20-F: Cheer Holding's 2025 Annual Report: AI-Driven Growth & Global Expansion

Cheer Holding, Inc. reports a slight revenue increase in 2025, driven by advertising, alongside significant investments in AI technology and plans for global expansion, despite ongoing regulatory uncertainties in China.

Summary

• Total revenues increased by 1.1% to $148.8 million in 2025 from $147.2 million in 2024.
• Advertising revenues accounted for 98.9% of total revenues in 2025, up from 98.0% in 2024.
• Net income for 2025 was $25.6 million, a slight decrease from $26.0 million in 2024.
• Operating expenses increased by 0.8% to $122.5 million in 2025.
• Selling and marketing expenses decreased by 7.8% to $69.4 million in 2025.
• Research and development expenses increased by 50.9% to $5.2 million in 2025, reflecting continued investment in IT infrastructure and AI.
• Cash and cash equivalents increased to $242.1 million as of December 31, 2025, from $197.7 million in 2024.
• Working capital was $334.8 million as of December 31, 2025.
• Successfully raised approximately $23.5 million from a public offering and a registered direct offering in Q4 2025.
• Launched CHEERS Telepathy 3.0 in October 2025, powered by the new, self-developed Polaris Intelligent Cloud 3.0 model, enhancing AI content creation.
• Discontinued CheerReal platform operations in January 2025.
• Received a Nasdaq deficiency notice on November 19, 2025, for not meeting the minimum bid price requirement and low-priced stock rule.
• Effected a one-for-fifty share consolidation on December 22, 2025, to regain Nasdaq compliance, which was granted on January 27, 2026.
• Shareholders approved a further share consolidation and reduction (1-for-3 Class A shares, par value $0.15) on March 16, 2026, at the Board's discretion.
• The company is shifting its strategic focus towards overseas expansion starting in 2026, targeting Asia, Latin America, and North America.
• Total app downloads across platforms reached 550 million as of December 31, 2025, a 5.0% year-on-year increase.
• Identified a material weakness in internal control over financial reporting as of December 31, 2025, due to a lack of sufficient U.S. GAAP and SEC reporting personnel and a lack of separation of duties.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report. While there's revenue growth and significant AI investment, the decline in net income, gross margin pressure, software impairment, and the Nasdaq delisting scare (even if resolved) indicate underlying operational and market challenges. The material weakness in internal controls is also a concern.

Positives

• Revenue grew by 1.1% to $148.8 million in 2025, primarily driven by advertising services.
• Significant investment in AI technology, including the launch of CHEERS Telepathy 3.0 with advanced multimodal functions and the Polaris Intelligent Cloud 3.0 model.
• Successfully raised approximately $23.5 million through public and registered direct offerings in Q4 2025, enhancing liquidity.
• Regained compliance with Nasdaq's minimum bid price requirement and secured continued listing after a share consolidation.
• Achieved strong user growth with total app downloads reaching 550 million as of December 31, 2025, a 5.0% year-on-year increase.
• Strategic shift towards overseas expansion beginning in 2026, aiming for global presence and diversified growth.
• Beijing subsidiary recognized as a 'Specialized and Innovative Enterprise' and 'National High-Tech Enterprise', highlighting technological leadership.
• Strong cash and cash equivalents position of $242.1 million as of December 31, 2025.

Negatives

• Net income slightly decreased by 1.3% from $25.968 million in 2024 to $25.621 million in 2025.
• Gross margin decreased in 2025 due to lower service fees charged to attract advertising customers.
• Impairment of $1.2 million for CheerCar App and Cheer Chat App software in 2025 due to lack of expected revenue generation.
• Discontinuation of CheerReal platform operations in January 2025.
• Received a Nasdaq deficiency notice in November 2025 for minimum bid price and low-priced stock rule, necessitating a 1-for-50 reverse stock split.
• Identified a material weakness in internal control over financial reporting as of December 31, 2025, due to insufficient U.S. GAAP and SEC reporting personnel and lack of separation of duties.
• The company's reliance on a Variable Interest Entity (VIE) structure in China exposes it to significant regulatory and legal uncertainties.
• Concentration risk exists with a few major customers, with six customers accounting for 22%, 17%, 16%, 16%, and 10% of total revenue in 2025.
• The controlling shareholder, Mr. Bing Zhang, holds approximately 91.5% of the aggregate voting power, limiting the influence of other investors.
• No cash dividends are foreseen in the foreseeable future, as earnings are intended for reinvestment.
• Bank accounts in China are not insured or protected against loss, exposing the company to potential financial risk.
• The company does not maintain business liability or disruption, litigation, or property insurance.
• The metaverse platform is currently under development with no assurance of market acceptance or sufficient interest.
• The launch of the CheerChat app has been delayed due to AI technology development.
• There is a risk of discontinuation of preferential tax treatments for PRC subsidiaries, potentially increasing the income tax rate to 25%.

