Executive Summary / Key Takeaways

• FingerMotion is strategically transforming from a foundational mobile telecommunications service provider in China into a diversified technology company, leveraging its established infrastructure to build high-growth platforms in automotive services (DaGe), public safety communications (C2 Platform), and AI-powered big data insights (Sapientus).
• While the core Telecommunication Products & Services segment remains the primary revenue driver, contributing 99% of total revenue, it faces margin pressures, leading to an 81% decline in gross profit for the six months ended August 31, 2025.
• Emerging platforms like DaGe and Command & Communication are demonstrating significant revenue growth (240% and 282% respectively for the six months ended August 31, 2025), driven by strategic partnerships and expansion into new markets, with management expecting further scaling in fiscal year 2026.
• The company's proprietary technologies, including the 5G-enabled RCS platform and the AI-powered Sapientus IME platform, represent critical differentiators aimed at enhancing user experience, improving operational efficiency for clients, and creating new recurring revenue streams.
• Key risks include a reliance on two major Chinese telecommunication companies for a substantial portion of revenue, ongoing liquidity pressures requiring additional capital for growth initiatives, and regulatory uncertainties associated with its Variable Interest Entity (VIE) structure and data security laws in China.

Setting the Scene: FingerMotion's Strategic Pivot in China's Digital Economy

FingerMotion, Inc. (NASDAQ:FNGR) is strategically transforming within China's dynamic digital landscape, evolving from its roots as a mobile telecommunications service provider into a diversified technology company. The company's overarching strategy centers on leveraging its foundational telecom infrastructure to incubate and scale innovative platforms across high-growth sectors such as automotive services, public safety communications, and AI-powered big data insights. This strategic evolution is a direct response to the immense growth in mobile services across China, a market that saw its telecom sector revenue rise 8% year-over-year to approximately US$232.43 billion in 2021. FingerMotion's journey began with a pivot from mobile gaming in 2018, establishing a Variable Interest Entity (VIE) structure to operate its mobile data business in China, securing critical partnerships with major carriers like China Unicom and China Mobile .

The company's competitive positioning is defined by its ability to secure and maintain licenses from these dominant Chinese telecommunication providers, allowing it to process mobile payments and recharge services. While this provides a significant advantage, FingerMotion operates in a highly competitive environment against other licensed payment portals and broader digital payment ecosystems like Tencent's WeChat and Alibaba's Alipay. These larger competitors benefit from vast user bases and integrated services, posing a challenge to FingerMotion's market share and growth trajectory. For instance, Tencent's (TCEHY) ecosystem offers notably wider reach and user engagement due to its all-in-one app model, while Alibaba's (BABA) extensive distribution channels and strong brand in e-commerce present formidable competition. FingerMotion's strategic focus on specialized, data-driven solutions and its proprietary technology platforms aim to carve out defensible niches and drive future growth.

Technological Edge: Fueling Diversification and Efficiency

FingerMotion's long-term investment thesis is deeply intertwined with its technological differentiators, particularly its Advanced Mobile Integrated Command and Communication Platform (C2 Platform), the DaGe platform, and the Sapientus big data insights platform. These technologies are designed to capitalize on the evolving digital and 5G infrastructure in China and beyond.

The C2 Platform is a critical technology for mission-critical mobile communications, targeting public safety agencies, emergency response teams, and industrial sectors. It leverages 5G connectivity and cloud-based technology to offer real-time data sharing, geospatial mapping, and situational awareness. This platform provides tangible benefits such as mobile video feeds and real-time GPS tracking, enhancing operational efficiency and response capabilities in high-risk areas. The strategic collaborations with Zhejiang Jincheng Automotive Group Co., Ltd. and Qingling Motors Co., Ltd. to integrate the C2 Platform into emergency response and intelligent vehicles highlight its potential for significant impact and future revenue growth from enterprise sales and government contracts.

