Business Context and Reporting Period
Company: WiMi Hologram Cloud Inc. (WIMI)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: WiMi is a Cayman Islands holding company operating primarily in China through Variable Interest Entities (VIEs). The company focuses on Augmented Reality (AR) advertising services, AR entertainment, and semiconductor-related products. In 2025, the company terminated its American Depositary Shares (ADS) program, transitioning to direct trading of Class B ordinary shares on NASDAQ. A 20-to-1 share consolidation was also effected in April 2025.
Key Financial Metrics (Year Ended Dec 31, 2025)
| Metric | 2025 (RMB) | 2025 (USD) | 2024 (RMB) |
|---|---|---|---|
| Total Revenue | 422,245,411 | 60,073,613 | 541,924,655 |
| Net Income | 347,116,002 | 49,384,817 | 103,336,878 |
| Gross Profit | 108,967,002 | 15,502,931 | 153,978,574 |
| Operating Loss | (38,649,127) | (5,498,681) | (29,077,059) |
| Cash & Short-term Investments | 3,376,795,303 | 480,422,733 | 1,918,440,136 |
| Working Capital | 2,611,600,000 (Approx) | 371,600,000 (Approx) | 1,269,182,842 |
| Convertible Notes Payable | 184,735,532 | 26,282,656 | 109,119,912 |
Note: USD figures are translated at the rate of USD 1.00 = RMB 7.0288.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased by 22.1% (RMB 119.7 million) compared to 2024, primarily due to a decline in market demand for AR advertising services. The semiconductor and AR entertainment segments reported zero revenue in 2025.
- Profitability Surge: Despite lower operating revenue, Net Income increased by 235.9% to RMB 347.1 million. This was driven by a massive increase in "Other Income," specifically investment income of RMB 395.5 million (compared to a loss of RMB 34.5 million in 2024), largely attributed to changes in financial markets and unrealized gains on short-term investments.
- Operating Expenses: Total operating expenses decreased by 19.4% to RMB 147.6 million. Research and Development (R&D) expenses dropped significantly by 43.3% to RMB 63.3 million as certain projects were completed. However, stock compensation expenses increased to RMB 22.1 million from zero in the prior year.
- Impairment & Credit Losses: The company recognized a provision for credit losses of RMB 21.6 million due to a counterparty deregistration. Impairment loss on long-lived assets decreased to RMB 14.8 million from RMB 35.8 million in 2024.
- Capital Structure: The company completed a 20-to-1 share consolidation and terminated its ADS program in April 2025. It also issued convertible notes totaling approximately RMB 258.7 million (USD 36.8 million) during the year.
Guidance, Outlook, Risks, and Unusual Items
- Internal Control Weaknesses: Management concluded that internal controls over financial reporting were not effective as of December 31, 2025. Material weaknesses were identified in the control environment (lack of sufficient U.S. GAAP expertise) and Information Technology General Controls (ITGC) regarding user account management and risk assessment.
- Regulatory Risks (China): The company faces significant risks related to its VIE structure, including potential changes in PRC laws regarding foreign investment, data security, and cybersecurity reviews. There is uncertainty regarding the enforceability of contractual arrangements with the VIE.
- HFCA Act Risk: While the company's auditor (OneStop Assurance PAC) is currently subject to PCAOB inspection, there remains a risk that future PRC regulatory actions could prevent the PCAOB from inspecting audit workpapers, potentially leading to delisting under the Holding Foreign Companies Accountable Act.
- Unusual Items: The significant net income in 2025 is largely non-operational, driven by investment gains rather than core business performance. The company also recorded a gain of RMB 12.3 million from the disposal of a subsidiary (Kashi Duodian).
- Liquidity: The company holds substantial cash and short-term investments (approx. RMB 3.38 billion) and believes it has sufficient working capital for the next 12 months. However, its ability to transfer funds from PRC subsidiaries to the Cayman holding company is subject to PRC foreign exchange regulations.
Key Facts for Investor Verification
- Sustainability of Earnings: Verify the sustainability of the 2025 net income, which is heavily reliant on investment income (RMB 395.5 million) rather than core operating revenue, which declined by 22%.
- Internal Control Remediation: Monitor the progress of remediation efforts for the identified material weaknesses in internal controls, specifically regarding U.S. GAAP expertise and ITGC, to ensure future financial reporting reliability.
- VIE Structure Viability: Assess the ongoing regulatory environment in China regarding VIE structures and data security laws, as these pose existential risks to the company's ability to consolidate its primary operating entities.
- Customer Concentration: Note that in 2025, three customers accounted for 17%, 14%, and 11% of total revenues, respectively, indicating high concentration risk.
- Convertible Notes: Review the terms of the RMB 184.7 million in convertible notes payable, including conversion triggers and potential dilution to existing shareholders.