Executive Summary / Key Takeaways

• FingerMotion is strategically evolving from its core mobile telecom services in China into high-growth verticals like Big Data analytics (Sapientus) and Smart Mobility (C2 Platform, DaGe Platform), aiming to diversify revenue streams and leverage its technological foundation.
• While core telecom revenue saw a 17% decline in FY2025, significant growth in SMS/MMS (206%) and initial contributions from DaGe and C2 platforms underscore the potential of newer segments, though overall revenue remained flat year-over-year at $35.61 million.
• Gross profit declined by 28% in FY2025, primarily due to a less favorable product mix compared to the prior year, highlighting the need for higher-margin contributions from emerging businesses to improve profitability.
• The company faces significant liquidity pressure, evidenced by a decrease in cash and working capital and increased cash used in operations, necessitating future capital raises despite recent equity and debt financing.
• Operating through a VIE structure in China exposes FingerMotion to substantial regulatory risks, including potential changes in laws regarding foreign investment, data security, and overseas listings, which could materially impact operations and shareholder value.

Setting the Scene: A Pivot Towards Data-Driven Growth

FingerMotion, Inc. (NASDAQ: FNGR) is a mobile data specialist company operating primarily in China through a Variable Interest Entity (VIE) structure. What began as a real estate management firm and briefly dabbled in mobile gaming has strategically pivoted to become a provider of mobile payment, telecommunications, and data-centric services. This evolution reflects a deliberate effort to capitalize on the vast digital landscape in China and leverage foundational partnerships with major telecom operators like China Unicom (CHU) and China Mobile (CHL).

At its core, FingerMotion's business model has historically centered on providing mobile payment and recharge services by acting as an authorized processor for these telecom giants. This allows the company to earn revenue through negotiated rebates on processed transactions. However, recognizing the limitations and competitive pressures within this segment, FingerMotion has embarked on a multi-pronged growth strategy aimed at diversifying its revenue base and tapping into emerging high-growth sectors. This strategic pivot is fundamentally driven by the company's development and application of proprietary technology platforms designed to extract value from mobile data and connectivity.

The competitive landscape in China's digital and telecom-adjacent markets is intense, dominated by large, well-capitalized players like Alibaba (BABA) and Tencent (TCEHY) in mobile payments and data services, alongside specialized firms like Palantir (PLTR) in data analytics and global payment networks like Visa (V). While giants like Alibaba and Tencent benefit from immense scale, vast user ecosystems, and robust financial resources, FingerMotion aims to carve out its niche through specialized integrations and data-driven solutions tailored for specific industry verticals. Its direct competition in mobile payments includes other licensed processors, some of which possess significantly deeper financial pockets. In data analytics, while Palantir offers advanced platforms, FingerMotion's Sapientus focuses on specific industry applications like Insurtech within the Chinese context. Visa, while a global payments leader, operates differently from FingerMotion's telecom-integrated model. FingerMotion believes its direct licenses with China Unicom and China Mobile provide an advantageous position, enabling it to offer integrated services and potentially negotiate favorable terms, though this concentration also presents a significant risk.

The Technological Engine: Powering Diversification

FingerMotion's strategic evolution is underpinned by its investment in and development of several key technology platforms. These platforms represent the company's attempt to build a competitive moat and expand beyond its foundational telecom services.

The PigeonHoles Integration System serves as the universal exchange platform, providing the seamless integration necessary to connect telecommunication operators with online stores across China. This system is fundamental to the core mobile payment and recharge business.

The SMS Integrated System manages the company's bulk SMS and MMS services. Processing over 150 million SMS transactions monthly, this platform provides corporate partners with a robust back-end for managing messaging settings, ensuring compliance with government guidelines, and tracking delivery. The company holds a license from MIIT to operate this business in the PRC.

The Rich Communication Services (RCS) platform, also known as Messaging as a Platform (MaaP), is being developed to leverage the 5G infrastructure for enhanced business messaging. The stated goal is to enable richer communication between businesses and customers directly within the messaging interface, potentially opening new marketing channels and increasing telecom operator user retention by reducing reliance on third-party apps. While development is complete, deployment is currently under review pending necessary consents from government bodies and service providers, reflecting the significant changes it could introduce to existing services.

Sapientus is the company's proprietary big data insights platform, housed within its Finger Motion Financial Company Limited subsidiary. Launched in July 2020, Sapientus focuses on delivering data-driven solutions for the insurance, healthcare, and financial services industries. The platform is designed to transform raw telecom data and other sources into behavioral insights for applications like risk assessment, underwriting enhancement, fraud evaluation, and precision marketing. The company has established collaborative research alliances with major reinsurers like Pacific Life Re and Munich Re to co-develop predictive analytics models. Sapientus has also secured patents in China for its technology and insurance-oriented applications, including Risk Rating API Design and Insurance Anti-Fraud System Design, demonstrating ongoing innovation in data science. The company is executing a strategy to expand Sapientus globally, emphasizing scalable, adaptable, and low-capital solutions.

