FingerMotion(FNGR) - 2026 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated interim financial statements and management's discussion and analysis of the company's financial performance and condition ITEM 1 – FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated interim financial statements, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's business, accounting policies, and financial position for the six months ended August 31, 2025, and comparative periods Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :-------------------------- | :-------------- | :---------------- | | Total Assets | $51,900,062 | $48,820,451 | | Total Liabilities | $36,824,675 | $35,161,495 | | Total Stockholders' Equity | $15,075,387 | $13,658,956 | | Cash and cash equivalents | $221,836 | $1,128,135 | | Accounts receivable, net | $37,778,762 | $32,659,437 | Unaudited Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss over specific interim periods Unaudited Condensed Consolidated Statements of Operations (Six Months Ended August 31) | Metric | 2025 | 2024 | Change | Change (%) | | :----------------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenue | $17,106,254 | $16,832,746 | +$273,508 | +2% | | Cost of revenue | $(16,914,993) | $(15,849,829) | $(1,065,164) | +7% | | Gross profit | $191,261 | $982,917 | $(791,656) | -81% | | Total operating expenses | $(3,669,611) | $(4,350,172) | +$680,561 | -16% | | Net loss before income tax | $(3,572,285) | $(3,346,383) | $(225,902) | +7% | | Net loss attributable to stockholders | $(3,549,566) | $(3,344,133) | $(205,433) | +6% | | Loss Per Share - Basic | $(0.06) | $(0.06) | $0.00 | 0% | Unaudited Condensed Consolidated Statements of Operations (Three Months Ended August 31) | Metric | 2025 | 2024 | Change | Change (%) | | :----------------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenue | $8,647,511 | $8,458,763 | +$188,748 | +2% | | Cost of revenue | $(8,608,771) | $(8,157,735) | $(451,036) | +6% | | Gross profit | $38,740 | $301,028 | $(262,288) | -87% | | Total operating expenses | $(1,528,160) | $(1,992,194) | +$464,034 | -23% | | Net loss before income tax | $(1,549,524) | $(1,690,551) | +$141,027 | -8% | | Net loss attributable to stockholders | $(1,541,010) | $(1,688,229) | +$147,219 | -9% | | Loss Per Share - Basic | $(0.03) | $(0.03) | $0.00 | 0% | Unaudited Condensed Consolidated Statement of Stockholders' Equity This statement outlines changes in the company's equity components, including common stock, paid-in capital, and accumulated deficit Changes in Stockholders' Equity (March 1, 2025 to August 31, 2025) | Item | Amount | | :------------------------------------ | :----------- | | Balance at March 1, 2025 | $13,658,956 | | Common stock issued for cash | $2,956,615 | | Common stock issued for professional service | $56,763 | | Common stock issued for conversion of customer deposit | $1,400,000 | | Additional paid in capital – stock options | $293,984 | | Net Loss | $(3,549,566) | | Balance at August 31, 2025 | $15,075,387 | Unaudited Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows (Six Months Ended August 31) | Metric | 2025 | 2024 | Change | | :-------------------------------------- | :----------- | :----------- | :----------- | | Net cash used in operating activities | $(3,086,249) | $(2,904,172) | $(182,077) | | Net cash used in investing activities | $(1,826) | $(1,741) | $(85) | | Net cash provided by financing activities | $2,205,493 | $2,629,688 | $(424,195) | | Effect of exchange rates on cash | $(23,717) | $(430,723) | +$407,006 | | Net change in cash | $(906,299) | $(706,948) | $(199,351) | | Cash at end of period | $221,836 | $810,284 | $(588,448) | - The decrease in net cash provided by financing activities was primarily due to the repayment of $751,122 in loan payable in 2025, compared to proceeds from loan payable and stock subscription advances in 2024[14][247] Notes to the Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's business, significant accounting policies, and specific financial statement line items Note 1 – Nature of Business and Basis of Presentation This note describes the company's business, its transition, and the basis for preparing the financial statements - FingerMotion, Inc. transitioned from property management to an information technology company in 2017, focusing on telecommunication services in China through a VIE structure[16][17][19] - The company uses a Variable Interest Entity (VIE) structure with Shanghai JiuGe Information Technology Co., Ltd. (JiuGe Technology) to acquire operational control in China, a common practice in industries with foreign investment restrictions[21][139][140] - Recent subsidiary incorporations (2024-2025) expand the company's ventures into communication/streaming services, communication equipment R&D/manufacturing, and sales of household/electronic products in China[26][27][28] Note 2 - Summary of Principal Accounting Policies This note outlines the key accounting principles and methods used in preparing the consolidated financial statements - Consolidated financial statements are prepared in accordance with U.S. GAAP and include the Company and its wholly-owned subsidiaries, with all intercompany accounts and transactions eliminated[29] - The Company consolidates its VIEs, specifically JiuGe Technology, as it is deemed the primary beneficiary through contractual arrangements, bearing the majority of risks and entitled to most returns[30][32] Assets and Liabilities of the VIE (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :---------------- | :-------------- | :---------------- | | Total assets | $9,567,357 | $10,160,413 | | Total liabilities | $13,158,812 | $12,952,195 | Operating Result of VIE (Six Months Ended August 31) | Metric | 2025 | 2024 | | :-------------------------- | :----------- | :----------- | | Revenue | $1,241,600 | $3,941,998 | | Gross profit | $82,056 | $435,436 | | Net loss | $(731,712) | $(823,143) | Operating Result of VIE's Subsidiaries (Six Months Ended August 31) | Metric | 2025 | 2024 | | :-------------------------- | :----------- | :----------- | | Revenue | $14,943,155 | $12,890,748 | | Gross profit | $81,794 | $547,481 | | Net loss | $(803,280) | $(224,972) | - Financial statements require management to make estimates and assumptions, particularly for assets, liabilities, revenues, and expenses, with actual results potentially differing[38] - The Company relies on cloud-based hosting, and any disruption or termination of this relationship could adversely affect operating results[39] - The Company