EX-99.A1C 2 sctoi111519a5ex99a1c_tkk.htm AMENDED AND RESTATED OFFER TO PURCHASE, DATED DECEMBER 11, 2019

Exhibit 99(a)(1)(c)

AMENDED & RESTATED
OFFER TO PURCHASE FOR CASH

by
TKK SYMPHONY ACQUISITION CORPORATION
Up to 25,000,000 of its Ordinary Shares

at a Purchase Price of $10.28 Per Share
in Connection with its Consummation of a Proposed Business Combination

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON December 16, 2019, UNLESS THE OFFER IS EXTENDED.

TKK Symphony Acquisition Corporation (the “Company,” “TKK,” “we,” “us” or “our”) hereby offers to purchase up to 25,000,000 of its issued and outstanding ordinary shares, par value $0.0001 per share (the “ordinary shares”), at a purchase price of $10.28 per ordinary share (the “Purchase Price”), net to the seller in cash, without interest, for an aggregate purchase price of up to $257,000,000, upon the terms and subject to certain conditions described in this Amended & Restated Offer to Purchase (this “Offer to Purchase”) and in the related Letter of Transmittal (“Letter of Transmittal,” which, together with this Offer to Purchase, as they may be amended or supplemented from time to time, constitute the “Offer”).

If you support the proposed Business Combination (as defined herein), you should not tender your ordinary shares pursuant to the Offer, because ordinary shares purchased by us pursuant to the Offer will cease to represent an interest in the continuing company following the Business Combination. However, even if you tender your ordinary shares pursuant to the Offer, all outstanding warrants of TKK to purchase ordinary shares will remain outstanding, and each outstanding right of TKK will be automatically converted into one-tenth (1/10) of an ordinary share upon the closing of the Business Combination.

Only ordinary shares validly tendered, and not properly withdrawn, will be purchased by us pursuant to the Offer. If we are not able to consummate the Business Combination substantially contemporaneously with the expiration of the Offer, we may amend, terminate, or extend the Offer. If we terminate the Offer, we will NOT: (1) purchase any ordinary shares pursuant to the Offer or (2) consummate the Business Combination in accordance with the terms of the Share Exchange Agreement described in this Offer to Purchase. If we do not consummate the Business Combination on or before February 20, 2020 (or until June 20, 2020 if we extend the period of time to consummate a business combination through the issuance of 25,000,000 warrants, each warrant to purchase one-half of an ordinary share, as a dividend to our public shareholders (“potential extension warrants”)), we will terminate the Offer and will commence winding up our affairs and, unless we identify an alternative initial business combination, will liquidate without completing a business combination.

The Purchase Price of $10.28 represents the amount that was on deposit as of November 26, 2019, in the Trust Account (the “Trust Account”) initially established to hold the proceeds of our initial public offering (“IPO”) net of taxes payable, divided by the 25,000,000 ordinary shares sold in the IPO. See “The Offer — General” and “The Offer — Purchase Price.”

The Offer is being made pursuant to the terms of the share exchange agreement, dated as of September 6, 2019 (as may be amended from time to time, the “Share Exchange Agreement”), by and among TKK, Glory Star New Media Group Limited, a Cayman Islands exempted company (“Glory Star”), Glory Star New Media (Beijing) Technology Co., Ltd., a wholly foreign-owned enterprise limited liability company (“WFOE”) incorporated in the People’s Republic of China (“PRC”) and indirectly wholly-owned by Glory Star, Xing Cui Can International Media (Beijing) Co., Ltd., a limited liability company incorporated in the PRC (“Xing Cui Can”), Horgos Glory Star Media Co., Ltd., a limited liability company incorporated in the PRC (“Horgos,” and collectively with Xing Cui Can, the “VIEs”, and the VIEs, the WFOE and Glory Star, collectively, the “Glory Star Parties”, and the Glory Star Parties collectively with their respective subsidiaries, the “Glory Star Group”), each of Glory Star’s shareholders (collectively, the “Sellers”), TKK Symphony Sponsor 1, TKK’s sponsor (the “Sponsor”), in the capacity as the representative from and after the closing of the Business Combination for TKK’s shareholders other than the Sellers (the “Purchaser Representative”), and Bing Zhang, in the capacity as the representative for the Sellers thereunder (the “Seller Representative”). Upon the consummation of the Business Combination, Glory Star will be a wholly owned subsidiary of TKK, and TKK will change its name to “Glory Star New Media Group Holdings Limited.”

 

Glory Star commenced operations in 2016. Through its subsidiaries and VIEs, Glory Star provides advertising and content production services, and operates a mobile and online advertising, digital media, and entertainment business in China, and is building one of the leading e-commerce platforms in China through its mobile app called 悦享视频 App (“CHEERS App”) that allows its users to access its online store (e-Mall), video content, live streaming, and online games. The aggregate consideration to be provided by TKK to the Sellers pursuant to the Share Exchange Agreement will consist of: (i) an aggregate number of ordinary shares equal to $425,000,000 divided by the redemption price (the “Closing Payment Shares”), of which five percent of the Closing Payment Shares (the “Escrow Shares”) shall be deposited into escrow to secure certain indemnification obligations of the Sellers, plus (ii) earnout payments consisting of up to an additional 5,000,000 ordinary shares if the combined company (and its subsidiaries on a consolidated basis) meets certain financial performance targets for the 2019 fiscal year and an additional 5,000,000 ordinary shares if the combined company (and its subsidiaries on a consolidated basis) meets certain financial performance targets for the 2020 fiscal year (the “Earnout Shares”). In the event that a financial performance target is not met for the 2019 fiscal year and/or 2020 fiscal year but the combined company (and its subsidiaries on a consolidated basis) meets certain financial performance targets for the 2019 fiscal year and 2020 fiscal year combined, the Sellers will be entitled to receive any Earnout Shares that they otherwise did not receive (the “Alternative Earnout”).

Pursuant to our Memorandum and Articles of Association, as amended, we are required, in connection with the Business Combination, to provide all holders of ordinary shares (the “public shareholders”) with the opportunity to redeem their ordinary shares for cash through a tender offer pursuant to the tender offer rules promulgated under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our Sponsor and the initial shareholders have agreed to waive their redemption rights with respect to any of their founder shares or public shares, if any, in connection with the consummation of the Business Combination. The Offer is being made to provide the public shareholders with such opportunity to redeem their ordinary shares. See “The Offer — Purpose of the Offer; Certain Effects of the Offer.”

THE OFFER IS CONDITIONED UPON THE SATISFACTION OF THE CLOSING CONDITION (AS FURTHER DESCRIBED IN THIS OFFER TO PURCHASE) AND THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE “THE OFFER — CONDITIONS OF THE OFFER.”

We will fund the purchase of ordinary shares in the Offer with cash available to us from the Trust Account upon consummation of the Business Combination. As of September 30, 2019, TKK had approximately $42,270 of cash and cash equivalents held outside the Trust Account. As of November 26, 2019, TKK had approximately $257.2 million held in the Trust Account. See “The Offer — Source and Amount of Funds.” The Offer is not conditioned on any minimum number of ordinary shares being tendered. The Offer is, however, subject to certain other conditions, including the Closing Condition. See “The Offer —Purchase of Ordinary Shares and Payment of Purchase Price” and “The Offer — Conditions of the Offer.”

TKK’s ordinary shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “TKKS”. As of December 6, 2019, the closing price of the ordinary shares was $10.19 per share. Shareholders are urged to obtain current market quotations for the ordinary shares before deciding whether to tender their ordinary shares pursuant to the Offer.

TKK also has outstanding units (the “Units”), each comprised of one ordinary share, one warrant to purchase one-half of an ordinary share (“warrant”) and one right to acquire one-tenth of one ordinary share upon the consummation of a Business Combination (“right”). The Units, warrants and rights are also listed on Nasdaq under the symbols “TKKSU”, “TKKSW” and “TKKSR”, respectively. The Offer is only open for our ordinary shares, and not the other securities included as part of the Units. You may tender ordinary shares that are included in Units, but to do so you must separate the Units into ordinary shares, warrants and rights prior to tendering such ordinary shares. The separation can typically be accomplished within three business days. See “The Offer — Procedures for Tendering Ordinary Shares.”

Our board of directors has (i) approved our making the Offer, (ii) approved the Share Exchange Agreement and (iii) determined that the Business Combination is in the best interests of TKK and, if consummated, the Business Combination would constitute our initial business combination pursuant to our Memorandum and Articles of Association, as amended. If you tender your ordinary shares in the Offer, you will not participate in the Business Combination with respect to such ordinary shares. However, all outstanding warrants of TKK to purchase ordinary shares will remain outstanding and if you hold rights, you will receive 1/10th of one ordinary share following the Business Combination. You would participate in the Business Combination to the extent

 

you retain any ordinary shares or become shareholders pursuant to the conversion of rights, the exercise of warrants, or otherwise. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU DO NOT ACCEPT THE OFFER WITH RESPECT TO YOUR ORDINARY SHARES.

Our Sponsor, officers, and certain members of our board of directors will directly benefit from the Business Combination and have interests in the Business Combination that may be different from, or in addition to, the interests of TKK shareholders. See “The Business Combination — Interests of Certain Persons in the Business Combination.”

You must make your own decision as to whether to tender your ordinary shares and, if so, how many ordinary shares to tender. In doing so, you should read carefully the information in this Offer to Purchase and in the Letter of Transmittal, including the purposes and effects of the Offer. See “The Offer — Purpose of the Offer; Certain Effects of the Offer.” You should discuss whether to tender your ordinary shares with your broker, if any, or other financial advisors. See “Risk Factors” for a discussion of risks that you should consider, including risks relating to Glory Star, and the inherent difficulty in obtaining accurate valuations on advertising/e-commerce/media companies such as Glory Star, before participating in the Offer.

Our Sponsor and our initial shareholders have agreed to waive their redemption rights in connection with the Offer with respect to the ordinary shares they own and as such, will not tender any shares they hold to TKK. See “The Offer — Purpose of the Offer; Certain Effects of the Offer” and “The Business Combination — Interests of Certain Persons in the Business Combination.”

The information contained herein concerning Glory Star, its business, and industry has been provided by Glory Star.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Offer. Any representation to the contrary is a criminal offense.

Questions and requests for assistance regarding the Offer may be directed to Morrow Sodali LLC, as information agent (the “Information Agent”) for the Offer, at the telephone numbers and e-mail address set forth on the back cover of this Offer to Purchase. You may request additional copies of the Offer to Purchase, the Letter of Transmittal, and the other Offer documents, if any, from the Information Agent at the telephone number and e-mail address on the back cover of this Offer to Purchase. You may also contact your broker, dealer, commercial bank, trust company or nominee for copies of these documents.

December 12, 2019

 

IMPORTANT

If you desire to tender all or any portion of your ordinary shares, you must do one of the following before the Offer expires:

•        if your ordinary shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact the nominee and have the nominee tender your ordinary shares for you;

•        if you hold certificates for ordinary shares registered in your own name, you must complete and sign the appropriate enclosed Letter of Transmittal according to its instructions and deliver it, together with any required signature guarantees, the certificates for your ordinary shares and any other documents required by the Letter of Transmittal, to Continental Stock Transfer & Trust Company;

•        if you are a participant institution of The Depository Trust Company, or DTC, you must tender your ordinary shares according to the procedure for book-entry transfer described in “The Offer — Procedures for Tendering Ordinary Shares” of this Offer to Purchase; or

•        if you are a holder of Units and wish to tender ordinary shares included in such Units, you must separate the Units into ordinary shares, warrants and rights prior to tendering such ordinary shares pursuant to the Offer. For specific instructions regarding separation of Units, you will need to contact your broker and/or see the letter from your broker/nominee, which includes an instruction form for your completion which provides a box to check to request separation of the Units. Accordingly, while we believe that such separation of the Units can typically be accomplished within three business days, no assurance can be given regarding how quickly units can be separated and Unit holders are urged to promptly contact their broker/nominee if they wish to tender the shares underlying their Units. If you fail to cause your ordinary shares to be separated in a timely manner before the Offer expires, you will not be able to validly tender such ordinary shares prior to the expiration of the Offer.

To validly tender ordinary shares pursuant to the Offer, other than ordinary shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must properly complete and duly execute the Letter of Transmittal and deliver it to us in accordance with the procedures described in Offer to Purchase.

We are not making the Offer to, and will not accept any tendered ordinary shares from, shareholders in any jurisdiction where it would be illegal to do so. However, we may, at our discretion, take any actions necessary for us to comply with the applicable laws and regulations to make the Offer to shareholders in any such jurisdiction.

We have not authorized any person to make any recommendation on our behalf as to whether you should tender your ordinary shares pursuant to the Offer. You should rely only on the information contained in this Offer to Purchase and in the related Letter of Transmittal or other information to which we have referred you. We have not authorized anyone to provide you with information or to make any representation in connection with the Offer other than those contained in this Offer to Purchase or in the related Letter of Transmittal. If anyone makes any recommendation or gives any information or representation regarding the Offer, you must not rely upon that recommendation, information or representation as having been authorized by us, our board of directors, the Depositary or the Information Agent for the Offer. You should not assume that the information provided in this Offer is accurate as of any date other than the date as of which it is shown, or if no date is otherwise indicated, the date of this Offer. However, were any material changes to occur that would require amendment to the Offer to Purchase, TKK would amend the Offer to Purchase and any related documents to disclose such information.

HOW TO OBTAIN ADDITIONAL INFORMATION

This Offer to Purchase incorporates important information about us that is not included or delivered herewith. If you would like to receive additional information or if you want additional copies of this document, the appendices or any other documents we file with the SEC, such information is available without charge upon written or oral request. Please contact the Information Agent for the Offering at:

Morrow Sodali LLC
470 West Avenue — 3
rd Floor
Stamford CT 06902
Individuals, please call (800) 662-5200
Banks and brokerage forms, please call (203) 658-9400
Email: TKKS.info@morrowsodali.com

 

TABLE OF CONTENTS

 

Page

CERTAIN DEFINITIONS

 

1

SUMMARY TERM SHEET

 

3

QUESTIONS AND ANSWERS ABOUT THE OFFER

 

4

RISK FACTORS

 

13

FORWARD-LOOKING STATEMENTS

 

51

INFORMATION ABOUT THE TKK AND GLORY STAR GROUP

 

52

SELECTED HISTORICAL FINANCIAL INFORMATION OF TKK

 

84

SELECTED HISTORICAL FINANCIAL INFORMATION OF GLORY STAR GROUP

 

85

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

86

THE BUSINESS COMBINATION

 

88

THE SHARE EXCHANGE AGREEMENT

 

99

THE OFFER

 

109

DESCRIPTION OF TKK’S SECURITIES AND MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS FOLLOWING THE BUSINESS COMBINATION

 

120

DESCRIPTION OF THE COMBINED COMPANY FOLLOWING THE BUSINESS COMBINATION

 

121

MARKET INFORMATION AND DIVIDENDS

 

122

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF TKK

 

123

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GLORY STAR

 

128

MANAGEMENT OF TKK

 

141

MANAGEMENT OF COMBINED COMPANY

 

144

PRINCIPAL SHAREHOLDERS

 

147

UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS

 

149

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

156

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

 

158

WHERE YOU CAN FIND MORE INFORMATION

 

164

INDEX TO FINANCIAL STATEMENTS

 

F-1

ANNEX A: Share Exchange Agreement, dated as of September 6, 2019 by and among TKK Symphony Acquisition Corporation, Glory Star New Media Group Limited and the other parties named therein, as amended.

 

A-1

i

CERTAIN DEFINITIONS

Unless otherwise stated or where the context otherwise requires, references in this Offer to Purchase to:

•        “we,” “us,” “our,” the “Company,” or “TKK” means the registrant, TKK Symphony Acquisition Corporation, a Cayman Islands exempted company;

•        “Additional Agreements” means the Registration Rights Agreement, Escrow Agreement, Non-Compete Agreements and Lock-Up Agreement, as contemplated by the Share Exchange Agreement;

•        “Memorandum and Articles of Association” means TKK’s Amended and Restated Memorandum and Articles of Association, as further amended and in effect on the date hereof;

•        “Business Combination” means the acquisition of Glory Star by TKK pursuant to the terms of the Share Exchange Agreement;

•        “Business Combination Deadline” means February 20, 2020 (or until June 20, 2020 if we extend the period of time to consummate a business combination through the issuance of 25,000,000 warrants, each to purchase one-half of an ordinary share, as a dividend to our public shareholders (“potential extension warrants”)), the deadline for consummating TKK’s initial business combination;

•        “Cayman Islands Companies Law” means the Cayman Islands Companies Law (2018 Revision), as amended;

•        “Closing Payment Shares” means the ordinary shares of TKK in an aggregate number equal to $425,000,000 divided by the redemption price, that are to be issued to the Sellers upon the consummation of the Business Combination as consideration therefor;

•        “combined company” means TKK (to be renamed “Glory Star New Media Group Holdings Limited”) and its subsidiaries following the consummation of the Business Combination;

•        “Earnout Shares” means a maximum of 10,000,000 ordinary shares that may be issued to the Sellers if, after the Business Consummation, the combined company meets certain financial performance targets for the 2019 fiscal year and 2020 fiscal year;

•        “Escrow Shares” means 5% of the Closing Payment Shares that are to be deposited into escrow to secure certain indemnification obligations of Glory Star and the Sellers;

•        “Exchange Act” means the United States Securities Exchange Act of 1934, as amended;

•        “founder shares” means the ordinary shares held by the Sponsor and other initial shareholders;

•        “FPI” or “FPI status” means a foreign private issuer as defined by and determined pursuant to Rule 3b-4 under the Exchange Act;

•        “Glory Star” means Glory Star New Media Group Limited, a Cayman Islands exempted company;

•        “Glory Star Group” means Glory Star together with its consolidated subsidiaries and VIEs.

•        “Glory Star Parties” are the VIEs, the WFOE and Glory Star, collectively;

•        “Horgos” means Horgos Glory Star Media Co., Ltd., a limited liability company incorporated in the PRC;

•        “initial public offering” or “IPO” means TKK’s initial public offering of Units at $10.00 per Unit which closed in August 2018;

•        “Nasdaq” means the Nasdaq Capital Market;

•        “PRC” means the People’s Republic of China;

•        “private placement warrants” means the warrants issued to an affiliate of the Sponsor in a private placement in connection with the IPO;

1

•        “public rights” and “rights” means the rights sold as part of the units in the IPO (whether they were purchased in the offering or thereafter in the open market); one right entitles the holder thereof to receive one-tenth (1/10) of an ordinary share upon the consummation of an initial business combination

•        “public shareholders” means holders of public shares;

•        “public shares” means the ordinary shares sold as part of the units in the IPO (whether they were purchased in the offering or thereafter in the open market);

•        “public warrants” or “warrants” are to the redeemable warrants sold as part of the units in the IPO (whether they were purchased in the offering or thereafter in the open market); each warrant entitles the holder thereof to purchase one-half of one ordinary share at a price of $5.75 per half share, subject to adjustment;

•        “Purchase Price” means $10.28 per ordinary share or $257,000,000 in aggregate;

•        “Purchaser Representative” means TKK Symphony Sponsor 1, a Cayman Islands exempted company, as representative of the Purchaser;

•        “RMB” refers to Renminbi, the lawful currency of China;

•        “SEC” means the United States Securities and Exchange Commission;

•        “Securities Act” means the United States Securities Act of 1933, as amended;

•        “Seller Representative” means Bing Zhang, as representative of the Sellers;

•        “Sellers” means the shareholders of Glory Star;

•        “Share Exchange” means the acquisition of the shares of Glory Star from the Sellers pursuant to the terms of the Share Exchange Agreement;

•        “Share Exchange Agreement” means the Share Exchange Agreement, dated as of September 6, 2019, as may be amended from time to time, by and among by and among TKK, Glory Star, WFOE, Xing Cui Can, Horgos, each of the Sellers, the Purchaser Representative, and the Seller Representative.

•        “Sponsor” means TKK Symphony Sponsor 1, a Cayman Islands exempted company;

•        “Trust Account” means the segregated account at Continental Stock Transfer and Trust Company, where certain of the proceeds from our IPO and the sale of the private placement warrants were deposited pursuant to an Investment Management Trust Agreement by and between TKK and Continental Stock Transfer & Trust Company, as trustee;

•        “underwriters” means the underwriters of TKK’s IPO;

•        “Units” means the units issued in TKK’s IPO; each Unit comprised of one ordinary share, one warrant and one right (whether they were purchased in the IPO or thereafter in the open market);

•        “VIE Contracts” means certain documents executed by the VIEs, the WFOE, the shareholders of the VIEs and certain other parties thereto as necessary to implement certain contractual arrangements in the PRC, which allow the WFOE to (i) exercise effective control over the VIEs and their subsidiaries, (ii) receive substantially all of the economic benefits of the VIEs and their subsidiaries; and (iii) have an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law;

•        “VIEs” means Xing Cui Can and Horgos, the variable interest entities of Glory Star;

•        “WFOE” means Glory Star New Media (Beijing) Technology Co., Ltd., a wholly foreign-owned enterprise limited liability company and indirectly wholly-owned by Glory Star; and

•        “Xing Cui Can” means Xing Cui Can International Media (Beijing) Co., Ltd., a limited liability company incorporated in the PRC.

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SUMMARY TERM SHEET

This summary term sheet highlights important information regarding the Offer and the Business Combination. To understand the Offer fully and for a more complete description of the terms of the Offer and the Business Combination, you should carefully read this entire Offer to Purchase, including the appendices and documents incorporated by reference, and the Letter of Transmittal. We have included references to the sections of this Offer to Purchase where you will find a more complete description of the topics addressed in this summary term sheet.

Structure of the Offer

 

The Offer consists of our offer to purchase ordinary shares, par value $0.0001 per share, of TKK upon the closing of the Offer.

Securities Subject to the Offer

 

Up to 25,000,000 ordinary shares.

Price Offered Per Ordinary Share in the Offer

 


$10.28 net to the seller in cash, without interest thereon, which amount represents the amount that was on deposit as of November 26, 2019, in the Trust Account initially established to hold the proceeds of our IPO net of taxes payable, divided by the 25,000,000 ordinary shares sold in the IPO (the “Purchase Price”).

Scheduled Expiration of Offer

 

5:00 p.m., New York City time, on December 16, 2019 unless the Offer is otherwise extended, which may depend on whether the conditions to closing the Business Combination have been completed, as well as the timing and process of the SEC’s review of the Offer to Purchase, or the Offer has been terminated (the “Expiration Date”).

Party Making the Offer

 

TKK Symphony Acquisition Corporation, a Cayman Islands exempted company.

Conditions to the Offer

 

Our obligation to purchase ordinary shares validly tendered and not properly withdrawn at the Expiration Date is conditioned upon, among other things, the Business Combination, in our reasonable judgment, to be determined immediately prior to the Expiration Date, being capable of being consummated substantially contemporaneously with this Offer, but in no event later than three business days after the Expiration Date (we refer to this condition, which is not waivable, as the “Closing Condition”).

Share Exchange Agreement and the Business Combination

 


The Offer is being made pursuant to the terms of the Share Exchange Agreement by and among TKK, Glory Star and the other parties named therein, pursuant to which TKK will acquire all of the issued and outstanding shares of Glory Star. Upon the consummation of the Share Exchange, Glory Star will become a wholly owned subsidiary of TKK, and TKK will change its name to “Glory Star New Media Group Holdings Limited.” The aggregate consideration to be provided by TKK to the Sellers pursuant to the Share Exchange Agreement will consist of: (i) the Closing Payment Shares (or 41,342,412 ordinary shares assuming a redemption price of $10.28 per share), 5% of which (or 2,067,121 Escrow Shares assuming a redemption price of $10.28 per share) shall be deposited into escrow to secure certain indemnification obligations of Glory Star and the Sellers, plus (ii) earnout payments consisting of up to an additional 10,000,000 Earnout Shares if we (and our subsidiaries on a consolidated basis) meet certain financial performance targets for the 2019 fiscal year and 2020 fiscal year.

   

Through its subsidiaries and VIEs, Glory Star provides advertisement and content production services, and operates an award winning mobile and online advertising, digital media, and entertainment business in China, and is building one of the leading e-commerce platforms in China through its mobile app called 悦享视频 App (“CHEERS App”) that allows its users to access its online store (e-Mall), video content, live streaming, and online games. For further information about Glory Star, please see “Information About TKK and Glory Star Group — Information about Glory Star Group” and “Risk Factors.”

For further information regarding the Offer, see “Questions and Answers About the Offer” beginning on page 4 and “The Offer” beginning on page 109.

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QUESTIONS AND ANSWERS ABOUT THE OFFER

General

Q.     What is the background of TKK Symphony Acquisition Corporation?

A:     We are a blank check company incorporated in the Cayman Islands on February 5, 2018. We were incorporated for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities. We are not limited to a particular industry or geographic region for purposes of consummating an initial business combination. On August 20, 2018, we consummated an IPO of 22,000,000 Units, generating total gross proceeds of $220,000,000. Simultaneously with the closing of the IPO, we consummated the sale of an aggregate of 11,800,000 private placement warrants at a price of $0.50 per warrant in a private placement to Symphony Holdings Limited (“Symphony”), generating total gross proceeds of $5,900,000. Following the closing of our IPO on August 20, 2018, $220,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the private placement warrants was placed in a Trust Account pending our completion of an initial business combination. On August 22, 2018, in connection with the underwriters’ partial exercise of their over-allotment option, we consummated the sale of an additional 3,000,000 Units at $10.00 per Unit and the sale of an additional 1,200,000 private placement warrants at $0.50 per private placement warrant, generating total gross proceeds of $30,600,000. A total of $30,000,000 of the net proceeds was deposited in the Trust Account, increasing the aggregate proceeds held in the Trust Account to $250,000,000.

On September 12, 2018, the ordinary shares, warrants and rights underlying the Units sold in the IPO began to trade separately.

If we do not consummate an initial business combination by the Business Combination Deadline, it will trigger our automatic winding up, liquidation and dissolution pursuant to the terms of our Memorandum and Articles of Association.

Q.     Who is Glory Star?

A:     Through its subsidiaries and VIEs, Glory Star provides advertisement and content production services, and operates an award winning mobile and online advertising, digital media, and entertainment business in China, and is building one of the leading e-commerce platforms in China through its mobile app called 悦享视频 App (“CHEERS App”) that allows its users to access its online store (e-Mall), video content, live streaming, and online games. Glory Star is a Cayman Islands company with its primary business address at F22, Xinhua Technology Building, No. 8 Tuofangying Road, Jiangtai, Chaoyang District, Beijing, People’s Republic of China. Glory Star commenced operations in 2016.

Q.     Who is offering to purchase TKK’s ordinary shares?

A:     TKK is offering to purchase its ordinary shares.

Q.     What securities are sought?

A.     TKK is offering to purchase up to all of its outstanding ordinary shares validly tendered and not properly withdrawn pursuant to the Offer. TKK’s Sponsor and its initial shareholders have agreed to waive their redemption rights with respect to any of their founder shares or public shares, if any, in connection with the consummation of the Business Combination. If you support the proposed Business Combination, you should not tender your ordinary shares pursuant to the Offer, because ordinary shares purchased by TKK pursuant to the Offer will cease to represent an interest in the continuing company following the Business Combination. However, even if you tender your ordinary shares pursuant to the Offer, all outstanding warrants to purchase ordinary shares will remain outstanding, and each outstanding right will be automatically converted into one-tenth (1/10) of an ordinary share upon consummation of the Business Combination.

Q.     Why are we making the Offer?

A.     Pursuant to our Memorandum and Articles of Association, we are required, in connection with the Business Combination, to provide all holders of our ordinary shares with the opportunity to redeem their ordinary shares for their pro rata share of our Trust Account (net of taxes payable). The Offer is being made to provide our

4

shareholders with such opportunity to redeem their ordinary shares. Our Sponsor and the initial shareholders have agreed to waive such redemption rights with respect to any ordinary shares they have acquired. See “The Offer — Purpose of the Offer; Certain Effects of the Offer.”

Promptly following the scheduled Expiration Date, we will publicly announce whether the offer conditions have been satisfied or waived (as applicable) and whether the Offer has been completed, extended or terminated. If such offer conditions are satisfied or waived (as applicable), promptly after the Expiration Date and substantially contemporaneously with the completion of the Business Combination, we shall purchase and pay the Purchase Price for each ordinary share validly tendered and not properly withdrawn. Public shareholders who have redeemed their shares will also be entitled to receive a pro rata portion of the additional accrued interest, if any, remaining in the Trust Account, which we expect to be nominal.

Q.     Why is the Offer for 25,000,000 ordinary shares?

A.     Pursuant to our Memorandum and Articles of Association, we are required, in connection with the Business Combination, to provide all holders of our shares with the opportunity to redeem their ordinary shares through a tender offer pursuant to the tender offer rules promulgated under the Exchange Act. The Offer is being made to provide our shareholders with such opportunity to redeem their ordinary shares in connection with consideration of the Business Combination. The Sponsor and the initial shareholders of TKK have agreed to waive their redemption rights with respect to any of their founder shares or public shares, if any, in connection with the consummation of the Business Combination. See “The Offer — Purpose of the Offer; Certain Effects of the Offer.”

Q.     What if the conditions to the Offer are not satisfied?

A.     Our obligation to purchase ordinary shares validly tendered and not properly withdrawn at the Expiration Date is conditioned upon, among other things, the satisfaction of the Closing Condition. If we are unable to satisfy the Closing Condition, we may amend, terminate or extend the Offer. If we terminate the Offer, we will NOT: (i) purchase any ordinary shares pursuant to the Offer or (ii) consummate the Business Combination in accordance with the terms of the Share Exchange Agreement. Ordinary shares tendered pursuant to the Offer but not purchased by us in the Offer will be returned at our expense promptly following the expiration of the Offer.

If we do not consummate the Business Combination on or before February 20, 2020 (or until June 20, 2020 if we extend the period of time to consummate a business combination through the issuance of 25,000,000 potential extension warrants), we will terminate the Offer unless we find an alternative deal and will commence winding up of our affairs and will liquidate without completing a business combination. See “The Offer — General” and “The Offer — Purchase Price.”

