F-1/A: Cheer Holding Launches $10.6M Unit Offering Amid AI Growth

Cheer Holding, Inc. is launching a best-efforts public offering of up to 15.58 million units, each comprising a Class A share or pre-funded warrant, and two series of warrants, aiming to raise approximately $10.6 million for working capital and strategic growth.

Summary

• Cheer Holding, Inc. is conducting a best-efforts public offering of up to 15,584,415 units at an assumed price of $0.77 per unit, based on its Nasdaq Capital Market Class A Share price on September 26, 2025.
• Each unit consists of one Class A ordinary share (or a pre-funded warrant in lieu thereof), one Series A warrant, and one Series B warrant.
• The Series A and Series B warrants have an initial exercise price of $0.81 per Class A Share and a one-year term, with the Series B warrants including a zero exercise price option to receive 4.1708 Class A Shares per warrant, up to a maximum of 65,000,000 Class A Shares.
• The company expects to receive net proceeds of approximately $10,615,000 from the offering, which will be used for general working capital, sales and marketing for user acquisition, and potential acquisitions.
• Cheer Holding operates as an offshore holding company in the Cayman Islands, conducting its primary operations in China through Variable Interest Entities (VIEs), Horgos and Xing Cui Can, which introduces unique regulatory and operational risks.
• The company has seen growth in its CHEERS App downloads across Video (440M), e-Mall (70.4M), and Telepathy (14.1M) as of June 30, 2025, with CHEERS Telepathy MAU significantly increasing to 3.3M.
• Financial results for the six months ended June 30, 2025, show revenues of $70,993,000 and net income of $7,756,000, compared to $71,055,000 and $12,417,000 respectively for the same period in 2024.
• Net cash provided by operating activities improved to $3,920,000 for the six months ended June 30, 2025, from a negative $6,741,000 in the prior year period.
• The company's Beijing subsidiary received recognition as a National High-Tech Enterprise in December 2023 and a Specialized and Innovative Enterprise in April 2024.
• Mr. Bing Zhang, Chairman, CEO, and interim CFO, will control approximately 67.3% of the voting power post-offering, allowing the company to operate as a controlled company under Nasdaq rules and rely on certain corporate governance exemptions.

Sentiment

Score: 4

Explanation: The filing presents a mixed outlook. While the company shows innovation in AI and user growth in its platforms, the significant drop in net income and the highly dilutive nature of the Series B warrants (zero exercise price option) are substantial negatives. The inherent risks of the VIE structure and Chinese regulatory environment also weigh heavily on sentiment, despite the positive auditor change regarding PCAOB inspections. The capital raise is necessary but comes with considerable dilution.

Positives

• Significant growth in CHEERS Telepathy Monthly Active Users (MAU) from 0.9 million in June 2023 to 3.3 million in June 2024, indicating strong adoption of its AI content creation platform.
• Consistent increase in CHEERS App downloads across all platforms (Video, e-Mall, Telepathy) from June 2024 to June 2025, demonstrating effective user acquisition and platform attractiveness.
• Positive shift in net cash provided by operating activities, moving from a negative $6,741,000 for the six months ended June 30, 2024, to a positive $3,920,000 for the same period in 2025.
• Recognition of the Beijing subsidiary as a National High-Tech Enterprise (December 2023) and a Specialized and Innovative Enterprise (April 2024) highlights technological innovation and market competitiveness.
• The company's strategic integration of cutting-edge AI technologies, such as CHEERS Telepathy, positions it as a leader in redefining content creation and digital ecosystems.
• The engagement of Enrome LLP, a Singapore-based accounting firm registered with the PCAOB, as the independent auditor for 2024, addresses concerns related to the Holding Foreign Companies Accountable Act (HFCAA).

Negatives

• Net income decreased significantly from $12,417,000 for the six months ended June 30, 2024, to $7,756,000 for the same period in 2025, despite stable revenues.
• The offering includes Series B Warrants with a zero exercise price option, which is highly likely to result in substantial dilution to existing shareholders as the company will not receive any proceeds from these exercises.
• There is no established public trading market for the Units, Pre-Funded Warrants, Series A Warrants, or Series B Warrants, limiting their liquidity.
• The company's reliance on a Variable Interest Entity (VIE) structure in China exposes it to significant regulatory and operational risks, including potential disallowance of the structure by the PRC government.
• As a controlled company, Cheer Holding intends to rely on Nasdaq exemptions from certain corporate governance rules, which may reduce shareholder protections.
• The Series A Warrant exercise price is subject to downward adjustment if the company issues Class A Shares or equivalents at a lower price, potentially leading to further dilution.
• Nasdaq may halt trading or delist Class A Shares due to public interest concerns or failure to maintain listing standards, particularly given the highly dilutive nature of the offering.

Risks

• No public market for the Units, Warrants, or Pre-Funded Warrants, limiting liquidity and making it difficult for investors to dispose of them or obtain accurate market value quotations.
• Substantial dilution to shareholders if Series B Warrants are exercised via the zero exercise price option, as the company will not receive any proceeds from these exercises.
• This is a best-efforts offering with no minimum number or dollar amount of securities required to be sold, meaning the company may not raise sufficient capital for its business plans.
• Future dilution may occur from additional equity offerings or acquisitions, potentially at prices less than the current offering price, and future investors could have superior rights.
• Management will have broad discretion over the use of net proceeds from the offering, and investors will not have the opportunity to assess the appropriateness of these uses before investing.
• FINRA sales practice requirements (Regulation Best Interest and suitability rules) may make it more difficult for broker-dealers to recommend speculative, low-priced securities, potentially reducing trading activity in Class A Shares.
• The Series A Warrants and Series B Warrants are subject to redemption by the company under certain conditions, potentially terminating unexercised warrants.
• Pre-Funded Warrants, Series A Warrants, and Series B Warrants have beneficial ownership limitations (4.99% or 9.99%), which may hinder holders' ability to exercise them when most advantageous.
• The Series A Warrant exercise price is subject to adjustment if the company issues Class A Shares or equivalents at a price lower than the then-current exercise price, potentially leading to further dilution.
• The Nasdaq Stock Market LLC may halt trading or delist Class A Shares due to public interest concerns arising from the issuance of warrants with similar terms and potential dilutive impact as those in this offering, or if the company fails to maintain listing standards.
• The Warrants and Pre-Funded Warrants are speculative in nature, and their market value may not equal or exceed their imputed assumed public offering price, potentially rendering them valueless if the Class A Share price does not exceed their exercise price.
• Holders of Warrants and Pre-Funded Warrants do not have shareholder rights (voting, dividends) until exercised.
• Risks associated with the company's corporate structure, including its reliance on VIEs in China, which may be less effective than direct ownership and subject to uncertainty in interpretation and application of PRC laws and regulations.
• Uncertainty regarding future actions of the PRC government that could disallow the VIE structure, leading to material changes in operations and significant depreciation or worthlessness of Class A Shares.
• Legal and operational risks associated with being based in China, including vague and uncertain PRC laws, potential cybersecurity reviews by the Cyberspace Administration of China (CAC), and data security reviews.
• Uncertainty regarding compliance with the New Administrative Rules Regarding Overseas Listings issued by the China Securities Regulatory Commission (CSRC) for future offerings or material events, which could hinder the ability to offer or continue to offer Class A Shares.
• Potential for delisting if any future auditor engaged by the company is not subject to full PCAOB inspection, despite current auditor Enrome LLP being PCAOB-registered.
• Restrictions on cash transfers from PRC subsidiaries and VIEs due to PRC regulations on dividend payments and statutory reserve requirements, potentially impacting the ability to pay dividends to shareholders.
• Potential for PRC withholding tax on dividends paid to overseas shareholders if the company is considered a PRC tax resident enterprise.
• Enforcement of civil liabilities against the company or its directors/officers may be difficult due to the company's incorporation in the Cayman Islands and the location of assets and personnel outside the United States, and the lack of treaties for judgment enforcement between relevant jurisdictions.

Future Outlook

The company intends to use the net proceeds from this offering for general working capital, sales and marketing expenses for user acquisition, and other general corporate purposes, including potential acquisitions of complementary businesses, technologies, or other assets. It plans to retain future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future. The company is committed to utilizing innovative product applications and technologies to drive long-term sustainable and scalable growth, particularly leveraging AI in content creation and developing a metaverse platform.

Management Comments

• Our vision is to become a world-leading mobile media and entertainment company dedicated to providing people pursuing a better life with an integrative platform featuring e-commerce and high-quality lifestyle entertainment.
• Our strategy has always been committed to advanced technology, innovation, and digital disruption in the media and entertainment industry.
• We believe that our strategic integration of cutting-edge AI technologies positions our company as a leader in redefining content creation, digital ecosystems, and next-generation human-AI interaction.
• We are committed to utilizing innovative product applications and technologies to drive its long-term sustainable and scalable growth.