operates as a single reportable segment, with all revenue and operations derived from China, and no geographical segments are presented[40] - The Company's reporting currency is the US dollar, while foreign subsidiaries use local currencies (RMB, SGD, HKD) as functional currencies; assets and liabilities are translated at period-end rates, and revenues/expenses at average rates, with adjustments recorded in accumulated other comprehensive income[41] Exchange Rates for RMB to USD | Item | Rate | | :-------------------------------- | :---------------- | | August 31, 2025 (Balance Sheet) | RMB7.1314 to $1.00 | | February 28, 2025 (Balance Sheet) | RMB7.2830 to $1.00 | | Six months ended August 31, 2025 (Income Statement/Cash Flows) | RMB7.2155 to $1.00 | | Six months ended August 31, 2024 (Income Statement/Cash Flows) | RMB7.2231 to $1.00 | - Identifiable intangible assets are recorded at cost and amortized over 3-10 years, with periodic impairment evaluations[43] - Long-lived assets are reviewed for impairment when circumstances indicate carrying value may not be recoverable, comparing undiscounted cash flows to carrying value, and recognizing impairment if carrying value exceeds fair value[45] - Accounts receivable are stated at expected collectible amounts, with allowances for credit losses based on historical experience, creditworthiness, aging, and specific circumstances[47] - For the six months ended August 31, 2025, one major customer accounted for approximately 79% of total revenue and 41% of total accounts receivable[51] - For the six months ended August 31, 2025, one major supplier accounted for approximately 78% of total purchases and 44% of total accounts payable[52] - Operating and finance lease right-of-use assets and lease liabilities are recognized at commencement based on the present value of future lease payments, using the incremental borrowing rate when the implicit rate is not readily determinable[53] - Cash and cash equivalents include cash on hand, demand deposits, and highly liquid short-term investments with original maturities of three months or less[54] - Equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of three to seven years[55] - Basic earnings per share is based on weighted average common shares outstanding, while diluted EPS includes potential common shares, using the "treasury stock" method for equity instruments[57][58] - The Company adopted ASC 606, recognizing revenue when performance obligations are satisfied, with no material change to timing or pattern of revenue recognition for existing streams[59][60] - Revenue is recognized from hosting and integration services and technology platform licensing when persuasive evidence of an arrangement exists, service is provided, fees are determinable, and collection is probable[61] - Cost of revenue includes telecommunication products and services, SMS & MMS business costs, and purchase costs for emergency equipment[62] - Research and development costs are expensed as incurred, including compensation, benefits, stock-based compensation, and materials for R&D, with recent efforts focused on integrating the Mobile Integrated Command and Communication Platform into emergency response vehicles[63] - Selling, general and administrative expenses cover compensation, benefits, stock-based compensation, professional fees, facility costs, depreciation, and amortization related to overhead activities[65] - The Company uses the asset and liability method for income taxes (ASC 740), recognizing current and future tax consequences of temporary differences, with a valuation allowance provided if deferred tax assets are unlikely to be realized[66] - Non-controlling interests represent minority ownership in subsidiaries (1% in three, 30% in Zhejiang ChangXin, 20% in Shanghai XiaoYi Bin Tong) and are recorded as a component of equity[67] - The Company adopted ASU No. 2023-07 (Improvements to Reportable Segment Disclosures) on March 1, 2024, with no material impact[69] - The Company is evaluating ASU No. 2023-09 (Improvements to Income Tax Disclosures), effective for the 2026 annual period, and ASU No. 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2026[70][71] Note 3 – Going Concern This note addresses the company's ability to continue operations, highlighting accumulated deficits and the need for future financing - The Company had an accumulated deficit of $37,736,950 at August 31, 2025, and a net loss of $3,572,285 for the six months ended August 31, 2025[73] - Continuation as a going concern depends on obtaining additional financing (equity/debt) to fund operations and achieve profitability, with no assurance of securing such funds on acceptable terms[74] Note 4 – Revenue This note disaggregates the company's revenue by its primary business segments for the reported periods Revenue by Segment (Six Months Ended August 31) | Segment | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Telecommunication Products & Services | $16,951,135 | $16,798,764 | | DaGe Platform | $17,836 | $5,252 | | Command & Communication | $109,826 | $28,730 | | Big Data | $27,457 | — | | Total Revenue | $17,106,254 | $16,832,746 | Note 5 – Equipment This note details the company's equipment assets, including cost, accumulated depreciation, and net book value Equipment (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :------------------------ | :-------------- | :---------------- | | Equipment | $107,185 | $103,945 | | Less: accumulated depreciation | $(94,829) | $(80,685) | | Net equipment | $12,356 | $23,260 | - Depreciation expenses for the six months ended August 31, 2025, totaled $13,007, a decrease from $13,521 in the prior year[77] Note 6 – Intangible Asset This note provides information on the company's intangible assets, including mobile applications, and their amortization Intangible Assets (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :------------------------ | :-------------- | :---------------- | | Mobile applications | $206,286 | $201,993 | | Less: accumulated amortization | $(203,699) | $(192,235) | | Net intangible assets | $2,587 | $9,758 | - Amortization expenses for the six months ended August 31, 2025, totaled $5,312, a decrease from $10,233 in the prior year[80] Note 7 – Prepayment and Deposit This note details the company's prepayments and deposits, primarily related to vendor agreements and e-commerce platforms Prepayment and Deposit (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :---------- | :-------------- | :---------------- | | Deposit | $4,916,625 | $6,631,704 | | Prepayment | $385,099 | $468,048 | | Total | $5,384,673 | $7,016,803 | - Deposits are pledged to vendors like China Unicom and China Mobile for telecommunication products and services, and payments are made to e-commerce platforms such as PinDuoDuo, Tmall, and JD.com[81] Note 8 – Accounts Receivable, net This note presents the gross accounts receivable, allowance for credit losses, and net collectible amounts Accounts Receivable, net (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :-------------------------- | :-------------- | :---------------- | | Accounts receivable | $38,448,580 | $33,094,782 | | Less: allowance for credit losses | $(669,818) | $(435,345) | | Net accounts receivable | $37,778,762 | $32,659,437 | Allowance for Credit Losses (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :---------------------- | :-------------- | :---------------- | | At beginning of the period | $435,345 | $0 | | Additions | $234,473 | $435,345 | | At end of the period | $669,818 | $435,345 | Note 9 – Other Receivables This note itemizes other receivable balances, including advances to suppliers and security deposits Other Receivables (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :------------------ | :-------------- | :---------------- | | Advances to suppliers | $1,125,989 | $745,935 | | Security deposit | $179,949 | $336,558 | | Others | $244,715 | $14,472 | | Total | $1,550,653 | $1,096,965 | Note 10 – Right-of-use Asset and Lease Liability This note details the company's lease assets and corresponding liabilities, including future minimum lease payments Right-of-use Asset and Lease Liability (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :------------------------ | :-------------- | :---------------- | | Right-of-use asset, net | $73,869 | $126,581 | | Current lease liability | $70,551 | $116,808 | | Non-current lease liability | $0 | $9,986 | | Total lease liability | $70,551 | $126,794 | - As of August 31, 2025, the weighted-average remaining lease term is 8 months, and the weighted-average discount rate is 4.75%[89] Future Minimum Lease Payments (as of August 31, 2025) | Period | Amount | | :----------------------- | :------- | | Twelve months ended August 31, 2026 | $71,672 | | Less: imputed interest | $(1,121) | | Present value of lease obligations | $70,551 | Note 11 – Common Stock This note provides details on the company's common stock, including warrants and stock options outstanding Stock Purchase Warrants Continuity Schedule (February 28, 2025 to August 31, 2025) | Metric | Number of Warrants | Weighted Average Exercise Price | | :------------------------ | :----------------- | :------------------------------ | | Balance, February 28, 2025 | 5,288,316 | $1.56 | | Exercised | (1,149,743) | $1.50 | | Exercised | (150,000) | $1.88 | | Balance, August 31, 2025 | 3,988,573 | $1.57 | - Warrants to purchase 5,000,004 shares of Common Stock were issued on December 23, 2024, at a combined purchase price of $1.50 per share, exercisable upon issuance and expiring in five years[95][100] - The Company received $1,918,614.50 from the exercise of warrants for 1,250,000 shares of common stock during May 2025[102][103] Stock Options Continuity Schedule (February 28, 2025 to August 31, 2025) | Metric | Number of Stock Options | Exercise Price | | :------------------------ | :-------------------- | :------------- | | Balance, February 28, 2025 | 6,039,100 | $4.18 | | Exercised | — | — | | Cancelled/Forfeited | — | — | | Balance, August 31, 2025 | 6,039,100 | $4.18 | - As of August 31, 2025, the aggregate intrinsic value of all outstanding stock options was estimated at $0, as the current stock price ($1.51) was lower than the strike prices of both the 2021 ($3.84) and 2023 ($4.62) grants[110] Note 12 – Earnings Per Share This note calculates basic and diluted earnings per share based on net loss and weighted average common shares outstanding Earnings Per Share (Six Months Ended August 31) | Metric | 2025 | 2024 | | :------------------------------------------ | :------- | :------- | | Net Loss | $(3,572,285) | $(3,346,383) | | Weighted average number of common shares outstanding —basic | 58,349,151 | 52,686,451 | | Weighted average number of common shares outstanding —diluted | 58,349,151 | 52,686,451 | | Loss per common share — basic | $(0.06) | $(0.06) | | Loss per common share — diluted | $(0.06) | $(0.06) | Note 13 – Income Taxes This note explains the company's income tax position, including effective tax rates and deferred tax assets and liabilities - The Company's effective income tax rate was 0.0% for the six months ended August 31, 2025 and 2024, primarily due to valuation allowances[118] Deferred Tax Account Balances (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :------------------------------------------ | :-------------- | :---------------- | | Total deferred tax assets | $10,520,712 | $9,812,461 | | Less: Valuation allowance | $(3,768,932) | $(3,188,969) | | Total deferred tax assets, net of valuation allowance | $6,751,780 | $6,623,492 | | Total deferred tax liabilities | $(17,315) | $(16,954) | | Net deferred tax assets (liabilities) | $6,734,465 | $6,606,538 | Note 14 – Commitments and Contingencies This note discloses any material outstanding claims, litigation, or other contingent liabilities - The Company is not currently involved in any material outstanding claims or litigation[123] Note 15 – Loan Payable This note details the company's short-term loan obligations, including lenders, amounts, interest rates, and repayment activities - Finger Motion Company Limited secured short-term loans totaling SGD$2,120,000 from Dr. Liew Yow Ming and Rita Chou Phooi Har in 2024 for working capital, with monthly interest rates ranging from 1.50% to 1.67%[126][127][128] - The Company repaid SGD$370,000 and SGD$250,000 in February 2025, and an additional SGD$1,000,000 (two SGD$500,000 loans) in July and August 2025[129][130] Note 16 – Subsequent Events This note describes significant events that occurred after the balance sheet date but before the financial statements were issued - On September 30, 2025, the Company acquired all intellectual property for its DaGe platform from Shanghai Jihaohe Information Technology Co., Ltd[131] - The acquisition consideration was 1,500,000 shares of common stock, issued on October 2, 2025, at a deemed price of $1.57 per share[131] ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations, highlighting material changes, corporate structure, business lines, recent developments, and liquidity. It includes a detailed comparison of financial