pro forma combined statements of operations for the nine months ended September 30, 2020 give pro forma effect to the BeeLive Acquisition as if it had occurred as of January 1, 2020. The unaudited pro forma combined statements of operations for the year ended December 31, 2019 give pro forma effect to the BeeLive Acquisition as if it had occurred as of January 1, 2019. This information should be read together with Scienjoy’s and BeeLive’s respective audited and unaudited financial statements and related notes.

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2020 has been prepared using the following:

The unaudited pro forma combined statement of operations for the year ended December 31, 2019 has been prepared using the following:

Description of the BeeLive Acquisition and the Business Combination

On August 10, 2020, we signed an Equity Acquisition Framework Agreement (the “BeeLive Acquisition Agreement”) with Sciscape International Limited, Tianjin Guangju Dingfei Technology Co., Ltd., Cosmic Soar Limited and Tianjin Guangju Dingsheng Technology Co., Ltd. Pursuant to the BeeLive Acquisition Agreement, we, through Scienjoy inc., acquired 100% of the equity interest in Sciscape International Limited which holds the platform BeeLive International and, through Zhihui Qiyuan (the VIE entity), acquired 100% of the equity interest in Tianjin Guangju Dingfei Technology Co., Ltd. which holds BeeLive Chinese (MiFeng). Pursuant to the Agreement, the Company is required to pay (i) a cash consideration of RMB50.0 million and (ii) RMB250.0 million in ordinary shares (approximately 5.4 million ordinary shares) to be issued by the Company. 30% of share consideration payments are subject to certain performance conditions (i.e. earn-out provisions as discussed below) and requirements over the following three years. On August 21, 2020, all target shares were transferred to the parties designated in BeeLive Acquisition Agreement. On September 10, 2020, we paid a cash consideration of RMB50.0 million to Tianjin Guangju Dingsheng Technology Co., Ltd. and issued 3,786,719 Ordinary Shares to Cosmic Soar Limited. Tianjin Guangju Dingfei Technology Co., Ltd. subsequently changed its name to Sixiang Mifeng (Tianjin) Technology Co. and Sciscape International Limited subsequently changed its name to Scienjoy BeeLive Limited.

Pursuant to the earn-out provisions of the BeeLive Acquisition Agreement, so long as the prior core management members of Sciscape International Limited, and Tianjin Guangju Dingfei Technology Co., Ltd. have complied with the employment agreement that he or she has entered into with BeeLive Companies and no material changes have occurred, (i) if the BeeLive Company’s total annual revenue is no less than RMB 336.6 million in Year 2020, Cosmic Soar Limited will be entitled to received additional 540,960 Ordinary Shares ; (ii) if the BeeLive Companies’ total annual revenue is no less than RMB 460.6 million in Year 2021, Cosmic Soar Limited will be entitled to received additional 540,960 Ordinary Shares; and (iii) if the BeeLive Companies’ total annual revenue is no less than RMB 580.9 million in Year 2022, Cosmic Soar Limited will be entitled to received additional 540,960 Ordinary Shares. If the total annual revenue of BeeLive Company in a particular performance year does not reach the target revenue as specified above, but is equal to or more than 80% of the target revenue, Cosmic Solar Limited will be entitled to a reduced number of the earn-out shares. The total contingent considerations for the earn-out were approximate RMB 39.8 million.

Accounting for the Business Combination

Business combinations are accounted for using the purchase method of accounting in accordance with FASB ASC 805, Business Combinations. The assets acquired and the liabilities assumed are measured at their fair values as of that date. Goodwill is recognized and measured as the excess of the total consideration transferred at the acquisition date over the fair values of the identifiable net assets acquired. Consideration transferred in a business acquisition is measured at the fair value as at the date of acquisition.

Basis of Pro Forma Presentation

The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable, and as it relates to the unaudited pro forma combined statement of operations, are expected to have a continuing impact on the results of the post-combination company. The adjustments presented on the unaudited pro forma combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the post-combination company upon consummation of the Business Combination.

The unaudited pro forma combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma combined financial information as being indicative of the historical financial position and results that would have been achieved had the companies always been combined or the future financial position and results that the post-combination company will experience. All intercompany transactions between the BeeLive and Scienjoy have been eliminated through pro forma adjustments.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2020

(In thousands, except per share amounts)

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2019

(In thousands, except per share amounts)

Pro Forma Adjustments to the Unaudited Combined Statements of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our combined financial statements and consolidated financial statements and the related notes included in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

We were originally incorporated on May 2, 2018 as a British Virgin Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On May 7, 2020, we consummated the acquisition of Scienjoy. As a result of the business combination, we became the holding company of Scienjoy and we changed our name from “Wealthbridge Acquisition Limited” to “Scienjoy Holding Corporation.”

