FingerMotion's Q2 Loss Narrows, But Gross Profit Plummets 87%

TL;DR

**FNGR is burning cash and its gross profit is collapsing, making it a risky bet despite a slight revenue bump.**

AI Summary

FingerMotion, Inc. reported a net loss of $1,549,524 for the three months ended August 31, 2025, a 8.3% improvement from the $1,690,551 net loss in the prior year period. For the six months ended August 31, 2025, the net loss increased to $3,572,285 from $3,346,383 in the same period last year, representing a 6.7% increase. Revenue saw a modest increase of 2.2% to $8,647,511 for the three-month period, and a 1.6% increase to $17,106,254 for the six-month period. Gross profit, however, significantly declined by 87.1% to $38,740 for the three months and by 80.5% to $191,261 for the six months, primarily due to a higher cost of revenue. Cash and cash equivalents decreased sharply from $1,128,135 at February 28, 2025, to $221,836 at August 31, 2025, indicating significant cash burn from operations. Accounts receivable increased by $5,119,325 to $37,778,762, while accounts payable increased by $3,839,344 to $28,399,705. The company continues to operate under a Variable Interest Entity (VIE) structure in China, with its VIE and VIE's subsidiaries contributing to the overall financial results.

Why It Matters

FingerMotion's continued net losses and significant decline in gross profit, despite a slight revenue increase, signal underlying operational inefficiencies that could concern investors. The substantial decrease in cash and cash equivalents, coupled with rising accounts receivable, points to potential liquidity challenges and working capital strain. For employees, sustained losses could lead to job insecurity or reduced growth opportunities. Customers might experience service disruptions if the company's financial health deteriorates further. In a competitive market, FingerMotion's struggle to convert revenue into profit could make it vulnerable to more financially robust rivals, impacting its long-term viability and market share.

Risk Assessment

Risk Level: high — The company reported a net loss of $3,572,285 for the six months ended August 31, 2025, and its cash and cash equivalents plummeted by 80.3% from $1,128,135 to $221,836 over the same period. This significant cash burn, combined with an 80.5% drop in gross profit to $191,261 for the six months, indicates severe operational challenges and high liquidity risk.

Analyst Insight

Investors should exercise extreme caution and consider divesting from FingerMotion, Inc. given the substantial cash burn, declining gross profit margins, and increasing net losses. The company's current financial trajectory suggests significant operational challenges and potential long-term viability concerns.

Financial Highlights

revenue

$8,647,511

total Assets

$51,900,062

total Debt

$36,824,675

net Income

-$1,549,524

gross Margin

0.45%

cash Position

$221,836

revenue Growth

+2.2%

Revenue Breakdown

Key Numbers

• $8.6M — Revenue (Increased 2.2% for the three months ended August 31, 2025, to $8,647,511 from $8,458,763.)
• $38.7K — Gross Profit (Decreased 87.1% for the three months ended August 31, 2025, to $38,740 from $301,028.)
• $(1.5M) — Net Loss (Improved 8.3% for the three months ended August 31, 2025, to $(1,549,524) from $(1,690,551).)
• $(3.5M) — Net Loss (Six Months) (Increased 6.7% for the six months ended August 31, 2025, to $(3,572,285) from $(3,346,383).)
• $221.8K — Cash and Cash Equivalents (Decreased 80.3% from $1,128,135 at February 28, 2025, to $221,836 at August 31, 2025.)
• $37.8M — Accounts Receivable, net (Increased 15.7% from $32,659,437 at February 28, 2025, to $37,778,762 at August 31, 2025.)
• $28.4M — Accounts Payable (Increased 15.6% from $24,560,361 at February 28, 2025, to $28,399,705 at August 31, 2025.)
• 60,908,429 — Common Shares Outstanding (As of October 7, 2025, indicating potential dilution from previous periods.)

