FINGERMOTION, INC. The terms the "Registrant", "we", "us", "our", "FingerMotion" and the "Company"
mean
Cautionary Note Regarding Forward-Looking Statements
The following management's discussion and analysis of the Company's financial condition and results of operations (the "MD&A") contains forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements, you should consider various factors, including the risks, uncertainties and assumptions set forth in reports and other documents we have filed with or furnished to theSEC and, including, without limitation, this Quarterly Report on Form 10-Q for the nine months endedNovember 30, 2021 , and our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2021 , including the consolidated financial statements and related notes contained therein. These factors, or any one of them, may cause our actual results or actions in the future to differ materially from any forward-looking statement made in this document. Refer to "Cautionary Note Regarding Forward-looking Statements" as disclosed in our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2021 , and Item 1A, Risk Factors, under Part II - Other Information of this Quarterly Report. Introduction This MD&A is focused on material changes in our financial condition fromFebruary 28, 2021 , our most recently completed year end, toNovember 30, 2021 , and our results of operations for the three months and nine months endedNovember 30, 2021 , and should be read in conjunction with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations as contained in our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2021 . Corporate Information
The Company was initially incorporated as
OnJune 21, 2017 , the Company amended its certificate of incorporation to effect a 1-for-4 reverse stock split of the Company's outstanding common stock, to increase the authorized shares of common stock to 200,000,000 shares and to change the name of the Company from "Property Management Corporation of America " to "FingerMotion, Inc. " (the "Corporate Actions"). The Corporate Actions and the amended certificate of incorporation became effective onJune 21, 2017 .
Our principal executive offices are located at
Share Exchange Agreement EffectiveJuly 13, 2017 , the Company entered into that certain Share Exchange Agreement (the "Share Exchange Agreement") by and among the Company,Finger Motion Company Limited , aHong Kong corporation ("FMCL") and certain shareholders of FMCL (the "FMCL Shareholders"). FMCL, aHong Kong corporation, was formed onApril 6, 2016 and is an information technology company that specializes in operating and publishing mobile games. Pursuant to the Share Exchange Agreement, the Company agreed to exchange the outstanding equity stock of FMCL held by the FMCL Shareholders for shares of common stock of the Company. On the closing date of the Share Exchange Agreement, the Company issued 12,000,000 shares of common stock to the FMCL shareholders. In addition, the Company issued 600,000 shares to consultants in connection with the transactions contemplated by the Share Exchange Agreement, and 2,562,500 additional shares to accredited investors, which was a concurrent financing but not a condition of closing the Share Exchange Agreement. As a result of the Share Exchange Agreement and the other transactions contemplated thereunder, FMCL became a wholly owned subsidiary of the Company. The Company operates its video game division through FMCL. However, inJune 2018 , the Company decided to pause the operation of the game division as it saw the opportunity in the telecommunication business and have since refocused
into this business. This description of the Share Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the terms of the Share Exchange Agreement, which was filed as an exhibit to our Current Report on Form 8-K filed with theSEC onJuly 20, 2017 and incorporated by reference herein. -24- Table of Contents VIE Agreements OnOctober 16, 2018 , the Company, through its indirect wholly owned subsidiary,Shanghai JiuGe Business Management Co., Ltd. ("JiuGe Management"), entered into a series of agreements known as variable interest agreements (the "VIE Agreements") pursuant to whichShanghai JiuGe Information Technology Co., Ltd. ("JiuGe Technology") became our contractually controlled affiliate. The use of VIE agreements is a common structure used to acquire PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government. The VIE Agreements include a Consulting Services Agreement, a Loan Agreement, a Power of Attorney Agreement, a Call Option Agreement, and a Share Pledge Agreement in order to secure the connection and commitments of the JiuGe Technology. We operate our mobile payment platform business through JiuGe Technology. The VIE Agreements included: ? a consulting services agreement through which JiuGe Management is mainly engaged in data marketing, technical services, technical consulting and business consultancy to JiuGe Technology (the "JiuGe Technology Consulting Services Agreement"); ? a loan agreement through which JiuGe Management grants a loan to the Legal Representative of JiuGe Technology for the purpose of capital contribution (the "JiuGe Technology Loan Agreement"); ? a power of attorney agreement under which the owner of JiuGe Technology has vested their collective voting control over JiuGe Technology to JiuGe Management and will only transfer their equity interests in JiuGe Technology to JiuGe Management or its
designee(s)
(the "JiuGe Technology Power of Attorney Agreement");
? a call option agreement under which the owner of JiuGe Technology has
granted to JiuGe Management the irrevocable and unconditional right
and option to acquire all of their equity interests in JiuGe
Technology or transfer these rights to a third party (the "JiuGe
Technology Call Option Agreement"); and
? a share pledge agreement under which the owner of JiuGe Technology has
pledged all of their rights, titles and interests in JiuGe Technology
to JiuGe Management to guarantee JiuGe Technology's performance of its
obligations under the JiuGe Technology Consulting Services Agreement
(the "JiuGe Technology Share Pledge Agreement").
