Joy Spreader Group Inc. - Interim / Quarterly Report 2021

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JOY SPREADER GROUP INC. 樂享集團有限公司 (Incorporated in the Cayman Islands with limited liability) Stock Code : 6988

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2021
INTERIM REPORT
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INTERIM REPORT 2020 1

CORPORATE INFORMATION

BOARD OF DIRECTORS

REGISTERED OFFICE

Executive Directors

Mr. Zhu Zinan (朱子南) (Chairman of the Board, Chief Executive Officer) Mr. Zhang Zhidi (張之的) Mr. Cheng Lin (成林) Ms. Qin Jiaxin (秦佳鑫) Mr. Sheng Shiwei (盛世偉)

Non-executive Directors

Mr. Hu Qingping (胡慶平) Mr. Hu Jiawei (胡家瑋)

Independent Non-executive Directors

Mr. Xu Chong (徐翀) Mr. Tang Wei (唐偉) Mr. Fang Hongwei (房宏偉) Mr. Yap Jin Meng Bryan (葉仁明)

AUDIT COMMITTEE

Mr. Tang Wei (唐偉) (Chairman) Mr. Xu Chong (徐翀) Mr. Yap Jin Meng Bryan (葉仁明)

Office of Sertus Incorporations (Cayman) Limited Sertus Chambers Governors Square, Suite #5-204 23 Lime Tree Bay Avenue P.O. Box 2547, Grand Cayman KY1-1104, Cayman Islands

COMPANY’S HEADQUARTERS IN THE

PRC

27/F, Wangjing Jinhui Building Chaoyang District Beijing PRC

PRINCIPAL PLACE OF BUSINESS IN

HONG KONG

40th Floor, Dah Sing Financial Centre No. 248 Queen’s Road East Wanchai Hong Kong

PRINCIPAL SHARE REGISTRAR AND T R A N S F E R O F F I C E I N C A Y M A N ISLANDS

REMUNERATION COMMITTEE

Mr. Xu Chong (徐翀) (Chairman) Mr. Cheng Lin (成林) Mr. Fang Hongwei (房宏偉)

Campbells Corporate Services Limited Floor 4, Willow House Cricket Square Grand Cayman KY1-9010 Cayman Islands

NOMINATION COMMITTEE

Mr. Zhu Zinan (朱子南) (Chairman) Mr. Xu Chong (徐翀) Mr. Fang Hongwei (房宏偉)

AUTHORISED REPRESENTATIVES

Mr. Zhu Zinan (朱子南) Mr. Lei Kin Keong (李健強)

AUDITOR

Deloitte Touche Tohmatsu Certified Public Accountants and Registered PIE Auditor 35/F, One Pacific Place 88 Queensway Hong Kong

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CORPORATE INFORMATION

JOINT COMPANY SECRETARIES

Ms. Qin Jiaxin (秦佳鑫) Mr. Lei Kin Keong (李健強) (ACG, ACS & HKICPA)

COMPLIANCE ADVISOR

Orient Capital (Hong Kong) Limited 28th and 29th Floor 100 Queen’s Road Central Central Hong Kong

HONG KONG LEGAL ADVISOR

Kirkland & Ellis 26th Floor, Gloucester Tower The Landmark 15 Queen’s Road Central Central Hong Kong

INVESTOR RELATIONS

Tel: (86)10-87726988 Email: [email protected]

WEBSITE

www.joyspreader.com

STOCK CODE

6988

HONG KONG SHARE REGISTRAR

Computershare Hong Kong Investor Services Limited Shops 1712-1716 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

JOY SPREADER GROUP INC. 3 2021 INTERIM REPORT

FINANCIAL HIGHLIGHTS

The unaudited condensed consolidated interim results of the Group for the six months ended June 30, 2021, together with the comparative figures for the six months ended June 30, 2020 are as follows:

FINANCIAL RESULTS HIGHLIGHTS

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For the six months ended June 30 Year-on-year
changes
2021 2020 [(1) ] Increase/
(Unaudited) (Unaudited) (decrease) (%)
(HK$ in millions, except for percentages)
(Restated)
(Note 1 to the
condensed
consolidated
financial
statements)
Revenue 624.33 384.51 62.37%
Interactive entertainment and other digital products marketing 495.12 349.64 41.61%
E-commerce products marketing 129.21 33.54 285.24%
Other products [(2)] – 1.33 (100.00)%
Gross profit 214.07 104.35 105.15%
Interactive entertainment and other digital products marketing 148.79 77.26 92.58%
E-commerce products marketing 65.28 26.83 143.31%
Other products [(2)] – 0.26 (100.00)%
Profit for the period (excluding foreign exchange
gains or losses) 137.17 67.82 102.26%
Foreign exchange gains or losses [(3)] 29.75 – –
Profit for the period 107.42 67.82 58.39%
Profit for the period attributable to owners of the Company 107.42 67.82 58.39%
Net profit margin excluding foreign exchange gains or losses 21.97% 17.64% 4.33 [(4)]
Net profit margin 17.21% 17.64% (0.43) [(4)]
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Notes:

(1) The presentation currency of the Company was changed from RMB to HK$ in 2020, therefore, the above financial results highlights are presented in HK$. The comparative information has been restated to reflect the change in presentation currency to HK$ accordingly;
(2) Other products mainly refer to non-performance-based marketing campaigns we provided to customers;
(3) Loss on the translation of the unutilized listing proceeds was due to the decline in Hong Kong dollar exchange rate;
(4) Changes in percentage points.

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FINANCIAL HIGHLIGHTS

INFORMATION HIGHLIGHTS ON OPERATIONS

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Year-on-year
As at June 30 or for changes
the six months ended June 30 Increase/
2021 2020 (decrease) (%)
Number of platform-based marketing points (quantities)
Covered marketing points [ (1)] 1,561,601 505,945 208.65%
Douyin 657,344 80,141 720.23%
WeChat official accounts 872,923 425,804 105.01%
WeChat video channels 31,334 – –
Active marketing points [ (1)] 689,512 304,668 126.32%
Douyin 65,237 20,649 215.93%
WeChat official accounts 624,275 284,019 119.80%
Average turnover per active marketing point [(1)]
Douyin e-commerce products (HK$) 9,920.44 8,608.65 15.24%
WeChat official accounts interactive entertainment (HK$) 2,833.77 2,788.33 1.63%
Average turnover per active marketing point (HK$) 3,504.26 3,182.81 10.10%
Matching transactions turnover
E-commerce products GMV (HK$ million) 647.18 177.76 264.08%
Interactive entertainment products turnover (HK$ million) 1,769.05 791.94 123.38%
Total matching transactions turnover (HK$ million) 2,416.23 969.70 149.17%
Number of customers and marketing products (quantities/types)
Number of marketers 308 225 36.89%
Number of interactive entertainment and other digital products 1,538 944 62.92%
Number of e-commerce products 231 124 86.29%
R&D investments
R&D expenditure (HK$ million) 29.90 3.68 712.50%
Number of data models (sets) 169 123 37.40%
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Note:

(1) For details of “covered marketing points”, “active marketing points” and “average turnover per active marketing point”, please refer to the paragraphs under “Our Business” and “Our Revenue Models” of “Corporate Profile” section.

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CORPORATE PROFILE

OVERVIEW

The Group is a leading technology company, engaged in mobile new media smart performance-based marketing business in China. With the rapid development of China’s mobile internet technology and business environment, mobile new media platforms, such as Tencent and ByteDance, have, on one hand, gathered extensive users and made overlong online time available, and on the other hand, fostered brand new scene of consumption based on the interests and potential demands of mobile internet users. The Group prospectively pays close attention to the change in business environment of mobile internet, and proactively practices the philosophy of “technology empowers marketing and performance achieves value (科技賦能營銷、效果成就價值)”. Through these efforts, the Group is committed to serving the vast mobile new media consumption market and mobile internet monetization area with leading marketing technological capability and platformbased professional service capability. Focusing on data and algorithms, we leverage coupled matching technologies based on interest recommendations to enable the e-commerce and interactive entertainment products to direct to consumer (“DTC”) and share the commercial value with the product providers and the new media publishers in the form of cost per sale (CPS).

OUR BUSINESS

The Group connects mobile new media content publishers and marketers using proprietary technologies and platforms, facilitates coupled matching of e-commerce products, interactive entertainment products, etc. with mobile new media traffic through supply side platform (“SSP”) services and demand side platform (“DSP”) services to facilitate user consumption behaviors, and charges profit-sharing fees according to transaction amount, conversion volume and other performance indicators. The Group doesn’t provide services based on the marketing budgets of marketers. Instead, we are committed to helping our marketers direct to consumer (“DTC”) to facilitate consumption transactions. Close cooperation with marketers in a model of cost per sale (CPS) is a characteristic of the Group’s business model.

(I) Supply Side Platform (“SSP”) Service: Media Profiling and Intelligent Product Selection

We provide simple and easy-to-use SaaS tools to mobile new media traffic providers, i.e., content publishers, to help them get access to our business platforms for the supply side platform (“SSP”)’s intelligent product selection service. The automatic analysis of the characteristic attributes of published content, the anonymous users’ behaviors on contents (such as retweeting, liking, following, commenting, etc.) and the dynamic interaction relationship between the aforesaid characteristic attributes and anonymous users’ behaviors enable the production of data-oriented and labelled media profiling data. Leveraging the data and algorithm-based interest recommendation technologies, we recommend to mobile new media publishers the products that match media profiling in the form of short lists selected by our model and launch them at the marketing points (such as the shopwindow of Douyin and the menu bar of WeChat official accounts) available to internet users for purchase, toping up, or download and installation, thus generating revenue through cost per sale (CPS) or cost per action (CPA). The SSP mainly provides services to WeChat official accounts and video channels, and content publishers on Douyin platform, or guilds and MCN organizations.

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CORPORATE PROFILE

Through the SSP service, the Group is able to obtain stable marketing points in bulk automatically. As of June 30, 2021, the Group had 1,561,601 covered marketing points in its business networks, increasing by 208.65% from 505,945 covered marketing points as of June 30, 2020. A “covered marketing point” refers to a marketing point accessed by the business platforms of the Group for potential business cooperation and authorizing the use of relevant services by the Group. Only after a series of technical works, including data analysis, media profiling and algorithm matching with product end, can a “covered marketing point” be converted into an “active marketing point”. An “active marketing point” refers to a marketing point concluding at least one matching transaction during a fixed period. For the six months ended June 30, 2021, the Group had 689,512 active marketing points on its business platforms, increasing by 126.32% from 304,668 active marketing points for the first half of 2020; the average turnover per active marketing point was approximately HK$3,504, increasing by 10.10% from approximately HK$3,183 for the first half of 2020.

The SSP service provides extensive distribution networks for the performance-based marketing services of the Group, and also helps us analyze the marketing performance simultaneously and provides technical support for data accumulation and algorithm iteration, thereby improving the cash conversion efficiency of our marketing points.

(II) Demand Side Platform (“DSP”) Service: Product Profiling and Intelligent Account Selection

Meanwhile, we provide demand side platform (“DSP”)’s intelligent account selection service to demanders of mobile new media traffic, i.e., the marketers. We transform the products of marketers into data and labels to form a product profile, and select the mobile new media marketing points mostly suitable for product distribution and release in the form of short lists selected by our model. Purchase, toping up or download and installation by the internet users through the marketing points help the marketers secure sales orders or new users. Marketers for DSP service primarily include (i) e-commerce operators who need to distribute its physical products; and (ii) companies who need to issue interactive entertainment and other digital products, such as game developers, online literature providers, app developers, etc.

(III) Matching Transactions

Under our SSP service and DSP service, the Group, via hyperlinks, publishes the products of marketers (such as games, e-commerce products, online literature, mobile app and applet promotion projects, etc.) at the marketing points of mobile new medias (such as the shopwindow of Douyin and the menu bar of WeChat official accounts) available to the internet users for purchase, toping up, or download and installation, thus achieving marketing target. The role of the Group in the marketing business is to match media profile and product profile, and to promote the consumption transactions of products at the marketing points under the help of the data models. We provide an intelligent platform for business cooperation between marketers and content publishers in the form of matching transaction.

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CORPORATE PROFILE

OUR REVENUE MODELS

Depending on different types of business, the Group mainly has two revenue models, i.e., “cost per sale (CPS)” and “cost per action (CPA)” and currently, the “cost per sale (CPS)” model is the major revenue model adopted by the Group. Based on the first-half year figures of 2021, revenue calculated on cost per sale (CPS) basis accounted for 92.71% of the total revenue of the Group.

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Types of business Revenue models
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Interactive entertainment and other digital products marketing, including:
Games	Cost per sale (CPS)
Online literature	Cost per sale (CPS)
Apps and others	Cost per action (CPA)
E-commerce products marketing	Cost per sale (CPS)

(I) Cost Per Sale (CPS) Model

For e-commerce, games and online literature marketing business, the Group charges service fee based on an agreed percentage of e-commerce GMV or turnover from interactive entertainment product release or joint operations (i.e., CPS sharing). The revenue of such business mainly depends on (i) the matching transactions turnover; and (ii) the agreed profit-sharing ratio.

(i) Matching transactions turnover

Turnover from the Group’s matching transactions may be expressed in the following formula:

Number of active marketing points × turnover per marketing point = turnover

(a) Number of active marketing points

An “active marketing point” refers to a marketing point concluding at least one matching transaction during a fixed period, which is converted from a “covered marketing point” after a series of technical works, including data analysis, media profiling and algorithm matching with the product end. A “covered marketing point” refers to a marketing point accessed to the business platforms of the Group for potential business cooperation and authorizing the use of relevant services by the Group. Therefore, the Group strives to improve the number of active marketing points either by increasing the number of “covered marketing points” or by improving the ratio of converting “covered marketing points” into “active marketing points”, being the important direction.