Q.     What will be the purchase price for the ordinary shares and what will be the form of payment?

A.     The Purchase Price for the Offer is $10.28 per ordinary share, which amount represents the amount that was on deposit as of November 26, 2019, in the Trust Account initially established to hold the proceeds of our IPO net of taxes payable, divided by the 25,000,000 ordinary shares sold in the IPO. All ordinary shares we purchase will be purchased at the Purchase Price. Public shareholders who have redeemed their shares will also be entitled to receive a pro rata portion of the additional accrued interest, if any, remaining in the Trust Account, which we expect to be nominal. See “The Offer — General” and “The Offer — Purchase Price.” If your ordinary shares are purchased in the Offer, you will be paid the Purchase Price in cash promptly after the Expiration Date.

Q.     Has TKK or its board of directors adopted a position on the Offer?

A.     Our board of directors has (i) approved our making this Offer, (ii) approved the Share Exchange Agreement and (iii) determined that the Business Combination is in the best interests of TKK and, if consummated would constitute the initial business combination pursuant to our Memorandum and Articles of Association. If the Closing Condition is not satisfied, we will be unable to consummate the Business Combination. If you support the proposed Business Combination, you should not tender your ordinary shares pursuant to the Offer, because ordinary shares purchased pursuant to the Offer will cease to represent an interest in the continuing company following the Business Combination. However, even if you tender your ordinary shares pursuant to the Offer, all outstanding warrants to purchase ordinary shares will remain outstanding, and each outstanding right of TKK will be automatically converted into one-tenth (1/10) of an ordinary share. OUR BOARD OF DIRECTORS

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UNANIMOUSLY RECOMMENDS THAT YOU DO NOT ACCEPT THE OFFER WITH RESPECT TO YOUR ORDINARY SHARES. You must make your own decision as to whether to tender your ordinary shares and, if so, how many to tender. In doing so, you should read carefully the information in this Offer to Purchase and in the Letter of Transmittal, including the purpose and effects of the Offer.

The Business Combination

Q.     Is there a Share Exchange Agreement related to the Offer?

A.     Yes. On September 6, 2019, TKK, Glory Star and other parties entered into the Share Exchange Agreement, pursuant to which, among other things and subject to the terms and conditions contained in the Share Exchange Agreement, TKK will acquire all the issued and outstanding shares of Glory Star and Glory Star will become a wholly owned subsidiary of TKK. On the Closing of the Business Combination, TKK will change its name to “Glory Star New Media Group Holdings Limited.”

Q.     What is the structure of the Business Combination and the Exchange Consideration?

A.     Upon the closing of the Business Combination, TKK will acquire from the Sellers all of the outstanding shares of Glory Star. The Sellers will receive an aggregate number of ordinary shares equal to $425,000,000 divided by the redemption price (or 41,342,412 ordinary shares assuming a redemption price of $10.28 per share), 5% of which (or 2,067,121 Escrow Shares assuming a redemption price of $10.28 per share) will be deposited into escrow to secure certain indemnification obligations. The Sellers will also be entitled to receive up to 10 million additional ordinary shares if we meet certain financial performance targets for the 2019 and 2020 fiscal years. The Share Exchange Agreement is based on an equity valuation of Glory Star of $425,000,000 with the right to earn up to 10,000,000 Earnout Shares. TKK has entered into a Registration Rights Agreement with the Sponsor and the Sellers pursuant to which TKK will grant certain registration rights to the Sellers with respect to the registration of the Closing Payment Shares and Earnout Shares. TKK expects that the Sellers will seek to have their shares in TKK registered for resale under the Registration Rights Agreement promptly following the closing of the Business Combination.

Approximately $257.2 million was held in the Trust Account as of November 26, 2019. As further required by the terms of the Share Exchange Agreement, we cannot consummate the Business Combination unless we retain an amount of net tangible assets of no less than $5,000,001 upon consummation of a Business Combination, after giving effect to the completion of the Redemption and any private placement financing and including the consolidated net tangible assets of Glory Star Group.

Q.     What will be the ownership and organizational structure of TKK after consummation of the Business Combination?

A.      After the Business Combination, assuming no redemptions of public shares for cash in the Offer and a $10.28 redemption price, TKK’s current public shareholders will own approximately 36.52% of TKK, while TKK’s current directors, officers and initial shareholders, including the Sponsor, and EarlyBirdCapital, will collectively own approximately 8.57% of TKK, and the pre-Business Combination Sellers will own approximately 54.91% of the combined company. Assuming redemption by holders of all of the outstanding public shares in the Offer and a $10.28 redemption price, TKK’s current public shareholders will own 4.97% of TKK, TKK’s current directors, officers and initial shareholders, including the Sponsor, and EarlyBirdCapital, will own approximately 12.83% of TKK, and the Sellers will own approximately 82.20% of TKK.

Additionally, immediately following the consummation of the Business Combination, the board of directors of TKK is expected to be composed of five directors. Glory Star will have the right to designate four directors, at least two of whom must satisfy applicable independent director requirements and TKK will have the right to designate one director who must satisfy applicable independent director requirements. It is anticipated that Mr. Bing Zhang will be appointed as Chairman and Mr. Sing Wang will be the TKK’s representative to the board, with the remaining three proposed members to the board to be determined.

Q.     Will there be a single controlling shareholder following the completion of the Business Combination?

A.     Yes. The ownership of ordinary shares following the consummation of the Business Combination will depend on the number of ordinary shares that are validly tendered, not validly withdrawn and accepted for payment pursuant to the Offer. Assuming that 75,292,412 ordinary shares are outstanding upon consummation of the

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Business Combination and that no ordinary shares have been redeemed and a $10.28 redemption price, Bing Zhang will beneficially own in the aggregate approximately 20.28% of the outstanding ordinary shares. See “Principal Shareholders” for more information regarding the beneficial ownership of TKK following the Business Combination.

Q.     What assumptions have we made when disclosing ownership information?

A.     We have made several assumptions with respect to ownership of ordinary shares following the consummation of the Business Combination. These assumptions impact certain calculations of post-transaction ownership and voting rights throughout this Offer to Purchase. Unless otherwise expressly stated, all such calculations relating to beneficial ownership and voting rights post-Business Combination assume: (i) that no ordinary shares are validly tendered pursuant to the Offer; and (ii) the issuance of 41,342,412 ordinary shares as consideration to the Sellers in connection with the Business Combination assuming a redemption price of $10.28 per share (excluding any Earnout Shares) and treating the Escrow Shares as fully owned by the Sellers.

Q.     Are there other agreements that will be entered into in connection with the Business Combination?

A.     Yes. In addition to the Share Exchange Agreement, the following agreements have been or will be executed in connection with the Business Combination:

•        Registration Rights Agreement.    TKK entered into a Registration Rights Agreement with the Purchaser Representative and the Sellers pursuant to which TKK shall grant each Seller certain registration rights with respect to the registration of the Closing Payment Shares and Earnout Shares.

•        Escrow Agreement.    TKK and the Seller Representative will enter into an agreement to deposit 5% of the Closing Payment Shares into escrow to be set aside to secure certain indemnification obligations of Glory Star and the Sellers pursuant to the Share Exchange Agreement.

•        Lock-Up Agreements.    TKK, the Purchaser Representative and certain Sellers that directly or indirectly own in excess of 10% of Glory Star’s equity prior to the consummation of the Business Combination also entered into Lock-Up Agreements with respect to their Exchange Shares (including Escrow Shares) and Earnout Shares.

•        Non-Competition and Non-Solicitation Agreement.    TKK, the Purchaser Representative, Glory Star and certain Sellers that directly or indirectly own in excess of 30% of Glory Star’s equity prior to the Closing (including Glory Star’s chairman) and their principal also entered into Non-Competition and Non- Solicitation Agreements in favor of TKK, Glory Star and their respective successors, affiliates and subsidiaries and variable interest entities relating to the post-Closing company’s business.

Q.     Are the Offer and the Business Combination conditioned on one another?

A.     Yes. Pursuant to the terms of the Share Exchange Agreement, it is a condition to the consummation of the Business Combination that the Offer is conducted in accordance with the terms of the Share Exchange Agreement, and, pursuant to the terms of this Offer to Purchase, the Offer is subject to the condition that the Closing Condition (as described below) is satisfied, among other conditions. If the Closing Condition is not satisfied by the Expiration Date, we will terminate or extend the Offer. In the event the Offer is terminated, we will promptly return any ordinary shares, at our expense, that were delivered pursuant to the Offer upon the expiration or termination of the Offer and we will not consummate the Business Combination. If we do not consummate the Business Combination on or before February 20, 2020 (or until June 20, 2020 if we extend the period of time to consummate a business combination through the issuance of 25,000,000 potential extension warrants), we will terminate the Offer and will commence winding up of our affairs and will liquidate without completing a business combination. See “The Share Exchange Agreement.”

Q.     What are the most significant conditions to the Offer?

A.     Our obligation to purchase ordinary shares validly tendered and not properly withdrawn at the Expiration Date is conditioned upon satisfaction of the Closing Condition.

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Q.     What are the most significant conditions to the Business Combination?

A.     General Conditions

Consummation of the Business Combination is conditioned on the satisfaction of each of the following conditions, among others:

•        the election or appointment of members to TKK’s board of directors as described above;

•        TKK (together with the Glory Star Group) having at least $5,000,001 in net tangible assets upon consummation of a Business Combination, after giving effect to the completion of the Redemption and any private placement financing; and

•        TKK’s ordinary shares continue to be listed on Nasdaq immediately following the Closing and TKK has at least 300 round-lot shareholders.

Conditions to Obligations of TKK

The obligations of TKK to consummate the Business Combination are subject to the satisfaction or waiver of certain conditions, including the following conditions, among others:

•        TKK shall have received employment agreements in form and substance reasonably acceptable to TKK and Glory Star between certain individuals and either TKK or a Glory Star Group company, executed by the parties thereto;

•        TKK shall have received the Escrow Agreement, the duly executed VIE Contracts and evidence that certain contracts involving Glory Star Group companies and/or any of the Sellers or other related persons have been terminated with no further liability of Glory Star Group thereunder; and

•        each of the Non-Competition Agreement, the Lock-Up Agreement and the Registration Rights Agreement being in full force and effect in accordance with its terms as of the Closing.

Conditions to Obligations of the Sellers

The obligations of the Sellers to consummate the Business Combination are subject to the satisfaction or waiver of certain conditions, including the following conditions, among others:

•        Glory Star shall have received the Escrow Agreement, duly executed by TKK, the Purchaser Representative and the Escrow Agent; and

•        each of the Non-Competition Agreement, the Lock-Up Agreement and the Registration Rights Agreement being in full force and effect in accordance with its terms as of the Closing.

Additionally, Glory Star has a termination right if TKK does not have sufficient funds available at the Closing, after giving effect to the Offer, but excluding Glory Star Group’s cash to pay certain amounts owed to the underwriters of its initial public offering.

If any of the conditions to the Business Combination are not satisfied, TKK or the Sellers, as applicable, may choose to exercise any applicable right to terminate the Share Exchange Agreement. See “Risk Factors — Risks Relating to the Consummation of the Business Combination” and “The Share Exchange Agreement — Conditions to Closing of the Business Combination.” We refer to the conditions to the Offer and the Business Combination, as the “offer conditions.” See “The Share Exchange Agreement — Conditions to Closing of the Business Combination” and “The Offer — Conditions of the Offer.”

Q.     What interests do our directors, executive officers, and Sponsor have in the Business Combination?

A.     Our Sponsor and certain of TKK’s directors and officers have interests in the Business Combination that may be different from, or in addition to, the interests of TKK’s shareholders. If the Business Combination is not completed by the Business Combination Deadline, TKK will be required to liquidate following distribution of the amounts in the Trust Account. In such event, there will be no distribution from the Trust Account with respect

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to the 6,250,000 ordinary shares held by the Sponsor and other initial shareholders or the 13,000,000 private placement warrants held by Symphony, which would expire worthless. Certain of TKK’s directors and executive officers are affiliated with the Sponsor.

Unless TKK consummates the Business Combination, its officers, directors and their respective affiliates will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceeded the amount of its working capital. As a result, the financial interest of TKK’s officers, directors and their respective affiliates could influence their motivation in pursuing Glory Star as a target and therefore there may be a conflict of interest when determining whether the Business Combination is in TKK’s shareholders’ best interests.

In addition, an affiliate of the Sponsor has contractually agreed that, if TKK liquidates prior to the consummation of a business combination, it will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.00 per share by the claims of target businesses or claims of vendors or other entities that are owed money by TKK for services rendered or contracted for or products sold to it. In addition, the Sponsor has provided loans to us in the aggregate amount of $850,000 as of September 30, 2019, and we expect that the Sponsor will provide additional loans to us prior to the Business Combination Deadline, which loans are repayable only upon the consummation of a business combination. Therefore, the Sponsor has a financial interest in consummating any business combination, thereby resulting in a potential conflict of interest. The Sponsor or its affiliates could influence TKK’s officers’ and directors’ motivation in pursuing Glory Star as a target and therefore there may be a conflict of interest when the directors and officers determine whether the Business Combination is in TKK’s shareholders’ best interests.

If the Business Combination with Glory Star is completed, the board of directors of TKK is expected to be composed of five directors. The Sellers will have the right to designate four directors and TKK will have the right to designate one director. Three of the directors must satisfy applicable independent director requirements.

The exercise of TKK’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the transaction may result in a conflict of interest when determining whether such changes or waivers are appropriate and in best interests of TKK’s shareholders.

The Offer

Q.     How will TKK fund the payment for the ordinary shares?

A.     We will use funds on deposit in the Trust Account to purchase the ordinary shares of redeeming shareholders. See “The Offer — Source and Amount of Funds,” “The Offer — Purpose of the Offer; Certain Effects of the Offer” and “The Share Exchange Agreement.” The Purchase Price for the Offer is $10.28 per ordinary share, which amount represents the amount that was on deposit as of November 26, 2019, in the Trust Account initially established to hold the proceeds of our IPO net of taxes payable, divided by the 25,000,000 ordinary shares sold in the IPO. Public shareholders who have redeemed their shares will also be entitled to receive a pro rata portion of the additional accrued interest, if any, remaining in the Trust Account, which we expect to be nominal. At November 26, 2019, the balance in our Trust Account was approximately $257.2 million.

Q.     How long do I have to tender my ordinary shares?

A.     The Offer will expire on December 16, 2019 at 5:00p.m., New York City time, unless we extend or terminate the Offer. You may tender your ordinary shares pursuant to the Offer until the Offer expires on the Expiration Date. Consistent with the terms of the Offer, we may extend the Offer depending on whether the conditions to the Business Combination have been satisfied and the timing and process of the SEC’s review of the Offer to Purchase and related materials and for other reasons. See “The Offer — General,” “The Offer — Purchase Price,” and “The Offer — Extension of the Offer; Termination; Amendment.” If a broker, dealer, commercial bank, trust company or other nominee holds your ordinary shares, it is likely the nominee has established an earlier deadline for you to act to instruct the nominee to accept the Offer on your behalf. We urge you to contact your broker, dealer, commercial bank, trust company or other nominee to find out the nominee’s deadline. See “The Offer — Procedures for Tendering Ordinary Shares.”

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Q.     Can the Offer be extended, amended or terminated and, if so, under what circumstances?

A.     We may extend or amend the Offer to the extent we determine such extension or amendment is necessary or is required by applicable law, rule or regulation, subject to certain restrictions in our Memorandum and Articles of Association and the Share Exchange Agreement. If we extend the Offer, we will delay the acceptance of any ordinary shares that have been validly tendered and not properly withdrawn pursuant to the Offer. We can also terminate the Offer if any of the offer conditions listed in “The Offer — Conditions of the Offer” are not satisfied, and the satisfaction thereof has not been waived. See “The Offer — Extension of the Offer; Termination; Amendment.”

Q.     How will I be notified if the Offer is extended or amended?

A.     If the Offer is extended, we will make a public announcement of the extension no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled Expiration Date. We will announce any amendment to the Offer by making a public announcement of the amendment. See “The Offer — Extension of the Offer; Termination; Amendment.”

Q.     How do I tender my ordinary shares?

A.     If you hold your ordinary shares in your own name as a holder of record and decide to tender your ordinary shares, you must deliver your ordinary shares by mail or physical delivery and deliver a completed and signed Letter of Transmittal or an Agent’s Message (as defined in “The Offer — Procedures for Tendering Ordinary Shares”) to Continental Stock Transfer & Trust Company (the “Depositary”) before 5:00 p.m., New York City time, on December 16, 2019 or such later time and date to which we may extend the Offer.

If you hold your ordinary shares in a brokerage account or otherwise through a broker, dealer, commercial bank, trust company or other nominee (i.e., in “street name”), you must contact your broker or other nominee if you wish to tender your ordinary shares. See “The Offer — Procedures for Tendering Ordinary Shares” and the instructions to the Letter of Transmittal.

If you are a participant institution of The Depository Trust Company (“DTC”), you must tender your ordinary shares, according to the procedure for book-entry transfer described in “The Offer — Procedures for Tendering Ordinary Shares” of this Offer to Purchase.

You may contact Morrow Sodali LLC (the “Information Agent”) or your broker for assistance. The telephone numbers and e-mail address for the Information Agent are set forth on the back cover of this Offer to Purchase. See “The Offer — Procedures for Tendering Ordinary Shares” and the instructions to the Letter of Transmittal.

Q.     Can I tender my Units in the Offer?

A.     No. The Offer is only being made for our ordinary shares. If any or all of your ordinary shares are held as part of a Unit and you wish to tender the ordinary shares included in such Units, you will need to separate the Unit into its component pieces prior to exercising your redemption rights with respect to the ordinary shares in the Offer and undertake all actions necessary to allow for tender of the separated shares. For specific instructions regarding separation of Units, you will need to contact your broker and/or see the letter from your broker/nominee, which includes an instruction form for your completion which provides a box to check to request separation of the Units. The voluntary separation of the Units occurs through the facilities of the DTC and is subject to the procedures of DTC and the various broker/nominees who hold their positions through DTC. Accordingly, while we believe that such separation of the Units can typically be accomplished within three business days, no assurance can be given regarding how quickly units can be separated and Unit holders are urged to promptly contact their broker/nominee if they wish to tender the shares underlying their Units. If you fail to cause your ordinary shares to be separated in a timely manner before the Offer expires, you will not be able to validly tender such ordinary shares prior to the expiration of the Offer.

Q.     Can I tender my warrants or rights in the Offer?

A.     No. The Offer is only being made for our ordinary shares. We are not offering to purchase our warrants or rights in the Offer. Furthermore, our warrants are not exercisable until the consummation of an initial business combination and therefore a warrant holder will not be able to exercise his, her or its warrants to purchase

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ordinary shares and then tender the ordinary shares pursuant to the Offer. In addition, the rights will not convert into one-tenth (1/10) of an ordinary share until the consummation of an initial business combination.

Q.     Until what time can I withdraw previously tendered ordinary shares?

A.     You may withdraw your tendered ordinary shares at any time prior 5:00 p.m., New York City time, on December 16, 2019 or such later time and date to which we may extend the Offer. In addition, unless we have already accepted your tendered ordinary shares for payment, you may withdraw your tendered ordinary shares at any time after 5:00 p.m., New York City time, on December 16, 2019. See “The Offer — Withdrawal Rights.”

Q.     How do I properly withdraw ordinary shares previously tendered?

A.     You must deliver, on a timely basis, a written notice of your withdrawal to the Depositary at the address appearing on the back cover page of this Offer in order to properly withdraw your ordinary shares. Your notice of withdrawal must specify your name, the number of ordinary shares to be withdrawn and the name of the registered holder of such ordinary shares. Certain additional requirements apply if the certificates for ordinary shares to be withdrawn have been delivered to the Depositary or if your ordinary shares have been tendered under the procedure for book-entry transfer set forth in “The Offer — Procedures for Tendering Ordinary Shares.” See “The Offer — Withdrawal Rights.”

Q.     When will TKK pay for the ordinary shares I tender that are accepted for purchase?

A.     We will pay the Purchase Price in cash for the ordinary shares we purchase promptly, and in any event concurrently with the consummation of the Business Combination, after (i) the expiration of the Offer if the offer conditions are satisfied or waived (as applicable), and (ii) our acceptance of the ordinary shares for payment. We will pay for the ordinary shares accepted for purchase by depositing the aggregate Purchase Price with the Depositary promptly after the expiration of the Offer provided that the offer conditions are met. The Depositary will act as your agent and will transmit to you the payment for all of your ordinary shares accepted for payment. See “The Offer — Purchase of Ordinary Shares and Payment of Purchase Price.”

Q.     Will I have to pay brokerage fees and commissions if I tender my ordinary shares?

A.     If you are a holder of record of your ordinary shares and you tender your ordinary shares directly to the Depositary, you will not incur any brokerage fees or commissions. If you hold your ordinary shares in street name through a broker, bank or other nominee and your broker tenders ordinary shares on your behalf, your broker may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See “The Offer — Procedures for Tendering Ordinary Shares.”

Q.     What are the U.S. federal income tax consequences if I tender my ordinary shares?

A.     The receipt of cash for your tendered ordinary shares will generally be treated for U.S. federal income tax purposes either as a sale or exchange transaction or as a distribution. Because we are a PFIC (defined below), beneficial owners of ordinary shares should review “Material U.S. Federal Income Tax Consequences” below and are urged to consult their personal tax advisors with respect to the tax implication of a potential tender of shares pursuant to this Offer.

Q.     Will I have to pay stock transfer tax if I tender my ordinary shares?

A.     We will not pay any stock transfer taxes in connection with this Offer. If you instruct the Depositary in the Letter of Transmittal to make the payment for the ordinary shares to anyone other than the registered holder, you may incur a stock transfer tax. See “The Offer — Purchase of Ordinary Shares and Payment of Purchase Price.”

Q.     Whom do I contact if I have questions about the Offer?

A.     For information or assistance, you may contact the Information Agent at the telephone numbers and e-mail address set forth on the back cover of this Offer to Purchase. You may request additional copies of the Offer to Purchase, the Letter of Transmittal and other related documents from the Information Agent at: (800) 662-5200. Banks and brokers can call collect at (203) 658-9400.

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Q.     How will the Offer affect the number of ordinary shares outstanding and the number of our shareholders?

A.     As of November 26, 2019, we had an aggregate of 31,450,000 ordinary shares outstanding. In addition, we had outstanding warrants (including warrants included in Units) to acquire 19,000,000 ordinary shares at an exercise price of $11.50 per whole share.

If no ordinary shares are tendered in this Offer, and prior to the completion of the Business Combination, the total number of our outstanding ordinary shares will not change (we will have 31,450,000 ordinary shares outstanding). If the Offer is fully subscribed, following our purchase of the ordinary shares tendered pursuant to this Offer, and prior to the completion of the Business Combination, we will have 6,450,000 ordinary shares outstanding. However, our Sponsor and our initial shareholders have agreed not to tender any shares that they own in this Offer. Warrants and rights are not subject to the Offer and therefore the respective number of warrants and rights outstanding will not be affected by the Offer. See “The Offer — Purpose of the Offer; Certain Effects of the Offer,” “The Offer —Source and Amount of Funds” and “Principal Shareholders.”

To the extent any of our shareholders validly tender their ordinary shares (without subsequently properly withdrawing such tendered ordinary shares) and that tender is accepted by us, the number of our holders would be reduced. See “The Offer — Purpose of the Offer; Certain Effects of the Offer,” and “Source and Amount of Funds.”

Q.     Is there a limit on the total number of ordinary shares that may be tendered?

A.     Our Memorandum and Articles of Association provide that we may not redeem our ordinary shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of a Business Combination, after giving effect to the completion of the Redemption and any private placement financing. Other than this limitation, our Memorandum and Articles of Association do not provide a specified maximum redemption threshold. In addition, as a result of the Business Combination being consummated concurrently with the redemption of ordinary shares in the Offer, we will have in excess of $5,000,001 in net tangible assets when combined with the net tangible assets of the Glory Star Group, even if all ordinary shareholders tender their shares. As such, there is no effective limitation on the number of outstanding shares held by our public shareholders that may be redeemed in order to close the Business Combination.

Q.     What will happen if I do not tender my ordinary shares?

A.     Shareholders who choose not to tender their ordinary shares will retain their ordinary shares and participate in the Business Combination.

Continuing shareholders that do not tender their ordinary shares will also be subject to several other risks including:

•        reduced public float and therefore reduced liquidity;

•        the ordinary shares could be delisted from Nasdaq if we do not meet applicable requirements;

•        share price declines; and

•        risks related to the operation of Glory Star Group’s business following the consummation of the Business Combination.

See “Description of TKK’s Securities and Material Differences in the Rights of Shareholders Following the Business Combination.”

Q.     If I object to the price being offered for my ordinary shares, will I have appraisal rights?

A.     No appraisal rights will be available to you in connection with the Offer. See “The Offer — Appraisal Rights.”

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RISK FACTORS

You should carefully consider the following risk factors in addition to the other information included or incorporated by reference in this Offer to Purchase, including matters addressed in the section entitled “Forward-Looking Statements” before you decide whether to tender ordinary shares in this Offer. We caution you not to place undue reliance on the forward-looking statements contained in this Offer, which speak only as of the date hereof.

Risks Relating to Glory Star Group’s Business and Industry

There are many risks and uncertainties that may affect Glory Star Group’s operations, performance, development and results. Many of these risks are beyond Glory Star’s control. The following is a description of the important risk factors that may affect Glory Star Group’s business. If any of these risks were to actually occur, Glory Star Group’s business, financial condition or results of operations could be materially adversely affected. Additional risks and uncertainties not currently known to Glory Star Group or that Glory Star Group currently considers to be immaterial may also materially adversely affect its business, financial condition or results of operations.

If Glory Star Group fails to anticipate user preferences and provide high-quality content, especially popular original content, in a cost-effective manner, it may not be able to attract and retain users to remain competitive.

Glory Star Group’s success depends on its ability to maintain and grow users and user time spent on its CHEERS App. To attract and retain users and compete against its competitors, Glory Star Group must continue to offer high-quality content, especially popular original content that provides its users with a superior online entertainment experience. To this end, Glory Star Group must continue to produce new original content and source new talent and producers in a cost effective manner. Given that it operates in a rapidly evolving industry, Glory Star Group must anticipate user preferences and industry trends and respond to such trends in a timely and effective manner. If Glory Star Group fails to fulfill the needs and preferences of its users in order to deliver a superior user experience or control its costs in doing so, it may suffer from reduced user traffic, and its business, financial condition and results of operations may be materially and adversely affected.

Glory Star Group currently relies on its in-house team of employees to generate creative ideas for original content and to supervise the original content origination and production process and intends to continue to invest its human and capital resources in such content production. Glory Star Group faces fierce competition for qualified personnel in a limited pool of high-quality creative talent. If it is not able to compete effectively for highly qualified personnel or attract and retain top talent at reasonable costs, its original content production capabilities would be materially and adversely impacted. If Glory Star Group is unable to offer popular original content that addresses its user’s tastes and preferences in a cost effective manner, it may suffer a reduction in user traffic and its business, financial condition and results of operations may be materially and adversely affected.

Glory Star Group operates in a capital intensive industry and requires a significant amount of cash to fund its operations and to produce or acquire high quality video content. If it fails to obtain sufficient capital to fund its operations, its 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 returns on investment, if at all. If Glory Star Group cannot obtain adequate capital to meet its capital needs, it may not be able to fully execute its strategic plans for growth and its business, financial condition and prospects may be materially and adversely affected. Glory Star anticipates it will need approximately $75 million to support its working capital needs in the next twelve (12) months. Even though Glory Star Group has recognized net income for the years ended December 31, 2017 and 2018, historically Glory Star Group has funded its working capital requirements through profits, bank loans and private placement of capital raise. As of June 30, 2019, Glory Star Group had approximately $38.2 million in working capital.

If Glory Star Group’s efforts to retain users and attract new users for its mobile and on-line video content and e-commerce products are not successful, its business, financial condition and results of operations will be materially and adversely affected.

In addition to its content production for television shows, Glory Star Group has experienced significant user growth for its mobile and on-line video and e-commerce products over the past several years. Glory Star

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Group’s ability to continue to retain users and attract new users will depend in part on its ability to consistently provide its users with compelling content choices, as well as a quality experience for selecting and viewing video content. If Glory Star Group introduces new features or service offerings, or change the mix of existing features and services offerings, in a manner that is not favorably received by its users, it may not be able to attract and retain users and its business, financial condition and results of operations would be materially and adversely affected.

If Glory Star Group fails to retain existing or attract new advertising customers to advertise within its mobile and online video content or on its e-commerce platform, maintain and increase its wallet share of advertising budget, or if it is unable to collect accounts receivable in a timely manner, its business, financial condition and results of operations may be materially and adversely affected.

Glory Star Group generates a substantial part of its revenues from advertising placed within its mobile and online video content and on its e-commerce platform. With the launch of its e-Mall in 2019, Glory Star Group anticipates that although mobile and online advertising revenue as a percentage of its total revenues is expected to decreased due to the fast growth in revenues generated in its e-Mall, its mobile and online advertising business is still growing and remains one of its largest sources of revenue. However, because its advertising customers are not under long term contracts, Glory Star Group may not be able to retain its advertising customers in the future, attract new advertising customers continuously or be able to retain its advertising customers at all. If its advertising customers find that they can generate better returns elsewhere, or if Glory Star Group’s competitors provide better online advertising services to suit the advertising customers’ goals, Glory Star Group may lose some or all of its advertising customers. In addition, third parties may develop and use certain technologies to block the display of online advertisements, and should this occur Glory Star Group’s members will be able to skip the viewing of its advertising customers’ advertisements, which may in turn cause Glory Star Group to lose advertising customers. If Glory Star Group’s advertising customers determine that their expenditures on internet video streaming platforms or its video content does not generate expected returns, they may allocate a portion or all of their advertising budgets to other advertising channels such as television, newspapers and magazines or other internet channels such as e-commerce and social media platforms, and reduce or discontinue business with us. Since most of Glory Star Group’s advertising customers are not bound by long-term contracts, they may easily reduce or discontinue advertising arrangements without incurring material liabilities. Failure to retain existing advertising customers or attract new advertising customers to advertise within the video content produced by us or on our e-commerce platform may materially and adversely affect Glory Star Group’s business, financial conditions and results of operations.

