Item 1. Business
ITEM
1. BUSINESS
Company
Overview
FingerMotion
( FingerMotion or the Company ) The Company is a mobile data specialist company incorporated
in Delaware, USA, with its head office located at 1460 Broadway, New York, New York, 10036. The Company operates the following
lines of business: (i) telecommunications products and services; (ii) Short Message Services ( SMS ) and Multimedia
Messaging Services ( MMS ); (iii) a rich communication services ( RCS ) platform; (iv) big
data insights; and (v) a video games division (inactive).
Telecommunications
Products and Services
The
Company has offered telecommunication products and services in China since September 2018, with its current product mix consisting
of payment and recharge services, data plans, subscription plans, mobile phones, and loyalty points redemption. 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-marketers websites, click into their respective phone providers
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 Unicom and China Mobile.
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 2019 FingerMotion 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 as PinDuoDuo ( PDD )
and TMall ( TMALL ). The Company is planning to further expand its universal exchange platform by setting up
B2C stores on several other major e-commerce platforms in China. In addition to that, we have been assigned as one of Chinas
Mobiles loyalty redemption partner where we will be providing the services for their customers via our platform.
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SMS
and MMS Services
In
beginning of 2019, 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. FingerMotions subsidiary, Beijing XunLian TianXia Technology
Co., Ltd. ( Beijing Technology ), retains a license from the Ministry 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 Technologys 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 Companys customer to meet MIITs guidelines on messages composed, until the SMS messages have been delivered
successfully.
Rich
Communication Services
In
March 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 Companys current and prospective business
partners.
Big
Data Insights
In
July 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. Utilizing
the information gathered via the Companys licensed access to telecommunication data, Sapientus transforms raw telco data
into basic building blocks, statistical measures, and behavioral inferences, while layering in auxiliary contextual information,
to extract behavioral insights and power revolutionary applications for insurance and financial services.
The
Companys 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 various big data enabled applications including
preferred risk selection, precision marketing, product customization, and claims management (e.g. fraud detection). The Companys
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.
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
June 2018, we temporarily paused its publishing and operating plans for existing games, and the Companys board of directors
decided to re-focus the companys resources into new business opportunities in China, particularly the mobile phone payment
and data business.
Corporate
Information
The
Company was initially incorporated as Property Management Corporation of America on January 23, 2014 in the State of Delaware.
On
June 21, 2017, the Company amended its certificate of incorporation to effect a 1-for-4 reverse stock split of the Companys
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 on June 21, 2017.
Our
principal executive offices are located at 1460 Broadway, New York, New York 10036, and our telephone number at that address is
(347) 349-5339.
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Share
Exchange Agreement
Effective
July 13, 2017, the Company entered into that certain Share Exchange Agreement (the Share Exchange Agreement )
by and among the Company, Finger Motion Company Limited, a Hong Kong corporation ( FMCL ) and certain shareholders
of FMCL (the FMCL Shareholders ). FMCL, a Hong Kong corporation, was formed on April 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 approximately 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 June 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.
VIE
Agreements
On
October 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 which Shanghai 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 Technologys 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.
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Acquisition
of Beijing Technology
On
March 7, 2019, the Company through JiuGe Technology acquired Beijing 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. 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 Companys SMS integrated platform is processing more than 150
million SMS text messages per month. Beijing Technology retains a license from the Ministry 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 utilize Beijing Technologys 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 Companys clients to fulfill the government guidelines, until the SMS messages have been delivered
successfully.
China
Unicom Cooperation Agreement
On
July 7, 2019, JiuGe Technology entered into that certain Yunnan Unicom Electronic Sales Platform Construction and Operation Cooperation
Agreement (the Cooperation Agreement ) with China United Network Communications Limited Yunnan Branch ( China
Unicom Yunnan ). Under the Cooperation Agreement, JiuGe Technology is responsible for constructing and operating China
Unicom Yunnans 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 platforms webpage in accordance with China Unicom Yunnans 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 partys 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 is attached hereto as Exhibit 10.7 and is incorporated herein by this reference.
