F-1/A: Cheer Holding Launches Dilutive Unit Offering

Cheer Holding, Inc. announced a best-efforts public offering of up to 8 million units, including Class A shares and highly dilutive warrants, to raise approximately $10.6 million for working capital and growth initiatives.

Summary

• Cheer Holding, Inc. is offering up to 8,000,000 units on a best-efforts basis at an assumed public offering price of $1.50 per unit.
• Each unit consists of one Class A ordinary share (or a pre-funded warrant), one Series A warrant, and one Series B warrant.
• The Series A and Series B warrants have an assumed initial exercise price of $1.58 per Class A Share and a one-year term.
• The Series B warrants include a zero exercise price option, allowing holders to receive 8.125 Class A Shares for each Series B warrant exercised, potentially issuing up to 65,000,000 Class A Shares.
• Pre-funded warrants are offered to purchasers whose beneficial ownership would exceed 4.99% (or 9.99%) of outstanding Class A Shares, with an exercise price of $0.001 per share.
• The company expects to receive approximately $10,615,000 in net proceeds, assuming all 8,000,000 units are sold and no warrants are exercised.
• Proceeds are intended for general working capital, sales and marketing for user acquisition, and other general corporate purposes, including potential acquisitions.
• Cheer Holding operates through a Variable Interest Entity (VIE) structure in China, which carries unique regulatory and operational risks.
• The company has a dual-class share structure (Class A: 1 vote, Class B: 100 votes), with Chairman Bing Zhang controlling approximately 74.6% of the voting power post-offering.
• Recent business developments include significant upgrades to the CHEERS Telepathy AI content creation platform in February, June, and December 2024, and its Beijing subsidiary being recognized as a National High-Tech Enterprise in December 2023 and a Specialized and Innovative Enterprise in April 2024.
• Key metrics as of June 30, 2025, include CHEERS Video app downloads at 440 million, CHEERS e-Mall at 70.4 million, and CHEERS Telepathy at 14.1 million. Monthly Active Users (MAU) as of June 30, 2024, were 51.1 million for CHEERS Video, 6.9 million for CHEERS e-Mall, and 3.3 million for CHEERS Telepathy.
• The company changed its independent auditors from Assentsure PAC to Enrome LLP on December 13, 2024, both Singapore-based and PCAOB-registered firms.
• Financial results for the six months ended June 30, 2025, show revenues of $70,993,000, income from operations of $8,324,000, and net income of $7,756,000.

Sentiment

Score: 4

Explanation: The offering aims to secure capital for strategic growth, particularly in AI technology, which is a positive. However, the significant potential for dilution from the Series B Warrants, the 'best efforts' nature of the offering, and the inherent regulatory and operational risks associated with the company's VIE structure in China introduce considerable uncertainty and downside risk. Recent financial performance shows a slight decline in key metrics, further contributing to a cautious outlook.

Positives

• Successful development and upgrades of the CHEERS Telepathy AI content creation platform, enhancing digital content production and interaction.
• Recognition of the Beijing subsidiary as a National High-Tech Enterprise (December 2023) and a Specialized and Innovative Enterprise (April 2024), highlighting technological innovation and market competitiveness.
• The PCAOB's ability to inspect audit firms in the PRC in 2022, and the company's engagement of PCAOB-inspected auditors (Enrome LLP), mitigates delisting risks related to the Holding Foreign Companies Accountable Act (HFCAA).
• Growth in CHEERS Telepathy app downloads (from 11.3 million to 14.1 million) and MAU (from 0.9 million to 3.3 million) from June 30, 2024, to June 30, 2025 (downloads) and June 30, 2023, to June 30, 2024 (MAU).
• Net cash provided by operating activities was positive at $3,920,000 for the six months ended June 30, 2025, a significant improvement from a negative $6,741,000 in the same period of 2024.

