EX-99.2 4 ea156747ex99-2_scienjoy.htm UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Introduction

 

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

 

The unaudited pro forma combined balance sheet as of September 30, 2021 gives pro forma effect to the Hongle Acquisition as if it had been consummated as of that date. The unaudited pro forma combined statements of operations for the nine months ended September 30, 2021 give pro forma effect to the Hongle Acquisition as if it had had occurred as of January 1, 2021. The unaudited pro forma combined statements of operations for the year ended December 31, 2020 give pro forma effect to the Hongle Acquisition as if both had occurred as of January 1, 2020. This information should be read together with Scienjoy’s and Hongle’s respective audited and unaudited financial statements and related notes.

 

The unaudited pro forma combined balance sheet as of September 30, 2021 has been prepared using the following:

 

●Scienjoy’s unaudited historical consolidated balance sheet as of September 30, 2021, as included elsewhere in this prospectus; and

 

●Hongle’s unaudited historical condensed balance sheet as of September 30, 2021, as included elsewhere in this prospectus.

 

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2021 has been prepared using the following:

 

●Scienjoy’s unaudited historical consolidated statement of income for the nine months ended September 30, 2021, as included elsewhere in this prospectus.

 

●Hongle’s unaudited historical condensed statement of operations for the nine months ended September 30, 2021, as included elsewhere in this prospectus.

 

The unaudited pro forma combined statement of operations for the year ended December 31, 2020 has been prepared using the following:

 

●Scienjoy’s audited historical consolidated statement of income for the year ended December 31, 2020 as included elsewhere in this prospectus;

 

●Hongle’s audited historical statement of operations for the period ended December 31, 2020 as included elsewhere in this prospectus; and

 

Description of the Hongle Acquisition

 

On December 29, 2021, Beijing local time, SHC entered into an Equity Acquisition Framework Agreement (the “Framework Agreement”) with Golden Shield Enterprises Limited (“Golden Shield”), Beijing Weiliantong Technology Co., Ltd. (“Weiliantong”, together with Golden Shield, the “Target Companies”, and each a “Target Company”), Tianjin Yieryi Technology Co., Ltd. (“Yieryi”), Wolter Global Investment Limited (“Wolter Global”, together with Yieryi, the “Sellers”, and each a “Seller”) and Qingdao Weilaijin Industry Investment Fund Partnership (Limited Partnership) (“Weilaijin”), which is one of the shareholders of Yieryi. Pursuant to the Framework Agreement, SHC, or its affiliates designated by SHC, will acquire all of the outstanding equity interests of (i) Weiliantong from Yieryi and (ii) Golden Shield from Wolter Global (the “Acquisitions”). Yieryi and Wolter Global are under common control.

 

 

 

The transactions contemplated under the Framework Agreement have closed on January 1, 2022 (the “Closing”). Upon the closing of transactions contemplated in the Framework Agreement, SHC acquired 100% of the issued and outstanding securities of Weiliantong and Golden Shield for an aggregate consideration of RMB280 million (approximately US$43.8 million), including RMB100 million (approximately US$15.6 million) in cash and RMB180 million (approximately US$28.2 million) in our Class A ordinary shares. The cash consideration includes RMB13.8 million (approximately US$2.2 million) cash to Yieryi and repayment of (i) the outstanding loans of Yieryi in an aggregate amount of RMB77.4 million (approximately US$12.1 million) and (ii) a third-party loan incurred by Weiliantong in an amount of RMB8.8 million (approximately US$1.4 million). The shares consideration consists of RMB20.8 million (approximately US$3.3 million) in our Class A ordinary shares to be issued to Weilaijin (the “Weilaijin Share Consideration”), a shareholder of Yieryi, and RMB159.2 million (approximately US$24.9 million) in our Class A ordinary shares to be issued to Wolter Global (the “Wolter Global Share

 

Accounting for the Business Combination

 

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

 

Basis of Pro Forma Presentation

 