China
Mobile Cooperation Agreement
In
December 2020, JiuGe Technology entered into a strategic cooperation agreement (the China Mobile Cooperation Agreement )
with China Mobiles subsidiary, China Mobile Financial Technology Co., Ltd. ( China Mobile Financial )
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.
From
the beginning of 2020, JiuGe Technology began actively seeking cooperation with China Mobile Financial, given China Mobiles
years of experience in the financial services industry. Currently, of China Mobiles 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 estimated 20 billion yuan (approximately US$2.86 billion) (Source: China Securities Journal, China
Mobile will open points ecological stock, customer points worth over 20 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.
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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 Incorporation /
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 Co., Ltd. (5)
PRC
Contractually controlled (5)
Beijing XunLian TianXia Technology Co., Ltd. (6)
PRC
Contractually 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., Ltd. (9)
PRC
Contractually controlled
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) 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 Shanghai JiuGe Business
Management Co., Ltd.
(6) Beijing
XunLian TianXia Technology Co., Ltd. is a 99% owned subsidiary of Shanghai JiuGe Information Technology Co., Ltd.
(7) Finger
Motion Financial Group Limited is a wholly-owned subsidiary of 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 Shanghai JiuGe Information Technology
Co., Ltd.
Products
and Services
Telecommunications
Products and Services
Historically,
telecommunication operators focused their efforts on expanding their retail presence; however, consumer behaviors and demands
have shifted from offline to online. In 2018, the Company developed a proprietary universal exchange platform called PigeonHoles
Integration System, which provides seamless integration between telecommunication operators and online stores servicing
Chinese consumers all around China.
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The
Companys products and services offerings include the following:
Product / Service
Details
Recharge Services
The Company offers recharge services to consumers throughout China.
Data Plan
The Company offers mobile data plans to consumers, including 5G plans.
Mobile Phone
The Company offers mobile phones to consumers online. Upon order completion, the Companys up-stream partners or phone distributors (VSens and ZhengZhouXinSiWei) will arrange direct delivery to the customer.
Loyalty Points Redemption
As one of China Mobiles loyalty point redemption partners, the Company provides loyalty point redemption services for their customers via the Companys platforms.
Subscription Plan
The Company acquires new customers by offering telecommunication subscription plans. The Company shares revenue with telecommunication operators on a new subscribers spending over the following 12 months.
Up-Stream
Partners
The
Company partners with all three major telecommunication operators in China, namely China Mobile, China Unicom and China Telecom,
to offer its products and services:
Telecommunication Operator
Products and Services
China Mobile
Recharge Service
Data Plan
Loyalty Points Redemption
Subscription Plans
China Unicom (1)
Recharge Service
Data Plan
Subscription Plan
China Telecom
Recharge Service
Data Plan
Notes:
(1) The
Company anticipates extending its services with China Unicom to include loyalty points redemption in the very near future.
In
2020, the Company entered into arrangements with two third party smartphone distributors (VSens and ZhengZhouXinSiWei) to extend
their product offerings across online stores on various platforms. The Company plans to commercialize the offering in the first
quarter of 2021.
Down-Stream
Partners
The
Company currently operates online stores and pages on various e-commerce and social media platforms, gaining access to millions
of users without having to incur the associated marketing expenditures or user acquisition investments.
Name of Online Stores
Partners / Platform
Details
JiuGe TongXin Store
TMall.com
Telco Products & Services
JiuGe Digital Store
TMall.com
Mobile Phones
HeNan China Mobile Store
TMall.com
China Mobile Flagship Store
YunNan China Unicom Store
TMall.com
China Unicom Flagship Store
ChiFeng China Mobile Store
TMall.com
China Mobile Flagship Store
YunNan China Unicom Store
PingDuoDuo.com
China Unicom Flagship Store
JiuGe Mobile Data Store
PingDuoDuo.com
Telco Products & Services
YunNan China Unicom Store
JD.com
China Unicom Flagship Store
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SMS
and MMS Service
Short
Message Service (SMS) remains the only secure and reliable communication medium that connects all telecommunication operators
globally. In 2019, the telecommunications industry in China sent a total of around 1,506 billion SMS, 1 equivalent to
a market size of RMB 39.2 billion (~$5.85 billion), a year-on-year increase of 37.5% compared to 2018. 2 The Company
was responsible for 1.2 billion, or 0.08% of market share.
