What changed in this filing

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Item 1A. Risk Factors

2021-05-28 compared with 2020-07-13 · 684 added, 787 removed, 39 unchanged (97% of the section changed)

to the information contained in this Annual Report on Form 10-K, we have identified the following material risks and uncertainties

which reflect our outlook and conditions known to us as of the date of this Annual Report.

These material risks and uncertainties

should be carefully reviewed by our stockholders and any potential investors in evaluating the Company, our business and the market

value of our common stock.

Furthermore, any one of these material risks and uncertainties has the potential to cause actual results,

performance, achievements or events to be materially different from any future results, performance, achievements or events implied,

suggested or expressed by any forward-looking statements made by us or by persons acting on our behalf.

Refer to “Cautionary

Note Regarding Forward-looking Statements”.

assurance that we will be successful in preventing the material adverse effects that any one or more of the following material

addition to the information contained in this Annual Report on Form 10-K, we have identified the following material risks and

uncertainties which reflect our outlook and conditions known to us as of the date of this Annual Report.

These material risks

and uncertainties should be carefully reviewed by our stockholders and any potential investors in evaluating the Company, our

business and the market value of our common stock.

Furthermore, any one of these material risks and uncertainties has the potential

to cause actual results, performance, achievements or events to be materially different from any future results, performance,

achievements or events implied, suggested or expressed by any forward-looking statements made by us or by persons acting on our

Refer to Cautionary Note Regarding Forward-looking Statements.

is no assurance that we will be successful in preventing the material adverse effects that any one or more of the following material

risks and uncertainties may cause on our business, prospects, financial condition and operating results, which may result in a

7 unchanged sentences

portion of your investment due to any one of these material risks and uncertainties.

Risks Related to the Business

We have a limited operating

history and, as a result, our past results may not be indicative of future operating performance.

We have a limited operating history,

which makes it difficult to forecast our future results.

You should not rely on our past results of operations as indicators of

future performance.

You should consider and evaluate our prospects in light of the risks and uncertainty frequently encountered

by companies like ours.

If we fail to address the risks and

difficulties that we face, including those described elsewhere in this “

Risk Factors ”

section, our business,

financial condition and results of operations could be adversely affected.

Further, because we have limited historical financial

data and operate in an evolving market, any predictions about our future revenue and expenses may not be as accurate as they would

be if we had a longer operating history or operated in a more predictable market.

We have encountered in the past, and will encounter

in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly

changing industries.

If our assumptions regarding these risks and uncertainties are incorrect or change, or if we do not address

these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition

and results of operations could be adversely affected.

We have a history of net losses

and we may not be able to achieve or maintain profitability in the future.

For all annual periods of our operating

history we have experienced net losses.

We generated net losses of approximately $3.0 million, $2.9 million and $1.8 million for

the years ended February 28, 2020, 2019 and 2018, respectively.

As of February 28, 2020, we had an accumulated deficit of $7.8

We have not achieved profitability, and we may not realize sufficient revenue to achieve profitability in future periods.

Our expenses will likely increase in the future as we develop and launch new offerings and platform features, expand in existing

and new markets, increase our sales and marketing efforts and continue to invest in our platform.

These efforts may be more costly

than we expect and may not result in increased revenue or growth in our business.

If we are unable to generate adequate revenue

growth and manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain

profitability.

If we fail to effectively manage

our growth, our business, financial condition and results of operations could be adversely affected.

We are currently experiencing growth

in our business.

This expansion increases the complexity of our business and has placed, and will continue to place, strain on

our management, personnel, operations, systems, technical performance, financial resources and internal financial control and reporting

Our ability to manage our growth effectively and to integrate new employees, technologies and acquisitions into our

existing business will require us to continue to expand our operational and financial infrastructure and to continue to retain,

attract, train, motivate and manage employees.

Continued growth could strain our ability to develop and improve our operational,

financial and management controls, enhance our reporting systems and procedures, recruit, train and retain highly skilled personnel

and maintain user satisfaction.

Additionally, if we do not effectively manage the growth of our business and operations, the quality

of our offerings could suffer, which could negatively affect our reputation and brand, business, financial condition and results

of operations.

The impact of the novel

coronavirus (COVID-19) pandemic on the global economy, our operations and consumer demand for consumer goods and services remains

uncertain, which could have a material adverse impact on our business, results of operations and financial condition and on the

market price of our common shares.

In December 2019, a strain of novel

coronavirus (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China.

COVID-19 has since spread rapidly throughout

many countries, and, on March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic.

In an effort to contain

and mitigate the spread of COVID-19, many countries, including the United States, Canada and China, have imposed unprecedented

restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that

have had significant outbreaks of COVID-19.

Although our operating subsidiaries and contractually controlled entity report that

is operation have not been materially affected at this point, significant uncertainty remains as to the potential impact of the

COVID-19 pandemic on our operations and on the global economy as a whole.

It is currently not possible to predict how long the

pandemic will last or the time that it will take for economic activity to return to prior levels.

The COVID-19 pandemic has resulted

in significant financial market volatility and uncertainty in recent weeks.

A continuation or worsening of the levels of market

disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business,

results of operations and financial condition, on the market price of our common shares, and on consumer demand for consumer services,

including those offered by our Company.

We depend on our key personnel

and other highly skilled personnel, and if we fail to attract, retain, motivate or integrate our personnel, our business, financial

condition and results of operations could be adversely affected.

Our success depends in part on the

continued service of our founders, senior management team, key technical employees and other highly skilled personnel and on our

ability to identify, hire, develop, motivate, retain and integrate highly qualified personnel for all areas of our organization.

We may not be successful in attracting and retaining qualified personnel to fulfill our current or future needs.

Our competitors

may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us

to find suitable replacements on a timely basis, on competitive terms or at all.

If we are unable to attract and retain the necessary

personnel, particularly in critical areas of our business, we may not achieve our strategic goals.

Our concentration of earnings

from two telecommunications companies may have a material adverse affect on our financial condition and results of operations.

We currently derive substantially

all of our revenue from the rebates we earn from China Unicom and China Mobile as a result of our processing payments for these

telecommunications companies’

consumers for mobile date and talk time.

If we were to lose the business of one or both of

these mobile telecommunications companies, if either were to fail to fulfill its obligations to us, if either were to

experience difficulty in paying rebates to us on a timely basis, if either negotiated lower pricing terms, or if either

increased the number of licensed payment portals it permits to process its payments, it could have a material adverse effect

on our competitive position, business, financial condition, results of operations and cash flows.

Related to the Business

have a limited operating history and, as a result, our past results may not be indicative of future operating performance.

have a limited operating history, which makes it difficult to forecast our future results.

You should not rely on our past results

of operations as indicators of future performance.

You should consider and evaluate our prospects in light of the risks and uncertainty

frequently encountered by companies like ours.

we fail to address the risks and difficulties that we face, including those described elsewhere in this Risk Factors

section, our business, financial condition and results of operations could be adversely affected.

Further, because we have limited

historical financial data and operate in an evolving market, any predictions about our future revenue and expenses may not be

as accurate as they would be if we had a longer operating history or operated in a more predictable market.

We have encountered

in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited

operating histories in rapidly changing industries.

If our assumptions regarding these risks and uncertainties are incorrect or

change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations

and our business, financial condition and results of operations could be adversely affected.

have a history of net losses and we may not be able to achieve or maintain profitability in the future.

all annual periods of our operating history we have experienced net losses.

We generated net losses of approximately $4.3 million,

$3.0 million and $2.9 million for the years ended February 28, 2021, 2020 and 2019, respectively.

As of February 28, 2021, we

had an accumulated deficit of $12.2 million.

We have not achieved profitability, and we may not realize sufficient revenue to

achieve profitability in future periods.

Our expenses will likely increase in the future as we develop and launch new offerings

and platform features, expand in existing and new markets, increase our sales and marketing efforts and continue to invest in

our platform.

These efforts may be more costly than we expect and may not result in increased revenue or growth in our business.

If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses in the

future and may not be able to achieve or maintain profitability.

we fail to effectively manage our growth, our business, financial condition and results of operations could be adversely affected.

are currently experiencing growth in our business.

This expansion increases the complexity of our business and has placed, and

will continue to place, strain on our management, personnel, operations, systems, technical performance, financial resources and

internal financial control and reporting functions.

Our ability to manage our growth effectively and to integrate new employees,

technologies and acquisitions into our existing business will require us to continue to expand our operational and financial infrastructure

and to continue to retain, attract, train, motivate and manage employees.

Continued growth could strain our ability to develop

and improve our operational, financial and management controls, enhance our reporting systems and procedures, recruit, train and

retain highly skilled personnel and maintain user satisfaction.

