Business context and reporting period
This is a Form 10-K for the fiscal year ended December 31, 2019, filed March 31, 2020. The filing identifies the registrant as Glory Star New Media Group Holdings Limited, formerly TKK Symphony Acquisition Corporation; it does not identify the company as Cheer Holding, Inc. The filing’s audited financial statements and MD&A cover TKK, the pre-combination blank-check company—not Glory Star’s operating business. Glory Star’s 2018–2019 financial statements and operating-company MD&A are referenced in a separate Form 8-K/A filed March 31, 2020, and are not included in the supplied text.
Glory Star provides advertising and content production services and operates the CHEERS App, combining video, live streaming, e-commerce and games in China. The business combination closed February 14, 2020 and was accounted for as a reverse merger, with Glory Star as accounting acquirer.
Financial and operating metrics
| Metric | 2019 | 2018 comparison |
|---|---|---|
| TKK net income | $3.28 million | $1.61 million |
| TKK operating costs | $2.35 million | $0.28 million |
| Trust-account interest income | $5.61 million | $1.95 million |
| Cash used in operating activities | $1.72 million | $0.37 million |
| Cash outside trust at year-end | $34,527 | $406,994 |
| Trust-account marketable securities | $257.52 million | $251.89 million |
| Total liabilities | $1.93 million | $23,790 |
TKK’s income was primarily trust-account interest, not operating revenue; it reported no operating revenue. Its 2019 operating cash use and net income therefore do not measure Glory Star’s operating performance. The filing text does not provide Glory Star’s 2019 revenue, profit, cash flow, margins, debt, or liquidity values clearly; those metrics require the separately referenced filing.
For Glory Star’s operations, CHEERS App downloads were approximately 72.5 million in 2019 versus 6.2 million in 2018; cumulative downloads reached more than 85 million at year-end 2019, compared with more than 12 million a year earlier. The e-Mall, launched in April 2019, reported 2019 GMV of RMB133.76 million (about $19.36 million), including December GMV of RMB33.73 million (about $4.82 million). GMV is merchandise transaction volume, not company revenue. By February 28, 2020, the company said its proprietary video content had generated more than 7.5 billion cumulative views.
Material changes and significant transactions
- The 2020 business combination issued approximately 41.2 million closing-payment shares; 2.06 million were placed in escrow. Sellers could receive up to 5 million additional shares for 2019 targets and another 5 million for 2020 targets, subject to performance conditions. Management said it believed the 2019 target had been met; the filing does not establish final earnout issuance.
- Immediately after the combination, sellers held approximately 82.79% of the company, former TKK directors, officers, initial shareholders and EBC approximately 12.16%, and public shareholders approximately 5.05%.
- In the tender offer completed February 13, 2020, approximately 24.99 million shares were tendered at about $10.31 per share. Approximately $257.72 million of trust funds repurchased shares; $142,764 paid transaction fees and expenses.
- Post-combination financing included a $4.0 million, one-year, interest-free EBC convertible note and a $1.4 million amended sponsor note. Both convert into shares under stated terms; the sponsor note has a $5.00 conversion-price floor. The EBC floor may decrease if the required resale registration statement is not effective by the deadline.
Outlook, risks and unusual items
- Management said Glory Star anticipated needing approximately $75 million for working capital over the next 12 months. The supplied filing does not provide the operating-company cash, forecast, or financing plan needed to assess this need against available liquidity.
- COVID-19 travel restrictions, quarantines and staffing constraints disrupted Beijing operations and delayed the audit and filing. The company said the pandemic’s ultimate operational and financial impact was uncertain and could be significant.
- Key structural risk: substantially all PRC operations are conducted through VIE contractual arrangements rather than direct ownership. Their enforceability, regulatory treatment and the company’s ability to control the VIEs and receive their economic benefits are uncertain.
- Other material risks include extensive PRC regulation of media, advertising, e-commerce and foreign investment; content and data-privacy compliance; competition and the cost of producing popular content; collection of receivables; foreign-exchange and cash-remittance restrictions; and dependence on third-party platforms and advertising customers.
- The company disclosed material weaknesses in Glory Star’s financial-reporting resources before the combination: no CFO and limited SEC/U.S. GAAP expertise, with reliance on outside consultants. TKK’s own controls were assessed as effective, but that assessment does not resolve the operating company’s disclosed weaknesses. The filing was not accompanied by an auditor attestation on internal controls.
- Glory Star reported no material pending legal proceedings to management’s knowledge, but said it did not maintain property, business-interruption or key-person insurance. It did not expect to pay cash dividends in the foreseeable future.
Important facts for investors to verify
- Confirm the issuer identity and obtain the referenced March 31, 2020 Form 8-K/A for Glory Star’s audited operating-company financial statements and MD&A; the supplied 10-K’s audited figures are TKK’s.
- Reconcile Glory Star’s 2019 revenue, earnings, operating cash flow, balance sheet, debt and working-capital requirement, including the stated $75 million funding need.
- Verify whether the 2019 and 2020 earnout conditions were met, the resulting share issuance, and dilution from the EBC and sponsor convertible notes.
- Assess post-tender liquidity and the availability of PRC cash to the offshore holding company, including foreign-exchange, dividend and VIE-contract constraints.
- Review COVID-19 effects, the remediation of financial-reporting weaknesses, VIE legal/regulatory exposure, and compliance with Nasdaq listing requirements.