Cheer Holding, Inc 6-K, filed Aug 10, 2023
Cheer Holding, Inc. (CHR)
About this 6-K
Cheer Holding, Inc filed this 6-K on August 10, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August
Commission File Number:
22F, Block B, Xinhua Technology Building,
No. 8 Tuofangying South Road,
Jiuxianqiao, Chaoyang District, Beijing, China 100016
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Explanatory Note
Glory Star New Media Group Holdings Limited (the “Company”) is furnishing this Form 6-K to provide its six-month interim financial statements and to incorporate such financial statements into the Company’s registration statements referenced below
This Form 6-K and Exhibits 99.1 and 99.2 attached hereto shall be deemed to be incorporated by reference into the Company’s registration statements on Form S-8 (File No. 333-237788) and on Form F-3 (File No. 333-248554), to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
Exhibit Index
| Exhibit No. | Exhibit Description | |
| 99.1 | Unaudited Interim Consolidated Financial Statements for the Six Months Ended June 30, 2023 and 2022. | |
| 99.2 | Operating and Financial Review and Prospectus in connection with the Unaudited Interim Consolidated Financial Statements for the Six Months Ended June 30, 2023 and 2022. | |
| 99.3 | Press Release - Glory Star Reports First Half Year 2023 Unaudited Financial Results | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Glory Star New Media Group Holdings Limited | ||
| By: | /s/ Bing Zhang | |
| Name: | Bing Zhang | |
| Title: | Chief Executive Officer | |
| Dated: August 10, 2023 | ||
2
Exhibit 99.1
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars in thousands, except share and per share data)
June 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepayment and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Deferred tax assets | ||||||||
| Unamortized produced content, net | ||||||||
| Right-of-use assets | ||||||||
| Prepayment and other non-current assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Accounts payable | ||||||||
| Advances from customers | ||||||||
| Due to a related party | ||||||||
| Accrued liabilities and other payables | ||||||||
| Other taxes payable | ||||||||
| Lease liabilities current | ||||||||
| Total current liabilities | ||||||||
| Lease liabilities non-current | ||||||||
| Warrant liability | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Equity | ||||||||
| Preferred shares (par value of $ | $ | $ | ||||||
| Ordinary shares (par value of $ | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| TOTAL GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED SHAREHOLDERS’ EQUITY | ||||||||
| Non-controlling interest | ||||||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE (LOSS) INCOME
(In U.S. dollars in thousands, except share and per share data)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | $ | $ | ||||||
| Operating expenses: | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Selling and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Research and development | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Income from operations | ||||||||
| Other (expenses) income: | ||||||||
| Interest income (expense), net | ( | ) | ||||||
| Change in fair value of warrant liability | ||||||||
| Other income, net | ||||||||
| Total other income | ||||||||
| Income before income tax | ||||||||
| Income tax (expenses) benefits | ( | ) | ||||||
| Net income | ||||||||
| Less: net gain (loss) attributable to non-controlling interest | ( | ) | ||||||
| Net income attributable to Glory Star New Media Group Holdings Limited’s shareholders | $ | $ | ||||||
| Other comprehensive loss | ||||||||
| Unrealized foreign currency translation loss | ( | ) | ( | ) | ||||
| Comprehensive (loss) income | ( | ) | ||||||
| Less: comprehensive loss attributable to non-controlling interests | ( | ) | ||||||
| Comprehensive (loss) income attributable to Glory Star New Media Group Holdings Limited’s shareholders | $ | ( | ) | $ | ||||
| Earnings per ordinary share | ||||||||
| $ | $ | |||||||
| Weighted average shares used in calculating earnings per ordinary share | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In U.S. dollars in thousands, except share and per share data)
| Ordinary shares | Additional paid-in | Retained | Statutory | Accumulated other comprehensive | Total shareholders’ | Non- controlling | Total | |||||||||||||||||||||||||||||
| Shares | Amount | capital | earnings | reserve | income (loss) | equity | interests | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | ||||||||||||||||||||||||||||||||||||
| Contribution from shareholder | ||||||||||||||||||||||||||||||||||||
| Shares-based compensation granted to employees | ||||||||||||||||||||||||||||||||||||
| Appropriation to statutory reserve | ( | ) | ||||||||||||||||||||||||||||||||||
| Net income | - | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance, Dec 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares in connection with a private placement | ||||||||||||||||||||||||||||||||||||
| Contribution from shareholder | - | |||||||||||||||||||||||||||||||||||
| Net income for the year | - | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars in thousands)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Loans made to a third party | ( | ) | ||||||
| Prepayments for acquisition of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of ordinary shares in connection with a private placement | ||||||||
| Proceeds from bank loans | ||||||||
| Repayments of bank loans | ( | ) | ( | ) | ||||
| Payment of loan origination fees | ( | ) | ( | ) | ||||
| Borrowings from a related party | ||||||||
| Contribution from shareholders | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, at beginning of period | ||||||||
| Cash and cash equivalents, at end of period | $ | |||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interests paid | $ | $ | ||||||
| Lease liabilities arising from obtaining right-of-use assets | $ | $ | ||||||
| Change in fair value of warrant liabilities | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
4
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Glory Star New Media Group Limited (“Glory Star” or the “Company”) is an exempted company incorporated on November 30, 2018, under the laws of the Cayman Islands. Glory Star, through its subsidiaries, the VIE and the VIE’s subsidiaries, provides advertisement and content production services and operate a leading mobile and online advertising, media and entertainment business in China.
| Date of incorporation | Place of incorporation | Percentage of legal/beneficial ownership by the Company | Principal activities | |||||||
| Subsidiaries: | ||||||||||
| Glory Star New Media Group HK Limited (“Glory Star HK”) | 2018 | % | ||||||||
| Glory Star New Media (Beijing) Technology Co., Ltd. (“WFOE”) | 2019 | % | ||||||||
| VIEs: | ||||||||||
| Xing Cui Can International Media (Beijing) Co., Ltd. (“Xing Cui Can”) | 2016 | % | ||||||||
| Horgos Glory Star Media Co., Ltd. (“Horgos”) | 2016 | % | Operating | |||||||
| VIEs’ subsidiaries | ||||||||||
| Glory Star Media (Beijing) Co., Ltd. (“Glory Star Beijing”) | 2016 | % | Operating | |||||||
| Leshare Star (Beijing) Technology Co., Ltd. (“Beijing Leshare”) | 2016 | % | Operating | |||||||
| Shenzhen Leshare Investment Co., Ltd. (“Shenzhen Leshare”) | 2018 | % | Operating | |||||||
| Horgos Glary Prosperity Culture Co., Ltd. (“Glary Prosperity”) | 2017 | % | Operating | |||||||
| Horgos Glary Prosperity Culture Co., Ltd, Beijing Branch (“Glary Prosperity BJ”) | 2018 | % | Operating | |||||||
| Glory Star (Horgos) Media Technology Co., Ltd (“Horgos Technology”) | September 20, 20220 | % | Operating | |||||||
5
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2022 filed on March 23, 2023.
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Group believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2022. The results of operations for the six months ended June 30, 2022 and 2023 are not necessarily indicative of the results for the full years.
Financial statement amounts and balances of the VIEs and the VIEs’ subsidiaries
Total assets and liabilities presented on the
Company’s unaudited condensed consolidated balance sheets and revenue, expense, net income presented on the Company’s unaudited
condensed consolidated statements of income as well as the cash flow from operating, investing and financing activities presented on the
unaudited condensed consolidated statements of cash flows are substantially the financial position, operation and cash flow of the VIEs
and the VIEs’ subsidiaries. Glory Star has not provided any financial support to the VIEs and the VIEs’ subsidiaries for the
six months ended June 30, 2022 and 2023.