We are a leading provider of mobile entertainment live streaming platforms in China and operates its platforms on both PC and mobile apps, through which users can enjoy immersive and interactive entertainment live streaming. We had approximately 243.5 million registered users by the end of September 30, 2020, increased from 200.4 million registered users for the year ended December 31, 2019. For the quarter ended September 30, 2020, the number of paying users also increased by 28% to 322,841 from 252,299 in the same quarter of last year.

We adopt a multi-platform strategy and all platforms are categorized as “SHOW live streaming” in which professional broadcasters provide live streaming entertainment for users primarily in the form of performances (such as singing, dancing, and talk shows). Broadcasters on all platforms have been professionally trained by relevant broadcaster agents to provide more professional content. Despite the similarity in contents, the different platforms adopt different operation strategies, such as, to name a few, different broadcaster policy, events, promotion, and games. We provide a technological infrastructure to enable broadcasters, online users and viewers to interact with each other during live streaming. All platforms can be accessed for free. We mainly derive our revenue from sales of virtual items on the platforms. Users can purchase virtual currency to purchase virtual items for use on the platforms. Users can recharge their virtual currency on the platforms through various online third-party payment platforms, such as WeChat Pay or AliPay.

On January 10, 2020, we consummated the acquisition of the 100% equity interest in Lixiaozhi (Chongqing) Internet Technology Co., Ltd. (“LXZ”) from its original shareholder for a cash consideration of RMB200 (US$29). We believe the acquisition of LXZ helps to enrich its product line, expand its user base and capitalize on the growth potential in the live streaming market.

On August 10, 2020, we signed an Equity Acquisition Framework Agreement (the “BeeLive Acquisition Agreement”) with Sciscape International Limited, Tianjin Guangju Dingfei Technology Co., Ltd., Cosmic Soar Limited and Tianjin Guangju Dingsheng Technology Co., Ltd.. Pursuant to the BeeLive Acquisition Agreement, we, through Scienjoy inc., acquired 100% of the equity interest in Sciscape International Limited which holds the platform BeeLive International and, through Zhihui Qiyuan (the VIE entity), acquired 100% of the equity interest in Tianjin Guangju Dingfei Technology Co., Ltd. which holds BeeLive Chinese (MiFeng). Pursuant to the Agreement, the Company is required to pay (i) a cash consideration of RMB50.0 million and (ii) RMB250.0 million in ordinary shares (approximately 5.4 million ordinary shares) to be issued by the Company. 30% of share consideration payments are subject to certain performance conditions and requirements over the following three years. Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” in this prospectus for a description of earn-out provisions. On August 21, 2020, all target shares were transferred to the parties designated in BeeLive Acquisition Agreement. On September 10, 2020, we paid a cash consideration of RMB50.0 million to Tianjin Guangju Dingsheng Technology Co., Ltd. and issued 3,786,719 Ordinary Shares to Cosmic Soar Limited. Tianjin Guangju Dingfei Technology Co., Ltd. subsequently changed its name to Sixiang Mifeng (Tianjin) Technology Co. and Sciscape International Limited changed its name to Scienjoy BeeLive Limited.  BeeLive is a global live streaming platform that initially launched in China in November 2016. During the second half of 2019, BeeLive began expanding into international markets. To date, BeeLive International offers Arabic language live streaming product in the Middle East and Thai language live streaming product in Southeast Asia. 

In January 2021, the Company purchased from Cross Wealth Investment Holding Limited, an entity related to two directors of the Company, 606,061 ordinary shares of Goldenbridge Acquisition Limited (“Goldenbridge”) for an aggregated consideration of US$ 2 million. Goldenbridge was formed as a special purpose acquisition company.

On February 8, 2021, the Board of the Company approved the 2021 Plan, for the purpose of providing additional incentives to employees, directors and consultants and to promote the success of the Company’s business. The 2021 Plan authorized the compensation committee or a committee designated and established by the Board to grant equity incentive awards, including options, restricted shares, and restricted share units to directors, employees and consultants of the Company for a number of ordinary shares not exceeding 3,000,000, subject to adjustments as may be required in accordance with the terms of the Plan. The vested portion of equity awards will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. The maximum exercisable term is ten years from the date of a grant. As of the date of this report, no equity award has been granted under 2021 Plan.

