SEC Company Response from Scienjoy Holding Corp (SJ) (CIK 0001753673) (SJ) — Jan 16, 2020
Scienjoy Holding Corp (SJ) (CIK 0001753673)
Date: Jan. 16, 2020 · CIK: 0001753673 · Accession: 0001213900-20-001206
AI Filing Summary & Sentiment
File numbers found in text: 001-38799
Referenced dates: January 2, 2020
Letter
Via Edgar Division of Corporation Finance Office of Technology Re: Wealthbridge Acquisition Limited Preliminary Proxy Statement on Schedule 14A Filed December 6, 2019 File No. 001-38799
Dear Mr. Nolan:
On behalf of our client, Wealthbridge Acquisition Limited (“Wealthbridge” or the “Company”), we hereby provide a response to the comments issued in a letter dated January 2, 2020 (the “Staff’s Letter”) regarding the Company’s Preliminary Proxy Statement on Schedule 14A (the “Proxy Statement”) Contemporaneously, we are submitting the amended Preliminary Proxy Statement via Edgar (the “Amended Proxy Statement”).
In order to facilitate the review by the Commission’s staff (the “Staff”) of the Amended Proxy Statement, we have responded, on behalf of the Company, to the comments set forth in the Staff’s Letter on a point-by-point basis. The numbered paragraphs set forth below respond to the Staff’s comments and correspond to the numbered paragraph in the Staff’s Letter.
Los Angeles New York Chicago Nashville Washington, DC San Francisco Beijing Hong Kong www.loeb.com
A limited liability partnership including professional corporations
January 16, 2020 Page 2
Preliminary Proxy Statement on Schedule 14A
Summary of the Proxy Statement, page 8
1. Please provide organizational charts of Wealthbridge and Scienjoy before and after the business combination to clarify the current ownership of Scienjoy and the ownership of the company following the transaction. Disclose that you expect to be a controlled company under the Nasdaq Stock Market Rules because Lavacano will control more than 50% of the voting power of your outstanding capital stock. Also, disclose that if you are deemed to be a foreign private issuer under Rule 3b-4 of the Exchange Act following the transaction, you plan to adopt a dual-class share structure that will result in further concentration of Lavacano's control over the company. Provide cross-references to the corresponding risk factors on pages 56 and 57, as well as a new risk factor that addresses the disclosure and reporting requirements (e.g., no requirement to comply with the proxy rules) and the exemptions from certain Nasdaq corporate governance rules that are available to a foreign private issuer and whether you intend to use them.
Response: The disclosure on page 8 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
2. You state that the Share Exchange Agreement provides that the minimum remaining amount in your trust account is no less than $10,000,000 after giving effect to payments to redeeming shareholders. Please disclose the maximum redemption amount that you have calculated for the purpose of complying with such provision, and describe what may happen if shareholder redemptions exceed such amount. In this regard, you disclose on page 108 that you may need to obtain additional equity or debt financing if you become obligated to redeem a significant number of your public shares upon completion of the business combination.
Response: The disclosure on page 9 and page 148 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Risk Factors, page 17
3. You disclose that Scienjoy's business objective includes expanding its business into overseas markets in Southeast Asia, the Middle East, and South America. Please provide a risk factor addressing the material business, regulatory, and economic risks in expanding its business outside China. Also, briefly explain the nature and scope of the Chinese government's Belt and Road Initiative and the risks and limitations related to the company's plan to align its geographic expansion strategy with such initiative.
Response: The disclosure on page 21 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment. The reference to the “Belt and Road Initiative” has been removed from the Amended Proxy Statement.
January 16, 2020 Page 3
4. To the extent your Second Amended and Restated Memorandum and Articles of Association will contain anti-takeover provisions that materially limit the rights of holders of your ordinary shares, please provide a risk factor that describes those limitations. In this regard, we note your existing memorandum and articles of association provide for the separation of your board of directors into two classes.
