FINGERMOTION, INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The terms the "Registrant", "we", "us", "our", "FingerMotion" and the "Company"
mean
consolidated subsidiaries and contractually controlled companies.
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
limitation, this Quarterly Report on Form 10-Q for the nine months ended
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 ended
II - Other Information of this Quarterly Report.
Introduction
This MD&A is focused on material changes in our financial condition from
and our results of operations for the three months and nine months ended
Discussion and Analysis of Financial Condition and Results of Operations as
contained in our Annual Report on Form 10-K for the fiscal year ended
28, 2022
Corporate Information
The Company was initially incorporated as
America
On
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 "
to "
amended certificate of incorporation became effective on
Our principal executive offices are located at
10036, and our telephone number at that address is (347) 349-5339.
We are a holding company incorporated in
incorporated in
holding company, we conduct a significant part of our operations through our
subsidiaries and through the VIE Agreements with the VIE based in
address challenges resulting from laws, policies and practices that may disfavor
foreign-owned entities that operate within industries deemed sensitive by the
Chinese government, we use the VIE structure to provide contractual exposure to
foreign investment in the PRC-based companies. We own 100% of the equity of a
WFOE,
VIE Agreements with the VIE, which is owned by Ms.
representative and general manager, and also the shareholder of the VIE. The VIE
Agreements have not been tested in court. As a result of our use of the VIE
structure, you may never directly hold equity interests the VIE. The securities
offered pursuant to this prospectus are securities of the Company, the
holding company, not of the VIE.
We fund the registered capital and operating expenses of the VIE by extending
loans to the shareholders of the VIE. The VIE Agreements governing the
relationship between the VIE and our WFOE enable us to (i) direct the activities
of the VIE that most significantly impact the VIE's economic performance, (ii)
receive substantially all of the economic benefits of the VIE, and (iii) have an
exclusive call option to purchase, at any time, all or part of the equity
interests in and/or assets of the VIE to the extent permitted by Chinese laws.
As a result of the VIE Agreements, the Company is considered the primary
beneficiary of the VIE for accounting purposes and is able to consolidate the
financial results of the VIE in its consolidated financial statements in
accordance with
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Share Exchange Agreement
Effective
Agreement (the "Share Exchange Agreement") by and among the Company,
Motion Company Limited
shareholders of FMCL (the "FMCL Shareholders"). FMCL, a
was formed on
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, in
2018
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 the
VIE Agreements
On
a series of agreements known as variable interest agreements (the "VIE
Agreements") pursuant to which
("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").
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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
Zhuhai,
In
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
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
herein. The English translation version of the JiuGe Technology Share Pledge
Agreement was filed as Exhibit 10.6 to our Form S-1/A (Amendment No. 1) filed
with the
Acquisition of Beijing Technology
On
TianXia Technology Co., Ltd.
of providing mass SMS text services to businesses looking to communicate with
large numbers of their customers and prospective customers. Through Beijing
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 the
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 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 to assist the Company's clients to fulfill the government guidelines,
until the SMS messages have been delivered successfully.
China Unicom Cooperation Agreement
On
Electronic Sales Platform Construction
"Cooperation Agreement") with China United Network Communications Limited
Branch
Technology is responsible for constructing and operating
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 with
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.
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The Cooperation Agreement expires three years from the date of its signature
with a yearly auto-renewal clause, 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 the
In
Co., Ltd.
Technology Co., Ltd.
launch the Device Protection program for mobile phones and the new 5G phones.
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 Contractually
Technology Co., Ltd.(5) PRC controlled (5)
Beijing XunLian TianXia Technology Contractually
Co., Ltd.(6) PRC controlled
Finger Motion Financial Group
Limited (7) Samoa 100%
Finger Motion Financial Company
Limited (8) Hong Kong 100%
Shanghai TengLian JiuJiu Information
Communication Technology Co., Contractually
Ltd.(9) PRC controlled
Notes:
(1)
Inc.