On February 23, 2021, we entered into the Purchase Agreement with White Lion Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, White Lion Capital is committed to purchase our Ordinary Shares with an aggregate offering price of up to $30,000,000 (“Commitment Amount”) from time to time over a period of up to six (6) months or until the date on which White Lion Capital shall have purchased shares equal to the Commitment Amount, subject to the termination of the Purchase Agreement. Under the Purchase Agreement, on any trading day selected by us, provided that the closing price of our Ordinary Shares upon the delivery of a purchase notice is greater than or equal to $0.25, we have the right, but not the obligation, to present White Lion Capital with a purchase notice, directing White Lion Capital (as principal) to purchase up to a certain amount shares of our Ordinary Shares (“Purchase Notice”). For Purchase Notices, the purchase price per share to be paid by White Lion Capital will be based on 87.5% of the lowest daily volume-weighted average price of our Ordinary Shares during a valuation period, which is five (5) trading days prior to the applicable closing date with respect to a regular Purchase Notice. We and White Lion Capital may also elect a negotiated fixed purchase at any time during the Commitment Period provided that the closing price of our Ordinary Shares upon delivery of such fixed purchase notice is greater than or equal to $0.25(“Fixed Purchase Notice”). The Fixed Purchase Notice will set forth a fixed number of shares and a fixed purchase price mutually agreed by the Company and White Lion Capital. The fixed purchased price shall be greater than or equal to $0.25 but could be higher or lower than the Purchase Price for a regular Purchase Notice. For more information on the transaction with White Lion Capital, see “OUR HISTORY AND CORPORATE STRUCTURE-Purchase Agreement with White Lion Capital LLC.”

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. COVID-19 has spread rapidly to many parts of the PRC and other parts of the world in the first half of 2020, which has caused significant volatility in the PRC and international markets. In 2020, the COVID-19 pandemic did not have a material net impact on the Company’s financial positions and operating results. The extent of the impact on the Company’s 2021 results and beyond will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations if the current situation continues.

Key Factors Affecting Our Results of Operations

General Factors

Development of the mobile live streaming market in China over the past decade has been influenced by a number of macroeconomic and technological factors and trends, including increasing disposable income and demand for cultural and entertainment activities and increased use of the mobile internet. Our business and operating results are affected by general factors affecting China’s entertainment live streaming industry, which may include the following:

Unfavorable changes in any of these general industry conditions could negatively affect demand for our services and materially and adversely affect its results of operations.

Specific Factors

While our business is influenced by general factors affecting the mobile live streaming industry in China, we believe our results of operations are more directly affected by company specific factors, including the following major factors:

Our ability to retain broadcasters and enhance user experience

We continue to improve our operational capability with more attractive contents, such as music, dancing, talk shows, traditional drama, online competitions and offline events, to further enhance user experience. We are offering different contents and games to attract more users to pay for our services and to pay more money per user as well. Therefore quality broadcasters and interesting contents are essential to our operations. In order to retain quality broadcasters, we have developed a revenue sharing policy, pursuant to which we share revenues generated on the platforms with talents agencies, which in turn share revenues with broadcasters. Additionally, in order to maintain the quality of broadcasters and service, we are very cautious in hiring broadcasters and has adopted strict operation procedures for screening broadcasters before hiring. We primarily work with professional agents to identify and retain new broadcasters. The increasing number of trained broadcasters, who provide better quality performance, also contributes to improved ARPPU and paying ratio of Scienjoy.

In January 2021, the Company purchased from Cross Wealth Investment Holding Limited, an entity related to two directors of the Company, 606,061 ordinary shares of Goldenbridge Acquisition Limited (“Goldenbridge”) for an aggregated consideration of US$ 2 million. Goldenbridge was formed as a special purpose acquisition company.

Our ability to maintain and expand our user base

User base is another key factor for success in the mobile live streaming industry. We endeavor to provide attractive content to keep users on its platforms as long as possible. Our multi-platform strategy attempt to retain users by providing diversified content, promotions and an enhanced user experience.

With respect to user base, mobile SHOW live streaming sector differs from other mobile live streaming sectors such as pan entertainment live streaming and game live streaming sector. Because, for SHOW live streaming, each broadcaster interacts in real time with users and therefore the number of users that each broadcaster can entertain at the same period in his/her video room is limited.

Due to our new strategy to focus on attracting and retaining targeted users who are willing to spend more on our platforms, the number of our paying user increased by 32%, from 528,457 paying users in fiscal 2018 to 697,475 paying users in fiscal 2019 and for the quarter ended September 30, 2020, the number of paying user was 322,841, increased by 28% from 252,299 in the same period of last year. As a result, our revenue for the year ended December 31, 2019 increased to RMB914.626 million from RMB743.018 million for the year ended December 31, 2018. For the nine months ended September 30, 2020 revenue was RMB767.8 million, increased by 18% from the same period of last year. This indicates that we can generate higher revenues when we focus on the targeted users who are willing to spend more on its platforms.

We continue to seek opportunities to grow our user base and enhance our user engagement. Our ability to do so largely depends on our ability to recruit, train, and retain high quality broadcasters and our ability to produce high quality content. We also intend to continue to invest in our brand recognition.

We intend to further explore overseas markets to expand our business and user base through both organic expansion and selective investments. On August 10, 2020, we signed an Equity Acquisition Framework Agreement (the “BeeLive Acquisition Agreement”) with Sciscape International Limited, Tianjin Guangju Dingfei Technology Co., Ltd., Cosmic Soar Limited and Tianjin Guangju Dingsheng Technology Co., Ltd.. Pursuant to the BeeLive Acquisition Agreement, we, through Scienjoy inc., acquired 100% of the equity interest in Sciscape International Limited which holds the platform BeeLive International and, through Zhihui Qiyuan (the VIE entity), acquired 100% of the equity interest in Tianjin Guangju Dingfei Technology Co., Ltd. which holds BeeLive Chinese (MiFeng). Pursuant to the Agreement, the Company is required to pay (i) a cash consideration of RMB50.0 million and (ii) RMB250.0 million in ordinary shares (approximately 5.4 million ordinary shares) to be issued by the Company. 30% of share consideration payments are subject to certain performance conditions and requirements over the following three years. Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” in this prospectus for a description of earn-out provisions. On August 21, 2020, all target shares were transferred to the parties designated in BeeLive Acquisition Agreement. On September 10, 2020, we paid a cash consideration of RMB50.0 million to Tianjin Guangju Dingsheng Technology Co., Ltd. and issued 3,786,719 Ordinary Shares to Cosmic Soar Limited. Tianjin Guangju Dingfei Technology Co., Ltd. subsequently changed its name to Sixiang Mifeng (Tianjin) Technology Co. and Sciscape International Limited changed its name to Scienjoy BeeLive Limited.  BeeLive is a global live streaming platform that initially launched in China in November 2016. During the second half of 2019, BeeLive began expanding into international markets. To date, BeeLive International offers Arabic language live streaming product in the Middle East and Thai language live streaming product in Southeast Asia.

Our ability to improve innovative technologies

The ability to understand market traffic and pair users with suitable broadcasters and activities is key for user stickiness and monetization in the mobile SHOW live streaming industry. By using big data analysis to understand individual user behavior and industry trends, we intend to adjust our platform to better guide users to appropriate broadcasters as well as to analyze traffic on other sites to select the best methods and targets for user acquisition.

Summary Consolidated Statements of Income

Revenues

Our revenues consist of live streaming revenue and technical services revenue. We generate technical services revenue from providing technical development and advisory services, but the technical services revenue accounts for less than 1% of revenue and is immaterial. We generate its revenue mostly from the sales of virtual items used in our live streaming business.

Virtual items are categorized as consumable and time-based items. Consumable items, as virtual gift service, are consumed and used by users upon purchase, while time-based virtual items, such as privilege titles, could be used for a fixed period of time. Accordingly, revenue is recognized at the time when the virtual item is delivered and consumed if the virtual item is a consumable item or, in the case of time-based virtual item, recognized ratably over the period each virtual item is made available to the user, which is usually over one to multiple months and does not exceed one year. For the years ended December 31, 2018 and 2019 and for the nine months ended September 30, 2019 and 2020, revenue from consumable virtual items represented over 95% of the total net revenue.

As we continue to grow our live streaming business, and enhance our user engagement and expand virtual gifting scenarios to increase users’ willingness to pay, we expect our revenue from the sales of virtual items in our live streaming business to increase.