Additionally, if we do not effectively manage the growth of our

business and operations, the quality of our offerings could suffer, which could negatively affect our reputation and brand, business,

financial condition and results of operations.

impact of the novel coronavirus (COVID-19) pandemic on the global economy, our operations and consumer demand for consumer goods

and services remains uncertain, which could have a material adverse impact on our business, results of operations and financial

condition and on the market price of our common shares.

December 2019, a strain of novel coronavirus (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China.

has since spread rapidly throughout many countries, and, on March 12, 2020, the World Health Organization declared COVID-19 to

be a pandemic.

In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada

and China, have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction

in economic activity in countries that have had significant outbreaks of COVID-19.

Although our operating subsidiaries and contractually

controlled entity report that is operation have not been materially affected at this point, significant uncertainty remains as

to the potential impact of the COVID-19 pandemic on our operations and on the global economy as a whole.

It is currently not possible

to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels.

COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent weeks.

A continuation or worsening

of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access

capital, on our business, results of operations and financial condition, on the market price of our common shares, and on consumer

demand for consumer services, including those offered by our Company.

depend on our key personnel and other highly skilled personnel, and if we fail to attract, retain, motivate or integrate our personnel,

our business, financial condition and results of operations could be adversely affected.

success depends in part on the continued service of our founders, senior management team, key technical employees and other highly

skilled personnel and on our ability to identify, hire, develop, motivate, retain and integrate highly qualified personnel for

all areas of our organization.

We may not be successful in attracting and retaining qualified personnel to fulfill our current

or future needs.

Our competitors may be successful in recruiting and hiring members of our management team or other key employees,

and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms or at all.

If we are unable

to attract and retain the necessary personnel, particularly in critical areas of our business, we may not achieve our strategic

concentration of earnings from two telecommunications companies may have a material adverse affect on our financial condition

and results of operations.

currently derive a substantial amount of our total revenue through contracts secured with China Unicom and China Mobile.

were to lose the business of one or both of these mobile telecommunications companies, if either were to fail to fulfill its obligations

to us, if either were to experience difficulty in paying rebates to us on a timely basis, if either negotiated lower pricing terms,

or if either increased the number of licensed payment portals it permits to process its payments, it could have a material adverse

effect on our competitive position, business, financial condition, results of operations and cash flows.

Additionally, we cannot

guarantee that the volume of revenue we earn from China Unicom and China Mobile will remain consistent going forward.

substantial change in our relationships with either China Uniocom or China Mobile, or both, whether due to actions by our

competitors, regulatory authorities, industry factors or otherwise, could have a material adverse effect on our business,

financial condition and results of operations.

Any actual or perceived security

or privacy breach could interrupt our operations, harm our brand and adversely affect our reputation, brand, business, financial

condition and results of operations.

Our business involves the processing

and transmission of our users’

personal and other sensitive data.

Because techniques used to obtain unauthorized access to

or to sabotage information systems change frequently and may not be known until launched against us, we may be unable to anticipate

or prevent these attacks.

Unauthorized parties may in the future gain access to our systems or facilities through various means,

including gaining unauthorized access into our systems or facilities or those of our service providers, partners or users on our

platform, or attempting to fraudulently induce our employees, service providers, partners, users or others into disclosing names,

passwords, payment information or other sensitive information, which may in turn be used to access our information technology systems,

or attempting to fraudulently induce our employees, partners or others into manipulating payment information, resulting in the

fraudulent transfer of funds to criminal actors.

In addition, users on our platform could have vulnerabilities on their own mobile

devices that are entirely unrelated to our systems and platform, but could mistakenly attribute their own vulnerabilities to us.

Further, breaches experienced by other companies may also be leveraged against us.

For example, credential stuffing attacks are

becoming increasingly common and sophisticated actors can mask their attacks, making them increasingly difficult to identify and

Certain efforts may be state-sponsored or supported by significant financial and technological resources, making them

even more difficult to detect.

Although we have developed systems

and processes that are designed to protect our users’

data, prevent data loss and prevent other security breaches, these

security measures cannot guarantee security.

Our information technology and infrastructure may be vulnerable to cyberattacks or

security breaches;

also, employee error, malfeasance or other errors in the storage, use or transmission of personal information

could result in an actual or perceived privacy or security breach or other security incident.

Any actual or perceived breach of

privacy or security could interrupt our operations, result in our platform being unavailable, result in loss or improper disclosure

of data, result in fraudulent transfer of funds, harm our reputation and brand, damage our relationships with third-party partners,

result in significant legal, regulatory and financial exposure and lead to loss of confidence in, or decreased use of, our platform,

any of which could adversely affect our business, financial condition and results of operations.

Any breach of privacy or security

impacting any entities with which we share or disclose data (including, for example, our third-party providers) could have similar

Additionally, defending against claims

or litigation based on any security breach or incident, regardless of their merit, could be costly and divert management’s

We cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually

incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will

not deny coverage as to any future claim.

The successful assertion of one or more large claims against us that exceed available

insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large

deductible or co-insurance requirements, could have an adverse effect on our reputation, brand, business, financial condition and

results of operations.

Systems failures and resulting

interruptions in the availability of our platform or offerings could adversely affect our business, financial condition and results

of operations.

Our systems, or those of third parties

upon which we rely, may experience service interruptions or degradation because of hardware and software defects or malfunctions,

distributed denial-of-service and other cyberattacks, human error, earthquakes, hurricanes, floods, fires, natural disasters, power

losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses,

ransomware, malware or other events.

Our systems also may be subject to break-ins, sabotage, theft and intentional acts of vandalism,

including by our own employees.

Some of our systems are not fully redundant and our disaster recovery planning may not be sufficient

for all eventualities.

Our business interruption insurance may not be sufficient to cover all of our losses that may result from

interruptions in our service as a result of systems failures and similar events.

We have not experienced any system

failures or other events or conditions that have interrupted the availability or reduced or affected the speed or functionality

of our offerings.

These events, were they to occur in the future, could adversely affect our business, reputation, results of operations

and financial condition.

The successful operation of

our business depends upon the performance and reliability of Internet, mobile, and other infrastructures that are not under our

Our business depends on the performance

and reliability of Internet, mobile and other infrastructures that are not under our control.

Disruptions in Internet infrastructure

or the failure of telecommunications network operators to provide us with the bandwidth we need to provide our services and offerings

could interfere with the speed and availability of our platform.

If our platform is unavailable when platform users attempt to

access it, or if our platform does not load as quickly as platform users expect, platform users may not return to our platform

as often in the future, or at all, and may use our competitors’

products or offerings more often.

In addition, we have no

control over the costs of the services provided by national telecommunications operators.

If mobile Internet access fees or other

charges to Internet users increase, consumer traffic may decrease, which may in turn cause our revenue to significantly decrease.

Our business depends on the efficient

and uninterrupted operation of mobile communications systems.

The occurrence of an unanticipated problem, such as a power outage,

telecommunications delay or failure, security breach or computer virus could result in delays or interruptions to our services,

offerings and platform, as well as business interruptions for us and platform users.

Furthermore, foreign governments may leverage

their ability to shut down directed services, and local governments may shut down our platform at the routing level.

events could damage our reputation, significantly disrupt our operations, and subject us to liability, which could adversely affect

our business, financial condition and operating results.

We have invested significant resources to develop new products to mitigate

the impact of potential interruptions to mobile communications systems, which can be used by consumers in territories where mobile

communications systems are less efficient.

However, these products may ultimately be unsuccessful.

We may be subject to claims,

lawsuits, government investigations and other proceedings that may adversely affect our business, financial condition and results

Any substantial

change in our relationships with either China Unicom or China Mobile, or both, whether due to actions by our competitors, regulatory

authorities, industry factors or otherwise, could have a material adverse effect on our business, financial condition and results

of operations.

We may be subject to claims, lawsuits,

arbitration proceedings, government investigations and other legal and regulatory proceedings as our business grows and as we deploy

new offerings, including proceedings related to our products or our acquisitions, securities issuances or business practices.

results of any such claims, lawsuits, arbitration proceedings, government investigations or other legal or regulatory proceedings

cannot be predicted with certainty.

Any claims against us, whether meritorious or not, could be time-consuming, result in costly

litigation, be harmful to our reputation, require significant management attention and divert significant resources.

Determining reserves for litigation is a complex and fact-intensive

process that requires significant subjective judgment and speculation.

It is possible that such proceedings could result in substantial

damages, settlement costs, fines and penalties that could adversely affect our business, financial condition and results of operations.

These proceedings could also result in harm to our reputation and brand, sanctions, consent decrees, injunctions or other orders

requiring a change in our business practices.

Any of these consequences could adversely affect our business, financial condition

and results of operations.

Furthermore, under certain circumstances, we have contractual and other legal obligations to indemnify

and to incur legal expenses on behalf of our business and commercial partners and current and former directors and officers.

We may require additional funding

to support our business.

