20-F: GLOBAL MOFY AI Reports $19.3M Net Loss in FY2025 Amid Growth

GLOBAL MOFY AI LIMITED reported a significant net loss of $19.3 million for the fiscal year ended September 30, 2025, despite a 35.3% increase in total revenues to $55.9 million, primarily driven by warrant-related losses and increased operating expenses.

Summary

• Total revenues increased by 35.3% to $55.9 million for the fiscal year ended September 30, 2025, up from $41.4 million in FY2024.
• The company recorded a net loss of $19.3 million in FY2025, a substantial decline from a net income of $12.1 million in FY2024.
• Virtual technology service revenue grew by 58.4% to $33.1 million in FY2025, accounting for 59.2% of total revenues.
• Digital asset development and other revenues increased by 11.6% to $22.8 million in FY2025, representing 40.8% of total revenues.
• Gross profit increased by 8.2% to $22.5 million in FY2025, but the overall gross margin decreased from 50.3% in FY2024 to 40.2% in FY2025.
• Operating expenses rose by 39.5% to $19.5 million in FY2025, mainly due to a 96.8% increase in general and administrative expenses and a 6.7% increase in research and development expenses.
• Research and development expenses reached $7.9 million in FY2025, up from $7.4 million in FY2024, reflecting continued investment in technology.
• The net loss was significantly impacted by a $22.3 million loss on issuance of warrant liability and a $4.2 million change in fair value of warrant liability in FY2025.
• The company identified three material weaknesses in its internal control over financial reporting as of September 30, 2025, related to insufficient financial reporting personnel, lack of comprehensive accounting policies, and inadequate IT general controls.
• As of September 30, 2025, the company had cash of $4.2 million and a total working capital of $1.5 million.
• The company invested $201,000 in Wetruck TechEnable Solutions Private Limited Company, acquiring a 6.7% equity interest on April 1, 2025.
• A private placement on April 15, 2025, raised approximately $4 million in gross proceeds, intended for general corporate purposes, including AI-powered technology platform expansion and the Gauss AI Lab.
• Another private placement on December 5, 2025, is expected to raise approximately $4.8 million for working capital and general corporate purposes.

Sentiment

Score: 4

Explanation: The company experienced strong revenue growth and made strategic investments in AI and digital assets, indicating positive operational momentum. However, a significant net loss for the fiscal year, primarily due to warrant-related accounting charges, and identified material weaknesses in internal controls, present substantial financial and operational concerns. The dual-class share structure and PRC regulatory risks also add to the cautious outlook.

Positives

• Total revenues increased by 35.3% year-over-year, reaching $55.9 million in FY2025, indicating strong business growth.
• Virtual technology service revenue saw substantial growth of 58.4% to $33.1 million, driven by the booming movie and TV industries in China and the company's reputation.
• Digital asset development and other revenues continued to grow by 11.6% to $22.8 million, benefiting from the surging popularity of the metaverse concept and strategic emphasis on higher-margin segments.
• The company is recognized as one of the leading digital asset banks in China, possessing over 150,000 high-precision 3D digital assets.
• Strategic partnerships and customer acquisition are strong, attracting high-profile clients like L'Oréal and Pepsi, and maintaining repeat business.
• Significant investment in Research and Development, with expenses increasing to $7.9 million in FY2025, focusing on 3D rebuilt technology and AI interactive technology.
• Launch of Gauss AI Lab, a fully integrated AI ecosystem, and the short drama brand Mofy Clip, indicating innovation and expansion into new content areas.
• Global Mofy China was recognized as a 'Specialized, High-End and Innovation-Driven Small and Medium-Sized Enterprise' by the Beijing Municipal Bureau of Economy and Information Technology.
• Successful regaining of Nasdaq minimum bid price compliance on December 11, 2024, following a reverse share split.

