Exhibit 99.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 24, 2019
TKK SYMPHONY ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
| Cayman Islands | 001-38631 | N/A | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
c/o Texas Kang Kai Capital Management (Hong Kong) Limited
2039, 2/F United Center,
95 Queensway Admiralty, Hong Kong
(Address of principal executive offices, including Zip Code)
+852 6212 8493
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Ordinary Shares, par value $0.0001 per share | TKKS | The NASDAQ Stock Market LLC | ||
| Warrants, each exercisable for one-half of one Ordinary Share | TKKSW | The NASDAQ Stock Market LLC | ||
| Rights, each exchangeable into one-tenth of one Ordinary Share | TKKSR | The NASDAQ Stock Market LLC | ||
| Units, each consisting of one Ordinary Share, one Warrant and one Right | TKKSU | The NASDAQ Stock Market LLC |
Item 7.01. Regulation FD Disclosure.
Furnished as Exhibit 99.1 is a copy of an updated investor presentation, dated October 2019, that will be used by TKK Symphony Acquisition Corporation (“TKK”) in connection with the previously-announced business combination with Glory Star New Media Group Limited, a Cayman Islands exempted company (“Glory Star”).
Also Furnished as Exhibit 99.2 is a copy of the script of the TKK and Glory Star investor call with respect to the proposed business combination.
The information in this Item 7.01 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (“Securities Act”) or the Exchange Act, except as expressly set forth by specific reference in such filing.
Important Information About the Transaction and Where to Find It
This communication is being made in respect of the proposed business combination between TKK and Glory Star. In connection with the proposed business combination, TKK has filed with the Securities and Exchange Commission (“SEC”) a Tender Offer Statement on Schedule TO, which includes an offer to purchase and a letter of transmittal (collectively, the “Tender Offer Documents”), and will file other documents regarding the proposed transaction with the SEC. TKK mailed the Tender Offer Documents to its shareholders on or about October 17, 2019. Before making any voting or investment decision, investors and shareholders of TKK are urged to carefully read the Tender Offer Documents any other relevant documents filed with the SEC, as well as any amendments or supplements to these documents, because they will contain important information about TKK, Glory Star and the proposed business combination. The documents filed by TKK with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov, or by directing a request to TKK Symphony Acquisition Corporation, c/o Texas Kang Kai Capital Management (Hong Kong) Limited, 2039, 2/F United Center, 95 Queensway Admiralty, Hong Kong, Attention: Secretary, +852 6212 8493.
Forward-Looking Statements
This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,” “projection,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, statements regarding Glory Star’s industry and market sizes, future opportunities for TKK, Glory Star and the combined company, TKK’s and Glory Star’s estimated future results and the proposed business combination between TKK and Glory Star, including the implied enterprise value, the expected transaction and ownership structure and the likelihood and ability of the parties to successfully consummate the proposed transaction. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements.
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In addition to factors previously disclosed in TKK’s reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: inability to meet the closing conditions to the business combination, including the occurrence of any event, change or other circumstances that could give rise to the termination of the definitive agreement; the inability to complete the transactions contemplated by the definitive agreement due to the failure to obtain approval of TKK’s shareholders, the inability to consummate the contemplated debt financing, the failure to achieve the minimum amount of cash available following any redemptions by TKK shareholders or the failure to meet The Nasdaq Stock Market’s listing standards in connection with the consummation of the contemplated transactions; costs related to the transactions contemplated by the definitive agreement; a delay or failure to realize the expected benefits from the proposed transaction; risks related to disruption of management time from ongoing business operations due to the proposed transaction; the reaction of Glory Star customers to the business combination, difficulties in maintaining and managing continued growth, restrictions on the ability to make dividend payments, and general economic conditions; geopolitical events and regulatory changes.
