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 the
Introduction
This MD&A is focused on material changes in our financial condition from
Corporate Information
The Company was initially incorporated as
On
Effective
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As a result of the Share Exchange Agreement and the other transactions
contemplated thereunder, FMCL became a wholly owned subsidiary of the Company.
FMCL, a
On
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. All of our subsidiaries are directly or indirectly owned or controlled by us:
Name of Entity Place of Ownership
Incorporation/Formation 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., PRC 100%
Ltd.(4)
Shanghai JiuGe Information Technology Co., PRC Contractually Ltd.(5) controlled (5) Beijing XunLian TianXia Technology Co., PRC 99%
Ltd.(6)
Suzhou BuGuNiao Digital Technology Co., PRC 99% Ltd.(7) Notes:
(1)
Inc.
(2)
(3)
Global Limited.
(4)
(5)
that is contractually controlled by
Ltd.
(6)
(7)
Shanghai JiuGe Information Technology Co., Ltd. Overview
We operate three principal lines of business, a video game division, a mobile payment platform and a mass SMS text message service. We operate our video game platform through FMCL.
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 current growth leader, and eSports and virtual reality gaining momentum as the next big sectors. This is the business focus for FMCL.
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In
We conduct our mobile payment and recharge business through JiuGe Technology, our contractually controlled affiliate.
In the first half of 2018, JiuGe Technology secured contracts with China United
Network Communications Group Co., Ltd. ("
Recent Developments
In
In
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Results of Operations
Three Months Ended
The following table sets forth our results of operations for the periods
indicated:
For the Three Months Ended
Aug. 31, 2020 Aug. 31, 2019
Revenue $ 3,621,054 $ 2,039,476
Cost of revenue $ (3,362,663 ) $ (1,832,747 )
Total operating expenses $ (1,152,972 ) $ (978,834 )
Total other income (expenses) $ (66,135 ) $ 5,556 Net Loss attributable to the Company's shareholders
$ 27,613 $ (7,992 )
Comprehensive loss attributable to the Company
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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 Change
Aug. 31, 2020 Aug. 31, 2019 (%)
Mobile Recharge $ 673,995 742,102 (9.2 %)
Sim Card $ 33,099 - 100 %
SMS $ 2,913,960 1,297,374 125 %
Total Revenue $ 3,621,054 2,039,476 77.5 %
We recorded
In the quarter results, JiuGe Technology added a new business unit partnering
with both China Mobile and China Unicom in offering and marketing subscription
plans for new subscribers. This is strategic partnership between Telcos and
JiuGe Technology, as JiuGe Technology will be leveraging on its expertise in
digital marketing and cooperation with major e-commerce platforms in
JiuGe Technology will be earning both an upfront commission plus the recurring revenue share of the newly acquired subscribers. Marketing costs have been incurred during the period to secure all these acquisitions where revenue flow will be spread over the next 12 to 15 months based on the agreement secured with the Telcos for different provinces. This is still at preliminary but JiuGe Technology is positive on the profitability of this business unit and will contribute to the total revenue stream to the Company.
Cost of Revenue
The following table sets forth the Company's cost of revenue for the periods
indicated:
For the Three Months Ended
Aug. 31, 2020 Aug. 31, 2019
Mobile Recharge $ 569,227 $ 658,030
Sim Card $ 9,826 $ -
SMS $ 2,783,611 $ 1,174,717
Total Cost of Revenue $ 3,362,663 $ 1,832,747 We recorded
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Gross profit (loss)
Our gross profit for the three month period ended
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 Three Months Ended
Aug. 31, 2020 Aug. 31, 2019
Accounting $ 11,345 $ 15,457
Consulting $ 290,053 $ 166,017
Entertainment $ 31,490 $ 80,012
IT $ 27,865 $ -
Rent $ 31,726 $ 21,315
Salaries and Wages $ 327,511 $ 203,121
Technical Fee $ 23,801 $ -
Others $ 99,186 $ 100,456
Total G&A Expenses $ 842,977 $ 586,378 We recorded
Marketing Cost
The following table sets forth the Company's marketing cost for the periods
indicated:
For the Three Months Ended
Aug. 31, 2020 Aug. 31, 2019
Marketing Cost $ 131,256 $ -
We incurred fees of
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Research & Development
The following table sets forth the Company's research & development for the
periods indicated:
For the Three Months Ended
Aug. 31, 2020 Aug. 31, 2019
Research & Development - Big Data
We incurred fees of
The Insurtech division of Finger Motion that focus on consumer behavioral insights extraction for the purpose of risk assessment. Insights are derived from various data sources with the primary sources being the telecommunication data. 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 mid of 2021.