In the first half of 2018, JiuGe Technology secured contracts with China Unicom
and China Mobile to distribute mobile data for businesses and corporations in 9
provinces/municipalities, namely Chengdu , Jiangxi , Jiangsu , Chongqing , Shanghai ,
Zhuhai, Zhejiang , Shaanxi and Inner Mongolia .
In September 2018 , JiuGe Technology launched and commercialized mobile payment
and recharge services to businesses for China Unicom. The JiuGe Technology
mobile payment and recharge platform enables the seamless delivery of real-time
payment and recharge services to third-party channels and businesses. We earn a
negotiated rebate amount from each of China Unicom and China Mobile for all
monies paid by consumers to China Unicom and China Mobile that we process. To
encourage consumers to utilize our portal instead of using our competitors'
platforms or paying China Unicom or China Mobile directly, we offer mobile data
and talk time at a rate discounted from these companies' stated rates, which are
also the rates we must pay to them to purchase the mobile data and talk time
provided to consumers through the use of our platform. Accordingly, we earn
income on the rebates we receive from the telecommunications companies, reduced
by the amounts by which we discount the mobile data and talk time sold through
our platform.
In October 2018 , China Unicom and China Mobile awarded JiuGe Technology with
contracts that established partnerships for data analysis, that could unlock
potential value-added services.
This description of the VIE Agreements discussed above do not purport to be
complete and are qualified in their entirety by reference to the terms of the
VIE Agreements, which were filed as exhibits to our Current Report on Form 8-K
filed with the SEC on December 27, 2018 and are incorporated by reference
herein.
Acquisition of Beijing Technology
OnMarch 7, 2019 , the Company through JiuGe Technology acquiredBeijing XunLian TianXia Technology Co., Ltd. ("Beijing Technology"), a company in the business of providing mass SMS text services to businesses looking to communicate with large numbers of their customers and prospective customers. ThroughBeijing Technology, the Company entered into the business of mass SMS text message service as a compliment to its mobile payment and recharge business. The mass SMS text message service offers bulk SMS services to end consumers with competitive pricing. Currently, the Company's SMS integrated platform is processing more than 150 million SMS text messages per month. Beijing Technology retains a license from theMinistry of Industry and Information Technology to operate SMS and MMS business in the PRC. Similar to the mobile recharge business, Beijing Technology is required to make a deposit or bulk purchase in advance and has secured business customers that will utilizeBeijing Technology's SMS integrated platform to send bulk SMS text messages monthly. Beijing Technology has the capability to manage and track the entire process, including to assist the Company's clients to fulfill the government guidelines, until the SMS messages have been delivered successfully. -25-
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China Unicom Cooperation Agreement
OnJuly 7, 2019 , JiuGe Technology entered into that certainYunnan Unicom Electronic Sales Platform Construction and Operation Cooperation Agreement (the "Cooperation Agreement") with China United Network Communications LimitedYunnan Branch ("China Unicom Yunnan"). Under the Cooperation Agreement, JiuGe Technology is responsible for constructing and operatingChina Unicom Yunnan's electronic sales platform through which consumers can purchase various goods and services from China Unicom Yunnan, including mobile telephones, mobile telephone service, broadband data services, terminals, "smart" devices and related financial insurance. The Cooperation Agreement provides that JiuGe Technology is required to construct and operate the platform's webpage in accordance withChina Unicom Yunnan's specifications and policies, and applicable law, and bear all expenses in connection therewith. As consideration for the services it provides under the Cooperation Agreement, JiuGe Technology receives a percentage of the revenue received from all sales it processes for China Unicom Yunnan
on the platform. The Cooperation Agreement expires three years from the date of its signature, but it may be terminated by (i) JiuGe Technology upon three months' written notice or (ii) by China Unicom Yunnan unilaterally. The Cooperation Agreement contains customary representations from each party regarding such party's authority to enter into and perform under the Cooperation Agreement, and provides customary events of default, including for various types of failure to perform. Any disputes arising between the parties under the Cooperation Agreement will be adjudicated in Chinese courts. This description of the Cooperation Agreement does not purport to be complete and is qualified in its entirety by reference to the terms of the Cooperation Agreement, which was filed as an exhibit to our Current Report on Form 8-K filed with theSEC onAugust 9, 2019 and is incorporated by reference herein.
China Mobile Cooperation Agreement
In
From the beginning of 2020, JiuGe Technology began actively seeking cooperation with China Mobile Financial, given China Mobile's years of experience in the financial services industry. Currently, of China Mobile's estimated 900 million subscribers, only an estimated 600 million currently participate and accumulate points within the loyalty reward program, often referred to as "Points Mall ", meaning there is still plenty of room for growth. These estimated 600 million subscribers have accumulated an aggregate of points worth an estimated20 billion yuan (approximatelyUS$2.86 billion ) (Source:China Securities Journal , "China Mobile will open "points" ecological stock, customer points worth over20 billion yuan ",Yang Jie ,November 15, 2019 ). The "Points Mall " business is the US equivalent of a loyalty rewards program. The program uses "points" as a form of currency that allows users to exchange them for products and services. The loyalty program strives to keep its content fresh and is on the lookout for partnerships with other unique brands to expand the universe of redemption products and services offered. Intercorporate Relationships The following is a list of all of our subsidiaries and the corresponding date of jurisdiction of incorporation or organization and the ownership interest of each entity. All of our subsidiaries are directly or indirectly owned or controlled by us: Place of Incorporation / Name of Entity Formation Ownership Interest
Finger Motion Company Limited (1)Hong Kong
100%
Finger Motion (CN) Global Limited (2)Samoa
100%
Finger Motion (CN) Limited (3)Hong Kong
100%
Shanghai JiuGe Business Management Co., Ltd.(4) PRC
100%
Shanghai JiuGe Information Technology
Contractually
Co., Ltd.(5) PRC controlled (5) Beijing XunLian TianXia Technology Contractually Co., Ltd.(6) PRC controlledFinger Motion Financial Group Limited(7) Samoa 100%Finger Motion Financial Company Limited(8) Hong Kong
100%
Shanghai TengLian JiuJiu Information
Contractually
Communication Technology Co., Ltd.(9) PRC controlled
-26-
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Notes:
(1) Finger Motion Company Limited is a wholly-owned subsidiary of
FingerMotion, Inc.
(2) Finger Motion (CN) Global Limited is a wholly-owned subsidiary of
FingerMotion, Inc.
(3)
Motion (CN) Global Limited . (4)Shanghai JiuGe Business Management Co., Ltd. is a wholly-owned subsidiary ofFinger Motion (CN) Limited .
(5)
entity that is contractually controlled by Shanghai JiuGe Business
Management Co., Ltd.
(6)
of Shanghai JiuGe Information Technology Co., Ltd.
(7)
FingerMotion, Inc.
(8)
of Finger Motion Financial Group Limited .
(9) Shanghai TengLian JiuJiu Information Communication Technology Co. ,
Ltd. is a 99% owned subsidiary of Shanghai JiuGe Information
Technology Co., Ltd.
Overview
The Company operates the following lines of business: (i) telecommunications
products and services; (ii) SMS and MMS service; (iii) a rich communication
services (RCS) platform; (iv) big data insights; and (v) a video game division
(inactive).
Telecommunications Products and Services
The Company's current product mix consisting of payment and recharge services,
data plans, subscription plans, mobile phones, loyalty points redemption and
other products bundles (i.e. mobile protection plans). Chinese mobile phone
consumers often utilize third-party e-marketing websites to pay their phone
bills. If the consumer connected directly to the telecommunications provider to
pay his or her bill, the consumer would miss out on any benefits or marketing
discounts that e-marketers provide. Thus, consumers log on to these e-marketer's
websites, click into their respective phone provider's store, and "top up," or
pay, their telecommunications provider for additional mobile data and talk time.
To connect to the respective mobile telecommunications providers, these
e-marketers must utilize a portal licensed by the applicable telecommunication
company that processes the payment. We have been granted one of these licenses
by China United Network Communications Group Co., Ltd. ("China Unicom ") and
China Mobile Communications Corporation ("China Mobile"), each of which is a
major telecommunications provider in China . We principally earn revenue by
providing mobile payment and recharge services to customers of China Unicomand China Mobile. We conduct our mobile payment business throughShanghai JiuGe Technology Co., Ltd. ("JiuGe Techology"), our contractually controlled affiliate through the entry into a series of agreements known as variable interest agreements (the "VIE Agreements") inOctober 2018 . In the first half of 2018, JiuGe Technology secured contracts with China Unicom and China Mobile to distribute mobile data for businesses and corporations in nine provinces/municipalities, namelyChengdu ,Jiangxi ,Jiangsu ,Chongqing ,Shanghai , Zhuhai,Zhejiang ,Shaanxi ,Inner Mongolia ,Henan andFujian . InSeptember 2018 , JiuGe Technology launched and commercialized mobile payment and recharge services to businesses for China Unicom. InMay 2021 , JiuGe Technology signed a volume-based agreement withChina Mobile Fujian to offer recharge services to theFujian province which we have launched and commercialized inNovember 2021 . The JiuGe Technology mobile payment and recharge platform enables the seamless delivery of real-time payment and recharge services to third-party channels and businesses. We earn a rebate from each telecommunications company on the funds paid by consumers to the telecommunications companies we process. To encourage consumers to utilize our portal instead of using our competitors' platforms or