Glory Star Group’s brand advertising customers typically enter into advertising agreements through various third-party advertising agencies. In China’s advertising industry, advertising agencies typically have good relationships and maintain longer periods of cooperation with the brand advertising customers they represent. In addition to entering into advertising contracts directly with advertising customers, Glory Star Group also enters into advertising contracts with third-party advertising agencies, which represent advertising customers, even if Glory Star Group has direct contact with such advertisers. As a result, it relies on third-party advertising agencies for sales to, and collection of payment from, its brand advertisers. The financial soundness of its advertising customers and advertising agencies may affect its collection of accounts receivable. Glory Star Group makes a credit assessment of its advertising customers and advertising agencies to evaluate the collectability of the advertising service fees before entering into an advertising contract. However, Glory Star Group may not be able to accurately assess the creditworthiness of each advertising customer or advertising agency, and any inability of advertising customers or advertising agencies to pay Glory Star Group for its services in a timely manner would negatively our liquidity and cash flows and may materially and adversely affect our business, financial condition and results of operations.

Glory Star Group operates in a highly competitive market and it may not be able to compete effectively.

Glory Star Group faces significant competition in China in various sub-market it operates, primarily from Alibaba (Nasdaq: BABA), Pin Duouo (Nasdaq:PDD), Douyu (Nasdaq: DOYU), Qu Toutiao (Nasdaq: QTT), Mango Media (SZ.300413), and Zhong Tian Guangze (SH.603721). Glory Star Group competes for users, usage time, advertising customers, and shoppers. Some of its competitors have a longer operating history and significantly greater financial resources than it does, and, in turn, may be able to attract and retain more users, usage time and advertising customers. Glory Star Group’s competitors may compete with it in a variety of ways, including by conducting brand promotions and other marketing activities, and making investments in and acquisitions of its business partners. If any of its competitors achieves greater market acceptance than it does or is able to offer more attractive internet video content,

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its user traffic and its 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 its business, financial condition and results of operations. Glory Star Group also faces competition for users and user time from major television stations, which are increasing their internet video offerings. Glory Star Group also faces 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 Glory Star Group’s business depends on its ability to maintain and enhance its brand.

Glory Star Group believes that maintaining and enhancing its brand is of significant importance to the success of its business. Glory Star Group’s well-recognized brand is critical to increasing its user base and, in turn, expanding its shoppers for its e-commerce platform and attractiveness to advertising customers and content providers. Since the internet video industry is highly competitive, maintaining and enhancing its brand depends largely on its ability to become and remain a market leader in China, which may be difficult and expensive to accomplish. To the extent its original content is perceived as low quality or otherwise not appealing to users, Glory Star Group’s ability to maintain and enhance its 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.

Increases in professionally-produced content, or PPC, by others may have a material and adverse effect on Glory Star Group’s business, financial condition and results of operations.

Glory Star Group depends on the quality of its PPC for the success of its business model. The amount of PPC, especially TV series and movies, have 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 Glory Star Group’s 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.

The continued and collaborative efforts of Glory Star Group’s senior management and key employees are crucial to its success, and any loss of senior management or key employees may materially and adversely affect our business, financial condition and results of operations.

Glory Star Group’s success depends on the continued and collaborative efforts of its senior management, especially its executive officers, including its founder, Mr. Bing Zhang. If one or more of Glory Star Group’s executives or other key personnel are unable or unwilling to continue to provide their services, Glory Star Group may not be able to find suitable replacements easily or at all. Competition for management and key personnel is intense and the pool of qualified candidates is limited. Glory Star Group may not be able to retain the services of its executives or key personnel, or attract and retain experienced executives or key personnel in the future. If any of its executive officers or key employees joins a competitor or forms a competing business, Glory Star Group may lose crucial business secrets, technological know-how, advertisers and other valuable resources. Each of Glory Star Group’s executive officers and key employees has entered into an employment agreement which contains non-compete provisions. However, Glory Star Group cannot assure you that they will abide by the employment agreements or that Glory Star Group’s efforts to enforce these agreements will be effective enough to protect its interests

Glory Star does not currently have a chief financial officer and has limited staff with SEC and US GAAP knowledge and experience, and is currently relying on third party consultant with SEC and US GAAP knowledge and experience to assist with its financial statements. As a result of these limitations, Glory Star may be exposed to potential risks relating to its internal controls over financial reporting.

Glory Star does not currently have a chief financial officer, although it is in the process of recruiting a chief financial officer with US GAAP and SEC reporting experience. Further, Glory Star has limited staff with appropriate levels of SEC and US GAAP knowledge and experience to meet the combined company’s future financial reporting requirements. It is currently relying on third party consultants with SEC and US GAAP knowledge and experience to assist with preparation of its consolidated financial statements. As a result of these material weaknesses identified, Glory Star may be exposed to potential risks relating to its internal controls over financial reporting.

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In addition, historically, it has been difficult to attract qualified accounting and financial personnel for PRC companies with the requirements that Glory Star seeks. Glory Star can provide no assurance that it will be able to successfully hire a qualified chief financial officer and staff with appropriate levels of SEC and US GAAP knowledge. In the event that the material weaknesses of Glory Star’s internal controls over financial reporting due to the lack of a qualified chief financial officer and accounting staff that cannot be remediated in a timely manner, its internal controls over financial reporting would not be effective which may cause a material misstatement in its financial statements and other information it reports. As a result, these deficiencies and potential misstatements would likely cause investors to lose confidence in the consolidated company’s reported financial and other information and could lead to a decline in the trading price of the company’s common shares.

Glory Star Group’s limited operating history makes it difficult to evaluate its business and prospects.

Glory Star Group expects to continue to grow its user and customer bases and explore new market opportunities. However, due to its limited operating history since 2016, Glory Star Group’s historical growth rate may not be indicative of its future performance. Glory Star Group cannot assure you that its growth rate will be the same as in the past. In addition, Glory Star Group may in the future introduce new services or significantly expand its existing services, including those that currently are of relatively small scale or with which Glory Star Group has little or no prior development or operating experience. If these new or enhanced services fail to engage users and customers, its business and operating results may suffer as a result. Glory Star Group cannot assure you that it will be able to recoup its investments in introducing these new services or enhancing existing smaller business lines, and it may experience significant loss and impairment of asset value due to such efforts. Furthermore, as a technology-based entertainment company, Glory Star Group frequently introduces innovative products and services to its users and advertising customers in order to capture new market opportunities. However, Glory Star Group cannot assure you that its products and services will be well received by its users and advertising customers. If Glory Star Group’s existing or new products and services are not well received by its users and customers, it may suffer damages to its brand image and may not be able to maintain or expand its user and customer base, which in turn may have a material and adverse effect on its business, financial condition and results of operations. You should consider Glory Star Group’s prospects in light of the risks and uncertainties fast-growing companies with limited operating histories in a fast evolving industry.

Glory Star Group may not be able to manage its growth effectively.

Glory Star Group has experienced rapid growth since it launched its services in 2016. To manage the further expansion of its business and the growth of its operations and personnel, it need to continuously expand and enhance its infrastructure and technology, and improve its operational and financial systems, procedures, compliance and controls. Glory Star Group also needs to expand, train and manage its growing employee base. In addition, Glory Star Group’s management will be required to maintain and expand its relationships with distributors, advertising customers, and other third parties. Glory Star Group cannot assure you that its current infrastructure, systems, procedures and controls will be adequate to support its expanding operations. If Glory Star Group fails to manage its expansion effectively, its business, financial condition, results of operations and prospects may be materially and adversely affected.

If Glory Star Group is unable to offer branded products at attractive prices to meet customer needs and preferences on its e-commerce platform, or if its reputation for selling authentic, high-quality products suffers, it may lose customers and its business, financial condition and results of operations may be materially and adversely affected.

Glory Star Group’s future growth on its e-commerce platform partially depends on its ability to continue to attract new customers as well as to increase the spending and repeat purchase rate of existing customers. Constantly changing consumer preferences have historically affected, and will continue to affect, the online retail industry. Consequently, it must stay abreast of emerging lifestyle and consumer preferences and anticipate product trends that will appeal to existing and potential customers.

As Glory Star Group implements its strategy to offer a personalized web-interface focusing on deep curation and targeted offerings desired by its customers, Glory Star Group expects to face additional challenges in the selection of products and services. Glory Star Group is focused on offering only authentic products on its e-commerce platform, as perception by its customers or prospective customers that any of its products are not authentic, or are lacking in quality, could cause its reputation to suffer. This is particularly important for cosmetics products, which it expect to account for an increasing proportion of its revenues. While Glory Star Group’s representatives generally check the

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products that are offered for sale on its e-commerce platform to confirm their authenticity and quality, there can be no assurance that its suppliers have provided Glory Star Group with authentic products or that all products that it sells are of the quality expected by consumers. If Glory Star Group’s customers cannot find desired products within its product portfolio at attractive prices, or if its reputation for selling authentic, high-quality products suffers, Glory Star Group customers may lose interest in its e-Mall and thus may visit Glory Star Group’s e-commerce platform less frequently or even stop visiting it altogether, which in turn, may materially and adversely affect Glory Star Group’s business, financial condition and results of operations.

User behavior on mobile devices is rapidly evolving, and if Glory Star Group fails to successfully adapt to these changes, its competitiveness and market position may suffer.

Buyers, sellers and other participants are increasingly using mobile devices in China for a wide range of purposes, including for e-commerce. While a significant and growing portion of participants access Glory Star Group’s e-commerce platform through mobile devices, this area is developing rapidly and Glory Star Group may not be able to continue to increase the level of mobile access to, or transactions on, its e-commerce platform by users of mobile devices. The variety of technical and other configurations across different mobile devices and platforms increases the challenges associated with this environment. Glory Star Group’s ability to successfully expand the use of mobile devices to access its e-commerce platform is affected by the following factors:

•        its ability to continue to provide compelling video content on its e-commerce platform and tools in a multiple mobile device environment;

•        its ability to successfully deploy apps on popular mobile operating systems; and

•        the attractiveness of alternative platforms.

If Glory Star Group is unable to attract significant numbers of new mobile buyers and increase levels of mobile engagement, its ability to maintain or grow its business would be materially and adversely affected.

Glory Star Group’s business prospects and financial results may be impacted by its relationship with third-party platforms.

In addition to its own e-commerce platform, Glory Star Group also distributes video content through third-party platforms. However, there can be no assurance that Glory Star Group’s arrangements with those platforms will be extended or renewed after their respective expiration or that Glory Star Group will be able to extend or renew such arrangements on terms and conditions favorable to Glory Star Group. In addition, if any such third-party platforms breach their obligations under any of the agreements entered into with Glory Star Group or refuses to extend or renew such agreements when their term expires, and Glory Star Group cannot find a suitable replacement on a timely basis, or at all, it may suffer significant losses to its user base and revenue streams, or lose the opportunity to expand its business through such platforms. Disputes may arise between Glory Star Group and third-party platforms with which Glory Star Group has used in the past that may adversely affect the relationship with such platforms which in turn may have a material and adverse effect on Glory Star Group’s business, financial condition and results of operations.

Glory Star Group faces risks, such as unforeseen costs and potential liability in connection with content it produces, licenses and/or distributes through third-party platforms and its e-commerce platform.

As a producer, licensor and distributor of content, Glory Star Group faces potential liability for negligence, copyright and trademark infringement, or other claims based on the content that it produces, licenses, provides and/or distributes. Glory Star Group also may face potential liability for content used in promoting its service, including marketing materials and features on its platform such as user reviews. Glory Star Group is responsible for the production costs and other expenses of its original content. Litigation to defend these claims could be costly and the expenses and damages arising from any liability or unforeseen production risks could harm its business, financial condition and results of operations. Glory Star Group may not be indemnified against claims or costs of these types and it may not have insurance coverage for these types of claims.

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Videos and other content produced by Glory Star Group or displayed on its e-commerce platform may be found objectionable by PRC regulatory authorities and may subject it to penalties and other administrative actions.

Glory Star Group is subject to PRC regulations governing internet access and the distribution of videos and other forms of information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet any content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, frightening, gruesome, offensive, fraudulent or defamatory. Furthermore, as an internet video streaming producer, Glory Star Group is not allowed to (i) produce or disseminate programs that distort, parody or vilify classic literary works; (ii) re-edit, re-dub or re-caption the subtitles of classic literary works, radio and television programs, and network-based original audio-video programs, (iii) intercept program segments and splice them into new programs; or (iv) disseminate edited pieces of works that distort the originals. Failure to comply with these requirements may result in monetary penalties, revocation of licenses to provide internet content or other licenses, suspension of the concerned platforms and reputational harm. In addition, these laws and regulations are subject to interpretation by the relevant authorities, and it may not be possible to determine in all cases the types of content that could cause Glory Star Group to be held liable as an internet content provider.

To the extent that PRC regulatory authorities find any content produced by Glory Star Group or displayed on its e-commerce platform objectionable, they may require Glory Star Group to limit or eliminate the dissemination of such content on its platform in the form of take-down orders or otherwise.

Glory Star Group operates in a rapidly evolving industry. If Glory Star Group fails to keep up with the technological developments and users’ changing requirements, its business, financial condition, results of operations and prospects may be materially and adversely affected.

The internet video streaming industry is rapidly evolving and subject to continuous technological changes. Glory Star Group’s success will depend on its ability to keep up with the changes in technology and user behavior resulting from the technological developments. As it make its services available across a variety of mobile operating systems and devices, Glory Star Group is dependent on the interoperability of its services with popular mobile devices and mobile operating systems that it does not control, such as Android and iOS. Any changes in such mobile operating systems or devices that degrade the functionality of Glory Star Group’s services or give preferential treatment to competitive services could adversely affect usage of its services. Further, if the number of mobile operating systems and devices increases, which is typically seen in a dynamic and fragmented mobile services market such as China, Glory Star Group will likely incur additional costs and expenses associated with developing tools and software necessary for access to its e-commerce platform by these devices and systems. If Glory Star Group fails to adapt its products and services to such changes in an effective and timely manner, it may suffer from decreased user traffic, which may result in a reduced user base. Furthermore, changes in technologies may require substantial capital expenditures in product development as well as in modification of products, services or infrastructure. Glory Star Group may not execute its business strategies successfully due to a variety of reasons such as technical hurdles, misunderstanding or erroneous prediction of market demand or lack of necessary resources. Failure to keep up with technological development may result in Glory Star Group’s products and services being less attractive, which, in turn, may materially and adversely affect its business, results of operations and prospects.

Glory Star Group may not be able to adequately protect its intellectual property rights, and any failure to protect its intellectual property rights could adversely affect its revenues and competitive position.

Glory Star Group believes that trademarks, trade secrets, copyrights, and other intellectual property it uses are critical to its business. Glory Star Group relies on a combination of trademark, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect its intellectual property and its brand. Protection of intellectual property rights in China may not be as effective as in the United States or other jurisdictions, and as a result, it may not be able to adequately protect its intellectual property rights, which could adversely affect its revenues and competitive position. In addition, any unauthorized use of its intellectual property by third parties may adversely affect its revenues and its reputation. Further, Glory Star Group may have difficulty addressing the threats to its business associated with piracy of its copyrighted content, particularly its original content. Glory Star Group’s content and streaming services may be potentially subject to unauthorized consumer copying and illegal digital dissemination without an economic return to Glory Star Group.

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Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and it may need to resort to litigation to enforce or defend intellectual property or to determine the enforceability, scope and validity of its proprietary rights or those of others. Such litigation and an adverse determination in any such litigation could result in substantial costs and diversion of resources and management attention.

Glory Star Group’s business generates and processes a large amount of data, and the improper use or disclosure of such data could harm its reputation as well as have a material adverse effect on its business and prospects.

Glory Star Group’s e-commerce platform generates and processes a large quantity of personal, transaction, demographic and behavioral data. Glory Star Group faces risks inherent in handling large volumes of data and in protecting the security of such data. In particular, Glory Star Group faces a number of challenges relating to data from transactions and other activities on its platform, including:

•        protecting the data in and hosted on its system, including against attacks on its system by outside parties or fraudulent behavior by its employees;

•        addressing concerns related to privacy and sharing, safety, security and other factors; and

•        complying with applicable laws, rules and regulations relating to the collection, use, disclosure or security of personal information, including any requests from regulatory and government authorities relating to such data.

Any systems failure or security breach or lapse that results in the release of user data could harm Glory Star Group’s reputation and brand and, consequently, its business, in addition to exposing Glory Star Group to potential legal liability.

Failure to maintain or improve its technology infrastructure could harm its business and prospects.

Adopting new software and upgrading Glory Star Group’s online infrastructure requires significant investments of time and resources, including adding new hardware, updating software and recruiting and training new engineering personnel. Maintaining and improving its technology infrastructure require significant levels of investment. Adverse consequences could include unanticipated system disruptions, slower response times, impaired quality of buyers’ and sellers’ experiences and delays in reporting accurate operating and financial information. In addition, much of the software and interfaces Glory Star Group uses are internally developed and proprietary technology. If Glory Star Group experiences problems with the functionality and effectiveness of its software, or are unable to maintain and constantly improve its technology infrastructure to handle its business needs, Glory Star Group’s business, financial condition, results of operation and prospects, as well as its reputation, could be materially and adversely affected.

Glory Star Group is subject to payment processing risk.

Glory Star Group’s e-commerce customers pay for their services using a variety of different online payment methods. Glory Star Group relies on third parties to process such payments. Acceptance and processing of these payment methods are subject to certain rules and regulations and require payment of interchange and other fees. To the extent there are increases in payment processing fees, material changes in the payment ecosystem, such as delays in receiving payments from payment processors and/or changes to rules or regulations concerning payment processing, Glory Star Group’s revenues, operating expenses and results of operations could be adversely impacted.

The successful operation of Glory Star Group’s business depends upon the performance and reliability of the Internet infrastructure in China.

Other than the production of television shows that are transmitted via satellite television in China, Glory Star Group’s business depends on the performance and reliability of the Internet infrastructure in China. Almost all access to the Internet is maintained through state-owned telecommunications operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology of China. In addition, the national networks in China are connected to the Internet through state-owned international gateways, which are the only channels through which a domestic user can connect to the Internet outside of China. Glory Star Group may not have access to alternative networks in the event of disruptions, failures or other problems with China’s Internet infrastructure. In addition, the Internet infrastructure in China may not support the demands associated with continued growth in Internet usage.

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Security breaches and attacks against Glory Star Group’s internal systems and network, and any potential resulting breach or failure to otherwise protect confidential and proprietary information, could damage Glory Star Group’s reputation and negatively impact its business, as well as materially and adversely affect its financial condition and results of operations.

Although Glory Star Group has employed resources to develop security measures against unauthorized access to its systems and networks, its cybersecurity measures may not successfully detect or prevent all unauthorized attempts to access the data on its network or compromise and disable its systems. Unauthorized access to its network and systems may result in the misappropriation of information or data, deletion or modification of user information, or a denial-of-service or other interruption to its business operations. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against Glory Star Group or its third-party service providers, it may be unable to anticipate, or implement adequate measures to protect against these attacks. If Glory Star Group is unable to avert these attacks and security breaches, it could be subject to significant legal and financial liability, its reputation would be harmed and it could sustain substantial revenue loss from user dissatisfaction. Glory Star Group may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Actual or anticipated attacks and risks may cause Glory Star Group to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm its reputation and business, but also could materially decrease its revenue and net income.

Glory Star Group relies upon its partners to make its service available through Internet Protocol Television (IPTV).

In the IPTV video streaming market, only a small number of qualified license holders can provide internet audio and visual program services to the TV terminal users via IPTV , set-top boxes and other electronic products. Most of those license holders are radio or TV stations. Private companies that wish to operate such business need to cooperate with those license holders to legally provide relevant services. If Glory Star Group is not successful in maintaining existing or creating new relationships, or if it encounters technological, content licensing, regulatory or other impediments to delivering its streaming content to its members via these devices, Glory Star Group’s ability to grow its business may be adversely impacted.

Disruption or failure of Glory Star Group’s IT systems could impair its users’ online entertainment experience and adversely affect its reputation.

Glory Star Group’s ability to provide users with a high-quality online entertainment experience on its e-commerce platform depends on the continuous and reliable operation of its IT systems. Glory Star Group cannot assure you that it will be able to procure sufficient bandwidth in a timely manner or on acceptable terms or at all. Failure to do so may significantly impair user experience on its platform and decrease the overall effectiveness of its platform to both users and advertisers.

If Glory Star Group experiences frequent or persistent service disruptions, whether caused by failures of its own systems or those of third-party service providers, Glory Star Group’s users’ experience may be negatively affected, which in turn, may have a material and adverse effect on its reputation. Glory Star Group cannot assure you that it will be successful in minimizing the frequency or duration of service interruptions.

Undetected programming errors could adversely affect Glory Star Group’s user experience and market acceptance of its video content, which may materially and adversely affect its business, financial condition and results of operations.

Video content produced by Glory Star Group or displayed on its e-commerce platform may contain programming errors that may only become apparent after its release. Glory Star Group generally has been able to resolve such programming errors in a timely manner. However, Glory Star Group cannot assure you that it will be able to detect and resolve all these programming errors effectively. Undetected audio or video programming errors or defects may adversely affect user experience which in turn may have a material and adverse effect on Glory Star Group’s business, financial condition and results of operation.

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Glory Star Group’s revenue and net income may be materially and adversely affected by any economic slowdown in China and indirectly by trade disputes between the United States and China that may contribute to uncertainties in economic outlook.

The success of Glory Star Group’s business depends on consumers spending from e-commerce, advertising fees, production costs and copyright payments from third parties which may be affected by consumer confidence and uncertainties in the outlook for economic growth within China. Glory Star Group derives substantially all of its revenue from China. As a result, its revenue and net income are impacted to a significant extent by economic conditions in China and globally, as well as economic conditions specific to online and mobile commerce and advertising of brands. The PRC government has in recent years implemented a number of measures to control the rate of economic growth, including by raising and lowering of interest rates and adjusting deposit reserve ratios for commercial banks as well as by implementing other measures designed to tighten or loosen credit and liquidity. In the past, these measures have contributed to a slowdown of the PRC economy and although recently the PRC has taken steps to reduce interest rates and adjusting deposit reserve ratios to increase the availability of credit in response to a weakening economy cause, in part, by the continuing trade dispute with the United States, no assurances can be given that the PRC’s efforts will result in more certainty in domestic economic outlook or an increase in consumer confidence. Any continuing or worsening slowdown could significantly reduce domestic commerce in China, including through the Internet generally and within its ecosystem. An economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in China or any other market in which Glory Star Group may operate could have a material adverse effect on its business, financial condition and results of operations.

Glory Star Group faces risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt its operations.

Glory Star Group is vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect its ability to produce video content or provide products and services on its e-commerce platform.

Glory Star Group’s business operations could be disrupted if any of its employees are suspected of having Ebola virus disease, H1N1 flu, H7N9 flu, avian flu, SARS or other epidemic, since it could require its employees to be quarantined and/or its offices to be disinfected. In addition, Glory Star Group’s business, financial condition or results of operations could be materially and adversely affected to the extent that any of these epidemics harms the Chinese economy in general.

Glory Star Group’s quarterly operating results may fluctuate, which makes its results of operations difficult to predict and may cause its quarterly results of operations to fall short of expectations.

Glory Star Group’s quarterly operating results have fluctuated in the past and may continue to fluctuate depending upon a number of factors, many of which are out of its control. Its operating results tend to be seasonal. As a result, comparing Glory Star Group’s operating results on a period-to-period basis may not be meaningful. For example, online user numbers tend to be lower during school holidays and certain parts of the school year, and advertising revenues tend to be lower during the Chinese New Year season, which may negatively affects Glory Star Group’s cash flow for those periods.

Glory Star Group requires highly qualified personnel to generate high quality video content and if it is unable to hire or retain qualified personnel, it may not be able to grow effectively and its business, financial condition, and results of operation may be materially and adversely affected.

Glory Star Group currently relies on its in-house team of employees to generate creative ideas for original content and to supervise the original content origination and production process and intends to continue to invest its human and capital resources in such content production. Glory Star Group faces fierce competition for qualified personnel in a limited pool of high-quality creative talent. If it is not able to compete effectively for highly qualified personnel or attract and retain top talent at reasonable costs, its original content production capabilities would be materially and adversely impacted. If Glory Star Group is unable to offer popular original content that addresses its user’s tastes and preferences in a cost effective manner, it may suffer a reduction in user traffic and its business, financial condition and results of operations may be materially and adversely affected.

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Glory Star Group’s future success also depends upon its ability to attract and retain highly qualified management personnel. Expansion of Glory Star Group’s business and its management will require additional managers and employees with industry experience, and its success will be highly dependent on its ability to attract and retain skilled management personnel and other employees. Glory Star Group may not be able to attract or retain highly qualified personnel. Competition for skilled management personnel is significant in China. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.

Glory Star’s controlling shareholder will have substantial influence over Glory Star and its interests may not be aligned with the interests of its other shareholders.

As of September 22, 2019, Glory Star has 2,000,000 issued and outstanding ordinary shares. 797,584 ordinary shares are held by Happy Starlight Limited, which is controlled by Mr. Bing Zhang, Glory Star’s sole director and Chief Executive Officer. As such, Mr. Zhang will have substantial influence over Glory Star’s business, including decisions regarding mergers, consolidations, the sale of all or substantially all of its assets, election of directors, declaration of dividends and other significant corporate actions. As the controlling shareholder, he may take actions that are not in the best interests of Glory Star’s other shareholders. These actions may be taken in many cases even if they are opposed by Glory Star’s other shareholders. In addition, this concentration of ownership may discourage, delay or prevent a change in control which could deprive you of an opportunity to receive a premium for your ordinary shares as part of a sale of its company.

Glory Star does not foresee paying cash dividends in the foreseeable future and, as a result, its investors’ sole source of gain will depend on capital appreciation, if any.

Glory Star does not plan to declare or pay any cash dividends on its shares of ordinary shares in the foreseeable future and currently intends to retain any future earnings for funding growth. As a result, investors should not rely on an investment in its securities if they require the investment to produce dividend income. Capital appreciation, if any, of Glory Star’s shares may be its investors’ sole source of gain for the foreseeable future.

Glory Star’s bank accounts are in China and are not insured or protected against loss.

Glory Star maintains its cash primarily with major banks in China which is primarily owned by the Chinese government. Glory Star’s cash accounts are not insured or otherwise protected. Should any bank or trust company holding its cash deposits become insolvent, or if it is otherwise unable to withdraw funds, it could lose the cash on deposit with that particular bank or trust company or have its account frozen.

Glory Star Group’s failure to protect its intellectual property rights could have a negative impact on its business.

Glory Star Group believes its brand, trade names, trademarks and other intellectual property are critical to its success. The success of its business depends substantially upon its continued ability to use its brand, trade names and trademarks to increase brand awareness and to further develop its brand. The unauthorized reproduction of its trade names or trademarks could diminish the value of its brand and its market acceptance, competitive advantages or goodwill. In addition, its proprietary information, which has not been patented or otherwise registered as its property, is a component of its competitive advantage and its growth strategy.

Monitoring and preventing the unauthorized use of its intellectual property is difficult. The measures Glory Star Group takes to protect its brand, trade names, trademarks and other intellectual property rights may not be adequate to prevent their unauthorized use by third parties. In addition, the application of laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involve substantial risks to Glory Star Group. To Glory Star Group’s knowledge, the relevant authorities in China historically have not protected intellectual property rights to the same extent as the United States. If Glory Star Group is unable to adequately protect its brand, trade names, trademarks and other intellectual property rights, it may lose these rights and its business may suffer materially. Further, unauthorized use of Glory Star Group brands, trade names or trademarks could cause brand confusion among advertisers and harm its reputation as a provider of high quality and comprehensive advertising services. If Glory Star Group’s brand recognition decreases, it may lose advertisers and fail in its expansion strategies, and its business, results of operations, financial condition and prospects could be materially and adversely affected.

Glory Star Group may be named as a defendant in litigation, or may be joined as a defendant in litigation brought against its customers by third parties, its customers’ competitors, governmental or regulatory authorities or consumers,

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which could result in judgments against Glory Star Group and materially disrupt its business. These actions could involve claims alleging, among other things, that:

•        advertising claims made with respect to its customers’ products or services are false, deceptive or misleading;

•        its customers’ products are defective or injurious and may be harmful to others; or

•        marketing, communicating or advertising materials created for its customers infringe on the proprietary rights of third parties.

The damages, costs, expenses and attorneys’ fees arising from any of these claims could have a material and adverse affect on Glory Star Group’s business, financial condition, results of operations, and prospects to the extent that it is not adequately indemnified by its customers. In any case, Glory Star Group’s reputation may be negatively affected by these allegations.

Glory Star Group relies on computer software and hardware systems in its operations, the failure of which could adversely affect its business, financial condition, and results of operations.

Glory Star Group is dependent upon its computer software and hardware systems in designing its advertisements and keeping important operational and market information. In addition, Glory Star Group relies on its computer hardware for the storage, delivery and transmission of data. Any system failure that causes interruptions to the input, retrieval and transmission of data or increase in service time could disrupt its normal operations. Although Glory Star Group has a disaster recovery plan that is designed to address the failures of its computer software and hardware systems, it may not be able to effectively carry out this disaster recovery plan or restore its operations within a sufficiently short time frame to avoid business disruptions. Any failure in Glory Star Group’s computer software or hardware systems could decrease its revenues and harm its relationships with advertisers, television channels and other media companies, which in turn could have a material adverse effect on its business, results of operations and financial condition.

Glory Star Group does not maintain business liability or disruption, litigation or property insurance and any business liability or disruption, litigation or property damage it experience may result in substantial costs to it and the diversion of its resources.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business disruption, business liability or similar business insurance products. Glory Star Group has determined that the risks of disruption or liability from its business, the potential loss or damage to its property, including its facilities, equipment and office furniture, the cost of obtaining insurance coverage for these risks and the difficulties associated with obtaining such insurance on commercially reasonable terms, make it impractical for Glory Star Group to have obtained such insurance on terms and conditions that are commercially reasonable. As a result, Glory Star Group did not purchase any business liability, disruption, litigation or property insurance coverage for its operations in China. Any occurrence of an uninsured loss or damage to its property or litigation or business disruption may result in substantial costs to Glory Star Group and the diversion of its resources, which could have an adverse effect on its operating results.

Risks Related to Glory Star Group’s Corporate Structure

The PRC government may determine that the VIE Contracts are not in compliance with applicable PRC laws, rules and regulations.