To grow our business, FingerMotion

currently looks to take advantage of the immense mobile phone payment market, gross transaction volume (GTV)

is estimated at US$153 billion in 2019 and is expected to increase to US$165 billion by 2024 (source:

actual or perceived security or privacy breach could interrupt our operations, harm our brand and adversely affect our reputation,

brand, business, financial condition and results of operations.

business involves the processing and transmission of our users personal and other sensitive data.

Because techniques used

to obtain unauthorized access to or to sabotage information systems change frequently and may not be known until launched against

us, we may be unable to anticipate or prevent these attacks.

Unauthorized parties may in the future gain access to our systems

or facilities through various means, including gaining unauthorized access into our systems or facilities or those of our service

providers, partners or users on our platform, or attempting to fraudulently induce our employees, service providers, partners,

users or others into disclosing names, passwords, payment information or other sensitive information, which may in turn be used

to access our information technology systems, or attempting to fraudulently induce our employees, partners or others into manipulating

payment information, resulting in the fraudulent transfer of funds to criminal actors.

In addition, users on our platform could

have vulnerabilities on their own mobile devices that are entirely unrelated to our systems and platform but could mistakenly

attribute their own vulnerabilities to us.

Further, breaches experienced by other companies may also be leveraged against us.

For example, credential stuffing attacks are becoming increasingly common and sophisticated actors can mask their attacks, making

them increasingly difficult to identify and prevent.

Certain efforts may be state-sponsored or supported by significant financial

and technological resources, making them even more difficult to detect.

we have developed systems and processes that are designed to protect our users data, prevent data loss and prevent other

security breaches, these security measures cannot guarantee security.

Our information technology and infrastructure may be vulnerable

to cyberattacks or security breaches;

also, employee error, malfeasance or other errors in the storage, use or transmission of

personal information could result in an actual or perceived privacy or security breach or other security incident.

actual or perceived breach of privacy or security could interrupt our operations, result in our platform being unavailable, result

in loss or improper disclosure of data, result in fraudulent transfer of funds, harm our reputation and brand, damage our relationships

with third-party partners, result in significant legal, regulatory and financial exposure and lead to loss of confidence in, or

decreased use of, our platform, any of which could adversely affect our business, financial condition and results of operations.

Any breach of privacy or security impacting any entities with which we share or disclose data (including, for example, our third-party

providers) could have similar effects.

Additionally,

defending against claims or litigation based on any security breach or incident, regardless of their merit, could be costly and

divert managements attention.

We cannot be certain that our insurance coverage will be adequate for data handling or data

security liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or

at all, or that any insurer will not deny coverage as to any future claim.

The successful assertion of one or more large claims

against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium

increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our reputation,

brand, business, financial condition and results of operations.

failures and resulting interruptions in the availability of our platform or offerings could adversely affect our business, financial

condition and results of operations.

systems, or those of third parties upon which we rely, may experience service interruptions or degradation because of hardware

and software defects or malfunctions, distributed denial-of-service and other cyberattacks, human error, earthquakes, hurricanes,

floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts,

terrorist attacks, computer viruses, ransomware, malware or other events.

Our systems also may be subject to break-ins, sabotage,

theft and intentional acts of vandalism, including by our own employees.

Some of our systems are not fully redundant and our disaster

recovery planning may not be sufficient for all eventualities.

Our business interruption insurance may not be sufficient to cover

all of our losses that may result from interruptions in our service as a result of systems failures and similar events.

have not experienced any system failures or other events or conditions that have interrupted the availability or reduced or affected

the speed or functionality of our offerings.

These events, were they to occur in the future, could adversely affect our business,

reputation, results of operations and financial condition.

successful operation of our business depends upon the performance and reliability of Internet, mobile, and other infrastructures

that are not under our control.

business depends on the performance and reliability of Internet, mobile and other infrastructures that are not under our control.

Disruptions in Internet infrastructure or the failure of telecommunications network operators to provide us with the bandwidth

we need to provide our services and offerings could interfere with the speed and availability of our platform.

If our platform

is unavailable when platform users attempt to access it, or if our platform does not load as quickly as platform users expect,

platform users may not return to our platform as often in the future, or at all, and may use our competitors products or

offerings more often.

In addition, we have no control over the costs of the services provided by national telecommunications operators.

If mobile Internet access fees or other charges to Internet users increase, consumer traffic may decrease, which may in turn cause

our revenue to significantly decrease.

business depends on the efficient and uninterrupted operation of mobile communications systems.

The occurrence of an unanticipated

problem, such as a power outage, telecommunications delay or failure, security breach or computer virus could result in delays

or interruptions to our services, offerings and platform, as well as business interruptions for us and platform users.

foreign governments may leverage their ability to shut down directed services, and local governments may shut down our platform

at the routing level.

Any of these events could damage our reputation, significantly disrupt our operations, and subject us to

liability, which could adversely affect our business, financial condition and operating results.

We have invested significant

resources to develop new products to mitigate the impact of potential interruptions to mobile communications systems, which can

be used by consumers in territories where mobile communications systems are less efficient.

However, these products may ultimately

be unsuccessful.

may be subject to claims, lawsuits, government investigations and other proceedings that may adversely affect our business, financial

condition and results of operations .

may be subject to claims, lawsuits, arbitration proceedings, government investigations and other legal and regulatory proceedings

as our business grows and as we deploy new offerings, including proceedings related to our products or our acquisitions, securities

issuances or business practices.

The results of any such claims, lawsuits, arbitration proceedings, government investigations

or other legal or regulatory proceedings cannot be predicted with certainty.

Any claims against us, whether meritorious or not,

could be time-consuming, result in costly litigation, be harmful to our reputation, require significant management attention and

divert significant resources.

Determining reserves for litigation is a complex and fact-intensive process that requires significant

subjective judgment and speculation.

It is possible that such proceedings could result in substantial damages, settlement costs,

fines and penalties that could adversely affect our business, financial condition and results of operations.

These proceedings

could also result in harm to our reputation and brand, sanctions, consent decrees, injunctions or other orders requiring a change

in our business practices.

Any of these consequences could adversely affect our business, financial condition and results of operations.

Furthermore, under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses

on behalf of our business and commercial partners and current and former directors and officers.

may require additional funding to support our business.

grow our business, FingerMotion currently looks to take advantage of the immense mobile phone payment market, estimated at a monthly

gross transaction volume (GTV) is estimated at US$153 billion in 2019 and is expected to increase to US$165 billion by 2024 (source:

https://telecomstechnews.com/news/2019/nov/21/total-mobile-service-revenue-china-hit-165bn-end-2024-reveals-globaldata/ ).

5 unchanged sentences

may have rights, preferences or privileges senior to those of our common stock, and our existing stockholders may experience dilution.

Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and

other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business

opportunities.

Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities

and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue

business opportunities.

We cannot be certain that additional funding will be available to us on favorable terms, or at all.

If we are unable

to obtain adequate funding or funding on terms satisfactory to us, when we require it, our ability to continue to support our business

growth and to respond to business challenges could be significantly limited, and our business, financial condition and results

of operations could be adversely affected.

Claims by others that we infringed

their proprietary technology or other intellectual property rights could harm our business.

Companies in the Internet and technology

industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property

In addition, certain companies and rights holders seek to enforce and monetize patents or other intellectual property rights

they own, have purchased or otherwise obtained.

As we gain a public profile and the number of competitors in our market increases,

the possibility of intellectual property rights claims against us grows.

From time to time, third parties may assert claims of

infringement of intellectual property rights against us.

Many potential litigants, including some of our competitors and patent-holding

companies, have the ability to dedicate substantial resources to assert their intellectual property rights.

Any claim of infringement

by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, could distract

our management from our business and could require us to cease use of such intellectual property.

Furthermore, because of the substantial

amount of discovery required in connection with intellectual property litigation, we risk compromising our confidential information

during this type of litigation.

We may be required to pay substantial damages, royalties or other fees in connection with a claimant

securing a judgment against us, we may be subject to an injunction or other restrictions that prevent us from using or distributing

our intellectual property, or we may agree to a settlement that prevents us from distributing our offerings or a portion thereof,

which could adversely affect our business, financial condition and results of operations.

With respect to any intellectual

property rights claim, we may have to seek out a license to continue operations found to be in violation of such rights, which

may not be available on favorable or commercially reasonable terms and may significantly increase our operating expenses.

licenses may be non-exclusive, and therefore our competitors may have access to the

same technology licensed to us.

If a third party does not offer us a license to its intellectual property on reasonable terms,

or at all, we may be required to develop alternative, non-infringing technology, which could require significant time (during which

we would be unable to continue to offer our affected offerings), effort and expense and may ultimately not be successful.

these events could adversely affect our business, financial condition and results of operations.

Risks Related to Our Securities

Our stock has limited

Our common stock trades on the OTCQB

operated by OTC Markets Group Inc.

Trading volume in our shares may be sporadic and the price could experience volatility.

market conditions exist, you may have difficulty selling your shares.