paying China Unicom or China Mobile directly, we offer mobile data and talk time at a rate discounted from these companies' stated rates, which are also the rates we must pay to them to purchase the mobile data and talk time provided to consumers through the use of our platform. Accordingly, we earn income on the rebates we receive from China Unicom and China Mobile, reduced by the amounts by which we discount the mobile data and talk time sold through our platform.FingerMotion started and commercialized its "Business to Business" ("B2B") model by integrating with various e-commerce platforms to provide its mobile payment and recharge services to subscribers or end consumers. In the first quarter of 2019FingerMotion expanded its business by commercializing its first "Business to Consumer" ("B2C") model, offering the telecommunication providers' products and services, including data plans, subscription plans, mobile phones, and loyalty points redemption, directly to subscribers or customers of the e-commerce companies, such asPinDuoDuo ("PDD"), TMall ("TMALL") and JD.Com ("JD"). The Company is planning to further expand its universal exchange platform by setting up B2C stores on several other major e-commerce platforms inChina . In addition to that, we have been assigned as one ofChina's Mobile's loyalty redemption partner where we will be providing the services for their customers via our platform. -27- Table of Contents Additionally, as previously disclosed, onJuly 7, 2019 , JiuGe Technology, our contractually controlled affiliate, entered into that certainYunnan Unicom Electronic Sales Platform Construction and Operation Cooperation Agreement (the "Cooperation Agreement") with China Unicom's Yunnan subsidiary. Under the Cooperation Agreement, JiuGe Technology is responsible for constructing and operating China Unicom's electronic sales platform through which consumers can purchase various goods and services from China Unicom, including mobile telephones, mobile telephone service, broadband data services, terminals, "smart" devices and related financial insurance. The Cooperation Agreement provides that JiuGe Technology is required to construct and operate the platform's webpage in accordance with China Unicom's specifications and policies, and applicable law, and bear all expenses in connection therewith. As consideration for the service it provides under the Cooperation Agreement, JiuGe Technology receives a percentage of the revenue received from all sales it processes for China Unicom on the platform. The Cooperation Agreement expires three years from the date of its signature, but it may be terminated by (i) JiuGe Technology upon three months' written notice or (ii) by China Unicom unilaterally. During the recent fiscal year, the Company expanded its offering under their telecommunication product and services by increasing their product line revenue streams. InMarch 2020 ,FingerMotion secure a contract with both China Mobile and China Unicom to acquire new users to take up the respective subscription plans. OnDecember 2, 2020 , our contractually controlled subsidiary,Shanghai JiuGe Information Technology Co., Ltd. , andChina Mobile Financial Technology Co., Ltd. , a subsidiary of China Mobile, signed a strategic cooperation agreement to explore and create a new forward-leaning business model that combines the traditional loyalty point redemption business with an e-commerce platform designed to create a higher evolution of brand loyalty. Recently, inFebruary 2021 , we increased the mobile phones sales to end users using all of our platforms. This business will continue to contribute to the overall revenue for the group as part of our offering to our customers. SMS and MMS Services OnMarch 7, 2019 , the Company through JiuGe Technology acquiredBeijing XunLian TianXia Technology Co., Ltd. ("Beijing Technology"), a company in the business of providing mass SMS text services to businesses looking to communicate with large numbers of their customers and prospective customers. With this acquisition, the Company expanded into a second partnership with the telecom companies by acquiring bulk Short Message Service ("SMS") and Multimedia Messaging Service ("MMS") bundles at reduced prices and offering bulk SMS services to end consumers with competitive pricing.FingerMotion's subsidiary, Beijing Technology, retains a license from theMinistry of Industry and Information Technology ("MIIT") to operate the SMS and MMS business in the PRC. Similar to the mobile payment and recharge business, Beijing Technology is required to make a deposit or bulk purchase in advance and has secured business customers, including premium car manufacturers, hotel chains, airlines and e-commerce companies, that utilize Beijing Technology's SMS integrated platform to send bulk SMS text messages monthly. Beijing Technology has the capability to manage and track the entire process, including guiding the Company's customer to meet MIIT's guidelines on messages composed, until the SMS messages have been delivered successfully. Rich Communication Services