There
are strict policies imposed by the Chinese government regulating message broadcasting via the SMS protocol. One key metric being
monitored is the rate of public complaints on messages received via SMS, with the aim of fighting spam messages and blocking uncensored
messages.
In
early 2019, the Company completed beta testing of its proprietary SMS Integrated System and the commercialization phase began
in April 2019. The SMS Integrated System provides a robust back-end control panel for corporate partners to access and manage
their own messaging settings. Corporate partners can upload a list of targeted members, compose text or multimedia messages and
define broadcasting settings. All messages must be submitted to the ministry for review before being delivered to telecommunication
operators back-end for broadcasting.
The
mass SMS text message service offers bulk SMS services to end consumers with competitive pricing. Beijing Technology retains a
license from the Ministry of Industry and Information Technology to operate 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 that will utilize Beijing Technologys 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 Companys customer to meet governments
guidelines on messages composed, until the SMS messages have been delivered successfully
The
Companys SMS Integrated System performs more than 150 million SMS transactions monthly. The Company focuses its efforts
on:
■ Continuously
enhancing the SMS Integrated System to offer a more flexible, reliable, and scalable platform.
1 Source:
http://data.chinabaogao.com/dianxin/2020/0364R5222020.html
2 Source:
https://jxca.miit.gov.cn/cms_files/filemanager/oldfile/jxca/upload/202003/202003111516300286.pdf
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■ Working
closely with telecommunication operators in a select few provinces allows the Companys business development team to negotiate
and secure better bulk purchase pricing from time to time.
■ The
Companys corporate partners span various industries such as airlines, insurance and financial services, e-commerce and
consumer markets; diversifying sources of revenue improves the stability of the Companys revenue stream and minimizes seasonal
fluctuations with SMS volume.
Rich
Communication Services (RCS) Platform
Telecommunication
operators around the world have reached consensus on the need to upgrade the operator messaging service from SMS to Rich Communication
Services (RCS) messaging in the 5G era. Worldwide, the GSM Association (GSMA) indicates 90 operators have launched RCS, attracting
473 million users and projecting an estimated value of $74 billion by 2021. 3
On
April 8, 2020, Chinas three major telecommunication operators, namely China Mobile, China Telecom and China Unicom, released
a 5G messaging white paper outlining their commitment to mandate all compatible handsets sold in the country support RCS. 4
5G
messaging service or RCS can support not only Person-to-Person (P2P) messaging, but also Application-to-Person (A2P) messaging.
Through P2P messaging, RCS offers a richer text-messaging system, provides phonebook polling and is capable of transmitting in-call
multimedia features. A2P messaging enables businesses and brands to communicate with users via chatbot, facilitates the sharing
of high-quality videos but also more direct interfacing with the internet; consumers will no longer have to download multiple
mobile apps and can, for instance, directly buy train tickets and book flights by just sending messages.
In
March 2020, the Companys management allocated resources dedicated for the research and development of a RCS platform –
MaaP (Messaging as a Platform). This RCS platform is expected to be a proprietary business messaging platform that enables businesses
and brands to communicate and service their customers on 5G infrastructure, delivering better user experience, more efficiently
and cost effectively. This is expected to open up a new marketing channel for the Companys current and prospective business
partners.
In
the third quarter of the fiscal year ended 2022, the Company anticipates commercializing the following RCS platforms:
RCS
Platform for Telecommunication Products and Services
The
Company intends to launch its own brand on the platform for the telecommunication products and services it currently carries.