(2)
FingerMotion, Inc.
(3) Finger Motion (CN) Limited is a wholly-owned subsidiary of Finger Motion (CN)
Global Limited .
(4) Shanghai JiuGe Business Management Co., Ltd. is a wholly-owned subsidiary of
Finger Motion (CN) Limited .
(5) Shanghai JiuGe Information Technology Co., Ltd. is a variable interest entity
that is contractually controlled by
Ltd.
(6)
(7)
FingerMotion, Inc.
(8) Finger Motion Financial Company Limited is a wholly-owned subsidiary of
Finger Motion Financial Group Limited .
(9) Shanghai TengLian JiuJiu Information Communication Technology Co., Ltd. is a
99% owned subsidiary of
Because we do not directly hold equity interests in the VIE, we are subject to
risks and uncertainties of the interpretations and applications of Chinese laws
and regulations, including but not limited to, the validity and enforcement of
the VIE Agreements among the WFOE, the VIE and the shareholder of the VIE. We
are also subject to the risks and uncertainties about any future actions of the
Chinese government in this regard that could disallow the VIE structure, which
would likely result in a material change in our operations and may cause the
value of our Common Shares to depreciate significantly or become worthless.
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The VIE Agreements may not be as effective as direct ownership in providing
operational control. For instance, the VIE and its shareholders could breach
their contractual arrangements with us by, among other things, failing to
conduct their operations in an acceptable manner or taking other actions that
are detrimental to our interests. The shareholder of the VIE may not act in the
best interests of our Company or may not perform their obligations under the VIE
Agreements. Such risks exist throughout the period in which we intend to operate
certain portions of our business through the VIE Agreements with the VIE. In the
event that the VIE or its shareholder fail to perform their respective
obligations under the VIE Agreements, we may have to incur substantial costs and
expend additional resources to enforce such arrangements. In addition, even if
legal actions are taken to enforce the VIE Agreements, there is uncertainty as
to whether Chinese courts would recognize or enforce judgments of
against us or such persons predicated upon the civil liability provisions of the
securities laws of
Related to the VIE Agreements". We rely on the VIE Agreements with the VIE and
its shareholder for a significant portion of our business operations. The VIE
Agreements may not be as effective as direct ownership in providing operational
control. Any failure by the VIE or its shareholder to perform their obligations
under such contractual arrangements would have a material and adverse effect on
our business.
As of the date of this periodic report on Form 10-Q, we and the VIE are not
required to seek permissions from the CSRC, the
China
operations of the VIE, other than a value-added telecommunications business
licence, which has already been obtained. Nevertheless, Chinese regulatory
authorities may in the future promulgate laws, regulations or implement rules
that require us, our subsidiaries or the VIEs to obtain permissions from such
regulatory authorities to approve the operations of the VIE or any securities
listing.
Overview
The Company is a mobile data specialist company that operates the following
lines of business: (i) Telecommunications Products and Services; (ii) Value
Added Product and Services; (iii) Short Message Services ("SMS") and Multimedia
Messaging Services ("MMS"); (iv) a Rich Communication Services ("RCS") platform;
(v) Big Data Insights; and (vi) 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 Unicom and China Mobile, each of which is a major telecommunications
provider in
recharge services to customers of China Unicom and China Mobile.
We conduct our mobile payment business through JiuGe Technology, our
contractually controlled affiliate through the entry into a series of agreements
known as VIE Agreements in
Technology secured contracts with China Unicom and China Mobile to distribute
mobile data for businesses and corporations in nine provinces/municipalities,
namely
launched and commercialized mobile payment and recharge services to businesses
for China Unicom. In
with China Mobile Fujian to offer recharge services to the
we have launched and commercialized in
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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.
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
2019
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 as
("JD"). The Company is planning to further expand its universal exchange
platform by setting up B2C stores on several other major e-commerce platforms in
loyalty redemption partner where we will be providing the services for their
customers via our platform.