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Total assets | $ | $ | ||||||
| Total liabilities | $ | $ | ||||||
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Total revenues | $ | $ | ||||||
| Net income | $ | $ | ||||||
| Net cash provided by (used in) operating activities | $ | $ | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| Net cash provided by financing activities | $ | $ | ||||||
The VIEs and the VIEs’ subsidiaries contributed
There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, the Company has provided and will continue to provide financial support to the VIEs considering the business requirements of the VIEs, as well as the Company’s own business objectives in the future.
There are no assets held in the VIEs and the VIEs’ subsidiaries that can be used only to settle obligations of the VIEs and the VIEs’ subsidiaries, except for registered capital and the PRC statutory reserves. As the VIEs and the VIEs’ subsidiaries are incorporated as a limited liability company under the PRC Company Law, creditors of the VIEs and the VIEs’ subsidiaries do not have recourse to the general credit of the Company for any of the liabilities of the VIEs and the VIEs’ subsidiaries. Relevant PRC laws and regulations restrict the VIEs and the VIEs’ subsidiaries from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.
6
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Accounts receivable, net
Accounts receivable represent the amounts that the Company has an unconditional right to consideration (including billed and unbilled amount) when the Company has satisfied its performance obligation. The Company does not have any contract assets since revenue is recognized when control of the promised services is transferred and the payment from customers is not contingent on a future event. The Company maintains allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyses historical bad debt, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to estimate the allowance. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted and the potential for recovery is considered remote.
Unamortized produced content
Produced content includes direct production costs, production overhead and acquisition costs and is stated at the lower of unamortized cost or estimated fair value. Produced content also includes cash expenditures made to enter into arrangements with third parties to co-produce certain of its productions.
The Company uses the individual-film-forecast-computation
method and amortizes the produced content based on the ratio of current period actual revenue (numerator) to estimated remaining unrecognized
ultimate revenue as of the beginning of the fiscal year (denominator) in accordance with ASC 926. Ultimate revenue estimates for the produced
content are periodically reviewed and adjustments, if any, will result in prospective changes to amortization rates. When estimates of
total revenues and other events or changes in circumstances indicate that a film or television series has a fair value that is less than
its unamortized cost, a loss is recognized currently for the amount by which the unamortized cost exceeds the film or television series’
fair value. For the six months ended June 30, 2023 and 2022, $
Accounts payable
Accounts payable represent liabilities for goods and services provided to the Company prior to the end of financial period which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities.
Accounts payable are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest method.
Revenue Recognition
The Company early adopted the new revenue standard Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, on January 1, 2017. The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer |
| ● | Step 2: Identify the performance obligations in the contract |
| ● | Step 3: Determine the transaction price |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract |
| ● | Step 5: Recognize revenue when the company satisfies a performance obligation |
7
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue Recognition (cont.)
The Company mainly offers and generates revenue from the copyright licensing of self-produced content, advertising and customized content production and others. Revenue recognition policies are discussed as follows:
| - | Copyright revenue |
The Company self produces or coproduces TV series featuring lifestyle, culture and fashion, and licenses the copyright of the TV series on an episode basis to the customer for broadcast over a period of time. Generally, the Company signs a contract with a customer which requires the Company to deliver a series of episodes that are substantially the same and that have the same pattern of transfer to the customer. Accordingly, the delivery of the series of episodes is defined as the only performance obligation in the contract.
For the TV series produced solely by the Company, the Company satisfies its performance obligation over time by measuring the progress toward the delivery of the entire series of episodes which is made available to the licensee for exhibition after the license period has begun. Therefore, the copyright revenue in a contract is recognized over time based on the progress of the number of episodes delivered.
The Company also coproduces TV series with other producers and licenses the copyright to third-party video broadcast platforms for broadcast. For TV series produced by Glory Star Group with co-producers, the Company satisfies its performance obligations over time by the delivery of the entire series of episodes to the customer, and requires the customer to pay consideration based on the number and the unit price of valid subsequent views of the TV series that occur on a broadcast platform. Therefore, the copyright revenue is recognized when the later of the valid subsequent view occurs or the performance obligation relating to the delivery of a number of episodes has been satisfied.
| - | Advertising revenue |
The Company generates revenue from sales of various forms of advertising on its TV series and streaming content by way of 1) advertisement displays, or 2) the integration of promotion activities in TV series and content to be broadcast. Advertising contracts are signed to establish the different contract prices for different advertising scenarios, consistent with the advertising period. The Company enters into advertising contracts directly with the advertisers or the third-party advertising agencies that represent advertisers.
For the contracts that involve the third-party advertising agencies, the Company is principal as the Company is responsible for fulfilling the promise of providing advertising services and has the discretion in establishing the price for the specified advertisement. Under a framework contract, the Company receives separate purchase orders from advertising agencies before the broadcast. Accordingly, each purchase order is identified as a separate performance obligation, containing a bundle of advertisements that are substantially the same and that have the same pattern of transfer to the customer. Where collectability is reasonably assured, revenue is recognized monthly over the service period of the purchase order.
For contracts signed directly with the advertisers, the Company commits to display a series of advertisements which are substantially the same or similar in content and transfer pattern, and the display of the whole series of advertisements is identified as the single performance obligation under the contract. The Company satisfies its performance obligations over time by measuring the progress toward the display of the whole series of advertisements in a contract, and advertising revenue is recognized over time based on the number of advertisements displayed.
Payment terms and conditions vary by contract types, and terms typically include a requirement for payment within a period from 6 to 9 months. Both direct advertisers and third-party advertising agencies are generally billed at the end of the display period and require the Company to issue VAT invoices in order to make their payments.
8
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue Recognition (cont.)
| - | Customized content production revenue |
The Company produces customized short streaming videos according to its customers’ requirement, and earns fixed fees based on delivery. Revenue is recognized upon the delivery of short streaming videos.
| - | CHEERS E-mall marketplace service revenue |
The Company through CHEERS E-mall, an online e-commerce platform, enables third-party merchants to sell their products to consumers in China. The Company charges fees for platform services to merchants for sales transactions completed on the Cheer E-Mall including but not limited to products displaying, promotion and transaction settlement services. The Company does not take control of the products provided by the merchants at any point in the time during the transactions and does not have latitude over pricing of the merchandise. Transaction services fee is determined as the difference between the platform sales price and the settlement price with the merchants. CHEERS E-mall marketplace service revenue is recognized at a point of time when the Company’s performance obligation to provide marketplace services to the merchants are determined to have been completed under each sales transaction upon the consumers confirming the receipts of goods. Payments for services are generally received before deliveries.
The Company provides coupons to consumers at our own discretion as incentives to promote CHEERS E-mall marketplace with validity usually around or less than one week, which can only be used in future purchases of eligible merchandise offered on CHEERS E-mall to reduce purchase price that are not specific to any merchant. Consumers are not customers of the Company, therefore incentives offered to consumers are not considered consideration payable to customers. As the consumers are required to make future purchases of the merchants’ merchandise to redeem these coupons, the Company does not accrue any expense for coupons when granted and recognizes the amounts of redeemed coupons as marketing expenses when future purchases are made.
Other Revenues
Other revenue primarily consists of copyrights trading of purchased and produced TV-series and the sales of products on Taobao platform. For copyright licensing of purchased and produced TV-series, the Company recognize revenue on net basis at a point of time upon the delivery of master tape and authorization of broadcasting right. For sales of product, the company recognize revenue upon the transfer of products according to the fixed price and production amount in sales orders.
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Category of Revenue: | ||||||||
| Advertising revenue | $ | $ | ||||||
| Copyrights revenue | ||||||||
| CHEERS e-Mall marketplace service revenue | ||||||||
| Other revenue | ||||||||
| Total | $ | $ | ||||||
| Timing of Revenue Recognition: | ||||||||
| Services transferred over time | $ | $ | ||||||
| Services transferred at a point in time | ||||||||
| Goods transferred at a point in time | ||||||||
| Total | $ | $ | ||||||
The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company does not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers within the scope of ASC Topic 606, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.
9
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Concentration and Credit Risk
Substantially all of the Company’s operating activities are transacted into RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions require submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.
