Scienjoy Holding (SJ) F-3/AShelf registration (foreign) (amended)

As filed with the Securities and Exchange Commission on September 8, 2023

Registration No. 333-271800

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO.2

TO FORM F-3

ON FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

SCIENJOY HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

RM 1118, 11^th Floor, Building 3, No. 99 Wangzhou Rd., Liangzhu St.
Yuhang District, Hangzhou, Zhejiang Province, 311113,
China

(86) 0571 8858 6668

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Cogency Global Inc.
122 East 42^nd Street, 18^th Floor
New York, NY 10168

(800) 221-0102

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to

Lan Lou, Esq.
Jun He Law Offices LLC
Suite 1919, 630 Fifth Avenue
New York, NY 10111
(917) 661-8175
Fax: (917) 672-3642

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Pursuant to Rule 429 under the Securities Act of 1933, the prospectus (“Prospectus”) included in this Amendment No. 2 on Form F-1 to Form F-3 (this “Registration Statement”) also covers securities registered and remaining unsold under Scienjoy Holding Corporation’s Registration Statement No. 333-256714, as amended, which became effective on June 11, 2021, and Scienjoy Holding Corporation’s Registration Statement No. 333-254818, as amended, which became effective on June 11, 2021. This Registration Statement also covers only resale securities registered and remaining unsold under Registration Statement No. 333-259951, as amended, which became effective on September 14, 2022. Upon effectiveness, this Registration Statement will also act as a post-effective amendment to such earlier registration statements.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED SEPTEMBER 8, 2023

PRELIMINARY PROSPECTUS

Scienjoy Holding Corporation

12,374,736 Class A Ordinary Shares

270,000 Oriental Warrants to Purchase Class A Ordinary Shares and

3,177,475 Class A Ordinary Shares Upon Exercise of the Public Warrants, the Oriental Warrants, and the Chardan Warrants

This prospectus relates to the issuance by Scienjoy Holding Corporation (the “Company,” “we,” “our” or “us”) of up to 3,177,475 of our Class A Ordinary Shares, no par value (the “Class A Ordinary Shares”), including (i) 2,826,850 Class A Ordinary Shares issuable upon the exercise of 5,653,700 outstanding warrants sold as part of the units in our initial public offering (the “Public Warrants”), (ii) 135,000 Class A Ordinary Shares issuable upon the exercise of 270,000 outstanding warrants issued to Oriental Holdings Limited (“Oriental”) in private placements in connection with our initial public offering (the “Oriental Warrants”) and (iii) 215,625 Class A Ordinary Shares issuable upon the exercise of 431,250 warrants (the “Chardan Warrants”).

This prospectus also relates to the offer and sale by the selling securityholders identified in this prospectus (the “Selling Securityholders”), or their permitted transferees, of:

The Chardan Warrants include warrants that may be issued upon exercise of the unit purchase option issued to Chardan Capital Markets, LLC (“Chardan”). The Public Warrants, the Oriental Warrants and the Chardan Warrants are collectively referred to herein as the “Existing Warrants.”

Each of the Existing Warrants entitles the holder to purchase one-half (1/2) of one Class A Ordinary Share at an exercise price of $11.50 per share commencing on May 7, 2020 and will expire on February 5, 2024, or earlier upon redemption. We may redeem the Public Warrants and Chardan Warrants at a price of $.01 per warrant if the last reported sales price of the Class A Ordinary Shares equals or exceeds $16.5 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders. The Oriental Warrants have terms and provisions that are identical to those of the Public Warrants and Chardan Warrants, except that the Oriental Warrants will not be redeemable by the Company so long as they are held by Oriental, or its permitted transferees.

The securities offered pursuant to this prospectus are collectively referred to in this prospectus as the “securities.” This prospectus provides you with a general description of these securities and the general manner in which the Selling Securityholders will offer the securities. We will not receive any proceeds from the sale of the Class A Ordinary Shares or Oriental Warrants offered by the Selling Securityholders pursuant to this prospectus. We will only pay for the audit and legal expenses of this offering, and the Selling Securityholders 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 registration of the securities covered by this prospectus does not mean that the Selling Securityholders will offer or sell any of the securities. The Selling Securityholders may sell the securities covered by this prospectus in a number of different ways and at varying prices. The Selling Securityholders may offer all or part of the securities for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. These securities are being registered to permit the Selling Securityholders to sell securities from time to time, in amounts, at prices and on terms determined at the time of offering. The Selling Securityholders may sell these securities through ordinary brokerage transactions, directly to market makers of our shares or through any other means described in the section entitled “Plan of Distribution” herein. In connection with any sales of securities offered hereunder, the Selling Securityholders, any underwriters, agents, brokers or dealers participating in such sales may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

Our Class A Ordinary Shares are traded on the NASDAQ Capital Market (“NASDAQ”) under the symbol “SJ” and our Warrants are traded on OTC under the symbol “SJOYW”. On September 7, 2023, the closing price for our Class A Ordinary Shares was $2.80 per share as reported on NASDAQ and on September 7, 2023, the closing price for our Warrants was $0.012 per warrant as reported on OTC.

Investing in our securities involves certain risks. You should review carefully the risks and uncertainties referenced under the heading “Risk Factors” on page 22 of this prospectus as well as those contained in the applicable prospectus supplement and any related free writing prospectus.

SCIENJOY HOLDING CORPORATION is not a Chinese operating company but a British Virgin Islands holding company with operations conducted by its subsidiaries and through contractual arrangements with the variable interest entities, or “VIEs,” based in China. We currently operate majority of the businesses in China through Zhihui Qiyuan (Beijing) Technology, Co. Ltd. (“Zhihui Qiyuan”), Sixiang Qiyuan (Hangzhou) Culture Technology Co., Ltd. (“Sixiang Qiyuan”) and their respective subsidiaries. Zhihui Qiyuan and its subsidiaries are referred to as Zhihui Qiyuan VIEs in this prospectus. Sixiang Qiyuan and its subsidiaries are referred to as Sixiang Qiyuan VIEs in this prospectus. Zhihui Qiyuan VIEs and Sixiang Qiyuan VIEs are collectively referred to as the “VIEs” in this prospectus.

The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where PRC law prohibits direct foreign investment in the operating companies in China. There are contractual arrangements among our PRC subsidiaries, the VIEs and their nominee shareholders. We have evaluated the guidance in FASB ASC 810 and concluded that we are the primary beneficiary of the VIEs because of these contractual arrangements. Accordingly, under U.S. GAAP, the financial statements of the VIEs are consolidated as part of our financial statements.