Actual results, performance or achievements may differ materially, and potentially adversely, from any projections and forward-looking statements and the assumptions on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance as projected financial information and other information are based on estimates and assumptions that are inherently subject to various significant risks, uncertainties and other factors, many of which are beyond our control. All information set forth herein speaks only as of the date hereof in the case of information about TKK and Glory Star or the date of such information in the case of information from persons other than TKK or Glory Star, and we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication. Forecasts and estimates regarding Glory Star’s industry and end markets are based on sources we believe to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.
No Offer or Solicitation
This Current Report on Form 8-K shall not constitute a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the transaction. This Current Report on Form 8-K shall also not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any states or jurisdictions in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act or an exemption therefrom.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Investor Presentation, dated October 2019 | |
| 99.2 | Script, dated October 24, 2019 |
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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 hereunto duly authorized.
| TKK Symphony Acquisition Corporation | ||
| Date: October 24, 2019 | By: | /s/ Sing Wang |
| Sing Wang | ||
| Chief Executive Officer | ||
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Exhibit 99.1
Exhibit 99.2
TKK Symphony Acquisition of Glory Star New Media Conference Call Script
[10/24/2019, 8:00 A.M. EDT]
Conference Call Operator
Ladies and gentlemen, welcome to the TKK Symphony Acquisition of Glory Star New Media Group conference call. All participants will be in listen-only mode, and there will not be a question-and-answer session. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. Will Dyke, Associate of ICR, for opening remarks and introductions. Please go ahead, Sir.
Will Dyke, Associate, ICR
Hello, everyone. TKK Symphony announced its business combination with Glory Star New Media Group on September 6 and filed a tender offer statement with the SEC on October 17, 2019. Now we would like to provide more details on the rationale behind the business combination. You may find today’s presentation on the company’s website at ir.yaoshixinghui.com, or “I R dot Y A O S H I X I N G H U I dot com” and the SEC’s website at www.sec.gov.
Joining us on the call today will be Mr. Sing Wang, Chairman and CEO of TKK Symphony, and Mr. Bing Zhang, co-founder and CEO of Glory Star. But before we begin, let’s briefly review the safe harbor statement and the non-GAAP financial measures disclaimer for regulatory compliance.
Please note that this call may contain forward-looking statements made pursuant to the Safe Harbor provision for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the Company's control, which may cause actual results, performance, or achievements of the Company to be materially different from the results, performance, or expectations implied by these forward-looking statements.
Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the Generally Accepted Accounting Principles in the company's filings with the SEC. You're reminded that such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure and that non-GAAP measures are not uniformly defined by all companies including those in the same industry.
With that said, I will now turn the call over to Mr. Sing Wang, Chairman and CEO of TKK Symphony.
Sing Wang, Chairman and CEO of TKK Symphony
Thank you, Will. Welcome everyone to the TKK Symphony and Glory Star New Media conference call.
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As you all know, after the market-close on September 6, 2019, we announced the execution of a definitive share exchange agreement. Under the agreement, Glory Star will exchange 100% of its equity holdings for an initial consideration of $425 million in value of TKK Symphony shares. After the closing of this transaction, TKK will change its name to Glory Star New Media Group Holdings Limited. We aim to grow Glory Star’s leading mobile entertainment platform throughout China. This announcement marks the conclusion of our strenuous review process. We have spent a lot of time analyzing both market dynamics and industry competition. We believe that, based on our due diligence, Glory Star has a number of highly-unique competitive advantages. Those advantages will continue to augment its leadership in the new media industry.
Now let’s turn to page 2 of the presentation published on Glory Star’s IR web site.
Established in 2016, Glory Star provides advertising and content production services, and operates a mobile and online digital media and entertainment business in China. Furthermore, Glory Star has built a leading e-commerce platform in China. It’s CHEERS mobile app allows users to access its online store, as well as video content, live streaming, and online games. Currently, Glory Star provides a variety of content, including short videos, online variety shows, online drama, live streaming, and the Cheers lifestyle video series.