Risks

• Failure to anticipate user preferences and provide high-quality content, especially popular original content, in a cost-effective manner.
• Operating in a capital-intensive industry and requiring significant cash to fund operations and content production.
• Inability to retain existing or attract new advertising customers, maintain wallet share of advertising budget, or collect accounts receivable in a timely manner.
• Operating in a highly competitive market with larger, more established competitors like Alibaba, Pinduoduo, and Douyu.
• Inability to maintain and enhance the company's brand.
• Increases in professionally-produced content (PPC) by others may materially and adversely affect the business.
• Loss of senior management or key employees.
• Limited operating history makes it difficult to evaluate the business and prospects.
• Inability to manage growth effectively.
• Failure to offer branded products at attractive prices or if the reputation for selling authentic, high-quality products suffers on the e-commerce platform.
• Failure to successfully adapt to rapidly evolving user behavior on mobile devices.
• Business prospects and financial results may be impacted by relationships with third-party platforms.
• Risks, such as unforeseen costs and potential liability, in connection with content produced, licensed, and/or distributed.
• Videos and other content produced or displayed may be found objectionable by PRC regulatory authorities.
• Failure to keep up with technological developments and users' changing requirements in a rapidly evolving industry.
• Inability to adequately protect intellectual property rights.
• Risks related to the incorporation of artificial intelligence (AI) into products and business operations, including unintended consequences, data leakage, IP infringement, and a dynamic regulatory environment.
• Inability to succeed in AI initiatives.
• Investments in new product offerings and technologies, including generative AI, are inherently risky.
• Improper use or disclosure of large amounts of generated and processed data could harm reputation and business.
• Failure to maintain or improve technology infrastructure.
• Payment processing risk.
• Dependence on the performance and reliability of the Internet infrastructure in China.
• Failures, errors, defects, or disruptions in IT systems or services.
• Security breaches and attacks against internal systems and network.
• Reliance on partners to make service available through Internet Protocol Television (IPTV).
• Undetected programming errors could adversely affect user experience and market acceptance of video content.
• Economic slowdown in China and indirectly by trade disputes between the United States and China.
• Natural disasters, health epidemics, and other outbreaks.
• Semi-annual operating results may fluctuate due to seasonality.
• Requirement for highly qualified personnel to generate high-quality video content.
• The controlling shareholder will have substantial influence over the company.
• No cash dividends are foreseen in the foreseeable future.
• Bank accounts in China are not insured or protected against loss.
• The company does not maintain business liability or disruption, litigation, or property insurance.
• The creation of the metaverse platform is dependent on the ability to develop an acceptable blockchain.
• The technology underlying blockchain is subject to industry-wide challenges and risks relating to consumer acceptance.
• Expansion of operations into new products, services, and technologies, including content categories, is inherently risky.
• Inability to continue to innovate technologically or develop, market, and sell new products and services.
• If the PRC government determines that VIE Contracts do not comply with applicable regulations, or if these regulations or their interpretations change in the future, severe consequences could result.
• VIE Contracts may not be as effective in providing operational control as direct ownership, and VIEs or their shareholders may fail to perform obligations.
• VIE Contracts may be subject to scrutiny by PRC tax authorities and additional taxes may be imposed.
• The shareholders of VIEs may potentially have a conflict of interest with the company and may breach their contracts.
• Certain terms of the VIE Contracts may not be enforceable under PRC laws.
• Exercise of the option to acquire equity ownership of VIEs may subject the company to certain limitations and substantial costs.
• The current corporate structure and business operations may be substantially affected by the newly enacted Foreign Investment Law.
• Reliance on business licenses and other licenses held by VIEs, and any deterioration of the relationship between VIEs.
• Recent state government interference into business activities on U.S. listed Chinese companies may negatively impact existing and future operations in China.
• Risks relating to the nature of China's advertising industry, including frequent and sudden changes in advertising proposals.
• China regulates media content extensively, potentially subjecting the company to government actions based on advertising content.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit legal protections.
• Substantial uncertainties in relation to the regulatory administration and governmental policies of the metaverse.
• Delays in issuing invoices due to China taxing authorities may materially and adversely affect cash flow.
• Competition in the industry is growing and could cause loss of market share and revenues.
• Inability to keep up with evolving AI infrastructure requirements.
• Business depends on the continuing efforts of management.
• Business may be materially adversely impacted by the global financial crisis and economic downturn.
• Any adverse changes in political policies of the PRC government could negatively impact China's overall economic growth.
• Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations.
• Difficulties in protecting interests and exercising rights as a shareholder since all operations are in China and officers reside outside the United States.
• Future inflation in China may inhibit economic activity.
• PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent the use of proceeds from future financing activities.
• Approval, record filing, and/or other requirements of the CSRC or other PRC governmental authorities may be required in connection with contractual arrangements and overseas offerings.
• Uncertainties exist with respect to the enactment timetable, interpretation, and implementation of laws and regulations for online platform business operation.
• The M&A Rules and certain other PRC regulations set forth complex procedures for acquisitions.
• PRC regulations relating to offshore investment activities by PRC residents and PRC citizens may increase administrative burden and subject beneficial owners to liabilities.
• Restrictions on foreign exchange under PRC laws may limit the ability to convert cash derived from operating activities into foreign currencies.
• Reliance on dividends and other distributions on equity paid by wholly-owned subsidiaries to fund cash and financing requirements.
• May be treated as a resident enterprise for PRC tax purposes under the EIT Law, subjecting global income to PRC income tax.
• Uncertainties with respect to the PRC legal system, including enforcement of laws and sudden changes in regulations.
• If the company becomes directly subject to recent scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies.
• Risk of discontinuation of preferential tax treatments.
• Uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
• New legislation or changes in PRC labor laws or regulations may affect business operations.
• The dual-class voting structure will have the effect of concentrating voting control with holders of Class B Ordinary Shares.
• Inability to predict the effect the dual-class structure may have on the market of the Class A Ordinary Shares.
• Class A Ordinary Shares may be delisted from The Nasdaq Capital Market.
• The trading prices of Class A Ordinary Shares are likely to be volatile.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the business.
• Risks related to a future determination that the Public Company Accounting Oversight Board (PCAOB) is unable to inspect or investigate the auditor completely.
• Future sales or other dilution of equity could depress the market price of Class A Ordinary Shares.
• Difficulties in protecting interests and exercising rights through the U.S. federal courts due to Cayman Islands incorporation.
• Failure to implement and maintain an effective system of internal control to remediate material weakness over financial reporting.
• Certain judgments obtained against the Company by shareholders may not be enforceable.
• If Class A Ordinary Shares become subject to the SEC's penny stock rules.
• Subject to additional restrictions under Rule 144 on resales of restricted securities as a former shell company.
• Adverse United States federal income tax consequences to United States investors if the company were or were to become a passive foreign investment company (PFIC).
• Concentration of revenues and receivables with specific customers (e.g., six customers accounted for 22%, 17%, 16%, 16%, and 10% of total revenue in 2025).
• Concentration of accounts payable with two vendors (44% and 41% in 2025).
• Uncertainties in the PRC legal system could limit the ability to enforce VIE contractual arrangements, potentially leading to revocation of licenses, operational restrictions, or fines.

Future Outlook

The company aims to build a comprehensive digital ecosystem integrating platforms, applications, technology, and industry, leveraging AI for the Web 3.0 era. It is developing a metaverse combining 5G, VR, AR, and AI, underpinned by blockchain, cloud computing, extended reality, and digital twin. A strategic shift towards overseas expansion is planned for 2026, focusing on high-growth markets in Asia Pacific, Latin America, and North America, with a dedicated global AI portrait and video product line beta testing anticipated in Q2 2026.

Management Comments

• "This structure will assist in the continuity of management in order to implement its shortand long-term business plan without being distracted by external financial market factors which, many times, are out of managements control." (Regarding the dual-class share structure and Mr. Zhang's control)
• "We believe that our unique approach in utilizing our AI technologies will achieve substantial market influence and commercial success."
• "By focusing towards overseas expansion to become a global company, we believe we will become a stronger and more valued company."
• "We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future."
• "We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months."

Industry Context

StockSavvy.ai notes that Cheer Holding operates in the rapidly evolving Chinese e-commerce and media industry, which is characterized by intense competition from major players like Alibaba and Pinduoduo. The company's focus on AI-driven content creation and metaverse development aligns with broader industry trends towards Web 3.0, immersive experiences, and advanced digital marketing. The strategic shift to overseas expansion indicates an effort to diversify revenue streams and mitigate risks associated with the highly regulated and competitive Chinese market, while also capitalizing on global growth in mobile commerce and social commerce.