Investors in our Class A Ordinary Shares thus are not purchasing equity interest in our operating entities in China but instead are purchasing equity interest in a British Virgin Islands holding company. As used in this prospectus, “SHC” refers to SCIENJOY HOLDING CORPORATION; “we,” “us,” “our company,” “our,” or “the Company” refer to SCIENJOY HOLDING CORPORATION and its subsidiaries; “our PRC subsidiaries” refer to our wholly foreign owned entities (the “WFOEs”), Sixiang Infinite (Beijing) Technology Co., Ltd. (“WXBJ”), Sixiang Infinite (Zhejiang) Culture Technology Co., Ltd. (“WXZJ”), Scienjoy International Limited, and Scienjoy Beelive Limited and their respective subsidiaries. The “VIEs” refer to the PRC variable interest entities, including Zhihui Qiyuan VIEs and Sixiang Qiyuan VIEs. Zhihui Qiyuan VIEs include Zhihui Qiyuan (Beijing) Technology, Co. Ltd. (智汇启源(北京)科技有限公司) or Zhihui Qiyuan, a limited liability company organized and existing under the laws of the PRC, and Zhihui Qiyuan’s subsidiaries, including Hai Xiu (Beijing) Technology Company Co. Ltd., Beijing Le Hai Technology Co. Ltd., Beijing Sixiang Shiguang Technology Co. Ltd., Sixiang Mifeng (Tianjin) Technology Co., Ltd (formerly known as Tianjin Guangju Dingfei Technology Co., Ltd.), Changxiang Infinite Technology (Beijing) Co., Ltd., ZhiHui QiYuan (HaiNan) Investment Co., Ltd., HuaYuHeFeng (Qingdao) Technology Co., Ltd., Beijing Weiliantong Technology Co., Ltd. Chuangda Zhihui (Beijing) Technology Co., Ltd (“CDZH”), Hongcheng Huiying (Zhejiang) Technology Industry Development Co., Ltd., and Beijing Huayi Dongchen Technology Co., Ltd. (“HYDC”), each such company formed under PRC Law. Sixiang Qiyuan VIEs include Sixiang Qiyuan (Hangzhou) Culture Technology Co., Ltd. and its subsidiaries, including Xiuli (Zhejiang) Culture Technology Co., Ltd., Leku (Zhejiang) Culture Technology Co. Ltd., Xiangfeng (Zhejiang) Culture Technology Co., Ltd., Haifan (Zhejiang) Culture Technology Co., Ltd., and Hongren (Zhejiang) Culture Technology Co., Ltd., each such company formed under PRC Law.

Our corporate structure is subject to risks associated with our contractual arrangements with the VIEs. The Company and its investors may never directly hold equity interests in the businesses that are conducted by the VIEs. Uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements, and these contractual arrangements have not been tested in a court of law. Because we do not hold equity interests in the VIEs, we are subject to risks due to the uncertainty of the interpretation and application of the PRC laws and regulations regarding VIEs and the VIE structure, including but not limited to regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements with the VIEs. We are also subject to the risk that the PRC government could disallow the VIE structure, which would likely result in a material change in our operations and as a result the value of our securities may depreciate significantly or become worthless. See “Risk Factors–-Risks Related to Our Corporate Structure” in the section entitled “Risk Factors” in this prospectus.

Treasury functions of the Company, the PRC subsidiaries and the VIEs (“the Group”) are conducted centrally under the Group and inter-company fund transfers are carried out among the entities and VIEs within the Group. The treasury function manages available funds at the Group level and allocates the funds to various entities and VIEs within the Group for their operations determined based on the related working capital needs. The Group’s management reviews and monitors the working capital needs of the Group’s subsidiaries and VIEs on a regular basis.

We and the VIEs are also subject to legal and operational risks associated with being based in and having the majority of the Company’s and the VIEs’ operations in China, including Hong Kong and Macau. These risks may result in a material change in the operations of the VIEs, our PRC subsidiaries and our company as a whole, or a complete hindrance of our ability to offer or continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structures, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On July 10, 2021, the PRC State Internet Information Office issued the Measures of Cybersecurity Review (Revised Draft for Comments), which requires cyberspace operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity Review. On December 28, 2021, the Cyberspace Administration of China, together with twelve other PRC regulatory authorities jointly revised and issued the Cyber Security Review Measures (“the Review Measures”), which has been effective since February 15, 2022. The Review Measures provides, among others, (i) the purchase of cyber products and services by critical information infrastructure operators (the “CIIOs”) and the network platform operators (the “Network Platform Operators”) which engage in data processing activities that affects or may affect national security shall be subject to the cybersecurity review by the Cybersecurity Review Office, the department which is responsible for the implementation of cybersecurity review under the Cyberspace Administration of China, or the CAC; and (ii) the Network Platform Operators with personal information data of more than one million users that seek for listing in a foreign country are obliged to apply for a cybersecurity review by the Cybersecurity Review Office. As advised by our PRC legal counsel, we believe that we and our PRC subsidiaries are not required to apply for a cyber security review with CAC, since we listed our Ordinary Shares on the Nasdaq before the effective date of the Review Measures and the requirement of Article 7 of the Review Measures that “Network Platform Operators” with personal information of more than one million users that seek for listing in a foreign country are obliged to apply for a cybersecurity review by the Cybersecurity Review Office” should not be applicable to us or our PRC subsidiaries. However, the Review Measures do not provide any explanation or interpretation of “overseas listing” or “affect or may affect national security”, and Chinese government may have broad discretion in interpreting and enforcing these laws and regulations. We cannot predict the impact of the review measures, if any, at this stage, and we will closely monitor and assess the statutory developments in this regard.

The VIEs currently are not required to obtain clearance from the Cyberspace Administration of China under the Measures for Cybersecurity Review, although we and the VIEs may face uncertainties as to the interpretation or implementation of such regulations or rules, and if required, whether such clearance can be timely obtained, or at all. However, there are uncertainties in the interpretation and enforcement of these new laws and guidelines, which could materially and adversely impact the business and financial performance of the VIEs and our company as a whole.

Our securities will be prohibited from trading if our auditor cannot be fully inspected by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, pursuant to the Holding Foreign Companies Accountable Act, as amended. On December 2, 2021, the SEC issued amendments to finalize the interim final rules previously adopted in March 2021 to implement the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. On December 16, 2021, the PCAOB issued a report relaying to the SEC its determinations that the board is unable to inspect or investigate completely registered public accounting firms in mainland China and Hong Kong due to positions taken by Chinese authorities. On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. The Statement of Protocol gives the PCAOB sole discretion to select the firms, audit engagements and potential violations it inspects and investigates and puts in place procedures for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed. In addition, the Statement of Protocol grants the PCAOB direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates. While significant, the Statement of Protocol is only a first step. Uncertainties still exist as to whether and how this new Statement of Protocol will be implemented. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor’s control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. On December 29, 2022, the Consolidated Appropriations Act, 2023 was signed into law, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified Issuer before the Securities and Exchange Commission must impose an initial trading prohibition on the issuer’s securities from three years to two years. Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the Securities and Exchange Commission is required under the HCFAA to prohibit the trading of the issuer’s securities on a national securities exchange and in the over-the-counter market. Our current Singapore-based auditor, OneStop Assurance PAC is not among the PCAOB-registered public accounting firms headquartered in Mainland China of the PRC or Hong Kong Special Administrative Regions of the PRC that are subject to PCAOB’s determination on December 16, 2021 of having been unable to inspect or investigate completely. However, we could still face the risk of delisting and cease of trading of our securities from a stock exchange or an over-the-counter market in the United States under the Holding Foreign Companies Accountable Act and the securities regulations promulgated thereunder, if the PCAOB determines in the future that it is unable to completely inspect or investigate our auditor. See “Risk Factors - Risks Related to Doing Business in China” in the section entitled “Risk Factors” in this prospectus.