The Company maintains certain bank accounts in
the PRC, Hong Kong and Cayman, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other
insurance. As of June 30, 2023, $
Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.
The Company’s sales are made to customers
that are located primarily in China. The Company has a concentration of its revenues and receivables with specific customers. For the
six months ended June 30, 2023, four customers accounted for
As of June 30, 2023, four customers accounted
for
The Company has a concentration of its purchases
and payables with specific vendors. For the six months ended June 30, 2023, three vendors accounted for
As of June 30, 2023, four vendors accounted for
Foreign Currency Translation
The reporting currency of the Company is the U.S. dollar (“USD”). The functional currency of subsidiaries, VIEs and VIEs’ subsidiaries located in China is the Chinese Renminbi (“RMB”). For the entities whose functional currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income/loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
All of the Company’s revenue and expense transactions are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
The consolidated balance sheet amounts, with the
exception of equity, at June 30, 2023 and December 31, 2022 were translated at RMB
10
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(w) Recent Accounting Pronouncements
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The new amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements, which Offers private companies, as well as not-for-profit entities that are not conduit bond obligors, a practical expedient that gives them the option of using the written terms and conditions of a common-control arrangement when determining whether a lease exists and the subsequent accounting for the lease, including the lease’s classification and Amends the accounting for leasehold improvements in common-control arrangements for all entities. The Combined Companies continues to evaluate the impact of ASU 2023-01 on its financial position, results of operations or cash flows.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
11
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
3. ACCOUNTS RECEIVABLE, NET
June 30, 2023 | December 31, 2022 | |||||||
| Accounts receivable | $ | $ | ||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivables, net | $ | $ | ||||||
June 30, 2023 | June 30, 2022 | |||||||
| Opening balance | $ | $ | ||||||
| Provision of allowance for doubtful accounts | ||||||||
| Writing off allowance for doubtful accounts | ( | ) | ||||||
| Foreign exchange adjustment | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
4. PREPAYMENT AND OTHER CURRENT ASSETS
June 30, 2023 | December 31, 2022 | |||||||
| Advances to vendors | $ | $ | ||||||
| Prepayment for outsourced production cost | ||||||||
| Staff advance | ||||||||
| Others | ||||||||
| $ | $ | |||||||
5. PROPERTY, PLANT AND EQUIPMENT, NET
June 30, 2023 | December 31, 2022 | |||||||
| Electronic equipment | $ | $ | ||||||
| Office equipment and furniture | ||||||||
| Leasehold improvement | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
For the six months ended June 30, 2023 and 2022,
depreciation expense amounted to $
12
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
6. INTANGIBLE ASSETS, NET
June 30, 2023 | December 31, 2022 | |||||||
| Software | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The balance of intangible assets mainly represents
software related to CHEERS App, primarily consisting e-mall, online game, video media library and data warehouse modules, etc., acquired
externally tailored to the Company’s requirements and is amortized straight-line over
| For the six months ending December 31, 2023 | $ | |||
| For the year ending December 31, 2024 | ||||
| For the year ending December 31, 2025 | ||||
| For the year ending December 31, 2026 | ||||
| For the year ending December 31, 2027 and thereafter | ||||
| Total | $ |
7. ACCRUED LIABILITIES AND OTHER PAYABLES
June 30, 2023 | December 31, 2022 | |||||||
| Payable to merchants of Cheers e-Mall | $ | $ | ||||||
| Co-invest online series production fund | ||||||||
| Payroll payables | ||||||||
| Other payables | ||||||||
| $ | $ | |||||||
13
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
8. OTHER TAXES PAYABLE
June 30, 2023 | December 31, 2022 | |||||||
| VAT payable | $ | $ | ||||||
| Income tax payable | ||||||||
| Business tax payable | ||||||||
| Others | ||||||||
| $ | $ | |||||||
9. BANK LOANS
June 30, 2023 | December 31, 2022 | |||||||
| Short-term bank loans: | ||||||||
| Loan from Bank of Beijing | $ | $ | ||||||
| Loan from China Merchants Bank | ||||||||
| Loan from Huaxia Bank | ||||||||
| Loan from Xiamen International Bank | ||||||||
| $ | $ | |||||||
For the six months ended June 30, 2023, the Company
entered into loan agreements with two banks, pursuant to the Company borrowed an aggregate of $
For the six months ended June 30, 2022, the Company
entered into loan agreements with three banks, pursuant to the Company borrowed an aggregate of $5,398 from the banks with maturity dates
due in September 2022 through March 2023. The loan bore interest rates ranging between
Guarantee information
The loan from Bank of Beijing was guaranteed by Beijing Shichuangtongsheng Financing Guarantee Co., Ltd, for whom a counter-guarantee was provided by Horgos and Mr. Zhang Bing, the Chairman of the Company’s board of directors.
The loan from China Merchants Bank was guaranteed by Beijing Zhongguancun Sci-tech Financing Guarantee Co., Ltd, for whom a counter guarantee was provided by Horgos, Mr. Zhang Bing, the Chairman of the Company’s board of directors, and Mr. Lu Jia, the Vice President of the Company.
The loan from Huaxia Bank was guaranteed by Beijing Haidian Sci-tech Enterprises Financing Guarantee Co., Ltd. Horgos Technology and Beijing Leshare provided counter-guarantee to Beijing Haidian Sci-tech Enterprises Financing Guarantee Co., Ltd and Mr. Zhang Bing, the Chairman of the Company’s board of directors, provided the additional guarantee.
The loan from Xiamen International Bank was guaranteed by Horgos, and Mr. Zhang Bing, the Chairman of the Company’s board of directors.
14
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
10. LEASES
The Company leases offices space under non-cancelable
operating leases, with terms ranging from
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
June 30, 2023 | December 31, 2022 | |||||||
| Right-of-use assets | $ | $ | ||||||
| Lease liabilities current | ||||||||
| Lease liabilities non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Remaining lease term and discount rate: | ||||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate | % | |||
For the six months ended June 30, 2023 and 2022,
the Company incurred total operating lease expenses of $
| For the six months ending December 31, 2023 | ||||
| For the year ending December 31, 2024 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
15
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
11. RELATED PARTY TRANSACTIONS
For the six months ended June 30, 2023, the Company borrowed $
As of December 31, 2022, the Company did not have balances due from or due to related parties. In addition, the Company did not enter into material related parties transaction arrangements during the six months ended June 30, 2022.
12. INCOME TAXES
The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the six months ended June 30, 2023 and 2022, the Company had no unrecognized tax benefits. Due to uncertainties surrounding future utilization, the Company estimates there will not be sufficient future income to realize the deferred tax assets arising from net operating losses for the VIEs and the VIEs’ subsidiaries. The Company maintains a full valuation allowance on its net deferred tax assets arising from net operating losses as of June 30, 2023 and December 31, 2022.
As of June
30, 2023 and December 31, 2022, the Company had deferred tax assets of $
The Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.
For the
six months ended June 30, 2023 and 2022, the Company had a deferred tax expenses of $
Uncertain tax positions
The Company accounts for uncertainty in income
taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained
on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the
largest amount that is more than
16
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
13. SHARE-BASED COMPENSATION TO EMPLOYEES
On February 14, 2020, the board of directors of
the Company approved 2019 Equity Incentive Plan (“2019 Plan”), which allows for the award of stock and options, up to
On March 13, 2020, three independent directors
of the Company entered into the independent director agreements and restricted stock award agreements (“Award Agreement”)
with the Company.
On May 29, 2020,
On September 15, 2020, the Company entered into
an independent director agreement with Mr. Ke Chen (“Chen Agreement”).