Additionally, as previously disclosed, on
contractually controlled affiliate, entered into that certain
Electronic Sales Platform Construction
"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 with yearly auto-renewal terms, 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. In
and China Unicom to acquire new users to take up the respective subscription
plans.
In
our platforms. This business will continue to contribute to the overall revenue
for the group as part of our offering to our customers.
Value Added Product and Services
These are new product and services that the Company expects to secure and work
with the telecommunication provider and all our e-commerce platform partners to
market. The current and upcoming value-added product is the Mobile Protection
programs which we plan to launch soon. In
controlled subsidiary, JiuGe Technology, through its 99% own subsidiary TengLian
signed an agreement with both China Unicom and China Mobile to co-operate to
roll out the Mobile Device Protection product which is incorporated into the
Telecommunication subscription plans in line with their roll out of new mobile
phones and new 5G phones. In
Mobile Device protection product with the roll out of the new mobile phones and
5G phones.
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SMS and MMS Services
On
TianXia Technology Co., Ltd.
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 SMS and MMS bundles at reduced prices and offering
bulk SMS services to end consumers with competitive pricing.
subsidiary, Beijing Technology, retains a license from the
and Information Technology
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
In
as Messaging as a Platform ("MaaP"). 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
In
"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 the
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.
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 around
Motion Financial Company Limited's
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.
In
research alliance with Munich Re in extending behavioral analytics to enhance
understanding of morbidity and behavioral patterns in
goal of creating value for both insurers and the end insurance consumers through
better technology, product offerings and customer experience.
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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. In
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 in
Results of Operations
Three Months Ended
2021
The following table sets forth our results of operations for the periods
indicated:
For the three months ended
November 30, November 30,
2022 2021
Revenue $ 11,402,935 $ 5,901,899
Cost of revenue $ (10,544,321 ) $ (4,934,824 )
Total operating expenses $ (2,720,417 ) $ (2,031,080 )
Total other income (expenses) $ (659,915 ) $ 26,833
Net Loss attributable to the Company's shareholders $ (2,521,992 ) $ (1,036,619 )
Foreign currency translation adjustment $ (182,270 ) $ 85,965
Comprehensive loss attributable to the Company $ (2,703,955 ) $ (950,825 )
Basic Loss Per Share attributable to the Company $ (0.06 ) $ (0.02 )
Diluted Loss Per Share attributable to the Company $ (0.06 ) $ (0.02 )
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
November 30, November 30,
2022 2021 (%)
Telecommunication Products & Services $ 10,346,741 $ 3,281,733 215 %
SMS & MMS Business $ 868,694 $ 2,620,166 -67 %
Big Data $ 187,500 $ - 100 %
Total Revenue $ 11,402,935 $ 5,901,899 93 %
We recorded
an increase of
30, 2021
respectively, offset in part by a decrease in revenue of
& MMS business. We principally earn revenue by providing mobile payment and
recharge services to customers of telecommunications companies in
Specifically, we earn a negotiated rebate amount from the telecommunications
companies for all monies paid by consumers to those companies that we process.
An increase in this line of business was evident especially on the mobile
recharge revenue as we had deployed certain funding that we had secured in the
last few months to this line of business. We plan to continue to develop this
mobile recharge business and expect that revenues would continue to grow when we
continue to deploy more funds. In contrast, our SMS texting service has shown a
drop in revenue as compared to the previous quarter. We are facing some
challenges in this line of business due to the ongoing Covid outbreak in
As for Big Data business, the revenue is ongoing with the contract secured in
collaboration expected to be completed by third quarter of our next financial
year. The development with other re-insurance companies is in progress.
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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, November 30,
2022 2021
Telecommunication Products & Services $ 9,668,146 $ 2,315,308
SMS & MMS Business $ 876,175 $ 2,529,516
Big Data $ - $ 90,000
Total Cost of Revenue $ 10,544,321 $ 4,934,824
We recorded
30, 2022
providing mobile payment and recharge services to customers of
telecommunications companies, subscription plans, and mobile phone sales in
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 ended
decrease of
2021
period.
