F-1/A: FST Corp. Files Amended F-1 for Share Issuance and Resale Post-Business Combination

FST Corp. files an amended F-1 registration statement to facilitate the issuance of shares upon warrant exercise and the resale of up to 35.18 million ordinary shares by existing securityholders following its January 2025 business combination.

Summary

• FST Corp. (FST) completed its business combination with Chenghe Acquisition I Co. (Chenghe) on January 15, 2025, with FST Corp. becoming the parent company and Chenghe renamed FST Ltd. as a wholly-owned subsidiary.
• The filing registers up to 14,399,985 Ordinary Shares issuable upon the exercise of warrants and up to 35,184,834 Ordinary Shares for resale by Selling Securityholders.
• As of June 10, 2025, FST's Ordinary Shares traded at US$1.56 per share, significantly below the warrant exercise price of $11.50.
• FST, a golf industry manufacturer established in Taiwan in 1976, specializes in high-performance golf club shafts under its proprietary KBS brand and as an OEM/ODM.
• The company reported a net loss of $3.24 million for the year ended December 31, 2024, an increase from a net loss of $2.17 million for the year ended December 31, 2023.
• Revenue increased by 27.0% from $28.73 million in 2023 to $36.50 million in 2024, primarily driven by a 26.9% increase in golf shaft sales to $35.32 million.
• Gross profit increased by 16.9% to $15.71 million in 2024, but the gross profit margin decreased from 46.8% in 2023 to 43.1% in 2024, attributed to a lower unit sale price product mix and higher fixed costs per unit.
• Operating expenses increased by 16.9% to $19.36 million in 2024, largely due to increased selling expenses (up 14.6% to $10.53 million) and general and administrative expenses (up 28.9% to $7.53 million) related to the business combination.
• The company is actively managing liquidity challenges stemming from high leverage and ongoing funding requirements, exploring various financing options including asset sales and new debt or equity securities.
• Material weaknesses in internal controls over financial reporting were identified for the year ended December 31, 2024, related to insufficient resource allocation and a lack of U.S. GAAP expertise.

Sentiment

Score: 3

Explanation: While FST Corp. has completed its business combination and shows strong revenue growth in a growing market, the company's current financial performance (increased net loss, decreased gross margin) and significant liquidity challenges are concerning. The identified material weaknesses in internal controls add to the risk profile. The low share price relative to warrant exercise price also indicates weak market confidence. The company's future depends heavily on successful execution of its financing and growth plans, which are subject to significant risks.

Positives

• Successfully completed the business combination with Chenghe Acquisition I Co. on January 15, 2025.
• Revenue increased by 27.0% from $28.73 million in 2023 to $36.50 million in 2024, demonstrating strong top-line growth.
• Golf shaft sales, the primary revenue driver, increased by 26.9% to $35.32 million in 2024.
• Opened KBS Taipei Flagship Store in fiscal year 2024, enhancing customer experience and brand awareness.
• Expanded brand portfolio to offer more high-end product lines, catering to diverse customer preferences.
• Commenced a new software service business in fiscal year 2024, generating $248,688 in new revenue.
• The KBS brand is widely accepted, with 73 PGA players using KBS shafts and 114 tournament victories as of June 1, 2025, indicating strong professional endorsement and market visibility.
• Operates a vertically integrated business model encompassing design, production, and marketing capabilities, allowing for brand premiums and enhanced profitability compared to OEM/ODM peers.
• Possesses strong R&D capabilities with a dedicated 21-person team, leveraging insights from PGA players and customer data for product development.
• Demonstrates manufacturing expertise and efficiency through automated production and IoT-connected smart manufacturing, leading to reduced manual labor, shorter delivery periods, and enhanced production capacity.
• Acquired land and buildings in 2023 for future factory expansion, expected to increase production capacity from 900,000 to 1.5 million shafts per month and save approximately $165,600 annually in rental costs.
• Maintains good credit relationships with multiple banks and had approximately $8.24 million in unused credit facilities as of December 31, 2024.
• Management believes it has sufficient resources to fund operations for at least the next twelve months based on current operating plans, existing financing arrangements, and continued shareholder support.