performance for the three and six months ended August 31, 2025, against the prior year, and discusses critical accounting policies and subsequent events Introduction This section introduces the scope of management's discussion and analysis of financial condition and results of operations - The MD&A covers financial condition changes from February 28, 2025, to August 31, 2025, and results of operations for the six months ended August 31, 2025[135] - The report contains forward-looking statements subject to risks and uncertainties, as detailed in the Annual Report on Form 10-K and Item 1A - Risk Factors of this Quarterly Report[134] Corporate Information This section describes the company's corporate structure, including its holding company status and Variable Interest Entity (VIE) arrangements in China - FingerMotion, Inc. is a Delaware holding company that conducts significant operations through its subsidiaries and a Variable Interest Entity (VIE), JiuGe Technology, in China[139] - The VIE structure provides operational control over JiuGe Technology and allows consolidation of its financial results in accordance with U.S. GAAP, achieved through contractual agreements and loans to the VIE's sole shareholder, Ms. Li Li[139][140] - The company's holding company structure presents risks, as investors do not directly hold equity in subsidiaries or the VIE, and the company relies on contributions from them for cash flow[144] Share Exchange Agreement This section details the acquisition of Finger Motion Company Limited and the company's strategic refocus on telecommunication business - On July 13, 2017, FingerMotion, Inc. acquired Finger Motion Company Limited (FMCL) via a Share Exchange Agreement, issuing 12,000,000 common shares to FMCL shareholders and 600,000 to consultants[147] - FMCL became a wholly-owned subsidiary, initially a video game division, but the company refocused on the telecommunication business in June 2018[148] VIE Agreements This section explains the contractual arrangements used to gain operational control over JiuGe Technology in China - The Company entered into VIE Agreements with JiuGe Technology on October 16, 2018, to acquire operational control of its mobile payment platform business in China[151] - Key VIE agreements include a Consulting Services Agreement (transferring after-tax net profits), a Loan Agreement (funding capital contribution and providing conversion rights), a Power of Attorney Agreement (vesting voting control), a Call Option Agreement (irrevocable right to acquire equity), and a Share Pledge Agreement (guaranteeing performance)[152][156] - While PRC counsel believes the VIE Agreements are valid, there are risks that PRC regulators or courts may deem them unenforceable, potentially impacting the company's control and financial benefits from JiuGe Technology[153][302] Acquisition of Operational Control of Beijing Technology This section describes the acquisition of Beijing Technology and its entry into the mass SMS text services business - On March 7, 2019, JiuGe Technology acquired operational control of Beijing Technology, entering the mass SMS text services business[159] - Beijing Technology's platform processes over 150 million SMS messages monthly, offering bulk services to businesses and managing delivery in compliance with MIIT guidelines[159][181] China Unicom Cooperation Agreement This section outlines the agreement with China Unicom Yunnan to build and operate an electronic sales platform - JiuGe Technology entered a Cooperation Agreement with China Unicom Yunnan on July 7, 2019, to build and operate its electronic sales platform[160] - The agreement grants JiuGe Technology a percentage of revenue from sales processed on the platform, which offers mobile phones, data services, smart devices, and financial insurance[160] - The agreement has a three-year term with yearly auto-renewal but can be terminated by JiuGe Technology with three months' notice or unilaterally by China Unicom Yunnan[161] Intercorporate Relationships This section clarifies the company's complex corporate structure involving subsidiaries and contractually controlled entities in China - The company's corporate structure involves a holding company, wholly-owned subsidiaries (e.g., Finger Motion Company Limited, Finger Motion (CN) Global Limited), and contractually controlled entities in the PRC (e.g., Shanghai JiuGe Information Technology Co., Ltd. and its subsidiaries)[164][167] - The company is subject to risks and uncertainties regarding Chinese laws and regulations, including the validity and enforcement of VIE Agreements, which could lead to a material change in operations or render common shares worthless if the VIE structure is disallowed[166] Overview of Business Lines This section provides a comprehensive description of the company's various business segments and service offerings Telecommunications Products and Services This section details the company's mobile payment, recharge, and data distribution services through major Chinese carriers - The company provides mobile payment and recharge services to China Unicom and China Mobile customers through a licensed portal, earning revenue from negotiated rebates[173][175] - Services include payment/recharge, data plans, subscription plans, mobile phones, and loyalty points redemption, offered via B2B and B2C models on e-commerce platforms like PinDuoDuo.com, TMall.com, and JD.Com[172][176] - JiuGe Technology has contracts with China Unicom and China Mobile to distribute mobile data in multiple provinces and signed a volume-based agreement with China Mobile Fujian in May 2021[174] Value Added Product and Services This section describes the company's development of mobile device protection and cloud-based data services - The company develops value-added products and services, including a Mobile Device Protection product for new mobile phones and 5G devices, in collaboration with China Unicom and China Mobile[180] - Cloud-based services offering secure data storage, processing, and databases are also provided to corporate customers, complementing telecommunication offerings[180] SMS and MMS Services This section outlines the company's mass messaging services for businesses, including licensing and operational scale - Through Beijing Technology, the company offers mass SMS and MMS services to businesses, processing over 150 million messages monthly, with a license from MIIT[181] - The service involves acquiring bulk SMS/MMS bundles at reduced prices and providing competitive pricing to end consumers, including