The market price of our common stock

may fluctuate significantly in response to numerous factors, some of which are beyond our control, including the following:

actual or anticipated fluctuations in our operating results;

changes in financial estimates by securities analysts or our failure to perform in line with such estimates;

changes in market valuations of other companies, particularly those that market services such as ours;

announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

introduction of product enhancements that reduce the need for our products;

departure of key personnel.

We do not intend to pay dividends

for the foreseeable future.

We have never declared nor paid cash

dividends on our capital stock.

We currently intend to retain any future earnings to finance the operation and expansion of our

business, and we do not expect to declare or pay any dividends in the foreseeable future.

As a result, stockholders must rely on

sales of their common stock after price appreciation as the only way to realize any future gains on their investment.

If securities or industry analysts

do not publish research or publish inaccurate or unfavorable research about our business, the market price and trading volume of

our common stock could decline.

The trading market for our common

stock may depend in part on the research and reports that securities or industry analysts publish about us, our business, our market

or our competition.

The analysts’

estimates are based upon their own opinions and are often different from our estimates

or expectations.

If one or more of the analysts who cover us downgrade our common stock, provide a more favorable recommendation

about our competitors or publish inaccurate or unfavorable research about our business, the price of our securities would likely

If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to

publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our

common stock to decline.

We are subject to federal legislation

to protect investors against corporate fraud.

Federal legislation, such as the Sarbanes-Oxley

Act of 2002 and the Dodd- Frank Act, has resulted in the adoption of various corporate governance measures designed to promote

the integrity of the corporate management and the securities markets.

Some of these measures have been adopted in response to legal

requirements.

Others have been adopted by companies in response to the requirements of national securities exchanges, such as the

NYSE or the Nasdaq Stock Market, on which their securities are listed.

Among the corporate governance measures that are required

under the rules of national securities exchanges are those that address board of directors’

independence, audit committee

oversight and the adoption of a code of ethics.

We have not yet adopted any of these

corporate governance measures such as an audit or other independent committees of our board of directors.

Additionally, since our

securities are not yet listed on a national securities exchange, we are not required to do so.

If we expand our board membership

in future periods to include independent directors, we may seek to establish an audit and other committees of our board of directors.

It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat

greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented

to define responsible conduct.

For example, in the absence of audit, nominating and compensation committees comprised of at least

a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and

recommendations for director nominees are made by a majority of directors who have an interest in the outcome of the matters being

Prospective investors should consider our current lack of corporate governance measures in making their investment decisions.

If we fail to maintain an effective

system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial

statements or comply with applicable regulations could be impaired.

As a public company, we are subject

to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002.

The Sarbanes-Oxley Act requires, among other

things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

We are continuing

to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be

disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods

specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated

and communicated to our principal executive and financial officers.

We are also continuing to improve our internal control over

we are unable to obtain adequate funding or funding on terms satisfactory to us, when we require it, our ability to continue to

support our business growth and to respond to business challenges could be significantly limited, and our business, financial

condition and results of operations could be adversely affected.

by others that we infringed their proprietary technology or other intellectual property rights could harm our business.

in the Internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations

of intellectual property rights.

In addition, certain companies and rights holders seek to enforce and monetize patents or other

intellectual property rights they own, have purchased or otherwise obtained.

As we gain a public profile and the number of competitors

in our market increases, the possibility of intellectual property rights claims against us grows.

From time to time, third parties

may assert claims of infringement of intellectual property rights against us.

Many potential litigants, including some of our

competitors and patent-holding companies, have the ability to dedicate substantial resources to assert their intellectual property

Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending

against the claim, could distract our management from our business and could require us to cease use of such intellectual property.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, we risk

compromising our confidential information during this type of litigation.

We may be required to pay substantial damages, royalties

or other fees in connection with a claimant securing a judgment against us, we may be subject to an injunction or other restrictions

that prevent us from using or distributing our intellectual property, or we may agree to a settlement that prevents us from distributing

our offerings or a portion thereof, which could adversely affect our business, financial condition and results of operations.

respect to any intellectual property rights claim, we may have to seek out a license to continue operations found to be in violation

of such rights, which may not be available on favorable or commercially reasonable terms and may significantly increase our operating

Some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to

If a third party does not offer us a license to its intellectual property on reasonable terms, or at all, we may be required

to develop alternative, non-infringing technology, which could require significant time (during which we would be unable to continue

to offer our affected offerings), effort and expense and may ultimately not be successful.

Any of these events could adversely

affect our business, financial condition and results of operations.

Related to Our Securities

stock has limited liquidity.

common stock trades on the OTCQX operated by OTC Markets Group Inc.

Trading volume in our shares may be sporadic and the price

could experience volatility.

If adverse market conditions exist, you may have difficulty selling your shares.

market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control,

including the following:

or anticipated fluctuations in our operating results;

in financial estimates by securities analysts or our failure to perform in line with such estimates;

in market valuations of other companies, particularly those that market services such as ours;

announcements

by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

of product enhancements that reduce the need for our products;

of key personnel.

do not intend to pay dividends for the foreseeable future.

have never declared nor paid cash dividends on our capital stock.

We currently intend to retain any future earnings to finance

the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.

a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future

gains on their investment.

securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the

market price and trading volume of our common stock could decline.

trading market for our common stock may depend in part on the research and reports that securities or industry analysts publish

about us, our business, our market or our competition.

The analysts estimates are based upon their own opinions and are

often different from our estimates or expectations.

If one or more of the analysts who cover us downgrade our common stock, provide

a more favorable recommendation about our competitors or publish inaccurate or unfavorable research about our business, the price

of our securities would likely decline.

If few securities analysts commence coverage of us, or if one or more of these analysts

cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the

price and trading volume of our common stock to decline.

are subject to federal legislation to protect investors against corporate fraud.

legislation, such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act, has resulted in the adoption of various

corporate governance measures designed to promote the integrity of the corporate management and the securities markets.

these measures have been adopted in response to legal requirements.

Others have been adopted by companies in response to the requirements

of national securities exchanges, such as the NYSE or the Nasdaq Stock Market, on which their securities are listed.

corporate governance measures that are required under the rules of national securities exchanges are those that address board

of directors independence, audit committee oversight and the adoption of a code of ethics.

have not yet adopted any of these corporate governance measures such as an audit or other independent committees of our board

of directors.

Additionally, since our securities are not yet listed on a national securities exchange, we are not required to

If we expand our board membership in future periods to include independent directors, we may seek to establish an audit

and other committees of our board of directors.

It is possible that if we were to adopt some or all of these corporate governance

measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested

directors and that policies had been implemented to define responsible conduct.

For example, in the absence of audit, nominating

and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such

as compensation packages to our senior officers and recommendations for director nominees are made by a majority of directors

who have an interest in the outcome of the matters being decided.

Prospective investors should consider our current lack of corporate

governance measures in making their investment decisions.

we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce

timely and accurate financial statements or comply with applicable regulations could be impaired.

a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002.

The Sarbanes-Oxley

Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial

We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that

information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and

reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under

the Exchange Act is accumulated and communicated to our principal executive and financial officers.

We are also continuing to

improve our internal control over financial reporting.

We have expended, and anticipate that we will continue to expend, significant

resources in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over

financial reporting.

We have expended, and anticipate that we will continue to expend, significant resources in order to maintain

and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

Our current controls and any new

controls that we develop may become inadequate because of changes in the conditions in our business.

Further, weaknesses in our

disclosure controls or our internal control over financial reporting may be discovered in the future.

Any failure to develop or

maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our results of

operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for

prior periods.

Any failure to implement and maintain effective internal control over financial reporting could also adversely affect

the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding

the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic

reports that will be filed with the SEC.

Ineffective disclosure controls and procedures and internal control over financial reporting

could also cause investors to lose confidence in our reported financial and other information, which would likely adversely affect

the market price of our common stock.

Our Common Shares are categorized as

“penny stock”, which may make it more difficult for investors to buy and sell our Common Shares due to suitability

requirements.

Our Common Shares are considered “penny

stock”.

The SEC has adopted Rule 15g-9 which generally defines “penny stock”

to be any equity security that has

a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.

price of our Common Shares is significantly less than $5.00 per share.

This designation imposes additional sales practice requirements

on broker-dealers who sell to persons other than established customers and “accredited investors”.

The penny stock

rules require a broker-dealer buying securities to disclose certain information concerning the transaction, obtain a written agreement

from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks

generally inherent in penny stocks.

These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell

our Common Shares, either directly or on behalf of their clients, may discourage potential stockholders from purchasing our Common

Shares, or may adversely affect the ability of stockholders to sell their shares.

Financial Industry Regulatory Authority

(“FINRA”) sales practice requirements may also limit a shareholder’s ability to buy and sell our Common Shares,

which could depress the price of our Common Shares.