To comply with applicable PRC laws, rules and regulations, Glory Star Group conducts its operations in the PRC through the VIE Contracts, a series of contractual arrangements entered into among (i) WFOE, (ii) Glory Star and certain shareholders of Glory Star, (iii) Xing Cui Can and its shareholders, and (iv) Horgos and its shareholder, which consist of the Business Cooperation Agreement, Exclusive Option Agreement, Proxy Agreement and Power of Attorney, and Share Pledge Agreement. As a result of these VIE Contracts, Glory Star manages and operates its value-added telecommunication services and certain other business through the WFOE, Xing Cui Can and Horgos pursuant to the rights it holds under the VIE Contracts. A majority of the economic benefit and almost all of the risks arising from the operations of Xing Cui Can and Horgos are ultimately enjoyed and undertaken by Glory Star under these agreements.

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There are risks involved with the operation of its business in reliance on the VIE Contracts, including the risk that the VIE Contracts may be determined by PRC regulators or courts to be unenforceable. Although Glory Star believes it is in compliance with current PRC regulations in the execution and implementation of the VIE Contracts, it cannot assure you the PRC government would agree that the VIE Contracts fully comply with existing PRC policies or with policies that may be adopted in the future. PRC laws and regulations governing the validity of these VIE Contracts are uncertain. If the VIE Contracts were for any reason determined to be in breach of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such breach, including:

•        imposing economic penalties;

•        discounting or restricting the operations of Horgos and Xing Cui Can;

•        imposing conditions or requirements in respect of the VIE Contracts with which Horgos, Xing Cui Can or WFOE may not be able to comply;

•        requiring Glory Star to restructure the relevant ownership structure or operations;

•        taking other regulatory or enforcement actions that could adversely affect its business; and

•        revoking the business licenses and/or the licenses or certificates of Horgos, Xing Cui Can or WFOE, and/or voiding the VIE Contracts.

Any of these actions would adversely affect its ability to manage, operate and gain the financial benefits of Horgos and Xing Cui Can, which would have a material adverse impact on its business, financial condition and results of operations.

Glory Star’s ability to manage and operate Horgos and Xing Cui Can under the VIE Contracts may not be as effective as direct ownership.

Glory Star Group conducts its advertising operation, e-commerce and certain other business in the PRC and generates virtually all of its revenues for its business through the VIE Contracts. Glory Star’s plans for future growth are based substantially on growing the operations of Horgos and Xing Cui Can. However, the VIE Contracts may not be as effective in providing Glory Star with control over Horgos and Xing Cui Can as direct ownership. Under the current VIE Contracts, if Horgos, Xing Cui Can or their shareholders fail to perform their obligations under these contractual arrangements, Glory Star may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC law, which it cannot be sure would be effective. Therefore, if Glory Star is unable to effectively control Horgos and Xing Cui Can, it may have an adverse effect on Glory Star’s ability to achieve its business objectives and grow its revenues.

As the VIE Contracts are governed by PRC law, Glory Star would be required to rely on PRC law to enforce its rights and remedies under them; PRC law may not provide Glory Star with the same rights and remedies as are available in contractual disputes governed by the law of other jurisdictions.

The VIE Contracts are governed by PRC law and provide for the resolution of disputes through arbitral proceedings. If Horgos, Xing Cui Can or their shareholders fail to perform their obligations under the VIE Contracts, Glory Star would be required to resort to legal remedies available under PRC law, including seeking specific performance or injunctive relief, or claiming damages. Glory Star cannot be sure that such remedies would provide Glory Star with effective means of causing Horgos or Xing Cui Can to meet their obligations, or recovering any losses or damages as a result of non-performance. Further, the legal environment in the PRC is not as developed as in some other jurisdictions. Uncertainties in the application of various laws, rules, regulations or policies in the PRC legal system could limit its liability to enforce the VIE Contracts and protect its interests.

The payment arrangement under the VIE Contracts may be challenged by the PRC tax authorities.

Glory Star Group generates its revenues through the payments it receive pursuant to the VIE Contracts. Glory Star Group could face adverse tax consequences if the PRC tax authorities determine that the VIE Contracts were not entered into based on arm’s length negotiations. For example, PRC tax authorities may adjust its income and expenses for PRC tax purposes, which could result in its being subject to higher tax liability, or cause other adverse financial consequences. According to the PRC Tax Administration and Collection Law,

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(中华人民共和国税收征收管理法), and Implementation Regulations for the Law of the PRC Tax Administration and Collection Law 《中华人民共和国税收征收管理法实施细则(2016修订 ), in the case of a transfer pricing related adjustment, the statute of limitation is three years normally and 10 years in special instances.

Glory Star Group relies on the approval certificates and business license held by it for its advertising operation, e-commerce and certain other business and any deterioration of the relationship between Horgos and Xing Cui Can could materially and adversely affect its business operations.

Glory Star Group operates its advertising operation, e-commerce and certain other business in the PRC on the basis of the approval certificates, business license and other requisite licenses held by Glory Star. There is no assurance that Glory Star Group will be able to renew its licenses or certificates when their terms expire with substantially similar terms as the ones it currently holds.

Further, its relationship with Horgos and Xing Cui Can is governed by the VIE Contracts, which is intended to provide Glory Star with effective control over the business operations of Horgos and Xing Cui Can. However, the VIE Contracts may not be effective in providing control over the application for and maintenance of the licenses required for Glory Star Group’s business operations. Glory Star could violate the VIE Contracts, go bankrupt, suffer from difficulties in its business or otherwise become unable to perform its obligations under the VIE Contracts and, as a result, its operations, reputations and business could be severely harmed.

If the WFOE exercises the purchase option it holds over the share capital of Horgos or Xing Cui Can pursuant to the Exclusive Option Agreement, the payment of the purchase price could materially and adversely affect its financial position.

Under the Exclusive Option Agreement, the WFOE has the option to purchase up to 100% of the equity interest in Horgos and Xing Cui Can at a price equivalent to the lowest price then permitted under PRC law, provided that the acquisition will not violate any PRC laws or regulations in effect. As Horgos and Xing Cui Can are already Glory Star’s contractually controlled affiliates, the WFOE’s exercising of the options would not bring immediate benefits to it, and payment of the purchase price could adversely affect Glory Star Group’s financial position.

Risks Relating to Doing Business in China

Glory Star Group is subject to PRC laws or regulations that govern its industry.

Glory Star Group is subject to administrative regulatory authorities and applicable laws in the PRC to operate its business. In order to operate its business Glory Star Group is required to obtain licenses and permits by various governmental agencies. Glory Star Group will not be able to operate some of businesses if it loses its licenses and permits, which will adversely affect its business.

Glory Star Group is 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. Glory Star Group strives to minimize problems related to work for clients by encouraging the conclusion of basic written agreements, but it is exposed to the risk of unforeseen incidents or disputes with advertising clients. In addition, similar to other companies in its industry in the PRC where relationships between advertising clients within a particular industry and advertising companies are not typically exclusive, Glory Star Group is 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 Glory Star Group’s efforts to respond to this change are ineffective, its business, results of operations and financial condition could be materially and adversely affected.

China regulates media content extensively and it may be subject to government actions based on the advertising content it design for advertising clients or services it provide to them.

PRC advertising laws and regulations require advertisers, advertising operators and advertising publishers, including Glory Star Group’s businesses, to ensure that the advertisements shall not contain any false or misleading content and their

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advertising activities shall be in full compliance with applicable laws, rules and regulations. Violation of these laws, rules or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the PRC government may revoke its business license. In addition, such non-compliance can constitute a violation of criminal law and criminal proceedings could be brought against Glory Star Group as a result.

Glory Star Group’s business includes assisting advertising clients in designing and producing advertisements, as well as executing their advertising campaigns. Glory Star Group acts as agent for its clients in dealing with television channels, or other media on whose platform its clients want to display their advertisements. Under Glory Star Group’s agreements with television stations, it is typically responsible for the compliance with applicable laws, rules and regulations with respect to advertising content that it provide to the media. In addition, some of its advertising clients provide completed advertisements for Glory Star Group to display on the television channels. Although these advertisements are subject to internal review and verification, their content may not fully comply with applicable laws, rules and regulations. Further, for advertising content related to special types of products and services, such as pharmaceuticals and medical procedures, pesticides and health products, it is required to confirm that Glory Star Group’s clients have obtained requisite government approvals. Glory Star Group endeavors to comply with such requirements, including by requesting relevant documents from the advertising clients and employing qualified advertising inspectors who are trained to review advertising content for compliance with applicable PRC laws, rules and regulations. However, Glory Star Group cannot assure you that violations or alleged violations of the content requirements will not occur with respect to its operations. If the relevant PRC governmental agencies determine the content of the advertisements that Glory Star Group represents violated any applicable laws, rules or regulations, Glory Star Group could be subject to penalties, which may harm its reputation and may divert significant amounts of its management’s time and other resources. It may be difficult and expensive to defend against such proceedings. Although Glory Star Group’s agreements with its clients normally require them to warrant the fairness, accuracy and compliance with relevant laws and regulations of their advertising content and agree to indemnify Glory Star Group for violations of these warranties, these contractual remedies may not cover all of its losses resulting from governmental penalties. Violations or alleged violations of the content requirements could also harm Glory Star Group’s reputation and impair its ability to conduct and expand its business.

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to Glory Star Group.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which legal decisions have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in the PRC. WFOE, Glory Star’s PRC operating subsidiary, is a wholly foreign-owned enterprise and is subject to laws and regulations applicable to foreign investment in the PRC as well as laws and regulations applicable to foreign-invested enterprises. WFOE is a privately owned company and is subject to various PRC laws and regulations that are generally applicable to companies in the PRC. These laws and regulations are still evolving, and their interpretation and enforcement involve uncertainties. For example, Glory Star may have to resort to administrative and court proceedings to enforce the legal protections that it enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection Glory Star may enjoy in the PRC legal system than in more developed legal systems. These uncertainties may also impede its ability to enforce the contracts Glory Star has entered into. As a result, these uncertainties could materially and adversely affect its business and operations.

Delays in issuing invoices due to China taxing authorities may materially and adversely affect its cash flow.

Companies operating in China may be required to obtain VAT invoices in advance from the Chinese tax authorities in order to collect the dues from its customers according to their contractual arrangement. To accomplish this, companies submit invoices to the Chinese tax authorities and awaits for the VAT invoices to be issued. Upon receipt, it sends the VAT invoices to the customers for payment. From time to time, the Chinese tax authority may delay issuing the VAT invoices because the amount of the company’s invoices exceeded the quotas previously granted for the VAT invoices for that period of time. Such quotas are set by the Chinese tax authorities based on the amount of invoices issued by the company over a period of time pursuant to the company’s past business operation, which quotas

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are adjusted periodically. As such, for fast growing companies like Glory Star, its invoices may periodically exceed the current quota granted which results in a delay in obtaining VAT invoices impacting its ability to timely invoice and collect its accounts receivable from its clients. To address this challenge, Glory Star has taken an active role in reaching out to the Chinese tax authorities to explain the company’s fast growth which is outpacing the quota needed to timely obtain VAT invoices. In addition, Glory Star is working closely with its clients to receive payments before VAT invoices are issued. However, if Glory Star is unable to timely increase its quota resulting in delays in issuing VAT invoices or its clients are unable or unwilling to make payments before receipt of VAT invoices, it may suffer delays in collecting its accounts receivable and hence affect its cash flow.

Competition in its industry is growing and could cause Glory Star Group to lose market share and revenues in the future.

Glory Star Group may face growing competition in its industry and it believes that the market is becoming more competitive as this industry matures and begins to consolidate. Some of its competitors have larger and more established borrower bases and substantially greater financial, marketing and other resources than Glory Star Group. As a result, Glory Star Group could lose market share and its revenues could decline, thereby affecting its earnings and potential for growth.

Glory Star Group’s business depends on the continuing efforts of its management. If it loses their services, its business may be severely disrupted.

Glory Star Group’s business operations depend on the continuing efforts of its management, particularly the executive officers named in this document. If one or more of its management were unable or unwilling to continue their employment with Glory Star Group, it might not be able to replace them in a timely manner, or at all. Glory Star Group may incur additional expenses to recruit and retain qualified replacements. Glory Star Group’s business may be severely disrupted and its financial condition and results of operations may be materially and adversely affected. In addition, its management may join a competitor or form a competing company. Glory Star Group may not be able to successfully enforce any contractual rights it has with its management team, in particular in China, where all of these individuals reside and where its business is operated through Glory Star Group through a series of subsidiaries and the VIE Contracts. As a result, Glory Star Group’s business may be negatively affected due to the loss of one or more members of its management.

Failure to maintain an effective internal control over financial reporting may cause the combined company’s investors to lose confidence in its financial and other reports.

As a public company, the combined company will be subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002. The Exchange Act requires, among other things, that the combined company file annual reports with respect to its business and financial condition. Section 404 of the Sarbanes-Oxley Act requires, among other things, that the combined company include a report of its management on the combined company’s internal control over financial reporting. The combined company is also required to include certifications of its management regarding the effectiveness of its disclosure controls and procedures. If the combined company cannot effectively maintain its controls and procedures, the combined company could suffer material misstatements in its financial statements and other information it reports which would likely cause investors to lose confidence. This lack of confidence could lead to a decline in the trading price of the combined company’s common shares.

Glory Star Group’s business may be materially adversely impacted by the global financial crisis and economic downturn.

Glory Star Group operates its business in the PRC. Any future global financial crisis and economic downturn may materially adversely impact Glory Star Group’s business, financial condition, results of operations and prospects in a number of ways, including:

•        it may face severe challenges, loss of customers and other operation risks during the global financial crisis and economic downturn;

•        financing and other sources of liquidity may not be available on reasonable terms or at all.

These risks may be exacerbated in the event of a prolonged economic downturn or financial crisis.

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A severe and prolonged global economic recession and the slowdown in the Chinese economy may adversely affect Glory Star Group’s business, results of operations and financial condition.

The growth of the Chinese economy has slowed down since 2012 compared to the previous decade and the trend may continue. According to the National Bureau of Statistics of China, China’s gross domestic product (GDP) growth was 6.6% in 2018. There is considerable uncertainty over the long-term effects of the monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. In addition, there have also been concerns on the relationship between China and the U.S. following rounds of tariffs imposed by the U.S. and retaliatory tariffs imposed by China and concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any prolonged slowdown in the global or Chinese economy may have a negative impact on Glory Star Group’s business, results of operations and financial condition, and continued turbulence in the international markets may adversely affect its ability to access the capital markets to meet liquidity needs.

Any adverse changes in political policies of the PRC government could negatively impact China’s overall economic growth, which could materially adversely affect Glory Star Group’s business.

Glory Star is a holding company and all of its operations are entirely conducted in the PRC. China’s economy differs from the economies of most other countries in many respects, including the amount of government involvement in the economy, the general level of economic development, growth rates and government control of foreign exchange and the allocation of resources. The PRC government exercises significant control over China’s economic growth by allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Any actions and policies adopted by the PRC government could negatively impact the Chinese economy, which could materially adversely affect Glory Star Group’s business.

Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business Glory Star Group may be able to conduct in the PRC and accordingly on the results of its operations and financial condition.

Glory Star Group’s business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which Glory Star Group must conduct its business activities. Glory Star Group’s ability to operate in China may be adversely affected by changes in Chinese laws and regulations. Under the current government leadership, the government of the PRC has been pursuing economic reform policies that encourage private economic activities and greater economic decentralization. However, the government of the PRC may not continue to pursue these policies, or may significantly alter these policies from time to time without notice.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing Glory Star Group’s business, or the laws and regulations applicable to foreign investments in China. Only after 1979 did the Chinese government begin to promulgate a comprehensive system of laws that regulate economic affairs in general, deal with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade, as well as encourage foreign investment in China. Although the influence of the law has been increasing, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. Also, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, there have been constant changes and amendments of laws and regulations over the past 30 years in order to keep up with the rapidly changing society and economy in China. Because government agencies and courts provide interpretations of laws and regulations and decide contractual disputes and issues, their inexperience in adjudicating new business and new polices or regulations in certain less developed areas causes uncertainty and may affect Glory Star Group’s business. Consequently, Glory Star Group cannot clearly foresee the future direction of Chinese legislative activities with respect to either businesses with foreign investment or the effectiveness on enforcement of laws and regulations in China. The uncertainties, including new laws and regulations

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and changes of existing laws, as well as judicial interpretation by inexperienced officials in the agencies and courts in certain areas, may cause possible problems to foreign investors.

The Second Session of the Thirteen National People’s Congress of the People’s Republic of China voted to adopt the Foreign Investment Law of the People’s Republic of China (“the Foreign Investment Law”) on March 15, 2019, which shall come into effect on January 1, 2020. The current three major foreign investment laws (the Sino-Foreign Equity Joint Venture Law, Sino-Foreign Cooperative Joint Venture Law and Wholly Foreign Owned Enterprise Law) shall be replaced by the Foreign Investment Law on January 1, 2020.

The Foreign Investment Law expressly stipulated that “the State protects foreign investors’ investment, earnings and other legitimate rights and interests within the territory of China pursuant to the present Law;” “foreign investors may, according to the present Law, freely remit into or out of China, in Renminbi or any other foreign currency, their contributions, profits, capital gains, income from asset proposal, intellectual property royalties, lawfully acquired compensation, indemnity or liquidation income and so on within the territory of China;” “Foreign investors shall not invest in any field with investment prohibited by the negative list for foreign investment access. Foreign investors shall meet the investment conditions stipulated under the negative list for any field with investment restricted by the negative list for foreign investment access;” “In formulating normative documents concerning foreign investment, the people’s governments at all levels and their departments concerned shall comply with laws and regulations, and if there are no laws or administrative regulations to serve as the basis, they shall not impair foreign-invested enterprises’ legitimate rights and interests or increase their obligations, set any market access and exit conditions, or intervene the normal production and operation activities of any foreign-invested enterprise.”

It is unclear how the Foreign Investment Law will be implemented in practice by the PRC government authorities. Comparing with the Draft Foreign Investment Law of the People’s Republic of China published in 2015, the Foreign Investment Law does not include the following expression of ‘control or acquire equities of an enterprise within the territory of China through contractual arrangements, including but not limited to contracts and trust agreements.’ Whether the offshore companies controlled by the PRC investors through variable interest entities structure be deemed as foreign investment remains to be seen.

Fluctuations in the foreign currency exchange rate between U.S. Dollars and Renminbi could adversely affect Glory Star Group’s financial condition.

The value of the RMB against the U.S. dollar and other currencies may fluctuate. Exchange rates are affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. On July 21, 2005, the PRC government changed its policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of foreign currencies. Following the removal of the U.S. dollar peg, the RMB appreciated more than 20% against the U.S. dollar over three years. From July 2008 until June 2010, however, the RMB traded stably within a narrow range against the U.S. dollar. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and more significant appreciation of the RMB against foreign currencies. On June 20, 2010, the PBOC announced that the PRC government would reform the RMB exchange rate regime and increase the flexibility of the exchange rate. On August 11, 2015, the PBOC led central parity quoting banks to further improve the formation mechanism of the RMB against the US dollar, indicating that the central parity quoting price shall be decided with reference to the closing price on the previous trading day. On December 11, 2015, the China Foreign Exchange Trade System launched the RMB exchange-rate index, which strengthened the reference to a currency basket to better maintain the stability of the RMB exchange rate against the currencies in the basket. As a result, the CNY/USD central parity formation mechanism of “closing rate + exchange-rate movements of a basket of currencies” was developed. In June 2016, the Foreign Exchange Self-Disciplinary Mechanism was established, allowing financial institutions to play a more important role in maintaining orderly operations in the foreign-exchange market and in an environment for fair competition. In February 2017, the Foreign Exchange Self-Disciplinary Mechanism adjusted the reference period for the central parity against the currency basket from 24 hours ahead of submitting the quotes to 15 hours between the closing on the previous trading day and the submission of the quotes, which avoided repeated references to the daily movements of the USD exchange rate in the central parity of the following day. In general, the RMB exchange-rate central parity formation mechanism has been improving, which has effectively improved the rule-based, transparent, and market-oriented nature of RMB exchange-rate policies and has played an active role in stabilizing exchange-rate expectations. The flexibility of the RMB exchange rate against the US dollar was further strengthened, exhibiting larger two-way fluctuations. Glory Star Group cannot predict how this new policy and mechanism will impact the RMB exchange rate.

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Glory Star Group’s revenues and costs are mostly denominated in the RMB, and a significant portion of its financial assets are also denominated in the RMB. Any significant fluctuations in the exchange rate between the RMB and the U.S. dollar may materially adversely affect Glory Star Group’s cash flows, revenues, earnings and financial position, and the amount of and any dividends, if any, it may pay on its ordinary shares in U.S. dollars. In addition, any fluctuations in the exchange rate between the RMB and the U.S. dollar could result in foreign currency translation losses for financial reporting purposes.

It may be difficult to protect interests and exercising rights as a shareholder since Glory Star conducts all of its operations in China, and all of its officers and its Chairman reside outside the United States.

Glory Star is incorporated in the Cayman Islands and it conducts all of its operations in China through Horgos, Xing Cui Can and their subsidiaries, its consolidated VIEs in China. In addition, all of Glory Star’s officers and its chairman reside outside of the United States and substantially all of the assets of those persons are located outside of the United States. As a result of all of the above, shareholders may have more difficulty in protecting their interests through actions against Glory Star’s management, or major shareholders than would shareholders of a corporation doing business entirely or predominantly within the United States.

Future inflation in China may inhibit economic activity and adversely affect Glory Star Group’s operations.

The Chinese economy has experienced periods of rapid expansion in recent years, which can lead to high rates of inflation or deflation. This has caused the PRC government to, from time to time, enact various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the PRC government to once again impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China. Any action on the part of the PRC government that seeks to control credit and/or prices may materially adversely affect Glory Star Group’s business operations.

PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent Glory Star from using proceeds from future financing activities to make loans or additional capital contributions to its PRC operating subsidiaries.

As an offshore holding company with PRC subsidiaries, Glory Star may transfer funds to its PRC subsidiaries or finance its operating entity by means of shareholder loans or capital contributions. Any loans to its PRC subsidiaries, which are foreign-invested enterprises, shall be limited to within the margin between the total investment and registered capital approved by the examination and approval authorities. Within the scope of the aforementioned margin, foreign-invested enterprises may voluntarily contract foreign debts. Where the margin is exceeded, the original examination and approval authorities shall re-conduct appraisal and determination of total investment. Such loan shall be registered with SAFE, or its local counterparts. Furthermore, any capital increase contributions Glory Star makes to its PRC subsidiaries, which are foreign-invested enterprises, shall be subject to record-filing via the Comprehensive Management System of Ministry of Commerce, or MOFCOM. Glory Star may not be able to obtain these government registrations or approvals on a timely basis, if at all. If Glory Star fails to receive such registrations or approvals, its ability to provide loans or capital increase contributions to its PRC subsidiaries may be negatively affected, which could adversely affect its liquidity and its ability to fund and expand its business.

In addition, SAFE promulgated a Notice on Further Improving and Adjusting the Foreign Exchange Administration Policies on Direct Investments on November 19, 2012, or Circular 59 (《国家外汇管理局关于进一步改进和调整直接投资外汇管理政策的通知》(汇发[2012]59 ) ), which became effective on December 17, 2012, and was further amended on May 4, 2015 and October 10, 2018, respectively, requires the authenticity of settlement of net proceeds from offshore offerings to be closely examined and the net proceeds to be settled in the manner described in the offering documents. Furthermore, SAFE promulgated a Notice on Reforming the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises, or Circular 19 (《国家外汇管理局关于改革外商投资企业外汇资本金结汇管理方式的通知》(汇发[2015]19) ), promulgated on March 30, 2015, and taken effect from June 1, 2015, pursuant to which the foreign-invested enterprises shall be allowed to settle their foreign exchange capitals on a discretionary basis, the RMB funds obtained by foreign-invested enterprises from the discretionary settlement of their foreign exchange capitals shall be managed under the accounts for foreign exchange settlement pending payment, and a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business and it shall not, unless otherwise prescribed by laws and regulations, use the foregoing funds for investment in securities etc. Besides, SAFE further promulgated a Notice on Reforming

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and Standardizing the Administrative Provisions on Capital Account Foreign Exchange Settlement, or Circular 16 (《国家外汇管理局关于改革和规范资本项目结汇管理政策的通知》(汇发〔201616 ) ), on June 9, 2016, according to which a domestic institution shall use foreign exchange earnings under capital account within its business scope and in a truthful manner for proprietary purposes and a bank shall not process foreign exchange settlement or payment formalities for a domestic institution that applies for the payment and settlement of all of its foreign exchange earnings under capital account in one lump-sum or the payment of all RMB funds in its Account for Foreign Exchange Settlement Pending Payment, if the domestic institution is unable to provide relevant materials in proof of transaction authenticity.

Circular 59, Circular 19 and Circular 16 may significantly limit Glory Star’s ability to effectively use the proceeds from future financing activities as the Wholly Foreign Owned Enterprise may not convert the funds received from Glory Star in foreign currencies into RMB or may not use the RMB funds obtained from foreign exchange settlement for certain purposes, which may materially adversely affect Glory Star’s liquidity and its ability to fund and expand its business in the PRC.

The disclosures about Glory Star in reports and other filings with the SEC and its other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.

Information about Glory Star’s in SEC filings and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure of Glory Star’s in SEC reports and other filings are not subject to the review by CSRC, a PRC regulator that is tasked with oversight of the capital markets in China. Accordingly, you should review information about Glory Star in SEC reports, filings and its other public pronouncements with the understanding that no local regulator has done any review of information about Glory Star in SEC reports, other filings or any of its other public pronouncements.

The approval of the CSRC may be required in connection with the Business Combination with Glory Star; the failure to obtain this approval, if required, could have a material adverse effect on its business, operating results and reputation.

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC and the State Administration of Foreign Exchange, or SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006, and were amended on June 22, 2009 (《关于外国投资者并购境内企业的规定(2009 ) ). The M&A Rules, among other things, include provisions that purport to require an offshore special purpose vehicle incorporated for the purpose of acquiring PRC domestic companies and controlled by PRC individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. The CSRC approval procedures require the filing of an application and supporting documents with the CSRC.

Based on the advice of Glory Star’s PRC legal advisor at the time, Glory Star believes that no specific CSRC approval was required in the context of Business Combination because (i) the CSRC has not issued any definitive rules or interpretations concerning whether the Business Combination is subject to the CSRC approval procedures under the M&A Rules; (ii) WFOE was established by Glory Star as a wholly foreign-owned enterprise, and Glory Star has not acquired any equity interest or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules that are its beneficial owners after the effective date of the M&A Rules, (iii) no provision in the M&A Rules clearly classifies the contractual arrangements among Horgos and Xing Cui Can, Glory Star’s VIEs and their shareholders as a type of acquisition transaction subject to the M&A Rules, and (iv) the CSRC currently has not issued any definitive rule or interpretation concerning whether the Business Combination falls under the M&A Rules. There can be no assurance that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as Glory Star’s PRC counsel, and hence Glory Star may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. In that case, the relevant regulatory agencies may impose fines and penalties on Glory Star’s operations in the PRC, limit its operating privileges in the PRC, or take other actions that could have a material adverse effect on its business, financial condition, results of operations, reputation and prospects.

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The M&A Rules set forth complex procedures for acquisitions conducted by foreign investors, which could make it more difficult to pursue growth through acquisitions.

The M&A Rules established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In the future, Glory Star may grow its business in part by acquiring complementary businesses. Complying with the requirements of this regulation to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit Glory Star’s ability to complete such transactions. Any delay or inability to obtain applicable approvals to complete acquisitions could affect Glory Star’s ability to expand its business or maintain its market share. In addition, in the future, if any of Glory Star’s acquisitions were subject to the M&A Rules and were found not to be in compliance with the requirements of the M&A Rules, relevant PRC regulatory agencies may impose fines and penalties on Glory Star’s operations in the PRC, limit its operating privileges in the PRC, or take other actions that could have a material adverse effect on its business, financial condition, results of operations, reputation and prospects.

PRC regulations relating to offshore investment activities by PRC residents and PRC citizens may increase the administrative burden Glory Star faces and may subject its PRC resident beneficial owners or employees who are stock option holders to personal liabilities, limit its subsidiary’s abilities to increase its registered capital or distribute profits to us, limit its ability to inject capital into its PRC subsidiary, or may otherwise expose Glory Star to liability under PRC law.

SAFE has promulgated regulations that require PRC residents and PRC corporate entities to register with local branches of SAFE in connection with their direct or indirect offshore investment activities. These regulations may apply to Glory Star’s shareholders who are PRC residents and may apply to any offshore acquisitions that it make in the future. In accordance with the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37 (《国家外汇管理局关于境内居民通过特殊目的公司境外投融资及返程投资外汇管理有关问题的通知》(汇发[2014]37 ) ), any PRC resident who is a direct or indirect shareholder of an offshore company is required to update his or her registration with the relevant SAFE branches, with respect to that offshore company, any material change involving an increase or decrease of capital, transfer or swap of shares, merger, division or other material event. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

There is uncertainty concerning under what circumstances residents of other countries and regions can be classified as a PRC resident. The PRC government authorities may interpret its beneficial owners’ status differently or their status may change in the future. Moreover, Glory Star may not be fully informed of the identities of the beneficial owners of Glory Star and it cannot assure you that all of its PRC resident beneficial owners will comply with SAFE regulations. The failure of Glory Star’s beneficial owners who are PRC residents to make any required registrations may subject Glory Star to fines and legal sanctions, and prevent Glory Star from being able to make distributions or pay dividends, as a result of which its business operations and its ability to distribute profits to you could be materially adversely affected.

Restrictions on foreign exchange under PRC laws may limit Glory Star’s ability to convert cash derived from its operating activities into foreign currencies and may materially and adversely affect the value of your investment.

Substantially all of Glory Star’s revenues and operating expenses are denominated in Renminbi. Under the relevant foreign exchange regulations in the PRC, conversion of the Renminbi is permitted, without the need for SAFE approval, for “current account” transactions, which includes dividends, trade, and service-related foreign exchange transactions, subject to procedural requirements including presenting relevant documentary evidence of such transactions and conducting such transactions at designated foreign exchange banks within China who have the licenses to carry out foreign exchange business. Conversion of the Renminbi for “capital account” transactions, which includes foreign direct investment, loans and investment in negotiable instruments, is still subject to significant limitations and requires approvals from and registration with SAFE and other PRC regulatory authorities. Under Glory Star’s current structure, its source of funds primarily consists of dividend payments from its subsidiary in the PRC.

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Glory Star cannot assure you that it will be able to meet all of its foreign currency obligations or to remit profits out of China. If future changes in relevant regulations were to place restrictions on the ability of Glory Star’s subsidiaries to remit dividend payments, its liquidity and ability to satisfy its third-party payment obligations and its ability to distribute dividends could be materially adversely affected.