premium car manufacturers, hotel chains, airlines and e-commerce companies[181] Rich Communication Services (RCS) This section discusses the company's development of an RCS platform for 5G infrastructure to enhance business communication - The company is developing an RCS platform (Messaging as a Platform, MaaP) for 5G infrastructure, aiming to provide businesses with a better, more efficient, and lower-cost user experience for customer communication[182] - Deployment of the RCS platform is under review, with ongoing discussions among government bodies and telecommunication companies to assess market impacts and secure necessary approvals[182] Big Data Insights (Sapientus) This section introduces the company's proprietary big data platform, offering data-driven solutions for various industries - Launched in July 2020, "Sapientus" is the company's proprietary big data insights platform, delivering data-driven solutions for insurance, healthcare, and financial services[183] - Sapientus offers a risk assessment engine for standard and customized scoring, providing insights for preferred risk selection, precision marketing, product customization, and fraud detection[184] - Recent advancements include the Insurance Management and Enablement (IME) platform, a digital solution to streamline customer management, product configuration, policy administration, and performance tracking for insurers and brokers[189] Smart Mobility Solution (C2 Platform) This section describes the company's advanced mobile integrated command and communication platform for public safety and industrial sectors - FingerMotion's Advanced Mobile Integrated Command and Communication Platform (C2 Platform) supports mission-critical mobile communications for public safety and industrial sectors, leveraging 5G and cloud technology[190] - The C2 Platform expanded deployment into pilot regions, establishing partnerships with automotive manufacturers and industrial partners, showcasing capabilities like mobile video feeds, real-time GPS tracking, and AI-driven analytics[191] DaGe Platform This section details the DaGe platform, an integrated marketplace for automotive products and services, including EV charging - The DaGe platform is an integrated marketplace for automotive products and services, including vehicle maintenance, repair, tire replacement, and EV charging, with significant growth driven by EV adoption[193] - The platform expanded its network of service providers and EV charging stations, enhanced user experience with location-based recommendations and real-time pricing, and leveraged telecommunications infrastructure for cross-promotion[194][195] Recent Developments This section highlights significant business events and strategic collaborations that occurred recently - In June 2025, JiuGe Technology entered strategic collaborations with Zhejiang Jincheng Automotive Group Co., Ltd. and Qingling Motors Co., Ltd. to integrate the C2 Platform into emergency response and intelligent vehicle solutions[198][199] - On September 30, 2025, the Company acquired the intellectual property for its DaGe platform from Shanghai Jihaohe Information Technology Co., Ltd. for 1,500,000 common shares[200] Results of Operations This section analyzes the company's financial performance, comparing revenues, expenses, and profitability across periods Three Months Ended August 31, 2025 Compared to Three Months Ended August 31, 2024 This section provides a detailed comparison of financial results for the three-month periods Revenue by Segment (Three Months Ended August 31) | Segment | 2025 | 2024 | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Telecommunication Products & Services | $8,639,881 | $8,425,244 | 3% | | DaGe Platform | $6,898 | $4,789 | 44% | | Command & Communication | $585 | $28,730 | -98% | | Big Data | $147 | — | 100% | | Total Revenue | $8,647,511 | $8,458,763 | 2% | - Telecommunication Products & Services remained the primary revenue driver, contributing 99% of total revenue[203] - DaGe Platform revenue grew by 44%, and Big Data generated initial revenue of $147[204][206] Cost of Revenue by Segment (Three Months Ended August 31) | Segment | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Telecommunication Products & Services | $8,594,670 | $8,121,699 | | DaGe Platform | $13,624 | $8,035 | | Command & Communication | $477 | $28,001 | | Big Data | — | — | | Total Cost of Revenue | $8,608,771 | $8,157,735 | - Total cost of revenue increased by 6% to $8.61 million, driven by costs associated with mobile payment/recharge services, subscription plans, mobile phone sales, and customer acquisition initiatives[207] - Gross profit decreased by 87% to $38,740, primarily due to margin variability in the Telecommunication Products & Services segment and initial ramp-up costs in emerging segments like DaGe Platform and Command and Communication[208] - Depreciation decreased by 34% to $7,766[209] General & Administrative Expenses (Three Months Ended August 31) | Expense Category | 2025 | 2024 | Change (%) | | :----------------------- | :----------- | :----------- | :--------- | | Accounting | $97,764 | $35,629 | 174% | | Consulting | $340,715 | $361,628 | -6% | | Salaries & Wages | $568,709 | $616,947 | -8% | | Travelling | $38,017 | $81,619 | -53% | | Total G&A Expenses | $1,387,466 | $1,548,036 | -10% | - Total G&A expenses decreased by 10% to $1.39 million, mainly due to lower salaries & wages, traveling, and entertainment expenses[210] - Marketing costs decreased by 74% to $18,836, with activities focused on the DaGe platform rollout[211] - R&D expenses decreased by 57% to $77,540, primarily directed towards the Big Data segment (Sapientus, IME platform) and preliminary development in the Command and Communication segment[212][213][214] - A credit impairment loss of $(71,198) was recorded, reflecting a favorable movement due to updated evaluation of customer credit risk[217] - Share compensation expenses decreased by 40% to $107,750, due to reduced engagement of consultants compensated with common stock, aligning with efforts to optimize equity issuances[219] - Total operating expenses decreased by 23% to $1.53 million[220] - Net loss attributable to shareholders decreased by 9% to $1.54 million, primarily due to the reduction in operating expenses[221] Six Months Ended August 31, 2025 Compared to Six Months Ended August 31, 2024 This section provides a detailed comparison of financial results for the six-month periods Revenue by Segment (Six Months Ended August 31) | Segment | 2025 | 2024 | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Telecommunication Products & Services | $16,951,135 | $16,798,764 | 1% | | DaGe Platform | $17,836 | $5,252 | 240% | | Command & Communication | $109,826 | $28,730 | 282% | | Big Data | $27,457 | — | 100% | | Total Revenue | $17,106,254 | $16,832,746 | 2% | - Telecommunication Products & Services contributed 99% of total revenue[224] - DaGe Platform revenue grew by 240%, Command & Communication by 282%, and Big Data generated initial revenue of $27,457[225][226][227] Cost of Revenue by Segment (Six Months Ended August 31) | Segment | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Telecommunication Products & Services | $16,789,322 | $15,813,315 | | DaGe Platform | $36,114 | $8,513 | | Command & Communication | $89,557 | $28,001 | | Big Data | — | — | | Total Cost of Revenue | $16,914,993 | $15,849,829 | - Total cost of revenue increased by 7% to $16.91 million, driven by costs for mobile payment/recharge services, subscription plans, mobile phone sales, and customer acquisition[228] - Gross profit decreased by 81% to $191,261, primarily due to margin variability in the Telecommunication Products & Services segment and initial ramp-up costs in the DaGe Platform and Command and Communication businesses[229] - Depreciation decreased by 23% to $18,319[230] General & Administrative Expenses (Six Months Ended August 31) | Expense Category | 2025 | 2024 | Change (%) | | :----------------------- | :----------- | :----------- | :--------- | | Accounting | $147,643 | $59,257 | 149% | | Consulting | $796,324 | $786,066 | 1% | | Salaries & Wages | $1,180,754 | $1,233,589 | -4% | | Travelling | $117,204 | $163,457 | -28% | | Total G&A Expenses | $2,897,892 | $3,429,813 | -16% | - Total G&A expenses decreased by 16% to $2.90 million, mainly due to lower salaries & wages, traveling, and other miscellaneous expenses[231] - Marketing costs decreased by 77% to $30,942, primarily related to targeted campaigns for the DaGe platform[232] - R&D expenses decreased by 30% to $250,192, with efforts focused on the Big Data segment (Sapientus, IME platform) and early-stage development of the Command & Communication segment[233][234][235] - A credit impairment loss of $236,769 was recorded, reflecting a prudent assessment of expected credit loss[238] - Share compensation expenses decreased by 42% to $235,497, due to reduced consultant engagement compensated with common stock[239] - Total operating expenses decreased by 16% to $3.67 million[240] - Net loss attributable to shareholders increased by 6% to $3.55 million, primarily due to the significant decline in gross profit from the low-margin product mix in the Telecommunication Product & Services segment[241] Liquidity and Capital Resources This section discusses the company's cash position, working capital, and future capital requirements Cash and Working Capital (August 31, 2025 vs. February 28, 2025) | Metric | August 31, 2025 | February 28, 2025 | | :-------------- | :-------------- | :---------------- | | Cash reserves | $221,836 | $1,128,135 | | Working capital | $8,252,110 | $6,902,805 | - The business model requires periodic fund deposits with telecommunication companies and expansion into cloud-based services has increased accounts receivable, placing pressure on liquidity[243] - Additional capital is required to sustain growth and strategic initiatives, including the rollout of the Command & Communication business and increased deposits with telecommunication companies, which the company plans to seek through equity or debt financing[243][285] - Net cash used in operating activities increased by $182,077 to $3,086,249, primarily due to a $4.61 million increase in accounts receivable, offset by increases in accounts payable and accrual and other payables[245] - Net cash used in investing activities was $1,826, a slight increase of $85 compared to the prior year[246] - Net cash provided by financing activities decreased by $424,195 to $2,205,493, mainly due to the repayment of $751,122 in loan payable[247] Off-Balance Sheet Arrangements This section confirms the absence of material off-balance sheet arrangements - The Company has no material off-balance sheet arrangements[248] Subsequent Events This section reports on significant events occurring after the reporting period - On September 30, 2025, the Company acquired the intellectual property for its DaGe platform from Shanghai Jihaohe Information Technology Co., Ltd. for 1,500,000 common shares at $1.57 per share[249] Critical Accounting Policies This section refers to the detailed disclosure of key accounting policies - Critical accounting policies are detailed in Note 2 of the financial statements and the Annual Report on Form 10-K[250][251] Recently Issued Accounting Pronouncements This section discusses the impact of new accounting standards on the company's financial statements - Recently issued but not yet effective accounting standards are not expected to have a material effect on the Company's financial statements[252] ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, FingerMotion, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, FingerMotion, Inc. is not required to provide quantitative and qualitative disclosures about market risk[253] ITEM 4 – CONTROLS AND PROCEDURES This section details the evaluation of the company's disclosure controls and procedures and internal control over financial reporting. It highlights the conclusion that controls were not effective due to material weaknesses, particularly in segregation of duties, and outlines management's ongoing remediation efforts Evaluation of Disclosure Controls and Procedures This section assesses the effectiveness of the company's disclosure controls and procedures - Disclosure controls and procedures were deemed ineffective as of August 31, 2025, due to material weaknesses in internal controls over financial reporting[255] - The material weakness identified is limited segregation of duties and oversight in the Company's finance and accounting functions, leading to a reasonable possibility of material misstatements not being prevented or detected[261] Management's quarterly report on internal control over financial reporting This section presents management's assessment of the effectiveness of internal control over financial reporting - Management concluded that certain aspects of the Company's internal control over financial reporting were not effective as of August 31, 2025[259] - The ineffectiveness is attributed to a material weakness: limited segregation of duties and oversight, and