In addition to the “penny stock”

rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment

is suitable for that customer before recommending an investment to a customer.

Prior to recommending speculative low-priced securities

to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s

financial status, tax status, investment objectives, and other information.

Under interpretations of these rules, FINRA believes

that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.

the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Shares, which

may limit your ability to buy and sell our Common Shares, have an adverse effect on the market for our Common Shares, and thereby

depress our price per Common Share.

Risks Related to the VIE Agreements

The PRC government may determine

that the VIE Agreements are not in compliance with applicable PRC laws, rules and regulations

JiuGe Management manages and operates

the mobile data business through JiuGe Technology pursuant to the rights its holds under the VIE Agreements.

Almost all economic

benefits and risks arising from JiuGe Technology’s operations are transferred to JiuGe Management under these agreements.

There are risks involved with the

operation of our business in reliance on the VIE Agreements, including the risk that the VIE Agreements may be determined by PRC

regulators or courts to be unenforceable.

Our PRC counsel has provided a legal opinion that the VIE Agreements are binding and

enforceable under PRC law, but has further advised that if the VIE Agreements were for any reason determined to be in breach of

any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with

such breach, including:

imposing economic penalties;

discontinuing or restricting the operations of JiuGe Technology or JiuGe Management;

imposing conditions or requirements in respect of the VIE Agreements with which JiuGe Technology or JiuGe Management may not be able to comply;

requiring our company to restructure the relevant ownership structure or operations;

taking other regulatory or enforcement actions that could adversely affect our company’s business;

revoking the business licenses and/or the licenses or certificates of JiuGe Management, and/or voiding the VIE Agreements.

Any of these actions could adversely

affect our ability to manage, operate and gain the financial benefits of JiuGe Technology, which would have a material adverse

impact on our business, financial condition and results of operations.

Our ability to manage and operate

JiuGe Technology under the VIE Agreements may not be as effective as direct ownership.

We conduct our mobile data business

in the PRC and generate virtually all of our revenues through the VIE Agreements.

Our plans for future growth are based substantially

on growing the operations of JiuGe Technology.

However, the VIE Agreements may not be as effective in providing us with control

over JiuGe Technology as direct ownership.

Under the current VIE arrangements, as a legal matter, if JiuGe Technology fails to

perform its obligations under these contractual arrangements, we may have to (i) incur substantial costs and resources to enforce

such arrangements, and (ii) rely on legal remedies under PRC law, which we cannot be sure would be effective.

Therefore, if we

are unable to effectively control JiuGe Technology, it may have an adverse effect on our ability to achieve our business objectives

and grow our revenues.

As the VIE Agreements are governed

by PRC law, we would be required to rely on PRC law to enforce our rights and remedies under them;

PRC law may not provide us with

the same rights and remedies as are available in contractual disputes governed by the law of other jurisdictions.

The VIE Agreements are governed by

the PRC law and provide for the resolution of disputes through arbitral proceedings pursuant to PRC law.

If JiuGe Technology or

its shareholders fail to perform the obligations under the VIE Agreements, we would be required to resort to legal remedies available

under PRC law, including seeking specific performance or injunctive relief, or claiming damages.

We cannot be sure that such remedies

would provide us with effective means of causing JiuGe Technology to meet its obligations or recovering any losses or damages as

a result of non-performance.

Further, the legal environment in China is not as developed as in other jurisdictions.

Uncertainties

in the application of various laws, rules, regulations or policies in PRC legal system could limit our liability to enforce the

VIE Agreements and protect our interests.

The payment arrangement under the VIE

Agreements may be challenged by the PRC tax authorities.

We generate our revenues through

the payments we receive pursuant to the VIE Agreements.

We could face adverse tax consequences if the PRC tax authorities determine

that the VIE Agreements were not entered into based on arm’s length negotiations.

For example, PRC tax authorities may adjust

our income and expenses for PRC tax purposes which could result in our being subject to higher tax liability or cause other adverse

financial consequences.

Shareholders of JiuGe Technology

have potential conflicts of interest with our company which may adversely affect our business.

Li Li is the CEO and legal

representative and is also the shareholder of JiuGe Technology.

There could be conflicts that arise from time to time between

our interests and the interests of Ms.

There could also be conflicts that arise between us and JiuGe Technology that

would require our shareholders and JiuGe Technology’s shareholders to vote on corporate actions necessary to resolve

the conflict.

current controls and any new controls that we develop may become inadequate because of changes in the conditions in our business.

Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement,

could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of

our financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial reporting

could also adversely affect the results of periodic management evaluations and annual independent registered public accounting

firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually

be required to include in our periodic reports that will be filed with the SEC.

Ineffective disclosure controls and procedures

and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other

information, which would likely adversely affect the market price of our common stock

Industry Regulatory Authority (FINRA) sales practice requirements may also limit a shareholders ability to

buy and sell our Common Shares, which could depress the price of our Common Shares.

addition to the penny stock rules described above, FINRA has adopted rules that require a broker-dealer to have

reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer.

Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable

efforts to obtain information about the customers financial status, tax status, investment objectives, and other information.

Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will

not be suitable for at least some customers.

Thus, the FINRA requirements make it more difficult for broker-dealers to recommend

that their customers buy our Common Shares, which may limit your ability to buy and sell our Common Shares, have an adverse effect

on the market for our Common Shares, and thereby depress our price per Common Share.

Related to the VIE Agreements

PRC government may determine that the VIE Agreements are not in compliance with applicable PRC laws, rules and regulations

Management manages and operates the mobile data business through JiuGe Technology pursuant to the rights its holds under the VIE

Almost all economic benefits and risks arising from JiuGe Technologys operations are transferred to JiuGe Management

under these agreements.

are risks involved with the operation of our business in reliance on the VIE Agreements, including the risk that the VIE Agreements

may be determined by PRC regulators or courts to be unenforceable.

Our PRC counsel has provided a legal opinion that the VIE Agreements

are binding and enforceable under PRC law, but has further advised that if the VIE Agreements were for any reason determined to

be in breach of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion

in dealing with such breach, including:

economic penalties;

discontinuing

or restricting the operations of JiuGe Technology or JiuGe Management;

conditions or requirements in respect of the VIE Agreements with which JiuGe Technology or JiuGe Management may not be able

our company to restructure the relevant ownership structure or operations;

other regulatory or enforcement actions that could adversely affect our companys business;

the business licenses and/or the licenses or certificates of JiuGe Management, and/or voiding the VIE Agreements.

of these actions could adversely affect our ability to manage, operate and gain the financial benefits of JiuGe Technology, which

would have a material adverse impact on our business, financial condition and results of operations.

ability to manage and operate JiuGe Technology under the VIE Agreements may not be as effective as direct ownership.

conduct our mobile data business in the PRC and generate virtually all of our revenues through the VIE Agreements.

Our plans for

future growth are based substantially on growing the operations of JiuGe Technology.

However, the VIE Agreements may not be as

effective in providing us with control over JiuGe Technology as direct ownership.

Under the current VIE arrangements, as a legal

matter, if JiuGe Technology fails to perform its obligations under these contractual arrangements, we may have to (i) incur substantial

costs and resources to enforce such arrangements, and (ii) rely on legal remedies under PRC law, which we cannot be sure would

be effective.

Therefore, if we are unable to effectively control JiuGe Technology, it may have an adverse effect on our ability

to achieve our business objectives and grow our revenues.

the VIE Agreements are governed by PRC law, we would be required to rely on PRC law to enforce our rights and remedies under them;

PRC law may not provide us with the same rights and remedies as are available in contractual disputes governed by the law of other

jurisdictions.

VIE Agreements are governed by the PRC law and provide for the resolution of disputes through arbitral proceedings pursuant to

If JiuGe Technology or its shareholders fail to perform the obligations under the VIE Agreements, we would be required

to resort to legal remedies available under PRC law, including seeking specific performance or injunctive relief, or claiming

We cannot be sure that such remedies would provide us with effective means of causing JiuGe Technology to meet its obligations

or recovering any losses or damages as a result of non-performance.

Further, the legal environment in China is not as developed

as in other jurisdictions.

Uncertainties in the application of various laws, rules, regulations or policies in PRC legal system

could limit our liability to enforce the VIE Agreements and protect our interests.

payment arrangement under the VIE Agreements may be challenged by the PRC tax authorities.

generate our revenues through the payments we receive pursuant to the VIE Agreements.

We could face adverse tax consequences if

the PRC tax authorities determine that the VIE Agreements were not entered into based on arms length negotiations.

example, PRC tax authorities may adjust our income and expenses for PRC tax purposes which could result in our being subject to

higher tax liability or cause other adverse financial consequences.

of JiuGe Technology have potential conflicts of interest with our company which may adversely affect our business.

Li is the legal representative and general manager, and also a shareholderof JiuGe Technology.

There could be conflicts that arise

from time to time between our interests and the interests of Ms.