Response: The disclosure on page 57 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Scienjoy relies on its mobile application and PC application to provide services . . ., page 29
5. You disclose that the Showself Live Streaming mobile application, which you characterize as Scienjoy's most popular platform in terms of registered users and revenue, was once removed by Apple's App Store for unknown reasons and that such incident caused a significant decrease in the number of downloads and had a material adverse impact on Scienjoy's business and results of operations. Please contextualize this disclosure by providing the date of removal and length of the suspension. To the extent material, disclose the quantitative financial impact on the company.
Response: The disclosure on page 30 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Key performance metrics used by Scienjoy, such as QAUs, paying users, ARPPU and paying ratio, may overstate the number . . ., page
6. You state that each of your three primary platforms has its own mobile application. Please discuss whether registered users are required to separately register for each platform and, if so, how this impacts the total number of registered users, active users and paying users and whether these users are counted more than once for purposes of calculating these metrics. To the extent that a user is registered or has been active on more than one platform, please disclose how you measure unique users.
Response: The disclosure on page 32 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
January 16, 2020 Page 4
The Business Combination Proposal Wealthbridge's Board's Reasons for the Approval of the Business Combination, page 70
7. You state that no reports as to the valuation of Scienjoy were produced by any of your advisors. You, however, also state that your board of directors received information from your legal and financial advisors prior to reaching the decision to approve the Share Exchange Agreement and the transaction. Please explain why the information that you received from your financial advisor does not qualify as a report, opinion, or appraisal that is materially related to the transaction. Refer to Item 14(b)(6) of Schedule 14A and Item 1015(b) of Regulation M-A.
Response: The disclosure on page 70 of the Amended Proxy Statement has been revised to clarify that Wealthbridge only received oral advice from its financial advisor and that no report or other documents were produced relating to the valuation of Scienjoy.
8. You disclose that your management team and board of directors recommended approval of the business combination, in part, because Scienjoy compares favorably to three publicly traded Chinese live streaming platforms (HUYA, DouYu, and YY) in terms of user scale and economics and that the pro forma equity market value of the post-combination company, assuming no redemptions, will represent a substantial discount to the equity market values of HUYA and DouYu. Please disclose whether the board also considered the differences between Scienjoy and HUYA and DouYu in connection with this analysis. For example, we note that HUYA and DouYu are companies with greater revenue and a greater number of registered users, active users, and paying users. We also note that HUYA and DouYu are primarily focused on the game live streaming market, which may not necessarily be comparable to the show live streaming market.
Response: The disclosure on page 72 of the Amended Proxy Statement has been revised in accordance with the Staff’s comments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Scienjoy Inc.
Key Factors Affecting Scienjoy's Results of Operations, page 130
9. You stress the importance of user retention and engagement to Scienjoy's business. Please tell us whether management of Scienjoy measures the operating performance of the business in terms of active user retention and/or engagement, such as average daily time spent on the platforms. If so, please provide those metrics for each period presented and describe how they are calculated.
Response: The disclosure throughout the Amended Proxy Statement has been revised in accordance with the Staff’s comment by deleting the phrase “user retention” because Scienjoy does not measure the operating performance by active user retention. Scienjoy measures active user engagement by the metrics of “Quarterly Average Revenue per Paying User” or “ARPPU.” The disclosure of ARPPU for each period on page 133 of the Amended Proxy Statement has been added in accordance with the Staff’s comment.
January 16, 2020 Page 5
Revenue, page 133
10. Please tell us why you do not provide revenue recognized from each of your three primary platforms (i.e., Showself Live, Lehai Live, and Haixiu Live). Consider disclosing the total number of paying users and by each of these three platforms.
Response: The disclosure on page 133 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Revenue Recognition, page 138
11. You disclose that in the case of time-based virtual items, live streaming revenue is recognized over the fixed period on a straight line basis. Please disclose the fixed period or term. In addition, describe the nature or type of virtual items that are time-based. Explain why recognizing revenue on a straight-line basis is appropriate. Please also address the application of ASC 606 upon adoption. We refer you to ASC 606-10-25-27 and 30.