Negatives

• Net loss increased from $2.17 million in 2023 to $3.24 million in 2024, indicating a deterioration in profitability.
• Gross profit margin decreased from 46.8% in 2023 to 43.1% in 2024, primarily due to a product mix with lower unit sale prices and higher fixed costs per unit resulting from relatively low production volume.
• Operating expenses increased significantly, partly due to transaction fees and professional fees incurred in connection with the Business Combination.
• The company is currently managing liquidity challenges stemming from high leverage and ongoing funding requirements, raising concerns about financial flexibility.
• The market price of Ordinary Shares was $1.56 per share on June 10, 2025, which is substantially below the warrant exercise price of $11.50, making it unlikely that warrant holders will exercise for cash and limiting potential capital inflow from this source.
• Identified material weaknesses in internal controls over financial reporting for the year ended December 31, 2024, specifically related to insufficient resource allocation and a lack of U.S. GAAP expertise, which could impact financial reporting accuracy and investor confidence.
• The company has experienced operating losses and there is no guarantee that it can regain and maintain consistent profitability in the future.
• The company does not currently anticipate distributing earnings, even after becoming profitable and generating cash flows from operations, which may affect shareholder returns.

Risks

• Limited operating history may make it difficult to successfully execute strategic initiatives and accurately evaluate future risks and challenges.
• Uncertainty regarding the ability to obtain or maintain the listing of ordinary shares on The Nasdaq Stock Market LLC.
• Limited experience of certain management team members in operating a public company in the United States.
• Potential litigation, governmental or regulatory proceedings, investigations, or inquiries involving the company, including in relation to the Business Combination.
• Adverse international, national, or local economic, social, or political conditions could negatively affect the company's business.
• Environmental uncertainties and risks related to adverse weather conditions and natural disasters.
• Volatility of the market price and liquidity of ordinary shares.
• Failure to achieve anticipated benefits of acquisitions or the need to dispose of non-core assets for less than their carrying value.
• Global political events that affect commodity prices.
• Risk that properties may be subject to actions and opposition by non-governmental agencies.
• Failure to obtain regulatory approvals for general operating activities or compliance for decommissioning.
• Geographical concentration of assets.
• Changes to current, or implementation of additional, regulations applicable to operations.
• Failure to secure the services and equipment necessary for operations for the expected price, on the expected timeline, or at all.
• Seasonal weather conditions that may cause operational delays.
• Changes to applicable tax laws or government incentive programs.
• Defects in the title or rights in relation to properties.
• Risk management activities that expose the company to the risk of financial loss and counter-party risk.
• The occurrence of an uninsurable event.
• An inability to recruit and retain a skilled workforce and key personnel.
• The potential physical effects of climate change on production and costs.
• Any breaches of cyber-security and loss of, or unauthorized access to, data.
• Changes to applicable tax laws and regulations or exposure to additional tax liabilities.
• Significant increased expenses and administrative burdens incurred as a public company.
• Internal control weaknesses and any misstatements of financial statements or inability to meet periodic reporting obligations.
• Foreign currency and interest rate fluctuations.
• Failure to comply with anticorruption, economic sanctions, and anti-money laundering laws.
• Uncertainties regarding macroeconomic conditions, including the impact of inflation, cost of capital, and changes in economic policies and regulations, such as trade policies and tariffs.
• Future growth and financial performance depend on the production and sale of current and new golf shaft products on an anticipated timeline and within an anticipated cost and pricing structure.
• Inability to maintain and enhance the KBS brand or if its reputation and business are harmed.
• Experience of past and potential future delays with regard to the development, design, manufacture, and commercial release of golf shaft products.
• Inability to accurately forecast demand for golf shaft products, which may negatively impact profit margins, liquidity, and inventory management.
• A reduction in the number of rounds of golf played or in the number of golf participants could adversely affect the company's business.
• Limited opportunities for future growth in sales of golf club shafts due to the highly competitive nature of the golf industry.
• Unfavorable economic conditions, including inflation and geopolitical events, could have a negative impact on consumer discretionary spending.
• Geopolitical conflicts, tensions, and developments (e.g., U.S. tariffs on imports from China and Taiwan) could affect operations, business, and profitability.
• Loss of a key customer, or a reduction in the purchase level of a key customer, could adversely affect the company's business.
• Loss of a key supplier or lack of product availability from suppliers (e.g., reliance on one external manufacturer for graphite shafts) could put the company at a competitive disadvantage.