There could also be conflicts that arise between us and JiuGe

Technology that would require our shareholders and JiuGe Technologys shareholders to vote on corporate actions necessary

to resolve the conflict.

There can be no assurance in any such circumstances that Ms.

Li will vote her shares in our best interest or

otherwise act in the best interests of our company.

Li will vote her shares in our best interest

or otherwise act in the best interests of our company.

Li fails to act in our best interests, our operating performance

and future growth could be adversely affected.

We rely on the approval certificates

and business license held by JiuGe Management and any deterioration of the relationship between JiuGe Management and JiuGe Technology

could materially and adversely affect our business operations.

We operate our mobile data business

in China on the basis of the approval certificates, business license and other requisite licenses held by JiuGe Management and

JiuGe Technology.

There is no assurance that JiuGe Management and JiuGe Technology will be able to renew their licenses or certificates

when their terms expire with substantially similar terms as the ones they currently hold.

Further, our relationship with JiuGe

Technology is governed by the VIE Agreements that are intended to provide us with effective control over the business operations

of JiuGe Technology.

However, the VIE Agreements may not be effective in providing control over the application for and maintenance

of the licenses required for our business operations.

JiuGe Technology could violate the VIE Agreements, go bankrupt, suffer from

difficulties in its business or otherwise become unable to perform its obligations under the VIE Agreements and, as a result, our

operations, reputations and business could be severely harmed.

If JiuGe Management exercises

the purchase option it holds over JiuGe Technology’s share capital pursuant to the VIE Agreements, the payment of the purchase

price could materially and adversely affect our financial position.

Under the VIE Agreements, JiuGe Technology’s

shareholders have granted JiuGe Management an option for the maximum period of time permitted by law to purchase all of the equity

interest in JiuGe Technology at a price equal to one dollar or the lowest applicable price allowable by PRC laws and regulations.

As JiuGe Technology is already our contractually controlled affiliate, JiuGe Management’s exercising of the option would

not bring immediate benefits to our company, and payment of the purchase prices could adversely affect our financial position.

Risks Related to Doing Business

Changes in China's political

or economic situation could harm us and our operating results.

Economic reforms adopted by the Chinese

government have had a positive effect on the economic development of the country, but the government could change these economic

reforms or any of the legal systems at any time.

This could either benefit or damage our operations and profitability.

the things that could have this effect are:

Level of government involvement in the economy;

Control of foreign exchange;

Methods of allocating resources;

Balance of payments position;

International trade restrictions;

International conflict.

The Chinese economy differs from

the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in many ways.

For example, state-owned enterprises still constitute a large portion of the Chinese economy and weak corporate governance and

a lack of flexible currency exchange policy still prevail in China.

a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy

was similar to those of the OECD member countries.

Uncertainties with respect

to the PRC legal system could limit the legal protections available to you and us.

We conduct substantially all of our

business through our operating subsidiary and affiliate in the PRC.

Our principal operating subsidiary and affiliate, JiuGe Management

and JiuGe Technology, are subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable

to foreign-invested enterprises.

The PRC legal system is based on written statutes, and prior court decisions may be cited for

reference but have limited precedential value.

Since 1979, a series of new PRC laws and regulations have significantly enhanced

the protections afforded to various forms of foreign investments in China.

However, since the PRC legal system continues to evolve

rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations

and rules involves uncertainties, which may limit legal protections available to you and us.

In addition, any litigation in China

may be protracted and result in substantial costs and diversion of resources and management attention.

In addition, most of our

executive officers and all of our directors are not residents of the United States, and substantially all the assets of these persons

are located outside the United States.

As a result, it could be difficult for investors to effect service of process in the United

States or to enforce a judgment obtained in the United States against our Chinese operations, subsidiary and affiliate.

You may have difficulty enforcing

judgments against us.

We are a Delaware holding company,

but Finger Motion (CN) Limited is a Hong Kong company, and our principal operating affiliate and subsidiary, JiuGe Technology and

JiuGe Management, are located in the PRC.

Most of our assets are located outside the United States and most of our current operations

are conducted in the PRC.

In addition, most of our directors and officers are nationals and residents of countries other than the

rely on the approval certificates and business license held by JiuGe Management and any deterioration of the relationship between

JiuGe Management and JiuGe Technology could materially and adversely affect our business operations.

operate our mobile data business in China on the basis of the approval certificates, business license and other requisite licenses

held by JiuGe Management and JiuGe Technology.

There is no assurance that JiuGe Management and JiuGe Technology will be able to

renew their licenses or certificates when their terms expire with substantially similar terms as the ones they currently hold.

our relationship with JiuGe Technology is governed by the VIE Agreements that are intended to provide us with effective control

over the business operations of JiuGe Technology.

However, the VIE Agreements may not be effective in providing control over the

application for and maintenance of the licenses required for our business operations.

JiuGe Technology could violate the VIE Agreements,

go bankrupt, suffer from difficulties in its business or otherwise become unable to perform its obligations under the VIE Agreements

and, as a result, our operations, reputations and business could be severely harmed.

JiuGe Management exercises the purchase option it holds over JiuGe Technologys share capital pursuant to the VIE Agreements,

the payment of the purchase price could materially and adversely affect our financial position.

the VIE Agreements, JiuGe Technologys shareholders have granted JiuGe Management an option for the maximum period of time

permitted by law to purchase all of the equity interest in JiuGe Technology at a price equal to one dollar or the lowest applicable

price allowable by PRC laws and regulations.

As JiuGe Technology is already our contractually controlled affiliate, JiuGe Managements

exercising of the option would not bring immediate benefits to our company, and payment of the purchase prices could adversely

affect our financial position.

Related to Doing Business in China

in Chinas political or economic situation could harm us and our operating results.

reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government

could change these economic reforms or any of the legal systems at any time.

This could either benefit or damage our operations

and profitability.

Some of the things that could have this effect are:

of government involvement in the economy;

of foreign exchange;

of allocating resources;

of payments position;

International

trade restrictions;

International

Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development,

or OECD, in many ways.

For example, state-owned enterprises still constitute a large portion of the Chinese economy and weak corporate

governance and a lack of flexible currency exchange policy still prevail in China.

As a result of these differences, we may not

develop in the same way or at the same rate as might be expected if the Chinese economy was similar to those of the OECD member

Uncertainties

with respect to the PRC legal system could limit the legal protections available to you and us.

conduct substantially all of our business through our operating subsidiary and affiliate in the PRC.

Our principal operating subsidiary

and affiliate, JiuGe Management and JiuGe Technology, are subject to laws and regulations applicable to foreign investments in

China and, in particular, laws applicable to foreign-invested enterprises.

The PRC legal system is based on written statutes,

and prior court decisions may be cited for reference but have limited precedential value.

Since 1979, a series of new PRC laws

and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China.

since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always

uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available

to you and us.

In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources

and management attention.

In addition, most of our executive officers and all of our directors are not residents of the United

States, and substantially all the assets of these persons are located outside the United States.

As a result, it could be difficult

for investors to effect service of process in the United States or to enforce a judgment obtained in the United States against

our Chinese operations, subsidiary and affiliate.

may have difficulty enforcing judgments against us.

are a Delaware holding company, but Finger Motion (CN) Limited is a Hong Kong company, and our principal operating affiliate and

subsidiary, JiuGe Technology and JiuGe Management, are located in the PRC.

Most of our assets are located outside the United States

and most of our current operations are conducted in the PRC.

In addition, most of our directors and officers are nationals and

residents of countries other than the United States.

A substantial portion of the assets of these persons is located outside the

United States.

A substantial portion of the assets of these persons is located outside the United States.

As a result, it may be

difficult for you to effect service of process within the United States upon these persons.

It may also be difficult for you to

enforce in U.S.

As a result, it may be difficult for you to effect service of process within the United States upon these persons.

It may also be difficult for you to enforce in U.S.

courts judgments predicated on the civil liability provisions of the U.S.

federal securities laws against us and

our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are

located outside the United States.

In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce

judgments of U.S.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures

Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures

Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions.

not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with

the United States.

In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment

against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty,

security or the public interest.

Therefore, it is uncertain whether a PRC court would enforce a judgment rendered by a court in

the United States.

The PRC government exerts substantial

influence over the manner in which we must conduct our business activities.

The PRC government has exercised

and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership.

Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import

and export tariffs, environmental regulations, land use rights, property and other matters.

We believe that our operations in China

are in material compliance with all applicable legal and regulatory requirements.

However, the central or local governments of

the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would

require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

Accordingly, government actions in

the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned

economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic

conditions in China or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese

properties or joint ventures.

Future inflation in China may inhibit

our ability to conduct business in China.

In recent years, the Chinese economy

has experienced periods of rapid expansion and highly fluctuating rates of inflation.

During the past ten years, the rate of inflation

in China has been as high as 20.7% and as low as -2.2%.