Negatives

• Reported a net loss of $19.3 million for FY2025, a significant reversal from a net income of $12.1 million in FY2024.
• The gross margin decreased from 50.3% in FY2024 to 40.2% in FY2025, primarily due to increased labor and outsourcing costs in virtual technology services and higher digital asset costs.
• Operating expenses increased significantly by 39.5% to $19.5 million in FY2025.
• Incurred a substantial loss on issuance of warrant liability of $22.3 million and a $4.2 million loss from the change in fair value of warrant liability in FY2025.
• Identified three material weaknesses in internal control over financial reporting, including insufficient financial reporting personnel with U.S. GAAP and SEC reporting knowledge, lack of comprehensive accounting policies, and inadequate IT general controls.
• The company has a history of net losses and negative cash flows from operating activities in some periods (e.g., negative cash flow of $18.1 million in FY2024), which may continue.
• Reliance on a few major customers (one customer accounted for 16% of total revenues in FY2025) and suppliers (four suppliers accounted for 19%, 14%, 11%, and 11% of total purchases in FY2025) poses concentration risk.

Risks

• Reliance on dividends from PRC subsidiaries for cash needs, which are subject to PRC laws and regulations, including restrictions on dividend payments and currency conversion controls.
• Uncertainties with the PRC legal system, including unpredictable changes in laws and regulations, and difficulties in enforcing laws and contracts.
• Potential for increased government oversight and control over overseas offerings and foreign investment in China-based issuers, which could limit the ability to offer securities or cause their value to decline.
• Difficulties in obtaining information for shareholder investigations or litigation outside China due to PRC regulations restricting direct investigations by foreign securities regulators.
• PRC regulation of loans and direct investments by offshore holding companies to PRC entities may delay or prevent the use of financing proceeds for PRC operating subsidiaries.
• Adverse changes in political and economic policies of the PRC government could negatively affect overall economic growth in China and demand for services.
• Risk of being classified as a PRC Resident Enterprise for tax purposes, leading to unfavorable tax consequences for the company and non-PRC shareholders.
• Exposure to liabilities under the U.S. Foreign Corrupt Practices Act and Chinese anti-corruption laws.
• Potential for delisting from Nasdaq under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB is unable to inspect the company's auditor for two consecutive years, despite current auditor being PCAOB-inspected.
• Uncertainty regarding the validity of the 'two-step slow-walk method' used to acquire domestic operating entities, which if deemed invalid, could prevent consolidation of Global Mofy China's financial statements.
• Limited operating history at the current scale, making past results not indicative of future performance and making financial planning difficult.
• Failure to meet contractual commitments with customers could lead to refunds or non-receipt of final payments, harming revenue and reputation.
• Intense competition in the metaverse and digital entertainment industry, with larger, more resourced competitors.
• Dependence on brand strength and reputation, which could be damaged by customer complaints, quality issues, or negative publicity.
• Potential failure to protect intellectual property, especially unregistered 3D digital assets, leading to unauthorized use, piracy, or infringement claims.
• Business is highly susceptible to market conditions, customer preferences, and potential regulations in the metaverse and digital entertainment industry.
• Inability to raise additional capital on favorable terms or at all, if required, leading to limitations on funding operations and growth.
• Dual-class share structure concentrates voting control with the CEO and Chairman of the Board and his affiliates, limiting influence of Class A shareholders.
• Volatility in the trading price of Class A Ordinary Shares, potentially unrelated to operating performance, making it difficult for investors to assess value.
• As an emerging growth company and foreign private issuer, the company is exempt from certain U.S. securities law disclosure and corporate governance requirements, potentially offering less protection to shareholders.

Future Outlook

The company plans to continue allocating resources to digital asset development, anticipating a further upward trajectory in its share of overall revenues. It intends to use proceeds from recent offerings to finance its generative AI platform, general research and development, administrative expenses, talent acquisition, and working capital needs, including investment in its Gauss AI Lab. The company does not expect to pay any cash dividends in the foreseeable future, retaining earnings for business operation and expansion.

Management Comments

• Management believes the increase in virtual technology service revenue was mainly driven by the prosperity of the movie and TV industries in China and the company's current reputation.
• Management attributes the significant increase in digital asset development and other revenues to the surging popularity of the metaverse concept and astute business strategies, including continuous expansion of new digital assets and emphasis on higher-margin segments.
• Management believes the likelihood of being required to make additional social insurance and housing provident fund contributions is very low.
• Management expects to utilize prepayments to vendors for outsourced digital assets before mid-year 2026.
• Management believes that current cash, future operating cash flows, and bank/third-party loans will be sufficient to meet working capital needs for the next 12 months.