The platform is expected to provide the Company with direct access to 5G mobile users. Furthermore, the Company can continue building
and enhancing its brand on the platform serving as the most comprehensive one-stop shop for telecommunication products and services.
RCS
Platform for Partners and Brands
The
Company is targeting to engage larger partners and brands on this new RCS platform. It is currently working and negotiating with
one of the largest phone distributors in China to be among the first partners launching services on the platform.
Big
Data Insights
The
Company launched its proprietary platform Sapientus in July 2020 as its big data insights arm to deliver data-driven
solutions and insights for businesses within the insurance and financial services industries. Leveraging the Companys strong
tech and data backbone, Sapientus specializes in data mining and insights extraction. The Companys flexible data structure
is built from the ground up, by transforming raw telco data into basic building blocks, statistical measures and behavioral inferences,
while layering in auxiliary contextual information, to extract behavioral insights and power revolutionary applications for insurance
and financial services.
Sapientus
equips insurance industry partners with a range of capabilities such as:
■ Behavior
insights and scoring derived from a time series of live telco data, along with an expansive set of auxiliary data, enabling deeper
contextual understanding of a customers behavior propensity and risk inclination for more granular segmentation;
3 Source:
https://www.gsma.com/futurenetworks/rcs/
4 Source:
https://www.gsma.com/futurenetworks/wp-content/uploads/2020/04/5G-Messaging-White-Paper-EN.pdf
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■ Transactional
integration giving real-time feedback enriched with risk and behavior insights on current and prospective customers, thereby further
promoting digital transformations in the industry – e.g. online underwriting, claims processing and fraud detection, etc.;
and
■ Insight-driven
data analytic services, sufficiently adaptive to incorporate new information such as emerging claim and marketing data, and synchronize
with the Companys partners operating and risk assessment philosophy via continual learning and honing.
Sapientus
deep bench of insurance and data science expertise is expected to attract an expanding client base, supporting risk calibrations
and insights extraction using advanced statistical methods and analytic techniques. The Companys proprietary risk assessment
engine offers standard and customized scoring and appraisal services based on multi-dimensional factors, enabled by extensive
data coverage through exclusive telco partnerships. The Company augments and shares value with its partners through various big
data enabled applications including preferred risk selection, precision marketing, product customization, and claims management
(e.g. fraud detection).
The
Companys mission is to deliver the next generation of data-driven insurance solutions that result in more accurate risk
assessments, more efficient processes and a more delightful customer journey.
The
Company anticipates development of Sapientus in three key stages:
Stage
1: Initialization
During
the initialization stage, the Companys focus on building its brand and honing its rating framework and analytics. To accomplish
this, the Company will be partnering with reinsurers to increase its visibility as well as assimilate its data analytics into
the reinsurers value chain. Potential engagements include underwriting enhancement, market segmentation, product design
as well as facilitation of claims review and adjudication. Revenue during this time will be sourced mainly from offering proprietary
rating system and related services that are customized to fit the Companys reinsurer partners specific needs. Furthermore,
establishing collaborative facilities with reinsurers allows the Company to integrate posterior information (claims, underwriting
experience, and campaign feedback) for improving its scoring / measurement system.
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Stage
2: Expansion
The
expansion stage shifts the Companys revenue focus from offering rating system alone to earning commissions and profit shares
through channel expansion and innovative product designs enabled by more granular customer segmentation. Channel expansion could
be achieved by cross-selling through the Companys affiliated company and brokerage arm, supported by leads generation for
niche marketing and further upselling. In addition, developing customized product solutions with reinsurers will augment value
proposition, offering more personalized and efficient coverage based on the latent risks of individuals. Precision marketing enhances
product take-up rates, while preferred risk selection is expected to attract profitable business and improve portfolio results.
As such, added value can be generated and shared among Sapientus and its (re)insurer and distribution partners.