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

 

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

 

Calculation of Purchase Price Consideration and Purchase Price Allocation

 

The fair value of consideration transferred on the closing date includes the value of cash consideration and vested equity awards attributable to pre-combination service. The purchase price is calculated as follows (in thousands):

 

Cash consideration unpaid as of  September 30, 2021   ¥ 13,800  
Equity awards attributable to business acquisition     148,325  
Contingent consideration – earn-out liability     19,875  
Total purchase price consideration   ¥ 182,000  

 

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Preliminary Purchase Price Allocation

 

Under the purchase method of accounting the total purchase price has been allocated to Hongle’s intangible assets acquired and liabilities assumed based on their estimated fair value at September 30, 2021. Management of Scienjoy has allocated the purchase price to the fair value of certain assets and liabilities of Hongle purchased in the business combination. Based upon the valuation the total purchase price was allocated as follows (in thousands):

 

The allocation of the purchase price and the estimated useful lives associated with certain assets is as follows (in thousands):

 

Assets acquired  RMB (in’000) 
Cash and cash equivalents  ¥1,605 
Accounts receivable, net   1,602 
Other current assets   9,857 
Property and equipment, net   184 
Other long term assets   136 
Intangible assets   190,023 
Goodwill   80,337 
Total assets acquired  ¥283,744 
Liabilities assumed     
Accounts payable  ¥(1,598)
Accrued liabilities   (1,866)
Deferred revenue   (5,583)
Loan payables   (11,400)
Due to related parties   (77,400)
Deferred tax liability   (3,897)
Total liabilities assumed  ¥(101,744)
Net assets acquired  ¥182,000 

 

   Amount   Estimated
Useful Life
Identifiable intangible assets:        
Software  ¥3,023   5
Trademark   23,000   10
License   164,000   Infinite
Total intangible assets:  ¥190,023    

 

Identifiable intangible assets. Software primarily relates to the programs run the Hongle platforms. Licenses relate to the operations of Hongle platforms for online transmission of audio-visual programs. Trade name primarily relates to Hongle, which is recognized as a popular mobile live streaming platforms.

 

Goodwill. Approximately RMB 80,337 has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets. In accordance with FASB ASC 350, Intangibles - Goodwill and Other, goodwill will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event that the management of the combined company determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.

  

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UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2021

(In thousands)

 

   (A)   (B)   Pro Forma      Pro Forma 
   Hongle   Scienjoy   Adjustments   Notes  Combined 
   RMB   RMB   RMB      RMB   US$ (3) 
                        
Assets                            
Current assets:                            
Cash and cash equivalents   1,605    291,879    (100,000)  (1)(4)   193,484    30,028 
Accounts receivable, net   1,602    228,478    -       230,080    35,708 
Amounts due from related parties   -    13,007    -       13,007    2,019 
Prepaid expenses and other current assets   9,857    26,750    -       36,607    5,681 
Investment in marketable securities   -    40,606            40,606    6,302 
Total Current Assets   13,064    600,720    (100,000)      513,784    79,738 
                             
Non-current assets:                            
Property and equipment, net   184    1,475    -       1,659    257 
Intangible assets, net   43    236,686    186,306   (1)(3)   423,035    65,654 
Long term investments   -    53,000            53,000    8,225 
Long term deposits and other assets   136    12,139    -       12,275    1,905 
Goodwill   -    92,069    80,337   (1)   172,406    26,757 
Deferred tax assets   -    5,147    -       5,147    799 
Total Non-Current Assets   363    400,516    266,643       667,522    103,597 
Total Assets   13,427    1,001,236    166,643       1,181,306    183,335 
                             