On April 7, 2022, the board appointed Mr. Zhihong
Tan as our non executive director, then granted and vested
As of June 30, 2023 and December 31, 2022, the
Company did not have unvested restricted ordinary shares. For the six months ended June 30, 2023 and 2022, the Company recognized share-based
compensation expenses of $ and $
17
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
14. EQUITY
Ordinary Shares
The Company is authorized to issue
On May 9,
2023, the Company closed its private placement with two institutional investors (the “Investors”). Pursuant to the Share
Subscription Agreement, the Company issued an aggregate of
As of June 30, 2023 and December 31, 2022, there
were
15. PRIVATE PLACEMENT WARRANTS
Simultaneously with the closing of the Initial
Public Offering, Symphony Holdings Limited (“Symphony”) purchased an aggregate of
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees. If the Private Placement Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants. In addition, the Private Placement Warrants may not be transferable, assignable or salable until the consummation of a Business Combination, subject to certain limited exceptions.
As of June 30, 2023 and December 31, 2022, the
Company had
Warrant Liability | ||||
| Estimated fair value at December 31, 2021 | $ | |||
| Change in estimated fair value | ( | ) | ||
| Estimated fair value at June 30, 2022 | $ | |||
| Estimated fair value at December 31, 2022 | $ | |||
| Change in estimated fair value | ( | ) | ||
| Estimated fair value at June 30, 2023 | $ | |||
18
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
15. PRIVATE PLACEMENT WARRANTS (cont.)
The fair value of the private warrants was estimated
using the binomial option valuation model. The application of the binomial option valuation model requires the use of a number of inputs
and significant assumptions including volatility. Significant judgment is required in determining the expected volatility of the common
share.
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Category of Revenue: | ||||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (in years) | ||||||||
| Expected dividend yield | ||||||||
| Expected volatility | % | % | ||||||
19
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars in thousands, except share and per share data)
16. SEGMENT INFORMATION
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different services.
Based on management’s assessment, the Company has determined that it has two operating segments as defined by ASC 280, including Cheers APPs internet business and traditional media businesses. Cheers APPs Internet Business generates advertising revenue from broadcasting IP short video, live streaming and APP advertising through Cheer APPs and service revenue from Cheers E-mall marketplace. Traditional Media Business mainly contributes the advertising revenue from Cheers TV-series, copyright revenue, customized content production revenue and others. The CODM measures the performance of each segment based on metrics of revenues and earnings from operations and uses these results to evaluate the performance of, and to allocate resources to, each of the segments. The Company currently does not allocate assets and share-based compensation for employees to its segments, as the CODM does not use such information to allocate resources to or evaluate the performance of the operating segments. As most of the Company’s long-lived assets are located in the PRC and most of the Company’s revenues are derived from the PRC, no geographical information is presented.
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net revenues: | ||||||||
| Cheers APPs Internet Business | $ | $ | ||||||
| Traditional Media Business | ||||||||
| Total consolidated net revenues | $ | $ | ||||||
| Operating income: | ||||||||
| Cheers APPs Internet Business | $ | $ | ||||||
| Traditional Media Business | ||||||||
| Total segment operating income | ||||||||
| Unallocated item * | ( | ) | ||||||
| Total consolidated operating income | $ | $ | ||||||
| * |
17. COMMITMENTS
Capital expenditure commitments
As of June 30, 2023, the Company had capital expenditure
commitments of $
17. SUBSEQUENT EVENTS
On July 28, 2023, Glory Star Beijing entered into
a three-year loan arrangement with Ximen International Bank, pursuant to which the Company borrowed a loan of $
20
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
IN CONNECTION WITH THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023 and JUNE 30, 2022
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and their related notes that appear elsewhere in this report on Form 6-K and with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on March 22, 2023, and as amended on March 23, 2023 (the “2022 Form 20-F”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. The information in this report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the 2022 Form 20-F under the section titled “Risk Factors” and in other parts of the 2022 Form 20-F. In this report, Glory Star New Media Group Holdings Limited. is referred to as “we,” “us,” “our,” the “Company” or “GSMG.” The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results.
Overview
We provide advertisement and content production services and operate a leading mobile and online advertising, media and entertainment business in China. Major production from us includes short videos, online variety show, online drama, living stream and CHEERS series. We are fast becoming one of the leading contents driven e-commerce platforms in China. We focus on creating original lifestyle content to monetize our advertising and e-commerce platform. We mainly offer and generate revenue from the copyright licensing of self-produced content, advertising and customized content production and CHEERS e-Mall marketplace service, membership fees, and others.
In April 2023, we completed a major upgrade to our self-developed digital collection non-fungible tokens (“NFT”) application, CheerReal. The update is now available on both Android and iOS and comes with improved security, advanced technology, enhanced functionality, and a more user-friendly interface.
In July 2023, we launched CHEERS Telepathy, a groundbreaking artificial intelligence (AI) content creation platform that incorporates multimodal functions. Powered by CHEERS AI’s intelligent cloud-based service “Polaris”, CHEERS Telepathy offers a glimpse into the future of art, by providing a stable and reliable AI content creation experience that allows for unprecedented possibilities of art and creativity.
On July 11, 2022, GS Holdings entered into an agreement and plan of merger (the “Merger Agreement”) with CHEERS Inc. (“Parent”) and GSMG Ltd. (“Merger Sub”) for the filing of the plan of merger with the Registrar of Companies of the Cayman Islands (the “Plan of Merger”). Pursuant to the Merger Agreement and the Plan of Merger, Merger Sub will merge with and into GS Holdings and cease to exist, with GS Holdings continuing as the surviving company and becoming a wholly-owned subsidiary of Parent (the “Going Private Transaction”).
On April 6, 2023, the Company sent a notice of termination to the Parent (the “Notice of Termination”), notifying the Parent that the Company proposes to terminate the Merger Agreement pursuant to Section 9.1(b)(ii) of the Merger Agreement due to the Parent and the Merger Sub’s breaches of the Merger Agreement, including, but not limited to, Section 7.2(a). The breaches have resulted in the failure of the conditions set forth in Section 8.3(b) and cannot be cured before the termination date of the Merger Agreement. Pursuant to the Notice of Termination, as a result of such termination, the Parent is obligated to pay US$1,055,897 (the “Parent Termination Fee”) to the Company.
On April 7, 2023, the Parent sent a response letter to the Company (the “Response Letter”) that while it disagrees with the allegations made in the Notice of Termination, the Parent acknowledges that the Company has the right to terminate the Merger Agreement pursuant to Section 9.1(h) of the Merger Agreement and thus agrees to pay the Parent Termination Fee pursuant to Section 9.2(b)(iv) of the Merger Agreement on that basis. As a result of the termination of the Merger Agreement, the proposed merger will not be completed.
On April 18, 2023, we entered into a Share Subscription Agreement (the “Subscription Agreement”) with two (2) accredited investors (the “Investors”), each of whom represented that it was a “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”). Pursuant to the Subscription Agreement, the Company agreed to issue and sell to the Investors an aggregate of 24,193,548 ordinary shares of the Company, par value $0.0001 (the “Shares”), at a price per share of $2.48 (the “Private Placement”). The purchase price was determined based off of the privatization price of US $1.55 per share approved by the Company’s shareholders on November 11, 2022, with a 60% premium as agreed to by the Company and the Investors. The Private Placement was made in reliance on an exemption for private offerings pursuant to Regulation S under the Securities Act. The Private Placement closed on May 9, 2023. The gross proceeds from the Private Placement was $60,000,000. The Company intends to use the net proceeds from the Private Placement for working capital and general corporate purposes.
2
Key Factors that Affect Operating Results
We operate in a capital intensive industry and require a significant amount of cash to fund our operations and to produce or acquire high quality video content. If we fail to obtain sufficient capital to fund our operations, our business, financial condition and future prospects may be materially and adversely affected.
The operation of an internet video streaming content provider and producer of television shows requires significant and continuous investment in content production or acquisition and video production technology. Producing high-quality original content is costly and time-consuming and typically requires a long period of time in order to realize a return on investment, if at all. If we cannot obtain adequate capital to meet our capital needs, we may not be able to fully execute our strategic plans for growth and our business, financial condition and prospects may be materially and adversely affected.