Stage
3: Integration
As
Sapientus matures, the Company enters the integration stage. Behavioral dynamics can prove to be very versatile in supporting
many possibilities beyond insurance. Having accumulated more diverse data and insights enriches the Companys rating perspective,
enabling it to offer a universal rating platform that can be commonly adopted across the industry. The Companys platform
can be readily integrated with other systems, helping the Company extend reach beyond insurance applications. For example, the
Companys generalized rating system can help conduct smart underwriting for financial loans or craft out consumer behaviors
and risk propensities to inform ecommerce business decisions. The Companys platform can be used standalone as an independent
rating tool, as well as offered as part of an integrated system, joining forces with various ecosystem partners on data access,
customer relationships, advanced analytics, product and service capabilities. Types of value that can be realized through ecosystems
include:
■ Friction
reduction : Creating a one-stop shop or interface for consumers by removing the hassle of switching among multiple providers;
■ Network
effects : Generating synergy value for stakeholders by pooling and sharing information and resources to serve common needs;
and
■ Data
integration : Mining and analyzing available data, applying learnings to deliver convenience and tangible benefits to customers.
Growth
Strategy
The
Companys growth strategy is a multi-pronged approach, continually asking Whats next? and consisting
of the following:
■ Enhancing
PigeonHoles Integration System and the SMS Integrated System . Maintaining a stable and robust platform will give the Company
the flexibility to manage new product offering and packages in order to increase revenue. This will be the key critical success
factor for the Companys expansion plans.
■ Expanding
customer base. Along with the stability of the Companys platform and its ability to access working capital, the Companys
growth will be based on increasing its market share through expanding its base in its current geographic regions of operations
and through expanding its presence into other regions. The Companys offerings can be targeted to a wider group of customers,
which should improve overall revenue.
■ New
Product line expansion. The Company will constantly increase its product offerings from its telco partners by designing new
packages and offerings in order to differentiate the Company from its competition.
■ Enhancing
values. The Company will continue to build brand loyalty and enhance its customer service to ensure customer retention and
repeat sales. In December 2020, the Company signed a Strategic Cooperation Agreement for Loyalty Program Business with China Mobile
Financial Technology Co., Ltd. The agreement is to explore and create a new forward-learning business model that combines the
traditional loyalty point redemption business with an e-commerce platform designed to create a higher evolution of brand loyalty.
■ Diversification.
Breaking away from the Companys core and traditional business, the Company is moving into the insurance technology
(insuretech) space with Sapientus and the Companys big data analytics arm. The Company will continue to explore
opportunities in the financial technology services (fintech), healthcare and advertising industries.
■ Focusing
on strength and investing in talent. The Company will continue to build the strongest team in all of its various businesses.
The company will also continue to build its core values to enhance and differentiate its support and services to ensure it is
able to stand out from its competitors.
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Sales
and Marketing
■ The
Companys sales and marketing efforts are focused on promoting brand awareness of its JiuGe telecommunication stores currently
operating on most major e-commerce and social media platforms in China.
■ The
Company is continuously planning, in cooperation with its telco partners, seasonal and targeted marketing events in different
provinces and cities.
■ Since
the inception of JiuGe Technology in 2018, the Company has secured contracts and agreements to work with nine 9 online stores
and twenty 20 business partners. The Companys strategy is to expand into the entire China region and to reach out to a
wider base of customers and users that can benefit from the Companys product offerings.
■ The
Companys new agreement with China Mobile on the loyalty redemption business is a step towards the Companys customer
retention strategy that will also enable it to cross-sell additional products and offerings from the Company.
■ The
Company will continue to focus on, and expand, its roster of corporate clients to improve sales in its SMS business, and will
focus on expanding into different industries.
Research
& Development
■ RCS
Platform - As a leader in the 5G ecosystem in China, the Company is developing the RCS platform to strengthen its first-mover
advantage in MaaP (Messaging as a Platform). This messaging platform enables businesses and brands to communicate and service
their customers on 5G infrastructure, delivering a more efficient, more cost efficient, and more robust user experience. This
should open up a new marketing channel for the Companys current and prospective business partners.