The Group increases the number of covered marketing points in various ways. We have extensive access to the covered marketing points via the official instruments of mobile new media platforms such as Douyin and WeChat official accounts, guilds, MCN organizations and individuals. As of June 30, 2021, the Group had 1,561,601 covered marketing points in its business networks, increasing by 208.65% from 505,945 covered marketing points as of June 30, 2020.

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CORPORATE PROFILE

The Group improves the ratio of converting “covered marketing points” into “active marketing points” in three aspects. Firstly, we continuously optimize the model-based algorithms to improve the ability of identifying and selecting higher-quality marketing points, thereby improving the quality of covered marketing points; secondly, we continuously optimize the model-based algorithms to improve the accuracy of media profiling, so that the content characteristics and anonymous fan behaviors at the covered marketing points can be fully identified and matched to the suitable products for trading purpose; thirdly, we continue to diversify our product portfolio and introduce more popular products to enhance product attractiveness and improve the activeness of the covered marketing points.

(b) Turnover per marketing point

In a bid to improve turnover per marketing point, we (i) optimize business structure by various means, including offering e-commerce and high unit-price products, to improve the strike price of single consumption transaction; and (ii) make real-time adjustments to the schedule and carousel at the marketing points based on model-based algorithms to boost the same-point trading frequency.

For the first half of 2021, the Group’s average turnover per active marketing point was approximately HK$3,504, increasing by 10.10% from approximately HK$3,183 for the first half of 2020. In particular, the average e-commerce GMV from matching transactions per active marketing point on Douyin was approximately HK$9,920 for the first half of 2021, increasing by 15.24% from HK$8,609 for the same period of 2020; and the average interactive entertainment product turnover from matching transactions per active marketing point on WeChat official accounts was approximately HK$2,834 for the first half of 2021, increasing by 1.63% from HK$2,788 for the same period of 2020.

Given the higher amount and faster growth of turnover from matching transactions at the e-commerce marketing points, the Group is focusing on the coverage of e-commerce marketing points to further improve the average marketing point turnover on its business platforms.

(ii) Agreed profit-sharing ratio

The agreed profit-sharing ratio is determined by the Group and the marketers after comprehensive evaluation by data models and product managers with reference to the product characteristics of the marketers. Different products have different profit-sharing ratios, and the profit-sharing ratio of a same product also differs in different marketing periods and with different marketing plans.

(II) Cost Per Action (CPA) Model

For apps and other digital products marketing service, the Group charges marketers for service based on transaction performance (e.g., download, installation and registration). Based on the first-half year figures of 2021, revenue calculated on cost per action (CPA) basis accounted for 7.29% of the total revenue of the Group, therefore, the CPA model is not a major revenue mode.

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CORPORATE PROFILE

DATA SECURITY AND PRIVACY PROTECTION

The Group highly values the trust of marketers, internet platform companies and content publishers, as well as their recognition to our business, technology and service capabilities. The Group has always been strictly complying with and will consistently implement the laws, regulations and systems relating to data security and privacy protection in the countries and regions where we operate, with higher standards. The majority of the data we analyze and apply in our research and development and operation is mobile new media content data, anonymous user behavioral data and product data, and none has involved with any privacy information of specific customers, users or IDs. Our database is under the protection of multi-dimensional and multi-layered encryption measures and is duly stored on trustworthy cloud and local server platforms in industry.

OUR TECHNOLOGIES

The Group has accumulated substantial mobile new media content data, anonymous user behavioral data and product data through long-term service, which has enabled us to build a powerful technology platform empowered by our proprietary business intelligence technologies and with valid data collection capabilities and strong data analysis capabilities. As a technology-driven company with data and algorithms being its core competencies, the Group is able to analyze and conduct information structure processing on products, mobile new media content and anonymous user behaviors through an automated platform to recommend customized products distribution and marketing strategies to marketers, and provide content publishers with a portfolio of products based on the interests of content subscribers.

OUR STRENGTHS AND BARRIERS

(I) Rapid Development of Industry

The businesses that the Group is engaged in possess broad prospects in both domestic and overseas short video interest-based e-commerce industry and mobile new media social industry, which are developing in a flourishing manner and have the potential to maintain long-term rapid development. In particular, the successful application of interest-based recommendation technology based on data and algorithms provides high-quality scenarios for the direct-to-consumer (“DTC”) marketing and promotion on short video platforms and mobile social platforms to boost user consumption.

Currently, the development of short video interest-based e-commerce is flourishing in China in various forms, including live streaming e-commerce and short video e-commerce, which are increasingly popular among users and have become the fastest growing online consumption scenario. Major short video platforms are also improving their infrastructures and functions to promote the commercialization of the platform;
Overseas interest-based e-commerce platforms, represented by TikTok, have accumulated a large number of users and diversified contents. Currently it is still in the early stage of commercialization and has huge market potentials and customer needs; and
The mobile new media social platforms are focusing on the video-oriented transformation to improve the proportion of video contents and establish commercialization systems applicable to video contents.

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CORPORATE PROFILE

From the perspective of marketers, the development of mobile internet technology provides a foundation for online sales or distribution to charge on performance basis, direct to consumer (“DTC”), and help customers secure new users and sales orders. Therefore, the marketing and promotion model adopting performance indicators, including cost per sale (“CPS”) and cost per action (“CPA”), is increasing favored by more and more marketers.

(II) The Platform Evolution Provides Historical Opportunities to Cross-platform Ecological Service Companies

Under the backdrop of response of the internet industry to the national anti-monopoly supervision, it is becoming the trend for internet platform companies to strengthen business integration, be more open and break manmade barriers. Under this trend, the internet platforms will delegate more business opportunities to partners to strengthen cross-platform cooperation in the form of using third party services, replacing enclosed business system with ecological construction.

The evolution trend of internet platform companies provides unprecedented opportunities to the ecological service companies such as the Group. In addition, as a result of absence of exclusive cooperation relationship as an agency with a certain platform, the Group will have opportunities to leverage its experience and capacity of cross-platform services in the business integration among platforms, thus further enabling it to meet the ecological development strategy and business needs.

(III) Advantages and Barriers of the Direct to Consumer (“DTC”) Based on Cost per Sale (CPS) Model

The Group does not provide services based on the marketing budget of marketers. The characteristics of the Group in the business model are to carry out close cooperation with marketers with cost per sale (CPS) model. Under this model, the Group has no need to obtain the marketing budget of marketers in advance. Instead, the Group helps marketers handle their concerns and needs for direct to consumer (“DTC”) to acquire new customers and sales orders through our service and technology capacity, and then conducts settlement with marketers pursuant to performance indicators such as transaction turnover. This not only satisfies marketers’ basic marketing pursuit to lower the marketing entrance but also improves the return on investment of marketing activities.

The success of cost per sale (CPS) model mainly attributes to the realization of sufficient sales volume to cover the costs relating to data, model algorithm and traffic, which depends on the long-term research and development investment and the optimization of model algorithm and the profound understanding of commercialization products and traffic.

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CORPORATE PROFILE

(IV) First-mover Advantages and Barriers of Data and Model Algorithm

The Group started to conduct the research and development of data and model algorithm in the WeChat official accounts platform as early as in 2013 and did the same in Douyin platform since 2018. As a result of such firstmover advantages, we have industry-leading data scale and data time dimension. Data accumulation has a decisive impact on model construction and model effectiveness, which has also built a competitive barrier for the Group’s leading position in the industry. Richly-structured, large-scale, time-spanning and real-time interactive data helps us better test, build and improve our algorithm models, and protect our marketing performance and improve our services continuously.

The Group is actively making layout of overseas interest e-commerce marketing business targeted to TikTok. Based on our experience in the domestic mobile new media commercial monetization business, we realized the importance of accumulation of data and model algorithm in the overseas interest e-commerce platform and have carried out relevant work. The capacity in model algorithm we have accumulated will provide valuable experience for us to carry out overseas interest e-commerce marketing business.

(V) Synergy Strengths of SSP service and DSP service

As two mutually supportive components of the Group’s business segments, our SSP service and DSP service form an organic entity, which together create a positive and interactive growth cycle of product library, traffic pool and model effect.

(VI) Service Capabilities of Cross-platform, Multi-product and Performance-based charging

From the perspective of marketers, the Group has the ability to distribute products for marketers across platforms, which enables us to satisfy the needs of multi-channel marketing promotion. From the perspective of mobile media content publishers, our product library contains a variety of products, including interactive online entertainment, online tools, consumer goods and other categories, which are in line with the requirements of laws and regulations, with high commercialization value that can provide better monetization results for content publishers.

(VII) License Advantages and Barriers

In addition to possessing the national high-new technology enterprise qualification and Zhongguancun high-new technology enterprise qualification, the Group also obtained the Internet Culture Operation License（網絡文化經營許可證）, which allows us to legally operate online cultural businesses such as games, e-commerce, online literature and live broadcasting, and acquire publishing, cooperating and distribution revenue on the basis of marketing effects.

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MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

• OVERVIEW OF RESULTS FOR THE FIRST HALF OF 2021

The Group has achieved revenue of HK$624.33 million in the first half of 2021, representing an increase of 62.37% as compared with HK$384.51 million in the first half of 2020. Such increase was mainly due to the fact that with high demand in the mobile new media performance-based marketing, the Group took full advantage of its firstmover advantages in data accumulation and algorithm model construction and the synergy strengths of SSP and DSP to increase the number and average trading volume of active marketing points through its service capabilities of cross-platform, multi-products and performance-based charging, promoting the Group’s trading volume of matched consumption, especially the significant increase in the trading volume of e-commerce product. As such, the revenue of the Group generated mainly based on cost per sale (CPS) model increased.

The Group has achieved gross profit of HK$214.07 million in the first half of 2021, representing an increase of 105.15% as compared with HK$104.35 million in the first half of 2020. Gross profit margin increased from 27.14% in the first half of 2020 to 34.29% in the first half of 2021. The increase in gross profit margin was mainly attributable to (i) the steady increase of gross profit margin of interactive entertainment and other digital product businesses; and (ii) the increasing percentage of short-form video e-commerce marketing business with higher gross profit margin.

PROGRESS OF BUSINESS FOR THE FIRST HALF OF 2021
Performance-based Marketing Services

The marketers and the number of their products in the Group’s performance-based marketing services have significantly increased in the first half of 2021. As at June 30, 2021, the Group’s performance-based marketing services covered approximately 23 industries, amounting up to 308 marketers.

Interactive Entertainment and Other Digital Product Performance-based Marketing Services

There were up to 236 game products recorded in the Group’s product library as at June 30, 2021, an addition of 27 game products as compared with that as of December 31, 2020. Online literature products amounted to 1,302 books, increasing 191 books as compared with that as of December 31, 2020.

In the first half of 2021, the Group recorded revenue of HK$495.12 million from interactive entertainment and other digital product performance-based marketing services, representing an increase of 41.61% as compared with HK$349.64 million of the same period last year, of which the game products realized revenue of HK$382.30 million, representing an increase of 63.80% as compared with HK$233.40 million in the first half of 2020; online literature products realized revenue of HK$67.32 million, representing a decrease of 23.41% as compared with HK$87.90 million in the first half of 2020; apps and other products realized revenue of HK$45.50 million, representing an increase of 60.55% as compared with HK$28.34 million in the first half of 2020.

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MANAGEMENT DISCUSSION AND ANALYSIS

• E-Commerce Product Performance-based Marketing Services

The e-commerce consumer goods included in the Group’s product library were up to 231 types as at June 30, 2021, an addition of 48 types as compared with 183 types as of December 31, 2020.

In the first half of 2021, the e-commerce product GMV of HK$647.18 million was achieved through the Group’s performance-based marketing services, representing an increase of 264.08% as compared with HK$177.76 million in the first half of 2020. As the revenue from the Group’s e-commerce product performance-based marketing services was recognized on a net basis, revenue of HK$129.21 million was recorded in the first half of 2021, representing 3.85 times of HK$33.54 million in the first half of 2020.

• Progress on Research & Development

The Group recorded research and development expenses of HK$29.90 million in the first half of 2021, representing an increase of 712.50% as compared with HK$3.68 million in the first half of 2020.

The Group is committed to establishing competitive advantage on model algorithm-based big data. The data models based on various product categories amounted to 169 sets as of June 30, 2021, representing an increase of 14.19% as compared with 148 sets as of December 31, 2020. Data labels adopted by intelligent recommendation coupling model was 2,447, representing an increase of 27.25% as compared with 1,923 labels as of December 31, 2020. The expansion of data scale and enhancement of algorithm capability have made a solid foundation for the improvement of the Company’s marketing business and further increasing the number of marketers and marketing SaaS customers.

STRATEGIC LAYOUT FOR THE SECOND HALF OF 2021 AND IN THE FUTURE

• VIGOROUS EXPANSION OF OVERSEAS INTEREST E-COMMERCE BUSINESS BASED ON SHORTFORM VIDEO CONTENT

The Group regards the overseas interest e-commerce marketing business based on short-form video content as one of its future strategic development priorities, and has started to establish relevant business system. Based on the operating characteristics and market environment of overseas mobile new media, we have built a new technical model and service system to expand interest e-commerce marketing business on overseas platforms that have huge numbers of active users in overseas, including but not limited to TikTok. We will strive to create a closed-loop business suitable for the local market from various links such as organization of supply resources, new media content and traffic, data analysis, matching transactions and logistics, and apply the “matching consumption” marketing model based on data algorithm and interest recommendation to overseas market. The first batch of the Group’s business is in Southeast Asian countries, and will gradually expand to other countries and regions in the fullness of time.