If our efforts to retain users and attract new users for our mobile and on-line video content and e-commerce products are not successful, our business, financial condition and results of operations will be materially and adversely affected.
In addition to our content production for television shows, we have experienced significant user growth for our mobile and on-line video and e-commerce products over the past several years. Our ability to continue to retain users and attract new users will depend in part on our ability to consistently provide our users with compelling content choices, as well as a quality experience for selecting and viewing video content. If we introduce new features or service offerings, or change the mix of existing features and services offerings, in a manner that is not favorably received by our users, we may not be able to attract and retain users and our business, financial condition and results of operations would be materially and adversely affected.
We operate in a highly competitive market and we may not be able to compete effectively.
We face significant competition in China in various sub-markets we operate. We compete for users, usage time, advertising customers, and shoppers. Some of our competitors have a longer operating history and significantly greater financial resources than we do, and, in turn, may be able to attract and retain more users, usage time and advertising customers. Our competitors may compete with us in a variety of ways, including by conducting brand promotions and other marketing activities, and making investments in and acquisitions of our business partners. If any of our competitors achieves greater market acceptance than we do or are able to offer more attractive internet video content, our user traffic and our market share may decrease, which may result in a loss of advertising customers, shoppers, and users, as well as have a material and adverse effect on our business, financial condition and results of operations. We also face competition for users and user time from major television stations, which are increasing their internet video offerings. We also face competition from users and user time from other internet media and entertainment services, such as internet and social media platforms that offer content in emerging and innovative media formats.
The success of our business depends on our ability to maintain and enhance our brand.
We believe that maintaining and enhancing our brand is of significant importance to the success of our business. Our well-recognized brand is critical to increasing our user base and, in turn, expanding our shoppers for our e-commerce platform and attractiveness to advertising customers and content providers. Since the internet video industry is highly competitive, maintaining and enhancing our brand depends largely on our ability to become and remain a market leader in China, which may be difficult and expensive to accomplish. To the extent our original content is perceived as low quality or otherwise not appealing to users, our ability to maintain and enhance our brand may be adversely impacted which in turn may result in a loss of users for our mobile and online video and e-commerce platform.
3
Increases in professionally-produced content, or PPC, by others may have a material and adverse effect on our business, financial condition and results of operations.
We depend on the quality of our PPC for the success of our business model. The amount of PPC, especially TV series and movies, has recently increased significantly in China and may continue to increase in the future. Due to relatively robust online advertising budgets, internet video streaming platforms are generating more revenues and are competing aggressively to produce and license more PPC in general. As the demand for quality PPC grows, the number of PPC producers will likely grow, resulting in an increase in competition for our users and usage time, which in turn may result in a loss of advertising customers, users, and shoppers on our e-commerce platform. Any significant loss in advertising customers, users, or shoppers on our e-commerce platform would have a material and adverse effect on our business, financial condition and results of operations.
We may not be able to manage our growth effectively.
We have experienced rapid growth since we launched our services in 2016. To manage the further expansion of our business and the growth of our operations and personnel, we need to continuously expand and enhance our infrastructure and technology, and improve our operational and financial systems, procedures, compliance and controls. We also need to expand, train and manage our growing employee base. In addition, our management will be required to maintain and expand our relationships with distributors, advertising customers, and other third parties. We cannot assure you that our current infrastructure, systems, procedures and controls will be adequate to support our expanding operations. If we fail to manage our expansion effectively, our business, financial condition, results of operations and prospects may be materially and adversely affected.
We are subject to risks relating to the nature of China’s advertising industry, including frequent and sudden changes in advertising proposals.
The nature of the advertising business in China is such that sudden changes in advertising proposals and actual advertisements are frequent. In China, television stations, as the advertising publisher, remain responsible for the content of advertisements, and as a result, television stations may reject or recommend changes to the content of advertisements. We strive to minimize problems related to work for clients by encouraging the conclusion of basic written agreements, but we are exposed to the risk of unforeseen incidents or disputes with advertising clients. In addition, similar to other companies in our industry in the PRC where relationships between advertising clients within a particular industry and advertising companies are not typically exclusive, we are currently acting for multiple clients within a single industry in a number of industries. If this practice in China is to change in favor of exclusive relationships and if our efforts to respond to this change are ineffective, our business, results of operations and financial condition could be materially and adversely affected.
There can be no assurance that the market for NFTs will be developed and/or sustained, which may materially adversely affect our business operations.
The market for digital assets, including, without limitation, NFTs, is still nascent. Accordingly, the market for NFTs may not develop, of if a market does develop, such value be maintained. If a market does not develop for NFTs, it may be difficult or impossible for us to develop and maintain a marketplace where our users can trade, purchase and sell their NFTs. We may not be able to complete the development of our metaverse platform or an NFT marketplace. In addition, we may not successfully integrate an NFT marketplace into our metaverse platform, thus affecting our ability to develop and continue our new lines of businesses.
4
Results of Operations
The following table summarizes our consolidated results of operations in absolute amount and as a percentage of our total net revenues for the periods indicated. Period-to-period comparisons of historical results of operations should not be relied upon as indicative of future performance.
(in U.S. dollars in thousands, except for percentages)
| For the Six Months Ended | ||||||||||||||||||||||||
| June 30, | ||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||
| US$ | % | US$ | % | US$ | % | |||||||||||||||||||
| Revenues | 67,435 | 100.00 | 69,933 | 100.00 | (2,498 | ) | (3.57 | ) | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Cost of revenues | (16,946 | ) | (25.13 | ) | (14,580 | ) | (20.85 | ) | (2,366 | ) | 16.23 | |||||||||||||
| Selling and marketing | (38,870 | ) | (57.64 | ) | (42,502 | ) | (60.78 | ) | 3,632 | (8.55 | ) | |||||||||||||
| General and administrative | (2,266 | ) | (3.36 | ) | (1,814 | ) | (2.59 | ) | (452 | ) | 24.92 | |||||||||||||
| Research and development | (641 | ) | (0.95 | ) | (532 | ) | (0.76 | ) | (109 | ) | 20.49 | |||||||||||||
| Total operating expenses | (58,723 | ) | (87.08 | ) | (59,428 | ) | (84.98 | ) | 705 | (1.19 | ) | |||||||||||||
| Income from operations | 8,712 | 12.92 | 10,505 | 15.02 | (1,793 | ) | (17.07 | ) | ||||||||||||||||
| Total other income, net | 124 | 0.19 | 86 | 0.12 | 38 | 44.19 | ||||||||||||||||||
| Income before income taxes | 8,836 | 13.11 | 10,591 | 15.14 | (1,755 | ) | (16.57 | ) | ||||||||||||||||
| Income tax (expenses) benefits | (37 | ) | (0.05 | ) | 46 | 0.07 | (83 | ) | (180.43 | ) | ||||||||||||||
| Net income | 8,799 | 13.06 | 10,637 | 15.21 | (1,838 | ) | (17.28 | ) | ||||||||||||||||
Revenues
We primarily generated revenues from four revenue streams: advertising, copyright licensing, customized content production and CHEERS e-Mall market service. For the six months ended June 30, 2023 and 2022, 96.5% and 95.9% of our revenues derived from advertising services.
Our revenues for the six months ended June 30, 2023 were US$67.4 million, representing a decrease of US$2.5 million, or 3.57% from US$69.9 million for the six months ended June 30, 2022. The change in revenues was mainly affected by depreciation of RMB during the six months ended June 30, 2023, leading to a lower USD amount in translation of revenues from RMB into USD. The weighted average rate for the six months ended June 30, 2023 was RMB 6.9646 to $1.00, depreciated from RMB 6.4835 to $1.00 for the six months ended June 30, 2022.
Without the impact of fluctuation of foreign exchange rates, our revenues for the six months ended June 30, 2023 increased by RMB 13.8 million (approximately US$2.0 million), or 3.04% as compared with the revenues for the same period of 2022. The increase in the revenues was primarily attributable an increase of advertising revenues of RMB 15.9 million as a result of continuous efforts to expand our customer base through improving our content production quality.
We expect to further expand our customers base with our efforts to enhance brand recognition and user traffic generation, leading to more exposure and high popularity of our Apps.
5
Operating expenses
Operating expenses consists of cost of revenues, selling and marketing, general and administrative and research and development expense.
Cost of revenues consists primarily of production cost of TV series, short stream video, live stream and network drama, labor cost and related benefits, payments to various channel owners for broadcast, purchase cost of goods and copyrights and costs associated with the operation of our online game and shopping platform CHEERS App such as bandwidth cost and amortization of intangible assets. Our cost of revenues increased by US$2.3 million, or 16.23%, from US$14.6 million for the six months ended June 30, 2022 to US$16.9 million for the six months ended June 30, 2023. Such an increase in cost of revenues was primarily driven by the increase in advertising cost of $2.0 million, which was incurred to increase our exposure to the market and potential customer base. We expect to achieve a further increase in advertising revenues with our continuous investment in advertising business. However, it may take time to make further investments before we generate revenues.
Our sales and marketing expenses primarily consist of salaries and benefits of sales department, user acquisition expense, advertising fee, travelling expense and CHEERS e-Mall marketing expense. Our sales and marketing expenses decreased by US$3.6 million, or 8.55%, to US$38.9 million for the six months ended June 30, 2023 from US$42.5 million for the six months ended June 30, 2022. The decrease was mainly due to a decrease in entertainment expenses and travel expenses incurred by our sales persons because we emphasized cost savings within our Company.
Our general and administrative expenses consist primarily of salaries and benefits for members of our management and bad debt provision expense for accounts receivable and professional service fees. Our general and administrative expenses increased by US$0.5 million, or 24.92%, to US$2.3 million for the six months ended June 30, 2023 from US$1.8 million for the six months ended June 30, 2022. The increase in general and administrative expenses was mainly attributable to an increase in provision against doubtful allowance of US$0.9 million because we wrote off accounts receivable due from one customer as the collection was remote, partially offset by a decrease of professional service fees of US$0.3 million. We incurred more professional service expenses for the six months ended June 30, 2022 which were incurred for Going Private Transaction.
Our research and development expenses consist primarily of salaries and benefits for our research and development department. Research and development expenses for the six months ended June 30, 2023 and 2022 were US$0.6 million and US$0.5 million, respectively. Such increase was primarily due to the continued investment in the IT infrastructure, user-friendliness upgrades, and continual implementation on content driven strategies.
Income tax (expenses) benefits
Income tax expenses for the six months ended June 30, 2023 were US$0.04 million because we reversed certain deferred tax assets arising from allowance for doubtful receivables as a result of collection of these receivables from our customers. Income tax benefits for the six months ended June 30, 2022 were US$0.05 million arising from recognition of deferred tax assets for recognition of allowance against doubtful accounts receivable.
Net Income
As a result of the foregoing, we had reported a net income of US$8.8 million and US$10.6 million, respectively, for the six months ended June 30, 2023 and 2022.
6
Segment information
We have two operating segments, namely CHEERS Apps Internet Business and Traditional Media Businesses. Our CHEERS Apps Internet Business generates advertising revenue from broadcasting IP short videos, live streaming and Apps advertising through our CHEERS Apps and service revenue from our CHEERS E-mall marketplace. Our Traditional Media Business mainly contributes to the advertising revenue from our CHEERS TV-series, copyright revenue, customized content production revenue and others. The table below measures the performance of each segment based on metrics of revenues and earnings from operations and uses these results to evaluate the performance of, and to allocate resources to, each of the segments.
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net revenues: | ||||||||
| CHEERS Apps Internet Business | $ | 61,608 | $ | 60,672 | ||||
| Traditional Media Business | 5,827 | 9,261 | ||||||
| Total consolidated net revenues | $ | 67,435 | $ | 69,933 | ||||
| Operating income: | ||||||||
| CHEERS Apps Internet Business | $ | 7,959 | $ | 9,116 | ||||
| Traditional Media Business | 753 | 1,391 | ||||||
| Total segment operating income | 8,712 | 10,507 | ||||||
| Unallocated item * | - | (2 | ) | |||||
| Total consolidated operating income | $ | 8,712 | $ | 10,505 | ||||
| * | The unallocated item for the six months ended June 30, 2022 presents the share-based compensation for employees, which is not allocated to segments. |
7
Liquidity and Capital Resources
To date, we have financed our operations primarily through cash flows from operations, and equity financing through public and private offerings of our securities. We plan to support our future operations primarily from cash generated from our operations and equity financings. We may also consider debt, preferred and convertible financing as well.
As of June 30, 2023, we had working capital of US$213.7 million, which were primarily comprised of cash and cash equivalents of US$152.4 million and accounts receivable of US$67.2 million. Working capital is the difference between the Company’s current assets and current liabilities.
On May 9, 2023, we closed a private placement with two institutional investors (the “Investors”). Pursuant to the Share Subscription Agreement, we issued an aggregate of 24,193,548 ordinary shares, at a purchase price of $2.48 per share for an aggregate gross proceeds of $60 million. The purchase price was agreed to by us and the Investors based on the privatization price of $1.55 per share approved by the Company’s shareholders on November 11, 2022, and with a 60% premium.
Substantially all of our cash and cash equivalents as of December 31, 2022 were held in China, of which all are denominated in Renminbi (RMB). In addition, we are a holding company with no material operations of our own. We conduct our operations primarily through our subsidiaries and VIEs in China. As a result, our ability to pay dividends, if any, depends upon dividends paid by our wholly-owned subsidiaries. We do not anticipate to pay any dividends in the future as any net income earned will be reinvested in the Company. In addition, our WFOE is permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, our WFOE and each of its consolidated entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE. We currently plan to reinvest all earnings from our WFOE to business development and do not plan to request dividend distributions from the WFOE.
If we experience an adverse operating environment or incurred anticipated capital expenditure requirement, or if we accelerate our growth, then additional financing may be required. No assurance can be given, however, that the additional financing, if required, would be on favorable terms or available at all. Such financing may include the use of additional debt or the sale or additional securities. Any financing, which involves the sale of equity securities or instruments that are convertible into equity securities, could result in immediate and possibly significant dilutions to our existing shareholders.
Cash Flows
The following table summarizes our cash flows for the years indicated:
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| (in thousands of U.S. dollars) | ||||||||
| Net cash provided by (used in) operating activities | $ | 27,179 | $ | (30,627 | ) | |||
| Net cash used in investing activities | (62 | ) | (383 | ) | ||||
| Net cash provided by financing activities | 60,009 | 842 | ||||||
| Effect of exchange rate changes | (5,167 | ) | (2,357 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 81,959 | (32,525 | ) | |||||
| Cash and cash equivalents, at beginning of period | 70,482 | 77,302 | ||||||
| Cash and cash equivalents, at end of period | $ | 152,441 | $ | 44,777 | ||||
8
We primarily fund our operations from our operations, bank borrowings and equity financing through private placements. We anticipate that the major capital expenditure in the near future is for working capital and general corporate purposes, and we intend to continue focusing on timelier collections of account receivable which should enhance our cash flows.
In addition, we also anticipate to raise capital through issuance of equity or debt securities or obtain credit facilities from financial institutions. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Operating Activities
Net cash provided by operating activities was US$27.2 million for the six months ended June 30, 2023, derived mainly from (i) net income of US$8.8 million for the six months ended June 30, 2023 adjusted for depreciation and amortization expenses of US$1.6 million, and (ii) net changes in our operating assets and liabilities, principally comprising of a decrease of US$28.5 million in accounts receivable because we improvement our collections from customers, and an increase of US$13.5 million in prepayments to our vendors because we increased our purchase of content production which required of repayments.
Net cash used in operating activities was US$30.6 million for the six months ended June 30, 2022, derived mainly from (i) net income of US$10.6 million for the six months ended June 30, 2022 adjusted for depreciation and amortization expenses of US$1.2 million, and (ii) net changes in our operating assets and liabilities, principally comprising of an increase of US$20.0 million in accounts receivable because certain customers delayed payments as they were adversely affected by the lockdown policy under COVID-19, an increase of US$18.6 million in prepayments to our vendors because we increased our purchase of content production which required of repayments, and an increase of US$5.9 million in accounts payable with increase of purchases.
Investing Activities
Net cash used in investing activities was US$0.06 million for the six months ended June 30, 2023, which was primarily derived from the loans of US$0.06 million to a third party.
Net cash used in investing activities was US$0.4 million for the six months ended June 30, 2022, which was primarily derived from the prepayments of US$0.4 million for intangible assets.
Financing Activities
Net cash provided by financing activities was US$60.0 million for the six months ended June 30, 2023, which was primarily derived from proceeds of US$60 million raised from the private placement closed in May 2023, proceeds of US$2.6 million from bank borrowings, borrowings of US$1.0 million from a related party, partially net off by a repayment of bank borrowings of US$4.0 million.
Net cash provided by financing activities was US$0.8 million for the six months ended June 30, 2022, which was primarily derived from proceeds of US$5.4 million from bank borrowings, partially net off by a repayment of bank borrowings of US$4.5 million.
Research and development
We have a team of experienced engineers who are primarily based at our headquarters in Beijing. We compete aggressively for engineering talent and work closely with top IT firms through outsourcing to address challenges such as AI recommended search engine, block chain scoring e-mall, network games battle platform, data warehouse, social networking E-commence V3.0, video media warehouse. For the six months ended June 30, 2023 and 2022, our research and development expenditures were US$0.6 million and US$0.5 million, respectively. We plan to continue investing in and improving our CHEERS Apps to further increase user friendliness, functionality and efficiency.
9
Critical Accounting Estimates
We prepare our financial statements in accordance with U.S. GAAP, which requires our management to make judgments, estimates and assumptions. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and various assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. You should read the following description of critical accounting policies, judgments and estimates in conjunction with our unaudited condensed consolidated financial statements and other disclosures included in this report.
We do not have critical accounting estimates that are related to us. A list of accounting policies, judgements and estimates that are relevant to us is included in note 2 of our Annual Report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on March 22, 2023, and as amended on March 23, 2023 (the “2022 Form 20-F”).
Recent Accounting Pronouncements
A list of recently issued accounting pronouncements that are relevant to us is included in note 2 to our unaudited condensed consolidated financial statements included elsewhere in this report.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company’s year-end financial statements, which could result in significant differences from this unaudited financial information.
10
Exhibit 99.3
Glory Star Reports First Half Year 2023 Unaudited Financial Results
BEIJING, August 10, 2023 /PRNewswire/ -- Glory Star New Media Group Holdings Limited (NASDAQ: GSMG) (“Glory Star”, the “Company” or “we”), a leading digital media platform and content-driven e-commerce company in China, today announced its unaudited financial results for the first half year of 2023 ended June 30, 2023.
First Half 2023 Operating Highlights
| ● | Downloads of the CHEERS Apps increased to approximately 395 million as of June 30, 2023, representing an increase of 23% compared to approximately 320 million as of June 30, 2022. |
CHEERS Video
| ● | Monthly Active Users (“MAU”) of the CHEERS Video app increased to approximately 49.8 million from 45.8 million in the same period of 2022, representing an increase of 9%. |
| ● | Daily Time Spent (“DTS”) on CHEERS Video was approximately 51 minutes. |
CHEERS e-Mall
| ● | MAU of the CHEERS e-Mall app increased to approximately 4.6 million from 3.0 million in the same period of 2022, representing an increase of 53%. |
| ● | Repurchase Rate (“RPR”) for CHEERS e-Mall was approximately 39%. |
CheerReal
| ● | MAU of the CheerReal app was approximately 1.2 million. |
| ● | Number of Digital Art Collections listed on CheerReal platform was 350 units. |
First Half 2023 Key Operating Results
The Company monitors the following key metrics to evaluate the growth of its business, measure the effectiveness of its marketing efforts, identify trends affecting its business, and make strategic decisions.
Downloads. We view the number of downloads at the end of a given period as a key indicator of the attractiveness and usability of our CHEERS Apps. As of June 30, 2023, downloads of our CHEERS Video, e-Mall and CheerReal apps in total were approximately 395 million, representing an increase of 23% compared to approximately 320 million as of June 30, 2022.
MAU. MAU is defined as a user who has logged in or accessed the Company’s CHEERS Apps. We calculate MAU using internal company data based on the activity of the user account and as adjusted to remove “duplicate” accounts. MAU is a tool that our management uses to manage their operations. In particular, our management sets targets of MAU and monitors the MAU to see whether to make adjustments as to the promotional activities, advertising campaign, and/or online video contents. For the six months ended June 30, 2023, the average MAU of our CHEERS Video and e-Mall apps were approximately 49.8 million and 4.6 million, growing 9% and 53% respectively as compared to the same period in 2022. The average MAU of the CheerReal app was approximately 1.2 million.
RPR. We track RPR to analyze the effectiveness of our marketing as well as customers retention, which is vital to our e-Mall. RPR is calculated as the percentage of our customers who have placed more than one order within a certain period of time. For the 180 days period during the first half of 2023, our CHEERS e-Mall RPR was approximately 39%.
DTS. We measure DTS as an additional metric to evaluate the attractiveness of our video content and stickiness of users. The average DTS using our CHEERS Video during first half 2023 was approximately 51 minutes.
First Half 2023 Financial Results
Revenues in the first half year of 2023 were US$67.4 million compared to US$69.9 million in the same period of 2022, representing a decrease of US$2.5 million, or 3.57% from US$69.9 million for the six months ended June 30, 2022.
Total operating expenses in the first half year of 2023 were US$58.7 million, compared to US$59.4 million in the same period of 2022.
| ● | Cost of revenues were US$16.9 million and US$14.6 million for the first half year of 2023 and 2022. The increase in cost of revenues was primarily driven by the increase in production cost. The Company believes higher production cost would improve product contents with higher quality, which would in turn contribute to our reputation in the industry and attract more customers. |
| ● | Sales and marketing expenses were US$38.9 million and US$42.5 million for the first half year of 2023 and 2022, mainly due to a decrease in other miscellaneous expenses incurred by sales persons because the Company emphasized cost savings. |
| ● | General and administrative expenses in the first half year of 2023 increased by 24.9% to US$2.3 million from US$1.8 million in the same period of 2022, which is mainly attributable to an increase in salary and welfare expenses because of an increase in headcount in our administrative department. |
| ● | Research and development expenses were US$0.6 million and US$0.5 million for the first half year of 2023 and 2022, respectively. |
Income from operations in the first half year of 2023 was US$8.7 million, compared to US$10.5 million in the same period of 2022.
Net income were US$8.8 million and US$10.6 million, respectively, for the six months ended June 30, 2023 and 2022.
Basic and diluted earnings per share in the first half year of 2023 were US$0.12 and US$0.12, respectively, compared to US$0.16 and US$0.16, respectively, in the same period of 2022.
Net cash provided by operating activities in the first half year of 2023 was US$27.2 million, compared to net cash used in operating activities of US$30.6 million in the same period of 2022.
As of June 30, 2023, the Company had cash and cash equivalents of US$152.4 million, compared to US$70.5 million as of December 31, 2022.
| 2 |
About Glory Star
As a preeminent provider of next-generation mobile internet infrastructure services in China, Glory Star is dedicated to building a digital ecosystem that integrates “platforms, applications, technology, and industry” into a cohesive system, thereby creating a new, open business environment for web3.0 that leverages AI technology. The Company is developing a 5G+VR+AR+AI shared universe space that builds on cutting-edge technologies including blockchain, cloud computing, extended reality, and digital twin.