Glory Star may rely on dividends and other distributions on equity paid by its wholly-owned subsidiaries to fund any cash and financing requirements it may have, and any limitation on the ability of its subsidiaries or Glory Star to make payments to Glory Star could have a material adverse effect on its ability to conduct its business.

Glory Star is a holding company, and it may rely on dividends from its wholly-owned subsidiaries and service, license and other fees paid to its wholly-owned subsidiary in China by Horgos Star and Xing Cui Can for its cash requirements, including any debt it may incur. Current PRC regulations permit Glory Star’s PRC subsidiaries to pay dividends to Glory Star only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, Glory Star’s PRC subsidiary, Xing Cui Can and Horgos are required to set aside at least 10% of their after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their registered capital, and each of its subsidiaries is required to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of its board of directors. These reserves are not distributable as cash dividends. Furthermore, if Glory Star’s PRC subsidiaries, Xing Cui Can and Horgos incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to Glory Star. In addition, the PRC tax authorities may require Glory Star to adjust its taxable income under the contractual arrangements it currently have in place in a manner that would materially and adversely affect its PRC subsidiaries’ ability to pay dividends and other distributions to Glory Star. Any limitation on the ability of its subsidiaries to distribute dividends to Glory Star or on the ability of Horgos and Xing Cui Can to make payments to Glory Star could materially and adversely limit its ability to grow, make investments or acquisitions that could be beneficial to its businesses, pay dividends, or otherwise fund and conduct its business.

Glory Star may be treated as a resident enterprise for PRC tax purposes under the EIT Law, which may subject Glory Star to PRC income tax for its global income and withholding for any dividends it pay to its non-PRC shareholders.

Under the Enterprise Income Tax Law (“EIT Law”), enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises,” and will generally be subject to the uniform 25% enterprise income tax rate for their global income. Although the term “de facto management bodies” is defined as “management bodies which have substantial and overall management and control power on the operation, human resources, accounting and assets of the enterprise,” the circumstances under which an enterprise’s “de facto management body” would be considered to be located in China are currently unclear. A circular issued by the State Administration of Taxation (《国家税务总局关于境外注册中资控股企业依据实际管理机构标准认定为居民企业有关问题的通知》) on April 22, 2009, provides that a foreign enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management bodies” located within China if the following requirements are satisfied: (1) the senior management and core management departments in charge of its daily operations function mainly in the PRC; (2) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (3) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC; and (4) at least half of the enterprise’s directors or senior management with voting rights reside in the PRC. In addition, the State Administration of Taxation recently promulgated the Interim Provisions on Administration of Income Tax of Chinese-Controlled Resident Enterprise Registered Overseas (《境外注册中资控股居民企业所得税管理办法(试行 )), effective from September 1, 2011, which clarified certain matters concerning the determination of resident status, administrative matters following this determination, and competent tax authorities. These interim provisions also specify that, when an enterprise that is both Chinese-controlled and incorporated outside of mainland China, receives PRC-sourced incomes such as dividends and interests, no PRC withholding tax is applicable if such enterprise has obtained a certificate evidencing its status as a PRC resident enterprise that is registered overseas and controlled by Chinese.

Most members of Glory Star’s management team are based in China and are expected to remain in China. Although its offshore holding companies are not controlled by any PRC company or company group, Glory Star cannot assure you that it will not be deemed to be a PRC resident enterprise under the EIT Law and its implementation rules. If Glory Star is deemed to be a PRC resident enterprise, it will be subject to PRC enterprise income tax at the rate of 25% on its global income. In that case, however, dividend income Glory Star receives from

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its PRC subsidiaries may be exempt from PRC enterprise income tax because the EIT Law and its implementation rules generally provide that dividends received by a PRC resident enterprise from its directly invested entity that is also a PRC resident enterprise is exempt from enterprise income tax. Accordingly, if Glory Star is deemed to be a PRC resident enterprise and earn income other than dividends from its PRC subsidiaries, a 25% enterprise income tax on Glory Star’s global income could significantly increase its tax burden and materially and adversely affect its cash flow and profitability.

In addition, the EIT Law and its implementation rules are relatively new and ambiguities exist with respect to the interpretation of the provisions relating to identification of PRC-sourced income. If Glory Star is deemed to be a PRC resident enterprise, dividends distributed to its non-PRC entity investors by Glory Star, or the gain its non-PRC entity investors may realize from the transfer of its common shares, may be treated as PRC-sourced income and therefore be subject to a 10% PRC withholding tax pursuant to the EIT Law and, as a result, the value of your investment may be materially and adversely affected.

Glory Star Group may have exposure to greater than anticipated tax liabilities.

Under PRC laws and regulations, arrangements and transactions among business entities may be subject to audit or challenge by the PRC tax authorities. The tax laws applicable to Glory Star Group’s business activities are subject to interpretation. Glory Star Group could face material and adverse tax consequences if the PRC tax authorities determine that some of its business activities are not based on arm’s-length prices and adjust its taxable income accordingly. In addition, the PRC tax authorities may impose late payment fees and other penalties to Glory Star Group for under-paid taxes. Glory Star Group’s consolidated net profit in the future may be materially and adversely affected if it is subject to greater than anticipated tax liabilities.

The PRC legal system has inherent uncertainties regarding the interpretation and enforcement of PRC laws and regulations which could limit the legal protections available to investors.

Substantially all of Glory Star Group’s operations are conducted in the PRC. The PRC legal system is a civil law system based on written statutes, and prior court decisions can only be cited as reference and have almost no precedential value. Since 1979, the PRC government has been developing a comprehensive system of laws, rules and regulations in relation to economic matters, such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because of the limited volume of published cases and their non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve some degree of uncertainty, which may lead to additional restrictions and uncertainty for Glory Star Group’s business and uncertainty with respect to the outcome of any legal action investors may take against Glory Star Group in the PRC. In addition, Glory Star Group cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. Any changes to such laws and regulations may materially increase Glory Star Group’s costs and regulatory exposure in complying with them.

If Glory Star becomes directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, it may have to expend significant resources to investigate and resolve any related issues, which could materially adversely impact its business operations and reputation.

Certain U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has been centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of certain U.S.-listed Chinese companies has sharply decreased in value. Certain companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this scrutiny, criticism and negative publicity may have on Glory Star’s business. If Glory Star becomes the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, it will have to expend significant resources to investigate such allegations and/or defend. This situation will be costly and time consuming and distract its management from growing Glory Star. Such allegations may materially adversely impact its business operations and reputation.

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The risk of discontinuation of Glory Star’s Preferential Tax Treatments.

Currently, Glory Star is eligible to be exempted from income tax from 2017 to 2020, and will be eligible for certain tax rebates from local taxing authorities from 2021 to 2025. If such preferential tax is no longer available to Glory Star, the income tax rate may increase up to 25%, which could have an adverse effect on financial condition and results of operations.

Following the Business Combination, we will face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

On February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Circular 7. Pursuant to Circular 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises, may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and is established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, considerations include, inter alia, (i) whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; (ii) whether the assets of the relevant offshore enterprise mainly consist of direct or indirect investment in China or if its income is mainly derived from China; and (iii) whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature evidenced by their actual function and risk exposure. According to Circular 7, where the payer fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Circular 7 does not apply to transactions of sales of shares by investors through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017, the SAT issued the Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or Circular 37, which further elaborates the relevant implemental rules regarding the calculation, reporting and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of Circular 7. Circular 7 may be determined by the tax authorities to be applicable to its offshore transactions or sales of its shares or those of its offshore subsidiaries where non-resident enterprises, being the transferors, were involved.

Accordingly, following the Business Combination, if a holder of our ordinary shares purchases our ordinary shares in the open market and sells them in a private transaction, or purchases our ordinary shares in a private transaction and sells them in the open market, and fails to comply with the SAT Circular 7, the PRC tax authorities may take actions, including requesting us to provide assistance for their investigation or impose a penalty on us, which could have a negative impact on our business operations. In addition, since we may pursue acquisitions as one of our growth strategies, and may conduct acquisitions involving complex corporate structures, the PRC tax authorities might impose taxes on capital gains or request that we submit certain additional documentation for their review in connection with any potential acquisitions, which may incur additional acquisition costs, or delay our acquisition timetable.

The PRC tax authorities have discretion under Circular 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment. We may pursue acquisitions in the future that involve complex corporate structures. Following the Business Combination, if we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments to the taxable income of these transactions under Circular 7, our income tax expenses associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.

New legislation or changes in the PRC labor laws or regulations may affect Glory Star Group’s business operations.

Relevant PRC labor laws or regulations could be amended or updated from time to time, and new laws or regulations may be enacted. Glory Star Group may be required to change its business practices in order to comply with the new or revised labor laws and regulations or adapt to policy changes. There can be no assurance that Glory Star Group will be able to change its business practices in a timely or efficient manner pursuant to such new requirements. Any such failure may subject Glory Star Group to administrative fines or penalties or other adverse consequences which could materially and adversely affect Glory Star’s brand name, reputation, business, financial condition and results of operations.

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Governmental control of currency conversion may limit Glory Star Group’s ability to utilize its net revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi (RMB) into foreign currencies and, in certain cases, on the remittance of currency out of China. Glory Star Group receives all of its revenues in Renminbi. Under Glory Star Group’s current corporate structure, Glory Star will primarily rely on dividend payments from the WFOE to fund any cash and financing requirements Glory Star may have, or for the possible payment of dividends. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of the WFOE may be used to pay dividends to Glory Star. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of the WFOE and VIE to pay off their respective debt in a currency other than Renminbi owed to entities outside China, if any, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents Glory Star Group from obtaining sufficient foreign currencies to satisfy its foreign currency demands, following the Business Combination, Glory Star may not be able to pay dividends to TKK in foreign currencies which would affect the value of your investment.

The trading prices of our ordinary shares are likely to be volatile, which could result in substantial losses to our shareholders and investors.

The trading prices of our ordinary shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other similarly situated companies that have listed their securities in the U.S. in recent years. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of these companies’ securities after their offerings may affect the attitudes of investors toward such companies listed in the United States, which consequently may affect the trading performance of our ordinary shares, regardless of our actual operating performance following the Business Combination. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as the large decline in share prices in the United States and other jurisdictions.

In addition to market and industry factors, the price and trading volume for our ordinary shares may be highly volatile for factors specific to our own operations post Business Combination, including the following:

•        variations in Glory Star Group’s revenues, earnings and cash flow;

•        announcements of new product and service offerings, investments, acquisitions, strategic partnerships, joint ventures, or capital commitments by Glory Star Group’s or its competitors;

•        changes in the performance or market valuation of Glory Star Group’s company or its competitors;

•        changes in financial estimates by securities analysts;

•        changes in the number of Glory Star Group’s users and customers;

•        fluctuations in Glory Star Group’s operating metrics;

•        failures on Glory Star Group’s part to realize monetization opportunities as expected;

•        additions or departures of Glory Star Group’s key management and personnel;

•        release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

•        detrimental negative publicity about Glory Star Group, its competitors or its industry;

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•        market conditions or regulatory developments affecting Glory Star Group or its industry; and

•        potential litigations or regulatory investigations.

Any of these factors may result in large and sudden changes in the trading volume and the price at which our ordinary shares will trade. In the past, shareholders of a public company often brought securities class action suits against the listed company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on Glory Star’s financial condition and results of operations.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about Glory Star’s business, the market price for our ordinary shares and trading volume could decline.

Following the Business Combination, the trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about Glory Star or its industry. If research analysts do not establish and maintain adequate research coverage or if the analysts who cover Glory Star downgrade our ordinary shares or publish inaccurate or unfavorable research about Glory Star’s industry, the market price for our ordinary shares might decline. If one or more of these analysts cease coverage of Glory Star or fail to publish reports on Glory Star regularly, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ordinary shares to decline.

While the Public Company Accounting Oversight Board (PCAOB) currently has access to inspect the auditor’s work papers and practices of Glory Star Group in China, new laws or restrictions imposed by the Chinese government may limit or restrict the PCAOB inspection which would deprive you of the benefits of such inspection.

Glory Star’s independent registered public accounting firm that issues the audit reports included in this Offer to Purchase, as an auditor of companies that are traded publicly in the U.S. and a firm registered with the PCAOB, is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and the relevant professional standards. The PCAOB currently has access to inspect the working paper of Glory Star’s auditors, however, new laws or restrictions may be imposed in China that may place new restrictions on PCAOB access to the auditor’s work papers of Glory Star, or if it extends its restrictions beyond firms it is currently preventing from sharing work papers. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditors’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections. Investors may lose confidence in Glory Star’s reported financial information and procedures and the quality of its financial statements if the PCAOB access to Glory Star’s auditors is limited or restricted.

Risks Relating to Glory Star’s Ordinary Shares

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because Glory Star is incorporated under Cayman Islands law.

Glory Star is an exempted company incorporated under the laws of the Cayman Islands. Glory Star’s corporate affairs are governed by its memorandum and articles of association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of its directors to Glory Star under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from common law of England and Wales, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of Glory Star’s shareholders and the fiduciary responsibilities of its directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United

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States. In particular, the Cayman Islands have a less developed body of securities laws as compared to the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

There is uncertainty as to whether the courts of the Cayman Islands would:

•        recognize or enforce judgments of courts of the United States obtained against Glory Star based on certain civil liability provisions of U.S. securities laws; and

•        entertain original actions brought against Glory Star predicated upon certain civil liability provisions of U.S. securities laws.

There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.

Certain judgments obtained against Glory Star by its shareholders may not be enforceable.

Glory Star is a Cayman Islands company and all of its assets are located outside of the United States. Substantially all of Glory Star’s current operations are conducted in the PRC. In addition, all of Glory Star’s directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against Glory Star or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against Glory Star’s assets or the assets of its directors and officers.

Risks Relating to the Consummation of the Business Combination

Shareholders of TKK will not be afforded an opportunity to vote on the Business Combination, which means TKK may consummate the Business Combination even though a majority of its public shareholders do not support such a combination.

TKK will hold a shareholder vote to approve the Business Combination and the proposed amendments to its Memorandum and Articles of Association before it consummates the Business Combination, and will separately distribute materials to its shareholders in connection therewith. However, as an FPI, TKK will not be required to seek shareholder approval to the extent the laws of the Cayman Islands, its jurisdiction of incorporation, do not require such a vote. Accordingly, TKK may consummate the Business Combination even if holders of a majority of its public shares do not approve of the Business Combination.

As an FPI, TKK is not required to meet certain Nasdaq standards related to shareholder voting.

The Nasdaq rules generally require a company to obtain shareholder approval in the following circumstances: (a) in connection with an acquisition, if a company issues shares equal to 20% or more of its pre-transaction outstanding shares, or 5% or more of its pre-transaction outstanding shares when a related party has a 5% or greater interest in the target; (b) in connection with a stock issuance that results in a change of control (whereby, as a result of an issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of ordinary shares or voting power and such ownership or voting power would be the largest ownership position in Glory Star); (c) in connection with an equity compensation plan (whereby a company establishes or materially amends a stock option or purchase plan or other arrangement pursuant to which stock may be acquired by officers, directors, employees or consultants); or (d) in connection with a private placement where the issuance (together with sales by officers, directors, or substantial shareholders, if any) equals 20% or more of the pre-transaction outstanding shares of Glory Star at a price less than the greater of book or market value.

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Although many blank check companies listed on Nasdaq would be required to seek shareholder approval in connection with their initial business combination (for example, if the consideration paid in connection with the transaction includes the issuance of 20% or more of such company’s then issued and outstanding shares), because TKK is an FPI, TKK is not required to seek shareholder approval under the Nasdaq rules to the extent the laws of the Cayman Islands do not require such a vote. The laws of the Cayman Islands provide TKK with a variety of methods to consummate the Business Combination without a shareholder vote to approve the Business Combination, including the manner in which the Business Combination is structured.

The only opportunities shareholders of TKK have to make the investment decision regarding the Business Combination will be to exercise their right to redeem TKK ordinary shares for cash.

Because TKK intends to consummate the Business Combination without seeking shareholder approval, shareholders will not have the right or opportunity to vote on the Business Combination. Accordingly, the only opportunities afforded to the shareholders of TKK to make an investment decision regarding the Business Combination is to exercise their redemption rights within the period of time (which will be through December 16, 2019) as set forth in this Offer to Purchase.

If TKK due diligence investigation of Glory Star Group was inadequate, then shareholders of TKK who do not redeem their ordinary shares in this Offer could lose some or all of their investment following the Business Combination.

Even though TKK conducted a due diligence investigation of Glory Star Group, it cannot be sure that this diligence uncovered all material issues that may be present in Glory Star Group or its business, or that it would be possible to uncover all material issues through a more protracted amount of due diligence, or that factors outside of Glory Star Group and its business and outside of its control will not later arise. The requirement that TKK must complete the Business Combination by the Business Combination Deadline, and TKK’s lack of experience investing in or managing companies in the e-commerce industry and media industry may have limited its ability to perform, and the available time to conduct, due diligence, and the Business Combination may be consummated pursuant to terms that TKK would have rejected upon a more comprehensive investigation.

TKK will issue ordinary shares as consideration in the Business Combination, which will dilute the interest of shareholders of TKK following the Business Combination and likely present other risks.

TKK will issue a substantial number of ordinary shares in order to complete the Business Combination. The issuance of additional ordinary shares:

•        will significantly dilute the equity interest of existing shareholders of TKK; and

•        may adversely affect prevailing market prices for the securities of TKK.

If the Offer is completed, additional sources of financing may not be available and TKK’s redemption of ordinary shares in the Offer will cause its public float to be reduced. As a result, its shareholders may be disadvantaged by reduced liquidity in its securities.

The Offer exposes TKK to a number of risks including:

•        use of funds to redeem ordinary shares in the Offer and to pay expenses of the Offer will reduce the funds available as working capital for the continuation of Glory Star Group’s business following the Business Combination;

•        TKK may not be able to replenish cash reserves by raising debt or equity financing in the future on terms acceptable to us, or at all; and

•        the “public float,” which is the number of shares owned by non-affiliate shareholders and available for trading in the securities markets, following the Offer and prior to the Business Combination, will be reduced, which may reduce the volume of trading in ordinary shares and may result in lower stock prices and reduced liquidity in the trading of ordinary shares prior to the completion of the Business Combination.

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TKK’s board of directors did not, and is not required to, obtain a fairness opinion in connection with the Business Combination.

TKK’s board of directors did not, and is not required to, obtain a fairness opinion in determining whether or not to proceed with the Business Combination. Shareholders of TKK will be relying on the judgment of TKK’s board of directors, who determined the advisability of the Business Combination and that the fair market value of Glory Star Group is equal to at least 80% of the balance in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account), as required by its Memorandum and Articles of Association. TKK’s shareholders will be relying on the judgment of its board of directors, whose collective experience in business evaluations for blank check companies like TKK is not significant. Furthermore, the directors may have a conflict of interest in analyzing the transaction due to their personal and financial interests and may be incorrect in its assessment of Glory Star Group and the Business Combination. As such, no assurance can be provided that Glory Star Group has a fair market value of at least 80% of the balance in the Trust Account or that the price TKK is paying for Glory Star Group is fair to TKK and its shareholders from a financial point of view. TKK’s board of directors unanimously recommends that you do not accept the offer with respect to your ordinary shares.

TKK may redeem the warrants at a time that is not beneficial to warrant holders.

TKK may call the warrants for redemption at any time after the redemption criteria described elsewhere in this Offer to Purchase have been satisfied. If TKK calls the warrants for redemption, warrant holders may be forced to accept a nominal redemption price or sell or exercise the warrants when they may not wish to do so.

TKK may waive one or more of the conditions to the Business Combination.

TKK may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Business Combination, to the extent permitted by applicable laws.

There is no guarantee, even if we consummate the Business Combination, that the public warrants will ever be in the money and they may expire worthless.

The exercise price for our public warrants is $5.75 per one-half share, or $11.50 per whole share. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the public warrants may expire worthless.

The Sponsor, private placement warrant holder, and the Sellers will have registration rights, the future exercise of which may adversely affect the market price of the ordinary shares.

Pursuant to an agreement entered into concurrently with TKK’s IPO, following the Business Combination, the Sponsor and certain holder of the private placement warrants, may demand that we register their unregistered ordinary shares and private placement warrants. In addition, TKK entered into a Registration Rights Agreement with the Seller Representative, pursuant to which TKK shall grant each Seller certain registration rights with respect to the Closing Payment Shares and Earnout Shares.

TKK will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of the ordinary shares.

Our ability to successfully effect the Business Combination and to successfully operate the business thereafter will be largely dependent upon the efforts of certain key personnel, including certain personnel of Glory Star, whom we expect to join us following the Business Combination. The loss of such key personnel could negatively impact the operations and profitability of our post-combination business.

Our ability to successfully effect the Business Combination and successfully operate the business is dependent upon the efforts of certain key personnel, including certain personnel of Glory Star. Although we expect such key personnel to remain with TKK following the Business Combination, it is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of our post-combination business. Furthermore, while we have scrutinized individuals we intend to engage to stay with TKK following the Business

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Combination, our assessment of these individuals may not prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.

Our officers, directors, security holders and their respective affiliates, including the Sponsor, may have competitive pecuniary interests that conflict with our interests.

We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. Further, we do not have a policy that expressly prohibits any of the Sponsor, officers, directors or their respective affiliates from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.

A market for the securities of TKK after the Business Combination may not fully develop, which would adversely affect the liquidity and price of our securities.

We intend to continue to list the ordinary shares and warrants on Nasdaq under the symbols “TKKS” and “TKKSW,” respectively, on or promptly after the consummation of the Business Combination, by filing a new listing application with Nasdaq, however, there is no guarantee that we will meet the Nasdaq listing requirements. Following the Business Combination, the price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities may never fully develop or, if developed, it may not be sustained. In addition, the price of the securities after the offering can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the Over the Counter markets, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national exchange. You may be unable to sell your securities unless a market can be established or sustained.

There is a limited amount of cash available to be used for other corporate purposes by TKK.

TKK and Glory Star have incurred significant costs associated with the Business Combination, including TKK’s expenses of approximately $908,065 as of September 30, 2019 and certain fees owed to the underwriters (see “The Share Exchange Agreement — Business Combination Marketing Agreement”). These expenses have limited the amount of cash available to be used for other corporate purposes following the Business Combination.

If the Business Combination’s benefits do not meet the expectations of investors and/or shareholders, the market price of our securities may decline.

The market price of TKK’s securities prior to the consummation of the Business Combination or the market price of our securities following the consummation of the Business Combination may decline as a result of the Business Combination if the market does not view the Business Combination positively due to current market environment, uncertainty of regulation, assessment of valuation, among others. Accordingly, shareholders may experience a loss as a result of a decline in the market price of TKK’s securities prior to the consummation of the Business Combination or TKK’s securities following the consummation of the Business Combination. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

The market price of TKK’s securities may decline as a result of the Business Combination.

The market price of TKK’s securities may decline as a result of the Business Combination for a number of reasons, including if:

•        investors react negatively to the prospects of the combined company’s business and the prospects of the Business Combination;

•        the effect of the Business Combination on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts;

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•        the combined company does not achieve the perceived benefits of the Business Combination as rapidly or to the extent anticipated by financial or industry analysts;

•        the value of Glory Star Group proves to be materially less than the value used by our board of directors to determine the Closing consideration.

Accordingly, investors may experience a loss as a result of decreasing market prices. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

TKK’s shareholders may not realize a benefit from the Business Combination commensurate with the ownership dilution they will experience in connection with the Business Combination.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Business Combination, TKK’s shareholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Business Combination.

TKK’s ability to request indemnification from the Sellers for damages arising out of the Business Combination is limited to those claims where damages exceed $2,125,000 and is also limited to ordinary shares of TKK placed in escrow or issuable in the earn-out.

To provide a fund to secure the indemnification obligations of the Sellers to TKK against losses that TKK may sustain as a result of or in connection with any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties and covenants of Glory Star contained in the Share Exchange Agreement or any certificate or other writing delivered to TKK pursuant to the Share Exchange Agreement, 5% of the Closing Payment Shares will be placed in escrow, valued at the redemption price, which will be returned for cancellation to the extent that TKK has damages for which it is entitled to indemnification. Total payments made by the Seller Representative to TKK with respect to such losses shall not exceed an amount equal to the value of the Escrow Shares plus the value of the Earnout Shares (the “Indemnifiable Loss Limit”). Claims for indemnification may be asserted against the Escrow Shares by TKK, within certain prescribed periods, once its aggregate losses equals at least $2,125,000 (the “Basket”), at which point, TKK will be entitled to indemnification for the total amount of such losses, subject to the Indemnifiable Loss Limit. Notwithstanding the foregoing, any indemnification claims for breaches of certain representations and warrants in the Share Exchange Agreement or fraud claims are not subject to the Indemnifiable Loss Limit and/or the Basket. As a consequence of these limitations, TKK may not be able to be entirely compensated for indemnifiable damages that it may sustain.

In the event that a significant number of ordinary shares are redeemed, the ordinary shares of TKK may become less liquid following the Business Combination.

If a significant number of ordinary shares are redeemed, TKK may be left with a significantly smaller number of shareholders following the Business Combination. As a result, trading in ordinary shares following the Business Combination may be further limited and your ability to sell your ordinary shares in the market could be adversely affected.

The issuance of ordinary shares in connection with the Business Combination, the potential exercise of the outstanding warrants and the issuance of additional ordinary shares as result thereof, or from future public or private offerings, and the automatic conversion of the outstanding rights, will result in substantial dilution and could have an adverse effect on the market prices of TKK’s securities.

TKK currently has 31,450,000 ordinary shares outstanding. In connection with the Business Combination and pursuant to the Share Exchange Agreement, TKK has agreed to issue an aggregate number of ordinary shares equal to $425,000,000 divided by the redemption price (or 41,342,412 ordinary shares assuming a redemption price of $10.28 per share) to the Sellers as consideration, and may issue up to an additional 10,000,000 ordinary shares to Sellers in earnout payments. Additionally, (i) upon closing of the Business Combination, each outstanding right will be automatically converted into one-tenth (1/10) of an ordinary share and (ii) 30 days following the closing of the Business

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Combination, the warrants will be exercisable for ordinary shares. The issuance of ordinary shares as consideration for the Business Combination, the potential exercise of outstanding warrants, and the issuance of additional shares in future public or private offerings, will result in substantial dilution and could have an adverse effect on the market price TKK’s securities.

Upon the consummation of the Business Combination, TKK’s former public shareholders will own:

•        approximately 36.52% of the outstanding shares of ordinary shares, assuming no tender of ordinary shares in connection with the Offer, a redemption price of $10.28 per share; or

•        0% of the outstanding shares of ordinary shares assuming all of the ordinary shares are validly tendered and not properly withdrawn, and are purchased, a redemption price of $10.28 per share in the Offer.

The issuance of additional ordinary shares, the exercise of warrants and the conversion of rights:

•        will significantly dilute the equity interest of existing TKK shareholders; and

•        may adversely affect prevailing market prices for ordinary shares and warrants.

Our shareholders will only be able to exercise a warrant if the issuance of ordinary shares upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.

No warrants will be exercisable on a cash basis and we will not be obligated to issue registered ordinary shares unless the ordinary shares issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Because the exemptions from qualification in certain states for re-sales of warrants and for issuances of ordinary shares by the issuer upon exercise of a warrant may be different, a warrant may be held by a holder in a state where an exemption is not available for issuance of ordinary shares upon exercise of the warrants and the holder will be precluded from exercising the warrant. As a result, the warrants may be deprived of any value, the market for the warrants may be limited and the holders of warrants may not be able to exercise their warrants if the Ordinary shares issuable upon such exercise is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside.

Risks Relating to the Failure to Consummate the Business Combination

If TKK is not able to consummate the Business Combination by the Business Combination Deadline, TKK would cease all operations except for the purpose of the winding up of TKK, and TKK would redeem its public shares and liquidate.

TKK is required to complete the Business Combination by the Business Combination Deadline. If TKK is unable to consummate the Business Combination by the Business Combination Deadline, TKK will, as promptly as reasonably possible but no more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including investment earnings (less up to $100,000 of investment earnings to pay dissolution expenses and net of taxes payable), divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

If we are required to wind-up, liquidate the Trust Account and distribute such amount therein, pro rata, to our public shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the Cayman Islands Companies Law. In that case, investors may be forced to wait beyond the Business Combination Deadline before the redemption proceeds of our Trust Account become available to them, and they receive the return of their pro rata portion of the proceeds from our Trust Account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we consummate our initial business combination prior thereto and only then in cases where investors have sought to redeem their ordinary shares. Only upon our redemption or any liquidation will public shareholders be entitled to distributions if we are unable to complete our initial business combination.

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If we are unable to consummate a business combination, our public shareholders may be forced to wait until February 20, 2020 (or until June 20, 2020 if we extend the period of time to consummate a business combination through issuance of the potential extension warrants, as described in more detail herein) before receiving liquidation distributions.

We have until February 20, 2020 (or June 20, 2020 if we extend the period of time to consummate a business combination through issuance of the potential extension warrants, as described in more detail herein) in which to complete a business combination. We have no obligation to return funds to investors prior to such date unless we consummate a business combination prior thereto and only then in cases where investors have sought to convert their shares. Only after the expiration of this full time period will public shareholders be entitled to liquidation distributions if we are unable to complete a business combination. Accordingly, investors’ funds may be unavailable to them until after such date and to liquidate your investment, you may be forced to sell your securities potentially at a loss.

Our board of directors may decide not to extend the term we have to consummate our initial business combination, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, and the warrants and rights will be worthless.

We have until February 20, 2020 to consummate our initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination by February 20, 2020, we may, by resolution of our board of directors, extend the period of time to consummate a business combination to no later than June 20, 2020 as set out below. Pursuant to the terms of our amended and restated memorandum and articles of association and the trust agreement entered into between us and Continental Stock Transfer & Trust Company on August 15, 2018, in order for the time available for us to consummate our initial business combination to be extended, we must issue to holders of our public shares by way of a dividend one warrant to purchase one half of an ordinary share for an aggregate of up to 25,000,000 potential extension warrants. In the event that we extend the period to consummate our initial business combination by issuing the potential extension warrants referenced above, we will issue a press release announcing such intention at least one month prior to our February 20, 2020 deadline. This press release will indicate (i) that the record date to establish the holders of record entitled to receive the dividend of potential extension warrants will be February 20, 2020 and (ii) the payment date of such dividend. Alternatively, pursuant to the terms of our amended and restated memorandum and articles of association and the trust agreement entered into between us and Continental Stock Transfer & Trust Company on August 15, 2018, we may extend the period of time to consummate a business combination by obtaining shareholder approval, in which case we will afford public shareholders an opportunity to redeem their public shares. If we extend the period of time to consummate a business combination by obtaining shareholder approval, we will not issue the potential extension warrants discussed above. In either case, we are not obligated to extend the time for us to complete our initial business combination.