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MANAGEMENT DISCUSSION AND ANALYSIS

• MULTI-CHANNEL LAYOUT OF 1P (1[st] -PARTY) TRAFFIC

As one of the Group’s strategic development priorities, we are committed to cultivating 1P content and traffic through multiple channels to enhance the Group’s customer service capabilities and profitability. We will continue to cultivate new media accounts, 1P content and traffic that have in-depth cooperation with the Group by means of strategic alliance, investment and incubation, and provide tailor-made new media content for the Group’s customers to improve consumption conversion and further reduce the traffic cost. 1P content and traffic will (i) help the Group to develop such mobile new media marketing business as e-commerce and interactive entertainment; and (ii) help the Group to deeply integrate data algorithm capabilities with mobile new media cultural content in response to the Chinese government’s call of “prosperity and development of culture in the new era”（新時代文化繁榮發展）, so as to promote the integration and innovative development of the cultural industry and new network media.

• CONTINUOUS OPTIMIZATION OF DATA ALGORITHM PLATFORM AND MAINTAIN R&D INVESTMENTS

As a technology company that provides cross-platform performance-based marketing services and promotes social consumption through data analysis and algorithm capabilities, the Group will continue to optimize the automatic transaction matching system and technology platform to realize accurate analysis of products and mobile new media content and information structured processing, and promote precise matching transaction of customer products and mobile new media content traffic. We will consolidate our core technical capabilities, continuously improve our technological capabilities and service levels, fully release the potential of data assets, accelerate the construction of solid business barriers, and help our business development with innovative and quality services in a long run to further strengthen our leading position in the industry.

As the Group explores new overseas business markets for its international development, we will continue to invest R&D resources in data analysis and algorithm modeling of overseas mobile new media (such as TikTok) video content, and strive to develop first-mover advantages and technical advantages in overseas mobile new media performance-based marketing, including interest e-commerce marketing and interactive entertainment marketing.

JOY SPREADER GROUP INC. 15 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Revenue

For the six months ended June 30, 2021, the revenue of the Group amounted to approximately HK$624.33 million, representing an increase of 62.37% as compared with approximately HK$384.51 million for the six months ended June 30, 2020. Such increase was mainly due to the fact that with high demand in the mobile new media performancebased marketing, the Group took full advantage of its first-mover advantages in data accumulation and algorithm model construction and the synergy strengths of SSP and DSP to increase the number and average trading volume of active marketing points through its service capabilities of cross-platform, multi-products and performance-based charging, promoting the Group’s trading volume of matched consumption, especially the significant increase in the trading volume of e-commerce product. As such, the revenue of the Group generated mainly based on cost per sale (CPS) model increased.

The following table sets forth a breakdown of our revenue by product type for the periods indicated:

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----- Start of picture text -----

For the six months ended June 30
2021 Percentage (%) 2020 Percentage (%)
(Unaudited) (Unaudited)
(HK$ million, except for percentages)
(Restated)
(Note 1 to
the condensed
consolidated
financial
statements)
Marketing revenue from interactive
entertainment and other digital products 495.12 79.30% 349.64 90.93%
Games 382.30 61.23% 233.40 60.70%
Online literature 67.32 10.78% 87.90 22.86%
Apps and others 45.50 7.29% 28.34 7.37%
Marketing revenue from e-commerce products 129.21 20.70% 33.54 8.72%
Revenue from other products [(1)] – – 1.33 0.35%
Total revenue 624.33 100.00% 384.51 100.00%
----- End of picture text -----

Note:

(1) Revenue from other products mainly refers to non-performance-based marketing campaigns we provided to customers.

Cost of Revenue

For the six months ended June 30, 2021, the cost of revenue of the Group amounted to approximately HK$410.26 million, representing an increase of 46.44% as compared with approximately HK$280.16 million for the six months ended June 30, 2020. The cost of revenue was mainly comprised of purchase cost of traffic on project placement platform. The increase in cost of revenue was primarily attributable to higher purchase cost of traffic arising from the increase in revenue.

16 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Gross Profit and Gross Profit Margin

For the six months ended June 30, 2021, the gross profit of the Group amounted to approximately HK$214.07 million, representing an increase of 105.15% as compared with approximately HK$104.35 million for the six months ended June 30, 2020.

For the six months ended June 30, 2021, the gross profit margin of the Group was 34.29%, representing an increase of 7.15 percentage points as compared with 27.14% for the six months ended June 30, 2020. The increase in gross profit margin was mainly attributable to (i) the steady increase of the gross profit margin of interactive entertainment and other digital product businesses; and (ii) the increasing percentage of short-form video e-commerce marketing business with higher gross profit margin.

The following table sets forth a breakdown of our gross profit by product type for the periods indicated:

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----- Start of picture text -----

For the six months ended June 30
2021 Percentage (%) 2020 Percentage (%)
(Unaudited) (Unaudited)
(HK$ million, except for percentages)
(Restated)
(Note 1 to
the condensed
consolidated
financial
statements)
Marketing gross profit from interactive
entertainment and other digital products 148.79 69.51% 77.26 74.04%
Games 100.33 46.87% 50.95 48.83%
Online literature 24.27 11.34% 20.62 19.76%
Apps and others 24.19 11.30% 5.69 5.45%
Marketing gross profit from e-commerce
products 65.28 30.49% 26.83 25.71%
Gross profit from other products [(1)] – – 0.26 0.25%
Total gross profit 214.07 100.00% 104.35 100.00%
----- End of picture text -----

Note:

(1) Gross profit from other products mainly refers to non-performance-based marketing campaigns we provided to customers.

JOY SPREADER GROUP INC. 17 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Other Income

The other income of the Group increased by 128.82% from approximately HK$2.29 million for the six months ended June 30, 2020 to approximately HK$5.24 million for the six months ended June 30, 2021, mainly due to (i) the amount of government grants increased by HK$1.08 million as compared with that of the same period last year; and (ii) the interest income on bank deposits increased by HK$1.90 million as compared with that of the same period last year.

Other Gains and Losses

During the Reporting Period, the other gains and losses of the Group were losses of approximately HK$30.70 million, and the losses were approximately HK$0.22 million for the six months ended June 30, 2020, which was mainly due to the increase in exchange translation loss of HK$29.75 million arising from the decline in the exchange rate of HK$ against RMB.

Distribution and Selling Expenses

The distribution and selling expenses of the Group primarily consist of (i) marketing expenses; (ii) staff costs; (iii) business trip expenses; and (iv) other expenses.

For the six months ended June 30, 2021, the distribution and selling expenses of the Group amounted to approximately HK$24.25 million, representing a substantial increase as compared with approximately HK$1.47 million of the same period last year, which was mainly due to the increase in selling promotion related expenses of the Group’s domestic e-commance business during the current period.

Administrative Expenses

The administrative expenses of the Group primarily consist of (i) amortization and depreciation; (ii) staff costs; (iii) business trip and entertainment expenses; (iv) professional service fees; (v) taxes and surcharges; (vi) rental expenses; and (vii) officerelated expenses.

For the six months ended June 30, 2021, the administrative expenses of the Group amounted to approximately HK$25.55 million, representing an increase of 156.78% as compared with approximately HK$9.95 million of the same period last year, which was mainly due to (i) the increase in staff costs and professional service fees with business expansion upon the Group’s successful listing in September last year; and (ii) the significant increase in amortization and depreciation and office-related expenses as compared with that of the same period last year.

18 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Research and Development Expenses

The research and development expenses of the Group primarily consist of expenses on data analysis and algorithm modeling, especially expenses on data analysis and algorithm modeling of domestic and overseas e-commerce business, and remuneration and benefits expenses for technical personnel in relation to the development of technology platforms.

For the six months ended June 30, 2021, the research and development expenses of the Group amounted to approximately HK$29.90 million, representing an increase of 712.50% as compared with approximately HK$3.68 million of the same period last year, which was mainly due to the increased investment in research and development for data analysis and algorithm modeling with rapid expansion of the Group’s business scale.

Finance Costs

For the six months ended June 30, 2021, the finance costs of the Group were interest expenses of lease liabilities arising from leasing properties during the Reporting Period. The Group had no bank loans during the Reporting Period.

Profit for the Reporting Period

As a result of the foregoing, the Group’s profit for the period increased by 58.39% from HK$67.82 million for the six months ended June 30, 2020 to HK$107.42 million for the Reporting Period.

Trade and Other Receivables and Deposits

The Group had trade and other receivables and deposits of HK$335.14 million and HK$410.04 million as at December 31, 2020 and June 30, 2021, respectively.

As at June 30, 2021, the balance of trade receivables of the Group amounted to HK$396.01 million, representing an increase of 23.41% as compared with HK$320.88 million as at December 31, 2020, which was mainly attributable to higher trade receivables due to significant increase in revenue from e-commerce product marketing business during the 618 shopping festival in 2021 as compared with last year.

Other receivables and deposits are employee petty cash expenses, rental deposits, deposits to suppliers, etc. As at June 30, 2021, the balance of other receivables and deposits of the Group amounted to HK$14.03 million, with no material change as compared with HK$14.26 million as at December 31, 2020.

Loan Receivables

The Group had loan receivables of HK$37.43 million and HK$18.03 million as at December 31, 2020 and June 30, 2021, respectively. The decrease was primarily attributable to the receipt of certain loan receivables.

JOY SPREADER GROUP INC. 19 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Prepayments

The Group had prepayments of HK$610.85 million and HK$942.22 million as at December 31, 2020 and June 30, 2021, respectively, which consist of the prepayments purchases of traffic and other prepayments. The increase in the Group’s prepayments was primarily attributable to the increase in purchase of prepaid traffic on an overseas short-video platform to satisfy the Group’s domestic and overseas business development needs, as well as negotiating a better pricing policy of procurement.

Equity Instruments at Fair Value through Other Comprehensive Income

The Group had equity instruments at FVTOCI of HK$37.86 million and HK$38.37 million as at December 31, 2020 and June 30, 2021, respectively, with no material change.

Bank Balances and Cash

The Group had bank balances and cash of HK$1,210.45 million and HK$901.72 million as at December 31, 2020 and June 30, 2021, respectively. The decrease was due to the expansion of the business scale, which was used to purchase of traffic on project placement platform.

Trade and Other Payables

The trade and other payables of the Group primarily consist of (i) purchase for traffic; and (ii) other payables, primarily representing accrued listing expenses, tax payables and compensation payable to employees.

The trade payables of the Group increased by 151.40% from HK$11.75 million as at December 31, 2020 to HK$29.54 million as at June 30, 2021, which was mainly attributable to the increase in payables for traffic purchase with expansion of the Group’s business scale.

The other payables of the Group decreased by 21.18% from HK$87.34 million as at December 31, 2020 to HK$68.84 million as at June 30, 2021, which was mainly attributable to the settlement of listing expenses and share issuance expenses of HK$17.82 million.

Lease Liabilities

The lease liabilities of the Group decreased from HK$21.04 million as at December 31, 2020 to HK$20.27 million as at June 30, 2021, which was attributable to payment of lease expenses and new leased properties.

20 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Liquidity and Capital Resources

The following table sets forth a summary of our cash flows for the periods indicated:

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----- Start of picture text -----

For the six months ended June 30
2021 2020
(Unaudited) (Unaudited)
HK$ million
(Restated)
(Note 1 to the
condensed
consolidated
financial
statements)
Net cash used in operating activities (244.66) (68.57)
Net cash (used in)/from investing activities (0.61) 28.34
Net cash used in financing activities (52.71) (5.26)
Net decrease in cash and cash equivalents (297.98) (45.49)
Cash and cash equivalents at the beginning of the period 1,210.45 146.79
Effect of foreign exchange rate changes (10.75) (0.04)
Cash and cash equivalents at the end of the period 901.72 101.26
----- End of picture text -----

As at June 30, 2021, cash and cash equivalents were mainly denominated in RMB, US$ and HK$.

Cash Flow from Operating Activities

Our cash inflows from operating activities primarily consist of collection of sales revenue from the provision of mobile new media performance-based marketing services to customers. Our cash outflow from operating activities mainly consist of purchase cost of traffic, distribution and selling expenses, research and development expenses, and administrative expenses.

For the six months ended June 30, 2021, our net cash used in operating activities was HK$244.66 million (for the six months ended June 30, 2020: HK$68.57 million), an increase of HK$176.09 million on a year-on-year basis, which was mainly due to the significant increase of the business volume and accordingly the increased trade receivables and prepayments in the first half of 2021 over the same period last year.

Cash Flow from Investing Activities

Our cash used in investing activities primarily consist of purchase of fixed assets, purchase of financial assets at FVTPL, grant and recovery of loan receivables.

For the six months ended June 30, 2021, our net cash used in investing activities was HK$0.61 million (for the six months ended June 30, 2020: net cash generated from investing activities of HK$28.34 million), which was mainly due to purchase of fixed assets and financial assets at FVTPL, and recovery of certain loan receivables.

JOY SPREADER GROUP INC. 21 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Cash Flow from Financing Activities

For the six months ended June 30, 2021, our net cash used in financing activities was HK$52.71 million (for the six months ended June 30, 2020: HK$5.26 million), an increase of HK$47.45 million on a year-on-year basis, which was mainly due to (i) approximately HK$35.36 million was used in the purchase of shares under the Share Award Scheme; and (ii) the increase in settlement of the related expenses of listing and issuance of Shares of approximately HK$9.50 million.

Financial Policy

The Group adopts prudent financial management methods to maintain a good financial position. The Board will continue to closely monitor the funding requirements of the Group’s future operation and development to ensure that they are met.

Capital Expenditures

The principal capital expenditures of the Group primarily consist of fixed assets, right-of-use assets and intangible assets. The following table sets forth our net capital expenditures for the periods indicated:

==> picture [483 x 222] intentionally omitted <==

The main sources of funds for the Group’s operations and capital expenditures are proceeds from operations and proceeds from the Listing. The Group believes that it has stable funding sources and sufficient bank balances and cash to meet the needs for future capital investment and working capital.