The Rich Communication Services (RCS) platform, also known as Messaging as a Platform (MaaP), is under development to enable businesses and brands to communicate and service customers on the 5G infrastructure. This platform is designed to deliver a better and more efficient user experience at a lower cost, allowing consumers to perform complex actions like booking flights directly through messages. This capability is expected to increase user retention for telecommunication providers by reducing reliance on third-party apps, thereby opening new marketing channels for FingerMotion's partners. While its deployment is currently under review, the RCS platform represents a significant technological leap aimed at enhancing user interaction and operational efficiency within the 5G ecosystem.

Sapientus, FingerMotion's proprietary big data insights arm, delivers data-driven solutions for the insurance, healthcare, and financial services industries. Its core technology is a proprietary risk assessment engine that offers standard and customized scoring and appraisal services based on multi-dimensional factors. A key initiative under Sapientus is the Insurance Management and Enablement (IME) platform, an end-to-end digital solution designed to streamline customer management, product configuration, policy administration, and performance tracking across the insurance value chain. The IME platform aims to improve efficiency, minimize errors, strengthen compliance, and provide real-time insights for insurers and brokers, creating new avenues for recurring revenue and strategic partnerships. FingerMotion's partnerships with Pacific Life Re and Munich Re (MURGY), alongside its exploration of an AI-powered insurance risk rating platform in Indonesia, underscore the global ambition and potential impact of Sapientus. The company maintains registered patents in China covering proprietary model algorithms and insurance analytics infrastructure, solidifying its competitive moat in this specialized area.

The DaGe Platform, an integrated marketplace for automotive products and services, is expanding to include vehicle maintenance, repair, tire replacement, and EV charging. This platform leverages FingerMotion's existing telecommunications infrastructure for user acquisition and platform traffic, capitalizing on the "growing EV market" and "increasing adoption of EVs". The recent acquisition of the intellectual property underpinning the DaGe platform for 1.50 million shares of common stock demonstrates the company's commitment to this segment and its potential for higher transaction volumes and revenue growth.

Financial Performance and Operational Dynamics

FingerMotion's financial performance for the three and six months ended August 31, 2025, reflects a company in transition, balancing growth in emerging segments with challenges in its core business. For the three months ended August 31, 2025, total revenue increased by 2% to $8.65 million compared to the prior year. This growth was primarily driven by the Telecommunication Products & Services segment, which contributed $8.64 million, representing 99% of total revenue. The DaGe Platform also showed strong early momentum, generating $6,898 in revenue, a 44% increase from the same period last year. However, the Command & Communication segment experienced a 98% decrease in revenue to $585 for the quarter.

For the six months ended August 31, 2025, total revenue increased by 2% to $17.11 million, with the Telecommunication Products & Services segment contributing $16.95 million, or 99% of total revenue. Notably, the DaGe Platform's revenue surged by 240% to $17,836, and the Command & Communication segment's revenue grew by 282% to $109,826 for the six-month period. The Big Data segment also saw significant growth, generating $27,457 in revenue for the six months, up from $100 in the prior year.

Despite revenue growth, gross profit for the three months ended August 31, 2025, significantly declined by 87% to $38,740, and for the six months, it decreased by 81% to $191,261. This decline is "primarily attributable to margin variability within the Telecommunication Products Services segment, where certain transactions carried lower margins". Additionally, "initial ramp-up costs in our emerging segments, particularly the DaGe Platform and Command and Communication business, contributed to overall margin pressure, as these segments are still in the early stages of development and have yet to achieve scale efficiencies". Operating expenses, however, saw a positive trend, decreasing by 23% to $1.53 million for the three months and by 16% to $3.67 million for the six months, largely due to reduced salaries, traveling, entertainment, and other miscellaneous expenses. This cost management helped mitigate the impact of lower gross profit, resulting in a net loss attributable to shareholders of $1.54 million for the three months, a 9% improvement, but an increased net loss of $3.55 million for the six months, up 6% from the prior year.

Liquidity and Capital Resources

FingerMotion's business model, particularly in mobile payment services, requires "periodic fund deposits with our telecommunication companies to obtain access to the mobile data and talk time we make available to consumers on our portal". The expansion into cloud-based services, which typically have longer collection cycles, and other growth initiatives have increased accounts receivable, placing "added pressure on our liquidity". As of August 31, 2025, cash and cash equivalents stood at $221,836, a notable decrease from $1.13 million at February 28, 2025.