Glory Star’s portfolio includes a wide range of products and services, such as Polaris Intelligent Cloud, CHEERS Telepathy, CHEERS Open Platform, CHEERS Video, CHEERS e-Mall, CheerReal, CheerCar, CheerChat, CHEERS Fresh Group-Buying E-commerce Platform, Digital Innovation Research Institute, CHEERS Livestreaming, variety show series, IP short video matrix, and more. These offerings provide diverse application scenarios that seamlessly blend “online/offline” and “virtual/reality” elements.
With “CHEERS+” at the core of Glory Star’s ecosystem, the Company is committed to consolidating and strengthening its core competitiveness, and achieving long-term sustainable and scalable growth.
For more information, please visit http://ir.gsmg.co/.
Safe Harbor Statement
Certain statements made in this release are “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, are: the ability to manage growth; ability to identify and integrate other future acquisitions; ability to obtain additional financing in the future to fund capital expenditures; fluctuations in general economic and business conditions; costs or other factors adversely affecting our profitability; litigation involving patents, intellectual property, and other matters; potential changes in the legislative and regulatory environment; a pandemic or epidemic; the occurrence of any event, change or other circumstances that could affect the Company’s ability to continue successful development and launch of its metaverse experience centers; the possibility that the Company may not succeed in developing its new lines of businesses due to, among other things, changes in the business environment and technological developments, competition, changes in regulation, or other economic and policy factors; disruptions or other business interruptions that may affect the operations of our products and services, the possibility that the Company’s new lines of business may be adversely affected by other economic, business, and/or competitive factors; other factors, risks and uncertainties set forth in documents filed by the Company with the Securities and Exchange Commission from time to time, including the Company’s latest Annual Report on Form 20-F filed with the SEC on March 22, 2023, as amended. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Such information speaks only as of the date of this release.
For investor and media inquiries, please contact:
Wealth Financial Services LLC
Connie Kang, Partner
Email: ckang@wealthfsllc.com
Tel: +86 1381 185 7742 (CN)
| 3 |
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. dollars in thousands, except share and per share data)
June 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 152,441 | $ | 70,482 | ||||
| Accounts receivable, net | 67,159 | 98,034 | ||||||
| Prepayment and other current assets | 27,378 | 15,329 | ||||||
| Total current assets | 246,978 | 183,845 | ||||||
| Non-current assets: | ||||||||
| Property, plant and equipment, net | 115 | 160 | ||||||
| Intangible assets, net | 18,026 | 20,297 | ||||||
| Deferred tax assets | 64 | 103 | ||||||
| Unamortized produced content, net | 528 | 807 | ||||||
| Right-of-use assets | 593 | 750 | ||||||
| Prepayment and other non-current assets, net | - | 1 | ||||||
| Total non-current assets | 19,326 | 22,118 | ||||||
| TOTAL ASSETS | $ | 266,304 | $ | 205,963 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Short-term bank loans | $ | 2,856 | $ | 4,421 | ||||
| Accounts payable | 4,992 | 6,405 | ||||||
| Advances from customers | 126 | 147 | ||||||
| Due to a related party | 1,000 | - | ||||||
| Accrued liabilities and other payables | 2,203 | 2,632 | ||||||
| Other taxes payable | 21,703 | 19,090 | ||||||
| Lease liabilities current | 368 | 208 | ||||||
| Total current liabilities | 33,248 | 32,903 | ||||||
| Lease liabilities non-current | 191 | 471 | ||||||
| Warrant liability | 7 | 86 | ||||||
| Total non-current liabilities | 198 | 557 | ||||||
| TOTAL LIABILITIES | $ | 33,446 | $ | 33,460 | ||||
| Equity | ||||||||
| Preferred shares (par value of $0.0001 per share; 2,000,000 authorized; none issued and outstanding) | $ | - | $ | - | ||||
| Ordinary shares (par value of $0.0001 per share; 200,000,000 shares authorized as of June 30, 2023 and December 31,2022; 92,317,950 shares and 68,124,402 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively) | $ | 9 | $ | 7 | ||||
| Additional paid-in capital | 87,470 | 27,009 | ||||||
| Statutory reserve | 1,411 | 1,411 | ||||||
| Retained earnings | 159,432 | 150,685 | ||||||
| Accumulated other comprehensive loss | (15,539 | ) | (6,684 | ) | ||||
| TOTAL GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED SHAREHOLDERS’ EQUITY | 232,783 | 172,428 | ||||||
| Non-controlling interest | 75 | 75 | ||||||
| TOTAL EQUITY | 232,858 | 172,503 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 266,304 | $ | 205,963 | ||||
| 4 |
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE (LOSS) INCOME
(In U.S. dollars in thousands, except share and per share data)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | $ | 67,435 | $ | 69,933 | ||||
| Operating expenses: | ||||||||
| Cost of revenues | (16,946 | ) | (14,580 | ) | ||||
| Selling and marketing | (38,870 | ) | (42,502 | ) | ||||
| General and administrative | (2,266 | ) | (1,814 | ) | ||||
| Research and development | (641 | ) | (532 | ) | ||||
| Total operating expenses | (58,723 | ) | (59,428 | ) | ||||
| Income from operations | 8,712 | 10,505 | ||||||
| Other (expenses) income: | ||||||||
| Interest income (expense), net | 32 | (60 | ) | |||||
| Change in fair value of warrant liability | 79 | 2 | ||||||
| Other income, net | 13 | 144 | ||||||
| Total other income | 124 | 86 | ||||||
| Income before income tax | 8,836 | 10,591 | ||||||
| Income tax (expenses) benefits | (37 | ) | 46 | |||||
| Net income | 8,799 | 10,637 | ||||||
| Less: net gain (loss) attributable to non-controlling interest | 52 | (170 | ) | |||||
| Net income attributable to Glory Star New Media Group Holdings Limited’s shareholders | $ | 8,747 | $ | 10,807 | ||||
| Other comprehensive loss | ||||||||
| Unrealized foreign currency translation loss | (8,907 | ) | (7,620 | ) | ||||
| Comprehensive (loss) income | (108 | ) | 3,017 | |||||
| Less: comprehensive loss attributable to non-controlling interests | - | (360 | ) | |||||
| Comprehensive (loss) income attributable to Glory Star New Media Group Holdings Limited’s shareholders | $ | (108 | ) | $ | 3,337 | |||
| Earnings per ordinary share | ||||||||
| Basic and Diluted | $ | 0.12 | $ | 0.16 | ||||
| Weighted average shares used in calculating earnings per ordinary share | ||||||||
| Basic and Diluted | 75,075,035 | 68,123,330 | ||||||
| 5 |
GLORY STAR NEW MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars in thousands)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | 27,179 | (30,627 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property, plant and equipment | (4 | ) | (28 | ) | ||||
| Loans made to a third party | (58 | ) | - | |||||
| Prepayments for acquisition of intangible assets | - | (355 | ) | |||||
| Net cash used in investing activities | (62 | ) | (383 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of ordinary shares in connection with a private placement | 60,000 | - | ||||||
| Proceeds from bank loans | 2,598 | 5,398 | ||||||
| Repayments of bank loans | (4,041 | ) | (4,473 | ) | ||||
| Payment of loan origination fees | (11 | ) | (83 | ) | ||||
| Borrowings from a related party | 1,000 | - | ||||||
| Contribution from shareholders | 463 | - | ||||||
| Net cash provided by financing activities | 60,009 | 842 | ||||||
| Effect of exchange rate changes | (5,167 | ) | (2,357 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 81,959 | (32,525 | ) | |||||
| Cash and cash equivalents, at beginning of period | 70,482 | 77,302 | ||||||
| Cash and cash equivalents, at end of period | $ | 152,441 | 44,777 | |||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interests paid | $ | 77 | $ | 136 | ||||
| Amortization of right of use assets | $ | 133 | $ | 209 | ||||
| Accretion of lease liabilities | $ | 69 | $ | 24 | ||||
| Change in fair value of warrant liabilities | $ | (79 | ) | $ | (2 | ) | ||
| 6 |