• Failure to execute growth strategy or manage growth effectively could adversely affect business, financial condition, and results of operations.
• The company's use of acquisitions and dispositions to position its businesses may not be successful, leading to adverse impacts.
• The company may need new or additional financing in the future to expand its business, and its inability to obtain capital on satisfactory terms or at all may have an adverse impact.
• Failure to effectively expand sales and marketing capabilities could harm the ability to increase customer base and achieve broader market acceptance.
• Failure to effectively expand into new markets could negatively affect revenues and business.
• Inability to maintain engineering, technological, and manufacturing expertise due to changing technology and evolving process development.
• Forecasts and projections are based upon assumptions, analyses, and internal estimates that may prove to be incorrect or inaccurate.
• Financial results may vary significantly from period to period due to fluctuations in operating costs or expenses and other foreseeable or unforeseeable factors.
• The company may experience delays in launching and ramping the production of its products and features, or may be unable to control its manufacturing costs.
• Exposure to fluctuations in currency exchange rates (U.S. dollar, New Taiwan Dollar, Japanese Yen) could materially and adversely affect revenues, earnings, and financial position.
• Inventory risks, including the need to write off excess and obsolete inventory if products are produced in excess of forecasted demand.
• Estimates of market opportunity and forecasts of market growth may prove to be inaccurate.
• Concentration of ownership among existing executive officers, directors, and their affiliates may prevent new investors from influencing significant corporate decisions.
• The company's insurance coverage strategy may not be adequate to protect it from all business risks.
• Failure to retain its existing senior management team or attract qualified new personnel could have a material adverse effect.
• Investor confidence and share value may be adversely impacted if management concludes that internal control over financial reporting is not effective.
• Substantial political risks associated with doing business in Taiwan, particularly due to the relationship between Taiwan and the People's Republic of China.
• Any lack of requisite approvals, licenses, permits, or filings or failure to comply with any requirements of Taiwan laws, regulations, and policies may materially and adversely affect daily operations.
• Femco is subject to restrictions on paying dividends or making other payments to the Company (e.g., statutory reserve, withholding tax), which may restrict the Company's ability to satisfy its liquidity requirements.
• Femco is subject to foreign exchange control imposed by Taiwan authorities, which may affect paying dividends, repatriating interest, or making other payments to the Company.
• If the company expands into the PRC market, it may be subject to Taiwanese regulations on investment or technical cooperation in the PRC.
• Taiwanese investors holding more than 10% of the company's ordinary shares will be subject to Taiwan regulations on investment or technical cooperation in the PRC for its investment or technical cooperation in the PRC.
• An active trading market for the company's ordinary shares may not be sustained, which would adversely affect the liquidity and price of ordinary shares.
• If performance of the company does not meet the expectations of equity research analysts, or if they issue unfavorable commentary or downgrade the company's ordinary shares, the price could decline.
• Sales of a substantial number of securities in the public market by existing shareholders could cause the price of the Ordinary Shares to fall, and certain Selling Securityholders may earn a positive rate of return even if other shareholders experience a negative rate of return.
• The company's issuance of additional share capital in connection with financings, acquisitions, investments, or otherwise will dilute all other shareholders.
• The company does not have any definite timetable for the payment of any dividends, and as a result, ability to achieve a return on investment may depend on appreciation in the price of ordinary shares.
• As an emerging growth company, the reduced reporting and disclosure requirements applicable may make its ordinary shares less attractive to investors.
• As a foreign private issuer, the company is not subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that are more lenient and less frequent than those of a U.S. domestic public company.
• The Warrant Agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain actions, which could limit the ability of warrant holders to obtain a favorable judicial forum.
• The company may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.
• The company does not intend to apply for the listing of its warrants on any stock exchange, which could lead to reduced liquidity of the warrants.
• The terms of the warrants may be amended in a manner that may be adverse to holders of the warrants with the approval by the holders of at least 65% of the then outstanding warrants, or for amendments necessary for the warrants to be classified as equity.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
• The company does not intend to make any determinations on whether the company or its subsidiaries are Controlled Foreign Corporations (CFCs) for U.S. federal income tax purposes, potentially impacting U.S. Holders.
• If the company or any of its subsidiaries are characterized as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, U.S. Holders may suffer adverse U.S. federal income tax consequences.