■ Big
Data Insights - Beginning in January 2019, the Company has continuously researched industry reports and compiled data
published by researchers and have incorporated its findings into its Sapientus data blocks. By integrating with external data
sources, the Companys R&D departments can develop innovative insuretech and fintech products to the Companys
re-insurance and financial services companies and partners.
Competition
Our
industry is highly competitive, rapidly changing, highly innovative and increasingly subject to regulatory scrutiny and oversight.
We compete against a wide range of businesses, including those that are larger than we are, have a dominant and secure position
or offer other products and services to consumers and merchants that we do not offer. We believe we are in an advantageous position
compared to many of our competitors or potential competitors because we have been granted an exclusive license to act as an authorized
processor of payments in China for China Unicom and China Mobile.
Our
mobile payments business competes principally against two alternatives. First, we compete directly with other holders of licenses
from the major mobile telecommunications providers in China. We understand there are a limited number of these licenses, but believe
that certain other license holders are large, diversified companies with deep financial resources. We also compete with payment
processors that are not authorized licensees of the mobile telecommunications companies but nevertheless provide similar services.
Separately, and more generally, we compete with all forms and methods of paying for additional data and minutes, including credit
and debit cards, other electronic payment platforms and bank transfers.
Because
we have been awarded a contract to process payments for China Unicom and China Mobile and, are therefore, able to offer services
directly to market with value added services, we believe the Company is in an advantageous position as compared to its competition.
We look to take advantage of the position that we have been afforded.
Intellectual
Property
The
Company has sufficient intellectual property rights to operate its mobile payment and recharge platform system. Specifically,
the Company has registered patents for its mobile payment and recharge platform system. The Company will continue to enhance the
system to meet market and consumer demands and requirements. The Company has also implemented strict controls to ensure the safe
and secure keeping of any source codes. 5
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Table of Contents
The
Company has registered the following patents:
Patent
Registration
Number
Region
Title
Inventors
Applicant
Status
as of
the date of
this Annual
Report
2019SR0439119
Shanghai,
China
PigeonHoles
Integration System (1)
Shanghai
JiuGe Business Management Co. Ltd
Shanghai
JiuGe Business Management Co. Ltd
Obtained
2020SR0741902
Shanghai,
China
SMS
Integrated System (2)
Shanghai
JiuGe Information Technology Co. Ltd
Shanghai
JiuGe Information Technology Co. Ltd
Obtained
2020SR0792227
China
JiuGe
Customer Profiling Software V1.0.0 (3)
Shanghai
JiuGe Information Technology Co. Ltd
Shanghai
JiuGe Information Technology Co. Ltd
Obtained
2020SR0772385
China
JiuGe
TELCO Big Data Software V1.0.0 (4)
Shanghai
JiuGe Information Technology Co. Ltd
Shanghai
JiuGe Information Technology Co. Ltd
Obtained
2020SR0809253
China
JiuGe
Risk Assessment System Software V1.0.0 (5)
Shanghai
JiuGe Information Technology Co. Ltd
Shanghai
JiuGe Information Technology Co. Ltd
Obtained
2020SR0860695
China
JiuGe
Internet Big Data Software V1.0.0 (6)
Shanghai
JiuGe Information Technology Co. Ltd
Shanghai
JiuGe Information Technology Co. Ltd
Obtained
2020SR0867792
China
JiuGe
Mobile Digital Precision Marketing Software V1.0.0 (7)
Shanghai
JiuGe Information Technology Co. Ltd
Shanghai
JiuGe Information Technology Co. Ltd
Obtained
Notes:
(1) PigeonHoles
Integration System is the Companys proprietary universal exchange platform which provides seamless integration between
telecommunication operators and online stores servicing PRCs customers.
(2) The
Companys SMS Integrated System provides a robust back-end control panel for corporate partners to access and manage their
own messaging settings. Corporate partners can upload a list of targeted members, compose text or multimedia messages and define
broadcasting settings.
(3) Patent
based on JiuGes big data analysis and commercialization of consumers profile
(4) Patent
based on JiuGes big data analysis for telecommunication products and services
(5) Patent
based on JiuGes big data analysis on risk assessment system
(6) Patent
based on JiuGes big data analysis for online product.