Industry Context

Cheer Holding operates in the dynamic and rapidly evolving mobile media, entertainment, and e-commerce sectors in China, with a strategic focus on AI-driven content creation and metaverse development. The industry is characterized by intense competition, rapid technological advancements, and significant regulatory oversight, particularly in China. The company's emphasis on original lifestyle content and its CHEERS Telepathy AI platform aligns with broader trends of personalized content, creator economy growth, and the increasing integration of AI in digital media. Its foray into the metaverse also positions it within an emerging, high-growth, but speculative, segment of the digital economy. The regulatory environment in China, especially concerning data security, cybersecurity, and overseas listings, continues to be a critical factor influencing operations and investor sentiment for companies like Cheer Holding.

Comparison to Industry Standards

• The company's focus on AI-driven content creation and a metaverse platform positions it alongside innovative tech companies, though specific comparable projects or results are not detailed in the filing.
• The repurchase rate of 38.8% for CHEERS e-Mall during the first half of 2025 provides an internal benchmark for customer retention, but without industry averages for similar e-commerce platforms in China, a direct external comparison is difficult.
• Average daily time spent of 54.3 minutes on CHEERS Video during the first half of 2025 indicates user engagement, which can be compared to leading short-video platforms globally (e.g., TikTok, YouTube) which often report higher engagement times, but specific direct comparisons are not provided.
• The growth in CHEERS Telepathy MAU from 0.9M to 3.3M year-over-year is strong for an emerging AI platform, suggesting competitive traction in the AI content tools market, though specific competitor metrics are not available in the filing.

Corporate Governance

Related Party Transactions

• An amount of $1,100,000 was due to Mr. Zhang Bin, the company's chairman, chief executive officer, and interim chief financial officer, representing interest-free borrowings. This amount was paid off on March 31, 2025.

Stakeholder Impact

• **Shareholders:** Face significant potential dilution from the Series B warrants' zero exercise price option and future equity offerings. Existing Class A shareholders' voting power will be diluted by the offering. The dual-class share structure concentrates voting power with Class B shareholders, particularly Mr. Bing Zhang, limiting influence for Class A holders. Lack of public market for warrants limits liquidity for warrant holders.
• **Employees:** The use of proceeds for general working capital and business expansion could support job stability and growth opportunities.
• **Customers:** Continued investment in AI technology (CHEERS Telepathy) and content production aims to enhance product offerings and user experience on CHEERS App, e-Mall, and video platforms.
• **Suppliers/Partners:** Potential acquisitions of complementary businesses or technologies could impact existing supplier relationships or create new opportunities.
• **Creditors:** The capital raise provides additional funds, potentially improving the company's liquidity and ability to meet short-term obligations, as reflected in the improved net cash from operating activities and increased cash balance.

Next Steps

• Complete the best-efforts public offering of up to 15,584,415 units.
• Utilize net proceeds for general working capital, sales and marketing for user acquisition, and other general corporate purposes, including potential acquisitions.
• Continue to develop and enhance the CHEERS Telepathy AI content creation platform and the metaverse platform.
• Monitor and comply with evolving PRC laws and regulations, particularly regarding cybersecurity, data security, and overseas listings.
• Maintain compliance with Nasdaq listing standards, especially concerning the dilutive effects of the offering and minimum bid price requirements.
• Potentially implement a share consolidation (1-for-10, 1-for-25, or 1-for-50) if the Class A Share price fails to maintain a minimum closing price of $1.00 for 30 consecutive trading days.

Key Dates

Recommendation

The offering presents a highly dilutive structure, particularly with the Series B Warrants' zero exercise price option, which will significantly increase the outstanding share count without generating cash proceeds for the company. While the company shows innovation in AI and user growth, the substantial decrease in net income for the first half of 2025, coupled with the inherent regulatory risks of operating through a VIE structure in China, creates considerable uncertainty. The lack of a public market for the warrants and the potential for Nasdaq delisting due to dilution or public interest concerns further exacerbate the risk profile. Given the significant dilution, declining profitability, and high regulatory and market risks, a seasoned investor would likely view this offering as unfavorable for existing shareholders and would recommend selling.

Keywords

Cheer Holding, CHR, SEC Filing, F-1/A, Public Offering, Units Offering, Class A Shares, Pre-Funded Warrants, Series A Warrants, Series B Warrants, Dilution, VIE Structure, China Regulatory Risk, AI Content Creation, CHEERS Telepathy, E-commerce, Mobile Media, Entertainment, Nasdaq Capital Market, Capital Raise, Financial Performance, PCAOB, HFCAA, Corporate Governance, Bing Zhang