As of the date of this prospectus, the VIEs have not made any dividends or distributions to the holding company, and no dividends or distributions have been made by the Company. Cashflow between us and the VIEs primarily consists of transfers from us to the VIEs for supplemental working capital, which is mainly used in payment of operating expenses and investments. For the years ended December 31, 2020, 2021 and 2022, cash transferred from WFOEs and its Subsidiaries to the VIEs was RMB318.0 million, RMB296.0 million and RMB273.2 million, respectively. Cash transferred from the VIEs to WFOEs and its Subsidiaries mainly consisted of repayment of the working capital loans. For the years ended December 31, 2020, 2021 and 2022, cash transferred from the VIEs to WFOEs and its Subsidiaries was RMB227.5 million, RMB253.1 million and RMB201.3 million, respectively. For the years ended December 31, 2020, 2021 and 2022, cash transferred from Scienjoy Holding Corporation to the offshore subsidiaries was nil, RMB562,000 and RMB1.6 million, respectively. For the years ended December 31, 2020, 2021 and 2022, cash transferred from offshore subsidiaries to Scienjoy Holding Corporation was RMB467,000, RMB260,000 and RMB36.2 million, respectively. For the year ended December 31, 2021, cash transferred from offshore subsidiaries to WFOEs and its Subsidiaries was capital contribution of RMB6.4 million. For the year ended December 31, 2021, cash transferred from WFOEs and its Subsidiaries to offshore subsidiaries was dividend of RMB7.0 million. For the year ended December 31, 2022, cash transferred from WFOEs and its Subsidiaries to offshore subsidiaries mainly consisted of repayment of working capital loans of RMB2.1 million and dividend of RMB6.3 million.

For the six months ended June 30, 2023, cash transferred from WFOEs and its Subsidiaries to the VIEs was RMB17.8 million. Cash transferred from the VIEs to WFOEs and its Subsidiaries mainly consisted of repayment of the working capital loans. For the six months ended June 30, 2023, cash transferred from the VIEs to WFOEs and its Subsidiaries was RMB84.5 million, For the six months ended June 30, 2023, cash transferred from offshore subsidiaries to VIEs was working capital loans of RMB19,000. For the six months ended June 30, 2023, cash transferred from Scienjoy Holding Corporation to the offshore subsidiaries was RMB363,000. For the six months ended June 30, 2023, cash transferred from offshore subsidiaries to Scienjoy Holding Corporation was RMB10.2 million. For the six months ended June 30, 2023, cash transferred from WFOEs and its Subsidiaries to offshore subsidiaries was working capital loan of RMB24.2 million. The source of funds is the capital retained from the Business Combination transaction and revenues generated by our PRC subsidiaries, and there is no tax consequence on the intercompany’ s short-term working capital loans. In the future, cash proceeds raised from overseas financing activities, including this offering, may be transferred by us to our PRC subsidiaries and the VIEs via capital contribution or shareholder loans, as the case may be.

To date, except for the above cash transferred between us and the VIEs, there are no other assets transferred between us and the VIEs. To date, the VIEs have not made any dividends or distributions to our WFOEs and our WFOEs have not made any dividends or distributions to its shareholders or Scienjoy Holding Corporation. As of the date of this prospectus, Scienjoy Holding Corporation has not paid dividends or made distributions to our investors of Class A Ordinary Shares.

On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, as approved by the State Council, released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies and five interpretive guidelines (collectively, the “Trial Measures”), which came into effect on March 31, 2023. Under the Trial Measures, a filing-based regulatory system shall be applied to “indirect overseas offerings and listings” of PRC domestic companies, which refers to securities offerings and listings in an overseas market made under the name of an offshore entity but based on the underlying equity, assets, earnings or other similar rights of a domestic company that operates its main business domestically. The Trial Measures state that, any post-listing follow-on offering by an issuer in the same overseas market, including issuance of shares, convertible notes and other similar securities, shall be subject to filing requirement within three business days after the completion of the offering. Therefore, any of our future offering and listing of our securities in an overseas market shall be subject to the filing requirements under the Trial Measures. As this secondary offering is conducted by the Selling Securityholders, rather than by us, we have been advised by our PRC legal counsel, that this secondary offering is not subject to the filing requirements under the Trial Measures.

If we fail to obtain required approval or complete other review or filing procedures, under the Trial Measures or otherwise, for any future overseas securities offering or listing, or if the CSRC disagrees with our view on the applicability of the Trial Measures to this secondary offering by the Selling Securityholders, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of the Class A Ordinary Shares. See “Risk Factors — Risk Factors Relating to Doing Business in China — The filling of the CSRC will be required and approval and/or other requirements from other PRC governmental authorities may be required in connection with an offering under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to complete such filing or obtain such approval.”

According to the Foreign Investment Law of the People’s Republic of China and its implementing rules, which jointly established the legal framework for the administration of foreign-invested companies, a foreign investor may, in accordance with other applicable laws, freely transfer into or out of China its contributions, profits, capital earnings, income from asset disposal, intellectual property rights, royalties acquired, compensation or indemnity legally obtained, and income from liquidation, made or derived within the territory of China in RMB or any foreign currency, and any entity or individual shall not illegally restrict such transfer in terms of the currency, amount and frequency. According to the Company Law of the People’s Republic of China and other Chinese laws and regulations, our PRC subsidiaries may pay dividends only out of their respective accumulated profits as determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its accumulated after-tax profits, if any, each year to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Where the statutory reserve fund is insufficient to cover any loss a PRC subsidiary incurred in the previous financial year, its current financial year’s accumulated after-tax profits shall first be used to cover the loss before any statutory reserve fund is drawn therefrom. Such statutory reserve funds and the accumulated after-tax profits that are used for covering the loss cannot be distributed to us as dividends. At their discretion, our PRC subsidiaries may allocate a portion of their after-tax profits based on Chinese accounting standards to a discretionary reserve fund.

Our PRC subsidiaries and the VIEs receive substantially all of their revenue in Renminbi. Renminbi is not freely convertible into other currencies. As result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to use their potential future Renminbi revenues to pay dividends to us. The Chinese government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in availability of foreign currency may then restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to our offshore entities for our offshore entities to pay dividends or make other payments or otherwise to satisfy our foreign-currency-denominated obligations. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and foreign currency debt. Currently, our PRC subsidiaries may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of the State Administration of Foreign Exchange of China (“SAFE”) by complying with certain procedural requirements. However, the relevant Chinese governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. The Chinese government may continue to strengthen its capital controls, and additional restrictions and substantial vetting processes may be instituted by SAFE for cross-border transactions falling under both the current account and the capital account. Any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of China or pay dividends in foreign currencies to holders of our securities. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant Chinese governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries. See “Risks Related to Doing Business in China and Our International Operations—We may rely on dividends and other distributions on equity paid by our Chinese subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” in the section entitled “Risk Factors” for a detailed discussion of the Chinese legal restrictions on the payment of dividends and our ability to transfer cash within our group. In addition, shareholders may potentially be subject to Chinese taxes on dividends paid by us in the event we are deemed a Chinese resident enterprise for Chinese tax purposes.

We have two classes of ordinary shares, namely, Class A Ordinary Shares and Class B Ordinary Shares. Both the Class A Ordinary Shares and the Class B Ordinary Shares will have the same rights except that the Class B Ordinary Shares will have weighted voting rights. Each Class B Ordinary Share shall have ten votes at a meeting of the shareholders or on any resolution of shareholders whereas each Class A Ordinary Share shall only have one vote.

The following table sets forth the number of securities being held by the Class A ordinary shareholders and Class B ordinary shareholders, including their donees, pledgees, transferees or other successors-in-interest, subject to the transfer restrictions described in this prospectus. The following table also sets forth the voting power held by the Class A ordinary shareholders and Class B ordinary shareholders. The percentages in the table are based on 38,113,879 shares of Class A Ordinary Shares and 2,925,058 shares of Class B Ordinary Shares as of September 5, 2023.

Heshine Holdings Limited, which is 100% owned by our Chief Executive Officer and Chairman, Xiaowu He, holds all of our issued and outstanding Class B Ordinary Shares. Together with the Class A Ordinary Shares held by it, Heshine Holdings Limited controls more than 50% of our voting rights. As a result, we are a “controlled company’’ as defined under the Nasdaq Stock Market Rules. 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, investors in Class A Ordinary Shares will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, and are therefore eligible to take advantage of certain reduced reporting requirements otherwise applicable to other public companies.

We are also a “foreign private issuer” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the Securities and Exchange Commission (the “SEC”) as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

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                   , 2023.

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

You should carefully read this prospectus and the information described under the heading “Where You Can Find More Information.” Neither we nor the Selling Securityholders have authorized anyone to give any information or make any representation about our company that is different from, or in addition to, that contained in this prospectus, or any accompanying prospectus supplement. Therefore, if anyone does give you information of this sort, you should not rely on it as authorized by us. You should rely only on the information contained in this prospectus and any accompanying prospectus supplement.

You should not assume that the information contained in this prospectus and any accompanying supplement to this prospectus is accurate on any date subsequent to the date set forth on the front of the document, even though this prospectus and any accompanying supplement to this prospectus is delivered or securities are sold on a later date. Neither the delivery of this prospectus, nor any sale made hereunder, shall under any circumstances create any implication that there has been no change in our affairs since the date hereof .

The distribution of this prospectus may be restricted by law in certain jurisdictions. You should inform yourself about and observe any of these restrictions. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this prospectus does not extend to you.

EXPLANATORY NOTE

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 indicated and except where the context otherwise requires, 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, 2022 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.8972, 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 31, 2022.

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, 2021 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.3726, 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 31, 2021.

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, 2020 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.5250, 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 31, 2020.

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.

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:

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

You are not purchasing equity securities of our subsidiaries that have substantive business operations in China but instead are purchasing equity securities of a British Virgin Islands holding company Scienjoy Holding Corporation is a British Virgin Islands holding company with no equity ownership in the VIEs and we conduct our operations in China through (i) our PRC subsidiaries and (ii) the VIEs with which we have maintained contractual arrangements. Investors in our Class A Ordinary Shares thus are not purchasing equity interest in our consolidated affiliated entities in China but instead are purchasing equity interest in a British Virgin Islands holding company. If the PRC government deems that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we and the VIEs could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company in the British Virgin Islands, the VIEs, and investors of Scienjoy Holding Corporation face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a group. In particular, as we are a China-based company incorporated in the British Virgin Islands, you should pay special attention to the subsection headed “Risks Related to Doing Business in China” below. This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including the risks and uncertainties described below and elsewhere in this prospectus.

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, and the Middle East. 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 six platforms under the brands “Showself” (秀色直播), “Lehai”(乐嗨), “Haixiu” (嗨秀), BeeLive Chinese (“MiFeng” 蜜疯直播), BeeLive International and Hongle.tv(“Hongle”红人直播). 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 7 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 2 platforms of our, “Haixiu” (嗨秀秀场) and “Lehai” (乐嗨秀场), each received 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. Hongle.tv (“Hongle” 红人直播) received 2 administrative penalties from Beijing Cultural Market Administrative Enforcement Department and 1 administrative penalty from Beijing Municipal Tax 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 “Risk Factors—Risks Factors Relating to Our Business and Industry—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 wrongdoing 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. 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.

Failure to achieve and maintain effective internal and disclosure controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and share price.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed.

As required by Rule 13a-15(c) of the Exchange Act, our management conducted an evaluation of our company’s internal control over financial reporting as of December 31, 2022 based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our disclosure controls and procedures and our internal control over financial reporting were not effective as of December 31, 2022. The identified material weaknesses include our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, or PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We have implemented and planned to implement a number of measures to address the material weaknesses. We have engaged an international consulting firm to assist us to improve our internal control over financial reporting. We have allocated additional resources, including staff or external consultants with relevant U.S. GAAP and SEC reporting experience, to improve financial oversight function, to introduce formal business performance review process, and to prepare and review the consolidated financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements. In addition, we intend to conduct regular and continuous U.S. GAAP accounting and financial reporting training programs.

However, we cannot assure you that all these measures will be sufficient to remediate our significant deficiencies in time, or at all. We anticipate that the process of building our accounting and financial functions and infrastructure will continue to require significant additional professional fees, internal costs and management efforts. As a public company, we will be required to maintain adequate internal control over financial reporting and to report any material weakness in our internal control over financial reporting. SEC Regulation S-K requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on internal control over financial reporting. Regulation S-K also requires that our management report on internal control over financial reporting be attested to by our independent registered public accounting firm, to the extent we are no longer an emerging growth company. Our independent registered public accounting firm is not required to attest to our management report on internal control over financial reporting while we are an emerging growth company.