InMarch 2020 , the Company began development of an RCS platform, also known as MaaP (Messaging as a Platform). This RCS platform will be a proprietary business messaging platform that enables businesses and brands to communicate and service their customers on the 5G infrastructure, delivering a better and more efficient user experience at a lower cost. For example, with the new 5G RCS message service, consumers will have the ability to list available flights by sending a message regarding a holiday and will also be able to book and buy flights by sending messages. This will allow telecommunication providers like China Unicom and China Mobile to retain users on their systems, without having to utilize third party apps or log onto the internet, which will increase their user retention. We expect this to open up a new marketing channel for the Company's current and prospective business partners. Big Data Insights InJuly 2020 , the Company launched its proprietary technology platform "Sapientus" as its big data insights arm to deliver data-driven solutions and insights for businesses within the insurance, healthcare, and financial services industries. The Company applies its vast experience in the insurance and financial services industry and capabilities in technology and data analytics to develop revolutionary solutions targeted towards insurance and financial consumers. Integrating diverse publicly available information, insurance and financial based data with technology and finally registering them into theFingerMotion telecommunications and insurance ecosystem, the Company would be able to provide functional insights and facilitate the transformation of key components of the insurance value chain, including driving more effective and efficient underwriting, enabling fraud evaluation and management, empowering channel expansion and market penetration through novel product innovation, and more. The ultimate objective is to promote, enhance and deliver better value to our partners and customers. -28-
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The Company's proprietary risk assessment engine offers standard and customized scoring and appraisal services based on multi-dimensional factors. The Company has the ability to provide potential customers and partners with insights-driven and technology-enabled solutions and applications including preferred risk selection, precision marketing, product customization, and claims management (e.g., fraud detection). The Company's mission is to deliver the next generation of data-driven solutions in the financial services, healthcare, and insurance industries that result in more accurate risk assessments, more efficient processes, and a more delightful user experience. On or aroundJanuary 25, 2021 , the Company's wholly owned subsidiary,Finger Motion Financial Company Limited's , big data analytic arm branded "Sapientus," entered into a services agreement with Pacific Life Re, a global life reinsurer serving the insurance industry with a comprehensive suite of products and services. Our Video Game Division The video game industry covers multiple sectors and is currently experiencing a move away from physical games towards digital software. Advances in technology and streaming now allow users to download games rather than visiting retailers. Video game publishers are expanding their direct-to-consumer channels with mobile gaming, the current growth leader, and eSports and virtual reality gaining momentum as the next big sectors. InJune 2018 , we temporarily paused its publishing and operating plans for existing games, and the Company's board of directors decided to re-focus the company's resources into new business opportunities inChina , particularly the mobile phone payment and data business. Results of Operations
Three Months Ended
The following table sets forth our results of operations for the periods
indicated:
For the three months ended
November 30, 2021 November 30, 2020
Revenue $ 5,901,899 $ 4,881,601
Cost of revenue $ (4,934,824 ) $ (4,261,058 )
Total operating expenses $ (2,031,080 ) $ (1,301,974 )
Total other income (expenses) $ 26,833 $ (24,215 )
Net Loss attributable to the Company's shareholders $ (1,036,619 ) $ (708,153 )
Foreign currency translation adjustment $ 85,965 $ 94,707
Comprehensive loss attributable to the Company $ (950,825 ) $ (613,761 )
Basic Loss Per Share attributable to the Company $ (0.02 ) $ (0.02 )
Diluted Loss Per Share attributable to the Company $
(0.02 ) $ (0.02 )
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Revenue
The following table sets forth the Company's revenue from its three lines of business for the periods indicated:
For the three months ended
November 30, 2021 November 30, 2020 Change (%)Telecommunication Products & Services $ 3,281,733
$ 482,575 580 % SMS & MMS Business $ 2,620,166 $ 4,399,026 -40 % Big Data $ - $ - - % Total Revenue $ 5,901,899 $ 4,881,601 21 % We recorded$5,901,899 in revenue for the three months endedNovember 30, 2021 , an increase of$1,020,298 or 21%, compared to the three months endedNovember 30, 2020 . This increase resulted from an increase in revenue of$2,799,158 from our Telecommunication Products & Services, offset in part by a decrease of$1,778,860 from our SMS & MMS business. We principally earn revenue by providing mobile payment and recharge services to customers of telecommunications companies inChina . Specifically, we earn a negotiated rebate amount from the telecommunications companies for all monies paid by consumers to those companies that we process. As we continue to develop our mobile recharge business, we expect that revenues will continue to grow especially on the new collaboration with China Mobile onFujian province. Our SMS texting service saw a drop in the comparative quarter last year as we are redistributing our resources to expand the Telecommunication Products & Services as opportunity arises. This trend will continue to better manage our resources to enable a healthier overall profit margin. We also earned revenue during the most recently completed fiscal year from our new venture on subscription plan acquisition and mobile phone sales. The Company expects and hopes that these new