lack of compensating controls in finance and accounting functions[261] - Management is implementing remediation actions, including documenting controls with proper segregation of duties and implementing corporate governance policies, but testing and validation of effectiveness are ongoing[262][264] Changes in internal control over financial reporting This section reports on any material changes in internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during the quarter, other than ongoing remediation efforts for identified material weaknesses[263] PART II – OTHER INFORMATION This section provides additional disclosures beyond the financial statements, including legal proceedings, risk factors, equity sales, defaults, and exhibits ITEM 1 – LEGAL PROCEEDINGS The Company is not a party to any pending legal proceedings, nor is it aware of any pending legal proceedings involving its officers, directors, affiliates, or significant beneficial holders that would be adverse to the company - The Company is not a party to any pending legal proceedings[266] ITEM 1A – RISK FACTORS This section outlines material risks and uncertainties that could adversely affect the company's business, financial condition, and operating results. These risks include those related to the company's business operations, its securities, its Variable Interest Entity (VIE) agreements, and the broader challenges of doing business in China, such as regulatory changes, geopolitical tensions, and legal system uncertainties Risks Related to the Business This section outlines various operational and strategic risks inherent to the company's business model - The Company has a limited operating history, making future results difficult to forecast and past results unreliable indicators of future performance[269][270] - The Company has a history of net losses, including $3.57 million for the six months ended August 31, 2025, and may not achieve or maintain profitability due to increasing expenses for new offerings and market expansion[271] - Rapid growth increases business complexity and strains management, operations, and financial resources, requiring continuous expansion of infrastructure and personnel[272] - Success depends on retaining key personnel and attracting new talent; failure to do so could adversely affect strategic goals[273] - A substantial amount of revenue is derived from China Unicom and China Mobile; loss of business, payment difficulties, or changes in terms from these companies could materially harm financial condition[274] - The business involves processing sensitive user data, making it vulnerable to cyberattacks, security breaches, or employee errors, which could interrupt operations, harm reputation, and lead to significant legal and financial exposure[275][277][278] - Systems, or those of third parties, are vulnerable to service interruptions from hardware/software defects, cyberattacks, natural disasters, or human error, which could adversely affect business and reputation[280][281] - Business operations rely on external Internet and mobile infrastructures; disruptions or increased costs could decrease consumer traffic and revenue[282] - Foreign governments may shut down services, and local governments may shut down the platform, damaging reputation and disrupting operations[283] - The company may face claims, lawsuits, and investigations, which are costly, time-consuming, and could result in substantial damages, fines, or changes in business practices[284] - The company requires additional capital to increase deposits with telecommunication companies and support the rollout of its Command & Communications business; failure to obtain funding could limit growth[285] - The company faces risks of intellectual property infringement claims, which could lead to substantial defense costs, damages, injunctions, or the need to develop alternative technologies, adversely affecting business[286][287] - Ongoing political and trade tensions between the U.S. and China could lead to new regulations or restrictions impacting operations, data rules, or cross-border business policies[288] Risks Related to Our Securities This section details risks associated with the company's common stock, including liquidity and price volatility - The company's common stock has limited liquidity, with sporadic trading volume and potential price volatility, making it difficult for shareholders to sell shares[289] - The market price of common stock may fluctuate significantly due to factors like operating results, analyst estimates, competitor announcements, key personnel changes, and global market trends[290] - The company does not intend to pay cash dividends in the foreseeable future, requiring stockholders to rely on stock price appreciation for gains[291] - The market price and trading volume could decline if analysts publish unfavorable research, downgrade the stock, or cease coverage[292] - Future issuance of common or preferred shares for financing will dilute existing shareholders' ownership and voting power, potentially reducing book value or market price[293] - Failure to maintain effective disclosure controls and internal control over financial reporting could impair timely and accurate financial statements, lead to restatements, and adversely affect investor confidence and stock price[294][295] - FINRA rules for speculative low-priced securities may make it difficult for broker-dealers to recommend the company's stock, potentially limiting trading and depressing the share price[296] - The company's shares have been thinly traded, and trading volume could decrease again, making it difficult for shareholders to sell at desired prices or at all[297] Risks Related to the VIE Agreements This section discusses the specific risks associated with the company's Variable Interest Entity structure in China - The PRC government may determine that VIE Agreements are not in compliance with applicable laws, leading to economic penalties, operational restrictions, restructuring requirements, or revocation of licenses[299][301][302] - VIE Agreements may not provide as effective control over JiuGe Technology as direct ownership, potentially hindering business objectives and revenue growth if the VIE fails to perform its obligations[303] - Enforcing VIE Agreements through PRC law is uncertain, as remedies may not be effective, and the legal environment in China is less developed, limiting protection of interests[304] - PRC tax authorities may challenge the VIE Agreements' payment arrangements if not deemed arm's length, potentially