As a company with less than US$1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. Any current or future evaluation of effectiveness is subject to subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. See “Management Discussion and Analysis—Internal Control over Financial Reporting.”

We continue to 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 Class A Ordinary Shares we are authorized to issue pursuant to all awards under the 2021 Share Incentive Plan is 3,000,000 Class A Ordinary Shares. As of the date of this prospectus, total of 1,759,707 restricted share units have been granted under 2021 Pan. 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 employees 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 complete filings and obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable PRC laws and regulations, including the filling with CSRC if we issue additional securities for the acquisitions, 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.

COVID-19 pandemic may have an adverse impact on our results of operations and financial condition for the fiscal year 2023.

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. After the initial outbreak of COVID-19, from time to time, some instances of COVID-19 infections have emerged in various regions of China, including the infections caused by the Omicron variants in 2022. For example, a wave of infections caused by the Omicron variants emerged in Shanghai in 2022, and a series of restrictions and quarantines were implemented to contain the spread. Our Beijing and Hangzhou office did not work at full capacity for approximately two months when these restrictive measures are in force, which negatively affected our operational and financial results. Many of the restrictive measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19 virus have been revoked or replaced with more flexible measures since December 2022. While the revocation or replacement of the restrictive measures to contain the COVID-19 pandemic could have a positive impact on our normal operations, the extent of the impact on our future financial results 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 still remain uncertain and unpredictable. Given this uncertainty, we are 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, and therefore we cannot guarantee that COVID-19 will not adversely impact our results of operations and financial condition for the fiscal year 2023.

Risk Factors Relating to Our Corporate Structure

We conduct our business through the VIEs by means of contractual arrangements. PRC laws and regulations governing our businesses and the validity of certain of our contractual arrangements are uncertain. If the PRC courts or administrative authorities determine that these contractual arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.

Current PRC laws and regulations place certain restrictions and conditions on foreign ownership of certain areas of businesses and accordingly to comply with PRC laws and regulations, we conduct such business activities through the VIEs in China. For more detailed discussions, see “Risk Factors—Risk Factors Relating to Our Corporate Structure—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.”

WXBJ has entered into contractual arrangements with the Zhihui Qiyuan VIEs and their respective shareholders, and WXZJ has entered into contractual arrangements with the Siixang Qiyuan VIEs and their respective shareholders. Such contractual arrangements enable us to exercise effective control over, receive substantially all of the economic benefits of, and have an exclusive option to purchase all or part of the equity interest and assets in the VIEs when and to the extent permitted by PRC law. We have evaluated the guidance in FASB ASC 810 and concluded that we are the primary beneficiary of the VIEs because of these contractual arrangements. Accordingly, under U.S. GAAP, the financial statements of the VIEs are consolidated as part of our financial statements.

However, Scienjoy Holding Corporation is a British Virgin Islands holding company with no equity ownership in the VIEs and we conduct our operations in China through (i) our PRC subsidiaries and (ii) the VIEs with which we have maintained contractual arrangements. Investors in our Class A Ordinary Shares thus are not purchasing equity interest in our consolidated affiliated entities in China but instead are purchasing equity interest in a British Virgin Islands holding company. If the PRC government deems that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we and the VIEs could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company in the British Virgin Islands, the VIEs, and investors of Scienjoy Holding Corporation face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a group.

On February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, or the Trial Measures, which will become effective on March 31, 2023. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes on the Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answers to Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website. The Trial Measures, together with the Guidance Rules and Notice, reiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises. The Trial Measures grant the CSRC the authority to regulate the overseas offering and listing of PRC companies with VIE structures and allow filings by VIE-structured companies insofar as they comply with the relevant regulations. PRC companies that are already listed on overseas exchanges by or before March 31, 2023 are not required to make any filings with CSRC unless they raise additional equity financing, in which case CSRC may also consult with certain PRC governmental authorities that regulate the PRC companies’ business operations, or ask the Company to obtain approvals or confirmation from such authorities in advance.

There still remain substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our and the VIEs’ business, or the enforcement and performance of our contractual arrangements with the VIEs and their shareholders. These laws and regulations may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. Due to the uncertainty and complexity of the regulatory environment, we cannot assure you that we and the VIEs would always be in full compliance with applicable laws and regulations, the violation of which may have adverse effect on our and the VIEs’ business and our reputation.

Although we believe we, our PRC subsidiaries and the VIEs are not in violation of current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. If the PRC government determines that we or the VIEs do not comply with applicable law, it could revoke the VIEs’ business and operating licenses, require the VIEs to discontinue or restrict the VIEs’ operations, restrict the VIEs’ right to collect revenues, block the VIEs’ websites, require the VIEs to restructure our operations, impose additional conditions or requirements with which the VIEs may not be able to comply, impose restrictions on the VIEs’ business operations or on their customers, or take other regulatory or enforcement actions against the VIEs that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the VIEs’ business operations or restrict the VIEs from conducting a substantial portion of their business operations, which could materially and adversely affect the VIEs’ business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of any of the VIEs that most significantly impact its economic performance, and/or our failure to receive the economic benefits from any of the VIEs, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP. In addition, our shares may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of our PRC subsidiaries that conduct a significant part of our operations.

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 took force on January 1, 2020, and replaced three existing laws regulating foreign investment in China, namely the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. 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 enterprise 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 latest version of the “negative list,” namely, the Special Management Measures (Negative List) for the Access of Foreign Investment (2021), which became effective on January 1, 2022, provides that foreign investment is prohibited in providing the Internet content service, Internet audio-visual program services and online culture activities that we conduct through our consolidated variable interest entities. These operations are subject to foreign investment restrictions/prohibitions set forth in the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2021) issued by the 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.

We depend upon the contractual arrangements in conducting our business in China, which may not be as effective as direct ownership in providing operational control.

We are a holding company incorporated in the British Virgin Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through the VIEs in China. We entered into the VIE agreements with Zhihui Qiyuan VIEs on January 29, 2019 and entered into the VIE agreements with Sixiang Qiyuan VIEs on June 1, 2022. We generate most of our revenue from operations of the VIEs. Our shares (include Class A Ordinary Shares) offered in this offering are shares of our offshore holding company instead of shares of the VIEs or our PRC subsidiaries. we rely on contractual arrangements by and among WXBJ, the Zhihui Qiyuan VIEs and their shareholders and the contractual arrangements by and among WXZJ, the Sixiang Qiyuan VIEs and their shareholders for our business operations, and these contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs. We rely on the performance by the VIEs and their shareholders of their obligations under the contracts to receive substantially all of the economic benefits from the VIEs’ operations and be the primary beneficiary of the VIEs for accounting purposes. The shareholders of the VIEs may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portion of our business through the contractual arrangements with the VIEs.

Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business. If the VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability, as a British Virgin Islands holding company, to enforce these contractual arrangements and doing so may be quite costly, and these contractual arrangements have not been tested in a court of law.