Negatives

• The offering is on a 'best-efforts' basis, meaning there is no guarantee that the company will raise the targeted amount of capital, potentially leaving it underfunded for its business plans.
• The Series B Warrants include a zero exercise price option that can result in substantial dilution, with up to 65,000,000 Class A Shares issuable, for which the company will receive no proceeds.
• 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 Class A Shares were trading at $1.17 on September 2, 2025, which is below the assumed public offering price of $1.50 per Unit.
• Revenues slightly decreased from $71,055,000 in the first half of 2024 to $70,993,000 in the first half of 2025.
• Income from operations decreased from $11,639,000 in the first half of 2024 to $8,324,000 in the first half of 2025.
• Net income decreased from $12,417,000 in the first half of 2024 to $7,756,000 in the first half of 2025.
• The company faces significant legal and operational risks associated with its Variable Interest Entity (VIE) structure and evolving, vague, and uncertain PRC laws and regulations, including those related to cybersecurity, data security, and overseas listings.
• The company may be subject to Nasdaq halting trading or delisting its Class A Shares due to public interest concerns arising from the highly dilutive nature of the warrants.

Risks

• No established public trading market for the Units, Pre-Funded Warrants, Series A Warrants, or Series B Warrants, which could limit liquidity and make it difficult for investors to dispose of them.
• Substantial dilution to shareholders if the Series B Warrants are exercised via the zero exercise price option, as up to 65,000,000 Class A Shares could be issued without the company receiving any proceeds.
• The 'best efforts' nature of the offering means no minimum number or dollar amount of securities is guaranteed to be sold, potentially leaving the company with insufficient capital for its business plans.
• Future equity offerings or acquisitions could lead to further dilution for existing shareholders.
• Management has 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 beforehand.
• 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 and Series B Warrants are subject to redemption by the company under certain conditions, which could lead to their termination if not exercised.
• Beneficial ownership limitations (4.99% or 9.99%) on the Pre-Funded Warrants, Series A Warrants, and Series B Warrants may restrict a holder's ability to exercise them when most advantageous.
• The Series A Warrant exercise price is subject to downward adjustment if the company issues Class A Shares or equivalents at a price lower than the then-current exercise price.
• The Nasdaq Stock Market LLC may halt trading in or delist Class A Shares due to public interest concerns or failure to maintain listing standards, particularly given the highly dilutive potential of the warrants.
• Warrants and Pre-Funded Warrants are speculative and may have no value if the Class A Share price does not exceed their respective exercise prices during their exercisable period.
• Holders of Warrants and Pre-Funded Warrants do not have shareholder rights (voting, dividends) until the warrants are exercised.
• Significant legal and operational risks associated with the Variable Interest Entity (VIE) structure in China, as it may be less effective than direct ownership and subject to uncertainty in interpretation and application of PRC laws.
• Uncertainty regarding future actions of the PRC government that could disallow the VIE structure, potentially resulting in material changes to operations and significant depreciation or worthlessness of Class A Shares.
• Evolving PRC laws and regulations concerning cybersecurity, data security, and overseas listings (e.g., Measures for Cybersecurity Review, Data Security Management Regulations, New Administrative Rules Regarding Overseas Listings) could subject the company to reviews, approvals, or compliance requirements that may hinder operations or listing status.
• Uncertainty as to whether courts in the Cayman Islands or China would recognize or enforce judgments of United States courts, making it difficult for investors to enforce civil liabilities.
• Despite recent progress, uncertainties exist regarding the PCAOB's ability to execute future inspections and investigations in China, and the risk of delisting under the HFCAA remains if future auditors are not subject to full PCAOB inspection.
• Restrictions on the transfer of cash from PRC subsidiaries and VIEs to the holding company (e.g., dividend payment limitations, statutory reserve requirements, foreign currency conversion controls) could impact the ability to pay dividends to shareholders.
• Potential for PRC withholding tax (up to 10%, or 5% if certain conditions met) on dividends paid to overseas shareholders if the company is considered a PRC tax resident enterprise.
• Compliance obligations under Cayman Islands economic substance requirements.

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. It plans to retain any future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future. A share consolidation (1-for-10, 1-for-25, or 1-for-50) may be implemented if the Class A Share price fails to maintain a minimum closing price of $1.00 for 30 consecutive trading days or for other business reasons. The company will be required to report to the CSRC for any future offerings on the Nasdaq Capital Market or other overseas markets, or upon the occurrence of major events, under the New Administrative Rules Regarding Overseas Listings. Glory Star HK intends to apply for a tax resident certificate when WFOE plans to declare and pay dividends.

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 of 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."
• "We have no intention of dismissing Enrome in the future or of engaging any auditor not subject to regular inspection by the PCAOB."

Industry Context

The company operates in the dynamic Chinese mobile media, entertainment, and e-commerce sectors, increasingly leveraging AI technology for content creation and integrated marketing, aligning with global trends in digital transformation and AI adoption. However, its Variable Interest Entity (VIE) structure and operations in China expose it to significant and evolving regulatory scrutiny from the PRC government, particularly concerning cybersecurity, data privacy, and overseas listings. This regulatory environment presents unique challenges compared to companies operating in less regulated or more transparent jurisdictions.

Management Changes

Corporate Governance

Legal Proceedings

• No involvement in any investigations on cybersecurity review initiated by any PRC regulatory authority.
• No receipt of any inquiry, notice, or sanction from any PRC governmental authority regarding cybersecurity.

Related Party Transactions

• An amount of $1,100,000 due to Mr. Zhang Bin, the company's chairman, chief executive officer, and interim chief financial officer, representing interest-free borrowings, was paid off on March 31, 2025.
• Mr. Bing Zhang subscribed for 500,000 Class B Shares at par value ($0.001 per share) on September 9, 2024, following shareholder approval on August 28, 2024.

Stakeholder Impact

• Shareholders: Face significant potential dilution from the offering, particularly from the Series B Warrants' zero exercise price option. The 'best efforts' nature of the offering introduces uncertainty regarding the actual capital raised. The dual-class share structure concentrates voting power, limiting influence for Class A shareholders.
• New Investors in the Offering: Are exposed to a high degree of risk due to the speculative nature of the warrants, the lack of a public trading market for the units and warrants, and the potential for substantial dilution.
• Company Operations: The capital raised, if sufficient, will support general working capital, sales and marketing, user acquisition, and potential acquisitions, enabling continued investment in AI technology and business expansion.
• Management: Retains broad discretion over the use of proceeds. Mr. Bing Zhang maintains substantial control over the company's affairs due to his Class B shareholdings.
• Regulatory Bodies: The company's operations and offering are subject to ongoing scrutiny and evolving regulations from PRC authorities (CSRC, CAC) and U.S. regulators (SEC, Nasdaq, PCAOB), requiring continuous compliance efforts.

Next Steps

• Complete the public offering of up to 8,000,000 Units.
• Utilize net proceeds for general working capital, sales and marketing for user acquisition, and other general corporate purposes, including potential acquisitions.
• Monitor Class A Share price for potential share consolidation if it fails to maintain a minimum closing price of $1.00 for 30 consecutive trading days.
• Report to the CSRC for any future offerings or major events as required by the New Administrative Rules Regarding Overseas Listings.
• Glory Star HK intends to apply for a tax resident certificate when WFOE plans to declare and pay dividends.
• Continue to develop and integrate AI technologies into content creation and digital ecosystems.

Key Dates

Recommendation

The offering provides necessary capital for Cheer Holding's strategic growth, particularly in its promising AI-driven content creation and e-commerce platforms. However, the highly dilutive nature of the Series B Warrants, the 'best efforts' structure of the offering, and the inherent regulatory uncertainties and risks associated with operating a VIE in China present significant challenges. The recent decline in revenue and profitability metrics also warrants a cautious approach. Investors should hold to observe the actual capital raised, the impact of dilution on the share structure, and the company's ability to navigate the complex regulatory environment while executing its growth strategy. The current share price being below the offering price also suggests market skepticism.

Keywords

Cheer Holding Inc., CHR, SEC F-1/A, Public Offering, Units Offering, Class A Ordinary 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, Online Advertising, Corporate Governance, Nasdaq Listing, Capital Raise, Financial Performance, PCAOB Inspection, HFCAA