The following table sets forth types of our revenue for the periods indicated:

As of September 30, 2020, we operated four brands of live streaming platforms, consisting of: Showself Live Streaming, Lehai Live Streaming, Haixiu Live Streaming and BeeLive Live Stream (including BeeLive Chinese version – Mifeng). The following table sets forth our revenue by platforms for the periods indicated:

The total number of paying users at Showself Live, Lehai Live, Haixiu Live and Beelive Live for the periods indicated is as following:

The ARPPU by Showself Live, Lehai Live, Haixiu Live and Beelive Live is as following (amounts in RMB):

Among four brands of live streaming platforms, Showself Live streaming contributed 40% to 67% of the paying users for the all the periods indicated. Our ARPPU in each platform may fluctuate from period to period due to the mix of live streaming services purchased by the paying users. The overall ARPPU for the years ended December 31, 2018 and 2019 was RMB 1,406 and RMB 1,306, respectively. For the quarter ended September 30, 2019 and 2020, the ARPPU was RMB967 and RMB976, respectively.

Cost of Revenues

Our cost of revenues primarily consists of (i) revenue sharing fees, including payments to various broadcasters and content providers, (ii) user acquisition costs, (iii) bandwidth related costs, and (iv) other costs.

The table below shows the cost of revenues for the periods indicated.

Revenue sharing fees and content cost: Our revenue sharing fees represent our payment to broadcasters based on a percentage of revenue from sales of virtual items, including virtual gifts and other subscription based privileges. Revenue sharing fees were 63% and 65% of revenues for the years ended December 31, 2018 and 2019, respectively. Revenue sharing fees were 66% of revenues for the nine months ended September 30, 2019 and 2020, respectively. We reduced our revenue sharing percentage for its broadcasters the first half year of 2018, which resulted in departures of broadcasters and lower revenue for the second half year of 2018. Subsequently, we adjusted our revenue sharing policy and provided broadcasters with higher revenue sharing percentage to attract more talented broadcasters. As a result, the revenue sharing fees increased by 28% in fiscal 2019 compared to fiscal 2018 and increased by 18% during the nine months ended September 30, 2020 comparing to the same period of last year. We expect our sharing fees and content cost for live streaming revenue to increase in line with the growth of our live streaming operations.

User acquisition costs: We acquire users primarily through viral marketing, or word-of-mouth marketing, and online download. We provide online downloads of our apps via various third-party websites, including online advertising networks, internet portals and mobile application stores. We pay such third parties a fee for each registered user account acquired through them.

Bandwidth related cost: Bandwidth related cost consists of fees that we pay to telecommunication service providers for server hosting, bandwidth and content delivery-related services such as CDN (content delivery network).

Others: Other costs include (i) fees that we pay to third-party payment processing platforms through which our users purchase our virtual currencies, technology service costs, and content producing costs, (ii) personnel fees directly related to the revenue such as operation employees’ salary and benefits, and (iii) depreciation and amortization expense for servers and other equipment, and intangibles directly related to operating the platforms. For the years ended December 31, 2018 and 2019 and for the nine months ended September 30, 2019 and 2020, other cost represented approximately 2% to 3% of related total revenue.

Operating Expenses

Our operating expenses consists of (i) sales and marketing expenses, (ii) research and development expenses, (iii) general and administrative expenses, and (iv) provision for doubtful accounts.

Sales and marketing expenses: Our sales and marketing expenses mainly consist of (i) salaries and benefits for sales and marketing employees, and (ii) branding and advertisement expenses, including advertisements, holding promotional events and developing and designing marketing campaigns. We expect to target sales and marketing expenditures to attract targeted paying users.

General and administrative expenses: Our general and administrative expenses primarily consist of (i) salaries and benefits for our general and administrative staff, (ii) consulting fees, (iii) other expenses primarily including general office expenses, and (iv) office rental expenses. We expect that general and administrative expenses will increase when we become a public company and incurs additional costs to comply with its reporting obligations under the U.S. securities laws.

Research and development expenses: Our research and development expenses primarily consist of (i) salaries and benefits for our research and development employees, and (ii) other expenses primarily including depreciation related to research use. We expect our research and development expenses to continue to grow as we continue to invest in innovative technologies to offer users a better experience.

Provision for doubtful accounts: We maintain an allowance for doubtful accounts which reflects our best estimate of amounts that potentially will not be collected. When we determine the allowance for doubtful accounts, we take into consideration various factors including but not limited to collection history and credit-worthiness of the debtors as well as the age of the individual receivables account. We expect that the provision for doubtful accounts to decline as we have committed more resources to collection of account receivables.