The shareholders of the VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. The shareholders of the VIEs may breach, or cause the VIEs to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIEs, which would have a material adverse effect on our ability to effectively control the VIEs and receive economic benefits from them. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

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. In addition, if SHC issues new securities for future financing, the Company shall disclose the whole corporate structure including VIEs to CSRC and may be inquired by CSRC about the background of such structure.

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 WXBJ and WXZJ (our indirect wholly-owned subsidiaries in China) are foreign-invested enterprises (or called “wholly foreign-owned enterprises”, the “WFOEs”) under PRC laws and regulations. To comply with PRC laws and regulations, we have to conduct our business in China mainly through WXBJ, WXZJ, Zhihui Qiyuan VIEs, and Sixiang Qiyuan VIEs and their respective subsidiaries, based on a series of contractual arrangements by and among WXBJ, Zhihui Qiyuan, and its registered shareholders and a series of contractual arrangements by and among WXZJ, Sixiang Qiyuan, and their respective subsidiaries. As a result of these contractual arrangements, we exert control over the VIEs (namely, Zhihui Qiyuan VIEs and Sixiang Qiyuan VIEs) and consolidate their financial results in our financial statements under U.S. GAAP. The VIEs (namely, Zhihui Qiyuan VIEs and Sixiang Qiyuan VIEs) hold the licenses, approvals, and key assets that are essential for our operations.

In the opinion of our PRC counsel, Beijing Feng Yu Law Firm (北京锋昱律师事务所) (“Feng Yu Law Firm”), based on its understanding of the relevant PRC laws and regulations, each of the contracts among WXBJ, Zhihui Qiyuan and its registered shareholders is valid, binding, and enforceable in accordance with its terms, each of the contracts among WXZJ, Sixiang 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 VIEs’ shareholding structure. If the WFOEs and its subsidiaries and the VIEs are found in violation of any PRC laws or regulations, or if the contractual arrangements among WXBJ, Zhihui Qiyuan and its registered shareholders or the contractual arrangements among WXZJ, Sixiang 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 and future financing. 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 VIEs that are important to our business if the VIEs declare bankruptcy or become subject to a dissolution or liquidation proceeding.

The 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 VIEs may not voluntarily liquidate the 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 VIEs, or the 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 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 WXBJ, Zhihui Qiyuan, and its registered shareholders or the contractual arrangements among WXZJ, Sixiang 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 VIEs adjust their taxable income upward for PRC tax purposes. Such an adjustment could increase VIEs’ tax expenses without reducing the tax expenses of WXBJ and/or WXZJ, subject the VIEs to late payment fees and other penalties for under-payment of taxes, and result in the loss of any preferential tax treatment WXBJ and/or WXZJ 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 and pay back 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 WXBJ or WXZJ, 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.

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 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.

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 VIEs, in particular WXBJ and WXZJ, two 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 Class A Ordinary Shares could be dramatically reduced.

Adverse Changes in China’s political, economic social conditions or government policies could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of the business and operations of the VIES and our PRC subsidiaries.

The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies.

The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese 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 the future business and operating results and the competitive position of the VIEs and our PRC subsidiaries. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on the VIEs and our PRC subsidiaries. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect the future business and operating results of the VIEs and our PRC subsidiaries.

The PRC government’s significant oversight over our business operation could result in a material adverse change in the operations of the VIEs and our company as a whole and the value of our Class A Ordinary Shares.

We conduct our business in China primarily through our PRC subsidiaries (including WFOEs) and the VIEs, which are subject to Chinese government’s significant oversight and discretion. The Chinese government may intervene or influence the current and future operations of our PRC subsidiaries and the VIEs at any time, or may exert more control over offerings conducted overseas and/or foreign investment in issuers likes ourselves, which could result in a material change in our operations and the value of our securities.

In the event that the Chinese government exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, relevant Chinese regulatory authorities could disallow contractual arrangement under the VIE agreements and hinder our ability to exert contractual control over or consolidate the VIEs under US. GAAP. the VIEs, which would likely result in a material change in operations and/or value of the Company’s securities, including that it could cause the value of such securities to significantly decline or become worthless.

Rules and regulations in China can change quickly with little or no advance notice and their interpretation and the implementation involve uncertainty, which could materially and adversely affect the operations of the VIEs and our company as a whole and the value of our securities.

The PRC government may take a series of regulatory actions and statements to regulate business operations in China from time to time with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structures which has been implemented by CSRC, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On December 28, 2021, the Cyberspace Administration of China (“CAC”) and certain other governmental authorities issued the Measures of Cybersecurity Review (effective as of February 15, 2022), requiring that cyberspace operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity Review. Furthermore, on February 17, 2023, the CSRC issued Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (effective as of March 31, 2023), requiring the company that directly or indirectly go to public offering overseas shall make filing with the CSRC within three days after its completion of offering. These new laws and regulations can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, change to the data and other business practices of the VIEs and our company, regulatory investigations, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise affect the business of the VIEs. As of the date of this prospectus, we have not received any inquiry or notice or any objections to this prospectus from CSRC, the CAC or any other PRC governmental authorities that have jurisdiction over our operations. However, given the current regulatory environment in China, there remains uncertainty regarding the interpretation and enforcement of the laws of China. Any future quick changes of the laws and rules with little or no advice notice and the uncertainty resulted therefrom could materially and adversely disrupt and affect the operation and future financing of our PRC subsidiaries, the VIEs and our company.

Our shares may be delisted and prohibited from being traded under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for two consecutive years. The delisting and the cessation of trading of our shares, or the threat of their being delisted and prohibited from being traded, may materially and adversely affect the value of your investment.

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above.

On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.

On November 5, 2021, the SEC approved Rule 6100 adopted by the PCAOB to establish a framework for the PCAOB’s determinations under the HFCA Act that the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction.

On December 2, 2021, the SEC issued amendments to finalize the interim final rules previously adopted in March 2021 to implement the submission and disclosure requirements in the HFCA Act, which require us to identify in our annual report on Form 20-F, (1) the auditors that provided opinions to the financial statements presented in the annual report, (2) the location where the auditors’ report was issued, and (3) the PCAOB ID number of the audit firm or branch that performed the audit work. If the SEC determines that we have three consecutive non-inspection years, the SEC will issue stop order to prohibit the trading of our shares.

On December 16, 2021, the PCAOB issued a Determination Report which reported that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China, because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region of the PRC, because of a position taken by one or more authorities in Hong Kong.