If we are unable to consummate our initial business combination within the applicable time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares for a pro rata portion of the funds held in the Trust Account and as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, the warrants and rights will be worthless.

Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them.

Our amended and restated memorandum and articles of association provide that we will continue in existence only until February 20, 2020 (or until June 20, 2020 if we extend the period of time to consummate a business combination through issuance of the potential extension warrants, as described in more detail herein) if a business combination has not been consummated by such time. If we are unable to complete an initial business combination during such time period, it will trigger our automatic winding up, liquidation and dissolution. As such, our shareholders could potentially be liable for any claims to the extent of distributions received by them pursuant to such process and any liability of our shareholders may extend beyond the date of such distribution. Accordingly, we cannot assure you that third parties, or us under the control of an official liquidator, will not seek to recover from our shareholders amounts owed to them by us.

If we are unable to consummate a transaction within the required time period, upon notice from us, the trustee of the Trust Account will distribute the amount in our Trust Account to our public shareholders. Concurrently, we shall

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pay, or reserve for payment, from funds not held in trust, our liabilities and obligations, although we cannot assure you that there will be sufficient funds for such purpose. If there are insufficient funds held outside the Trust Account for such purpose, TKK Capital Holding has agreed that it will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us and which have not executed a waiver agreement.

If we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by our shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby exposing themselves and our company to claims, by paying public shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offense and may be liable to pay a fine of US$18,292.68 and subject to imprisonment for five years in the Cayman Islands.

Our directors may decide not to enforce indemnification obligations against TKK Capital Holding, an affiliate of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to TKK’s public shareholders.

In the event that the proceeds in the Trust Account are reduced below $10.00 per share, and TKK Capital Holding, an affiliate of the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent director(s) would determine whether to take legal action against TKK Capital Holding to enforce its indemnification obligations. While we currently expect that our independent director(s) would take legal action on our behalf against TKK Capital Holding to enforce its indemnification obligations to us, it is possible that our independent director(s) in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If our independent director(s) choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public shareholders may be reduced below $10.00 per share.

Risks Relating to the Offer

TKK requires shareholders who wish to redeem their ordinary shares in connection with the Business Combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.

TKK requires public shareholders who wish to redeem their ordinary shares to either tender their certificates to its transfer agent at any time prior to the expiration date set forth in these tender offer documents or to deliver their shares to the transfer agent electronically using the DTC’s DWAC (Deposit/Withdrawal At Custodian) System. In order to obtain a physical certificate, a shareholder’s broker and/or clearing broker, DTC and TKK’s transfer agent will need to act to facilitate this request. It is TKK’s understanding that shareholders should generally allow at least two weeks to obtain physical certificates from the transfer agent. However, given the time limitations created by the expiration of the tender offer and because TKK does not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical stock certificate. While it typically takes a short time to deliver shares through the DWAC System, there is no assurance this will be the case. Accordingly, if it takes longer than TKK anticipates for shareholders to deliver their ordinary shares, shareholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their ordinary shares.

As TKK will require its public shareholders who wish to redeem their ordinary shares in connection with the Offer to comply with specific requirements for redemption described above, such redeeming shareholders may be unable to sell their securities when they wish to in the event that the Business Combination is not consummated.

If TKK requires public shareholders who wish to redeem their ordinary shares in connection with the proposed Business Combination to comply with specific requirements for redemption as described above and the Business Combination is not consummated, TKK will promptly return such certificates to its public shareholders. Accordingly, shareholders of TKK who attempted to redeem their ordinary shares in such a circumstance will be unable to sell

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their securities after the failed acquisition until TKK has returned their securities to them. The market price for TKK’s ordinary shares may decline during this time and shareholders of TKK may not be able to sell their securities when they wish to, even while other shareholders that did not seek redemption may be able to sell their securities.

There is no guarantee that a shareholder’s decision whether to tender ordinary shares will put the shareholder in a better future economic position.

We can give no assurance as to the price at which a shareholder may be able to sell its ordinary shares in the future following the completion of the Business Combination. Certain events following the consummation of the Business Combination may cause an increase in our share price, and may result in a lower value realized now than a shareholder of TKK might realize in the future had the shareholder not agreed to tender ordinary shares. Similarly, if a shareholder of TKK does not tender ordinary shares, the shareholder will bear the risk of ownership of the Ordinary shares of TKK after the consummation of the Business Combination, and there can be no assurance that a shareholder can sell the shareholder’s shares in the future for a greater amount than the redemption price set forth in the Offer. A shareholder of TKK should consult the shareholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

The Offer presents potential risks and disadvantages to us and our continuing shareholders.

The Offer exposes us to a number of risks including:

•        the use of a substantial portion of the cash in our Trust Account, which reduces the funds available as working capital for our businesses going forward, available for significant cash acquisitions in the future or available for other business opportunities that could create significant value for our shareholders;

•        the risk that we would not be able to replenish our cash reserves by raising debt or equity financing in the future on terms acceptable to us, or at all; and

•        the risk that the Offer may reduce our “public float,” which is the number of shares owned by non-affiliate shareholders and available for trading in the securities markets, and the number of our shareholders, which may reduce the volume of trading in the ordinary shares and may result in lower share prices and reduced liquidity in the trading of the ordinary shares following completion of the Offer and limit our ability to meet Nasdaq listing standards, including having the requisite number of round lot holders or shareholders. Please see risk factor entitled “Nasdaq could delist our ordinary shares, which could limit investors’ ability to transact in our securities and subject us to additional trading restrictions,” below.

Because we may redeem up to all of our ordinary shares in the Offer, the liquidity of our securities in the open market may be significantly reduced.

We may redeem up to all of our ordinary shares in the Offer, which would result in significantly fewer ordinary shares issued and outstanding and, in turn, would significantly reduce the liquidity of our securities, including our ordinary shares that are not redeemed.

Risks Relating to TKK Symphony Acquisition Corporation

The requirement that we complete an initial business combination within a specific period of time may give potential target businesses leverage over us in negotiating a business transaction.

We have until February 20, 2020 (or June 20, 2020 if we extend the period of time to consummate a business combination through issuance of the potential extension warrants, as described in more detail herein) to complete an initial business combination. Any potential target business with which we enter into negotiations concerning a business combination will be aware of this requirement. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete a business combination with that particular target business, we may be unable to complete a business combination with any other target business. This risk will increase as we get closer to the time limits referenced above.

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The requirement that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial business combination may limit the type and number of companies that we may complete such a business combination with.

Pursuant to the Nasdaq listing rules, the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial business combination. This restriction may limit the type and number of companies with which we may complete a business combination. If we are unable to locate a target business or businesses that satisfy this fair market value test, we may be forced to liquidate and you will only be entitled to receive your pro rata portion of the funds in the Trust Account.

If Nasdaq delists our securities from trading on its exchange after our initial public offering, we would not be required to satisfy the fair market value requirement described above and could complete a business combination with a target business having a fair market value substantially below 80% of the balance in the Trust Account.

Because we are incorporated under the laws of the Cayman Islands, you may face difficulty protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited.

We are an exempted company incorporated under the laws of the Cayman Islands and certain of our officers and directors are residents of jurisdictions outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the United States courts against our directors or officers.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Law (as the same may be supplemented or amended from time to time) or the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a Federal court of the United States.

We have been advised by our Cayman Islands legal counsel that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a United States company.

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Certain obligations of our Sponsor are memorialized in agreements between our Sponsor, the underwriters of our IPO and us, and these agreements may be amended to change these obligations or eliminate them entirely.

In connection with our IPO, our Sponsor, certain affiliate of our Sponsor, our officers and directors and other initial shareholders agreed to certain obligations pursuant to certain Letter Agreements, as amended, including:

•        in connection with a shareholder vote to approve our initial business combination and/or amend the provisions of our Memorandum and Articles of Association (the article that contains all of the special provisions applicable to us prior to and in connection with our initial business combination) prior to consummation of our initial business combination, to vote their shares in favor of the proposed initial business combination;

•        that he, she or it will not exercise redemption rights in connection with any shares held by such person;

•        to waive their rights to participate in any liquidation distribution with respect to the ordinary shares if we fail to consummate an initial business combination; and

•        only with respect to an affiliate our Sponsor, if we are unable to complete an initial business combination and are forced to dissolve and liquidate, to indemnify us for all claims of contracted parties, to the extent we fail to obtain valid and enforceable waivers from such parties (we have not, however, sought information nor received information from such affiliate of our Sponsor relating to its ability to satisfy any indemnification obligation).

The Letter Agreements were filed as exhibits to our Report on Form 8-K filed with the SEC on August 21, 2018. The Letter Agreements may be amended or terminated with the consent of each of the parties thereto. Accordingly, if each of the parties to the agreements determines that these obligations are no longer in their best interest, then the agreements may be amended or terminated and these obligations may be changed or eliminated entirely.

Since TKK’s Sponsor will lose its entire investment if the Business Combination is not consummated, a conflict of interest may exist in determining whether the Business Combination is appropriate for TKK’s initial business combination.

Our Sponsor and initial shareholders own an aggregate of 6,250,000 founder shares. Symphony has also, through an affiliate, purchased from us an aggregate of 13,000,000 private warrants at $0.50 per private warrant (for a total purchase price of $6,500,000) that will expire worthless if we do not consummate a business combination. In the event of our dissolution and liquidation, our Sponsor may not receive distributions from the Trust Account with respect to these shares. Therefore, our Sponsor’s financial interests may influence its motivation in identifying and selecting an acquisition target and consummating our initial business combination in a timely manner. In addition, many of our directors are affiliated with our Sponsor, which may result in a conflict of interest when they determine whether the terms, conditions and timing of a particular initial business combination are appropriate and in our shareholders’ best interest.

Unless we complete an initial business combination, we will not repay loans provided to us from our Sponsor, and neither our officers, directors, nor any of their respective affiliates, will receive reimbursement for any out-of-pocket expenses incurred by them if such expenses exceed the amount available to us for working capital and general corporate purposes. Therefore, they may have a conflict of interest in determining whether a particular initial business combination is appropriate and in the best interest of TKK.

We shall provide reimbursement of out-of-pocket expenses reasonably incurred by our officers, directors, or any of their respective affiliates, in connection with identifying, investigating and consummating an initial business combination, for which there is no maximum amount of out-of-pocket expenses that may be incurred. Notwithstanding, neither our officers, directors, nor any of their respective affiliates, will receive reimbursement for any out-of-pocket expenses reasonably incurred by them to the extent that such expenses exceed the amount not required to be retained in the Trust Account unless an initial business combination is consummated. In addition, the Sponsor has provided loans to us in the aggregate amount of $850,000 as of September 30, 2019, and we expect that the Sponsor will provide additional loans to us prior to the Business Combination Deadline, which loans are repayable only upon the consummation of a business combination. The financial interest of our officers, directors, or any of their respective affiliates, including the Sponsor, could influence their motivation in selecting an acquisition target and thus, there may be a conflict of interest when determining whether a particular initial business combination is in the shareholders’ best interest.

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Nasdaq could delist our ordinary shares, which could limit investors’ ability to transact in our securities and subject us to additional trading restrictions.

Our securities are listed on the Nasdaq Capital Market, a national securities exchange. We cannot assure you that we will be able to remain in compliance with the Nasdaq listing requirements.

If the Nasdaq Capital Market delists our securities, we could face significant material adverse consequences, including:

•        a limited availability of market quotations for our securities;

•        reduced liquidity for our securities;

•        a determination that our ordinary shares are a “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

•        a limited amount of news and analyst coverage; and

•        a decreased ability to issue additional securities or obtain additional financing in the future.

In addition, it is a condition to consummation to the Business Combination that our ordinary shares shall have been approved for listing on Nasdaq, subject to completion of the Business Combination. If our securities are delisted from Nasdaq, the Sellers could elect to terminate the Share Exchange Agreement and, as a result, we would not be able to complete the Business Combination, or another business combination, before the Business Combination Deadline.

If our ordinary shares become subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions, and trading activity in our securities may be adversely affected.

If at any time we have net tangible assets of $5,000,001 or less and our ordinary shares have a market price per share of less than $5.00, transactions in our ordinary shares may be subject to the “penny stock” rules promulgated under the Exchange Act. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:

•        make a special written suitability determination for the purchaser;

•        receive the purchaser’s written agreement to the transaction prior to sale;

•        provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and

•        obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.

If our ordinary shares become subject to these rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. As a result, the market price of our securities may be depressed, and you may find it more difficult to sell our securities.

We may be a passive foreign investment company, or “PFIC,” which could result in adverse United States federal income tax consequences to U.S. investors.

Since we may be a PFIC, beneficial owners that are U.S. taxpayers of our ordinary shares may be subject to potentially adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. In particular, tendering U.S. Holders, as defined under “Material U.S. Federal Income Tax Consequences”, may be required to treat any gain recognized on the tender as ordinary income and may be subject to an interest charge on the portion of any gain that is attributable to a prior tax year. We urge U.S. investors to consult their own tax advisors regarding the possible application of the PFIC rules. See “Material U.S. Federal Income Tax Consequences.”

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We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our securities less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth company” for up to five years. However, if our non-convertible debt issued within a three-year period exceeds $1.0 billion or revenues exceed $1.07 billion, or the market value of our ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, we are not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, we have reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and we are exempt from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates. We cannot predict if investors will find our shares less attractive because we may rely on these provisions. If some investors find our shares less attractive as a result, there may be a less active trading market for our shares and our share price may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will not adopt the new or revised standard until the time private companies are required to adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

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FORWARD-LOOKING STATEMENTS

This Offer to Purchase contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our and Glory Star Group’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. The risks and uncertainties include, but are not limited to:

•        future operating or financial results;

•        the risk that governmental and regulatory review of the tender offer documents may result in the inability of Glory Star to complete the Offer by the Expiration Date;

•        the ability of Glory Star to consummate the Business Combination and any initial business combination;

•        future payments of dividends and the availability of cash for payment of dividends;

•        future acquisitions, business strategy and expected capital spending;

•        assumptions regarding interest rates and inflation;

•        ability to attract and retain senior management and other key employees;

•        ability to manage our growth;

•        fluctuations in general economic and business conditions;

•        financial condition and liquidity, including its ability to obtain additional financing in the future (from warrant exercises or outside services) to fund capital expenditures, acquisitions and other general corporate activities;

•        estimated future capital expenditures needed to preserve our capital base;

•        the ability to meet the Nasdaq listing standards, including having the requisite number of shareholders, and the potential delisting of Glory Star New Media Group Holdings Limited (formerly TKK) securities from Nasdaq;

•        potential changes in the legislative and regulatory environments;

•        a lower return on investment;

•        potential volatility in the market price of our securities; and

•        other factors discussed in “Risk Factors.”

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in “Risk Factors” in this Offer to Purchase. Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this Offer to Purchase. Except as required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Offer to Purchase or to reflect the occurrence of unanticipated events.

You should carefully consider these risks, in addition to the risks factors set forth in the section titled “Risk Factors” and other information in this Offer to Purchase and in our other filings with the SEC, including the final prospectus related to our IPO dated August 15, 2018 (Registration No. 333-226423) and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, or our 2018 Annual Report, which is incorporated herein by reference. The documents we file with the SEC, including those referred to above, also discuss some of the risks that could cause actual results to differ from those contained or implied in the forward-looking statements. See “Where You Can Find More Information.”

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INFORMATION ABOUT TKK AND GLORY STAR GROUP

Information about TKK Symphony Acquisition Corporation

TKK Symphony Acquisition Corporation is a blank check company incorporated under the laws of the Cayman Islands on February 5, 2018. TKK was incorporated for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. TKK is not limited to a particular industry or geographic region for purposes of consummating a business combination. However, TKK believes it is particularly well-positioned to capitalize on growing opportunities created by consumer/lifestyle assets that may have particular application for the Peoples Republic of China market.

In August 2018, TKK consummated its IPO of an aggregate of 25,000,000 Units, including 3,000,000 Units pursuant to the partial exercise of the over-allotment option by the underwriters of the IPO. Each Unit issued in the IPO consists of one ordinary share, one warrant and one right. Each warrant entitles the holder to purchase one-half of an ordinary share at a price of $5.75 per half share. Simultaneously with the consummation of the IPO, TKK completed a private placement of 13,000,000 warrants, which we refer to as the “private placement warrants,” at a purchase price of $0.50 per warrant to its Symphony, generating gross proceeds of $6,500,000. On August 16, 2018, the Units commenced trading on the Nasdaq under the symbol “TKKU.” As a result of the partial exercise of the overallotment option, as of August 22, 2018, the Sponsor forfeited 75,000 ordinary shares so that the initial shareholders, including the Sponsor, maintain aggregate ownership, on an as-converted basis, at 20% of TKK’s issued and outstanding ordinary shares.

The 25,000,000 Units sold in the IPO were sold at an offering price of $10.00 per Unit, generating gross proceeds of $250,000,000, which was placed in the Trust Account pending TKK’s completion of an initial business combination.

On September 12, 2018, the ordinary shares, warrants and rights underlying the Units sold in the IPO began to trade separately.

If TKK does not consummate our initial business combination by the Business Combination Deadline, TKK must liquidate the Trust Account to the holders of the public shares and dissolve.

TKK is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act). TKK will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of TKK’s initial public offering, (b) in which it has total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of its ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period. As an emerging growth company, it has elected, under Section 107(b) of the JOBS Act, to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.

Information about Glory Star Group

This section contains forward-looking statements about the business and operations of the Glory Star Group and the combined company following the Business Combination. The actual results of combined company may differ materially from those currently anticipated as a result of many factors, including those described under “Risk Factors” and elsewhere in this Offer to Purchase. See “Forward-Looking Statements.”

Overview

Glory Star Group provides advertisement and content production services and operates an award winning mobile and online advertising, digital media and entertainment business in China. After launching its CHEERS App in 2018, it is fast becoming one of the leading e-commerce platforms in China by allowing its users to access its online store (e-Mall), video content, live streaming, and online games. By leveraging Glory Star Group’s rich library of original professionally-produced content to drive user engagement, Glory Star Group has created an ecosystem that attracts and retains a large and growing viewing audience base for its platform.

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As of October 31, 2019, Glory Star Group had distributed nearly 78,000 minutes of proprietary video content to its users, including short videos, online variety shows, online dramas, live streaming, and its lifestyle video series, which achieved more than 4.32 billion views cumulatively.

For the six month periods ended June 30, 2018 and 2019, downloads of Glory Star Group’s CHEERS App were approximately 1.97 million and 22.7 million, respectively. As of June 30, 2018, June 30, 2019, August 31, 2019, and October 31, 2019, the cumulative number of downloads of the CHEERS App exceeded 8.55 million, 35.5 million, 55 million, and 72 million, respectively.

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Glory Star Group’s Vision

Glory Star Group’s vision is to become a world leading mobile media and entertainment company dedicated to providing people pursuing a better life with an integrative platform of featuring e-commerce and high quality lifestyle entertainment.

Glory Star Group’s Business

Established in 2016, Glory Star Group focused on providing advertisement and content production services and becoming a leading mobile and online advertising, media and entertainment business in China by creating professionally-produced content featuring lifestyle, culture and fashion. In 2018, Glory Star Group expanded into e-commerce services by introducing its CHEERS APP which integrated its e-commerce services with professionally-produced content. Primary to its vision, Glory Star Group continues to produce, create and add to its rich library of short videos, drama series, and live streaming, which Glory Star Group owns and streams on its own mobile app, Internet Protocol Television (IPTV), and online platform, as well as for distributions and licensing to other medium such as Chinese television stations and third party online streaming platforms throughout China and the world. Leveraging the popularity of its professionally-produced content and distribution networks, Glory Star Group drives viewing audiences to its CHEERS App ecosystem to convert them as users of its online video steaming services and as customers to its e-Mall and online games.

Cheers APP

The CHEERS App is Glory Star Group’s core platform serving millions of users in China. Most of the users are attracted to download our mobile app after they watch our professionally-produced content (both long and short videos on various distribution channels) featuring, lifestyle, culture and fashion. Central to our business model, the CHEERS App has been developed into a comprehensive content-driven e-commerce platform in which shoppers can access multiple segments such as online store (e-Mall), live streamings, original short videos, and online games. The mobile app users can watch our high-quality video content and shop in our in-app e-Mall. Such a combination has become a prevalent trend in Chinese e-commerce innovation. The following is a summary of Glory Star Group’s CHEERS App:

-        E-Mall (Online Store)

Leveraging its brand, its large viewing audience, and users of its CHEERS App video app, in April 2019, Glory Star Group launched its e-Mall platform where Glory Star Group offers products to its users through third party merchants that its has screened and approved. Glory Star Group charges third-party merchants to its e-Mall platform a service fee and a commission for sales of their products.

As of June 30, 2019, Glory Star Group’s e-Mall has sold over 3,000 Stock Keeping Units (“SKUs”), recording over RMB6.73 million (US$0.96 million) in the volume of merchandise sold through its CHEERS App — gross merchandise value (“GMV”), which represents approximately RMB0.29 million (US$0.04 million) in revenues, achieving an impressive monthly GMV of RMB3.5 million (US$0.5 million) in June 2019, up from only RMB1.3 million (US$0.2 million) in April 2019. As of October 31, 2019, Glory Star Group’s e-Mall has sold over 6,600 SKUs, recording over RMB 65.2 million (US$ 9.3 million) in GMV.

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-        Live Streaming

In June, 2018, Glory Star Group launched its first live streaming called Shopping Genius. As of September, 2019, Glory Star Group now has 4 live streaming in production including Shopping Genius, Bargaining Genius, Guessing Game, Unbeatable Lucky Card, each 90 minute segments, where users can interact with each other and the hosts, obtain discount coupons by participating in the real-time online games and quizzes, and make purchases in our e-Mall with these discount coupons. In addition, as requested by some clients, some live streaming are customized in order to lead the audience to make purchases in the clients’ online stores and/or in other e-commerce platforms such as JD.com and Taobao.com. Glory Star Group monetizes live streaming by promoting products where its subscribers can purchase products through its e-Mall. In addition, Glory Star Group’s e-commerce suppliers and distributors of on e-Mall have the option to enter separate advertising agreements with Glory Star Group for promoting their products in Glory Star Group’s live streaming.

Shopping Genius

 

 

This show promotes various products for sale on e-Mall and provides an opportunity for viewers to participate in question and answer games for the discount coupons for the promotional products.

Bargaining Genius

 

 

This shows promotes various products for sale on e-Mall and allows viewers to compete with each other for discount coupons for the promotional products.

Guessing Game

 

 

This is a live game show that allows viewers to win points that go towards discounts for purchase of items in e-Mall.

Unbeatable Lucky Card

 

 

This is a live game show that allows viewers to win points that go towards discounts for purchase of items in e-Mall.

-        Online Short Videos

Glory Star Group streams its professionally-produced content on its CHEERS App where it generates advertising revenues from traditional pre-video, in-video, banner advertisements, and pop-up advertisements. Glory Star Group also generates revenues from soft product placements that are incorporated into its original video content. Glory Star Group leverages its deep library of professionally-produced content, large viewing audience base, and big data analytics capabilities to help its advertisers target their specific demographics in China.

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-        Online Games

Glory Star Group has developed four (4) online games for its CHEERS App where players can play our games that it has developed in-house. Glory Star Group monetizes online games through users’ in-app purchases of gift packages and game privileges.

Series TV Shows

In February, 2017, Glory Star Group started production of its series TV shows, which contain six (6) lifestyle shows including Cheers Food, Cheers Health, Cheers Fashion, Cheers Baby, Cheers Space and Cheers World, each episodes are 30 minutes in length. Glory Star Group’s series TV shows are unique in the content creation and production, with trending lifestyle updates filmed both in-studio and outdoor. Glory Star Group generates revenues from its series TV shows by licensing to TV stations with exclusive advertising times and charging advertising fees, and by displaying products of our E-mall. Glory Star Group distributes and promotes its series TV shows content on a variety of online video platforms, mobile apps, IPTV and television channels where we generate advertising revenues from traditional pre-video, in-video, and pop-up advertisements. Glory Star Group also generates revenues from soft product placements that are incorporated into its series TV shows. Glory Star Group produces and licenses its series TV shows for airing on local broadcast, basic cable television networks, and throughout China. Our shows

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can be seen on satellite stations such as Anhui Satellite Television (AHTV) and Shenzhen Satellite Television, which are year-to-year contracts. The following is a summary of Glory Star Group’s series TV shows:

Cheers Health

 

 

This TV program features and promotes healthy lifestyle.

Cheers Fashion

 

 

This TV program features high-end fashion and beauty, and is touted as the fashion bible in the fashion field.

Cheers World

 

 

This TV program is China’s only leading short tourism program that brings together the world’s best tourism destinations, sharing travel experiences from unique perspectives of the visitors and the cultural scene of the destinations. It has been fully recommended by the cultural centers or consulates of foreign embassies in China and has close ties and cooperation with embassies in many countries around the world.

Cheers Baby

 

 

This TV program is hosted by Cao Ying, who shares the parenting experience of parents in the form of question and answer format, and in-depth interviews. This is one of few programs of this type in China.

Cheers Food

 

 

This TV programs centers around food and the stories between people and food from various perspectives. Since the launch of Shenzhen Satellite TV, its average ranking has remained stable within the top 8 in China.

Cheers Space

 

 

The regular weekly programs focuses on home décor and interior design.

Drama & Variety Shows

Glory Star Group partners with third-party third parties to produce and license original online drama and variety show series for distribution on online videos platforms. Glory Star Group currently developed the following drama series and variety shows:

My Greatest Hero

 

 

The TV series My Greatest Hero explores the lives of a high school tennis team. This program is in partnership with iQIYI and has become one of the most popular youth TV series amongst young people.

Hi! Rap Season 1

 

 

This variety show was developed in 2018 as a “light-variety” talk show.

Hi! Rap Season 2

 

 

In 2019, we developed season 2 of this variety show. It is currently one of the most popular variety shows in China.

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Depending on the contract with partners, Glory Star either shares revenues generated by the number of viewers, or share of advertising revenues generated by the contents.

Advertising

Glory Star Group distributes and promotes its professionally-produced content on its CHEERS App and on a variety of online video platforms, mobile apps, IPTV and television channels where it generates advertising revenues from traditional pre-video, in-video, and pop-up advertisements. Glory Star Group also generates revenues from soft product placements that are incorporated into Glory Star Group’s original video content, including its online short videos. In addition, Glory Star Group’s e-Mall suppliers and distributors have the option to enter into separate advertising agreements for displaying their products in Glory Star Group’s live streamings. All items displayed in the live streamings can be purchased in e-Mall. Glory Star Group leverages its deep library of professionally-produced content, wide distribution channel, and big data analytics capabilities to help its advertisers target their specific demographics in China.

Production Services

Glory Star Group provides brand advertising services to third-party advertising agencies by producing variety shows, short videos, and live streaming according to customers’ needs for a fee. Glory Star Group also provides planning, shooting, and post-production services for a fee.

Content Licensing and Distribution

Glory Star Group, from time to time, may also acquire rights to rebroadcast and/or distribute third-party film and television drama.

Industry overview

Growth of e-commerce in China

The growing e-commerce market scale, as well as the population of online shoppers in China, have built a solid industry outlook for emerging e-commerce platforms. In an October 2019 market research study that we commissioned, Market Overview of Content-Driven E-commerce Platform in China, iResearch Consulting reported that the total e-commerce market sales in China has reached RMB15,242 billion in 2018, with a compound annual growth rate (CAGR) of 17.6% from 2014 to 2018. The e-commerce sales in China grows faster than that of total retail sales of consumer goods in China, which has a CAGR of 8.8% from 2014 to 2018.

Source: National Bureau of Statistics, iResearch

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The population of online shoppers has reached 610 million in 2018, of which 97% are also mobile shoppers, according to iResearch. The total population of online shoppers in China is expected to reach 900 million by 2021, at a CAGR of 13.8%.

Source: CNNIC, iResearch

Growth of online video users

The development of high-speed internet network and the growing popularity of short video platforms have fueled the growth of online video viewership. According to iResearch report, the population of online video users in China has reached 0.59 billion by the end of 2018, with a CAGR of 17% from 2014 to 2018. Online video users take up 69% of total internet users by the end of 2018, while it was only 47% by the end of 2014.

Source: CNNIC, iResearch

Video content-driven e-commerce platforms

With the rapid growth of e-commerce market and online video users, many e-commerce platforms started to leverage video content in assisting the customer acquisition of their e-commerce platforms.

A video content-driven e-commerce platform refers to an e-commerce platform with promotional and advertising video content that encourage or incentivize customers in making purchase on its e-commerce platform. The video content adopted by most platforms are live streaming shows and short videos.

A video content-driven e-commerce platform can be PGC, UGC, or PUGC content-driven, depending on who produces the content:

•        PGC refers to Professional Generated Content, which relies on professional video producers and is normally more costly to produce. However, it also has the highest commercial value for its attention to details and consistent quality;

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•        UGC refers to User Generated Content, which features contents produced by the general public; and

•        PUGC refers to Professional User Generated Content, which is the combination of PGC and UGC.

Monetization

A video content-driven e-commerce platform can usually monetize video content through following means:

•        Advertising revenue for in-video product placement, start screen ads, in-app banner ads, and other forms of advertisements;

•        Commission revenue from video producers and live streamers on the platform when transactions are completed and settled; and/or

•        Direct e-commerce sales of commodities on the platform.

Proprietary PGC video content-driven e-commerce platform

A proprietary PGC video content-driven e-commerce platform is a segment of content-driven e-commerce platform, with in-house professional video production and proprietary e-commerce platform. When compared with other video content-driven e-commerce platforms, a proprietary PGC video content-driven e-commerce platform usually have larger advantage in maintaining high-quality content production with dedicated professional production team.

Market Scale

The proprietary PGC video content-driven e-commerce platform industry is still at an early stage of development with high growth rate but limited qualified market participants. However, many e-commerce platforms have or are planning on developing video content on their platforms in 2019.

According to iResearch report, the market scale of proprietary PGC video content-driven e-commerce platforms in terms of GMV is approximately RMB2.6 billion in 2018, with a CAGR of 191.5% from 2016 to 2018. The market is expected to grow at a CAGR of 47.6% to RMB19.5 billion in 2023.

Source: iResearch

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Key successful factors for video content-driven E-commerce platforms

•        Selection of commodities:    A platform must be careful and thoughtful in selecting commodities with high popularity and reasonable profit margin to keep customers attracted.

•        Sustainable high-quality video content:    A platform must be able to sustain consistent video content quality and avoid publishing any video that may result in negative publicity, or even regulatory punishment.

•        Stable customer inflow:    A platform must secure a solid channel for customer acquisition and to keep all customer activities within a proprietary ecosystem in order to minimize customer loss.

Competitive landscape

According to iResearch report, Glory Star Group is amongst the top 5 video content-driven e-commerce platforms in China in terms of monthly GMV in August 2019.

Competition

Glory Star Group’s competitors include Alibaba (Nasdaq: BABA), Pin Duouo (Nasdaq: PDD), Douyu (Nasdaq: DOYU), Qu Toutiao (Nasdaq: QTT), Mango Media (SZ.300413), and Zhong Guang Tianze (SH.603721) for users, shoppers, and advertising customers. Glory Star Group also competes with other internet media and entertainment services, such as internet and social platforms that offer content in emerging and innovative media formats, as well as major TV stations.

Employees

As of November 22, 2019, Glory Star Group had 194 full time employees. Glory Star Group has entered into written employment contracts with all of its employees in accordance with PRC Labor Law and Contract Law. None of its employees is covered by collective bargaining contracts. Glory Star Group believes that it maintains a good working relationship with its employees and Glory Star Group has not experienced any significant labor disputes or any difficulty in recruiting staff for its operations.

As required by PRC regulations, Glory Star Group participates in various government statutory social security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund. Glory Star Group is required under PRC law to contribute to social security plans at specified percentages of the salaries, bonuses and certain allowances of its employees up to a maximum amount specified by the local government from time to time. An employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within a stipulated deadline and be subject to a late fee.

Intellectual Property

Glory Star Group’s success depends largely on its ability to protect its core technology and intellectual property. To accomplish this, Glory Star Group relies on its trade secrets, including know-how, confidentiality clauses in standard labor agreements and third party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protects its proprietary rights in its technology. Glory Star Group currently does not own any patents and does not have any pending patent applications.

As of November 22, 2019, Glory Star owned forty-five registered trademarks and, sixteen trademark registration applications in the PRC, and twenty-three registered copyrights (including copyrights with respect to twenty software products developed by it relating to various aspects of its operations and three copyright works). The software and registered works are crucial to Glory Star’s business.

Legal Proceedings

From time to time, Glory Star Group may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm its business. To the best knowledge of management, there are no material legal proceedings pending against Glory Star Group.

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There are no proceedings in which any of its directors, officers, or any beneficial shareholder of more than five percent (5%) of its voting securities is an adverse party or has a material interest adverse to Glory Star.

Seasonality

Aside from fluctuations in the level of advertising spending resulting from changes in the overall economic and market conditions in China, Glory Star’s revenues are affected by seasonal fluctuations in business and consumer spending that also affect the level of advertising spending over time in China. Glory Star’s quarterly operating results have fluctuated in the past and may continue to fluctuate depending upon a number of factors, many of which are out of its control. Glory Star’s operating results tend to be seasonal. As a result, detailed attention shall be paid when comparing its operating results on a period-to-period basis. For example, online user numbers tend to be higher during holidays and end of the year, and advertising revenues tend to be higher at the end of the year.

Facilities

Glory Star Group’s principal executive office is located at F22, Xinhua Technology Building, No. 8 Tuofangying Road, Jiangtai, Chaoyang District, Beijing, People’s Republic of China, which has approximately 1,770 square meters of office space. As of November 22, 2019, Glory Star Group also rents an additional seven facilities primarily used for office space. Total space under lease, including Glory Star Group’s principal executive office is 2,317 (m2). Glory Star pays monthly rent of approximately $40,928 per month. Lease expiration dates range from 2020 to 2025. Glory Star Group believes that its current offices are suitable and adequate to operate its business at this time. Glory Star Group does not own any real property.

Insurance

Glory Star Group does not maintain any property insurance policies covering equipment and facilities for losses due to fire, earthquake, flood or any other disaster. Consistent with customary industry practice in China, Glory Star Group does not maintain business interruption insurance or key employee insurance for its executive officers. Uninsured damage to any of its equipment or buildings or a significant product liability claim could have a material adverse effect on its results of operations.

Dividend Policy

Glory Star’s board of directors has complete discretion on whether to pay dividends, subject to the any rights and restrictions attached to any class of shares. The form, frequency and amount of any dividends declared will depend upon Glory Star’s future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant or are required to be satisfied pursuant to Cayman law.

Glory Star is a holding company, and its relies on dividends paid by its operating subsidiaries in China for its cash needs, including the funds necessary to pay dividends and other cash distributions to its shareholders, if any, service any debt it may incur and pay its operating expenses. The payment of dividends in China is subject to limitations. Regulations in the PRC currently permit payment of dividends by its PRC subsidiaries only out of their accumulated profits as determined in accordance with accounting standards and regulations in China. Each of Glory Star’s PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year to contribute to its reserve fund until the accumulated balance of the reserve fund reaches 50% of its registered capital. Each of Glory Star’s PRC subsidiaries is also required to reserve a portion of its after-tax profits to its employee welfare and bonus fund, the amount of which is determined by its board of directors. These funds are not distributable in cash dividends.

Memorandum and Articles of Association

Glory Star was incorporated in the Cayman Islands as an exempted company with limited liability on November 30, 2018 with registration number 345545. Glory Star’s memorandum and articles of association (the “articles”) filed under the laws of the Cayman Islands contain, inter alia, provisions designed to provide certain rights and protections to the company’s shareholders. Pursuant to the articles, if different classes of shares are issued, the amendment of the rights attaching to any class will generally require the consent in writing of the holders of at least two-thirds of the issued shares of that class.

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Furthermore, the Companies Law (as revised) of the Cayman Islands (the “Companies Law”) requires certain corporate actions to be passed by the shareholders of the company by way of a ‘Special Resolution’, being the consent of at least two-thirds of votes of shareholders at a general meeting (a higher threshold may be specified in the company’s articles), or all of the shareholders pursuant to a written resolution (provided that this method is permitted by the articles, as is the case with Glory Star). Such actions are as follows:

•        Amending the memorandum of association;

•        Authorising a reduction of share capital;

•        Amending the articles of association;

•        Adopting articles of association where the memorandum of association was not accompanied by articles of association;

•        Changing the name of the company and/or adopting or changing a dual foreign name of the company;

•        Permitting the paperless transfer of shares in a company pursuant to the rules of an approved stock exchange;

•        Appointing an inspector to examine the affairs of the company;

•        Voluntarily winding up the company under the Companies Law;

•        Requiring the Court to wind up the company under the Companies Law;

•        In support of an application to the Court to recall the liquidation;

•        In connection with the re-registration of a company as an exempted limited duration company (and vice versa);

•        In connection with the re-registration of a company as a special economic zone company (and vice versa);

•        Conversion of an ordinary non-resident company into a company;

•        Conversion of a company into a segregated portfolio company; and

•        Approving mergers and consolidations of a company.

In addition, Glory Star’s articles permit the company to:

(a)     be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing; and

(b)    reduce its share capital and any capital redemption reserve in any manner, authorised and consent required by Companies Law;

in each case with the approval of a Special Resolution.

Aside from the statutory requirements for a Special Resolution above, the articles require certain other corporate actions to have the consent of the shareholders by way of an ‘Ordinary Resolution’ (i.e. with a majority consent, or a unanimous consent in the case of a written resolution), including the following:

•        Increasing the share capital of the company;

•        Consolidating and dividing all or any of its share capital into shares of larger amount than its existing shares;

•        Subdividing its existing shares, or any of them, into shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived;

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•        Cancelling any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled;

•        Converting all or any of its paid up shares into stock and reconvert that stock into paid up shares of any denomination;

•        Determining (a) the minimum and maximum number; (b) the remuneration; and (c) the shareholding qualification of the directors of the company; and

•        Subject to the Companies Law, approve the capitalization of any credit of the company’s reserve accounts.

Exchange Controls

The Cayman Islands currently has no exchange control restrictions.

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ORGANIZATION STRUCTURE

History and Development of Glory Star and Glory Star Group

Glory Star was incorporated as an exempted company under the laws of the Cayman Islands on November 30, 2018. Glory Star was formed as a holding company and operates through its subsidiaries formed which were formed in 2016. Through the VIE Contract, Glory Star operates and consolidates the financial results of its VIEs in China.

The following is a brief description of each of Glory Star’s subsidiaries and VIEs:

•        Glory Star HK.    Glory Star New Media Group HK Limited (“Glory Star HK”) is a limited company incorporated on December 18, 2018, under the Companies Ordinance of Hong Kong. The total amount of share capital of Glory Star HK is HKD 1.00 with one (1) authorized share. Glory Star HK is wholly owned by Glory Star.

•        WFOE.    Glory Star New Media (Beijing) Technology Co., Ltd. (“WFOE”) is a wholly foreign-owned enterprise established by Glory Star HK on March 13, 2019. WFOE has been issued a business license (No. 91110113MA01HN7N6P) by the Beijing Administration for Industry and Commerce Shunyi District Bureau on April 4, 2019.

•        Xing Cui Can.    Xing Cui Can International Media (Beijing) Co., Ltd. (“Xing Cui Can”) is a limited liability company incorporated under laws of PRC on September 7, 2016, and the current shareholders are: Bing Zhang, Jia Lu, Ran Zhang, Yixing He, Ronghui Zhang, Hui Lin, Hui Jin, Hanying Li, Yinghao Zhang, and Jiancong Xiao, all of whom are PRC residents. Xing Cui Can currently holds a business license issued by Beijing Administration for Industry and Commerce Chaoyang District Bureau. Through a series of contractual agreements, WFOE is deemed to control Xing Cui Can and have rights to consolidate all of Xing Cui Can’s audited financial results.

•        Horgos.    Horgos Glory Star Media Co., Ltd. (“Horgos”) is a limited liability company incorporated under laws of PRC on November 1, 2016. The current shareholders are Xing Cui Can, Bing Zhang, Jia Lu, Ran Zhang, Yixing He, Ronghui Zhang, Hui Lin, Hui Jin, Hanying Li, Yinghao Zhang and Everest Venture Capital Investment Co., Ltd. (“Everest”). Horgos currently holds a business license issued by Horgos Market Supervisory Authority. Xianhong Liang and Jiancong Xiao are the beneficial owners of Horgos through Everest. Through a series of contractual agreements, WFOE is deemed to control Horgos and have rights to consolidate all of Horgos’s audited financial results.

Prior to the incorporation of Glory Star, on August 31, 2017 (the “Acquisition Date”), Horgos completed the acquisition of 100% of the equity interest of Leshare Star (Beijing) Technology Co., Ltd. (“Beijing Leshare”), a company incorporated in the PRC, which is mainly engaged in internet advertising activities and owns a copyright of “Fashion Star Short Video App Leshare Software.” Horgos purchased all 100% equity interest of Beijing Leshare from six individual shareholders with a consideration of $0. Prior to the acquisition, Mr. Bing Zhang was the chief operation officer of Horgos and had a 65% equity interest in Beijing Leshare, hence the acquisition was deemed as a related party transaction. Beijing Leshare’s assets and liabilities were recorded at their carrying values as of the Acquisition Date, and the results of operations of Beijing Leshare are consolidated with the results of operations of Glory Star Group, starting on August 31, 2017.

Glory Star’s principal executive offices are located at 22F, Xinhua Technology Building, No. 8 Tuofangying Road, Jiangtai District, Chaoyang District, Beijing.

Glory Star’s Corporate Structure

Glory Star is a Cayman Islands holding company and conducts its operations in China through its PRC subsidiaries and VIEs. Through its Hong Kong subsidiary Glory Star HK, Glory Star owns a direct equity interest in WFOE, its wholly-owned PRC subsidiary. WFOE has entered into a series of contractual arrangements with (i) Xing Cui Can and its shareholders, and (ii) Horgos and its shareholders, which allow Glory Star to exercise effective control over Xing Cui Can and Horgos and receive substantially all the economic benefits of Xing Cui Can and Horgos. Any failure by the VIEs or their respective shareholders to perform their obligations under these contractual arrangements, and any failure by Glory Star to maintain effective control over Xing Cui Can and Horgos, would result in Glory Star’s inability to continue to consolidate its VIEs’ financial results of operations in its financial results of operations and would have a material adverse effect on Glory Star’s business.

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The following diagram illustrates Glory Star’s corporate structure as of the date of this Offer to Purchase. Unless otherwise indicated, equity interests depicted in this diagram are held 100%. The relationships between WFOE and Xing Cui Can, and WFOE and Horgos as illustrated in this diagram are governed by the VIE Contracts and do not constitute equity ownership.

Contractual Arrangements among WFOE, the VIEs and the VIEs Shareholders

Current PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in value-added telecommunication services, and certain other business. Glory Star HK is a company registered in Hong Kong. WFOE is considered a foreign-invested enterprise. To comply with PRC laws and regulations, Glory Star primarily conducts its business in China through the VIE’s based on the VIE Contracts. As a result of VIE Contracts, Glory Star HK exerts control over Glory Star’s consolidated affiliated entities in the PRC and consolidates their operating results in its financial statements under U.S. GAAP. The following is a summary of the VIE Contracts that provide Glory Star with effective control of the VIEs and that enables it to receive substantially all of the economic benefits from its operations.

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Contracts that give Glory Star effective control of the VIEs

Business Cooperation Agreement.    WFOE entered into separate business cooperation agreements with Xing Cui Can and Horgos, and their respective shareholders in September 2019, pursuant to which (1) each VIE shall not enter into any transaction which may materially affect such VIE’s assets, obligations, rights and operations without the written consent of WFOE; (2) each VIE and the VIE shareholders agree to accept suggestions by WFOE in respect of the employment and dismissal of such VIE’s employees, daily operations, dividend distribution and financial management of such VIE; and (3) the VIE and the VIE shareholders shall only appoint individuals designated by WFOE as the director, general manager, chief financial officer and other senior management members. In addition, each of the VIE shareholders agree that (i) unless required by WFOE, will not make any decisions or otherwise request the VIE to distribute any profits, funds, assets or property to the VIE shareholders, or (ii) issue any dividends or other distribution with respect to the shares of the VIE held by the VIE shareholders. The term of each business cooperation agreement is perpetual unless terminated by WFOE upon thirty (30) days advance notice, or upon the transfer of all shares of the respective VIEs to WFOE (or its designee).

Exclusive Option Agreement.    WFOE entered into separate exclusive option agreements with Xing Cui Can and Horgos, and their respective shareholders in September 2019. Pursuant to these exclusive option agreements, the VIE shareholders have granted WFOE (or its designee) an option to acquire all or a portion of each of their equity interests in the VIEs at the price equivalent to the lowest price then permitted under PRC law. If the equity interests are transferred in installments, the purchase price for each installment shall be pro rata to the equity interests transferred. WFOE may, at its sole discretion, at any time exercise the option granted by the VIE shareholders. Moreover, WFOE may transfer such option to any third party. The VIE shareholders may not, among other obligations, change or amend the articles of association and bylaws of the VIE, increase or decrease the registered capital of the VIEs, sell, transfer, mortgage or dispose of their equity interest in any way, or incur, inherit, guarantee or assume any debt except for debts incurred in the ordinary course of business unless otherwise expressly agreed to by WFOE, and enter into any material contracts except in the ordinary course of business unless otherwise expressly agreed to by WFOE. The term of each of these exclusive option agreements is 10 years and will be extended automatically for successive 5 year terms except where WFOE provides prior written notice otherwise. The exclusive option agreements may be terminated by WFOE upon thirty (30) days advance notice, or upon the transfer of all shares of the respective VIEs to WFOE (or its designee).

Share Pledge Agreement.    WFOE entered into separate share pledge agreements with Xing Cui Can and Horgos, and their respective shareholders in September 2019. Pursuant to these share pledge agreements, the VIE shareholders have pledged all of their equity interests in the VIEs as priority security interest in favor of WFOE to secure the performance of the VIEs and their shareholders’ performance of their obligations under, where applicable, (i) the Master Exclusive Service Agreement, (ii) the Business Cooperation Agreement, and (iii) the Exclusive Option Agreements (collectively the “Principal Agreements”). WFOE is entitled to exercise its right to dispose of the VIE shareholders’ pledged interests in the equity of the VIE in the event that either the VIE shareholders or the VIE fails to perform their respective obligations under the Principal Agreements. The equity pledge agreements will remain in full force and remain effective until the VIE and the VIE shareholders have satisfied their obligations under the Principal Agreements.

Proxy Agreements and Powers of Attorney.    WFOE entered into separate Proxy Agreements and Powers of Attorney with Xing Cui Can and Horgos, and their respective shareholders in September 2019. Pursuant to the proxy agreements and powers of attorney, each VIE shareholder irrevocably nominates and appoints WFOE or any natural person designated by WFOE as its attorney-in-fact to exercise all rights of such VIE equity holder in such VIE, including, but not limited to, (i) execute and deliver any and all written decisions and to sign any minutes of meetings of the board or shareholder of the VIE, (ii) make shareholder’s decisions on any matters of the VIE, including without limitation, the sale, transfer, mortgage, pledge or disposal of any or all of the assets of the VIE, (iii) sell, transfer, pledge or dispose of any or all shares in the VIE, (iv) nominate, appoint, or remove the directors, supervisors and senior management members of the VIE when necessary, (v) oversee the business performance of the VIE, (vi) have full access to the financial information of the VIE, (vii) file any shareholder lawsuits or take other legal action against the VIE’s directors or senior management members, (viii) approve annual budget or declare dividends, (ix) manage and dispose of the assets of the VIE, (x) have the full rights to control and manage the VIE’s finance, accounting and daily operations, (xi) approve filing of any documents with the relevant governmental authorities or regulatory bodies, and (xii) any other rights provided by the VIE’s charters and/or the relevant laws and regulations on the VIE shareholders. The proxy agreements and powers of attorney shall remain in effect during the term of the Exclusive Service Agreements.

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Confirmation and Guarantee Letter.    Each of the VIE shareholders signed a confirmation and guarantee letter in September 2019, pursuant to which each VIE equity holder agreed to fully implement the arrangements set forth in the Principal Agreements, Share Pledge Agreement, and the Proxy Agreement and Power of Attorney, and agreed to not carry out any act which may be contrary to the purpose or intent of such agreements.

Spousal Consent.    Each of the VIE shareholders’ spouses, if applicable, signed a spousal consent in September 2019 pursuant to which the spouse of each of the shareholders acknowledges that the equity interests in Horgos and Xing Cui Can held by the spouse will be disposed according to the arrangements set forth in the Principal Agreements, Share Pledge Agreement, and the Proxy Agreement and Power of Attorney and undertakes not to carry out any act with the intent to interfere with the arrangements set forth in aforementioned agreements, and agree to be bound by the aforementioned agreements if they receive any equity interests in Horgos and Xing Cui Can.

Contracts that enable Glory Star to receive substantially all of the economic benefits from the VIEs

Master Exclusive Service Agreements.    WFOE entered into separate Exclusive Service Agreements with Xing Cui Can and Horgos in September 2019, pursuant to which WFOE provides exclusive technology support and services, staff training and consultation services, public relation services, market development, planning and consultation services, human resource management services, licensing of intellectual property, and other services as determined by the parties. In exchange, the VIEs pay service fees to WFOE equal to the pre-tax profits of the VIEs less (i) accumulated losses of the VIEs and their subsidiaries in the previous financial year, (ii) operating costs, expenses, and taxes, and (iii) reasonable operating profit under applicable PRC tax law and practices. During the term of these agreements, WFOE has the right to adjust the amount and time of payment of the service fees at its sole discretion without the consent of the VIEs. WFOE (or its service provider) will own any intellectual property arising from the performance of these agreements. The term of each of these Exclusive Service Agreements is perpetual unless terminated by WFOE upon thirty (30) days’ advance notice, or upon the transfer of all shares of the respective VIEs to WFOE (or its designee) 10 years under the Option Agreement.

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GOVERNMENT REGULATIONS

Regulations of Glory Star Group’s Industry

The PRC government imposes extensive controls and regulations over the e-commerce industry and media industry, including television, advertising, media content production. This section summarizes the principal PRC regulations that are relevant to lines of business of Glory Star Group.

Regulations on Foreign Investment

Guidance Catalogue of Industries for Foreign Investment

On June 28, 2017, the National Development and Reform Commission (the “NDRC”), and MOFCOM,, promulgated the Foreign Investment Catalog which was implemented on July 28, 2017. For foreign investment, the Foreign Investment Catalog is divided into encouraged industries, restricted industries and prohibited industries, and industries which are not listed in the Foreign Investment Catalog are categorized as the permitted industries for foreign investment. The list of restricted industries and prohibited industries in the Foreign Investment Catalog was abolished by the Special Administrative Measures for Foreign Investment Access (Negative List) (2018 Edition), which was then replaced by Special Administrative Measures for Foreign Investment Access (Negative List) (2019 Edition) (the “2019 Negative List”) promulgated on June 30, 2019 by NDRC and MOFCOM and implemented on July 30, 2019. According to the 2019 Negative List, foreign investment in value-added telecommunications services (except for e-commerce) falls within the Negative List. As a result, foreign investors can only conduct investment activities through equity or contractual joint ventures with certain shareholding requirements and approvals from competent authorities. PRC partners are required to hold the majority interests in the joint ventures and approval from MOFCOM, or the Ministry of Industry and Information Technology (“MIIT”) for the incorporation of the joint ventures and the business operations.

On October 8, 2016, the MOFCOM promulgated the Interim Administrative Measures for Record-filing of the Incorporation and Change of Foreign-invested Enterprises, or FIE Interim Administrative Measures, as amended on June 30, 2018. Under the FIE Interim Administrative Measures, the incorporation and change of Foreign-invested Enterprises, or FIE, are subject to record filing procedures, instead of prior approval requirements, provided that the incorporation or change does not trigger any special entry administrative measures required by the government. If the incorporation or change of FIE matter is subject to the special entry administration measures, the approval of the MOFCOM or its local counterparts is still required.

Foreign Direct Investment in Value-Added Telecommunications Companies

Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises promulgated by the State Council on December 11, 2001, as amended on September 10, 2008 and February 6, 2016, or the FITE Regulations, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50%. Moreover, for a foreign investor to acquire any equity interest in a value-added telecommunication business in China, it must satisfy a number of stringent performance and operational experience requirements, including demonstrating good track records and experience in operating value-added telecommunication business overseas. Foreign investors that meet these requirements must obtain approvals from the MIIT, and MOFCOM or their authorized local counterparts, which retain considerable discretion in granting approvals.

MIIT issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular, on July 13, 2006. The MIIT Circular indicates a PRC company that holds an Internet Content Provider License, or the ICP License, is prohibited from leasing, transferring or selling the ICP License to foreign investors in any form, and from providing any assistance, including resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. Moreover, the domain names and registered trademarks used by an operating company providing value-added telecommunications service must be legally owned by such company and/or its shareholders. In addition, such company’s operation premises and equipment must comply with its approved ICP License, and such company should improve its internal internet and information security standards and emergency management procedures.

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On June 19, 2015, MIIT issued the Circular on Loosening the Restrictions on Shareholding by Foreign Investors in Online Data Processing and Transaction Processing Business (for-profit E-commerce), or the Circular 196. The Circular 196 allows a foreign investor to hold 100% of the equity interest in a PRC entity that provides online data processing and transaction processing services (for-profit e-commerce). With respect to the applications for a license for on-line data processing and transaction processing business (for-profit e-commerce), the requirements for the proportion of foreign equity are governed by this Circular, other requirements and corresponding approval procedures are subject to the FITE Regulations. However, due to the lack of additional interpretation from PRC regulatory authorities, it remains unclear as to what impact MIIT Circular 2015 may have on Glory Star Group or other PRC internet companies with similar corporate and contractual structures.

In view of these restrictions on foreign direct investment in value-added telecommunications services and certain other types of businesses under which Glory Star Group’s business may fall, including internet culture services and radio/television programs production and operation business, Glory Star may rely on contractual arrangements with its VIEs to operate such business in China. For more information, please see “Glory Star’s Corporate Structure.” Due to the lack of interpretative guidance from the relevant PRC governmental authorities, there are uncertainties regarding whether PRC governmental authorities would consider Glory Star’s corporate structure and contractual arrangements to constitute foreign ownership of a value-added telecommunications business.

Foreign Investment Law

The National People’s Congress, or the NPC, Standing Committee promulgated the Foreign Investment Law on March 15, 2019, which will come into effect on January 1, 2020, to replace the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises, the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures and the Law of the People’s Republic of China on Sino-Foreign Cooperative Joint Ventures as the basic law on foreign investment in the PRC.

The Foreign Investment Law stipulates that the foreign investors’ capital contributions, profits, capital gains, income from asset disposal, intellectual property royalties, legally obtained compensation or indemnification, and liquidation income that are made or obtained in China, may be freely remitted in or out of China in RMB or foreign exchange according to law. In addition, it further stipulates that the state protects the legitimate rights and interests of intellectual property rights held by foreign investors and FIEs. In formulating specific normative documents concerning foreign investment, local governments’ authorities at various levels and their relevant departments shall comply with the provisions of laws and regulations, including Foreign Investment Law. Without the basis of laws and regulations, local governments shall not reduce or prejudice FIEs’ legitimate rights and interests, impose additional regulatory burden, set additional impediments for FIE on accessing specific markets, or interfere with the FIE’s normal business activities.

Due to the lack of additional interpretation from PRC regulatory authorities, it is unclear how the Foreign Investment Law will be implemented in practice by the PRC government authorities and whether the offshore companies controlled by the PRC investors through variable interest entities structure be deemed as foreign investment remains to be seen. For more information, please see “Risk Factors — Risks Relating to Doing Business in China — Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business Glory Star may be able to conduct in the PRC and accordingly on the results of its operations and financial condition.”

Regulations Related to E-Commerce

In 2005, the General Office of the State Council issued Several Opinions on Accelerating the Development of Electronic Commerce to stress the significance of the e-commerce and the importance of regulating the development of e-commerce. In 2007, MOFCOM promulgated the Guiding Opinions on Online Trading (for Tentative Implementation), under which, the term “Online Trading” is defined as the commodity or service trading conducted between the buyer and the seller by making use of internet and the behaviors of online trading participants.

According to the Opinions of the Ministry of Commerce on Promoting the Regularized Development of the E-Commerce promulgated by MOFCOM in 2007, which required to, among others, regularize the information release and transmission behaviors of all parties concerned to online trading, applaud legal, regularized, fair and equitable online marketing, electronic contracting, after-sale services and other e-commerce trading acts, prevent and settle various kinds of trading disputes, regularize electronic payment acts and ensuring the safe flow of funds.

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Implementing Opinions on Promoting E-Commerce Application was promulgated by MOFCOM in October 2013, which aims to further promote the development of e-commerce, guide the healthy and speedy development of network retailing, strengthen the development of e-commerce for rural villages and agricultural products, support the development of urban community e-commerce application system and promote innovative application of cross-border e-commerce.

In May 2015, the State Council promulgated the Opinions on Striving to Develop E-commerce to Speed Up the Cultivation of New Economic Driving Force in order to lower the requirements for market access, further simplify the registration of registered capital, deeply promote the reform from ”certificate before license” to ”license before certificate” in the field of e-commerce and simplify the approval process for the overseas listing of e-commerce enterprises in the territory and encourage the cross-border RMB direct investment in the field of e-commerce.

In addition, in December 2016, Guiding Opinions on Fully Enhancing the Credit Construction in the E-commerce Sector was issued by the State Administration for Industry and Commerce and other governmental authorities. These opinions require that e-commerce platforms (a) establish and perfect internal credit constraint mechanisms, and make full use of big data technologies to strengthen the credit control in terms of commodity quality, intellectual property rights, service level, etc.; (b) establish the business credit early risk warning system, and promptly publish the relevant information to society and risk prompts for seriously dishonest businesses selling forged and fake commodities and hyping credit by malicious scalping, according to requirements of relevant industrial competent and regulatory authorities; (c) establish and improve a report and complaint handling mechanism and responsively submit clues on suspected illegalities and irregularities identified to relevant industrial competent and regulatory authorities, and (d) coordinate with relevant authorities concerning investigation and treatment of business operators on e-commerce platforms. In the event an e-commerce platform fails to actively fulfill its responsibilities, the relevant industrial competent or regulatory authority is authorized to promptly take measures, such as engage in communications, provide notification and impose administrative punishments in accordance with the law. Glory Star believes that it is currently in material compliance with the guidance provided by the opinions.

Filing by Third-Party Platform Providers for Online Food Trading

In July 2016, the State Food and Drug Administration, or SFDA, promulgated the Measures for Investigation and Handling of Illegal Acts Involving Online Food Safety, pursuant to which a third-party platform provider for online food trading in the PRC is required to file a record with the food and drug administration at the provincial level and obtain a filing number. If an online food trading third-party platform provider fails to complete such filing, the provider may be ordered to make rectifications and given a warning by the competent food and drug administration, and failure to make such rectification may be subject to fines ranging from RMB5,000 to RMB30,000. As of March 18, 2019, Xing Hui Beijing has completed the required filing formalities with the competent food and drug administration.

Regulations Relating to Product Quality and Consumer Rights Protection

Based on the PRC Consumer Rights and Interests Protection Law, as amended in and effective March 2014, and the Administrative Measures on Online Trading, or Online Trading Measures, by State Administration for Industry and Commerce, or SAIC, on January 29, 2014, have provided stringent requirements and obligations on business operators, including internet business operators and platform service providers. For example, consumers are entitled to return goods purchased online, subject to certain exceptions, within seven days upon receipt of such goods for no reason. To ensure that sellers and service providers comply with these laws and regulations, the platform operators are required to implement rules governing transactions on the platform, monitor the information posted by sellers and service providers, and report any violations by such sellers or service providers to the relevant authorities. In addition, online marketplace platform providers may, pursuant to the relevant PRC consumer protection laws, be exposed to liabilities if the lawful rights and interests of consumers are infringed upon in connection with consumers’ purchase of goods or acceptance of services on online marketplace platforms and the online marketplace platform providers fail to provide consumers with the contact information of the seller or manufacturer. Furthermore, online marketplace platform providers may be jointly and severally liable with sellers and manufacturers if they are aware or should be aware that any seller or manufacturer is using the online platform to infringe upon the lawful rights and interests of consumers and fail to take measures necessary to prevent or stop such activity.

