Despite admitting to improperly recognizing revenue which resulted in a restatement of its financials FingerMotion Inc. (FNGR), a communications equipment and services provider, never actually corrected its top-line errors.

While preparing its FY25 financials, FingerMoton says it discovered it had been recognizing revenue prior to meeting customer performance obligations. In response, the company says it refined its “revenue recognition approach” which included:

“...reclassifying certain amounts as prepayments and addressing instances of over-recognition of revenue, where revenue was previously recognized ahead of the fulfillment of related performance obligations.”

Though clearly acknowledging it recognized sales it shouldn’t have, FingerMotion’s restated FY24 sales in the FY25 annual report are unchanged from the original.

What is restated, among other items, are FingerMotion’s receivables.

The company overstated receivables in FY24 by 6.5%.

Fast forward six weeks to FingerMotion’s most recent quarterly report and it’s clear trouble with accounts receivable is not over. Rather than blaming, in part, a classification error as it did previously for inflating receivables, the company is now flagging collectibility issues.

FingerMotion’s bad receivables spiked 72.4% in the latest quarter.

However, the buyers of FingerMotion’s receivables might be telling investors that more caution is warranted.

Even with the significant year-over-year (YoY) spike, the bad debt is just $750,743, or 1.89% of total receivables versus 1.3% in the prior year’s comparable quarter.

Yet demand for FingerMotion’s receivables appears to be down significantly as the company was able to sell just 37% of total receivables as of May 31, 2025, versus 99% in the prior year’s comparable quarter.

Before its latest pivot to the communications solutions sector FingerMotion launched in the property management space before pivoting to mobile gaming and now operating as a holding company for multiple Chinese variable interest entities (VIEs).

Regardless, even before the restatement that did not include a correction to revenue, investors couldn’t trust FingerMotion’s financial statements due to multiple control deficiencies which resulted in the following admission:

“...segregation of all conflicting duties may not always be possible and may not be economically feasible.”

With an Enterprise Value (EV) of approximately $101.6 million, FingerMotion is priced as if it will grow annual sales to more than $19.4 billion, up from an estimated $126.3 million in 2025. To justify its current share price of $1.75 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates FingerMotion must:

—Grow sales 75% annually for the next decade, faster than the company’s estimated 2025 sales growth of 69.1%
—Increase NOPAT margin to 4%, versus our 2024 estimate of (13.03%) and three-year average estimate of (14.65%)
—Increase Invested Capital (IC) Turns to 2.1, up from our three-year average estimate of 0.87 and 2024 estimate of 1.9

Notably, the current share price also implies FingerMotion increases Return on Invested Capital (ROIC) to 8.4% from our three-year average estimate of (28.7%):