FingerMotion, Inc. is a diverse technology company that has established a robust presence in the Chinese market, leveraging its expertise across a range of verticals. With a focus on mobile data services, SMS/MMS, big data analytics, and emergency response solutions, the company has demonstrated its adaptability and growth potential in the rapidly evolving Chinese technology landscape.
Business Overview and History
FingerMotion was initially incorporated as Property Management Corporation of America on January 23, 2014 in Delaware, USA. On June 21, 2017, the company amended its certificate of incorporation to effect a 1-for-4 reverse stock split of the company’s outstanding common stock, increase the authorized shares of common stock to 200M shares, and change the name of the company to FingerMotion, Inc.
In July 2017, FingerMotion acquired all outstanding shares of Finger Motion Company Limited (FMCL), a Hong Kong-based mobile game developer. This transaction was accounted for as a reverse acquisition, with FMCL being the accounting acquirer and becoming a wholly owned subsidiary of FingerMotion. The company initially operated its video game division through FMCL, but in June 2018, decided to pause gaming operations and pivot towards the more lucrative telecommunications and data services business.
In October 2018, FingerMotion, through its indirect wholly-owned subsidiary, Shanghai JiuGe Business Management Co., Ltd. (JiuGe Management), entered into a series of variable interest entity (VIE) agreements with Shanghai JiuGe Information Technology Co., Ltd. (JiuGe Technology), making it FingerMotion’s contractually controlled affiliate. This strategic move allowed the company to leverage JiuGe Technology’s expertise and licenses to operate within the highly regulated Chinese technology sector.
FingerMotion’s core business lines include Telecommunications Products and Services, SMS/MMS Services, and Big Data Insights. The company’s Telecommunications Products and Services segment generates revenue by providing mobile payment and recharge services to customers of major Chinese telecom providers, such as China Unicom and China Mobile. In March 2019, FingerMotion expanded its SMS/MMS Services division through JiuGe Technology’s acquisition of Beijing Technology Co, a company specializing in mass SMS text services for businesses. This acquisition allowed FingerMotion to offer bulk SMS and MMS services to businesses in China with competitive pricing.
In 2020, the company launched its proprietary big data analytics platform, Sapientus, which leverages diverse data sources to deliver data-driven solutions and insights for the insurance, healthcare, and financial services industries. Sapientus has since forged strategic partnerships with leading global reinsurance firms, such as Pacific Life Re and Munich Re, further strengthening FingerMotion’s foothold in the data analytics space.
More recently, in 2024, FingerMotion’s subsidiary, JiuGe Technology, made headlines by receiving national certification from China’s Ministry of Industry and Information Technology (MIIT) for its Advance Mobile Integrated Command and Communication (C2) Platform. This platform is designed to facilitate collaboration between dispatchers, first responders, and healthcare agencies during emergency situations, marking the company’s foray into the crisis management solutions market.
Financial Performance and Ratios
FingerMotion reported quarterly revenue of $8.46 million for the period ended August 31, 2024, a decrease of 9% compared to the same period in the prior year. This decline was primarily attributed to a reduction in revenue from the Telecommunications Products and Services segment, which was partially offset by growth in the Command Communication segment.
Financials
The company’s gross profit margin for the six months ended August 31, 2024, was 5.84%, compared to 11.65% in the same period of the previous year. This decrease was largely due to a shift in the product mix, with the higher-margin cloud business contributing less to overall revenue during the current period.
For the three months ended August 31, 2024, FingerMotion reported a net loss of $1.69 million, compared to a net loss of $134,080 in the same period a year earlier. The company’s operating cash flow for this period was negative $1.49 million, while free cash flow stood at negative $1.49 million as well.
FingerMotion operates through several key product segments:
SMS and MMS Services For the three months ended August 31, 2024, revenue from this segment was $3,770, down 54% year-over-year.
Command Communication This is a new revenue stream for FingerMotion, contributing $28,730 in revenue during the three months ended August 31, 2024. The company did not have any revenue from this segment in the prior year period.
Big Data During the three months ended August 31, 2023, this segment generated $76,750 in revenue. However, this revenue stream was eliminated in the current three-month period.
The company continues to invest in research and development, spending $180,270 in the three months ended August 31, 2024, up 2% from the prior year.
Liquidity
FingerMotion’s current ratio, a measure of short-term liquidity, stood at 1.48 as of August 31, 2024, indicating the company’s ability to meet its short-term obligations. The company’s quick ratio, which excludes inventories, was 1.80, suggesting a more conservative liquidity position.
The company’s cash and cash equivalents totaled $810,280 as of August 31, 2024, down from $1.52 million at the end of the previous fiscal year. This decline was primarily due to increased deposits with telecom companies to support the expansion of the Telecommunications Products and Services business, as well as the ramp-up of the Command Communication (C2) Platform.
FingerMotion’s debt-to-equity ratio was 0.10 as of August 31, 2024. The company entered into a loan agreement on July 18, 2024 for a short-term loan facility of SGD1,500,000 (approximately $1.02 million) with Dr. Liew Yow Ming, with SGD1,000,000 drawn as of the date of the 10-Q filing.
Risks and Challenges
FingerMotion’s reliance on a limited number of large customers, namely China Unicom and China Mobile, exposes the company to significant concentration risk. The loss of business from these major telecom providers could have a material adverse effect on FingerMotion’s financial performance.
The company’s operations in China also subject it to various regulatory uncertainties, including potential changes in laws and policies governing the telecommunications, data, and technology sectors. The Chinese government’s recent crackdown on certain tech companies and increased scrutiny of overseas listings have introduced additional compliance challenges for FingerMotion.
Furthermore, FingerMotion’s variable interest entity (VIE) structure, which is commonly used by foreign-owned companies to gain access to the Chinese market, carries inherent legal and operational risks. The enforceability of the VIE Agreements has not been tested in court, and any adverse regulatory changes or government actions could significantly disrupt the company’s business.
The company has faced some challenges due to the COVID-19 pandemic and increased competition, which have impacted its financial performance. However, the company is working to diversify its product offerings and expand its geographic reach to drive future growth.
Outlook and Growth Initiatives
Despite the recent challenges, FingerMotion remains focused on expanding its presence in the Chinese market and diversifying its revenue streams. The company’s focus on the high-growth SMS/MMS and big data analytics businesses, as well as its foray into the emergency response solutions market, hold promise for future growth.
In the Telecommunications Products and Services segment, FingerMotion is exploring opportunities to deepen its partnerships with China Unicom and China Mobile, while also expanding its B2B and B2C offerings through e-commerce platforms. The successful rollout of the Advance Mobile Integrated C2 Platform, which has already received national certification from China’s MIIT, could open up new revenue streams in the crisis management and public safety sectors.
Furthermore, FingerMotion’s Sapientus division continues to forge strategic alliances with leading global reinsurers, positioning the company as a data analytics powerhouse in the insurance, healthcare, and financial services industries. The division’s recent patent recognition from China’s National Copyright Administration underscores its technological capabilities and innovation.
While FingerMotion navigates the challenges posed by regulatory uncertainties and market conditions, the company’s diverse business model, innovative solutions, and strategic partnerships provide a solid foundation for long-term growth and value creation.
Conclusion
FingerMotion’s journey as a multifaceted technology company in the Chinese market has been marked by strategic pivots, innovative product offerings, and strategic partnerships. Despite the recent financial and operational challenges, the company’s diversified business model, strong market positioning, and growth initiatives suggest promising long-term potential. As FingerMotion continues to navigate the evolving regulatory landscape and capitalize on emerging opportunities, investors will closely watch the company’s ability to execute its growth strategy and maintain its competitive edge in the dynamic Chinese technology sector.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.