On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. The Statement of Protocol gives the PCAOB sole discretion to select the firms, audit engagements and potential violations it inspects and investigates and puts in place procedures for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed. In addition, the Statement of Protocol grants the PCAOB direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates. While significant, the Statement of Protocol is only a first step. Uncertainties still exist as to whether and how this new Statement of Protocol will be implemented. The PCAOB is required to reassess its determinations by the end of 2022 and there are uncertainties whether the PCAOB will determine it is still unable to inspect or investigate completely registered public accounting firms in mainland China and Hong Kong.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor’s control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

On December 29, 2022, the Consolidated Appropriations Act, 2023 was signed into law, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified Issuer before the Securities and Exchange Commission must impose an initial trading prohibition on the issuer’s securities from three years to two years. Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the Securities and Exchange Commission is required under the HCFAA to prohibit the trading of the issuer’s securities on a national securities exchange and in the over-the-counter market.

Our former auditor, Friedman LLP, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with the applicable professional standards. We are not aware of any reasons to believe or conclude that Friedman LLP would not permit an inspection by the PCAOB or that it may not be subject to such inspection. However, given the recent developments, we cannot assure you whether PCAOB or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.  Our shares could still be delisted and prohibited from being traded over-the-counter under the HFCA Act PCAOB determines in the future that it is unable to fully inspect or investigate our auditor which has a presence in China.

Our current auditor, OneStop Assurance PAC, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with the applicable professional standards. We are not aware of any reasons to believe or conclude that OneStop Assurance PAC would not permit an inspection by the PCAOB or that it may not be subject to such inspection. However, given the recent developments, we cannot assure you whether PCAOB or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.  Our shares could still be delisted and prohibited from being traded over-the-counter under the HFCA Act PCAOB determines in the future that it is unable to fully inspect or investigate our auditor which has a presence in China.

Furthermore, there is no guarantee that future audit reports will be prepared by auditors that are completely inspected by the PCAOB, and, as such, future investors may be deprived of such inspections, which could result in limitations or restrictions to SHC’s access of the U.S. capital markets.

The filling of the CSRC will be required and approval and/or other requirements from other PRC governmental authorities may be required in connection with an offering under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to complete such filing or obtain such approval.

On February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, or the Trial Measures, which will become effective on March 31, 2023. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5, Notes on the Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant CSRC Answers to Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website. The Trial Measures, together with the Guidance Rules and Notice, reiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Under the Trial Measures and the Guidance Rules and Notice, domestic enterprises conducting overseas securities offering and listing, either directly or indirectly, shall complete filings with the CSRC pursuant to the Trial Measures’ requirements within three working days following the submission of an application for initial public offering or listing. Starting from March 31, 2023, enterprises that have been listed overseas or satisfy all of the following conditions shall be deemed as “Grandfathered Issuers” and are not required to complete the overseas listing filing immediately, but shall complete filings as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC: (i) the application for indirect overseas offering or listing shall have been approved by the relevant overseas regulatory authority or stock exchange prior to March 31, 2023 (as the SEC does not approve or disapprove of an offering, this requirement is interpreted to be the SEC’s declaration of the registration statement to be effective with respect to this offering), (ii) the enterprise is not required to reapply for the approval of the relevant overseas regulatory authority or stock exchange, and (iii) such overseas securities offering or listing shall be completed before September 30, 2023. Starting from March 31, 2023, domestic enterprises that have submitted valid applications for overseas offerings and listing but have not obtained the approval from relevant overseas regulatory authority or overseas stock exchange shall complete filings with the CSRC prior to their overseas offering and listings.

Our PRC counsel, has advised us that, we will not be required to submit an application to the CSRC for the approval regarding the Company’s listing shares on Nasdaq because the Company has already been listed before March 31, 2023. However, if the Company issues additional securities for refinancing or acquisition of domestic assets, or go listing in other public markets, it shall make filling with the CSRC within three days after completion of such offering, and may be subject to pre-examination, confirmation or approval from the competent PRC authorities governing our business operation in China, such as MIIT and CAC.

As this secondary offering is conducted by the Selling Securityholders, rather than by us, we have been advised by our PRC Legal Counsel that this secondary offering by the Selling Securityholder is not subject to any filing requirements under the Trial Measures. However, there can be no assurance that relevant PRC regulatory authorities, including the CSRC, would reach the same conclusion. If the CSRC disagrees with our view on the applicability of the Trial Measures to this secondary offering or if we fail to complete the filing procedures with the CSRC for any future overseas securities offering, we may face sanctions by the CSRC, which may include fines and penalties, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future overseas securities offerings, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of the Class A Ordinary Shares.

In addition, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, purport to require offshore special purpose vehicles that are controlled by PRC companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and whether such M&A Rules will be abolished entirely by the authorities, or particularly, replaced partially by new regulations such as the Trial Measures. If a governmental approval is still required, it is uncertain how long it will take for us to obtain such approval, and, even if we obtain such approval, the approval could be rescinded. Any failure to obtain or a delay in obtaining the requisite governmental approval or filings for an offering, or a rescission of such CSRC approval or filing if obtained by us, may subject us to sanctions imposed by the relevant PRC regulatory authority, which could include fines and penalties on our and the VIEs’ operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

Our PRC counsel, has advised us that, based on its understanding of the M&A Rules, we will not be required to submit an additional application to the CSRC for the approval under the M&A Rules for an offering. However, our PRC counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, especially by such governmental authorities other than CSRC, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules, if any. We cannot assure you that relevant PRC governmental authorities, including the CSRC, would reach the same conclusion as our PRC counsel, and hence, we may face regulatory actions or other sanctions from them. Furthermore, relevant PRC governmental authorities promulgated the Opinions on Strictly Cracking Down Illegal Securities Activities, which provided that the administration and supervision of overseas-listed China-based companies will be strengthened, and the special provisions of the State Council on overseas issuance and listing of shares by such companies will be revised, clarifying the responsibilities of domestic industry competent authorities and regulatory authorities. However, the Opinions on Strictly Cracking Down Illegal Securities Activities only provides principle rules, leaving uncertainties regarding the interpretation and implementation of these opinions. It is possible that any new rules or regulations may impose additional requirements on us. In addition, on December 28, 2021, the Cyberspace Administration of China (“CAC”) and certain other governmental authorities issued the Measures of Cybersecurity Review (effective as of February 15, 2022), according to which, among others, operators of “critical information infrastructure” or data processors holding over one million users’ personal information shall apply to the Cybersecurity Review Office for a cybersecurity review before any listing on a foreign stock exchange. If it is determined in the future that CAC approval or other procedural requirements from any other governmental authorities are required to be met for and prior to an additional offering, it is uncertain whether we can or how long it will take us to obtain such approval or complete such procedures and any such approval could be rescinded. Any failure to obtain or delay in obtaining such approval or completing such procedures for an offering, or a rescission of any such approval, could subject us to sanctions by the relevant PRC governmental authorities. The governmental authorities may impose restrictions and penalties on our operations in China, such as the suspension of our apps and services, revocation of our licenses, or shutting down part or all of our operations, limit our ability to pay dividends outside of China, delay or restrict the repatriation of the proceeds from an offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our Class A Ordinary Shares. The PRC governmental authorities may also take actions requiring us, or making it advisable for us, to halt an offering before settlement and delivery of the Class A Ordinary Shares offered hereby. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the PRC governmental authorities later promulgate new rules or explanations requiring that we obtain their approvals for filings, registrations or other kinds of authorizations for an offering, we cannot assure you that we can obtain the approval, authorizations, or complete required procedures or other requirements in a timely manner, or at all, or obtain a waiver of the requisite requirements if and when procedures are established to obtain such a waiver.