Key Players & Entities

• FingerMotion, Inc. (company) — Registrant and parent company
• Shanghai JiuGe Business Management Co., Ltd. (company) — Indirect wholly-owned subsidiary
• Shanghai JiuGe Information Technology Co., Ltd. (company) — Variable Interest Entity (VIE)
• Zhejiang ChangXin Communication Equipment Co., Ltd. (company) — 70% owned subsidiary of Shanghai KeShunXiang Automobile Service Co., Ltd., incorporated March 28, 2025
• Shanghai XiaoYi Bin Tong Technology Co., Ltd. (company) — 80% owned by JiuGe Technology, incorporated April 15, 2025
• $8,647,511 (dollar_amount) — Revenue for the three months ended August 31, 2025
• $1,549,524 (dollar_amount) — Net loss for the three months ended August 31, 2025
• $221,836 (dollar_amount) — Cash and cash equivalents as of August 31, 2025
• $37,778,762 (dollar_amount) — Accounts receivable, net as of August 31, 2025
• $38,740 (dollar_amount) — Gross profit for the three months ended August 31, 2025

FAQ

Risk Factors

• Deteriorating Gross Margins [high — financial]: Gross profit declined by 87.1% to $38,740 for the three months ended August 31, 2025, and by 80.5% to $191,261 for the six months. This is primarily due to a significant increase in the cost of revenue, which outpaced revenue growth.
• Accelerated Cash Burn [high — financial]: Cash and cash equivalents decreased by 80.3% from $1,128,135 at February 28, 2025, to $221,836 at August 31, 2025. This sharp decline indicates a substantial burn rate from operations, raising concerns about short-term liquidity.
• Increasing Accounts Receivable [medium — financial]: Accounts receivable increased by $5,119,325 to $37,778,762. While this could indicate sales growth, it also ties up significant working capital and increases the risk of bad debt if collections are not managed effectively.
• VIE Structure in China [medium — operational]: The company operates under a Variable Interest Entity (VIE) structure in China. This structure carries inherent regulatory and legal risks associated with Chinese corporate law and foreign investment restrictions.
• Growing Net Loss (Six Months) [medium — financial]: The net loss for the six months ended August 31, 2025, increased by 6.7% to $3,572,285 from $3,346,383 in the prior year period. Despite a slight improvement in the quarterly net loss, the year-to-date trend is negative.

Industry Context

FingerMotion operates in the digital transformation and smart services sector, particularly focusing on the Chinese market. This industry is characterized by rapid technological advancements, evolving consumer preferences, and intense competition. Companies in this space often rely on innovative platforms and services to capture market share, facing challenges related to scalability, regulatory compliance, and customer acquisition costs.

Regulatory Implications

The company's reliance on a VIE structure in China exposes it to significant regulatory risks. Changes in Chinese laws regarding foreign investment, data privacy, or VIE arrangements could materially impact its operations and financial results. Compliance with evolving regulations in its operating markets is crucial.

What Investors Should Do

1. Monitor Cost of Revenue Closely
2. Assess Liquidity and Cash Burn
3. Evaluate Accounts Receivable Management
4. Understand VIE Structure Risks

Key Dates

• 2025-08-31: End of Second Fiscal Quarter — Reporting period for the 10-Q, showing significant gross margin decline and cash burn.
• 2025-02-28: End of First Fiscal Quarter — Prior period balance sheet date, showing a higher cash position of $1,128,135.

Glossary

Variable Interest Entity (VIE)

A legal structure used by companies to bypass foreign ownership restrictions in certain industries in China. The company has contractual control over the VIE's assets and operations, allowing it to consolidate their financial results. (FingerMotion operates under this structure in China, which presents unique regulatory and legal risks.)

Gross Profit

Revenue minus the cost of revenue. It represents the profit a company makes after deducting the direct costs associated with producing and selling its goods or services. (A significant decline in gross profit (87.1% for the quarter) indicates rising costs of revenue are severely impacting profitability.)

Cash Burn Rate

The rate at which a company is spending its cash reserves, typically from operations. A high cash burn rate can deplete a company's liquidity quickly. (The sharp decrease in cash and cash equivalents suggests a high cash burn rate, posing a liquidity risk.)

Accounts Receivable, net

Money owed to a company by its customers for goods or services delivered but not yet paid for, net of any allowance for doubtful accounts. (A substantial increase in accounts receivable may indicate sales growth but also ties up working capital and increases credit risk.)

Year-Over-Year Comparison

Compared to the prior year period, FingerMotion reported a slight revenue increase of 2.2% for the three months ended August 31, 2025. However, this revenue growth was overshadowed by a severe deterioration in gross profit, which plummeted by 87.1% due to a higher cost of revenue. While the net loss for the quarter improved slightly by 8.3%, the six-month net loss widened by 6.7%. Key balance sheet changes include a substantial decrease in cash and cash equivalents and significant increases in both accounts receivable and accounts payable.