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The Tort Liability Law of the PRC, which was enacted by the Standing Committee of the NPC, or SCNPC, in December 2009 and took effect in July 2010, also provides that if an online service provider is aware that an online user is committing infringing activities, such as selling counterfeit products, through its internet services and fails to take necessary measures, it will be jointly liable with the said online user for such infringement. If the online service provider receives any notice from the infringed party on any infringing activities, the online service provider will take necessary measures, including deleting, blocking and unlinking the infringing content, in a timely manner. Otherwise, it will be jointly liable with the respective online user for the extended damages.

As an e-commerce platform service provider, Glory Star is subject to the PRC Consumer Rights and Interests Protection Law, the Online Trading Measures and the Tort Liability Law of the PRC and believes that it is currently in compliance with these regulations in all material aspects.

Regulations on the Media Industry

Programme Content

According to the Provisions on the Administration of Radio and Television Program Production promulgated by the State Administration of Radio, Film and Television, or SARFT, on July 19, 2004 and took effect in August 20, 2004, and was amended on August 28, 2015, entities engaging in (i) the production of television programs, such as feature programs, general programs, drama series and animations, and (ii) the trading activities and agency services on the copyrights of such programs, must first obtain preliminary approval from the SARFT or its provincial branches for license. Horgos and Xing Hui Beijing have obtained the required approvals accordingly.

Regulations on the Advertising Industry

Regulations Relating to Advertising Law

The principal regulations governing advertising businesses in China include Advertising Law promulgated by SCNPC on October 27, 1994, which was amended on April 24, 2015 and October 26, 2018. Under the Advertising Law, advertisers refer to any legal persons, economic organizations or individuals that, directly or through agents, design, produce and publish advertisements to promote products or services. Advertisement operators refer to those legal persons, economic organizations or individuals consigned to provide advertisement content design, production and agency services. Advertisement publishers refer to those legal persons or other economic organizations that publish advertisements for the advertisers or for those advertisement operators that are consigned by the advertisers. An advertisement should present distinct and clear descriptions of the product’s function, place of origin, quality, price, manufacturer, validity period, warranties or the contents, forms, quality, price or promises of the services offered. False advertising that may mislead consumers and compromise legal rights and interests of consumers will subject the advertiser to civil liabilities. Where the advertising operator or advertising publisher is unable to provide the real name, address or valid contact information of the advertiser, the consumers may require the advertising operator or advertising publisher make compensation in advance. For false advertisements of goods or services other than those stipulated in the preceding paragraph which caused harm to consumers, where the advertising operator, advertising publisher and advertising spokesperson knew or should have known the falsity yet still provided design, production, agency or publishing services, or provide recommendation or endorsement, they will bear joint and several liability with the advertiser.

PRC advertising laws and regulations provide specific content requirements for advertisements in China, which include prohibitions on, among other things, misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are also prohibited. It is prohibited to disseminate tobacco advertisements via broadcast, film, television or print media, or in any waiting lounge, theater, cinema, conference hall, stadium or other public area. There are also specific restrictions and requirements regarding advertisements that relate to matters such as patented products or processes, pharmaceuticals, medical instruments, agrochemicals, foodstuff, alcohol and cosmetics. In addition, all advertisements relating to pharmaceuticals, medical instruments, agrochemicals and veterinary pharmaceuticals advertised through broadcast, film, television, newspaper, magazine and other forms of media, together with any other advertisements which are subject to censorship by administrative authorities according to relevant laws and administrative regulations, must be submitted to the relevant administrative authorities for content approval prior to dissemination.

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Advertisers are required by PRC advertising laws and regulations to ensure that the content of the advertisements they prepare are true and accurate as well as in full compliance with applicable laws and regulations. In providing advertising services, advertising service providers and advertising publishers must review the prescribed supporting documents provided by advertisers for advertisements and verify that the content of the advertisements complies with applicable PRC laws and regulations. Violation of these regulations may result in penalties, including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the SAIC or its local branches may revoke violators’ licenses or permits for advertising business operations. Furthermore, advertisers, advertising service providers or advertising distributors may be subject to civil or criminal liability if they infringe on the legal rights and interests of third parties in the course of their advertising business.

Regulations Relating to Internet Advertising

On July 4, 2016, the SAIC promulgated the Interim Measures for the Administration of Internet Advertising, or the Internet Advertising Measures, which became effective on September 1, 2016. The Internet Advertising Measures provides additional compliance requirements for online advertising business in addition to those requirements set forth in the Advertising Law. Pursuant to the Internet Advertising Measures, Internet Advertising refers to the commercial advertising for direct or indirect marketing goods or services in the form of text, image, audio, video, or others means through websites, webpages, internet apps, or other internet media. Major additional compliance requirements are: (i) advertisements must be identifiable and marked with the word “advertisement,” enabling consumers to distinguish them from non-advertisement content; (ii) publishing advertisements on the Internet through a pop-up page or in other forms shall provide a prominently marked “CLOSE” button to ensure “one-click closure;” (iii) sponsored search results must be clearly distinguished from organic search results; (iv) it is forbidden to send advertisements or advertisement links by email without the recipient’s permission or induce Internet users to click on an advertisement in a deceptive manner; and (v) internet information service providers that do not participate in the operation of internet advertisements should stop publishing illegal advertisements if they know or should know that the advertisements are illegal. According to Internet Advertising Measures, it is not allowed to publish the online advertisement for prescription drugs, tobaccos and goods or services prohibited from publish according to applicable laws and administrative regulations. In addition, all advertisements for medical treatment, pharmaceuticals, food formula for special medical purposes, medical devices, pesticides, veterinary drugs, healthcare food and other special goods or services must be submitted to the relevant administrative authorities for content approval prior to publishing.

Regulations Related to Internet Information Security and Privacy Protection

PRC government authorities have enacted laws and regulations with respect to internet information security and protection of personal information from any abuse or unauthorized disclosure. Internet information in China is regulated and restricted from a national security standpoint. The SCNPC enacted the Decisions on Maintaining Internet Security in 2000, and was amended on August 27, 2009, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The Ministry of Public Security has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may revoke the service provider’s operating license and shut down its websites.

Under the Several Provisions on Regulating the Market Order of Internet Information Services issued by the MIIT in 2011, an internet information service provider may not collect any user personal information or provide any such information to third parties without the consent of the users and it must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary to provide its services. An internet information service provider is also required to properly maintain the user personal information, and in case of any leak or likely leak of the user personal information, the internet information service provider must take immediate remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority. In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the SCNPC in December 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection and use of user personal information must (i) be subject to the consent of the user; (ii) be in accordance with the principles of legality, rationality and necessity; and (iii) be within the specified purposes, methods and scopes.

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An internet information service provider must also keep such information strictly confidential, and is prohibited from divulging, tampering or destroying any such information, or selling or providing such information to other parties. An internet information service provider is required to take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss. Any violation of these laws and regulations may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, shut down of websites or even criminal liabilities.

In addition, pursuant to the Notice on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens issued by of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security in 2013, and the Interpretation on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens issued by the Supreme People’s Court and the Supreme People’s Procuratorate in May 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information:(i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations.

Furthermore, pursuant to the Ninth Amendment to the Criminal Law issued by the SCNPC in August 29, 2015, which became effective in November 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders is subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation. In addition, any individual or entity that (a) sells or provides personal information to others in a way violating the applicable law, or (b) steals or illegally obtains any personal information is subject to criminal penalty in severe situation.

In November 2016, the SCNPC promulgated the Network Security Law of the People’s Republic of China, or the Network Security Law, effective June 1, 2017. The Network Security Law is formulated to maintain the network security, safeguard the cyberspace sovereignty, national security and public interests, protect the lawful rights and interests of citizens, legal persons and other organizations, and requires that a network operator, which includes, among others, internet information services providers, take technical measures and other necessary measures in accordance with the provisions of applicable laws and regulations as well as the compulsory requirements of the national and industrial standards to safeguard the safe and stable operation of the networks, effectively respond to network security incidents, prevent illegal and criminal activities, and maintain the integrity, confidentiality and availability of network data. The Network Security Law emphasizes that any individuals and organizations that use networks is required to comply with the PRC Constitution and laws, abide by public order and cannot endanger network security or make use of networks to engage in unlawful activities such as endangering national security, economic order and social order, and infringing the reputation, privacy, intellectual property rights and other lawful rights and interests of other people. The Network Security Law has reaffirmed the basic principles and requirements as specified in other existing laws and regulations on personal information protections, such as the requirements on the collection, use, processing, storage and disclosure of personal information, and internet service providers being required to take technical and other necessary measures to ensure the security of the personal information they have collected and prevent the personal information from being divulged, damaged or lost. Any violation of the provisions and requirements under the Network Security Law may subject the internet service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or even criminal liabilities.

To comply with these PRC laws and regulations, Glory Star has adopted internal procedures to monitor content displayed on its website and application. However, due to the large amount of data Glory Star generates and processes, it may not be able to properly protect customers’ personal information and safeguard its networks. See “Risk Factors — Risks Relating to Glory Star Group’s Business and Industry- Glory Star Group’s business generates and processes a large amount of data, and the improper use or disclosure of such data could harm its reputation as well as have a material adverse effect on its business and prospects.”

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Regulations Related to Intellectual Property Rights

Regulations on Copyright

Under the Copyright Law, issued in 1990 and most recently amended in 2010, or the Copyright Law, and its related Implementing Regulations issued in 2002 and amended in 2013, creators of protected works enjoy personal and property rights with respect to publication, authorship, alteration, integrity, reproduction, distribution, lease, exhibition, performance, projection, broadcasting, dissemination via information network, production, adaptation, translation, compilation and related activities. Other than the rights of authorship, alternation and integrity of an author which shall be unlimited in time, the term of a copyright is the life of the individual author plus 50 years, but for by a corporation the term is 50 years after first publication. In consideration of the social benefits and costs of copyrights, the PRC authorities balance copyright protections with limitations that permit certain uses, such as for private study, research, personal entertainment and teaching, without compensation to the author or prior authorization.

The Measures for Administrative Protection of Copyright Related to Internet, which was jointly promulgated by the National Copyright Administration, or NCA, and the MIIT on April 29, 2005, and became effective on May 30, 2005, provides that upon receipt of an infringement notice from a legitimate copyright holder, an operator of Internet information services, or ICP operator, must take remedial actions immediately by removing or disabling access to the infringing content. If an ICP operator knowingly transmits infringing content or fails to take remedial actions after receipt of a notice of infringement that harms public interest, the ICP operator could be subject to administrative penalties, including an order to cease infringing activities, confiscation by the authorities of all income derived from the infringement activities, or payment of fines.

On May 18, 2006, the State Council promulgated the Regulations on the Protection of the Right to Network Dissemination of Information (as amended in 2013). Under these regulations, an owner of the network dissemination rights with respect to written works or audio or video recordings who believes that information storage, search or link services provided by an Internet service provider infringe his or her rights may require that the Internet service provider delete, or disconnect the links to, such works or recordings.

In order to further implement the Computer Software Protection Regulations promulgated by the State Council in 2001 and amended in January 2013, the National Copyright Administration issued the Computer Software Copyright Registration Procedures in 2002, which apply to software copyright registration, license contract registration and transfer contract registration. As of November 22, 2019, Glory Star Group had twenty registered software copyrights.

Regulations on Trademarks

Registered trademarks are protected by the Trademark Law of the PRC (Revised in 2019) which was adopted in 1982 and subsequently amended in 1993, 2001, 2013 and 2019, respectively as well as by the Implementation Regulations of the PRC Trademark Law adopted by the State Council in 2002 and as most recently amended on April 29, 2014. The Trademark Office under the SAIC handles trademark registrations. The Trademark Office grants a ten-year term to registered trademarks and the term may be renewed for another ten-year period upon request by the trademark owner. A trademark registrant may license its registered trademarks to another party by entering into trademark license agreements, which must be filed with the Trademark Office for its record. As with patents, the Trademark Law has adopted a first-to-file principle with respect to trademark registration. If a trademark applied for is identical or similar to another trademark that has already been registered or subject to a preliminary examination and approval for use on the same or similar kinds of products or services, such trademark application may be rejected. Any person applying for the registration of a trademark may not injure existing trademark rights first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use. As of November 22, 2019, Glory Star Group had forty-five registered trademarks and sixteen trademarks registration applications in the PRC.

Regulations on Domain Names

The MIIT promulgated the Measures on Administration of Internet Domain Names, or the Domain Name Measures, on August 24, 2017, which took effect on November 1, 2017, and replaced the Administrative Measures on China Internet Domain Name promulgated by MII on November 5, 2004. According to the Domain Name Measures, the MIIT is in charge of the administration of PRC internet domain names. The domain name registration follows a first-to-file principle. Applicants for registration of domain names must provide the true, accurate and complete

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information of their identities to domain name registration service institutions. The applicants will become the holder of such domain names upon the completion of the registration procedure. As of November 22, 2019, Glory Star Group had 3 domain names in PRC.

LABOR REGULATIONS

Labor Contract Law

The PRC Labor Contract Law was promulgated on June 29, 2007, as amended on December 28, 2012, and became effective on July 1, 2013. According to the PRC Labor Contract Law of PRC, labor contracts must be entered into if labor relationships are to be established between an entity and its employees. The entity cannot require the employees to work in excess of the time limit as permitted under the relevant labor laws and regulations and shall pay to the employees wages that are no lower than local standards on minimum wages. The entity shall also abide by the aforementioned laws and regulations and perform procedures for dissolution and termination of labor contracts, payment of labor remuneration and economic compensation, use of labor dispatch and payment of social insurance.

Regulations on Social Insurance and Housing Provident Fund

According to the PRC Social Insurance Law issued by the SCNPC on October 28, 2010, and implemented on July 1, 2011, and subsequently revised on December 29, 2018, the state established a social insurance system including basic pension insurance, basic medical insurance, unemployment insurance, work-related injury insurance and maternity insurance, under which both employers and individuals are required to pay social insurance premiums. Migrant workers participate in such social insurance schemes, and foreigners employed within the territory of the PRC also participate in social insurance as well. Violations of the PRC Social Insurance Law may result in the imposition of fines, and criminal liability may be incurred in serious cases. An employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within a stipulated deadline and be subject to a late fee of 0.05% per day, as the case may be. If the employer still fails to rectify the failure to make social insurance contributions within the deadline, it may be subject to a fine ranging from one to three times the amount overdue.

According to the Regulations on Management of Housing Provident Fund which was promulgated and implemented by the State Council on April 3, 1999, and subsequently revised on March 24, 2002, and March 24, 2019, enterprises in China are required to register with the housing provident fund management center within 30 days from the date of establishment, and complete the procedures for establishment of housing accumulation fund accounts for their employees within 20 days from the date of registration. In violation of such regulation, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline.

Regulations on Foreign Exchange Registration of Offshore Investment by PRC Residents

On July 4, 2014, State Administration of Foreign Exchange, or the SAFE, promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has

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amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

Regulations on Foreign Currency Exchange

The principal regulation governing foreign currency exchange in China is the Foreign Exchange Administration Rules of the PRC, or the Foreign Exchange Administration Rules, promulgated on January 29, 1996, as subsequently amended on January 14, 1997, and August 1, 2008. Under these rules, RMB is generally freely convertible for payments of current account items, such as trade and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as capital transfer, direct investment, investment in securities, derivative products or loan unless prior approval of SAFE is obtained.

Under the Foreign Exchange Administration Rules, foreign-invested enterprises in the PRC may purchase foreign exchange without the approval of SAFE for paying dividends by providing certain evidencing documents, such as board resolutions and tax certificates, or for trade and services-related foreign exchange transactions by providing commercial documents evidencing such transactions. They are also allowed to retain foreign currency, subject to an approval by SAFE of a cap amount, to satisfy foreign exchange liabilities. In addition, foreign exchange transactions involving overseas direct investment or investment and exchange in securities and derivative products abroad are subject to registration with SAFE and approval or file with the relevant governmental authorities if necessary.

On November 19, 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which was amended on May 4, 2015, and October 10, 2018, respectively. This Circular substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013 and was further amended on October 10, 2018, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, will directly examine the applications and conduct the registration.

The Circular on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise, or the SAFE Circular No. 19, which was promulgated by the SAFE on March 30, 2015 and became effective on June 1, 2015, provides that a foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights and interests (or for which the bank has registered the injection of the monetary capital contribution into the account). Pursuant to the SAFE Circular No.19, for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment with the foreign exchange administration or the bank at the place where it is registered.

The Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or the SAFE Circular No. 16, which was promulgated by the SAFE and became effective on June 9, 2016, provides that enterprises registered in the PRC may also convert their foreign debts from foreign currency into

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Renminbi on a self-discretionary basis. The SAFE Circular No. 16 also provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on self-discretionary basis, which applies to all enterprises registered in the PRC.

Regulation on PRC Tax

PRC Enterprise Income Tax

According to the Enterprise Income Tax, or EIT Law, which was promulgated by the NPC on March 16, 2007, and implemented on January 1, 2008, and subsequently revised on February 24, 2017, and December 29, 2018, and the Implementation Regulations of EIT Law, which was promulgated by the State Council on December 6, 2007, and implemented on January 1, 2008 and amended on April 23, 2019, enterprises are divided into resident enterprises and non-resident enterprises. Resident enterprises, which refer to enterprises that are set up in accordance with the PRC law, or that are set up in accordance with the law of the foreign country (region) but with its actual administration institution in China, pay enterprise income tax originating both within and outside China at the tax rate of 25%. Non-resident enterprises refer to entities established under foreign law whose actual administration institution is not within China but have institution or premises in China, or which do not have institution or premises in China but have income sourced within China. Non-resident enterprises that have set up institutions or premises in China pay enterprise income tax at the tax rate of 25% in relation to the income originated from China and obtained by the aforementioned institutions or premises, as well as the income incurred outside China, provided there is an actual relationship between such income and the aforementioned institutions or premises. For non-resident enterprises that have no institutions or premises in China, or, although they have institutions or premises in China, there is no actual relationship between the income and the aforementioned institutions or premises, they pay enterprise income tax at the tax rate of 10% in relation to the income originated from China. The aforementioned income includes income from sales of goods, provision of labor services, transfer of property, equity investment including dividends, interest income, rental income, income from royalties, donations and other income. In addition, according to the EIT Law and the Implementation Regulations of EIT Law, for the income incurred from equity investment including dividends and bonus among eligible resident enterprises, and the income which is incurred from equity investment including dividends and bonus obtained from resident enterprise by non-resident enterprises that have set up institutions or premises in China and the income has an actual relationship with such institutions or premises, such incomes are tax-free income.

Regulation on PRC Value-added Tax

According to the Interim Regulations of PRC on Value-added Tax, which was promulgated by the State Council on December 13, 1993 and subsequently revised on November 10, 2008, February 6, 2016 and November 19, 2017 and the Detailed Rules for the Implementation of the Interim Regulations of the People’s Republic of China on Value-added Tax which was promulgated by the Ministry of Finance (the “MOF”) on December 25, 1993, and subsequently revised on December 15, 2008 and October 28, 2011, entities and individuals that sell goods or labor services of processing, repair or replacement, sell services, intangible assets, or immovables, or import goods within the territory of China are taxpayers of value-added tax (“VAT”), and pay VAT in accordance with law. Unless otherwise stipulated, the VAT rate is 17% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing goods; 11% for taxpayers selling transportation, postal, basic telecommunications, construction, or immovable leasing services, selling immovables, transferring land use rights, or selling or importing specific goods; unless otherwise stipulated, 6% for taxpayers selling services or intangible assets.

On March 23, 2016, the MOF and the SAT published the Circular of the MOF and the SAT on Fully Launch of the Pilot Scheme for the Conversion of Business Tax to Value-added Tax and its annexes, pursuant to which entities and individuals that sell services, intangible assets, or immovables pay VAT instead of business tax since May 1, 2016.

According to the Circular of the MOF and the SAT on Adjusting Value-added Tax Rate, which was promulgated by the MOF and the SAT on April 4, 2018, and became effective on May 1, 2018, the tax rates for the taxable sales or goods import activity, which were subject to the tax rates of 17% and 11%, respectively, were adjusted to 16% and 10%, respectively.

According to the Circular on Policies in Relation to the Deepening of Value-added Tax Reforms, which was jointly promulgated by the MOF, the SAT and the General Administration of Customs on March 20, 2019, the tax rate of 16% and 10% originally applicable to general VAT taxpayers’ VAT taxable sales or goods import shall be adjusted to 13% and 9%, respectively.

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Dividend Distribution

The EIT Law prescribes a standard withholding tax rate of 20% on dividends and other PRC sourced passive income of non-resident enterprises. The Implementation Rules reduced the rate from 20% to 10%. The central government of the PRC and the government of Hong Kong signed the Arrangement between the Mainland of the PRC and Hong Kong for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income on August 21, 2006, or the Arrangement. According to the Arrangement, no more than 5% withholding tax shall apply to dividends paid by a PRC company to a Hong Kong resident, provided that the recipient is a company that holds at least 25% of the equity interests of the PRC company and is deemed as the “beneficial owner” under the Arrangement. Notice on the Implementation of the Fourth Protocol of Arrangement between Chinese Mainland and Hong Kong SAR on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income (Announcement [2016] No.12 of the State Administration of Taxation), Announcement of the State Administration of Taxation on the Implementation of the Third Protocol of Arrangement between Chinese Mainland and Hong Kong SAR on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, Announcement [2011] No.1 , Notice on the Implementation of the Second Protocol of Arrangement between Chinese Mainland and Hong Kong SAR on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income (Guo Shui Han [2008] No. 685) and Circular of the State Administration of Taxation on Interpreting and Implementing Some Clauses in the Arrangement between Mainland China and Hong Kong SAR concerning Avoiding Double Taxation and Preventing Tax Evasion on Income(Guo Shui Han [2007] No. 403), which was partially repealed on January 4, 2011 and August 27, 2015 ,have amended the Arrangement accordingly.

On February 3, 2018, the SAT promulgated Announcement of the State Administration of Taxation on Issues Relating to “Beneficial Owner” in Tax Treaties, State Administration of Taxation Announcement [2018] No. 9, Circular 9, which clarifies that a beneficial owner shall be a person who has ownership and control over the income and the rights and property from which the income is derived. To prove “beneficial owner” status, the applicant shall submit the materials pursuant to the provisions of Article 7 of the Announcement of the State Administration of Taxation on Promulgation of the “Administrative Measures on Entitlement of Non-residents to Treatment under Tax Treaties” (State Administration of Taxation Announcement [2015] No. 60, was amended by Announcement of the State Administration of Taxation on Partially Amending Taxation Regulatory Documents on June 15, 2018). Therein, where an applicant is a “beneficial owner” pursuant to the provisions of Article 3 of this Announcement, the applicant shall also provide, in addition to the tax resident identity of the applicant, the tax resident identity documents of the person who satisfies the criteria for “beneficial owner” and the person who satisfies the criteria, issued by the tax authorities in charge at the country (region) where he/she resides; where the applicant is a “beneficial owner” pursuant to the provisions of item (4) of Article 4 of this Announcement, the applicant shall also provide, in addition to the tax resident identity document of the applicant, the tax resident identity documents of the person who holds 100% of the applicant’s shares directly or indirectly and the multi-tier holders, issued by the tax authorities in charge at the country (region) for which the said person and the multi-tier holders are residents; the tax resident identity document shall prove that the person is a tax resident in the year in which the income is obtained or the preceding year.

Regulations on Tax regarding Indirect Transfer

On February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Circular 7. Pursuant to Circular 7, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises, may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and is established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, considerations include, inter alia, (i) whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; (ii) whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income is mainly derived from China; and (iii) whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature evidenced by their actual function and risk exposure. According to the Circular 7, where the payer fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. The Circular 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017,

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the SAT issued the Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or SAT Circular 37, which further elaborates the relevant implemental rules regarding the calculation, reporting and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of the SAT Circular 7. The SAT Circular 7 may be determined by the tax authorities to be applicable to its offshore transactions or sale of its shares or those of its offshore subsidiaries where non-resident enterprises, being the transferors, were involved.

Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors

On August 8, 2006, six PRC regulatory agencies, including MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006, and were amended on June 26, 2009. The M&A Rules, among other things, include provisions that purport to require an offshore special purpose vehicle formed for the purpose of acquiring PRC domestic companies and controlled by PRC individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. The CSRC approval procedures require the filing of an application and supporting documents with the CSRC.

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MANAGEMENT OF GLORY STAR GROUP

The key executive officers and directors of Glory Star Group are set forth in the following table:

Name

 

Age

 

Position

Zhang, Bing

 

52

 

Director (Chairman and Chief Executive Officer) of Glory Star

Lu, Jia

 

39

 

Director and Senior Vice President of Glory Star Media (Beijing) Co., Ltd.

Zhang, Ran

 

39

 

Director and Vice President (in charge of distribution/channels/publicity/chief editor’s office), Supervisor of Glory Star Media (Beijing) Co., Ltd.

Glory Star does not currently have a chief financial officer and is in the process of recruiting a chief financial officer for the combined company.

Business Experience

Bing Zhang, Director (Chairman and Chief Executive Officer).    Mr. Zhang is the sole director and chairman of Glory Star. Mr. Zhang also serves as a director of Glory Star New Media Group HK Limited, executive director of Glory Star New Media (Beijing) Technology Co., Ltd., and chairman of Horgos Glary Wisdom Marketing Planning Co., Ltd., and Glary Wisdom (Beijing) Marketing Planning Co., Ltd. since 2018, executive director of Xing Cui Can, chairman of Horgos Glory Star Media Co., Ltd., Glory Star Media (Beijing) Co., Ltd., and Horgos Glary Prosperity Culture Co., Ltd. since 2017, and an executive director of Leshare Star (Beijing) Technology Co., Ltd. since 2016. From 2011 to 2019, Mr. Zhang was the Vice President of Fashion Group as well as Chairman of Board of Directors and General Manager of Fashion Starlight (Beijing) Media Co., Ltd. During that time, he helped expand the high-end fashion magazine into a series of fashion TV shows, and helped developed a number of nationally renowned TV programs, films and documentaries including but not limited to “New Youth”, “Morning Light in Xiaoxiang”, “Golden Eagle Star”, “China Entertainment Reports”, “ Muse Dress”, “Muse Dress S2”, “On The Way”, “Detective Chinatown”, “The Three-Body Problem”, “The Rise of a Tomboy”, “Yuanzhang Zhu”, “The Censors of Qing Dynasty”, and “Fashion”. Mr. Bing Zhang holds an EMBA Degree of Tsinghua SEM and a Bachelor Degree of Hunan University.

Jia Lu, Director and Senior Vice President of Glory Star Media (Beijing) Co., Ltd.    Mr. Lu is a director of Glory Star Media (Beijing) Co., Ltd., and a director of Horgos Glory Star Media Co., Ltd., Horgos Glary Wisdom Marketing Planning Co., Ltd., Glary Wisdom (Beijing) Marketing Planning Co., Ltd. since 2018, and director of Horgos Glary Prosperity Culture Co., Ltd. since 2017, and senior vice president of Glory Star Media (Beijing) Co., Ltd. Since 2016. From 2011 to 2016, Mr. Lu served as Vice General Manager at Trends Star (Beijing) Cultural Media Co., Ltd. Mr. Lu holds a Bachelor degree of Beijing film academy.

Ran Zhang, Director, Vice President (in charge of distribution/channels/publicity/chief editor’s office), and Supervisor of Glory Star Media (Beijing) Co., Ltd.    Mrs. Zhang is the director and Supervisor of Glory Star Media (Beijing) Co., Ltd. and a director of Horgos Glory Star Media Co., Ltd. Since 2018, and vice president (in charge of distribution/channels/publicity/chief editor’s office) of Glory Star Media (Beijing) Co., Ltd, and supervisor of Xing Cui Can and Leshare Star (Beijing) Technology Co., Ltd. since 2016. From October 2010 to December 2016, she served as Issuance Director at Fashion Starlight (Beijing) Media Co., Ltd. Mrs. Ran Zhang holds a Bachelor degree of Jingshi College of Science and Technology, Beijing Normal University.

There are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer. Glory Star’s Board of Directors is not paid for services as directors.

Involvement in Certain Legal Proceedings

To the best of Glory Star’s knowledge, during the past ten years, none of Glory Star Group’s directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

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(4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Board Composition and Committees

Glory Star’s Board of Directors currently consists of one director. Glory Star does not have any board committees or independent directors on our board of directors. Glory Star is not required under the Companies Law to have independent directors.

Terms of Directors and Executive Officers

Glory Star’s directors are not subject to a term of office and hold office until such times as they resign or are removed from office by ordinary resolution or as otherwise described below. Any director can be removed from office by ordinary resolution. A director will be removed from office automatically if, among other things, the director becomes bankrupt or has become of unsound mind. Glory Star’s officers are appointed by and serve at the discretion of the Board of Directors.

Indemnification Matters

Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences or committing a crime. Glory Star’s memorandum and articles of association provide for indemnification of directors and officers for all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings incurred in their capacities as such, except by reasons of their own willful default or fraud.

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EXECUTIVE COMPENSATION

Compensation for Glory Star Group’s Executive Officers

The following table sets forth information concerning all forms of compensation earned by Glory Star Group’s named executive officers during the fiscal years ended December 31, 2018 and 2017 for services provided to Glory Star Group.

Name and Principal Position

 

Year

 

Salary
($)

 

Bonus
($)

 

Stock
Awards
($)

 

Option
Awards
($)(1)

 

Non-Equity
Incentive Plan
Compensation
($)

 

All Other
Compensation
($)

 

Total
($)

Bing Zhang,

 

2018

 

$

82,362

 

$

 

$

 

$

 

$

 

$

 

$

82,362

Chairman and Chief

 

2017

 

$

82,682

 

$

 

$

 

$

 

$

 

$

 

$

82,682

Executive Officer

     

 

   

 

   

 

   

 

   

 

   

 

   

 

 
       

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Jia Lu,

 

2018

 

$

61,791

 

$