Amortization & Depreciation
We recorded depreciation of
ended
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, November 30,
2022 2021
Accounting $ - $ 47,041
Consulting $ 737,083 $ 556,071
Entertainment $ 60,676 $ 53,091
IT $ 12,923 $ 38,005
Rent $ 24,897 $ 27,915
Salaries & Wages $ 474,512 $ 655,589
Technical Fee $ 21,653 $ 41,328
Travelling $ 82,255 $ 18,712
Others $ 221,801 $ 83,362
Total G&A Expenses $ 1,635,800 $ 1,521,114
We recorded
months ended
three months ended
other expenses are principally due to the funding exercise and the Company's
promotional activities during the period.
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Marketing Cost
The following table sets forth the Company's marketing cost for the periods
indicated:
For the three months ended
November 30, November 30,
2022 2021
Marketing Cost $ 64,012 $ 240,299
We recorded
2022
30, 2021
scenario which incurred less promotional activities. Marketing costs represent
the costs of promoting our product offerings through all our platforms.
Research & Development
The following table sets forth the Company's research & development for the
periods indicated:
For the three months ended
November 30, November 30,
2022 2021
Research & Development $ 180,158 $ 158,055
We incurred fees of
ended
access and usage fees charged by telecommunications companies.
Our Insurtech division 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.
Over the past year, we have deepened the Company's determined commitment toward
working with partners in elucidating consumer insights via big data algorithms
and applying behavioral analytics to the fintech sector in sparking new
innovations and commercial applications. The following capture the most recent
accomplishments and milestones:
? Strengthening partnership network - Signed a new agreement to advance to the
next phase of collaboration with Pacific Life Re in
? Upgrade of the analytic engine - We have enriched the algorithms with more
elaborative auxiliary data, which, in conjunction with the existing information
system and records, will lend transformational support and capabilities to the
analytics, empowering more precise and robust results that are suited for
commercial applications. The collaborative research studies with leading
industry partners have enhanced and validated our analytic framework and
insurance risk rating services platform, which is now ready for deployment to
the wide insurance and financial services industry.
? API rollout for market adoption - Our risk rating services platform is built on
an application programming interface (API) structure that is integrated with
our partners' core system, linked to an underlying data repertoire and analytic
framework that facilitates real-time rating feedback to insurance companies.
Regular API upgrades and enhancements enable greater flexibility in tightening
service integration and broadening commercial opportunities with our partners.
? Official patent recognition - Over the past two years, Sapientus has been
granted eight patents by the
for the abovementioned model algorithms and technological infrastructure as
well as insurance-oriented applications, for example, Risk Rating API Design,
Insurance Risk Assessment platform and Insurance Fraud Detection System (one
other applications is still pending approval). NCAC is the governing body for
patent and copyright verification and approval in
successful applications for these patents validate Sapientus' continuing
innovation in data science and its application in the field of insurance,
finance, and beyond, demonstrating the Company's active participation and
contributions to the industry.
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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 , November 30,
2022 2021
Share compensation expenses
We incurred fees of
of the services which have been provided to the Company for the three months
ended
consulting and advisory services associated with the Company's funding
activities. The rationale for rewarding these consultants and advisors with
shares is to minimize the usage of cash by the Company to allow the Company to
use the cash to invest in revenue-generating activities.