These factors have led to the adoption by the Chinese government, from

time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation.

High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action,

which could inhibit economic activity in China, and thereby harm the market for our products and our company.

Restrictions on currency exchange

may limit our ability to receive and use our revenues effectively.

The majority of our revenues will

be settled in Chinese Renminbi (RMB), and any future restrictions on currency exchanges may limit our ability to use revenue generated

in RMB to fund any future business activities outside China or to make dividend or other payments in U.S.

Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions,

significant restrictions still remain, including primarily the restriction that foreign-invested enterprises may only buy, sell

or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange

In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental

approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items.

We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility

Fluctuations in exchange rates

could adversely affect our business and the value of our securities.

The value of our common stock will

be indirectly affected by the foreign exchange rate between U.S.

dollars and RMB and between those currencies and other currencies

in which our sales may be denominated.

Appreciation or depreciation in the value of the RMB relative to the U.S.

dollar would affect

our financial results reported in U.S.

dollar terms without giving effect to any underlying change in our business or results of

Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged

federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the

substantial majority of whose assets are located outside the United States.

In addition, there is uncertainty as to whether the

courts of the PRC would recognize or enforce judgments of U.S.

The recognition and enforcement of foreign judgments are

provided for under the PRC Civil Procedures Law.

Courts in China may recognize and enforce foreign judgments in accordance with

the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or

on reciprocity between jurisdictions.

China does not have any treaties or other arrangements that provide for the reciprocal recognition

and enforcement of foreign judgments with the United States.

In addition, according to the PRC Civil Procedures Law, courts in

the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates

basic principles of PRC law or national sovereignty, security or the public interest.

Therefore, it is uncertain whether a PRC

court would enforce a judgment rendered by a court in the United States.

PRC government exerts substantial influence over the manner in which we must conduct our business activities.

PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy

through regulation and state ownership.

Our ability to operate in China may be harmed by changes in its laws and regulations,

including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other

We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements.

However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations

of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such

regulations or interpretations.

government actions in the future, including any decision not to continue to support recent economic reforms and to return to a

more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant

effect on economic conditions in China or particular regions thereof and could require us to divest ourselves of any interest

we then hold in Chinese properties or joint ventures.

inflation in China may inhibit our ability to conduct business in China.

recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation.

the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2%.

These factors have led to the

adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of

credit or regulate growth and contain inflation.

High inflation may in the future cause the Chinese government to impose controls

on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market

for our products and our company.

on currency exchange may limit our ability to receive and use our revenues effectively.

majority of our revenues will be settled in Chinese Renminbi (RMB), and any future restrictions on currency exchanges may limit

our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or other

payments in U.S.

Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the

RMB for current account transactions, significant restrictions still remain, including primarily the restriction that foreign-invested

enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China

authorized to conduct foreign exchange business.

In addition, conversion of RMB for capital account items, including direct investment

and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange

accounts for capital account items.

We cannot be certain that the Chinese regulatory authorities will not impose more stringent

restrictions on the convertibility of the RMB.

in exchange rates could adversely affect our business and the value of our securities.

value of our common stock will be indirectly affected by the foreign exchange rate between U.S.

dollars and RMB and between those

currencies and other currencies in which our sales may be denominated.

Appreciation or depreciation in the value of the RMB relative

dollar would affect our financial results reported in U.S.

dollar terms without giving effect to any underlying change

in our business or results of operations.

Fluctuations in the exchange rate will also affect the relative value of any dividend

we issue that will be exchanged into U.S.

dollars as well as earnings from, and the value of, any U.S.

dollar-denominated investments we make in the future.

Since July 2005, the RMB is no longer

pegged to the U.S.

Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent

significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the

dollar-denominated investments

we make in the future.

July 2005, the RMB is no longer pegged to the U.S.

Although the Peoples Bank of China regularly intervenes in the

foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate

significantly in value against the U.S.

dollar in the medium to long term.

Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations

in the RMB exchange rate and lessen intervention in the foreign exchange market.

Very limited hedging transactions

are available in China to reduce our exposure to exchange rate fluctuations.

To date, we have not entered into any hedging transactions.

While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited,

and we may not be able to successfully hedge our exposure at all.

In addition, our foreign currency exchange losses may be magnified

by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

Restrictions under PRC law

on our PRC subsidiary’s ability to make dividends and other distributions could materially and adversely affect our ability

to grow, make investments or acquisitions that could benefit our business, pay dividends to our shareholders, and otherwise fund

and conduct our businesses.

Substantially all of our revenues

are earned by JiuGe Management, our PRC subsidiary.

PRC regulations restrict the ability of our PRC subsidiary to make dividends

and other payments to its offshore parent company.

PRC legal restrictions permit payments of dividends by our PRC subsidiary only

out of its accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations.

subsidiary is also required under PRC laws and regulations to allocate at least 10% of our annual after-tax profits determined

in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital.

Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form

of loans, advances or cash dividends.

Any limitations on the ability of our PRC subsidiary to transfer funds to us could materially

and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends

and otherwise fund and conduct our business.

Failure to comply with PRC

regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders

to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary or affiliate, limit

our PRC subsidiary’s and affiliate’s ability to distribute profits to us or otherwise materially adversely affect us.

In October 2005, the Chinese State

Administration of Foreign Exchange (“

SAFE ”), issued the Notice on Relevant Issues in the Foreign Exchange Control

over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular

75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over

an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength

of domestic PRC assets originally held by those residents.

Internal implementing guidelines issued by SAFE, which became public

in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover the establishment or acquisition

of control by PRC residents of offshore entities which merely acquire “control”

over domestic companies or assets,

even in the absence of legal ownership;

(2) adding requirements relating to the source of the PRC resident’s funds used to

establish or acquire the offshore entity;

covering the use of existing offshore entities for offshore financings;

(3) purporting

to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated

assets in China;

and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must

be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use

Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital,

transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China

to guarantee offshore obligations and Notice 106 makes the offshore SPV jointly responsible for these filings.

In the case of an

SPV which was established, and which acquired a related domestic company or assets, before the implementation date of Circular

75, a retroactive SAFE registration was required to have been completed before March 31, 2006;

this date was subsequently extended

indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken

by the SPV and its affiliates were in compliance with applicable laws and regulations.

Failure to comply with the requirements

of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion

of applicable foreign exchange restrictions.

Any such failure could also result in the SPV’s affiliates being impeded or

prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the

SPV, or from engaging in other transfers of funds into or out of China.

We have advised our shareholders

who are PRC residents, as defined in Circular 75, to register with the relevant branch of SAFE, as currently required, in connection

with their equity interests in us and our acquisitions of equity interests in our PRC subsidiary and affiliate.

However, we cannot

provide any assurances that their existing registrations have fully complied

with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals

required by Circular 75.

Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or

whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies.

our present and prospective PRC subsidiary’s and affiliate’s ability to conduct foreign exchange activities, such as

the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC

Moreover, it is possible that in the future PRC authorities

may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations.

To date, we have not

entered into any hedging transactions.

While we may enter into hedging transactions in the future, the availability and effectiveness

of these transactions may be limited, and we may not be able to successfully hedge our exposure at all.

In addition, our foreign

currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign

under PRC law on our PRC subsidiarys ability to make dividends and other distributions could materially and adversely affect

our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to our shareholders, and

otherwise fund and conduct our businesses.

Substantially

all of our revenue is earned by JiuGe Management, our PRC subsidiary.

PRC regulations restrict the ability of our PRC subsidiary

to make dividends and other payments to its offshore parent company.

PRC legal restrictions permit payments of dividends by our

PRC subsidiary only out of its accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and

Our PRC subsidiary is also required under PRC laws and regulations to allocate at least 10% of our annual after-tax

profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50%

of our registered capital.

Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable

to us in the form of loans, advances or cash dividends.

Any limitations on the ability of our PRC subsidiary to transfer funds

to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our

business, pay dividends and otherwise fund and conduct our business.

to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject

our PRC resident shareholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our

PRC subsidiary or affiliate, limit our PRC subsidiarys and affiliates ability to distribute profits to us or otherwise

materially adversely affect us.

October 2005, the Chinese State Administration of Foreign Exchange ( SAFE ), issued the Notice on Relevant

Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside

China, generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before

establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing

outside of China on the strength of domestic PRC assets originally held by those residents.

Internal implementing guidelines issued

by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover

the establishment or acquisition of control by PRC residents of offshore entities which merely acquire control over

domestic companies or assets, even in the absence of legal ownership;

(2) adding requirements relating to the source of the PRC

residents funds used to establish or acquire the offshore entity;

covering the use of existing offshore entities for offshore

(3) purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated

company or unrelated assets in China;

and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain

documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas

financing and the use of proceeds.