Since its inception, Glory Star has leveraged its unique capability to market and monetize original, premium content through multiple sales channels. Its innovative business model, accomplished management team, and specialized big data system have enabled it to grow its user base significantly. At the same time, it has secured incredible B2B advertisement deals with some of the most renowned domestic and international brands. As of June 30, 2019, Glory Star had distributed nearly 70 thousand minutes of proprietary video content to its users and received more than 4.2 billion views cumulatively. Additionally, as of September 30, 2019, downloads of its CHEERs mobile app exceeded 65 million, further illustrating the appeal of its content.
Turning to Page 3.
We incorporated TKK Symphony in 2018 as a special purpose acquisition corporation. In August of last year, we successfully completed an IPO on Nasdaq and raised $250 million. Since our IPO, we have been actively seeking an acquisition target.
Our TKK Symphony management team and board of directors have extensive knowledge in consumer, lifestyle, new media, and e-commerce sectors, both in China and internationally. In search of a suitable acquisition target, we initially cast a wide net in terms of industry and geographic location. Glory Star New Media Group fits our investment criteria the best, as it straddles both online and mobile video advertising as well as the growing e-commerce industries. We are excited to grow together through this business combination.
According to the transaction agreement, Glory Star will exchange 100% of its equity holdings for an initial consideration of $425 million in value of TKK Symphony shares. All amounts remaining in TKK Symphony’s trust account at closing will be used for the growth and expansion of the combined entity.
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The transaction is expected to have an adjusted equity value of 529.0 million US dollars, including 10 million earnout shares at an assumed price of $10.26 per share. This is equivalent to 22.9 times and 14.2 times Price to Earnings in 2019 and 2020, respectively, based on earnout terms. The selling shareholder will rollover all of its equity for an estimated 80.37% initial ownership, assuming all of TKK Symphony’s shareholders elect to redeem their shares at closing.
Upon transaction closing, TKK will change its name to Glory Star New Media Group Holdings Limited, change its ticker symbol to “GSMG”, and continue to trade on Nasdaq. Mr. Bing Zhang, co-founder, chairman and CEO of Glory Star, will remain as chairman and CEO of the combined entity, and I will become an independent director of its board. We will uphold our mission of integrating premium lifestyle content with innovative mobile technology and e-commerce offerings to enrich people’s lives.
The transaction is expected to close by the end of 2019, subject to customary closing conditions.
As Page 4 of the presentation shows, we are excited about this transaction for five key reasons: a tremendous market opportunity with favorable trends, an innovative business model, an experienced management team, solid financial performance, and a fair valuation with attractive earnout terms that align the interests of all parties.
I would now like to turn the call over to Bing Zhang, the chairman, CEO, and co-founder of Glory Star New Media, to discuss these points in greater detail.
Bing Zhang, Co-Founder, Chairman and CEO of Glory Star New Media
Thank you, Sing, and hello, everyone. This is Will Dyke, Associate of ICR. As the IR representative of the Company, I will now speak on behalf of Mr. Bing Zhang, co-founder and CEO of Glory Star New Media.
Established in November 2016, Glory Star has pioneered a unique, new business model integrating e-commerce services with premium video content. The Company has become a leading online digital media and entertainment company in China, with a strong track record both in terms of viewership and production capabilities. In 2017, we launched our signature lifestyle video series, Cheers. In 2018, we launched CHEERS APP to integrate e-commerce services with professionally-produced content.
Currently, we are among the top market participants by GMV in the professionally-generated-video e-commerce industry. We serve millions of users through both third-party platforms and our mobile APP. Through the innovative integration of e-commerce services with premium lifestyle content, we have effectively pioneered a unique, new media model. Our ability to integrate highly engaging content with e-commerce services has enabled us to capitalize on the immense growth potential of China’s mobile live streaming and short-videos markets while cultivating new, innovative monetization opportunities. Going forward, we expect our extensive industry knowledge, deep pool of professional talent, and robust operating performance to continue enhancing our financial performance and launch us into a new stage of growth.
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Turning to Page 5.
