Corporate History and Structure
We commenced our commercial operations in May 2015 through Beijing WiMi Hologram Cloud Software Co., Ltd. (previously under the name “WiMi Lightspeed Capital Investment Management (Beijing) Co., Ltd.”), or Beijing WiMi. In February 2016, Beijing WiMi formed a wholly-owned subsidiary, Micro Beauty Lightspeed Investment Management HK Limited in Hong Kong. In addition, Beijing WiMi acquired 100% equity interest in Shenzhen Yidian Internet Technology Co., Ltd, or Shenzhen Yidian, on October 21, 2015, Shenzhen Yitian Hulian Internet Technology Co., Ltd., or Shenzhen Yitian, on August 20, 2015 and Shenzhen Kuxuanyou Technology Co., Ltd., or Shenzhen Kuxuanyou on August 26, 2015.
We incorporated WiMi Cayman under the laws of the Cayman Islands as our offshore holding company in August 2018 to facilitate offshore financing. In September 2018, we established WiMi Hologram Cloud Limited, or WiMi HK, our wholly-owned Hong Kong subsidiary, and WiMi HK established a wholly-owned PRC subsidiary, Beijing Hologram WiMi Cloud Internet Technology Co., Ltd., or Hologram WiMi, which is also referred to as WiMi WFOE in this prospectus. WiMi HK set up joint venture companies, Icinit Limited and VIDA Semicon Co., Limited in June and August 2020, respectively. In August 2020, we established a wholly-owned subsidiary, Lixin Technology, in Hainan Province, China. In September 2020, we established a subsidiary, VIYI Technology, in Cayman Islands. On September 27, 2020, VIYI Technology, FE-DA and its original shareholder entered into an acquisition framework agreement, which was subsequently amended and supplemented on September 28, 2020, pursuant to which VIYI Technology acquired the entire equity interests of FE-DA.
On November 15, 2020, we entered into an equity transfer agreement with Bofeng Investment Limited and Bravo Great Enterprises Limited, pursuant to which we transferred 4.0% and 6.0% of the issued share capital of VIYI Technology to Bofeng Investment Limited and Bravo Great Enterprises Limited, respectively, for a total consideration of US$10,000,000. On December 7, 2020, we entered into an equity transfer agreement with Universal Winnings Holding Limited, pursuant to which we transferred 3.5% of the issued share capital of VIYI Technology Inc. to Universal Winnings Holding Limited for a consideration of US$3,500,000.
Due to restrictions imposed by PRC laws and regulations on foreign ownership of companies that engage in internet and other related business, Hologram WiMi and Shenzhen Weiyixin later entered into a series of contractual arrangements with Beijing WiMi and Shenzhen Yitian, or our VIEs, and their respective shareholders, respectively. We depend on these contractual arrangements with our VIEs, in which we have no ownership interests, and their shareholders to conduct most aspects of our operations. We have relied and expect to continue to rely on these contractual arrangements to conduct our business in China. For more details, see “—Contractual Arrangements with Our VIEs and Their Respective Shareholders.” The shareholders of our VIEs may have potential conflicts of interest with us. See “Risk Factors—Risks Related to Our Corporate Structure—Our shareholders or the shareholders of our VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business.”
Under PRC laws and regulations, our PRC subsidiaries may pay cash dividends to us out of their respective accumulated profits. However, the ability of our PRC subsidiaries to make such distribution to us is subject to various PRC laws and regulations, including the requirement to fund certain statutory funds, as well as potential restriction on currency exchange and capital controls imposed by the PRC government. For more details, see “Risk Factors—Risks Related to Doing Business in China—Our PRC subsidiaries and VIEs are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements, conduct our business and to pay dividends to holders of the ADSs and our ordinary shares” and “PRC Regulation—Regulation on Dividend Distributions.”
As a result of our direct ownership in WiMi WFOE and Shenzhen Weiyixin and the variable interest entity contractual arrangements, we are regarded as the primary beneficiary of each of our VIEs. We treat each of them and their respective subsidiaries as our consolidated affiliated entities under generally accepted accounting principles in the United States of America (“U.S. GAAP”), and have consolidated the financial results of these entities in our consolidated financial statements in accordance with U.S. GAAP.
