CHR

MKT CAP $13.2MP/E 0.1DIV YIELD —FCF YIELD —REV TTM $148.8M +1.1%NET INCOME $25.6M −1.3%NET CASH $240.7M52W 1.29 – 21.00SEC XBRL · TTM TO Invalid Date

How CHR rewrote its risk factors

10-K ITEM 1A · FY2018 → FY2019

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Risks Relating to Our Business and Industry There are many risks and uncertainties that may affect our operations, performance, development and results.
Many of these risks are beyond our control.
The following is a description of the important risk factors that may affect our business.
If any of these risks were to actually occur, our business, financial condition or results of operations could be materially adversely affected.
Additional risks and uncertainties not currently known to us or that we currently consider to be immaterial may also materially adversely affect our business, financial condition or results of operations.
If we fail to anticipate user preferences and provide high-quality content, especially popular original content, in a cost-effective manner, we may not be able to attract and retain users to remain competitive.
Our success depends on our ability to maintain and grow users and user time spent on the CHEERS App.
To attract and retain users and compete against our competitors, we must continue to offer high-quality content, especially popular original content that provides our users with a superior online entertainment experience.
To this end, we must continue to produce new original content and source new talent and producers in a cost effective manner.
Given that we operate in a rapidly evolving industry, we must anticipate user preferences and industry trends and respond to such trends in a timely and effective manner.
If we fail to fulfill the needs and preferences of our users in order to deliver a superior user experience or control our costs in doing so, we may suffer from reduced user traffic, and our business, financial condition and results of operations may be materially and adversely affected.
We currently rely on our 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 our human and capital resources in such content production.
We face fierce competition for qualified personnel in a limited pool of high-quality creative talent.
If we are not able to compete effectively for highly qualified personnel or attract and retain top talent at reasonable costs, our original content production capabilities would be materially and adversely impacted.
If we are unable to offer popular original content that addresses our user’s tastes and preferences in a cost effective manner, we may suffer a reduction in user traffic and our business, financial condition and results of operations may be materially and adversely affected.
We operate in a capital intensive industry and require a significant amount of cash to fund our operations and to produce or acquire high quality video content.
If we fail to obtain sufficient capital to fund our operations, our business, financial condition and future prospects may be materially and adversely affected.
The operation of an internet video streaming content provider and producer of television shows requires significant and continuous investment in content production or acquisition and video production technology.
Producing high-quality original content is costly and time-consuming and typically requires a long period of time in order to realize a returns on investment, if at all.
If we cannot obtain adequate capital to meet our capital needs, we may not be able to fully execute our strategic plans for growth and our business, financial condition and prospects may be materially and adversely affected.
We anticipate that we will need approximately $75 million to support our working capital needs in the next twelve (12) months.
Even though we have recognized net income for the years ended December 31, 2017 and 2018, historically we have funded our working capital requirements through profits, bank loans and private placement of capital raise.
As of June 30, 2019, we had approximately $38.2 million in working capital.
If our efforts to retain users and attract new users for our mobile and on-line video content and e-commerce products are not successful, our business, financial condition and results of operations will be materially and adversely affected.
In addition to our content production for television shows, we have experienced significant user growth for our mobile and on-line video and e-commerce products over the past several years.
Our ability to continue to retain users and attract new users will depend in part on our ability to consistently provide our users with compelling content choices, as well as a quality experience for selecting and viewing video content.
If we introduce new features or service offerings, or change the mix of existing features and services offerings, in a manner that is not favorably received by our users, we may not be able to attract and retain users and our business, financial condition and results of operations would be materially and adversely affected.
If we fail to retain existing or attract new advertising customers to advertise within our mobile and online video content or on our e-commerce platform, maintain and increase our wallet share of advertising budget, or if we are unable to collect accounts receivable in a timely manner, our business, financial condition and results of operations may be materially and adversely affected.
We generate a substantial part of our revenues from advertising placed within our mobile and online video content and on our e-commerce platform.
With the launch of our e-Mall in 2019, we anticipate that although mobile and online advertising revenue as a percentage of our total revenues is expected to decrease due to the fast growth in revenues generated in our e-Mall, our mobile and online advertising business is still growing and remains one of our largest sources of revenue.
However, because our advertising customers are not under long term contracts, we may not be able to retain our advertising customers in the future, attract new advertising customers continuously or be able to retain our advertising customers at all.
If our advertising customers find that they can generate better returns elsewhere, or if our competitors provide better online advertising services to suit the advertising customers’ goals, we may lose some or all of our advertising customers.
In addition, third parties may develop and use certain technologies to block the display of online advertisements, and should this occur our members will be able to skip the viewing of our advertising customers’ advertisements, which may in turn cause us to lose advertising customers.
If our advertising customers determine that their expenditures on internet video streaming platforms or our 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 our 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 our business, financial conditions and results of operations.
Our 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, we also enter into advertising contracts with third-party advertising agencies, which represent advertising customers, even if we have direct contact with such advertisers.
As a result, we rely on third-party advertising agencies for sales to, and collection of payment from, our brand advertisers.

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Gone since FY2018

Risks Associated with Our Business We have no operating history and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective.
Since we do not have an operating history, you will have no basis upon which to evaluate our ability to achieve our business objective, which is to acquire an operating business.
We will not generate any revenues until, at the earliest, after the consummation of a business combination.
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.
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.
Our sponsor 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 ability to obtain an extension of time to consummate an initial business combination by issuing potential extension warrants is different than other similarly structured blank check companies.
In order to obtain an extension of time to consummate an initial business combination, many blank check companies have been required to place additional funds in trust for the benefit of their public shareholders, thereby increasing the per-share liquidation amount payable to public shareholders if the company is unable to consummate an initial business combination by the extended deadline.
In contrast, as indicated above, we can obtain a four month extension to consummate our initial business combination by issuing to holders of our public shares, by way of a dividend, one warrant to purchase one half of one ordinary share for an aggregate of up to 25,000,000 potential extension warrants.
If we are unable to consummate a business combination by the new deadline, the potential extension warrants will expire worthless and our public shareholders will receive the same per-share liquidation amount they would have received if we had not extended the time to consummate a business combination.
You are not entitled to protections normally afforded to investors of blank check companies.
We are deemed to be a “blank check” company under the United States securities laws.
However, since we have net tangible assets in excess of $5,000,000, we are exempt from rules promulgated by the SEC to protect investors of blank check companies such as Rule 419.
Accordingly, investors are not afforded the benefits or protections of those rules which would, for example, completely restrict the transferability of our securities, restrict the use of interest earned on the funds held in the trust account and require us to complete a business combination by February 20, 2020.
Because we are not subject to Rule 419, we are entitled to withdraw amounts from the funds held in the trust account prior to the completion of a business combination and we may have more time to complete an initial business combination.
We may issue ordinary or preferred shares or debt securities to complete a business combination, which would reduce the equity interest of our shareholders and likely cause a change in control of our ownership.
Our memorandum and articles of association currently authorize the issuance of up to 200,000,000 ordinary shares, par value $.0001 per share, and 2,000,000 preferred shares, par value $.0001 per share.
Immediately after our initial public offering and the purchase of the private warrants, there were 147,050,000 authorized but unissued ordinary shares available for issuance (after appropriate reservation for the issuance of the shares underlying the public and private warrants, potential extension warrants and rights).
Although we have no commitment as of the date of this report, we may issue a substantial number of additional ordinary shares or preferred shares, or a combination of ordinary shares and preferred shares, to complete a business combination.
The issuance of additional ordinary shares or preferred shares: ● may significantly reduce the equity interest of investors in our initial public offering; ● may subordinate the rights of holders of ordinary shares if we issue preferred shares with rights senior to those afforded to our ordinary shares; ● may cause a change in control if a substantial number of ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and ● may adversely affect prevailing market prices for our ordinary shares.
Similarly, if we issue debt securities, it could result in: ● default and foreclosure on our assets if our operating revenues after a business combination are insufficient to repay our debt obligations; ● acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; ● our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and ● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding.
If the net proceeds of our initial public offering not being held in trust are insufficient to allow us to operate 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), we may be unable to complete a business combination.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2018 ↗, FY2019 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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