Business Context and Reporting Period
Fingermotion, Inc. filed this Form 8-K on October 21, 2020, to report financial results for the second fiscal quarter ended August 31, 2020. The company operates in the SMS, Sim Card, and Mobile Recharge sectors.
Key Financial Metrics
- Revenue: Q2 revenue was $3.6 million; six-month revenue totaled $6.4 million.
- Profitability: Q2 gross profit was $258,391; six-month gross profit was $552,830. The company reported a basic and diluted loss per share of $0.03.
- Liquidity and Balance Sheet: Cash on hand was $419,707. The company reported a working capital deficit of $355,679. Total assets were $9.06 million against total liabilities of $10.62 million, with total current liabilities at $9.42 million.
- Capital Structure: 33,742,953 common shares were issued and outstanding as of August 31, 2020.
Material Changes
Revenue increased significantly compared to the prior year. Q2 2020 revenue grew by 77.5% compared to the same quarter in 2019. Revenue for the six-month period ended August 31, 2020, increased by 114% compared to the same period in 2019. Management attributes this growth to the SMS business becoming a top revenue generator.
Guidance, Outlook, and Risks
Management expects revenue growth to continue throughout the fiscal year, targeting annual revenue of over $16 million for fiscal 2021. The company is investing in e-commerce platforms and anticipates a return on these investments by January 2021. A material risk factor is the current working capital deficit of $355,679, indicating current liabilities exceed current assets.
Investor Verification Checklist
- Verify the unaudited condensed consolidated interim financial statements available on EDGAR.
- Confirm the sustainability of the 77.5% year-over-year revenue growth rate.
- Assess the company's ability to fund operations given the $355,679 working capital deficit and cash balance of $419,707.
- Monitor the timeline for returns on e-commerce platform investments, currently projected for January 2021.