The Smart Mobility Solutions vertical, which began contributing revenue in FY2025, encompasses two key platforms:

• The Advanced Mobile Integrated Command and Communication Platform (C2 Platform) is designed for emergency response and specialty vehicles. It integrates satellite communication, 5G networks, IoT sensors, AI analytics, and cloud systems to enable real-time data exchange, remote monitoring, and mobile command coordination, even in challenging environments. The platform includes features like in-vehicle unified communications, smart cameras, UAVs, and integrated multimedia dispatch systems, and is compliant with China's MIIT security standards. Deployments are expected to scale in the upcoming fiscal year, targeting municipal agencies, public safety departments, and private-sector entities.
• The DaGe Platform is a digital marketplace connecting automotive owners with service providers and vendors. It offers services like maintenance, repair, tire replacement, and EV charging. As of February 2025, the platform had integrated around 86,000 charging stations and secured approximately 12,500 vendors and service providers. The platform generates revenue through subscriptions, transaction fees, advertising, and product sales, aligning with the growth in the EV market. The company plans to continue expanding its network and offerings.

These technological initiatives are critical to FingerMotion's strategy, enabling diversification into higher-growth, potentially higher-margin areas and providing differentiated offerings compared to broader payment or data platforms. The success of these platforms in gaining market traction and generating profitable revenue will be key to the company's future.

Financial Performance: Growth Pockets Amidst Profitability Headwinds

FingerMotion's financial results for the fiscal year ended February 28, 2025, reflect a period of strategic transition, with pockets of strong growth in newer segments offsetting declines in the core business.

Total revenue for FY2025 was $35.61 million, a slight decrease of 1% compared to $35.79 million in FY2024. This modest change masks significant shifts within the business segments:

• Telecommunication Products and Services: Revenue decreased by 17%, from $32.79 million in FY2024 to $27.21 million in FY2025. This segment remains the largest contributor but highlights the challenges in the core business.
• SMS and MMS: This segment saw substantial growth, with revenue surging by 206%, from $2.67 million in FY2024 to $8.19 million in FY2025. This indicates strong market demand for bulk messaging services and successful execution in this area.
• DaGe Platform: Recorded its first revenue contribution of $80,592 in FY2025, up from $0 in FY2024. While small, this marks the commercialization and initial traction of the automotive services marketplace.
• Command Communication: Also began contributing revenue in FY2025, generating $188,576, up from $0 in FY2024. This signifies the initial deployment and revenue generation from the Smart Mobility C2 Platform.
• Big Data: Revenue declined significantly by 82.3%, from $327,913 in FY2024 to $58,209 in FY2025. This segment's performance appears volatile, potentially reflecting the early stage of commercialization and reliance on specific collaboration agreements.

Cost of revenue increased by 3% to $32.84 million in FY2025, outpacing the slight decrease in total revenue. This led to a notable decline in gross profit, which fell by 28% from $3.86 million in FY2024 to $2.76 million in FY2025. The company attributes this decline primarily to a less favorable product mix in the Telecommunication Products & Services segment, specifically noting the absence of contributions from the higher-margin cloud business that was present in the prior year. This underscores the importance of the emerging high-margin businesses like Big Data and potentially certain Smart Mobility applications for improving overall profitability.

Operating expenses increased by 13% to $8.71 million in FY2025. Key drivers included a significant increase in marketing costs (97% to $276,258), primarily for promoting the new DaGe App platform, and a 100% increase in credit impairment loss ($439,613), reflecting a more prudent assessment of customer credit risk. Share compensation expenses also saw a substantial increase (311% to $761,802), as the company utilized equity to compensate consultants and conserve cash. Research and development expenses decreased slightly (10% to $632,767), mainly due to savings in data access fees for the Insurtech division.

The combination of declining gross profit and increasing operating expenses resulted in a net loss attributable to shareholders of $5.11 million in FY2025, a 34% increase from the $3.81 million net loss in FY2024. This indicates that while the company is achieving growth in certain segments, it is not yet at a scale or margin profile to achieve overall profitability, and investments in new initiatives are currently weighing on the bottom line.

Liquidity and the Need for Capital

FingerMotion's financial health, particularly its liquidity, remains a critical factor for investors. As of February 28, 2025, the company had cash and cash equivalents of $1.13 million, down from $1.52 million a year prior. Working capital also saw a significant decrease, falling from $11.60 million to $6.90 million over the same period.

The company's business model, especially the mobile payment segment, requires substantial upfront deposits with telecommunication companies to access the services it resells. Furthermore, expansion into new areas like the cloud business (which has longer collection cycles) and investments in the DaGe and C2 platforms have increased accounts receivable and placed pressure on cash flow. Net cash used in operating activities increased to $8.18 million in FY2025, primarily driven by increases in accounts receivable ($24.86 million increase) and prepayments/deposits ($1.37 million increase), partially offset by increases in accounts payable ($19.67 million increase).