product offerings will continue to provide additional revenue for the Company in the future. During the last quarter of the fiscal year, our Big Data division secured a contract with Pacific Life Re, a global life reinsurance serving the insurance industry with comprehensive suite of products and services, to develop a holistic multi-faceted risk rating concept, leveraging the Company's proprietary approach to analytics by drawing data from novel sources and filtering them through advance algorithms with the ultimate goal to apply new insights generated from ourFingerMotion's predictive model to the traditional insurance industry. This division has since recorded revenue and we expect additional revenue from this division in the future. Cost of Revenue The following table sets forth the Company's cost of revenue for the periods indicated: For the three months ended November 30, 2021 November 30, 2020
Telecommunication Products & Services $ 2,315,308 $
159,592 SMS & MMS Business $ 2,529,516 $ 4,101,466 Big Data $ 90,000 $ - Total Cost of Revenue $ 4,934,824 $ 4,261,058 We recorded$4,934,824 in costs of revenue for the three months endedNovember 30, 2021 , an increase of$673,766 or 16%, compared to the three months endedNovember 30, 2020 . As previously mentioned, we principally earn revenue by providing mobile payment and recharge services to customers of telecommunications companies, subscription plans and mobile phone sales inChina . To earn this revenue, we incur cost of the product, certain customer acquisition costs, including discounts to our customers and promotional expenses, which is reflected in our cost of revenue. Gross profit
Our gross profit for the three months endedNovember 30, 2021 was$967,075 , an increase of$346,532 or 56%, compared to the three months endedNovember 30, 2020 . This increase in gross profit resulted from higher revenue for the period. Amortization & Depreciation We recorded depreciation of$14,721 for fixed assets for the three months endedNovember 30, 2021 , a decrease of$31,013 or 68%, compared to the three months endedNovember 30, 2020 . This decrease resulted as a portion of our intangible assets have been fully amortized. -30-
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General & Administrative Expenses
The following table sets forth the Company's general and administrative expenses for the periods indicated:
For the three months ended
November 30, 2021 November 30, 2020
Accounting $ 47,041 $ 15,650
Consulting $ 556,071 $ 304,277
Entertainment $ 53,091 $ 37,602
IT $ 38,005 $ 16,826
Rent $ 27,915 $ 14,320
Salaries & Wages $ 655,589 $ 338,156
Technical Fee $ 41,328 $ -
Travelling $ 18,712 $ 29,436
Others $ 83,362 $ 37,283
Total G&A Expenses $ 1,521,114 $ 793,550
We recorded
Marketing Cost
The following table sets forth the Company's marketing cost for the periods
indicated:
For the three months ended
November 30, 2021 November 30, 2020
Marketing Cost $ 240,299 $ 136,960
We recorded$240,299 in marketing cost for the three months endedNovember 30, 2021 for our telecommunication products and services business. Marketing costs represent the costs of promoting our product offerings through all our platforms including other digital marketing expenses. Research & Development The following table sets forth the Company's research & development for the periods indicated: For the three months ended November 30, 2021 November 30, 2020 Research & Development $ 158,055 $ 124,723
We incurred fees of
The Insurtech division ofFingerMotion focuses on consumer behavioral insights extraction for the purpose of risk assessment. Insights are mined from a multitude of data sources, harmonized with the objectives of our various business partners. The initial phase of business application is to focus on insurance industry particularly in the area of underwriting risk rating, complementary claims adjudication and assessment, and risk segmentation & market penetration.
This division comprises of experienced actuaries, data scientists and computer programmers.
The expenses for research & development include associated wages and salaries, data access fees and IT infrastructure.
The 1st stage of prototyping on Phase 1 - analytical framework and business applications have been completed and target to commercialize by the middle of calendar 2022.
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Share Compensation Expenses
The following table sets forth the Company's share compensation expenses for the
periods indicated:
For the three months ended
November 30, 2021 November 30, 2020 Share compensation expenses $ 96,891 $
201,007 We incurred fees of$96,891 in share issuance for consultants in consideration of the services which have been provided to the company for the three months endedNovember 30, 2021 , a decrease of$104,116 or 52% as compared to$201,007 for the three months endedNovember 30, 2020 . The decrease was due to some of the expired advisory and consultation services. Operating Expenses We recorded$2,031,080 in operating expenses for the three months endedNovember 30, 2021 , as compared to$1,301,974 in operating expenses for the three months endedNovember 30, 2020 . The increase of$729,106 or 56% for the three months endedNovember 30, 2021 is as set forth above.
Net Loss attributable to the Company's shareholders
The net loss attributable to the Company's shareholders was$1,036,619 for the three months endedNovember 30, 2021 and$708,153 for the three months endedNovember 30, 2020 . The increase in net loss attributable to the Company's shareholders of$328,466 or 46% resulted primarily from the increase in total operating expenses as discussed above.