(7) Patent
based on JiuGes big data analysis for online digital contents on mobile
Regulation
We
operate in a rapidly evolving regulatory environment characterized by a heightened regulatory focus on all aspects of the payments
industry. That focus continues to become even more heightened as regulators on a global basis focus on such important issues as
countering terrorist financing, anti-money laundering, privacy, cybersecurity and consumer protection. Some of the laws and regulations
to which we are subject were enacted recently, and the laws and regulations applicable to us, including those enacted prior to
the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation.
New or changing laws and regulations, including how such laws and regulations are interpreted and implemented, as well as increased
penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of
operations, and financial condition. Therefore, as we grow, we will need to develop the capacity to monitor these areas closely
to design compliant solutions for our customers who depend on us.
- 12 -
Table of Contents
Government
regulation impacts key aspects of our business. We are subject to regulations that affect the payments industry in the markets
in which we operate.
Payments
Regulation . Various laws and regulations govern the payments industry in China, where our mobile payment and recharge platform
principally operates. Our activities in this regard are, or may be, supervised by one or more financial regulatory authorities,
including the Peoples Bank of China. Other national or provincial regulatory agencies may have or assert jurisdiction over
our activities, including agencies and authorities outside of China, if our platform is utilized by consumers in such jurisdictions.
The laws and regulations applicable to the payments industry in any given jurisdiction are subject to interpretation and change.
Anti-Money
Laundering and Counter-Terrorist Financing . FingerMotion is subject to anti-money laundering ( AML ) laws
and regulations in China, the U.S. and other jurisdictions, as well as laws designed to prevent the use of the financial systems
to facilitate terrorist activities. As we grow our business, we will need to develop an AML program designed to prevent our payment
network from being used to facilitate money laundering, terrorist financing, and other illicit activities, or to do business in
countries or with persons and entities included on designated country or person lists promulgated by the U.S. Department of the
Treasurys Office of Foreign Assets Controls ( OFAC ) and equivalent authorities in China and other countries
whose jurisdiction we may become subject as a result of our operations. Any AML and sanctions compliance program we put in place
will need to involve policies, procedures and internal controls designed to address these legal and regulatory requirements and
assist in managing money laundering and terrorist financing risks.
Data
Protection and Information Security. Aspects of our operations or business may be subject to privacy and data protection regulation
in China, the U.S. and elsewhere. In the U.S., we are subject to privacy information safeguarding requirements under the Gramm-Leach-Bliley
Act that require the maintenance of a written, comprehensive information security program, among other laws, which we do not currently
have in place. Regulatory authorities around the world are considering numerous legislative and regulatory proposals concerning
privacy and data protection that may contain additional privacy and data protection obligations than exist today. In addition,
the interpretation and application of these privacy and data protection laws in China, the U.S. and elsewhere are often uncertain
and in a state of flux.
Anti-Corruption .
FingerMotion is subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery
Act, and similar anti-corruption laws in the jurisdictions in which we operate. Anti-corruption laws generally prohibit offering,
promising, giving, accepting or authorizing others to provide anything of value, either directly or indirectly, to or from a government
official or private party in order to influence official action or otherwise gain an unfair business advantage, such as to obtain
or retain business.
Additional
Regulatory Developments . Various regulatory agencies continue to examine a wide variety of issues, including virtual currencies,
identity theft, account management guidelines, privacy, disclosure rules, cybersecurity and marketing that may impact the Companys
business.
Compliance
with Environmental Laws
Compliance
with foreign, federal, state and local laws that have been enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, have not had a material effect on our capital expenditures, earnings
or competitive position.
Employees
As
of February 28, 2021, we had 69 total employees, of whom all were full time. We have approximately 60 employees in China, 3 employees
in Malaysia, 2 employees in Hong Kong, 1 employee in Taiwan, 2 employees in USA and 1 employee in Canada. We believe that we enjoy
good relations with our employees.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.