Liabilities and Shareholders’ Equity                            
Current liabilities:                            
Accounts payable   1,598    35,406    -       37,004    5,742 
Accrued salary and employee benefits   1,808    12,155    -       13,963    2,167 
Accrued expenses and other current liabilities   58    7,365    -       7,423    1,152 
Current portion of contingent consideration – earn-out liability   -    52,783    10,183   (1)   62,966    9,772 
Income tax payable        11,245            11,245    1,745 
Loan payables   11,400    11,468    (8,800)  (4)   14,068    2,183 
Due to related party   77,400    -    (77,400)      -    - 
Warrants liabilities   -    5,090    -       5,090    790 
Deferred revenue   5,583    70,744    -       76,327    11,846 
Total Current Liabilities   97,847    206,256    (76,017)      228,086    35,397 
                             
Non-current liabilities:                            
Contingent consideration – earn-out liability   -    8,175    9,692       17,867    2,773 
Loan payables                     -      
Deferred tax liabilities   -    58,992    3,346   (1)(3)   62,338    9,675 
Total Non-Current Liabilities   -    67,167    13,038       80,205    12,448 
Total Liabilities   97,847    273,423    (62,979)      308,291    47,845 
                             
Commitments and Contingencies                            
                             
Shareholders’ Equity                            
Ordinary shares   10,150    133,719    138,175   (1)   282,044    43,773 
Statutory reserves   -    28,824    -       28,824    4,473 
Retained earnings (Accumulated deficit)   (94,570)   549,643    91,447   (1)   546,520    84,819 
Accumulated other comprehensive loss   -    15,627    -   (1)   15,627    2,425 
Total Shareholders’ Equity (Deficit)   (84,420)   727,813    229,622       873,015    135,490 
Total Liabilities and Shareholders’ Equity   13,427    1,001,236    166,643       1,181,306    183,335 

 

Pro Forma Adjustments to the Unaudited Combined Balance Sheet

 

(A)

Derived from financial information of the subsidiary contained in the audited consolidated balance sheet of Hongle as of September 30, 2021. See Hongle’s financial statements and the related notes appearing elsewhere in this filling document

(B)Derived from the unaudited condensed consolidated balance sheet of Scienjoy as of September 30, 2021. See Scienjoy’s financial statements and the related notes appearing elsewhere in filling document.
(1)Reflects the result of the Hongle Acquisition in goodwill, intangible assets, deferred tax liabilities, contingent consideration – earn-out liability and equity as if it has been consummated.
(2)Translations of balances in the pro forma combined balance sheet from RMB into USD (or “US$”) as of September 30, 2021 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.4434, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of September 30, 2021. No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate, or at any other rate.
(3)Amortization of software and trademark and related income tax effect.
(4)Reflects the result of Hongle Acquisition that Sicenjoy pays Hongle’s outstanding loan payable balances on behalf of Hongle.

 

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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2021

(In thousands, except per share amounts)

 

   (A)   (B)   Pro Forma      Pro Forma 
   Hongle   Scienjoy   Adjustments   Notes  Combined 
   RMB   RMB   RMB      RMB   US$ (3) 
                        
Net revenues   126,511    1,171,191    -       1,297,702    201,400 
Cost of revenues   (107,285)   (938,797)   (3,450)  (4)   (1,049,532)   (162,885)
Gross profit   19,226    232,394    (3,450)  (4)   248,170    38,515 
                             
Sales and marketing expenses   (1,906)   (3,746)   -       (5,652)   (877)
General and administrative expenses   (1,314)   (38,606)   (224)  (4)   (40,144)   (6,230)
Provision (recovery of) for doubtful accounts   (165)   (3,405)   -       (3,570)   (554)
Research and development expenses   (6,512)   (39,793)   -       (46,305)   (7,186)
Operating income (loss)   9,329    146,844    (3,674)  (4)   152,499    23,668 
                             