The company's working capital was $8.25 million at August 31, 2025, compared to $6.90 million at February 28, 2025. While management anticipates that available resources and expected operating inflows will be sufficient for near-term obligations, "to sustain our growth and support strategic initiatives, including the rollout of our Command Communication business and increase deposits with telecommunication companies, we will require additional capital". FingerMotion intends to seek additional capital through public or private sales of equity or debt securities, or both, and may explore financing arrangements with commercial banks or non-traditional lenders. Net cash used in operating activities increased to $3.09 million for the six months ended August 31, 2025, primarily due to increases in accounts receivable and other receivables.

Outlook and Strategic Trajectory

FingerMotion's outlook is centered on scaling its emerging platforms and expanding its technological reach. The company expects deployments of its C2 Platform to "scale up during the fiscal year ending February 28, 2026, with further geographic expansion planned for key markets in China". These developments are "expected to drive revenue growth from enterprise sales, government contracts, and strategic partnerships". Similarly, the DaGe platform is projected to continue expanding its offerings by targeting new markets and forming strategic partnerships.

For the Big Data segment, the company explicitly states its intention to "expand Sapientus beyond China, with an emphasis on scalable and low capital data solutions designed for international markets". This strategic move aims to diversify revenue streams and reduce geographical concentration risk. The early-stage development of the Command & Communication segment under strategic collaboration is also "supporting future opportunities in emergency response and public safety infrastructure". These forward-looking statements underscore a commitment to innovation and market diversification, leveraging its technological capabilities to drive future revenue and potentially improve profitability as these segments achieve scale efficiencies.

Key Risks and Challenges

Investing in FingerMotion carries several pertinent risks. A significant concern is the company's "concentration of earnings from two telecommunications companies," China Unicom (CHU) and China Mobile (CHL). Any adverse change in these relationships, such as loss of business, payment difficulties, or lower negotiated terms, could materially affect its financial condition. The company also faces inherent risks associated with its "limited operating history" and a "history of net losses," with no guarantee of future profitability.

Operational risks include "actual or perceived security or privacy breach" and "systems failures and resulting interruptions" that could harm operations and reputation. The dependency on "the efficient and uninterrupted operation of mobile communications systems" is also a critical vulnerability. Geopolitical tensions between the United States and China could lead to new regulations or restrictions impacting operations. Furthermore, the Variable Interest Entity (VIE) structure in China introduces regulatory uncertainty, as the "PRC government may determine that the VIE Agreements are not in compliance with applicable PRC laws, rules and regulations". New PRC regulations, such as the "Overseas Listing Trial Measures," could also "significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of our securities to significantly decline or be worthless". Finally, a material weakness in internal controls related to limited segregation of duties and oversight, while being remediated, poses an ongoing risk until fully resolved and validated.

Conclusion

FingerMotion stands at a pivotal juncture, actively transforming its business model to capitalize on the burgeoning digital economy in China and beyond. The core investment thesis hinges on its ability to successfully diversify beyond its foundational, albeit low-margin, telecommunications services by scaling its technologically differentiated platforms in automotive services (DaGe), public safety communications (C2 Platform), and AI-powered big data insights (Sapientus). While recent financial results highlight the challenges of margin compression in its legacy business and the initial ramp-up costs of new ventures, the significant growth rates in these emerging segments, coupled with strategic partnerships and a clear technological roadmap, signal a compelling long-term growth trajectory.

The company's proprietary technologies, particularly the IME platform within Sapientus and the 5G-enabled C2 and RCS platforms, are crucial competitive advantages that could drive future recurring revenue and enhance operational efficiencies for clients. However, investors must weigh these opportunities against substantial risks, including a high concentration of revenue from key telecom partners, ongoing liquidity needs, and the inherent regulatory complexities and geopolitical uncertainties of operating in China. FingerMotion's future success will largely depend on its execution in scaling these innovative platforms, securing additional capital, and adeptly managing the evolving regulatory and competitive landscape.