Significant Investments, Material Acquisitions and Disposals of Subsidiaries and Associated

Company

During the Reporting Period, the Group did not hold any significant investments or have any material acquisitions or disposals of subsidiaries or associated companies.

Future Plans for Material Investments or Capital Assets

Save as disclosed under the section headed “Future Plans and Use of Proceeds” in the Prospectus, the Group does not have any other plans for material investments or capital assets.

22 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

Segment Information

Details of segment information are set out in Note 4 to the condensed consolidated financial statements.

Indebtedness

Bank Borrowings

As at June 30, 2021, the Group did not have any bank borrowings.

Contingent Liabilities, Charges of Assets and Guarantees

Contingent Liabilities

As at June 30, 2021, the Group was not involved in any material legal, arbitration or administrative proceedings that, if adversely determined, and did not have any contingent liabilities, that, we expected would materially adversely affect our business, financial position or results of operations.

Charges of Assets and Guarantees

As at June 30, 2021, the Group did not have any outstanding mortgages, charges, debentures, other issued debt capital, bank overdrafts, borrowings, liabilities under acceptance or other similar indebtedness, any guarantees or other material contingent liabilities.

Gearing Ratio

Gearing ratio is calculated using total liabilities divided by total assets and multiplied by 100%. As at June 30, 2021, the gearing ratio of the Group was 5.07% (as at December 31, 2020: 5.34%).

Current Ratio

Current ratio represents current assets divided by current liabilities. Current ratio increased from 20.63 times as of December 31, 2020 to 21.11 times as of June 30, 2021.

Foreign Exchange Risk and Hedging

Foreign currency risk refers to the risk of loss resulting from changes in foreign currency exchange rates. The Group has bank balances denominated in US$ and HK$, exposing the Group to foreign exchange risk. The Group mainly operates in the PRC with most of the transactions denominated and settled in RMB. The Group will closely monitor the situation and take particular measures when necessary to ensure that foreign currency risk is under control.

Employees and Remuneration Policies

As at June 30, 2021, the Group had 79 full-time employees in the PRC and overseas (as at December 31, 2020: 73 full-time employees), the majority of whom were based in the PRC. As of June 30, 2021, over 75.95% of our employees was in the positions of research and development, technical and operation.

The total staff costs for the six months ended June 30, 2021 was approximately HK$12.44 million (for the six months ended June 30, 2020: HK$6.40 million). The Directors and senior management receive compensation from the Group in the form of fees, salaries, bonus, contributions to pension schemes, allowances and benefits in kind.

JOY SPREADER GROUP INC. 23 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

In term of employee benefits and security, the Group complies with the minimum working age and minimum wage prescribed by law and provides employees with five national statutory social insurances in accordance with the Beijing Social Insurance Ordinance (《北京市社會保險條例》). The Group strictly guarantees that employees have their rights to various holidays, such as public holidays, paid annual leave, sick leave, wedding leave and maternity leave. Additionally, the Group also provides employees with employee accident insurance, reimbursement of transportation expenses for overtime and other benefits and safeguard measures. Moreover, we organize team building quarterly and physical examinations annually for our employees.

We provide professional training programs for new employees we hired. We also customize in accordance to the needs of the employees in different departments, and provide regular and professional training both online and offline.

The Group recruits our personnel through professional search firms and recruiting websites. The Group has established effective employee incentive schemes to correlate the remuneration of our employees with their overall performance, and has established a merit-based remuneration awards system. Employees are promoted not only in terms of position and seniority. On June 21, 2021, the Group has adopted the Share Award Scheme to recognize the contributions of the certain directors, employees, consultants and advisers of the Group in order to incentivize them to retain with the Group, and to motivate them to strive for the future development and expansion of the Group.

Share Award Scheme

The Company has adopted a share award scheme (the “Share Award Scheme”) on June 21, 2021 (the “Adoption Date”) to recognize the contributions of the certain directors, employees, consultants and advisers of the Group in order to incentivize them to retain with the Group, and to motivate them to strive for the future development and expansion of the Group. The summary of the Share Award Scheme is as follows:

(I) Duration and termination of the Share Award Scheme

Unless terminated earlier by the Board in accordance with the Share Award Scheme Rules, the Share Award Scheme is valid and effective for a term of 10 years commencing from the Adoption Date. The Share Award Scheme shall terminate on the earlier of (i) the 10th year from the Adoption Date; and (ii) such date of early termination as determined by the Board provided that such termination shall not affect any subsisting rights of any Selected Participant. Upon termination, (i) no further grant of Award Shares may be made under the Share Award Scheme; (ii) all Award Shares and the related income shall become vested in the Selected Participant so referable on such date of termination; and (iii) net sale proceeds (after making appropriate deductions) of the Returned Shares and such noncash income together with the residual cash and such other funds remaining in the Trust shall be remitted to the Company forthwith after the sale.

(II) Share Award Scheme Limit

The Board shall not make any further Award of Award Shares in case that the award of the Shares by the Board under the Share Award Scheme will result in the nominal value of such Shares exceeding ten per cent of the issued share capital of the Company from time to time.

The maximum number of Shares which may be awarded to any Selected Participant under the Share Award Scheme shall not exceed one per cent of the issued share capital of the Company from time to time in any 12-month period.

24 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

(III) Administration of the Share Award Scheme

The Share Award Scheme is subject to the administration of the Board and the Trustee in accordance with the terms stated in the Share Award Scheme Rules and the terms of the Trust Deed.

(IV) Voting rights of the Award Shares

Notwithstanding that the Trustee is the legal registered holder of the Shares held upon trust pursuant to the Trust Deed, the Trustee shall not exercise the voting rights attached to such Shares.

(V) Operation of the Share Award Scheme

The Board may, in respect of the Share Award Scheme and after having regard to the requirement under the Share Award Scheme, determine the number of Shares to be purchased as Scheme Shares, and cause to be paid the purchase price for the Scheme Shares and the related expenses to the Trustee who will purchase the Scheme Shares. The Trustee shall apply the entire amount without deduction (except for transaction levy, stamp duty and other statutory fees) towards the purchase of the maximum number of board lots of Shares at the prevailing market price.

The Board may, from time to time, at its absolute discretion select any director, employee, consultant and adviser of the Group (other than any person who is resident in a place where the award and/or the vesting and transfer of the Award Shares is not permitted under the laws and regulations of such place or where compliance with applicable laws and regulations in such place makes it necessary to exclude such person) for participation in the Share Award Scheme as a Selected Participant and determine the Award Shares for each of them.

Upon receipt of the instruction from the Board as to the name of Selected Participant(s) and the number of Award Shares to be granted to the Selected Participant(s), the Trustee shall make relevant arrangement to convert the Scheme Shares to the Award Shares for the relevant Selected Participant(s).

(VI) Vesting and lapse of the Share Award Scheme

When the Selected Participant(s) has (have) satisfied all vesting conditions specified by the Board at the time of making the Award and becomes entitled to the Shares forming the subject of the Award, the Trustee shall transfer the relevant Award Shares to the Selected Participant(s) or their Nominee(s). The Vesting Date shall be on any Business Day at the end of the month specified by the Company of any year, but in any event not later than 12 months after the Reference Date.

An Award lapses when (i) the relevant Selected Participant ceases to be an employee of the Group; or (ii) any fraud or serious misconduct, violation of laws or regulations, or damage to the interests of the Company by Selected Participant; or (iii) an order for the withdrawal of Listing and the winding-up of the Company is made or a resolution is passed for the voluntary winding-up of the Company (otherwise than for the purposes of, and followed by, an amalgamation or reconstruction in such circumstances that substantially the whole of the undertaking, assets and liabilities of the Company pass to a successor company), the Award shall automatically lapse forthwith and the Award Shares shall not vest on the relevant Vesting Date but shall become Returned Shares for the purposes of the Share Award Scheme.

JOY SPREADER GROUP INC. 25 2021 INTERIM REPORT

MANAGEMENT DISCUSSION AND ANALYSIS

During the six months ended June 30, 2021, 11,495,000 Shares were purchased by the Trustee from the market at an average price of approximately HK$3.08 per Share, with an aggregate amount of HK$35,363,000. No Shares were granted to eligible employees pursuant to the Share Award Scheme during the six months ended June 30, 2021. As at June 30, 2021, no Award Shares had been granted under the Share Award Scheme. At the end of the Reporting Period, 11,495,000 Shares were held by the Trustee.

For details of the Share Award Scheme, please refer to the Company’s announcement dated June 21, 2021.

Changes in Directors’ Information

According to Rule 13.51B(1) of the Listing Rules, the changes in information on the Directors of the Company required to be disclosed are as follows:

The meetings of the remuneration committee and the Board of the Company held on March 26, 2021 unanimously approved that Mr. Cheng Lin would not receive any remuneration for his role as an executive Director of the Company, but his annual remuneration received in the capacity of the vice president of the Group has been adjusted from RMB324,644 to US$100,000, effective from September 21, 2020.

Ms. Qin Jiaxin, Mr. Sheng Shiwei, Mr. Hu Jiawei and Mr. Yap Jin Meng Bryan, all being Directors, hold office of three years commencing on the day of the conclusion of the annual general meeting of the Company which was held on June 30, 2021.

Events after the Reporting Period

Change of Company Name

The English name of the Company has changed from “Joy Spreader Interactive Technology. Ltd” to “Joy Spreader Group Inc.” and the Chinese name “樂享集團有限公司” has been adopted as the new dual foreign name of the Company to replace its existing Chinese name “樂享互動有限公司” with effect from July 7, 2021.

Change of Stock Short Name

The English stock short name of the Company for trading in the Shares on the Stock Exchange remains unchanged as “JOY SPREADER”, but the Chinese stock short name has been changed from “樂享互動” to “樂享集團”, with effect from 9:00 a.m. on August 5, 2021. The stock code of the Company on the Stock Exchange remains unchanged as “6988”.

Change of Company Website and Contact Information

The official website of the Company has been changed from “www.adjoy.com.cn” to “www.joyspreader.com” from August 5, 2021. Due to the changes of the name of the Company and the website of the Company, the email address of the Company for investors’ communications has been synchronously changed from the original email address of [email protected] to [email protected]. The telephone number and facsimile number have been changed to (86)10-87726988 and (86)10-84775189, respectively. The above updated email address, the telephone number and facsimile number of the Company has been put into use from August 2, 2021.

Save as disclosed above, there are no material events that affected the Group and occurred after the six months ended June 30, 2021.

26 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

OUR MAJOR SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES

As at 30 June, 2021 the Group has the following major subsidiaries and consolidated affiliated entities:

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----- Start of picture text -----

Subsidiaries Place of Establishment Date of Establishment
----- End of picture text -----

Joy Spreader Interactive Technology (HK) Limited	Hong Kong	March 28, 2019
Joy Spreader Interactive Group (HK) Limited	Hong Kong	October 25, 2019
Beijing Joy Spreader Interactive Technology Co., Ltd	Beijing, PRC	May 22, 2019
Horgos Joyspreader Interactive Technology Co., Ltd	Horgos, PRC	March 24, 2020
Joy Spreader (Nanjing) Investment Co., Ltd	Nanjing, PRC	November 17, 2020
Joy Spreader (Nanjing) Interactive Technology Co., Ltd	Nanjing, PRC	November 23, 2020

==> picture [483 x 20] intentionally omitted <==

----- Start of picture text -----

Consolidated Affiliated Entities Place of Establishment Date of Establishment
----- End of picture text -----

Beijing Joyspreader	Beijing, PRC	October 9, 2008
Horgos Wuyou Internet Technology Co., Ltd	Horgos, PRC	March 20, 2017
Beijing Wuyou Technology Co., Ltd	Beijing, PRC	July 30, 2014
Horgos Yaoxi Internet Technology Co., Ltd	Horgos, PRC	March 19, 2017
Horgos Zhipu Shulian Internet Technology Co., Ltd	Horgos, PRC	January 7, 2020

PROPERTIES

Our headquarters is located in Beijing. As of the date of this interim report, we did not have any owned properties and we leased 10 properties with an aggregate gross floor area of approximately 2,399 square meters from independent third parties. Our leased properties are primarily used as premises for our offices.

JOY SPREADER GROUP INC. 27 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

CONTRACTUAL ARRANGEMENTS

The Group has entered into the Contractual Arrangements with WFOE, Beijing Joyspreader and the Registered Shareholders, to enable us to, among other things, (i) obtain substantially all of the economic benefits from Beijing Joyspreader in consideration for the management and consultation services provided by the Company in this regard; (ii) exercise effective control over Consolidated Affiliated Entities; and (iii) hold an exclusive option to purchase all or any part of equity interests in Beijing Joyspreader where permitted by PRC laws. Accordingly, through the Contractual Arrangements, our Consolidated Affiliated Entities’ results of operations, assets and liabilities, and cash flows will be consolidated into the Company’s financial statements.

Please refer to the section headed “Contractual Arrangements” in the Prospectus for details. For the six months ended June 30, 2021, the Board has reviewed the overall performance of the contractual arrangements and believed that the Group has complied with the contractual arrangements in all material respects.

On March 15, 2019, the Foreign Investment Law was formally passed by the 13th National People’s Congress and took effect on January 1, 2020. The Foreign Investment Law stipulates forms of foreign investment as below:

i. foreign investors set up foreign invested enterprises in China severally or jointly with other investors;
ii. foreign investors acquire shares, equity, properties or other similar interests in any domestic enterprise;
iii. foreign investors invest in new projects in China severally or jointly with other investors; and
iv. foreign investors invest through any other methods under laws, administrative regulations, or provisions prescribed by the State Council.

The Foreign Investment Law stipulates that the Negative List is applied in certain industry sectors. The Negative List set out in the Foreign Investment Law sets out in a unified manner the special management measures for foreign investment access, such as the requirements of equity interest and senior executives. Where any foreign investor directly or indirectly holds shares, equity, properties or other interests in any domestic enterprise, such domestic enterprise is not allowed or limited to invest in any sector set out in the Guidance Catalog of Industries for Foreign Investment (《外商投資產業指導目錄》). Foreign investors are allowed to invest in any sector beyond the Negative List and shall be managed on the same basis as domestic investments.

Current PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in internet culture businesses and other related businesses. In particular, under the Negative List, which was revised in 2020, certain of the Group’s performance-based marketing services fall into the internet culture businesses which is considered prohibited. To comply with PRC laws and regulations, the Group conducts our performance-based marketing in China through Beijing Joyspreader and its subsidiaries, based on a series of Contractual Arrangements by and among WFOE, Beijing Joyspreader and the Registered Shareholders. As a result of these Contractual Arrangements, the Group exerts control over Beijing Joyspreader and its subsidiaries and consolidates their results of operations into the Group’s financial statements. Beijing Joyspreader and its subsidiaries hold the licenses, approvals and key assets that are essential for the operations of the Group’s Relevant Businesses.

28 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

During the Reporting Period and up to the date of this interim report, there has been no update on the Foreign Investment Law and the Group has complied with the Foreign Investment Law and the implementation rules in relation to the qualification requirements.

For the efforts made and actions taken by the Group in compliance with the qualification requirements, please refer to the section headed “Contractual Arrangements” in the Prospectus.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Company is committed to maintaining high standard of corporate governance to safeguard the interests of the Shareholders, enhance corporate value, formulate its business strategies and policies, and enhance its transparency and accountability. The Company has adopted the principles and code provisions of the CG Code as its own code of corporate governance.

The Board is of the view that the Company has complied with all applicable code provisions of the CG Code for the six months ended June 30, 2021, except for a deviation from the code provision A.2.1 of the CG Code, the roles of chairman and chief executive officer of the Company are not separate and are both performed by Mr. Zhu Zinan. In view of Mr. Zhu’s experience, personal profile and his roles in the Group and that Mr. Zhu has assumed the role of chief executive officer of our Group since its establishment, the Board considers it beneficial to the business prospect and operational efficiency of our Group for Mr. Zhu acting as the chairman of the Board and continuing to act as the chief executive officer of the Company. The Board believes that this structure will not impair the balance of power and authority between the Board and the management of the Company, given that: (i) decision to be made by our Board requires approval by at least a majority of our Directors, and we believe that there is sufficient check and balance in the Board; (ii) Mr. Zhu and the other Directors are aware of and undertake to fulfill their fiduciary duties as Directors, which require, among other things, that he acts for the benefit and in the best interests of our Company and will make decisions for our Group accordingly; and (iii) the balance of power and authority is ensured by the operations of the Board which comprises experienced and high caliber individuals who meet regularly to discuss issues affecting the operations of the Company. Moreover, the overall strategic and other key business, financial, and operational policies of our Group are made collectively after thorough discussion at both Board and senior management levels. The Board will continue to review the effectiveness of the corporate governance structure of our Group in order to assess whether separation of the roles of chairman of the Board and chief executive officer is necessary. Directors strive to achieve a high standard of corporate governance (which is of critical importance to our development) to protect the interest of shareholders.

JOY SPREADER GROUP INC. 29 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted the Model Code as the code of conduct regarding securities transactions by the Directors.

Having made specific enquiries of all Directors, all of them have confirmed that they have complied with the Model Code and the relevant employees written guidelines for the six months ended June 30, 2021. No incident of non-compliance of the written guidelines by the relevant employees who are likely to be in possession of inside information of the Company was noted by the Company.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ITS ASSOCIATED CORPORATIONS

As at June 30, 2021, the interests and short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept pursuant to Section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

Interests in Shares or underlying Shares of the Company

Name of Director	Nature of interest	Number of Shares/ underlying Shares(1)	Approximate percentage of shareholding interest
Mr. Zhu	Interest in controlled corporation(2)	858,409,400 (L)	39.28%
	Interest of a party to an agreement(4)	51,750,000 (L)	2.37%
Mr. Zhang	Interest in controlled corporation(3)	51,750,000 (L)	2.37%
	Interest of a party to an agreement(4)	858,409,400 (L)	39.28%

Notes:

(1) The letter “L” denotes the person’s long position in the Shares and the underlying Shares of the Company.
(2) 747,298,300 Shares and 111,111,100 Shares of the Company are held by ZZN. Ltd. and Laurence mate. Ltd. respectively. Mr. Zhu held 100% interests of ZZN. Ltd. and 90% interests of Laurence mate. Ltd., and therefore Mr. Zhu is deemed to be interested in the Shares held by ZZN. Ltd. and Laurence mate. Ltd. under the SFO.
(3) 51,750,000 Shares are held by ZZD. Ltd. and ZZD. Ltd. is wholly owned by Mr. Zhang.
(4) Pursuant to the Concert Party Agreement between Mr. Zhu and Mr. Zhang, they have agreed to act in concert by aligning their votes at Shareholders’ meetings of the Company. Therefore, they are deemed to be jointly interested in the aggregate number of Shares held by ZZN. Ltd., ZZD. Ltd. and Laurence mate. Ltd under the SFO.

30 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

Interests in Shares or Underlying Shares of Beijing Joyspreader

Name of Director	Nature of interest	Number of shares of Beijing Joyspreader(1)	Approximate percentage of shareholding interest in Beijing Joyspreader
Mr. Zhu	Beneficial owner	7,472,983 (L)	45.81%
	Interest in controlled corporation(2)	1,111,111 (L)	6.81%
	Interest of a party to an agreement(3)	667,500 (L)	4.09%
Mr. Zhang	Beneficial owner	667,500 (L)	4.09%
	Interest of a party to an agreement(3)	8,584,094 (L)	52.62%
Notes:

(1) The letter “L” denotes the person’s long position in the Shares and the underlying Shares of the Company.

(2) Mr. Zhu held 90% equity interests of Beijing Zinan and Friends, which in turn held 1,111,111 shares of Beijing Joyspreader, and therefore Mr. Zhu is deemed to be interested in the shares held by Beijing Zinan and Friends in Beijing Joyspreader under the SFO.
(3) Pursuant to the Concert Party Agreement between Mr. Zhu and Mr. Zhang, they have agreed to act in concert by aligning their votes at shareholders’ meetings of Beijing Joyspreader. Therefore, they are deemed to be interested in the shares of Beijing Joyspreader held by them under the SFO.

Save as disclosed above, as at June 30, 2021, so far as it was known to the Directors or chief executive of the Company, none of the Directors or chief executive of the Company had interests or short positions in the Shares, underlying Shares and debentures of the Company or its associated corporations as recorded in the register required to be kept, pursuant to Section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE

SHARES AND UNDERLYING SHARES OF THE COMPANY

As at June 30, 2021, so far as it was known to the Directors or chief executive of the Company, the following persons had interests and/or short positions in the Shares or underlying Shares as recorded in the register required to be kept by the Company under section 336 of the SFO.

JOY SPREADER GROUP INC. 31 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

Interests in Shares or Underlying Shares of the Company

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Number of Shares/ Approximate percentage
Name of Shareholder Nature of interest underlying Shares [(1)] of shareholding interest
----- End of picture text -----

Mr. Zhu	Interest in controlled corporation(2)	858,409,400 (L)	39.28%
	Interest of a party to an agreement(3)	51,750,000 (L)	2.37%
ZZN. Ltd.	Beneficial owner(4)	747,298,300 (L)	34.20%
Mr. Zhang	Interest in controlled corporation(5)	51,750,000 (L)	2.37%
	Interest of a party to an agreement(3)	858,409,400 (L)	39.28%
ZZD. Ltd.	Beneficial owner(5)	51,750,000 (L)	2.37%
Laurence mate. Ltd.	Beneficial owner(6)	111,111,100 (L)	5.08%
Shenzhen Nanhai Growth
Win-win Limited	Beneficial owner(7)	124,610,400 (L)	5.70%
NT Balance Capital Ltd.	Beneficial owner(8)	118,795,300 (L)	5.44%
Balance Capital Group Ltd.	Beneficial owner(9)	72,727,100 (L)	3.33%

Notes:

(1) The letter “L” denotes the person’s long position in the Shares and the underlying Shares of the Company.
(2) Mr. Zhu held 100% interests of ZZN. Ltd. and 90% interests of Laurence mate. Ltd.
(3) Pursuant to the Concert Party Agreement entered between Mr. Zhu and Mr. Zhang, they agreed to act in concert by aligning their votes at Shareholders’ meetings of the Company. Therefore, they are deemed to be jointly interested in the aggregate number of Shares held by ZZN. Ltd., ZZD. Ltd. and Laurence mate. Ltd.
(4) ZZN. Ltd. is a limited liability company incorporated in the BVI and wholly owned by Mr. Zhu.
(5) ZZD. Ltd. is a limited liability company incorporated in the BVI and wholly owned by Mr. Zhang.
(6) Laurence mate. Ltd. is owned as to 90% by Mr. Zhu and 10% by Mr. Zhang.
(7) Each of Shenzhen Nanhai Chengzhangtongying (sole shareholder of Shenzhen Nanhai Growth Win-win Limited), Cowin Jinxiu Capital Firm (深圳同創錦繡資產管理有限公司) (general partner of Shenzhen Nanhai Chengzhangtongying), Shenzhen Cowin Asset Management Co., Ltd (深圳同創偉業資產管理股份有限公司) (sole shareholder of Cowin Jinxiu Capital Firm), Shenzhen Cowin Venture Capital Co., Ltd. (深圳市同創偉業創業投資有限公司) (holding approximately 35.01% equity interests of Shenzhen Cowin Asset Management Co., Ltd.), Mr. Zheng Weihe (鄭偉鶴) (holding 45% equity interests of Shenzhen Cowin Venture Capital Co., Ltd.) and Ms. Huang Li (黃荔) (holding 55% equity interests of Shenzhen Cowin Venture Capital Co., Ltd.) is deemed to be interested in the Shares held by Shenzhen Nanhai Growth Win-win Limited under the SFO.
(8) Each of Nantong Pinghengchuangye (sole shareholder of NT Balance Capital Ltd.), Nantong Pingheng Capital Management Center (Limited Partnership) (南通平衡資本管理中心（有限合夥)) (“Nantong Pingheng Capital”, general partner of Nantong Pinghengchuangye), Nanjing Pingheng Capital (general partner of Nantong Pingheng Capital), Mr. Lv Xueqiang (呂學強, general partner of Nanjing Pingheng Capital), Nantong Luhai Tongchou Growth Fund Co., Ltd (南通陸海統籌發展基金有限公司) (limited partner holding 40% equity interests of Nantong Pinghengchuangye) and Nantong Finance Bureau (holding 75% equity interest of Nantong Luhai Tongchou Growth Fund Co., Ltd) is deemed to be interested in the Shares held by NT Balance Capital Ltd. under the SFO.
(9) Each of Nanjing Pingheng Capital (sole shareholder of Balance Capital Group Ltd.) and Mr. Lv Xueqiang (呂學強, general partner of Nanjing Pingheng Capital) is deemed to be interested in the Shares held by Balance Capital Group Ltd. under the SFO. Mr. Lv Xueqiang is also the ultimate controller of NT Balance Capital Ltd.

Save as disclosed above, as at June 30, 2021, the Directors and chief executive of the Company were not aware of any other person who had an interest or short position in the Shares or underlying Shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

32 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

USE OF PROCEEDS FROM LISTING

The Company was successfully listed on the Main Board of the Stock Exchange on September 23, 2020. After deducting underwriting fees, commissions and related expenses payable by the Company, the Company obtained the net proceeds from the Global Offering amounted to HK$1,498.83 million (including the net proceeds from partial exercise of the Overallotment Option). The utilization of proceeds from the Listing of the Group as of June 30, 2021 is analyzed as follows:

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Net proceeds
(including net
proceeds from
the exercise of Approximate Net proceeds Unutilized net
Intended applications of net proceeds as stated in the Over-allotment percentage of utilized as of proceeds as of Expected timeframe for
Prospectus Option) net proceeds June 30, 2021 June 30, 2021 unutilized net proceeds
(HK$ million) (%) (HK$ million) (HK$ million)
----- End of picture text -----

To develop our short-form video mobile new media
monetization business, the net proceeds:
(1) Will be used to invest in developing our self-owned	511.11	34.10%	416.52	94.59	over the next four years
user traffic;
(2) Will be used to expand our team;	61.45	4.10%	35.36	26.09	over the next four years
(3) Will be used to further develop our short-form	37.47	2.50%	–	37.47	over the next four years
video technology infrastructure;
(4) Will be used to procure high quality copyrights or	265.29	17.70%	198.94	66.35	over the next four years
ownership of high quality interactive entertainment
products or license-in high quality interactive
entertainment products; and
(5) Will be used to continuously develop and optimize	23.98	1.60%	22.52	1.46	over the next four years
our algorithms and data collection capabilities
to increase the effectiveness of recommendation
algorithms for short-form videos.

JOY SPREADER GROUP INC. 33 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

USE OF PROCEEDS FROM LISTING (Continued)

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To continue to strengthen our capabilities in
performance-based mobile new media marketing
services, the net proceeds:
(1) Will be used for potential investments in, or	106.42	7.10%	–	106.42	over the next four years
acquisitions of suitable licensed or large agents of
top mobile new media platforms;
(2) Will be used for upgrading and optimizing our	46.46	3.10%	–	46.46	over the next four years
technologies, platforms and algorithms;
(3) Will be used to expand our interactive	121.41	8.10%	–	121.41	over the next four years
entertainment products offerings; and
(4) Will be used to increase and diversify our	22.48	1.50%	–	22.48	over the next four years
collaboration with licensed or large agents of
popular mobile new media platforms in order to
capture high-quality mobile new media resources.
To finance our international expansion, the net
proceeds:
(1) Will be used to establish an overseas office in	61.45	4.10%	–	61.45	over the next four years
South Korea or countries in Southeast Asia and
to establish an international sales and marketing
team;
(2) Will be used for exploring potential investments	38.97	2.60%	–	38.97	over the next four years
and acquisitions, including talent trainee agency
companies with strong talent resources in South
Korea and Southeast Asia;

34 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

USE OF PROCEEDS FROM LISTING (Continued)

Intended applications of net proceeds as stated in the Prospectus	Net proceeds (including net proceeds from the exercise of Over-allotment Option)	Approximate percentage of net proceeds	Net proceeds utilized as of June 30, 2021	Unutilized net proceeds as of June 30, 2021 Expected timeframe for unutilized net proceeds
	(HK$ million)	(%)	(HK$ million)	(HK$ million)
(3) Will be used for procuring user traffic from overseas mobile new media platforms or their agents that provide traffic resources to extend our performance-based mobile new media marketing services to overseas platforms for both domestic marketers and foreign marketers that seek to market their products on overseas short-video platforms; and (4) Will be used to develop overseas versions of our technology platforms. For working capital and general corporate purposes Total	29.98 22.48 149.88 1,498.83	2.00% 1.50% 10.00% 100.00%	– – 82.97 756.31	29.98 over the next four years 22.48 over the next four years 66.91 over the next four years 742.52

PURCHASE, SALE OR REDEMPTION OF THE LISTED SECURITIES OF THE COMPANY

Neither the company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the six months ended June 30, 2021.

JOY SPREADER GROUP INC. 35 2021 INTERIM REPORT

CORPORATE GOVERNANCE AND OTHER INFORMATION

REVIEW OF INTERIM REPORT

The independent auditors of the Company, namely, Deloitte Touche Tohmatsu, have carried out a review of the interim financial information in accordance with the Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants.

The Audit Committee comprises three independent non-executive Directors, namely, Mr. Tang Wei, Mr. Xu Chong, and Mr. Yap Jin Meng Bryan. The chairman of the Audit Committee is Mr. Tang Wei. The Audit Committee has jointly reviewed with the management and the independent auditors of the Company the accounting principles and policies adopted by the Company and discussed internal control and financial reporting matters (including the review of the unaudited interim results for the six months ended June 30, 2021) of the Group. The Audit Committee considered that the interim results are in compliance with the applicable accounting standards, laws and regulations, and the Company has made appropriate disclosures thereof.

INTERIM DIVIDEND

The Board did not declare any interim dividend for the six months ended June 30, 2021 (for the six months ended June 30, 2020: Nil).

APPRECIATION

The Board would like to express its sincere gratitude to the shareholders, management team, employees, business partners and customers of the Group for their support and contribution to the Group.

By order of the Board Joy Spreader Group Inc. Zhu Zinan Chairman

Beijing, the PRC, August 30, 2021

36 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

REPORT ON REVIEW OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS OF JOY SPREADER GROUP INC. (FORMERLY KNOWN AS JOY SPREADER INTERACTIVE TECHNOLOGY. LTD)

(Incorporated in the Cayman Islands with limited liability)

Introduction

We have reviewed the condensed consolidated financial statements of Joy Spreader Group Inc. (formerly known as Joy Spreader Interactive Technology. Ltd) (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 38 to 56, which comprise the condensed consolidated statement of financial position as of 30 June 2021 and the related condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the six-month period then ended, and certain explanatory notes. The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) issued by the International Accounting Standards Board. The directors of the Company are responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with IAS 34. Our responsibility is to express a conclusion on these condensed consolidated financial statements based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” (“HKSRE 2410”) issued by the Hong Kong Institute of Certified Public Accountants. A review of these condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 30 August 2021

JOY SPREADER GROUP INC. 37 2021 INTERIM REPORT

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2021

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Six months ended 30 June
2021 2020
Notes HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Revenue 4 624,332 384,507
Cost of revenue (410,261) (280,155)
Gross profit 214,071 104,352
Other income 5,235 2,286
Other gains and losses 5 (30,695) (222)
Impairment losses under expected credit loss model,
net of reversal 6 (698) (12,509)
Distribution and selling expenses (24,248) (1,471)
Administrative expenses (25,550) (9,948)
Research and development expenses (29,902) (3,675)
Listing expenses 7 – (7,116)
Finance costs (552) (320)
Profit before taxation 8 107,661 71,377
Income tax expense 9 (240) (3,555)
Profit for the period attributable to owners of the Company 107,421 67,822
Other comprehensive income (expense)
Items that will not be reclassified to profit or loss:
Exchange differences on translation from functional
currency to presentation currency 25,102 (9,268)
Fair value gain on equity instruments at fair value through
other comprehensive income 71 11
Income tax relating to item that will not be reclassified (11) (2)
Other comprehensive income (expense) for the period,
net of income tax 25,162 (9,259)
Total comprehensive income for the period attributable
to owners of the Company 132,583 58,563
Basic and diluted earnings per share (HK cents) 11 4.92 4.16
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38 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

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As at 30 June As at 31 December
2021 2020
Notes HK$’000 HK$’000
(Unaudited) (Audited)
NON-CURRENT ASSETS
Property, plant and equipment 12 32,849 20,173
Right-of-use assets 15,840 18,732
Intangible assets 7,397 8,722
Deferred tax assets 1,297 1,300
Other deposits 14 2,823 2,791
Equity instruments at fair value through other
comprehensive income 13 38,367 37,862
98,573 89,580
CURRENT ASSETS
Trade and other receivables and deposits 14 407,217 332,345
Loan receivables 15 18,027 37,427
Prepayments 16 942,222 610,854
Financial assets at fair value through profit or loss 17 8,875 –
Bank balances and cash 901,720 1,210,447
2,278,061 2,191,073
CURRENT LIABILITIES
Trade and other payables 18 98,376 99,090
Lease liabilities 7,713 6,152
Income tax payable 1,810 986
107,899 106,228
NET CURRENT ASSETS 2,170,162 2,084,845
TOTAL ASSETS LESS CURRENT LIABILITIES 2,268,735 2,174,425
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JOY SPREADER GROUP INC. 39 2021 INTERIM REPORT

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2021

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As at 30 June As at 31 December
2021 2020
Notes HK$’000 HK$’000
(Unaudited) (Audited)
NON-CURRENT LIABILITIES
Lease liabilities 12,553 14,890
Deferred tax liabilities – 573
12,553 15,463
NET ASSETS 2,256,182 2,158,962
CAPITAL AND RESERVES
Share capital 19 22 22
Reserves 2,256,160 2,158,940
TOTAL EQUITY 2,256,182 2,158,962
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40 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2021

Share capital Treasury stocks Capital reserve Fair value through other comprehensive income reserve Statutory reserve funds Translation reserve Retained earnings Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note)	At 1 January 2021 (Audited) 22 – 1,745,119 21,073 33,034 78,130 281,584 2,158,962 Profit for the period – – – – – – 107,421 107,421 Changes in fair value of equity instruments – – – 60 – – – 60	Exchange difference on translation – – – – – 25,102 – 25,102	Profit and total	comprehensive income for the period – – – 60 – 25,102 107,421 132,583	Purchase of shares under Share Award Scheme (note) – (35,363) – – – – – (35,363) Appropriation of statutory reserve funds – – – – 134,015 – (134,015) –	At 30 June 2021 (Unaudited) 22 (35,363) 1,745,119 21,133 167,049 103,232 254,990 2,256,182		At 1 January 2020 (Audited) (Restated) 16 – 289,741 3,735 19,790 (19,957) 156,149 449,474	Profit for the period (Restated) – – – – – – 67,822 67,822	Changes in fair value of equity instruments (Restated) – – – 9 – – – 9	Exchange difference on translation (Restated) – – – – – (9,268) – (9,268)	Profit and total comprehensive income (expense)	for the period (Restated) – – – 9 – (9,268) 67,822 58,563	At 30 June 2020 (Unaudited) (Restated) 16 – 289,741 3,744 19,790 (29,225) 223,971 508,037	Note: The Company has adopted a share award scheme pursuant to the Board of directors (the “Board”) resolution of the Company dated 21 June 2021. Details of which are set out in note 20.

JOY SPREADER GROUP INC. 41 2021 INTERIM REPORT

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2021

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
OPERATING ACTIVITIES
Cash used in operations (244,658) (68,538)
–
Income tax paid (32)
Net cash used in operating activities (244,658) (68,570)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (12,889) (4,291)
Proceeds from disposal of prepayments for acquisition of buildings – 883
Purchase of financial assets at fair value through profit or loss (8,572) (133,883)
–
Redemption of financial assets at fair value through profit or loss 131,746
Repayment of loan receivables 19,400 33,158
Increase in loan receivables – (1,845)
–
Proceeds from disposal of intangible assets 2,208
–
Acquisition of a subsidiary (note 21) (1,128)
Interest received 2,578 369
Net cash (used in)/from investing activities (611) 28,345
FINANCING ACTIVITIES
Purchase of shares under share award scheme (35,363) –
Repayment of lease liabilities (3,432) (1,074)
Interest paid (552) (320)
Payment of share issue costs (13,366) (3,870)
Net cash used in financing activities (52,713) (5,264)
Net decrease in cash and cash equivalents (297,982) (45,489)
Cash and cash equivalents at beginning of the period 1,210,447 146,787
Effect of foreign exchange rate changes (10,745) (42)
Cash and cash equivalents at end of the period,
represented by bank balances and cash 901,720 101,256
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42 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

1. General Information

Joy Spreader Group Inc. (formerly known as Joy Spreader Interactive Technology. Ltd) (the “Company”) was incorporated and registered in the Cayman Islands on 19 February 2019 as an exempted company with limited liability under the Companies Law of the Cayman Islands and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The address of the Company’s registered office is located at the office of Sertus Incorporations (Cayman) Limited, Sertus Chambers Governors Square, Suite #5-204, 23 Lime Tree Bay Avenue P.O. Box 2547, Grand Cayman KY1-1104, Cayman Islands. The Company’s principal place of business is located at the People’s Republic of China (the “PRC”). The principal activities of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) are provision of digital marketing business and the relevant services.

On 30 June 2021, a special resolution was passed by the annual general meeting of the Company that the English name of the Company was changed from “Joy Spreader Interactive Technology. Ltd” to “Joy Spreader Group Inc.”, while the Chinese name of the Company was changed from “樂享互動有限公司” to “樂享集團有限公司” simultaneously, which was subject to and conditional upon the approval of the Registrar of Companies in the Cayman Islands by issuing a certificate of incorporation on change of name. On 7 July 2021, the Registrar of Companies in the Cayman Islands issued a certificate of incorporation on change of name to the Company.

The ultimate holding company and immediate holding company of the Company are ZZN. Ltd. and Laurence mate. Ltd., which were incorporated in the British Virgin Islands, and are ultimately controlled by Mr. Zhu Zinan, the chairman and chief executive officer of the Company.

The condensed consolidated financial statements are presented in HK$, which is different from the Company’s functional currency of RMB. The Directors adopted HK$ as presentation currency. For facilitating the reading of the consolidated financial statements of the Company by users and in view of the Group’s future internationalization strategy, the presentation currency of the Company was changed from RMB to HK$ during the last year, as the Company’s shares are listed on the Stock Exchange in September 2020. The comparative information has been restated to reflect the change in presentation currency to HK$ accordingly.

2. Basis of Preparation

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) issued by the International Accounting Standards Board (the “IASB”) as well as the applicable disclosure requirements of Appendix 16 to the Listing Rules.

JOY SPREADER GROUP INC. 43 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

3. Principal Accounting Policies

The condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments, which are measured at fair values, as appropriate.

The accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2021 are the same as those presented in the Group’s annual consolidated financial statements for the year ended 31 December 2020.

Application of amendments to International Financial Reporting Standards (“IFRSs”)

In the current interim period, the Group has applied the following amendments to IFRSs issued by the IASB, for the first time, which are mandatory effective for the annual periods beginning on or after 1 January 2021 for the preparation of the Group’s condensed consolidated financial statements:

Amendment to IFRS 16 Covid-19-Related Rent Concessions Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2

The application of the amendments to IFRSs in the current period has had no material impact on the Group’s financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

4. Revenue and Segmental Information

The Group is engaged in the provision of performance-based we-media marketing services for various types of products (including mobile applications, mobile games, online literature, branding and activities, etc.). Performancebased we-media promotion refers to the form of promotion which is displayed on we-media, which are mainly online accounts registered by their users having the traffic to publish internet content (including text, pictures, audio or games or video contents) to the public. The Group normally acquires the traffic of different online platforms from the suppliers (which are we-media publishers including WeChat official accounts and information flow platforms) and places the internet content provided by the customers in the appropriate we-media platforms (such as WeChat) which can target the interests of their subscribers.

44 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

4. Revenue and Segmental Information (Continued)

Disaggregation of revenue by the type of products promoted

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Interactive entertainment and other digital products marketing 495,124 349,634
E-commerce products marketing 129,208 33,539
–
Other products 1,334
624,332 384,507
Timing of revenue recognition
A point in time 624,332 384,507
----- End of picture text -----

Segment information

The Group has been operating in one reporting segment, being the performance-based we-media marketing service.

For the purpose of resources allocation and performance assessment, the Group’s chief executive officer, being the chief operating decision maker, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one reportable segment and no further analysis of this single segment is presented. In this regard, no segment information is presented.

Geographical information

The Group is located in the PRC and all of the Group’s revenue is generated from contracts with customers in the PRC based on where services are rendered, and all of the Group’s non-current assets are located in the PRC. Thus, no geographical information is presented.

JOY SPREADER GROUP INC. 45 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

5. Other Gains and Losses

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Loss on disposal of property, plant and equipment, net – 22
Foreign exchange losses, net 29,753 –
–
Gain from changes in fair value of financial assets at FVTPL (303)
Others 1,245 200
30,695 222
----- End of picture text -----

6. Impairment Losses Under Expected Credit Loss Model, Net of Reversal

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Net impairment losses recognised (reversed) in respect of:
trade receivables 997 12,751
other receivables (299) (242)
698 12,509
----- End of picture text -----

The basis of determining the inputs and assumptions and the estimation techniques used in the condensed consolidated financial statements for the six months ended 30 June 2021 are the same as those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2020.

As at 31 December 2019, the Group’s trade receivables from one of its customers amounting to HK$16.1 million was impaired by HK$4.7 million and the repayment date has been revised and scheduled to be fully repaid by the end of May 2020 in February 2020. As at 30 June 2020, none of such receivables were settled, and the Group had fully impaired the net carrying amount of such receivables amounting to HK$11.4 million during the six months ended 30 June 2020.

46 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

6. Impairment Losses Under Expected Credit Loss Model, Net of Reversal (Continued)

The Group issued a formal attorney letter to the customer on 22 May 2020 and initiated an arbitration proceeding in a PRC arbitration court on 17 November 2020. Up to the issuance date of these condensed consolidated financial statements, the Group was still under the process of arbitration and none of such receivables were settled.

7. Listing Expenses

The listing expenses represented the expenses that related to the initial public offering and listing of the shares of the Company on the Stock Exchange which was completed in September 2020, and were accrued according to the progress of the Listing.

8. Profit Before Taxation

Profit before taxation has been arrived at after charging the following items:

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Depreciation of property, plant and equipment 1,595 916
Depreciation of right-of-use assets 4,659 2,397
Amortisation of intangible assets (included in administrative expenses) 1,420 1,302
Total depreciation and amortisation 7,674 4,615
----- End of picture text -----

9. Income Tax Expense

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Current tax:
PRC Enterprise Income Tax 811 3,588
Deferred tax (571) (33)
240 3,555
----- End of picture text -----

JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

10. Dividends

No dividend were paid, declared or proposed during the interim period (six months ended 30 June 2020: nil). The Directors have determined that no dividend will be paid in respect of the current interim period (six months ended 30 June 2020: nil).

11. Earnings Per Share

The calculation of basic earnings per share attributable to the owners of the Company is based on the following data:

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Earnings
Profit for the period attributable to owners of the Company 107,421 67,822
Basic earnings per share (HK cents) 4.92 4.16
----- End of picture text -----

Number of shares

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----- Start of picture text -----

Six months ended 30 June
2021 2020
’000 ’000
(Unaudited) (Unaudited)
Weighted average number of ordinary shares for the purpose of
basic earnings per share 2,185,042 1,631,263
----- End of picture text -----

The number of ordinary shares for the purposes of calculating basic earnings per share for the last interim period has been adjusted for the effect of the Share Subdivision as explained in note 19 (note a).

The weighted average number of ordinary shares for the purpose of calculating basic earnings per share for the current interim period has been arrived at after deducting shares held by share award scheme trust as set out in note 20.

During the six months ended 30 June 2021 and 2020, there was no potential ordinary share outstanding with diluted impact.

12. Property, Plant and Equipment

During the six months ended 30 June 2021, the Group acquired property, plant and equipment with an aggregate amount of HK$14,017,000 (six months ended 30 June 2020: HK$4,291,000 (Restated)).

48 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

13. Equity Instruments at Fair Value through Other Comprehensive Income

Equity instruments at FVTOCI as at 30 June 2021 and 31 December 2020 represented the Group’s 19.916% equity interests in 北京影漪視界科技有限公司 (“Yingyi Technology”), an unlisted company established in the PRC. The Directors have elected to designate the investment in equity instruments at FVTOCI as they believe that the investment is not held for trading and not expected to be sold in the foreseeable future. Details of the fair value measurement are disclosed in note 22.

14. Trade and Other Receivables and Deposits

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----- Start of picture text -----

As at 30 June As at 31 December
2021 2020
HK$’000 HK$’000
(Unaudited) (Audited)
Trade receivables 396,008 320,874
Other receivables and deposits 14,032 14,262
Total trade and other receivables and deposits 410,040 335,136
Analysis as
Non-current 2,823 2,791
Current 407,217 332,345
410,040 335,136
----- End of picture text -----

The Group usually allows a credit period of 90 days to its customers which is interest free with no collateral.

Aging of trade receivables net of allowance for credit losses, is prepared based on invoice date, which approximated the respective revenue recognition date, are as follows:

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----- Start of picture text -----

As at 30 June As at 31 December
2021 2020
HK$’000 HK$’000
(Unaudited) (Audited)
Within 3 months 297,371 264,444
3-6 months 92,677 53,244
7-12 months 5,960 3,186
396,008 320,874
----- End of picture text -----

JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

15. Loan Receivables

Loan receivables as at 31 December 2020 represented an unsecured advance to Yingyi Technology originated on 11 February 2020 for Yingyi Technology’s liquidity purpose amounting to HK$1,782,000 and an unsecured advance to a third party (the “Third Party”) originated on 11 November 2020 for the third party’s liquidity purpose amounting to HK$35,645,000, the advance carried fixed interest rate at 12% and 6% per annum chargeable to Yingyi Technology and the Third Party, respectively.

Loan receivables as at 30 June 2021 represented an unsecured advance to the Third Party amounting to HK$18,027,000. During the six months ended 30 June 2021, the loan to Yingyi Technology amounting to HK$1,782,000 and the loan to the Third Party amounting to HK$17,618,000 were received.

16. Prepayments

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----- Start of picture text -----

As at 30 June As at 31 December
2021 2020
HK$’000 HK$’000
(Unaudited) (Audited)
Prepayments for purchases of traffic 934,554 609,369
Other prepayments 7,668 1,485
942,222 610,854
----- End of picture text -----

17. Financial Assets at Fair Value through Profit or Loss

Financial assets at FVTPL as at 30 June 2021 represented the Group’s investment in a private fund, through which the Group invested in JD Logistics, Inc., a company listed on the Stock Exchange. The Directors have measured the financial assets at FVTPL as they believe that the investment is held for trading and expected to be sold in the foreseeable future. Details of the fair value measurement are disclosed in note 22.

18. Trade and Other Payables

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----- Start of picture text -----

As at 30 June As at 31 December
2021 2020
HK$’000 HK$’000
(Unaudited) (Audited)
Trade payables 29,540 11,748
Employee compensation payable 9,187 8,799
Other tax payable 3,983 18,766
Accrued listing expense/share issue costs 34,691 52,513
Deposits received from customers 2,404 2,376
Other payables and accruals 18,571 4,888
98,376 99,090
----- End of picture text -----

50 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

18. Trade and Other Payables (Continued)

The following is an analysis of trade payables by age, presented based on the invoice date:

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----- Start of picture text -----

As at 30 June As at 31 December
2021 2020
HK$’000 HK$’000
(Unaudited) (Audited)
Within 3 months 22,592 5,555
3-6 months 4,963 2,469
7-12 months 1,985 2,218
–
1-2 years 1,506
29,540 11,748
----- End of picture text -----

The average credit period on purchases of goods or services is 90 days.

19. Share Capital

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----- Start of picture text -----

Number of shares Share capital
HK$
Ordinary shares of HK$0.001 each
Authorised
At 1 January 2020, 30 June 2020 50,000,000 50,000
Share subdivision into HK$0.00001 each (Note a) 4,950,000,000 –
At 31 December 2020, 30 June 2021 5,000,000,000 50,000
Issued and fully paid
At 1 January 2020, 30 June 2020 16,312,632 16,313
Share subdivision (Note a) 1,614,950,568 –
Issue of shares on 23 September 2020 (Note b) 543,700,000 5,437
Issue of shares on 28 October 2020 (Note c) 10,305,000 103
At 31 December 2020 2,185,268,200 21,853
–
Shares repurchased (Note 20) (11,495,000)
At 30 June 2021 2,173,773,200 21,853
----- End of picture text -----

JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

19. Share Capital (Continued)

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----- Start of picture text -----

As at 30 June As at 31 December
2021 2020
HK$’000 HK$’000
(Unaudited) (Audited)
Presented as 22 22
----- End of picture text -----

Notes:

a. On 26 August 2020, a written resolution was passed by the shareholders of the Company to approve the subdivision of each share of the Company’s issued and unissued share capital with par value of HK$0.001 each into 100 shares of the corresponding class with par value of HK$0.00001 each before the Listing (the “Share Subdivision”). According to the Share Subdivision, 1,614,950,568 shares were issued to existing shareholders of the Company in proportion to their shareholding in the Company before the Listing.
b. On 23 September 2020, 543,700,000 ordinary shares of the Company of HK$0.00001 each were issued at a price of HK$2.88 per share in connection with the Listing, raising a total gross proceed of HK$1,565,856,000.
c. On 28 October 2020, the Company elected to allot and issue a further 10,305,000 ordinary shares of HK$0.00001 each at a price of HK$2.88, raising a total gross proceed of HK$29,678,400.

20. Share Based Payment Transactions

The Company has adopted a share award scheme pursuant to the Board resolution of the Company dated 21 June 2021 (the “Share Award Scheme”).

Pursuant to the Share Award Scheme, the Company had contracted with a trustee (the “Trustee”) to establish a trust (the “Trust”) on 21 June 2021. The Board may from time to time during the effective period of the Share Award Scheme (a term of 10 years commencing on the adoption of this scheme or early terminated) contribute funds to the Trust and instruct the Trustee to purchase shares of the Company on the Stock Exchange. Shares purchased and held by the Trust are transferrable and have voting rights, however, the Trustee shall not exercise the voting rights. Shares will be granted to the selected directors, employees, consultants and advisers of the Group (the “Selected Participants”) pursuant to the terms and trust deed of the Share Award Scheme. Vesting of the shares granted to the Selected Participants is conditional upon the fulfilment of vesting conditions as specified by the Board. During the six months ended 30 June 2021, the Trustee purchased a total of 11,495,000 shares of the Company with a consideration of HK$35,363,000. The cost of the shares purchased was recognised in equity as treasury stocks. During the six months ended 30 June 2021, no participant was selected as the Selected Participants, thus no share had been granted and 11,495,000 shares of the Company were held by the Trustee as at 30 June 2021.

52 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

21. Acquisition of Assets Through Acquisition of a Subsidiary

In March 2021, the Group acquired 100% of the equity interest in Beijing Anxin Teling Biotechnology Limited (“Beijing Anxin”) from an independent third party for a consideration of HK$1,194,000. The acquisition was accounted for as acquisition of assets as Beijing Anxin has not carried any business so far.

Consideration transferred

	HK$’000
Cash Assets acquired and liabilities recognised at the date of acquisition are as follows:	1,194
	HK$’000
Bank balances and cash Property, plant and equipment Net cash outflow on acquisition of Beijing Anxin	66 1,128 1,194
	HK$’000
Cash consideration paid Less: cash and cash equivalents balances acquired	1,194 66 1,128

JOY SPREADER GROUP INC. 53 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

22. Fair Value Measurements of Financial Instruments

(i) Financial instruments carried at fair value

The Group measures its following financial instruments at fair value as at 30 June 2021 on a recurring basis:

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----- Start of picture text -----

Fair value Significant Range of inputs Relationship of
as at 30 June Fair value Valuation technique(s) unobservable as at 30 June unobservable
Financial assets 2021 hierarchy and key input(s) input(s) 2021 inputs to fair value
(Unaudited)
Unlisted equity HK$38,367,000 Level 3 Income approach the discounted Long-term revenue 2.5% The higher the long-term
securities cash flow method was used to growth rate revenue growth rate, the
capture the present value of higher the fair value vice
the expected future economic versa (Note a)
benefits, to be derived from
the ownership of this investee, Discount rate 19% The higher the discount rate,
based on an appropriate the lower the fair value, vice
discount rate versa (Note b)
Investment in HK$8,875,000 Level 1 Quoted bid prices in an active N/A N/A N/A
private fund market
Fair value Valuation Significant Range of inputs Relationship of
as at 31 December Fair value technique(s) and unobservable as at 31 December unobservable
Financial assets 2020 hierarchy key input(s) input(s) 2020 inputs to fair value
(Audited)
Unlisted equity HK$37,862,000 Level 2 Recent transaction price N/A N/A N/A
securities
Notes:
----- End of picture text -----

a. A 1% increase/decrease in the long-term growth rate holding all other variables constant would increase/decrease the carrying amount of unlisted equity securities by HK$1,227,000 as at 30 June 2021.
b. A 1% increase/decrease in the discount rate holding all other variables constant would decrease/increase the carrying amount of unlisted equity securities by HK$1,087,000 as at 30 June 2021.

54 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

22. Fair Value Measurements of Financial Instruments (Continued)

(i) Financial instruments carried at fair value (Continued)

The unlisted equity securities represent equity instruments at FVTOCI of the Group (see note 13). As there was no equity transaction of Yingyi Technology happened during the current interim period, the Company could not get available recent transaction price information in the market to determine the fair value of Yingyi Technology as at 30 June 2021. As a result, these equity instruments were transferred from level 2 to level 3 during six months ended 30 June 2021.

The fair value of the unlisted equity securities as at 30 June 2021, 30 June 2020 and 1 January 2020 have been arrived based on a valuation carried out by an independent valuer.

The investment in private fund represents financial assets at FVTPL of the Group (see note 17). The fair value of the investment as at 30 June 2021 was determined based on a published price quotation on the Stock Exchange and was classified as level 1 of the fair value hierarchy.

(ii) Reconciliation of level 3 measurements

The following table represents the reconciliation of level 3 measurements throughout the interim period.

		Unlisted equity securities
		HK$’000
At 1 January 2021 (Audited) Transfer from level 2 to level 3 Net gain in other comprehensive income Exchange realignment At 30 June 2021 (Unaudited)		– 37,862 71 434 38,367

JOY SPREADER GROUP INC. 55 2021 INTERIM REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2021

22. Fair Value Measurements of Financial Instruments (Continued)

(ii) Reconciliation of level 3 measurements (Continued)

		Investment in financial products at fair value	Unlisted equity securities	Total
		HK$’000	HK$’000	HK$’000
At 1 January 2020 (Audited) (Restated) Purchase (Restated) Redemption (Restated) Interest income on financial assets as FVTPL (Restated) Net gain in other comprehensive income (Restated) Exchange realignment (Restated) At 30 June 2020 (Unaudited) (Restated)		– 133,883 (131,746) 333 – (2,470) –	11,092 – – – 11 (214) 10,889	11,092 133,883 (131,746) 333 11 (2,684) 10,889

(iii) Fair values of financial instruments carried at other than fair value

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the condensed consolidated financial statements approximate their fair values.

23. Related Party Transactions

Compensation of key management personnel

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----- Start of picture text -----

Six months ended 30 June
2021 2020
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Restated)
Fee 257 34
Salaries and other benefits-in-kind 2,370 505
Contributions to retirement benefits scheme 155 21
Discretionary bonus 1,016 553
3,798 1,113
----- End of picture text -----

56 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

DEFINITIONS

“app” “Audit Committee” “1P traffic” “Award” “Award Share(s)” “Beijing Joyspreader” “Beijing Zinan and Friends” “Board” “CG Code” “Chairman”

“China”, “Mainland China” or “the PRC” “Concert Party Agreement” “Consolidated Affiliated Entities”

“Contractual Arrangements”

“DSP”

mobile application

the audit committee of the Board

first-party traffic, the traffic generated by the private domain platform itself, or the traffic that is transferred to the private domain platform and retained through other platforms, media channels, partners and etc.

an award granted by the Board to a Selected Participant in accordance with the terms of the rules of the share award scheme adopted by the Company on June 21, 2021

the Shares granted to a Selected Participant under the share award scheme adopted by the Company on June 21, 2021

Beijing Joy Spreader Interactive Network Technology Co., Ltd (北京樂享互動網絡科技股份有限公司), a company established under the laws of the PRC with limited liability on October 9, 2008, and by virtue of the Contractual Arrangements, accounted for as our subsidiary

Beijing Zinan and his Friends Cultural Centre (Limited Partnership) (北京子南和他的小夥伴們文化中心（有限合夥)), a limited partnership set up under the laws of the PRC on July 6, 2016 which is directly owned as to 90% by Mr. Zhu and 10% by Mr. Zhang

the board of Directors

the Corporate Governance Code as set out in Appendix 14 to the Listing Rules

the Chairman of the Board

the People’s Republic of China, excluding, for the purpose of this interim report, Hong Kong, Macau Special Administrative Region and Taiwan

the acting-in-concert agreement entered into between Mr. Zhu and Mr. Zhang on April 1, 2016 and renewed on December 11, 2019

the entities we control through the Contractual Arrangements, namely Beijing Joyspreader and its subsidiaries

the series of contractual arrangements entered into by, among others, WFOE, Beijing Joyspreader and the Registered Shareholders

demand side platform

JOY SPREADER GROUP INC. 2021 INTERIM REPORT

DEFINITIONS

“Director(s)” the director(s) of the Company “FVTPL” fair value through profit or loss “FVTOCI” fair value through other comprehensive income “Group”, “the Group”, the Company, its subsidiaries and the consolidated affiliated entities at the “we” or “us” relevant time or, where the context so requires, in respect of the period before our Company became the holding company of its present subsidiaries, the subsidiaries of our Company or the businesses operated by its present subsidiaries (as the case may be) “GMV” Gross Merchandise Volume “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Hong Kong dollars” or “HK$” Hong Kong dollars, the lawful currency of Hong Kong “United States dollars” or “US$” United States dollars, the lawful currency of the United States. “Joy Spreader”, “Company”, Joy Spreader Group Inc. (樂享集團有限公司) (formerly known as Joy Spreader or “We” Interactive Technology. Ltd (樂享互動有限公司)), a company incorporated in the Cayman Islands on February 19, 2019 as an exempted company with limited liability “Listing” the listing of the Shares on the Main Board of the Stock Exchange on September 23, 2020 “Listing Date” September 23, 2020, being the date on which the Shares were listed on the Main Board “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange, as amended or supplemented from time to time “Main Board” the Main Board of the Stock Exchange “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules

58 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

DEFINITIONS

“Nanjing Pingheng Capital” Nanjing Balance Capital Management Centre (General Partnership) (南京平衡資本管理中心（普通合夥)), a general partnership set up under the laws of the PRC on March 6, 2013 “Nantong Pinghengchuangye” Nantong Pinghengchuangye Venture Capital Investment Centre (Limited Partnership) (南通平衡創業投資基金中心（有限合夥)), a limited partnership set up under the laws of the PRC on June 11, 2015 “Mr. Zhang” Mr. Zhang Zhidi (張之的), our executive Director, general manager and one of our Controlling Shareholders “Mr. Zhu” Mr. Zhu Zinan (朱子南), chairman of the Board, executive Director, chief executive officer and one of our Controlling Shareholders “Over-allotment Option” has the meaning ascribed thereto in the Prospectus “Prospectus” the prospectus issued by the Company dated September 10, 2020 “Reference Date“ in respect to Selected Participant(s), the date of final approval by the Board of the amount for the purchase of Shares pursuant to the share award scheme adopted by the Company on June 21, 2021 “Registered Shareholder(s)” b e i n g M r . Z h u , S h e n z h e n N a n h a i C h e n g z h a n g t o n g y i n g , N a n t o n g Pinghengchuangye, Beijing Zinan and Friends, Jiaxing Baozheng Investment Partnership Enterprise (Limited Partnership)(嘉興寶正投資合夥企業(有限合夥)), 嘉興寶正投資合夥企業(有限合夥)), (有限合夥)), 有限合夥)), )), Daoyoudao Technology Group Co., Ltd. (道有道科技集團股份公司，formerly known 道有道科技集團股份公司，formerly known formerly known as 道有道(北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen 道有道(北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen (北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen 北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen )科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen 科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen ), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen Liang, Shanghai Jinjia Asset Management Co., Ltd. (上海今嘉資產管理有限公司), 上海今嘉資產管理有限公司), ), Mr. Guo Zhiwei, Ms. Zhang Yue, Ms. Zhang Wenyan, Ms. Xue Xiaoli, Ms. Zhu Xifen, Mr. Xiong Chi and Ms. Huang Huijuan, who are shareholders of Beijing Joyspreader “Renminbi” or “RMB” Renminbi Yuan, the lawful currency of China “Reporting Period” the six months period from January 1, 2021 to June 30, 2021 “SaaS” Software as a Service “Scheme Shares” shares eligible to be granted as Award Shares in accordance with the terms of the Scheme as determined by the Board “Selected Participant(s)” eligible participant(s) selected by the Board to participate in the share award scheme adopted by the Company on June 21, 2021

in respect to Selected Participant(s), the date of final approval by the Board of the amount for the purchase of Shares pursuant to the share award scheme adopted by the Company on June 21, 2021

b e i n g M r . Z h u , S h e n z h e n N a n h a i C h e n g z h a n g t o n g y i n g , N a n t o n g Pinghengchuangye, Beijing Zinan and Friends, Jiaxing Baozheng Investment Partnership Enterprise (Limited Partnership)(嘉興寶正投資合夥企業(有限合夥)), 嘉興寶正投資合夥企業(有限合夥)), (有限合夥)), 有限合夥)), )), Daoyoudao Technology Group Co., Ltd. (道有道科技集團股份公司，formerly known 道有道科技集團股份公司，formerly known formerly known as 道有道(北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen 道有道(北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen (北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen 北京)科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen )科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen 科技股份有限公司), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen ), Nanjing Pingheng Capital, Mr. Zhang, Mr. Chen Liang, Shanghai Jinjia Asset Management Co., Ltd. (上海今嘉資產管理有限公司), 上海今嘉資產管理有限公司), ), Mr. Guo Zhiwei, Ms. Zhang Yue, Ms. Zhang Wenyan, Ms. Xue Xiaoli, Ms. Zhu Xifen, Mr. Xiong Chi and Ms. Huang Huijuan, who are shareholders of Beijing Joyspreader

shares eligible to be granted as Award Shares in accordance with the terms of the Scheme as determined by the Board

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

JOY SPREADER GROUP INC. 59 2021 INTERIM REPORT

DEFINITIONS

“Shareholder(s)” holder(s) of Shares “Share(s)” ordinary shares in the share capital of the Company with the nominal value of HK$0.00001 each “Shenzhen Nanhai Shenzhen Nanhai Growth Win-win Private Equity Investment Fund (Limited Chengzhangtongying” Partnership) (深圳南海成長同贏股權投資基金（有限合夥)), a limited partnership set up under the laws of the PRC on July 20, 2017 “SSP” supply side platform “Stock Exchange” The Stock Exchange of Hong Kong Limited “Trust” the trust constituted by the Trust Deed to serve the Scheme “Trust Deed” the trust deed entered into by the Company and the Trustees (as may be restated, supplemented and amended from time to time) “Trustee” the trustee (which is independent of and not a connected person of the Company) appointed by the Company for the administration of the share award scheme adopted by the Company on June 21, 2021 or any additional or replacement trustee(s) “Vesting Date” the date or dates on which the Award (or part thereof) is to be vested in the relevant Selected Participant(s) “WFOE” Beijing Joy Spreader Interactive Technology Co., Ltd (北京樂享互動科技有限公司 a limited liability company established in the PRC on May 22, 2019 and a whollyowned subsidiary of us

In this Report, the terms “associate”, “connected person”, “controlling shareholder” and “subsidiary” shall have the meanings given to such terms in the Listing Rules, unless the context otherwise requires.

60 JOY SPREADER GROUP INC. 2021 INTERIM REPORT

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Joy Spreader Group Inc. — Interim / Quarterly Report 2021

51106_rns_2021-09-29_d5cd5062-d07e-4757-a98e-2016688e4a79.pdf

CORPORATE INFORMATION

BOARD OF DIRECTORS

REGISTERED OFFICE

Executive Directors

Non-executive Directors

Independent Non-executive Directors

AUDIT COMMITTEE

COMPANY’S HEADQUARTERS IN THE

PRC

PRINCIPAL PLACE OF BUSINESS IN

HONG KONG

PRINCIPAL SHARE REGISTRAR AND T R A N S F E R O F F I C E I N C A Y M A N ISLANDS

REMUNERATION COMMITTEE

NOMINATION COMMITTEE

AUTHORISED REPRESENTATIVES

AUDITOR

JOINT COMPANY SECRETARIES

COMPLIANCE ADVISOR

HONG KONG LEGAL ADVISOR

INVESTOR RELATIONS

WEBSITE

STOCK CODE

HONG KONG SHARE REGISTRAR

FINANCIAL HIGHLIGHTS

FINANCIAL RESULTS HIGHLIGHTS

INFORMATION HIGHLIGHTS ON OPERATIONS

CORPORATE PROFILE

OVERVIEW

OUR BUSINESS

(II) Demand Side Platform (“DSP”) Service: Product Profiling and Intelligent Account Selection

(III) Matching Transactions

CORPORATE PROFILE

OUR REVENUE MODELS

(I) Cost Per Sale (CPS) Model

(i) Matching transactions turnover

(a) Number of active marketing points

(b) Turnover per marketing point

(ii) Agreed profit-sharing ratio

(II) Cost Per Action (CPA) Model

CORPORATE PROFILE

DATA SECURITY AND PRIVACY PROTECTION

OUR TECHNOLOGIES

OUR STRENGTHS AND BARRIERS

(I) Rapid Development of Industry

CORPORATE PROFILE

(IV) First-mover Advantages and Barriers of Data and Model Algorithm

(V) Synergy Strengths of SSP service and DSP service

(VI) Service Capabilities of Cross-platform, Multi-product and Performance-based charging

(VII) License Advantages and Barriers

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

• OVERVIEW OF RESULTS FOR THE FIRST HALF OF 2021

MANAGEMENT DISCUSSION AND ANALYSIS

• E-Commerce Product Performance-based Marketing Services

• Progress on Research & Development

STRATEGIC LAYOUT FOR THE SECOND HALF OF 2021 AND IN THE FUTURE

• VIGOROUS EXPANSION OF OVERSEAS INTEREST E-COMMERCE BUSINESS BASED ON SHORTFORM VIDEO CONTENT

• MULTI-CHANNEL LAYOUT OF 1P (1[st] -PARTY) TRAFFIC

• CONTINUOUS OPTIMIZATION OF DATA ALGORITHM PLATFORM AND MAINTAIN R&D INVESTMENTS

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

Revenue

Cost of Revenue

Gross Profit and Gross Profit Margin

MANAGEMENT DISCUSSION AND ANALYSIS

Other Income

Other Gains and Losses

Distribution and Selling Expenses

Administrative Expenses

Research and Development Expenses

Finance Costs

Profit for the Reporting Period

Trade and Other Receivables and Deposits

Loan Receivables

MANAGEMENT DISCUSSION AND ANALYSIS

Prepayments

Equity Instruments at Fair Value through Other Comprehensive Income

Joy Spreader Group Inc. Interim / Quarterly Report 2021