Nine Months Ended
The following table sets forth our results of operations for the periods
indicated:
For the nine months ended
November 30, 2021 November 30, 2020
Revenue $ 17,285,302 $ 11,245,589
Cost of revenue $ (15,001,674 ) $ (10,072,216 )
Total operating expenses $ (5,591,170 ) $ (3,324,717 )
Total other income (expenses) $ (93,753 ) $ (93,069 )
Net Loss attributable to the Company's shareholders $ (3,404,273 ) $ (2,247,253 )
Foreign currency translation adjustment $ 58,611 $ 106,446
Comprehensive loss attributable to the Company $ (3,345,830 ) $ (2,141,218 )
Basic Loss Per Share attributable to the Company $ (0.08 ) $ (0.07 )
Diluted Loss Per Share attributable to the Company $ (0.08 ) $ (0.07 ) Revenue
The following table sets forth the Company's revenue from its three lines of business for the periods indicated:
For the nine months ended
November 30, 2021 November 30 2020 Change (%)Telecommunication Products & Services $ 6,730,108
$ 1,583,461 325 % SMS & MMS Business$ 10,423,776 $ 9,662,128 8 % Big Data $ 131,418 $ - 100 % Total Revenue$ 17,285,302 $ 11,245,589 54 % We recorded$17,285,302 in revenue for the nine months endedNovember 30, 2021 , an increase of$6,039,713 or 54%, compared to the nine months endedNovember 30, 2020 . This increase resulted from an increase in revenue of$5,146,647 ,$761,648 and$131,418 from our Telecommunication Products & Services, SMS & MMS business and Big Data business, respectively. We principally earn revenue by providing mobile payment and recharge services to customers of telecommunications companies inChina . Specifically, we earn a negotiated rebate amount from the telecommunications companies for all monies paid by consumers to those companies that we process. As we continue to develop our mobile recharge business, we expect that revenues will continue to grow. Our SMS texting service has experienced a small growth only compared to last year. We are redistributing our resources to our other products when the opportunity arises to secure a better overall gross margin mix for the Company. We also earned revenue during the most recently completed fiscal year from our new venture on subscription plan acquisition and mobile phone sales. The Company expects and hopes that these new product offerings will continue to provide additional revenue for the Company in the future. During the last quarter of the fiscal year, our Big Data division secured a contract with Pacific Life Re, a global life reinsurance serving the insurance industry with comprehensive suite of products and services, to develop a holistic multi-faceted risk rating concept, leveraging the Company's proprietary approach to analytics by drawing data from novel sources and filtering them through advance algorithms with the ultimate goal to apply new insights generated from ourFingerMotion's predictive model to the traditional insurance industry. This division has since recorded revenue and we expect additional revenue from this division in the future. -32- Table of Contents Cost of Revenue The following table sets forth the Company's cost of revenue for the periods indicated: For the nine months ended November 30, 2021 November 30, 2020
Telecommunication Products & Services $ 5,005,278 $
928,451 SMS & MMS Business $ 9,726,396 $ 9,143,765 Big Data $ 270,000 $ - Total Cost of Revenue$ 15,001,674 $ 10,072,216 We recorded$15,001,674 in costs of revenue for the nine months endedNovember 30, 2021 , an increase of$4,929,458 or 49%, compared to the nine months endedNovember 30, 2020 . As previously mentioned, we principally earn revenue by providing mobile payment and recharge services to customers of telecommunications companies, subscription plans and mobile phone sales inChina . To earn this revenue, we incur cost of the product, certain customer acquisition costs, including discounts to our customers and promotional expenses, which is reflected in our cost of revenue. Gross profit Our gross profit for the nine months endedNovember 30, 2021 was$2,283,628 , an increase of$1,110,255 or 95%, compared to the nine months endedNovember 30, 2020 . This increase in gross profit resulted from higher revenue for the period. Amortization & Depreciation
We recorded depreciation of
General & Administrative Expenses
The following table sets forth the Company's general and administrative expenses for the periods indicated:
For the nine months ended
November 30, 2021 November 30, 2020
Accounting $ 143,918 $ 41,995
Consulting $ 1,469,484 $ 844,805
Entertainment $ 134,159 $ 98,264
IT $ 74,684 $ 62,408
Rent $ 80,060 $ 86,431
Salaries & Wages $ 1,870,805 $ 982,735
Technical Fee $ 96,964 $ 25,197
Travelling $ 69,604 $ 57,538
Others $ 206,097 $ 179,193
Total G&A Expenses $ 4,145,775 $ 2,378,566
We recorded
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Marketing Cost
The following table sets forth the Company's marketing cost for the periods
indicated:
For the nine months ended
November 30, 2021 November 30, 2020
Marketing Cost $ 384,381 $ 268,216
We recorded $384,381 in marketing cost for the nine months ended November 30,
2021 for our telecommunication products and services business. Marketing costs
represent the costs of promoting our product offerings through all our platforms
including other digital marketing expenses.
Research & Development
The following table sets forth the Company's research & development for the
periods indicated:
For the nine months ended
November 30, 2021 November 30, 2020
Research & Development $ 438,033 $ 351,867
We incurred fees of$438,033 in research & development for the nine months endedNovember 30, 2021 as compared to$351,867 for the nine months endedNovember 30, 2020 . The increase of$86,166 or 24% was due to higher data access and usage fees charged by telecommunications companies. The Insurtech division ofFingerMotion focuses on consumer behavioral insights extraction for the purpose of risk assessment. Insights are mined from a multitude of data sources, harmonized with the objectives of our various business partners. The initial phase of business application is to focus on insurance industry particularly in the area of underwriting risk rating, complementary claims adjudication and assessment, and risk segmentation & market penetration.
This division comprises of experienced actuaries, data scientists and computer programmers.
The expenses for research & development include associated wages and salaries, data access fees and IT infrastructure.
The 1st stage of prototyping on Phase 1 - analytical framework and business applications have been completed and target to commercialize by the middle of calendar 2022.