Our DNA as a new media pioneer has enabled us to participate in several fast-growth industries in China, including advertising, live streaming, and short videos, as well as traditional and social e-commerce. More importantly, each of these industries is trending up and to the right. Let’s take a moment to consider a few of the metrics that help to illustrate the current growth potential.
According to reports by the State Administration for Industry and Commerce and iResearch:
| ● | In 2018, China’s advertising market reached RMB 799.1 billion, with a CAGR of 9.3% between 2014 and 2018; |
| ● | In the same period, lifestyle content categories accounted for 7 of the top 10 categories by ad spend, with Food accounting for 11.9% of the total ad spend; |
| ● | China has one of the largest live-streaming and short-form video ad markets in the world. By 2019, the live streaming ad market in China is expected to grow to 5.2 billion RMB and the short video ad market in China is expected to grow to 32.8 billion RMB; |
| ● | The Chinese mobile shopping population has increased significantly, from 236 million in 2014 to 592 million in 2018; |
| ● | As a result, the size of China’s social e-Commerce market reached 626.9 billion RMB in 2018 and is expected to reach 2.9 trillion RMB by 2021. |
The current market momentum has created a favorable environment for our business’s operating performance in 2019 to date. As shown on page 6 of the presentation, we have expanded both vertically and horizontally. We continue to acquire customers through high-quality content, cultivate users’ desires to make purchases through video offerings, and improve our retention rate with repeat purchases, all of which have yielded promising results.
| ● | As of June 30, 2019, we had distributed nearly 70 thousand minutes of proprietary video content to our users in a variety of content categories, achieving more than 4.2 billion views cumulatively. |
| ● | We have incubated over 70 proprietary short-form video content IPs. Our interactive live-streaming quiz show “Shopping Genius” recorded over 500 thousand live viewers on average. |
| ● | As of September 30, 2019, cumulative downloads of our Cheers mobile app exceeded 65 million, reaching more than 23.5 million Monthly Active Users and 3.6 million Daily Active Users on average in the period. |
| ● | More importantly, we have also integrated marketplace, video SNS, and membership rewards systems within our platform to explore additional monetization opportunities. |
This strong operating performance demonstrates our ability to effectively market and monetize original, premium lifestyle content through multiple sales channels in China.
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By integrating lifestyle content and e-commerce services, we have elevated ourselves above the crowd and become a leader in our field, consistently growing our active user base while prudently managing the costs of acquiring new customers. Notably, our ability to continually grow our user base is a product of our healthy ecosystem, highly-engaging video content, and flagship e-Mall property.
We have also purposefully cultivated a number of key differentiations to bolster our competitive advantages and widen our economic moat.
Please turn to Page 7.
We primarily target millennials with a wide breadth of product offerings as they increasingly live their lives online. This is accomplished through a carefully planned content strategy that tailors content genres, platform selection, and production quality to our targeted demographic.
As we continue expanding our leading content library, we are also increasingly able to leverage our professionally-generated content to drive consumers to our e-Mall. On e-Mall, our customers can access thousands of domestic and international consumer and lifestyle brand partners.
After driving consumers to e-Mall, we are able to convert them into customers through both our innovative membership program and rewards system. This model has proven so effective, that, in 2019, we achieved a customer retention rate of around 70% showcasing the health of our uniquely positioned, content-driven ecosystem and vitality of our one-stop consumer solution. This strategy strongly supports the long-term success of our business, continuously enhancing our brand and supercharging our ecosystem.
Turning to Page 8.
We have leveraged our highly engaging content to design an innovative membership and rewards system. This system cultivates our users’ consumption habits on e-Mall by leveraging our premium, lifestyle video content. As members consume and interact with our short-form video and live streaming content, they simultaneously enjoy exclusive discounts and earn rewards. This strong value proposition, combined with our premium brand, sticky ecosystem, industry-leading retention rate, and premium content has also increased our attractiveness to other business customers.
Turning to Page 9.
Upon the closing of the deal, we have arranged for an experienced management team with strong industry talent and deep professional experience to assume leadership of the company.
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I, Bing Zhang, am a co-founder, the chairman and CEO of Glory Star. Prior to starting Glory Star, I pioneered the televising of fashion content and created the first online variety show in China and have received a number of awards in the media industry. After the transaction closes, I will serve as Chairman of GSMG and remain CEO.
Also remaining in their roles are, Jia Lu, co-founder and SVP of Glory Star, and Ran Zhang, co-founder and VP of Glory Star. Furthermore, we have an elite operational team of around 170 professionals and a highly competent management team, the majority of whom have been working together for more than 8 years.
Turning to page 10.
Now, I would like to give you an overview of our financials.
We are pleased to note that Glory Star is profitable and growing rapidly. Our revenues grew by 74.1% from 33.2 million USD in 2017 to 57.8 million USD in 2018. Improvements in our various product offerings, which generate revenues through advertising, copyright and distribution, production, and e-Commerce services, drove this strong growth momentum.
Importantly, we have also expanded our profitability while growing revenues. In 2018, our income from operations increased to 13.5 million USD from 10.3 million USD in 2017.
Our adjusted net profit increased to 12.9 million USD in 2018 from 11.0 million USD in 2017. For our adjusted net profits in 2019 and 2020, we are targeting 25.4 million USD and 44.4 million USD, respectively, to hit our earnout targets.
I will now turn the call back to Sing for a recap of the transaction.
Sing Wang, Chairman and CEO of TKK Symphony
Thank you, Will, for speaking on behalf of Chairman Zhang.
Let’s now turn to Page 11 of the presentation.
We anticipate an initial equity value of 529.0 million USD, implying 22.9 times the estimated price-to-adjusted earnout earnings multiple for 2019, and 14.2 times the estimated price-to-adjusted earnout earnings multiple for 2020.
If no TKK Symphony shareholders elect to redeem their shares at closing, Glory Star’s current shareholders will hold approximately 54.96% of the combined company, TKK Symphony’s public shareholders will own approximately 36.49%, and TKK’s founders and affiliates will own approximately 8.56%. If all of TKK Symphony’s shareholders elect to redeem their shares at closing, Glory Star’s current shareholders will hold approximately 80.37% of the combined company, TKK Symphony’s public shareholders will own approximately 7.12%, and TKK’s founders and affiliates will own approximately 12.51%.
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The transaction has an incentive earnout mechanism. Glory Star’s shareholders shall be entitled to receive an additional 5 million ordinary shares if its adjusted net income for 2019 is equal to or greater than 180 million RMB. Shareholders will receive an additional 5 million ordinary shares if its adjusted net income for 2020 is equal to or greater than 315 million RMB. However, should Glory Star fail to meet the earnout target for any earnout year, Glory Star’s shareholders shall not be entitled to receive any earnout shares for that earnout year. If the aggregate adjusted net income for both earnout years combined is at least 495 million RMB, Glory Star’s shareholders shall be entitled to receive any earnout shares that they otherwise did not receive.
Turning to Page 12.
In summary, we are excited about the merger between TKK Symphony and Glory Star. We believe that the combined company will generate substantial shareholder value, as it enjoys a tremendous market opportunity and operates an innovative business model. More importantly, it has an experienced management team. Chairman Zhang has over 30 years of industry experience. The majority of the executive team has worked together for at least 8 years. Under their leadership, we are confident that the Company can continue to deliver solid financial performance going forward. Above all, the deal terms and valuation of this transaction are very attractive to long-term shareholders.
As a reminder, the transaction has been unanimously approved by the boards of both TKK Symphony and Glory Star. Completion of the transaction is subject to customary closing conditions detailed in the Tender Offer statement.
This concludes our remarks for today. Thank you for joining the call. Please do not hesitate to contact us with any questions about the business or transaction. We look forward to speaking with everyone again in the future.
This concludes this conference call. Thank you, operator.
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