Key Financial Figures

• $0.0001 — ge on which registered Common Stock, $0.0001 par value FNGR The Nasdaq Stock Mar
• $1.00 — ccounts August 31, 2025 RMB7.1314 to $1.00 February 28, 2025 RMB7.2830 to $1.00

Filing Documents

• fngr-20250831_10q.htm (10-Q) — 1171KB
• fngr-20250831_10qex31z1.htm (EX-31.1) — 9KB
• fngr-20250831_10qex31z2.htm (EX-31.2) — 9KB
• fngr-20250831_10qex32z1.htm (EX-32.1) — 5KB
• image_01.jpg (GRAPHIC) — 144KB
• 0001520138-25-000303.txt ( ) — 6182KB
• fngr-20250831.xsd (EX-101.SCH) — 47KB
• fngr-20250831_cal.xml (EX-101.CAL) — 57KB
• fngr-20250831_def.xml (EX-101.DEF) — 162KB
• fngr-20250831_lab.xml (EX-101.LAB) — 319KB
• fngr-20250831_pre.xml (EX-101.PRE) — 284KB
• fngr-20250831_10q_htm.xml (XML) — 867KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION 3

– FINANCIAL STATEMENTS

ITEM 1 – FINANCIAL STATEMENTS 3

– MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 30 Three Months Ended August 31, 2025 Compared to Three Months Ended August 31, 2024 41 Six Months Ended August 31, 2025 Compared to Six Months Ended August 31, 2024 45 Liquidity and Capital Resources 49

- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 50

– CONTROLS AND PROCEDURES

ITEM 4 – CONTROLS AND PROCEDURES 50 Evaluation of Disclosure Controls and Procedures 50 Changes in internal control over financial reporting 52

– OTHER INFORMATION

PART II – OTHER INFORMATION 53

– LEGAL PROCEEDINGS

ITEM 1 – LEGAL PROCEEDINGS 53

– RISK FACTORS

ITEM 1A – RISK FACTORS 53

– UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 72

– DEFAULTS UPON SENIOR SECURITIES

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES 72

– MINE SAFETY DISCLOSURES

ITEM 4 – MINE SAFETY DISCLOSURES 72

– OTHER INFORMATION

ITEM 5 – OTHER INFORMATION 72

– EXHIBITS

ITEM 6 – EXHIBITS 73 2

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

– FINANCIAL STATEMENTS

ITEM 1 – FINANCIAL STATEMENTS 3 FINGERMOTION, INC. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the six months ended August 31, 2025 (Unaudited - Expressed in U.S. Dollars) 4 FingerMotion, Inc. Condensed Consolidated Balance Sheets August 31, February 28, 2025 2025 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 221,836 $ 1,128,135 Accounts receivable, net 37,778,762 32,659,437 Inventories 123,546 136,020 Prepayment and deposit 5,384,673 7,016,803 Other receivables 1,550,653 1,096,965 Total Current Assets 45,059,470 42,037,360 Non-current Assets Equipment 12,356 23,260 Intangible assets 2,587 9,758 Right-of-use asset 73,869 126,581 Deferred tax asset 6,751,780 6,623,492 Total Non-Current Assets 6,840,592 6,783,091 TOTAL ASSETS $ 51,900,062 $ 48,820,451 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 28,399,705 $ 24,560,361 Accrual and other payables 7,954,481 9,323,641 Loan payable, current portion 382,623 1,133,745 Lease liability, current portion 70,551 116,808 Total Current Liabilities 36,807,360 35,134,555 Non-current Liabilities Lease liability, non-current portion — 9,986 Deferred tax liabilities 17,315 16,954 Total Non-Current Liabilities 17,315 26,940 TOTAL LIABILITIES $ 36,824,675 $ 35,161,495 STOCKHOLDERS' EQUITY Preferred stock, par value $ .0001 per share; Authorized 1,000,000 shares; issued and outstanding - 0 - shares. — — Common Stock, par value $ .0001 per share; Authorized 200,000,000 shares; issued and outstanding 59,408,429 shares and 57,141,186 issued and outstanding at August 31, 2025 and February 28, 2025 respectively 5,941 5,714 Additional paid-in capital 51,717,567 47,304,416 Additional paid-in capital - stock options 1,767,980 1,473,996 Accumulated deficit ( 37,736,950 ) ( 34,187,384 ) Accumulated other comprehensive income ( 661,922 ) ( 943,276 )

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