Response: The disclosure on page 139 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
In light of the adoption of ASC 606, “Revenue from Contracts with Customers” using the modified retrospective method, Scienjoy has evaluated the potential impact on Scienjoy’s consolidated financial statements as below:
Revenues are recognized when control of the promised virtual items or services is transferred to Scienjoy’s customers, in an amount that reflects the consideration Scienjoy expects to be entitled to in exchange for those virtual items or services.
Under ASC 606-10-25-27, “An entity transfer control of a good or service over time and therefore, satisfied a performance obligation and recognizes revenue over time, if one of the following criteria is met: … the customer simultaneously receive and consume the benefit provided by the entity’s performance as the entity performs….”
January 16, 2020 Page 6
For each of the time-based virtual item mentioned above, the users receive and consume the benefits of the virtual items during the contract period. As a result, revenue related to time-based virtual items provided on a subscription basis is recognized ratably over the contract period in accordance with ASC 606-10-25-27. Scienjoy does not have further performance obligations to the user after the stated contract period of time for time-based virtual items.
Further, according to ASC 606-10-25-30, “If a performance obligation is not satisfied over time in accordance with paragraphs 606-10-25- 27 through 25-29, an entity satisfies the performance obligation at a point in time. To determine the point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity shall consider the guidance on control in paragraphs 606-10-25-23 through 25-26….”
For the consumable virtual items, Scienjoy considers each consumable virtual item as a single performance obligation provided on a consumption basis. Revenue is recognized at the point in time when the consumable virtual item is transferred directly to the users and consumed by them. Scienjoy does not have further performance obligations to the user after the v
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CORRESP
1
filename1.htm
Giovanni
caruso
Partner
345 Park Avenue
New York, NY 10154
Direct 212.407.4866
Main 212.407.4000
Fax 212.937.3943
gcaruso@loeb.com
Via
Edgar
January
16, 2020
Bernard
Nolan
Division
of Corporation Finance
Office
of Technology
U.S. Securities & Exchange Commission
100
F Street, NE
Washington,
D.C. 20549
Re: Wealthbridge
Acquisition Limited
Preliminary Proxy Statement on Schedule 14A
Filed December 6, 2019
File No. 001-38799
Dear
Mr. Nolan:
On
behalf of our client, Wealthbridge Acquisition Limited (“Wealthbridge” or the “Company”), we hereby provide
a response to the comments issued in a letter dated January 2, 2020 (the “Staff’s Letter”) regarding the Company’s
Preliminary Proxy Statement on Schedule 14A (the “Proxy Statement”) Contemporaneously, we are submitting the amended
Preliminary Proxy Statement via Edgar (the “Amended Proxy Statement”).
In
order to facilitate the review by the Commission’s staff (the “Staff”) of the Amended Proxy Statement, we have
responded, on behalf of the Company, to the comments set forth in the Staff’s Letter on a point-by-point basis. The numbered
paragraphs set forth below respond to the Staff’s comments and correspond to the numbered paragraph in the Staff’s
Letter.
Los Angeles New York Chicago Nashville Washington, DC San
Francisco Beijing Hong Kong www.loeb.com
A limited liability partnership including professional corporations
January 16, 2020
Page 2
Preliminary
Proxy Statement on Schedule 14A
Summary
of the Proxy Statement, page 8
1. Please
provide organizational charts of Wealthbridge and Scienjoy before and after the business
combination to clarify the current ownership of Scienjoy and the ownership of the company
following the transaction. Disclose that you expect to be a controlled company under
the Nasdaq Stock Market Rules because Lavacano will control more than 50% of the voting
power of your outstanding capital stock. Also, disclose that if you are deemed to be
a foreign private issuer under Rule 3b-4 of the Exchange Act following the transaction,
you plan to adopt a dual-class share structure that will result in further concentration
of Lavacano's control over the company. Provide cross-references to the corresponding
risk factors on pages 56 and 57, as well as a new risk factor that addresses the disclosure
and reporting requirements (e.g., no requirement to comply with the proxy rules) and
the exemptions from certain Nasdaq corporate governance rules that are available to a
foreign private issuer and whether you intend to use them.