Future Outlook

The company expects full-year revenue to grow steadily, supported by current customer orders and strong sales performance in Q1 2025. It plans to continue investing in research and development to maintain a leading position in golf shaft competition, including exploring new golf shaft material compositions and improving manufacturing efficiency. Strategic growth initiatives include acquiring other golf shaft producers, particularly those with graphite shaft production lines, and expanding the KBS Golf Experience store network globally into markets such as PRC, South Korea, Southeast Asia, Europe, and the Middle East, as well as opening additional stores in the U.S. and Japan. The company is also evaluating the potential impacts of U.S. trade policies and geopolitical tensions on its operations.

Management Comments

• Management believes that if specific plans are successfully implemented, they will address the Company's liquidity needs to enable continuation of operations for the foreseeable future.
• The Company expects full-year revenue to grow steadily, taking into account current visibility of customer orders and continued revenue growth in the first quarter of 2025.
• The Company is closely monitoring the tariff situation and maintains inventory hubs in the U.S., Japan, and Taiwan to diversify trade risks and reduce lead times.
• The Company is currently evaluating the market to identify potential acquisition targets that meet criteria for graphite shaft brands with their own production lines and strong market reputation.
• The Company believes that it will be able to continue to improve its competitive positioning by adhering closely to consumer demand, augmented by strong brand development efforts, a comprehensive product line, and online and offline sale touch points.

Industry Context

The global golf equipment market is projected to reach $25 billion in revenue in 2024, with an expected annual growth rate (CAGR) of 5.63% from 2024 to 2028. Taiwan has established itself as a leading global golf equipment production hub with a comprehensive supply chain ecosystem, offering strong manufacturing capabilities and competitive production pricing. The golf industry is highly competitive, characterized by frequent new product introductions and short product life cycles (2-3 years). Geopolitical tensions, particularly U.S.-China tariffs, have led to manufacturing orders shifting from PRC to Taiwan, presenting an opportunity for the company. The maturation of the U.S. golf market is prompting major golf brands to seek new opportunities in emerging markets like PRC, South Korea, Southeast Asia, Europe, and the Middle East, where golf is gaining popularity due to growing affluence, sporting success, and policy support.

Comparison to Industry Standards

• FST's KBS brand was ranked among the top 100 businesses in the golf industry by the National Golf Foundation in 2023, indicating strong market recognition.
• In the premium shaft sector, FST competes with established international brands such as True Temper (U.S.) and Nippon Shaft (Japan).
• FST's production facilities in Taiwan offer a competitive advantage in terms of cost and efficiency compared to its U.S. and Japanese competitors like True Temper and Nippon Shaft.
• In the standard and economy shaft segments, FST competes with other OEMs in Taiwan, the People's Republic of China, and other regions, primarily on pricing, delivery lead time, manufacturing capacity, and production yield.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently a party to any legal or government proceedings that are individually or collectively materially adverse to its ability to conduct its businesses.
• A Taiwan company filed a trademark opposition with the Taiwan Intellectual Property Office (TIPO) in August 2023, objecting to the registration of the company's FST trademarks in Taiwan (Registration Numbers 02307326, 02307516, and 02307578). This matter is ongoing, but the company views its impact as minimal due to valid U.S. trademarks and primary sales generated from the U.S. and other countries outside Taiwan.

Related Party Transactions

• FST Corp. made payments on behalf of its subsidiary Femco and its subsidiaries for issuance and related formation costs, totaling $36,068 in 2023 and $2,305,610.79 in 2024, with a balance payable of $2,341,678.79 as of December 31, 2024.
• Femco leases land and buildings from Far East Machinery Co., Ltd. (a principal shareholder of the Group), with monthly rent increasing from NT$550,000 in 2021 to NT$2,000,000 in 2023 and 2024. Aggregate payments from January 1, 2021, to the latest lease term totaled NT$73,920,000 (approximately $2,254,345.84).
• Far East Machinery Co., Ltd. also advanced utility payments on the company's behalf, totaling $719,049.59 in 2024 and $779,119.46 in 2023.
• Femco leased land and buildings from Chiayi Sports Equipment Co., Ltd. (where David Chuang, the Chairman, has an immediate family member as Chairman of the board) until September 20, 2023, with monthly rent of NT$450,000. Aggregate payments from January 1, 2021, to termination totaled NT$14,685,000 (approximately $479,588.50).
• The company purchased land and buildings from Chiayi Sports Equipment Co., Ltd. for NT$296,000,000 (approximately $9,666,884) in July 2023.
• Chiayi Sports Equipment Co., Ltd. also advanced utility payments on the company's behalf, totaling $3,360.23 in 2024 and $24,619.53 in 2023.
• FST America leases warehouse space from Peko, LLC (owned by David Chuang), with monthly rent of $27,500 until June 30, 2021, and $32,500 from July 1, 2023. Lease payments were $390,000 in 2024 and $360,000 in 2023.
• FST provides software services to Factory Automation Technology Co., Ltd. (3.66% owned by FST, 51.59% by Far East), incurring software service fees of $235,769 in 2024 and $219,143 in 2023.
• FST purchased machinery from Factory Automation Technology Co., Ltd. totaling $698,600 in 2024 and $114,597 in 2023.
• FST sells golf shafts to its subsidiaries FST America and FST Japan. FST America paid FST $9,549,633.00 in 2024 and $10,087,784.13 in 2023 for shaft purchases. FST Japan paid FST $535,883.20 in 2024 and $1,074,672.76 in 2023 for shaft purchases.
• FST America also purchased golf shafts from FST, totaling $403,404.05 in 2024.

Stakeholder Impact

• Shareholders: Face potential dilution from future share issuances, risk of negative returns if the share price remains low, and are subject to different disclosure and governance standards due to the company's foreign private issuer and emerging growth company status.
• Employees: The company reports a good relationship with its employees, with no labor union representation or history of work stoppages. A pension system is in place as required by Taiwan law.
• Customers: Benefit from enhanced customer experience through new flagship stores and an expanded portfolio of high-end products. However, they could be impacted by production delays or quality issues if risks materialize.
• Suppliers: The company maintains long-term relationships with most suppliers but relies on limited sources for certain materials and a single external manufacturer for graphite shafts, posing potential supply chain risks.
• Creditors: The company's liquidity challenges and high leverage could impact its ability to meet debt obligations, though management has plans to refinance or sell assets to address these concerns.

Next Steps

• Implement corrective measures to address identified material weaknesses in internal controls over financial reporting and continuously monitor their effectiveness.
• Evaluate a range of financing alternatives with financial institutions and other third parties to secure additional capital and strengthen the capital structure.
• Potentially dispose of certain non-core land assets as a contingency plan if financing progress does not proceed as expected.
• Continue to invest in research and development to enhance product design, material composition, and manufacturing efficiency.
• Identify and evaluate potential acquisition targets in the graphite shaft industry to expand product lines and production capabilities.
• Expand the KBS Golf Experience store network in new geographic markets (e.g., PRC, South Korea, Southeast Asia, Europe, Middle East) and existing markets (U.S., Japan).
• Monitor the impact of U.S. trade policies and geopolitical tensions on operations and profitability, adopting flexible supply chain strategies.

Key Dates

Recommendation

While FST Corp. has successfully completed its business combination and demonstrates strong revenue growth in a growing market, the company's current financial performance (increased net loss, decreased gross margin) and significant liquidity challenges are concerning. The identified material weaknesses in internal controls add to the risk profile. The stock price is currently very low relative to warrant exercise prices, indicating a lack of market confidence. However, the company's established brand (KBS), vertical integration, R&D capabilities, and strategic plans for expansion and acquisitions offer long-term potential. The 'Hold' recommendation reflects the balance between these significant risks and the potential for future recovery and growth if management successfully executes its remediation and expansion strategies. Investors should monitor the company's progress on liquidity, internal controls, and profitability closely.

Keywords

Golf equipment, Golf shafts, Manufacturing, Taiwan, SPAC, Business combination, KBS brand, SEC filing, F-1/A, Public company, Financial results, Corporate governance, Risk factors, Warrants, Nasdaq, OEM, ODM, Liquidity, Internal controls