Comparison to Industry Standards

• The company operates in a highly competitive market, facing significant competition from Alibaba (Nasdaq: BABA), Pinduoduo (Nasdaq: PDD), Douyu (Nasdaq: DOYU), Mango Media (SZ.300413), and TVZone Media (SH.603721).
• APAC live commerce GMV is expected to reach $423 billion, with conversion rates 8-10x higher than traditional e-commerce (KPMG & Alibaba, 2026; McKinsey, 2025), indicating a strong market opportunity for Cheer Holding's live streaming e-commerce.
• Mobile commerce maturity in China, with 78% of transactions now occurring on mobile devices (Google & Temasek, 2025), is a key trend that Cheer Holding's CHEERS App leverages.

Corporate Governance

Legal Proceedings

• To the best knowledge of management, there are no material legal proceedings pending against the company.

Related Party Transactions

• On September 9, 2024, Mr. Bing Zhang, Chairman, CEO, and interim CFO, purchased 500,000 Class B Ordinary Shares for $500.
• The company borrowed $700 thousand from Mr. Bing Zhang in 2025 and $1,600 thousand in 2023. It repaid $500 thousand to Mr. Bing Zhang in 2024. These borrowings were interest-free and repayable on demand.
• The company borrowed $950 thousand from Happy Starlight Limited (controlled by Mr. Bing Zhang) in 2025. This borrowing was interest-free and repayable on demand.
• Mr. Bing Zhang guarantees loans from Huaxia Bank Co., Ltd. West Railway Station Branch and China Citic Bank.

Stakeholder Impact

• Shareholders face potential dilution from future equity sales, concentrated voting power with Class B shareholders, potential volatility in share price, risks of delisting, difficulties in protecting interests due to Cayman Islands incorporation and PRC operations, and potential adverse U.S. federal income tax consequences if the company is deemed a PFIC.
• Employees benefit from share-based compensation plans and statutory social security plans in the PRC, but there is a risk of losing key management and employees.
• Customers are impacted by the company's ability to provide high-quality content, adapt to technological changes, and maintain its e-commerce platform's reputation. There is also a risk of data privacy breaches.
• Suppliers and vendors are exposed to concentration risk, as the company has significant accounts payable with a few major vendors.
• Creditors (banks) have loans guaranteed by Mr. Bing Zhang and Horgos, mitigating some risk.

Next Steps

• Continue investing in IT infrastructure, user-friendliness upgrades, and content-driven strategies.
• Further expand the customer base to enhance brand recognition and user traffic.
• Continue researching and developing entertainment and shopping applications for the planned metaverse platform.
• Provide a suite of tools for users to facilitate new content development by creators.
• Accelerate global presence and overseas expansion, starting in high-growth markets in Asia Pacific, Latin America, and North America.
• Roll out internationally exclusive AI applications spanning lifestyle and smart living sectors.
• Begin beta testing for a dedicated global AI portrait and video product line around Q2 2026.
• Address the material weakness in internal control over financial reporting by hiring additional U.S. GAAP/SEC reporting personnel and a qualified CFO, and providing regular training.
• Implement the approved share consolidation and reduction (1-for-3 Class A shares, par value $0.15) at the Board's discretion.
• CHEERS API Open Platform to enter promotion phase and prepare for new API releases, temporarily not charging usage fees.

Key Dates

Recommendation

StockSavvy.ai recommends a "hold" due to the mixed signals. While the company is making strategic investments in AI and global expansion, and successfully resolved a Nasdaq delisting threat, the slight decline in net income, gross margin pressure, software impairment, and identified material weakness in internal controls present notable concerns. The significant regulatory risks in China and the concentration of voting power also warrant caution. Investors should monitor the execution of AI initiatives, overseas expansion, and remediation of internal control issues before considering a stronger position.

Keywords

Cheer Holding, CHR, SEC Filing, Annual Report, 20-F, China, E-commerce, AI, Artificial Intelligence, Metaverse, Digital Media, Content Production, Online Advertising, CHEERS App, CHEERS Telepathy, Polaris Intelligent Cloud, Nasdaq, VIE Structure, Regulatory Risk, Cybersecurity, Data Privacy, Share Consolidation, Capital Raise, Financial Results, Entertainment, Mobile Commerce