Operating Expenses
We recorded
30, 2022
ended
ended
Net Loss attributable to the Company's shareholders
The net loss attributable to the Company's shareholders was
three months ended
shareholders of
profit, increase in expenses pertaining to the funding exercise and the
provision for the mandatory default amount on the Note issued on
Nine Months Ended
2021
The following table sets forth our results of operations for the periods
indicated:
For the nine months ended
November 30, November 30,
2022 2021
Revenue $ 21,241,015 $ 17,285,302
Cost of revenue $ (19,587,546 ) $ (15,001,674 )
Total operating expenses $ (6,444,283 ) $ (5,591,170 )
Total other income (expenses) $ (713,667 ) $ (93,753 )
Net Loss attributable to the Company's shareholders
Foreign currency translation adjustment
$ (711,433 ) $ 58,611
Comprehensive loss attributable to the Company
Basic Loss Per Share attributable to the Company
Diluted Loss Per Share 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 nine months ended Change
November 30, November 30
2022 2021 (%)
Telecommunication Products & Services $ 14,673,364 $ 6,730,108 118 %
SMS & MMS Business $ 6,317,651 $ 10,423,776 -39 %
Big Data $ 250,000 $ 131,418 90 %
Total Revenue $ 21,241,015 $ 17,285,302 23 %
We recorded
an increase of
2021
respectively, offset in part by a decrease in revenue of
& MMS business. We principally earn revenue by providing mobile payment and
recharge services to customers of telecommunications companies in
Specifically, we earn a negotiated rebate amount from the telecommunications
companies for all monies paid by consumers to those companies that we process.
The increase in this line of business especially in the mobile recharge revenue
was evident as we deployed certain funding that we had secured in the last few
months to this line of business. We plan to continue to develop our mobile
recharge business and expect that revenues would continue to grow further when
we continue to deploy more funds. In contrast, our SMS texting service has shown
a drop in revenue as compared to last year. We are facing some challenges in
this line of business due to the ongoing Covid outbreak in
first half year of the last fiscal year, our Big Data division secured a
contract with Pacific Life Re, a global life reinsurance serving the insurance
industry with a 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 our predictive model to the traditional insurance industry. In
a further contract to advance to the next phase of collaboration which has
contributed to the current revenue recorded.
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, November 30,
2022 2021
Telecommunication Products & Services $ 13,401,733 $ 5,005,278
SMS & MMS Business $ 6,185,813 $ 9,726,396
Big Data $ - $ 270,000
Total Cost of Revenue $ 19,587,546 $ 15,001,674
We recorded
30, 2022
providing mobile payment and recharge services to customers of
telecommunications companies, subscription plans and mobile phone sales in
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 ended
decrease of
2021
period.
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Amortization & Depreciation
We recorded depreciation of
ended
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, November 30,
2022 2021
Accounting $ 97,828 $ 143,918
Consulting $ 1,418,406 $ 1,469,484
Entertainment $ 153,450 $ 134,159
IT $ 49,451 $ 74,684
Rent $ 94,502 $ 80,060
Salaries & Wages $ 1,514,546 $ 1,870,805
Technical Fee $ 73,252 $ 96,964
Travelling $ 124,560 $ 69,604
Others $ 625,224 $ 206,097
Total G&A Expenses $ 4,151,219 $ 4,145,775
We recorded
months ended
nine months ended
other expenses are principally due to the funding exercise and the Company's
promotional activities during the period.
Marketing Cost
The following table sets forth the Company's marketing cost for the periods
indicated:
For the nine months ended
November 30, November 30,
2022 2021
Marketing Cost $ 290,592 $ 384,381
We recorded
2022
30, 2021
scenario which incurred less promotional activities. Marketing costs represent
the costs of promoting our product offerings through all our platforms.
Research & Development
The following table sets forth the Company's research & development for the
periods indicated:
For the nine months ended
November 30, November 30,
2022 2021
Research & Development $ 589,909 $ 438,033
We incurred fees of
2021
usage fees charged by telecommunications companies.
Our Insurtech division 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 the insurance industry,
particularly in the area of underwriting risk rating, complementary claims
adjudication and assessment, and risk segmentation & market penetration.
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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.