Recognizing the need for capital to fund ongoing operations, support growth initiatives (particularly the rollout of the Command Communication business), and increase deposits with telecom partners, the company has actively sought financing. During FY2025, FingerMotion raised $6.64 million through equity financings (a private placement and a registered direct offering) and secured approximately $1.59 million SGD in short-term loan facilities. Subsequent to the fiscal year end, in May 2025, the company completed another private placement, raising $2.35 million in gross proceeds.

Despite these efforts, the company explicitly states that additional capital will be required to sustain its growth and support strategic initiatives. There is no assurance that future funding will be available on favorable terms, or at all. This ongoing need for capital, coupled with recurring losses and negative operating cash flow, raises substantial doubt about the company's ability to continue as a going concern, as noted by its auditor. The ability to secure future funding and manage working capital efficiently will be paramount to executing the growth strategy.

Outlook and Strategic Trajectory

FingerMotion's outlook is centered on the continued development and scaling of its newer, higher-growth business lines, particularly the DaGe Platform and the Smart Mobility C2 Platform, while seeking to improve the profitability of its overall operations.

The company expects the DaGe Platform to deliver stronger returns in future periods as user adoption increases and the network of EV charging stations and service providers expands. The initial revenue contribution in FY2025, though small, signals the beginning of commercialization in this strategic area aligned with the growing EV market.

Similarly, the Command Communication business, with its C2 Platform, is expected to see deployments scale in the upcoming fiscal year, with planned geographic expansion in key markets in China. The company anticipates this will drive revenue growth from enterprise sales, government contracts, and strategic partnerships.

The Big Data Insights segment (Sapientus) is strategically focused on expanding beyond China, emphasizing scalable, adaptable, and low-capital data-driven solutions for diverse global markets. The company continues to invest in R&D to enhance its analytical capabilities and commercial applications, aiming to position Sapientus as a leading provider of data-driven solutions.

While the core Telecommunication Products and Services segment saw a decline in FY2025, the significant growth in SMS/MMS revenue demonstrates the potential for growth within existing telecom partnerships by focusing on specific services. The company's strategy includes enhancing its core platforms, expanding its customer base geographically, introducing new product lines, and building brand loyalty.

The successful execution of this multi-pronged strategy is heavily dependent on the company's ability to secure the necessary funding to support increased operational scale and continued investment in technology and market expansion. Management is also focused on improving internal controls and operational efficiency to support future growth.

Risks on the Horizon

Investing in FingerMotion involves significant risks, many of which are inherent in operating in the Chinese market and the company's specific business model and stage of development.

A primary risk stems from the company's VIE structure. While designed to provide operational control and economic benefits in industries where foreign investment is restricted, the VIE agreements have not been tested in court and could be challenged or disallowed by the PRC government. Any such action could result in a material change in operations, significant depreciation in stock value, or render the stock worthless, as investors do not directly hold equity in the operating entity.

The PRC regulatory environment poses broad risks, including uncertainties in the legal system, potential changes in laws regarding data security (Data Security Law, Cybersecurity Review, Personal Information Protection Law), capital controls limiting the ability to remit funds out of China, and increased oversight over overseas listings. Compliance with new data regulations may entail significant expenses and could lead to penalties, suspension of operations, or even delisting if requirements are not met.

Concentration risk is material, as a substantial amount of revenue is derived from contracts with China Unicom and China Mobile. Any adverse change in these relationships, including loss of business, delayed payments, or renegotiated terms, could have a material adverse effect on financial condition and results of operations.

The company's liquidity position is strained, with a history of net losses and negative operating cash flow. The need for significant deposits with telecom partners and investments in new growth areas necessitate additional funding. The inability to raise sufficient capital on favorable terms poses a material risk to the company's ability to execute its business plan and continue as a going concern.

Operational risks include the ability to effectively manage growth, dependence on key personnel, potential systems failures or security breaches, and reliance on internet/mobile infrastructure not under the company's control. The identified material weakness in internal control over financial reporting (limited segregation of duties and oversight) also presents a risk to the reliability of financial reporting, although management is implementing remediation plans.

Competition from larger, more established players with greater resources could limit FingerMotion's ability to gain market share and maintain pricing power.

Conclusion

FingerMotion is at a critical juncture, actively transforming itself from a core mobile telecom services provider into a more diversified technology company focused on data analytics and smart mobility solutions. The recent financial results for FY2025 highlight this transition, with strong growth in the SMS/MMS segment and initial revenue contributions from the promising DaGe and C2 platforms, even as the core telecom business faces headwinds and overall profitability remains elusive.

The investment thesis hinges on FingerMotion's ability to successfully scale these newer, technology-driven segments and leverage its unique partnerships within the Chinese telecom ecosystem to create sustainable, higher-margin revenue streams. The proprietary platforms like Sapientus, C2, and DaGe represent the potential for differentiation in competitive markets. However, significant challenges remain, particularly concerning the company's strained liquidity, the ongoing need for external funding, and the inherent risks associated with operating under a VIE structure within China's evolving regulatory landscape. The ability to navigate these financial and regulatory hurdles while executing on its ambitious growth and diversification strategy will be the key determinant of FingerMotion's future success and its potential to unlock value for investors.

This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own due diligence.