Acquisition

6 Months Ended

Jun. 30, 2022

Business Combinations [Abstract]

ACQUISITION

4. ACQUISITION

4.1 Acquisition of Weiliantong

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

Pursuant to the Framework Agreement, the Acquisition requires both cash and share considerations (the “Considerations”). The Company is required to pay RMB180,000 in its Class A ordinary shares, consisting of (1) the shares consideration of RMB20,800 to Weilaijin (the “Weilaijin Share Consideration”), a shareholder of Yieryi, and (ii) the shares consideration of RMB159,200 in its Class A ordinary shares to Wolter Global (the “Wolter Global Share Consideration”). 20% of the Wolter Global Share Consideration are subject to certain performance conditions (i.e., earn-out provisions) and requirements over the following two years (earn-out arrangement). The Company is also required to pay cash consideration of RMB13,800 cash to Yieryi. The total fair value of the Considerations was determined at RMB181,958, based on a valuation performed by an independent valuation firm engaged by the Company.

In addition, the Company is required to repay Weilianton’s loan payable in aggregated of RMB86,200 on behalf of Weilianton, consisting of RMB77,400 loans payable to Yieryi and RMB8,800 loan payable to a third party.

The objective of the Acquisition is to support the Company’s strategic growth initiative of acquiring the top-tier online live streaming platform Hongle.tv and expanding the NFT business scope. The Acquisition was closed on January 1, 2022. 

The Acquisition was accounted for as business combination in accordance with ASC 805. Acquisition-related costs incurred for the acquisitions are not material. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition based on a valuation performed by an independent valuation firm engaged by the Company.

	Amount
	RMB		USD
Cash acquired		9,497		1,418
Accounts receivable, net		937		140
Prepaid expenses and other current assets		893		133
Deferred tax assets-current		6,163		920
		17,490		2,611
Property and equipment, net		163		24
Intangible assets, net		190,021		28,369
Long term deposits and other non-current assets		136		20
Goodwill		75,742		11,308
Total assets		283,552		42,332
Current liabilities		101,594		15,168
Total liabilities		101,594		15,168
Total consideration		181,958		27,164

The intangible assets are mainly attributable to Trademark and license as well as software acquired through the acquisition, which are generally amortized over 5-10 years, except that the license acquired for Weiliantong platform is determined to have an infinite useful life and is not subject to amortization.

Weiliantong began its business since 2015. The following table summarizes unaudited pro forma results of operations for the six months ended June 30, 2021, assuming that acquisition of Weiliantong occurred as of January 1, 2021. The pro forma results have been prepared for comparative purpose only based on management’s best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred as of the beginning of period:

	For the Six months ended June 30, 2021		For the Six months ended June 30, 2021
	(Unaudited)		(Unaudited)
	RMB		USD
Pro forma revenue		845,854		126,283
Pro forma gross profit		172,097		25,693
Pro forma income from operations		111,598		16,661
Pro forma net income		168,465		25,151

4.2 Acquisition of Chuangda Huizhi

In January 2022, SG consummated the acquisition of the 100% equity interest in Chuangda Zhihui (Beijing) Technology Co., Ltd. (“CDZH”) and its wholly owned subsidiary, Beijing Huayi Dongchen Technology Co., Ltd. (“HYDC”) from its original shareholders for a cash consideration of RMB10 (the “CDZH acquisition”). The consolidated operating results of CDZH for the years ended December 31, 2021 were not significant to the Company. The Company believes the CDZH acquisition will help to enrich the Company’s product line, expand its user base and capitalize on the growth potential in the live streaming market. The CDZH acquisition was accounted for as business combination in accordance with ASC 805. Acquisition-related costs incurred for the acquisitions are not material. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition based on a valuation performed by an independent valuation firm engaged by the Company.

	Amount
	RMB		USD
Cash acquired		168		25
Accounts receivable, net		97		14
Prepaid expenses and other current assets		15		2
Amounts due from related parties		6,563		980
		6,843		1,021
Intangible assets, net		100		15
Goodwill		4,971		742
Total assets		11,914		1,778
Current liabilities		11,814		1,764
Total liabilities		11,814		1,764
Total consideration		100		14

The intangible assets are mainly attributable to a license acquired through the acquisition, which are generally amortized over 6 years.