User Growth and Engagement - As of December 31, 2020, the total downloads of the CHEERS App reached approximately 169 million, up from 85 million as of December 31, 2019, indicating significant growth in user acquisition [218]. - Daily Active Users (DAUs) increased from 1.91 million in 2019 to 5.37 million in 2020, reflecting a substantial rise in user engagement [220]. Sales and Product Expansion - Gross Merchandise Value (GMV) for the e-Mall surged from 132 million in 2020, demonstrating strong sales growth [223]. - The e-Mall carried 24,975 SKUs as of December 31, 2020, compared to 13,180 SKUs as of December 31, 2019, indicating an expansion in product offerings [223]. Financial Activities - The company completed a public offering on February 24, 2021, raising approximately 1.7 million [213]. E-commerce and Market Trends - The CHEERS App serves as a comprehensive content-driven e-commerce platform, integrating video content with online shopping, which is a growing trend in Chinese e-commerce [226]. - The company aims to capitalize on the growth potential of China's live streaming and e-commerce markets while exploring innovative monetization opportunities [215]. - The total e-commerce market sales in China reached RMB34,810 billion in 2019, with a CAGR of 12.4% from 2015 to 2019 [240]. - The population of online shoppers in China is expected to reach 850 million by 2021, at a CAGR of 10.8% [241]. - The population of online video users in China reached 850.44 million by March 2020, with a CAGR of 13.3% from 2015 [243]. - The market scale of proprietary PGC video content-driven e-commerce platforms was approximately RMB3.5 billion in 2019, with a CAGR of 151.6% from 2016 to 2019, expected to grow to RMB14.5 billion by 2024 [248]. - The company is among the top five video content-driven e-commerce platforms in China based on semi-annual GMV for the first half of 2020 [252]. Employee and Operational Information - As of December 31, 2020, the company had 159 full-time employees and maintained a good working relationship with them [253]. - The company does not own any real property, relying on leased office space for its operations [341]. - As of December 31, 2020, the company has a total of 2,317 square meters of office space, paying approximately $40,832 in monthly rent [341]. Intellectual Property and Compliance - The company owned 59 registered trademarks in the PRC and 4 registered trademarks in Hong Kong as of December 31, 2020 [255]. - As of December 31, 2020, the company had thirty-six (36) registered software copyrights and four (4) work copyrights [298]. - The company is required to comply with the PRC Labor Contract Law, which mandates that labor contracts must be established with employees and wages must meet local minimum standards [303]. - Under the PRC Social Insurance Law, both employers and individuals are required to pay social insurance premiums, with penalties for non-compliance including fines and potential criminal liability [304]. Regulatory Environment - The company is subject to extensive controls and regulations over the e-commerce and media industry in China [260]. - The ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50% [263]. - The Foreign Investment Law allows foreign investors to freely remit capital contributions and profits made in China, enhancing the protection of intellectual property rights [269]. - The PRC Consumer Rights and Interests Protection Law mandates that consumers can return goods purchased online within seven days for no reason, impacting online marketplace operations [277]. - The company is subject to stringent regulations regarding advertising, including the requirement for advertisements to be true and accurate, with penalties for violations [284]. - Internet Advertising Measures require that online advertisements be clearly identifiable and marked, ensuring consumer awareness [285]. - The company is currently in compliance with regulations related to product quality and consumer rights protection, as well as internet advertising laws [279][284]. - E-commerce regulations have been established to promote the healthy development of online trading and protect consumer rights [272]. - The company has obtained necessary approvals for television program production and trading activities, complying with media industry regulations [280]. Taxation and Financial Regulations - The EIT Law imposes a 25% tax rate on resident enterprises and a 10% rate on non-resident enterprises without a physical presence in China [315]. - High and new technology enterprises enjoy a reduced enterprise income tax rate of 15% if they meet specific criteria [316]. - Leshare Star (Beijing) Technology Co., Ltd. recognized as a high and new technology enterprise, entitled to a preferential tax rate of 15% from 2019 to 2022 [317]. - The VAT rate for general taxpayers selling goods was adjusted from 17% to 13% as per the 2019 reforms [323]. - The EIT Law prescribes a standard withholding tax rate of 10% on dividends paid to non-resident enterprises [324]. VIE Structure and Agreements - The company is structured as a Cayman Islands exempted holding company and operates in China through PRC subsidiaries and VIEs [330]. - The VIE Contracts allow the company to consolidate the financial results of its VIEs under U.S. GAAP, despite restrictions on foreign ownership in certain sectors [332]. - The Master Exclusive Service Agreements enable the company to receive service fees equal to the pre-tax profits of the VIEs, adjusted for losses, operating costs, and taxes [340]. - The exclusive option agreements grant the company the right to acquire equity interests in the VIEs at the lowest price permitted under PRC law, with a term of 10 years [334]. - The share pledge agreements provide the company with a priority security interest in the VIEs' equity interests to secure performance under the Principal Agreements [335]. - Proxy agreements allow the company to exercise all rights of VIE equity holders, including management and financial oversight [336]. - The VIE shareholders have agreed to implement arrangements set forth in the Principal Agreements and not to interfere with these agreements [338].
Glory Star(GSMG) - 2020 Q4 - Annual Report