Results of Operations

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenue: Total revenues increased by RMB171.6 million, or 23%, from RMB743.0 million for the year ended December 31, 2018 to RMB914.6 million for the year ended December 31, 2019. Such increase was primarily attributable to our continuing efforts to grow and monetize our business, resulting in increased user willingness to pay. These efforts include offering compelling content, optimizing product features and introducing new games in live video rooms. User paying willingness is represented by paying ratio and user paying amount, represented by ARPPU. Our paying ratio increased from 1.4% for the year ended December 31, 2018 to 2.1% for the year ended December 31, 2019. Due to expanded and diversified user base, our average ARPPU decreased slightly by 7%, from RMB 1,406 for the year ended December 31, 2018 to RMB 1,306 for the for the year ended December 31, 2019.

In fiscal 2019, we increased our revenue sharing fee for our broadcasters to retain and attract more broadcasters. We also continued to introduce more events and games to further increase users’ willingness to pay and paying amount. As a result, our revenue increased to RMB914.6 million for the year ended December 31, 2019 from RMB743.0 million for the year ended December 31, 2018. The increase was primarily attributable to an increase of 23% in live streaming revenue from consumable virtual items due to the increase of the number of paying users from 528,457 in fiscal 2018 to 697,475 in fiscal 2019.

Cost of revenues: Our cost of revenues increased by 21%, from RMB594.1 million for the year ended December 31, 2018 to RMB720.6 million for the year ended December 31, 2019. The increase was primarily due to increased revenue resulting a higher revenue sharing fee to broadcasters. We intend to provide competitive revenue sharing fee for broadcasters to attract more quality livestreaming content to users. On the other side, with the increased of brand awareness, the user acquisition cost has been lower by 6% from 2018 to 2019.

For the year ended December 31, 2019, the Company’s bandwidth related cost amounted to RMB6.275 million, a decrease of 30% as compared to fiscal 2018. With the increasing competition in hosting and bandwidth market and optimized technology, we were able to cut down bandwidth related costs with its growing live streaming operations.

User acquisition costs further decreased from RMB100.134 million in fiscal 2018 to RMB94.367 million in fiscal 2019. With increasing brand awareness and increased quality content provided by Broadcasters, the Company expects user acquisition costs to decrease.

Gross profit: As a result of the foregoing, our gross profit increased by 30%, from RMB148.934 million for the year ended December 31, 2018 to RMB193.989 million for the year ended December 31, 2019. The gross profit margin increased from 20% in 2018 to 21% in 2019.

Operating expenses:

Net income: As a result of the foregoing, net income increased by 40%, from RMB106.7 million for the year ended December 31, 2018 to RMB 149.9 million for the year ended December 31, 2019.

Nine months ended September 30, 2020 Compared to nine months ended September 30, 2019

Revenues: Total revenue for the nine months ended September 30, 2020 increased by 18% to RMB767.8 million from RMB649.5 million in the same period of 2019. This increase was driven by our increasing ability to attract and retain paying users and broadcasters on our platform. For the quarter ended September 30, 2020, the number of paying user was 322,841, increased by 28% from 252,299 paying user in the same period of fiscal 2019. The paying ratio also increased from 2.1% in third quarter of fiscal 2019 to 3.1% in the third quarter of fiscal 2020. Our average ARPPU for the third quarter of 2019 and 2020 was RMB967 and RMB976, respectively.

Cost of revenues: Our cost of revenues for the nine months ended September 30, 2020 increased by 12.7% to RMB585.4 million from RMB519.5 million in the same period of 2019. The increase was primarily attributable to a 18% increase in our revenue sharing fees and content costs, which was in line with the growth of our live streaming operations in the first nine months of 2020. The other costs increased 48% in the first nine months of fiscal 2020 comparing to the same period of fiscal 2019, consistent with the increase in revenue. On the other side, for the nine months ended September 30, 2020, the user acquisition cost amounted to RMB52.6 million, decreased by 26% from the same period of fiscal 2019 due to the increasing brand awareness and more quality content provided by broadcasters attracting more viewers.

Gross profit: Our gross profit for the nine months ended September 30, 2020 increased by 40% to RMB182.4 million from RMB130.0 million in the same period of 2019. Gross margin for the nine months ended September 30, 2020 expanded to 24% from 20% in the same period of 2019. Additionally, as we continued to expand our brand influence and enhance the quality of our content offerings, it helped the Company to improve our gross margin in turn.

Total operating expenses for the nine months ended September 30, 2020 increased by 35% to RMB41.5 million from RMB30.7 million in the same period of 2019.