Response:
The disclosure on page 8 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
2. You
state that the Share Exchange Agreement provides that the minimum remaining amount in
your trust account is no less than $10,000,000 after giving effect to payments to redeeming
shareholders. Please disclose the maximum redemption amount that you have calculated
for the purpose of complying with such provision, and describe what may happen if shareholder
redemptions exceed such amount. In this regard, you disclose on page 108 that you may
need to obtain additional equity or debt financing if you become obligated to redeem
a significant number of your public shares upon completion of the business combination.
Response:
The disclosure on page 9 and page 148 of the Amended Proxy Statement has been revised in accordance with the Staff’s
comment.
Risk
Factors, page 17
3. You
disclose that Scienjoy's business objective includes expanding its business into overseas
markets in Southeast Asia, the Middle East, and South America. Please provide a risk
factor addressing the material business, regulatory, and economic risks in expanding
its business outside China. Also, briefly explain the nature and scope of the Chinese
government's Belt and Road Initiative and the risks and limitations related to the company's
plan to align its geographic expansion strategy with such initiative.
Response:
The disclosure on page 21 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment. The reference
to the “Belt and Road Initiative” has been removed from the Amended Proxy Statement.
January 16, 2020
Page 3
4. To
the extent your Second Amended and Restated Memorandum and Articles of Association will
contain anti-takeover provisions that materially limit the rights of holders of your
ordinary shares, please provide a risk factor that describes those limitations. In this
regard, we note your existing memorandum and articles of association provide for the
separation of your board of directors into two classes.
Response:
The disclosure on page 57 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Scienjoy
relies on its mobile application and PC application to provide services . . ., page 29
5. You
disclose that the Showself Live Streaming mobile application, which you characterize
as Scienjoy's most popular platform in terms of registered users and revenue, was once
removed by Apple's App Store for unknown reasons and that such incident caused a significant
decrease in the number of downloads and had a material adverse impact on Scienjoy's business
and results of operations. Please contextualize this disclosure by providing the date
of removal and length of the suspension. To the extent material, disclose the quantitative
financial impact on the company.
Response:
The disclosure on page 30 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Key
performance metrics used by Scienjoy, such as QAUs, paying users, ARPPU and paying ratio, may overstate the number . . ., page
32
6. You
state that each of your three primary platforms has its own mobile application. Please
discuss whether registered users are required to separately register for each platform
and, if so, how this impacts the total number of registered users, active users and paying
users and whether these users are counted more than once for purposes of calculating
these metrics. To the extent that a user is registered or has been active on more than
one platform, please disclose how you measure unique users.
Response:
The disclosure on page 32 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
January 16, 2020
Page 4
The
Business Combination Proposal Wealthbridge's Board's Reasons for the Approval of the Business Combination, page 70
7. You
state that no reports as to the valuation of Scienjoy were produced by any of your advisors.
You, however, also state that your board of directors received information from your
legal and financial advisors prior to reaching the decision to approve the Share Exchange
Agreement and the transaction. Please explain why the information that you received from
your financial advisor does not qualify as a report, opinion, or appraisal that is materially
related to the transaction. Refer to Item 14(b)(6) of Schedule 14A and Item 1015(b) of
Regulation M-A.
Response: The disclosure on page
70 of the Amended Proxy Statement has been revised to clarify that Wealthbridge only received oral advice from its financial advisor
and that no report or other documents were produced relating to the valuation of Scienjoy.
8. You
disclose that your management team and board of directors recommended approval of the
business combination, in part, because Scienjoy compares favorably to three publicly
traded Chinese live streaming platforms (HUYA, DouYu, and YY) in terms of user scale
and economics and that the pro forma equity market value of the post-combination company,
assuming no redemptions, will represent a substantial discount to the equity market values
of HUYA and DouYu. Please disclose whether the board also considered the differences
between Scienjoy and HUYA and DouYu in connection with this analysis. For example, we
note that HUYA and DouYu are companies with greater revenue and a greater number of registered
users, active users, and paying users. We also note that HUYA and DouYu are primarily
focused on the game live streaming market, which may not necessarily be comparable to
the show live streaming market.
Response:
The disclosure on page 72 of the Amended Proxy Statement has been revised in accordance with the Staff’s comments.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations of Scienjoy Inc.
Key
Factors Affecting Scienjoy's Results of Operations, page 130
9. You
stress the importance of user retention and engagement to Scienjoy's business. Please
tell us whether management of Scienjoy measures the operating performance of the business
in terms of active user retention and/or engagement, such as average daily time spent
on the platforms. If so, please provide those metrics for each period presented and describe
how they are calculated.
Response:
The disclosure throughout the Amended Proxy Statement has been revised in accordance with the Staff’s comment by deleting
the phrase “user retention” because Scienjoy does not measure the operating performance by active user retention.
Scienjoy measures active user engagement by the metrics of “Quarterly Average Revenue per Paying User” or “ARPPU.”
The disclosure of ARPPU for each period on page 133 of the Amended Proxy Statement has been added in accordance with the Staff’s
comment.
January 16, 2020
Page 5
Revenue,
page 133
10. Please
tell us why you do not provide revenue recognized from each of your three primary platforms
(i.e., Showself Live, Lehai Live, and Haixiu Live). Consider disclosing the total number
of paying users and by each of these three platforms.
Response:
The disclosure on page 133 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
Revenue
Recognition, page 138
11. You
disclose that in the case of time-based virtual items, live streaming revenue is recognized
over the fixed period on a straight line basis. Please disclose the fixed period or term.
In addition, describe the nature or type of virtual items that are time-based. Explain
why recognizing revenue on a straight-line basis is appropriate. Please also address
the application of ASC 606 upon adoption. We refer you to ASC 606-10-25-27 and 30.
Response:
The disclosure on page 139 of the Amended Proxy Statement has been revised in accordance with the Staff’s comment.
In
light of the adoption of ASC 606, “Revenue from Contracts with Customers” using the modified retrospective method,
Scienjoy has evaluated the potential impact on Scienjoy’s consolidated financial statements as below:
Revenues
are recognized when control of the promised virtual items or services is transferred to Scienjoy’s customers, in an amount
that reflects the consideration Scienjoy expects to be entitled to in exchange for those virtual items or services.
Under
ASC 606-10-25-27, “An entity transfer control of a good or service over time and therefore, satisfied a performance obligation
and recognizes revenue over time, if one of the following criteria is met: … the customer simultaneously receive and consume
the benefit provided by the entity’s performance as the entity performs….”
January 16, 2020
Page 6
For
each of the time-based virtual item mentioned above, the users receive and consume the benefits of the virtual items during the
contract period. As a result, revenue related to time-based virtual items provided on a subscription basis is recognized ratably
over the contract period in accordance with ASC 606-10-25-27. Scienjoy does not have further performance obligations to the user
after the stated contract period of time for time-based virtual items.
Further,
according to ASC 606-10-25-30, “If a performance obligation is not satisfied over time in accordance with paragraphs 606-10-25-
27 through 25-29, an entity satisfies the performance obligation at a point in time. To determine the point in time at which a
customer obtains control of a promised asset and the entity satisfies a performance obligation, the entity shall consider the
guidance on control in paragraphs 606-10-25-23 through 25-26….”
For
the consumable virtual items, Scienjoy considers each consumable virtual item as a single performance obligation provided on a
consumption basis. Revenue is recognized at the point in time when the consumable virtual item is transferred directly to the
users and consumed by them. Scienjoy does not have further performance obligations to the user after the v