Over the past year, we have deepened the Company's determined commitment toward
working with partners in elucidating consumer insights via big data algorithms
and applying behavioral analytics to the fintech sector in sparking new
innovations and commercial applications. The following capture the most recent
accomplishments and milestones:
? Strengthening partnership network - Signed a new agreement to advance to the
next phase of collaboration with Pacific Life Re in
? Upgrade of the analytic engine - We have enriched the algorithms with more
elaborative auxiliary data, which, in conjunction with the existing information
system and records, will lend transformational support and capabilities to the
analytics, empowering more precise and robust results that are suited for
commercial applications. The collaborative research studies with leading
industry partners have enhanced and validated our analytic framework and
insurance risk rating services platform, which is now ready for deployment to
the wide insurance and financial services industry.
? API rollout for market adoption - Our risk rating services platform is built on
an application programming interface (API) structure that is integrated with
our partners' core system, linked to an underlying data repertoire and analytic
framework that facilitates real-time rating feedback to insurance companies.
Regular API upgrades and enhancements enable greater flexibility in tightening
service integration and broadening commercial opportunities with our partners.
? Official patent recognition - Over the past two years, Sapientus has been
granted eight patents by the
for the abovementioned model algorithms and technological infrastructure as
well as insurance-oriented applications, for example, Risk Rating API Design,
Insurance Risk Assessment platform and Insurance Fraud Detection System (one
other applications is still pending approval). NCAC is the governing body for
patent and copyright verification and approval in
successful applications for these patents validate Sapientus' continuing
innovation in data science and its application in the field of insurance,
finance, and beyond, demonstrating the Company's active participation and
contributions to the industry.
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, November 30,
2022 2021
Share compensation expenses $ 1,367,909 $ 579,437
We incurred fees of
consideration of the services which have been provided to the Company for the
nine months ended
ended
consulting services and advisor associated with the Company's recent funding
activities. The rationale for rewarding these consultants and advisors with
shares is to minimize the usage of cash by the Company to allow the Company to
use the cash to invest in revenue-generating activities.
Operating Expenses
We recorded
30, 2022
ended
ended
Net Loss attributable to the Company's shareholders
The net loss attributable to the Company's shareholders was
nine months ended
shareholders of
profit, increase in expenses pertaining to the funding exercise and the
provision for the mandatory default amount on the Note issued on
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Table of Contents
Liquidity and Capital Resources
The following table sets out our cash and working capital as of
2022
As at As at
November 30, February 28,
2022 2022
Cash reserves $ 11,870,526 $ 461,933
Working capital $ 16,713,400 $ 4,930,441
At
compared to cash and cash equivalents of
increase in the cash reserves is mainly due to the recent funds that we have
raised. 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. With the recent funds that we have managed to raise, we
have deployed some of these funds into operations to increase our prepayments
and deposits with the telecommunication companies and in return able to generate
a higher revenue. Accordingly, the amount of cash we have on hand fluctuates
significantly from period to period as explained above to ensure our cash is
being used efficiently by our operations to generate revenues. 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 intend to continue 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.
Statement of Cash flows
The following table provides a summary of cash flows for the periods presented:
For the nine months ended
November 30, November 30,
2022 2021
Net cash used in operating activities $ (5,600,444 ) $ (5,122,691 )
Net cash used in investing activities $ (67,761 ) $ (13,776 )
Net cash provided by financing activities $ 17,550,000 $ 5,364,193
Effect of exchange rates on cash & cash equivalents $ (473,202 ) $ 38,005
Net increase (decrease) in cash and cash equivalents $ 11,408,593 $ 265,731
Cash Flow used in Operating Activities
Net cash used in operating activities increased by
ended
primarily due to an increase in prepayment and deposit of (
30, 2021
(
(
(
2021
(
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Cash Flow used in Investing Activities
During the nine months ended
by
Cash Flow provided by Financing Activities
During the nine months ended
by
primarily due to the issuance of convertible notes and the proceeds from
issuance of shares of our common stock.
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.
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 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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