Other income (expense):                            
Interest income, net   9    1,882    -       1,891    293 
Foreign exchange gain (loss), net   (2)   (34)   -       (36)   (6)
Other expense (income), net   652    (84)   -       568    88 
Change in fair value of contingent consideration   -    45,463    --       45,463    7,056 
Change in fair value of warrants liability   -    21,830            21,830    3,388 
Change in fair value of investment in marketable security   -    27,648    -       27,648    4,291 
Income before income taxes   9,988    243,549    (3,674)  (4)   249,863    38,778 
Provision for income taxes   -    (6,044)   551   (4)   (5,493)   (853)
Net income   9,988    237,505    (3,123)  (4)   244,370    37,925 
                             
Weighted average shares outstanding, basic and diluted        30,728,931        (1)   35,148,844    35,148,844 
Basic and diluted net income per share        30,728,931        (1)   35,148,844    35,148,844 
                             
Basic net income per share        7.73            6.95    1.08 
Diluted net income per share        7.73            6.95    1.08 

 

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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2020

(In thousands, except per share amounts)

 

   (A)   (B)   Pro Forma      Pro Forma 
   Hongle   Scienjoy   Adjustments   Notes  Combined 
   RMB   RMB   RMB      RMB   US$ (3) 
                        
Net revenues   169,280    1,222,183    -       1,391,463    215,951 
Cost of revenues   (138,768)   (959,939)   (4,600)  (4)   (1,103,307)   (171,231)
Gross profit   30,512    262,244    (4,600)  (4)   288,156    44,720 
                             
Sales and marketing expenses   (5,586)   (10,121)   -       (15,707)   (2,438)
General and administrative expenses   (1,756)   (33,889)   (298)  (4)   (35,943)   (5,578)
Provision for doubtful accounts        8,253            8,253    1,281 
Research and development expenses   (6,084)   (31,780)           (37,864)   (5,876)
Operating income (loss)   17,086    194,707    (4,898)  (4)   206,895    32,109 
                             
Other income (expense):                            
Interest income, net   17    2,960    -       2,977    462 
Foreign exchange gain (loss), net   2    703    -       705    109 
Other expense, net   1,081    (4,702)   -       (3,621)   (562)
Change in fair value of contingent consideration   -    3,904    -       3,904    606 
Change in fair value of warrants liability   -    (14,068)   -       (14,068)   (2,183)
Income before income taxes   18,186    183,504    (4,898)  (4)   196,792    30,541 
Provision for income taxes   -    (7,404)   735   (4)   (6,669)   (1,035)
Net income   18,186    176,100    (4,163)  (4)   190,123    29,506 
                             
Weighted average shares outstanding, basic        23,287,706        (2)   27,707,619    27,707,619 
Weighted average shares outstanding, diluted        26,828,666        (2)   31,248,579    31,248,579 
                             
Basic net income per share        7.56            6.86    1.06 
Diluted  net income per share        6.56            6.08    0.94 

 

Pro Forma Adjustments to the Unaudited Combined Statements of Operations

 

(A) Derived from financial information of the subsidiary contained in the audited consolidated statement of operations and comprehensive income of Hongle for the year ended December 31, 2020 and for the nine months ended September 30, 2021. See Hongle’s financial statements and the related notes appearing elsewhere in this proxy statement.
(B) Derived from the unaudited consolidated statement of income and comprehensive income of Scienjoy for the nine months ended September 30, 2021 and the audited consolidated statement of income and comprehensive income of Scienjoy for the year ended December 31, 2020. See Scienjoy’s financial statements and the related notes appearing elsewhere in this proxy statement.
(1)The calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the Hongle Acquisition is being reflected as if it had occurred as of January 1, 2021, the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares have been outstanding for the entire period presented.
(2)The calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the Hongle Acquisition is being reflected as if it had occurred as of January 1, 2020, the calculation of weighted average shares outstanding for basic and diluted net income per share assumes that the shares have been outstanding for the entire period presented.
(3)

Translations of balances in the pro forma combined statements of operations from RMB into USD (or “US$”) for the nine months ended September 30, 2021 and for the year ended December 31, 2020 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.4434, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of September 30, 2021. No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate, or at any other rate.
(4)Amortization of software and trademark and related income tax effect.

 

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