Industry Context

The company operates in the rapidly evolving metaverse and digital entertainment industry, leveraging AI-driven technology for virtual content production and digital asset development. It positions itself as a building block for the metaverse, aiming to be a leading digital asset provider. The industry is experiencing a boom in the metaverse concept, driving demand for digital assets and virtual technology services. The company faces intense competition from established players like BaseFX in virtual technology and SVHQ Media in digital marketing, and anticipates new entrants in digital asset development due to market growth.

Comparison to Industry Standards

• The company is identified as one of the largest high-precision 3D digital asset banks in China, with over 150,000 digital assets, according to Frost & Sullivan.
• The company claims a first-mover advantage of more than one year in digital asset development.
• Competitors in virtual technology service include BaseFX in China.
• Competitors in digital marketing include SVHQ Media from Singapore, though few provide full package services like Global Mofy China.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this annual report, the company is not involved in any legal or administrative litigation that may have a material adverse effect on its business, balance sheet, operating performance, and cash flow.

Related Party Transactions

• As of September 30, 2025, $22,846 was due to Mr. Haogang Yang (CEO and Director) for payroll payables.
• As of September 30, 2025, $140 was due from Mori Enterprise Management (Beijing) Partnership (controlled by Mr. Haogang Yang) as an interest-free loan for working capital.
• As of September 30, 2025, $19,244 was due from Qi Fei Shanghai Technology Co., Ltd. (controlled by Mr. Haogang Yang) as an interest-free loan for working capital.
• As of September 30, 2025, $6,949 was due from Mr. Chen Chen (CFO) for petty cash.

Stakeholder Impact

• Shareholders: Experience dilution from multiple equity issuances and warrant exercises. The dual-class structure concentrates voting power with the CEO. The significant net loss and internal control weaknesses could negatively impact investor confidence and share price. However, strategic investments in AI and metaverse could offer long-term growth potential.
• Employees: Benefit from equity incentive plans (7,800,000 Class A Ordinary Shares issued in Sep/Oct 2024, 2,875,772 Class B Ordinary Shares issued in April 2025, 5,000,000 Class A Ordinary Shares issued in Nov/Dec 2025). The company is actively recruiting and investing in R&D personnel.
• Customers: Benefit from expanded digital asset bank (over 150,000 assets) and new AI-powered content solutions (Gauss AI Lab), potentially leading to higher quality and more cost-effective services. Continued strong relationships with major customers like L'Oréal and Pepsi.
• Suppliers: The company's reliance on a few major suppliers (four suppliers accounted for 19%, 14%, 11%, and 11% of total purchases in FY2025) indicates a concentrated relationship, which could be a risk if relationships deteriorate.
• Creditors: The company has short-term bank loans and loans from third parties, with management expecting to obtain new or renew existing loans based on good credit history. The principal shareholder has pledged to provide financial support if necessary.

Next Steps

• Continue to implement measures to remediate identified material weaknesses in internal control over financial reporting.
• Allocate additional resources to digital asset development and expand the digital asset bank.
• Invest in the generative AI platform, general research and development, administrative expenses, and talent acquisition, including the Gauss AI Lab.
• Complete the CSRC filing for follow-on offerings within three business days after completion.
• Monitor compliance with Nasdaq listing standards, particularly the minimum bid price requirement.

Key Dates

Recommendation

While GLOBAL MOFY AI LIMITED demonstrated strong revenue growth in its virtual technology and digital asset development segments, indicating a robust market position and strategic expansion into the high-growth AI and metaverse industries, the reported net loss of $19.3 million for FY2025 is a significant concern. This loss is largely attributable to non-cash warrant-related charges, which, while not impacting immediate cash flow, reflect complex financial structuring. The identified material weaknesses in internal controls over financial reporting also warrant caution, suggesting potential for future financial misstatements or operational inefficiencies. However, the company's continued investment in R&D, strategic partnerships, and recent capital raises provide a foundation for future growth. Given the high-risk, high-reward nature of emerging technology companies, particularly those operating under PRC regulatory uncertainties and a dual-class share structure, a 'Hold' recommendation is appropriate. Investors should monitor the remediation of internal control weaknesses, the impact of new AI initiatives on profitability, and any further regulatory developments in China.

Keywords

AI, Metaverse, Digital Assets, Virtual Technology, SEC Filing, China, Financial Results, Corporate Governance, Risk Factors, Nasdaq