The VIEs may be subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on the business, financial condition and results of operations of the VIEs and our company as a whole.

The VIEs are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations. We may be subject to various risks and costs associated with the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. This data is wide ranging and relates to our employees, users, anchors, contractors and other counterparties and third parties. 

On June 10, 2021, the Standing Committee of the National People’s Congress of China promulgated the Data Security Law which shall take effect on September 1, 2021. The Data Security Law provides for data security and privacy obligations of entities and individuals carrying out data activities, prohibits entities and individuals in China from providing any foreign judicial or law enforcement authority with any data stored in China without approval from the competent PRC authority, and sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations, including rectification order, warning, fines of up to RMB10 million, suspension of relevant business, and revocation of business permits or licenses.

On August 20, 2021, the Standing Committee of the National People’s Congress adopted the Personal Information Security Law, which shall come into force as of November 1, 2021. The Personal Information Protection Law includes the basic rules for personal information processing, the rules for cross-border provision of personal information, the rights of individuals in personal information processing activities, the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and use of personal information.

On December 28, 2021, the CAC and twelve other PRC regulatory authorities jointly revised and issued the Cyber Security Review Measures (“the Review Measures”), which became effective on February 15, 2022. The Review Measures provides, among others, (i) the purchase of cyber products and services by critical information infrastructure operators (the “CIIOs”) and the network platform operators (the “Network Platform Operators”) which engage in data processing activities that affects or may affect national security shall be subject to the cybersecurity review by the Cybersecurity Review Office, the department which is responsible for the implementation of cybersecurity review under the CAC; and (ii) the Network Platform Operators with personal information data of more than one million users that seek for listing in a foreign country are obliged to apply for a cybersecurity review by the Cybersecurity Review Office. On November 14, 2021, the CAC published the Regulations on the Administration of Network Data Security (Draft for Comment) to open for public consultation, which stipulates that if a data processor proposes to be listed abroad or provide personal information outside the territory of PRC, it shall be subject to certain security assessment and filing requirements in CAC or competent authorities. As advised by our PRC legal counsel, we believe that we and our PRC subsidiaries and the VIEs are not required to apply for a cyber security review with CAC, since we listed our Ordinary Shares on the Nasdaq before the effective date of the Review Measures, and our PRC subsidiaries and the VIEs as the “network platform operators” will not be subject to CAC’s review or approval regarding data cyber security under other current-effective CAC rules, since that, (A) all of collection and processing of any personal information or other data in the ordinary course of business are conducted by our PRC subsidiaries and the VIEs within the territory of PRC, (B) none of our PRC subsidiaries or the VIEs provides any personal information or operational data outside the territory of PRC, (C) such personal information or operational data handled by our PRC subsidiaries and the VIEs will not be construed as important data threatening China’s national security, and (D) none of our PRC subsidiaries or the VIEs will fell under the “critical information infrastructure operators”, which are subject to direct and more strict regulatory supervision under CAC rules. However, the Review Measures do not provide any explanation or interpretation of “overseas listing” or “affect or may affect national security,” and Chinese government may have broad discretion in interpreting and enforcing these laws and regulations, which may also require the Company to make filings or obtain approval from CAC or other competent authorities with respect to its further offerings in overseas public markets. We cannot predict the impact of the review measures, if any, at this stage, and we will closely monitor and assess the statutory developments in this regard.

On July 7, 2022, the CAC promulgated the Measures on Security Assessment of Cross-border Data Transfer, which became effective on September 1, 2022. The data export measures require that any data processor who processes or exports personal information exceeding a certain volume threshold pursuant to the measures shall apply for a security assessment by the CAC before transferring any personal information abroad, including the following circumstances: (i) important data will be provided overseas by any data processor; (ii) personal information will be provided overseas by any operator of critical information infrastructure or any data processor who processes the personal information of more than 1,000,000 individuals; (iii) personal information will be provided overseas by any data processor who has provided the personal information of more than 100,000 individuals in aggregate or has provided the sensitive personal information of more than 10,000 individuals in aggregate since January 1, 2021; and (iv) other circumstances where the security assessment is required as prescribed by the CAC. A data processor shall, before applying for the security assessment of an outbound data transfer, conduct a self-assessment of the risks involved in the outbound data transfer. The security assessment of a cross-border data transfer shall focus on assessing the risks that may be brought about by the cross-border data transfer concerning national security, public interests, or the lawful rights and interests of individuals or organizations.

The VIEs do not collect, process or use personal information of entities or individuals other than what is necessary for our business and do not disseminate such information. Although we believe the VIEs currently are not required to obtain clearance from the Cyberspace Administration of China under the Measures for Cybersecurity Review or the Opinions on Strictly Cracking Down on Illegal Securities Activities, we face uncertainties as to the interpretation or implementation of such regulations or rules, and if required, whether such clearance can be timely obtained, or at all.

Compliance with the PRC Cybersecurity Law, the PRC National Security Law, the Data Security Law, the Personal Information Protection Law, the Cybersecurity Review Measures, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, including data security and personal information protection laws, may result in additional expenses to us and subject us to negative publicity, which could harm our reputation among users and negatively affect the trading price of our shares in the future. There are also uncertainties with respect to how the PRC Cybersecurity Law, the PRC National Security Law and the Data Security Law will be implemented and interpreted in practice. PRC regulators, including the Ministry of Public Security, the MIIT, the SAMR and the Cyberspace Administration of China, have been increasingly focused on regulation in the areas of data security and data protection, including for mobile apps, and are enhancing the protection of privacy and data security by rule-making and enforcement actions at central and local levels. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to penalties, including fines, suspension of business, prohibition against new user registration (even for a short period of time) and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected.

It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator, such as the Department of Justice, the SEC, the PCAOB and other authorities, to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

In the event that the U.S. regulators carry out investigation on us and there is a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC.

Failure to comply with laws and regulations applicable to our business in China could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business.

Our PRC subsidiaries and the VIEs in China are subject to regulation by various governmental agencies in China, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as value-added telecommunication laws and regulations, privacy and data protection-related laws and regulations, intellectual property laws, employment and labor laws, workplace safety, consumer protection laws, governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. These laws and regulations impose added costs on our business. Noncompliance with applicable regulations or requirements could subject our PRC subsidiaries and the VIEs to: