Cheer Holding, Inc. current report, Q2 FY2021

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Filing Overview

Glory Star New Media Group Holdings Limited, now identified in the request as Cheer Holding, Inc., filed a Form 6-K for May 2021 on May 25, 2021. The filing addresses the non-reliance and planned restatement of previously issued financial statements following updated SEC guidance on SPAC warrants.

Financial Reporting Impact

  • Management and the audit committee concluded that previously issued financial statements for the year ended December 31, 2020, the quarter ended March 31, 2020, and the three and six months ended June 30, 2020 should no longer be relied upon.
  • The affected reports include the 2020 Form 20-F, the March 31, 2020 interim Form 10-Q, and the June 30, 2020 interim Form 6-K.
  • The company expects to restate its historical financial statements to reclassify private placement warrants from equity to liabilities.
  • Subsequent changes in the fair value of those warrants will be recognized in the consolidated statement of operations, potentially creating non-cash gains or losses.
  • The filing does not provide clear revised amounts for assets, liabilities, equity, earnings, cash flow, margins, debt, liquidity, or the expected quantitative effect of the restatement.

Reason for Restatement

The SEC’s April 12, 2021 staff statement clarified that certain SPAC-related warrants may require liability classification and fair-value accounting under ASC 815. After reevaluating the warrants issued in connection with the business combination with TKK Symphony Acquisition Corporation and the February 14, 2020 reverse recapitalization, the company determined that the private placement warrants were not indexed to its own stock and did not qualify for equity classification.

Outlook, Risks, and Unusual Items

  • The company intends to file Amendment No. 1 to its 2020 Form 20-F as soon as practicable.
  • The expected impact remains preliminary and may change materially as management completes the restatement and the independent auditor completes its audit.
  • The filing identifies a material weakness in internal control over financial reporting and discusses planned remediation.
  • Key risks include completion of the audit, remediation of the material weakness, changes to the restated financial statements, and the effect of warrant fair-value changes on reported earnings.
  • The filing contains forward-looking statements and cautions that actual results may differ materially from expectations.

Investor Verification Checklist

  1. Verify the final amended 2020 Form 20-F and the quantitative effect of the warrant reclassification.
  2. Review restated liabilities, equity, net income or loss, retained earnings, and per-share amounts for all affected periods.
  3. Assess the recurring earnings volatility that may result from fair-value changes in the warrant liability.
  4. Confirm whether the material weakness has been remediated and whether the auditor has completed its review.
  5. Reconcile the company name and corporate identity, as the filing uses Glory Star New Media Group Holdings Limited while the request identifies Cheer Holding, Inc.