Share Compensation Expenses
The following table sets forth the Company's share compensation expenses for the
periods indicated:
For the Three Months Ended
Aug. 31, 2020 Aug. 31, 2019
Share compensation expenses $ 50,033 $ 255,744 We incurred fees of
Operating Expenses
We recorded
Net Loss
As a result of the foregoing, our net loss for the three month period ended
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Six Months Ended
The following table sets forth our results of operations for the periods
indicated:
For the Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Revenue $ 6,363,988 $ 2,972,745
Cost of revenue $ (5,811,158 ) $ (2,684,390 )
Total operating expenses $ (2,022,743 ) $ (2,078,670 )
Total other income (expenses) $ (68,854 ) $ 11,140 Net Loss attributable to the Company's shareholders
$ 11,739 $ 4,734
Comprehensive loss attributable to the Company
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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 Six Months Ended Change
Aug. 31, 2020 Aug. 31, 2019 (%)
Mobile Recharge $ 1,067,787 1,493,044 (28 %)
Sim Card $ 33,099 - 100 %
SMS $ 5,263,102 1,479,701 256 %
Total Revenue $ 6,363,988 2,972,745 114 %
We recorded
In the quarter results, JiuGe Technology added a new business unit partnering
with both China Mobile and China Unicom in offering and marketing subscription
plans for new subscribers. This is strategic partnership between Telcos and
JiuGe Technology, as JiuGe Technology will be leveraging on its expertise in
digital marketing and cooperation with major e-commerce platforms in
JiuGe Technology will be earning both an upfront commission plus the recurring revenue share of the newly acquired subscribers. Marketing costs have been incurred during the period to secure all these acquisitions where revenue flow will be spread over the next 12 to 15 months based on the agreement secured with the Telcos for different provinces. This is still at preliminary but JiuGe Technology is positive on the profitability of this business unit and will contribute to the total revenue stream to the Company.
Cost of Revenue
The following table sets forth the Company's cost of revenue for the periods
indicated:
For the Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Mobile Recharge $ 759,033 $ 1,331,146
Sim Card $ 9,826 $ -
SMS $ 5,042,299 $ 1,353,245
Total Cost of Revenue $ 5,811,158 $ 2,684,390 We recorded
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Gross profit (loss)
Our gross profit for the six month period ended
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 Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Accounting $ 26,345 $ 101,149
Consulting $ 540,528 $ 422,628
Entertainment $ 60,662 $ 132,589
IT $ 45,582 $ -
Rent $ 72,111 $ 39,434
Salaries and Wages $ 644,579 $ 317,323
Technical Fee $ 47,547 $ -
Others $ 147,662 $ 197,726
Total G&A Expenses $ 1,585,016 $ 1,210,849 We recorded
Marketing Cost
The following table sets forth the Company's marketing cost for the periods
indicated:
For the Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Marketing Cost $ 131,256 $ -
We incurred fees of
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Research & Development
The following table sets forth the Company's research & development for the
periods indicated:
For the Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Research & Development - Big Data
We incurred fees of
The Insurtech division of Finger Motion that focus on consumer behavioral insights extraction for the purpose of risk assessment. Insights are derived from various data sources with the primary sources being the telecommunication data. 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 mid of 2021.
Share Compensation Expenses
The following table sets forth the Company's share compensation expenses for the
periods indicated:
For the Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Share compensation expenses $ 71,710 $ 661,488 We incurred fees of
Operating Expenses
We recorded
Net Loss
As a result of the foregoing, our net loss for the six month period ended
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Liquidity and Capital Resources
At
We currently do not have any financing arrangements in place. We did, however,
raise
Statement of Cashflows
The following table provides a summary of cash flows for the periods presented:
For the Six Months Ended
Aug. 31, 2020 Aug. 31, 2019
Net cash used in operating activities $ (1,218,461 ) $ (1,723,711 )
Net cash used in investing activities $ (115,239 ) $ (11,253 )
Net cash provided by financing activities $ 1,639,207 $ 966,473
Effect of exchange rates on cash & cash
equivalents $ 11,281 $ (15,567 )
Net (decrease) increase in cash and cash
equivalents $ 316,788 $ (784,058 ) Cash Flow used in Operating Activities
Net cash used in operating activities decreased by
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Cash Flow used in Investing Activities
During the six month period ended
Cash Flow provided by Financing Activities
During the six month period ended
Trends and Uncertainties
The impact of Coronavirus (COVID-19)
The Company has analyzed its operations and has found that the impact of COVID-19 on the Company is minimal. As the PRC has been reopening with more businesses and the enforcing on strict controls by the PRC Government on the containment of the spread of this virus since March, the Company's business is expected to continually improve for the fiscal year 2021. However, there will be a possibility that the outbreak may worsen at a later point in time where it may impact the growth of the business, all of which are uncertain and cannot be predicted at this point.
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.
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Subsequent Events
Subsequent to
On
On
On
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
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 ended
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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