Share Compensation Expenses
The following table sets forth the Company's share compensation expenses for the
periods indicated:
For the nine months ended
November 30, 2021 November 30, 2020
Share compensation expenses $ 579,437 $ 272,717
We incurred fees of $579,437 in share issuance for consultants in consideration
of the services which have been provided to the company for the nine months
ended November 30, 2021 as compared to $272,717 for the nine months ended
November 30, 2020 . The increase of $306,720 or 112% was due to more consultants
being compensated with shares of the Company.
Operating Expenses
We recorded $5,591,170 in operating expenses for the nine months ended November
30, 2021 , as compared to $3,324,717 in operating expenses for the nine months
ended November 30, 2020 . The increase of $2,266,453 or 68%, for the nine months
ended November 30, 2021 is as set forth above.
Net Loss attributable to the Company's shareholders
The net loss attributable to the Company's shareholders was$3,404,273 for the nine months endedNovember 30, 2021 and$2,247,253 for the nine months endedNovember 30, 2020 . The increase in net loss attributable to the Company's shareholders of$1,157,020 or 51% resulted primarily from the increase in total operating expenses as discussed above. -34-
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Liquidity and Capital Resources
The following table sets out our cash and working capital as of
As at November 30, 2021 As at February 28, 2021
Cash reserves $ 1,116,448 $ 850,717Working capital (deficiency) $
5,489,655 $ 2,992,232 AtNovember 30, 2021 , we had cash and cash equivalents of$1,116,448 as compared to cash and cash equivalents of$850,717 atFebruary 28, 2021 . In order for us to continue to operate our mobile payment business, we must deposit funds with our telecommunication companies from time to time in order to obtain access to the mobile data and talk-time we make available to consumers on our portal. Accordingly, the amount of cash we have on hand fluctuates significantly from period to period. The Company otherwise does not have any planned capital expenditures and has historically funded its operations from revenues and sales of securities, including convertible debt securities. We believe that our cash on hand, cash equivalents and short-term investments, along with our revenues from operations, will fund our projected operating requirements, fund our current operations and repay our outstanding indebtedness, in each case, for at least the next 12 months. However, to grow our business substantially, we will need to increase the amount of funds we have deposited with the telecommunications companies for which we process mobile recharge payments. Accordingly, we expect to seek additional capital through public or private sales of our equity or debt securities, or both. We might also enter into financing arrangements with commercial banks or non-traditional lenders. We cannot provide investors with any assurance that we will be able to raise additional funding from the sale of our equity or debt securities, or both, in order to increase our deposits with our telecommunications company clients, or if available, that such funding will be on terms acceptable to us. We did, however, raise$4,674,498 through the sale of shares of our common stock in private placement transactions exempt from the registration requirements of the United States Securities Act of 1933, as amended, during the nine months endedNovember 30, 2021 . Statement of Cashflows The following table provides a summary of cash flows for the periods presented: For the nine months ended November 30, 2021 November 30, 2020 Net cash used in operating activities$ (5,122,691 ) $ (4,133,370 ) Net cash used in investing activities $ (13,776 ) $ (320,629 ) Net cash provided by financing activities $ 5,364,193 $ 5,226,207 Effect of exchange rates on cash & cash equivalents $ 38,005 $ 113,976 Net increase (decrease) in cash and cash equivalents $
265,731 $ 886,184
Cash Flow used in Operating Activities
Net cash used in operating activities increased by$989,321 in the nine months endedNovember 30, 2021 compared to the nine months endedNovember 30, 2020 , primarily due to an increase in prepayment and deposit of ($2,798,735 ) (November 30, 2020 :$814,310 ), increase in other receivable of ($646,529 ) (November 30, 2020 : ($1,278,777)) , increase in inventories of ($14,508 ) (November 30, 2020 : ($1,380)) , decrease in accounts payable of ($798,171 ) (November 30, 2020 :$386,507 ), decrease in lease liability of ($3,191 ) (November 30, 2020 : ($17,797)) ; offset by a decrease in account receivable of$760,120 (November 30, 2020 : ($1,382,141)) , and an increase in accrual and other payable of$1,156,637 (November 30, 2020 : ($66,702)) .
Cash Flow used in Investing Activities
During the nine months period ended
Cash Flow provided by Financing Activities
During the nine months period ended
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Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Subsequent Events
OnDecember 28, 2021 , the Company's board of directors approved and granted in aggregate 4,545,500 stock options, of which 1,169,500 stock options were granted to certain directors and officers of the Company, having an exercise price of$8.00 per share and an expiry date of five years from the date of grant. The stock options have vesting provisions of 20% on the date of grant and 20% on each of the first, second, third and fourth anniversary of the date of grant.
On
On
Critical Accounting Policies
For a complete summary of all of our significant accounting policies refer to Note 2: Summary of Principal Accounting Policies of the Notes to the Condensed Consolidated Financial Statements as presented under Item 8, Financial Statements and Supplementary Data in our Annual Report on Form 10-K for our fiscal year endedFebruary 28, 2021 .
Refer to "Critical Accounting Policies" under Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations in our Annual
Report on Form 10-K for our fiscal year ended
Recently Issued Accounting Pronouncements
The Company does not believe recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
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