WIMI

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, 2024
Business Overview: WiMi is a Cayman Islands holding company operating primarily in China through Variable Interest Entities (VIEs). The company focuses on holographic Augmented Reality (AR) advertising services, AR entertainment products (payment middleware, game distribution), and semiconductor solutions (central processing algorithms and chips).
Corporate Structure Update: The company terminated its American Depositary Shares (ADS) program on April 2, 2025, and began trading Class B ordinary shares directly on NASDAQ. A 20-to-1 share consolidation was effected on April 14, 2025.

Key Financial Metrics (Year Ended Dec 31, 2024)

Note: USD figures are translated at the rate of RMB 7.1884 to USD 1.00 as of Dec 31, 2024.

Material Changes vs. Prior Period

• Profitability Turnaround: The company reported a net income of RMB 103.3 million in 2024, a significant reversal from a net loss of RMB 510.4 million in 2023. This improvement was driven by a substantial reduction in operating expenses and non-cash impairment charges.
• Revenue Decline: Total revenue decreased by 7.4% to RMB 541.9 million. This was primarily due to the complete cessation of the semiconductor business (revenue dropped from RMB 12.8 million to zero following the divestiture of Fe-da Electronics in 2023) and a 5.2% decline in AR advertising revenue due to market demand.
• Expense Reduction: Operating expenses plummeted by 76.9% to RMB 183.1 million. Key drivers included the elimination of RMB 55.7 million in stock compensation expenses and RMB 243.3 million in goodwill impairment losses recorded in 2023.
• Cash Flow Surge: Net cash provided by operating activities increased to RMB 532.9 million, up from RMB 88.6 million in 2023, largely due to the net income and adjustments for non-cash items like impairment reversals.

Guidance, Outlook, and Risks

Management Commentary: Management intends to retain earnings to fund business expansion and does not plan to pay cash dividends in the foreseeable future. The company is focusing on its core AR advertising business after exiting the semiconductor segment.

Key Risks:

• VIE Structure: Operations rely on contractual arrangements with Chinese VIEs. Changes in PRC regulations could render these arrangements invalid, potentially forcing the company to relinquish control of its operations.
• Internal Controls: Management identified material weaknesses in internal control over financial reporting as of December 31, 2024, including deficiencies in the control environment and IT general controls (data backup, user access, risk assessment).
• Regulatory Environment: The company faces evolving risks regarding PRC data security laws, cybersecurity reviews, and the Holding Foreign Companies Accountable Act (HFCA), which could impact its ability to list in the U.S.
• Concentration Risk: One customer accounted for 12.0% of total revenue in 2024.

Investor Verification Checklist

• Internal Control Remediation: Verify the progress of remediation plans for the identified material weaknesses in internal controls and IT general controls.
• VIE Compliance: Monitor PRC regulatory developments regarding Variable Interest Entities and data security laws that could impact the enforceability of the company's operating structure.
• Revenue Concentration: Assess the stability of the top customer representing 12% of revenue and the company's strategy to diversify its client base.
• Capital Allocation: Review the company's strategy for its significant cash balance (approx. USD 267 million) and confirm the absence of dividend plans.
• Share Consolidation Impact: Confirm the trading status and liquidity of the Class B ordinary shares following the April 2025 20-to-1 consolidation and ADS termination.