FingerMotion(FNGR) - 2023 Q1 - Quarterly Report

Financial Performance - Revenue for the three months ended May 31, 2022, was $4,855,123, a decrease of 19% compared to $5,996,489 for the same period in 2021[16] - Gross profit for the same period was $377,071, down from $619,697, resulting in a gross margin of approximately 7.8%[16] - Net loss attributable to the Company's shareholders for the three months ended May 31, 2022, was $1,444,123, compared to a net loss of $911,890 for the same period in 2021, representing an increase in loss of 58%[16] - The company reported a comprehensive loss of $1,749,404 for the three months ended May 31, 2022, compared to a comprehensive loss of $851,870 for the same period in 2021[16] - The accumulated deficit increased to $18,596,295 as of May 31, 2022, up from $17,152,172 as of February 28, 2022[60] - For the three months ended May 31, 2022, the Company reported a net loss of $1,444,668 compared to a net loss of $909,506 for the same period in 2021, representing an increase in loss of approximately 58.5%[98] Assets and Liabilities - Total assets decreased to $9,205,466 as of May 31, 2022, from $10,366,905 as of February 28, 2022, reflecting a decline of approximately 11%[13] - Current liabilities increased to $5,313,091 as of May 31, 2022, compared to $5,278,655 as of February 28, 2022, indicating a slight increase of 1%[13] - Cash and cash equivalents rose to $805,548 as of May 31, 2022, from $461,933 as of February 28, 2022, marking an increase of approximately 74%[13] - The total liabilities of the VIE were $9,513,003 as of May 31, 2022, up from $8,556,844 as of February 28, 2022, reflecting an increase of about 11.2%[34] Revenue Breakdown - Revenue from Telecommunication Products & Services was $1,516,125, down from $1,737,080, while SMS & MMS Business revenue decreased from $4,160,694 to $3,338,998[63] - The VIE's revenue for the three months ended May 31, 2022, was $1,438,367, compared to $373,151 for the same period in 2021, indicating a significant increase of approximately 285.5%[37] - The VIE subsidiary reported revenue of $3,416,755 for the three months ended May 31, 2022, down from $5,524,623 in the same period of 2021, a decrease of approximately 38.2%[38] - The Big Data segment recorded no revenue for the quarter, a decline of 100% from $98,715 in the previous year[155] Operating Expenses - The total cost of revenue for the quarter ended May 31, 2022, was $4,478,052, a decrease of $898,740 or 17% compared to $5,376,792 for the same period in 2021[156] - Operating expenses for the quarter ended May 31, 2022, were $1,812,491, an increase of $336,912 or 23% compared to $1,475,579 for the same period in 2021[167] - General and administrative expenses increased to $1,239,550 for the quarter ended May 31, 2022, an increase of $59,803 or 5% compared to $1,179,747 for the same period in 2021[158] - Research and development expenses rose to $211,647 for the quarter ended May 31, 2022, an increase of $76,218 or 56% compared to $135,429 for the same period in 2021[162] Shareholder Information - The weighted average common shares outstanding for basic and diluted calculations were 42,693,999 for the three months ended May 31, 2022[16] - The Company had a balance of 1,846,168 share purchase warrants outstanding as of May 31, 2022, with a weighted average exercise price of $2.84[92] - The Company received cash proceeds of $539,998 from the exercise of share purchase warrants during Fiscal 2022, compared to $50,000 in Fiscal 2021[91] - The Company issued 12,000,000 shares of common stock to FMCL shareholders as part of the Share Exchange Agreement[23] Business Operations - The Company has activated its insurtech business through Finger Motion Financial Company Limited, which secured its first contract and recorded revenue in the last quarter of the fiscal year[27] - The Company operates its mobile payment platform through JiuGe Technology, which secured contracts with China Unicom and China Mobile to distribute mobile data in 9 provinces[123] - The Company has shifted focus from its video game division to telecommunications, pausing game operations since June 2018[119] - The Company has entered into VIE Agreements to control JiuGe Technology, which is essential for its operations in China due to foreign investment restrictions[121] Risks and Challenges - The company is dependent on obtaining additional financing to fund operations and achieve profitability, with no assurance of success[61] - The company relies heavily on revenue from two telecommunications companies, China Unicom and China Mobile, which poses a risk to its financial condition if business with either is lost[196] - The company is currently facing risks related to the COVID-19 pandemic, which could impact operations and consumer demand[193] - The Company is subject to risks related to the VIE structure, which could significantly impact operations and share value if disallowed by the Chinese government[133] Future Outlook - The company expects revenue growth from its mobile recharge business as operations return to pre-lockdown levels in China[155] - The company plans to launch Mobile Protection programs in collaboration with China Unicom and China Mobile, expected in the second quarter of FY2023[145] - A contract was secured with Pacific Life Re to develop a multi-faceted risk rating concept, which is anticipated to generate additional revenue for the Big Data division in the future[155]