leading to higher tax liability or adverse financial consequences[305] - The sole shareholder of JiuGe Technology, Ms. Li Li, also serves as its legal representative and general manager, creating potential conflicts of interest that could adversely affect the company's operating performance[306] - The company relies on JiuGe Management's licenses and certificates; failure to renew or deterioration of the relationship with JiuGe Technology could severely harm operations[308][309] - If JiuGe Management exercises its option to purchase JiuGe Technology's equity at a nominal price, the payment could adversely affect the company's financial position, despite not bringing immediate benefits[310] Risks Related to Doing Business in China This section covers broad geopolitical, regulatory, and economic risks of operating in the Chinese market - Changes in China's economic reforms or legal systems, government involvement, foreign exchange control, or international trade restrictions could damage operations and profitability[311][313] - The evolving PRC legal system, with non-uniform interpretations and enforcement, limits legal protections and makes litigation protracted and costly[314] - Heightened U.S.-China tensions could lead to new regulations or restrictions, impacting trade, investments, and technological exchanges, adversely affecting business[315] - PRC Securities Law Article 177 restricts providing securities-related documents to overseas parties without consent, potentially delaying or preventing compliance with regulatory requests[315] - Enforcing U.S. court judgments against the company or its non-U.S. resident officers/directors is difficult due to PRC-based assets and operations, and China's lack of reciprocal enforcement treaties with the U.S.[316] - The PRC government exerts substantial control over the economy; new, stricter regulations or interpretations could require additional expenditures or divestment of Chinese interests[317][318] - The CSRC's Overseas Listing Trial Measures (effective March 31, 2023) require filing for indirect overseas offerings by PRC domestic companies meeting certain conditions, with non-compliance leading to fines and sanctions[319][321] - Uncertainty regarding these new regulations could limit the company's ability to conduct business, accept investments, or maintain listings, potentially causing securities to decline in value[321] - High inflation in China could lead the government to impose credit/price controls, inhibiting economic activity and harming the company's market and operations[323] - PRC currency and capital transfer regulations may limit the company's ability to remit income earned in RMB to the U.S. or shareholders[324] - Recent regulatory developments in China, particularly on offshore capital raising, may lead to additional regulatory review, increased compliance costs, and potential limitations or suspension of business operations[325] - The SEC's request for additional disclosures from China-based operating companies and potential government interference could impact the company[326] - China's Data Security Law (effective September 2021) requires data classification and hierarchical protection, prohibiting data transfer to foreign agencies without approval[327] - The Cyber Security Law mandates security measures and a multi-level protection scheme (MLPS) for network operators[329] - The Personal Information Protection Law (effective November 2021) imposes comprehensive data privacy requirements, including local storage for critical information infrastructure operators and security assessments for data export[332] - Non-compliance with these evolving laws could lead to significant expenses, operational changes, fines, suspension, or delisting from U.S. markets[331][333] - Restrictions on RMB convertibility may limit the company's ability to use RMB revenues for activities outside China or to make U.S. dollar dividend payments[335] - Fluctuations between the U.S. dollar and RMB can affect financial results, dividend values, and investments, with limited hedging options available in China[336][338] - PRC regulations restrict dividend payments from the PRC subsidiary to its offshore parent, requiring allocation to statutory reserve funds, which limits the ability to fund growth, investments, or pay dividends[339] - Loans and capital contributions to PRC subsidiaries and affiliated entities are subject to statutory limits, registration, and approval requirements from SAFE or MOFCOM, which may delay or prevent funding and business expansion[340][341] - Circular 19 (2015) limits the use of foreign currency capital contributions converted to RMB, potentially restricting fund transfers to China operations[342] - PRC residents' failure to register offshore special purpose companies (SPVs) under Circular 75 could lead to personal liability, fines, restrictions on investment activities, or limitations on profit distributions from PRC affiliates[343][345] - Failure to comply with Circular 78 regarding employee stock options granted to Chinese citizens could result in fines, legal sanctions, and restrictions on future option grants[346] - If classified as a "resident enterprise" by PRC tax authorities, the company could be subject to a 25% enterprise income tax on worldwide income and a 10% withholding tax on dividends to non-PRC shareholders, with potential double taxation[347][348][349][350] - The company is subject to FCPA and Chinese anti-corruption laws; unauthorized payments by employees or representatives could lead to severe criminal/civil sanctions and adverse effects on business[351] - PRC companies historically lack Western-style management and financial reporting, making it difficult to establish adequate controls, potentially leading to significant deficiencies in internal controls and non-compliance with U.S. securities laws[352] - The company's SEC reports and public announcements are not subject to review by PRC regulatory authorities, meaning no local agency has conducted due diligence on its China operations[353] - PRC M&A Rules and national security review requirements make acquisitions in China time-consuming and complex, potentially delaying or affecting growth strategies[354][355][356] - Failure to obtain required approvals could lead to challenges to PRC business, administrative punishments, and adverse effects on financial condition and stock price[357] - New CSRC regulations (Overseas Listing Trial Measures) require filings for new securities offerings, potentially limiting the ability to offer securities