Amendments to registrations made under Circular 75 are required in connection with any increase

or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in

any assets located in China to guarantee offshore obligations and Notice 106 makes the offshore SPV jointly responsible for these

In the case of an SPV which was established, and which acquired a related domestic company or assets, before the implementation

date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006;

this date was

subsequently extended indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange

transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations.

Failure to comply

with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties

under PRC laws for evasion of applicable foreign exchange restrictions.

Any such failure could also result in the SPVs

affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer

or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.

have advised our shareholders who are PRC residents, as defined in Circular 75, to register with the relevant branch of SAFE,

as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiary

and affiliate.

However, we cannot provide any assurances that their existing registrations have fully complied with, and they

have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required

by Circular 75.

Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether

SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies.

For example, our

present and prospective PRC subsidiarys and affiliates ability to conduct foreign exchange activities, such as the

remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC

resident beneficial holders.

5 unchanged sentences

to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions,

restrict our overseas or cross-border investment activities, limit our subsidiary’s and affiliate’s ability to make

restrict our overseas or cross-border investment activities, limit our subsidiarys and affiliates ability to make

distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

Under the New EIT Law, we may

be classified as a “resident enterprise”

Such classification will likely result in unfavorable tax consequences

to us and our non-PRC shareholders.

Under the New EIT Law effective on

January 1, 2008, an enterprise established outside China with “de facto management bodies”

within China is considered

a “resident enterprise,”

meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise

income tax purposes.

The implementing rules of the New EIT Law define de facto management as “substantial and overall management

and control over the production and operations, personnel, accounting, and properties”

of the enterprise.

On April 22, 2009, the State Administration

of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated

Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application

of the New EIT Law and its implementation non-Chinese enterprise or group controlled offshore entities.

Pursuant to the Notice,

an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a

“non-domestically incorporated resident enterprise”

if (i) its senior management in charge of daily operations reside

or perform their duties mainly in China;

(ii) its financial or personnel decisions are made or approved by bodies or persons in

(iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in

and (iv) at least half of its directors with voting rights or senior management often resident in China.

A resident enterprise

would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10%

when paying dividends to its non-PRC shareholders.

However, it remains unclear as to whether the Notice is applicable to an offshore

enterprise incorporated by a Chinese natural person.

Nor are detailed measures on imposition of tax from non-domestically incorporated

resident enterprises are available.

Therefore, it is unclear how tax authorities will determine tax residency based on the facts

of each case.

Given the above conditions, although

unlikely, we may be deemed to be a resident enterprise by Chinese tax authorities.

If the PRC tax authorities determine that we

are a “resident enterprise”

for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could

First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC

enterprise income tax reporting obligations.

In our case, this would mean that income such as interest on financing proceeds and

non-China source income would be subject to PRC enterprise income tax at a rate of 25%.

Second, although under the New EIT Law

and its implementing rules dividends paid to us from our PRC subsidiary would qualify as “tax-exempt income,”

guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which

enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that

are treated as resident enterprises for PRC enterprise income tax purposes.

Finally, it is possible that future guidance issued

with respect to the new “resident enterprise”

classification could result in a situation in which a 10% withholding

tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from

transferring our shares.

We are actively monitoring the possibility of “resident enterprise”

If we were treated as a “resident

enterprise”

by PRC tax authorities, we would be subject to taxation in both the U.S.

and China, and our PRC tax may not be

creditable against our U.S.

We may be exposed to liabilities

under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could

have a material adverse effect on our business.

We are subject to the Foreign Corrupt

Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials

and political parties by U.S.

persons and issuers as defined by the statute, for the purpose of obtaining or retaining business.

We have operations, agreements with third parties and we earn the majority of our revenue in China.

PRC also strictly prohibits

bribery of government officials.

Our activities in China create the risk of unauthorized payments or offers of payments by our

executive officers, employees, consultants, sales agents or other representatives of our Company, even though they may not always

be subject to our control.

It is our policy to implement safeguards to discourage these practices by our employees.

existing safeguards and any future improvements may prove to be less than effective, and the executive officers, employees, consultants,

sales agents or other representatives of our Company may engage in conduct for which we might be held responsible.

Violations of

the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities,

which could negatively affect our business, operating results and financial condition.

the New EIT Law, we may be classified as a resident enterprise of China.

Such classification will likely result

in unfavorable tax consequences to us and our non-PRC shareholders.

the New EIT Law effective on January 1, 2008, an enterprise established outside China with de facto management bodies

within China is considered a resident enterprise, meaning that it can be treated in a manner similar to a Chinese

enterprise for enterprise income tax purposes.

The implementing rules of the New EIT Law define de facto management as substantial

and overall management and control over the production and operations, personnel, accounting, and properties of the enterprise.

April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese

Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies,

or the Notice, further interpreting the application of the New EIT Law and its implementation non-Chinese enterprise or group

controlled offshore entities.

Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by

a Chinese enterprise or group will be classified as a non-domestically incorporated resident enterprise if (i) its

senior management in charge of daily operations reside or perform their duties mainly in China;

(ii) its financial or personnel

decisions are made or approved by bodies or persons in China;

(iii) its substantial assets and properties, accounting books, corporate

chops, board and shareholder minutes are kept in China;

and (iv) at least half of its directors with voting rights or senior management

often resident in China.

A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income

and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC shareholders.

However, it remains unclear

as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person.

Nor are detailed measures

on imposition of tax from non-domestically incorporated resident enterprises are available.

Therefore, it is unclear how tax authorities

will determine tax residency based on the facts of each case.

the above conditions, although unlikely, we may be deemed to be a resident enterprise by Chinese tax authorities.

If the PRC tax

authorities determine that we are a resident enterprise for PRC enterprise income tax purposes, a number of unfavorable

PRC tax consequences could follow.

First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable

income as well as PRC enterprise income tax reporting obligations.

In our case, this would mean that income such as interest on

financing proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%.

Second, although

under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiary would qualify as tax-exempt

income, we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange

control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound

remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.

Finally, it is possible

that future guidance issued with respect to the new resident enterprise classification could result in a situation

in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by

our non-PRC shareholders from transferring our shares.

We are actively monitoring the possibility of resident enterprise

we were treated as a resident enterprise by PRC tax authorities, we would be subject to taxation in both the U.S.

and China, and our PRC tax may not be creditable against our U.S.

may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination

that we violated these laws could have a material adverse effect on our business.

are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments

to foreign governments and their officials and political parties by U.S.

persons and issuers as defined by the statute, for the

purpose of obtaining or retaining business.

We have operations, agreements with third parties and we earn the majority of our

revenue in China.

PRC also strictly prohibits bribery of government officials.

Our activities in China create the risk of unauthorized

payments or offers of payments by our executive officers, employees, consultants, sales agents or other representatives of our

Company, even though they may not always be subject to our control.

It is our policy to implement safeguards to discourage these

practices by our employees.

However, our existing safeguards and any future improvements may prove to be less than effective,

and the executive officers, employees, consultants, sales agents or other representatives of our Company may engage in conduct

for which we might be held responsible.

Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or

civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and

financial condition.

In addition, the U.S.

government may seek

to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

Because our business is located

in the PRC, we may have difficulty establishing adequate management, legal and financial controls, which we are required to do

in order to comply with U.S.

government may seek to hold our Company liable for successor liability FCPA violations

committed by companies in which we invest or that we acquire.

our business is located in the PRC, we may have difficulty establishing adequate management, legal and financial controls, which

we are required to do in order to comply with U.S.

securities laws.

PRC companies have historically not

adopted a Western style of management and financial reporting concepts and practices, which includes strong corporate governance,

internal controls and, computer, financial and other control systems.

Some of our staff is not educated and trained in the Western

system, and we may have difficulty hiring new employees in the PRC with such training.

As a result of these factors, we may experience

difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements,

books of account and corporate records and instituting business practices that meet Western standards.

Therefore, we may, in turn,

experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley

This may result in significant deficiencies or material weaknesses in our internal controls, which could impact the

reliability of our financial statements and prevent us from complying with Commission rules and regulations and the requirements

of the Sarbanes-Oxley Act of 2002.

Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect

on our business.

companies have historically not adopted a Western style of management and financial reporting concepts and practices, which includes

strong corporate governance, internal controls and, computer, financial and other control systems.

Some of our staff is not educated

and trained in the Western system, and we may have difficulty hiring new employees in the PRC with such training.

of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial

data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western

Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required

under Section 404 of the Sarbanes-Oxley Act of 2002.

This may result in significant deficiencies or material weaknesses in our

internal controls, which could impact the reliability of our financial statements and prevent us from complying with Commission

rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002.

Any such deficiencies, weaknesses or lack of compliance

could have a materially adverse effect on our business.

UNRESOLVED STAFF COMMENTS

Not applicable.

corporate headquarters is located at 1460 Broadway, New York, New York.

We do not own any real property.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors