FingerMotion, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - 48 - Table of Contents FINGERMOTION, INC. CONSOLIDATED FINANCIAL STATEMENTS For the year ended February 28, 2022 (Expressed in U.S. Dollars) Index to the Financial Statements Contents Page(s) Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets at February 28, 2022 and February 28, 2021 F-3 Consolidated Statements of Operations for the years ended February 28, 2022 and February 28, 2021 F-4 Consolidated Statement of Shareholders’ Equity for the years ended February 28, 2022 and February 28, 2021 F-5 Consolidated Statements of Cash Flows for the years ended February 28, 2022 and February 28, 2021 F-6 Notes to the Consolidated Financial Statements F-7 F- 1 Table of Contents 中正達會計師事務所 Centurion ZD CPA & Co. Certified Public Accountants (Practising) Unit 1304, 13/F, Two Harbourfront, 22 Tak Fung Street, Hunghom, Hong Kong. 香港 紅磡 德豐街22號 海濱廣場二期 13樓1304室 Tel 電話: (852) 2126 2388 Fax 傳真: (852) 2122 9078 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of FingerMotion, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of FingerMotion, Inc. (the “Company”) as of February 28, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended February 28, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended February 28, 2022 and 2021 in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Centurion ZD CPA & Co. Centurion ZD CPA & Co. Hong Kong May 31, 2022 We have served as the Company’s auditor since 2017 PCAOB ID # 2769 F- 2 Table of Contents FingerMotion, Inc. Consolidated Balance Sheets February 28, February 28, 2022 2021 ASSETS Current Assets Cash and cash equivalents $ 461,933 $ 850,717 Accounts receivable 4,875,149 4,099,312 Inventories 1,407 1,401 Prepayment and deposit 3,331,342 646,377 Other receivables 1,539,265 1,506,720 Current Assets 10,209,096 7,104,527 Non-current Assets Equipment 26,808 26,453 Intangible assets 125,932 161,210 Right-of-use asset 5,069 49,314 Non-current Assets 157,809 236,977 TOTAL ASSETS $ 10,366,905 $ 7,341,504 LIABILITIES AND SHAREHOLDER’S DEFICIT Current Liabilities Accounts payable $ 3,588,289 $ 2,473,636 Accrual and other payables 1,685,297 1,046,190 Loan payable, current portion — 544,900 Lease liability, current portion 5,069 47,569 Current Liabilities 5,278,655 4,112,295 Non-current Liabilities Loan payable, non-current portion — 1,109,307 Lease liability, non-current portion — 4,936 Non-current Liabilities — 1,114,243 TOTAL LIABILITIES $ 5,278,655 $ 5,226,538 SHAREHOLDERS’ EQUITY Preferred stock, par value $ .0001 per share; Authorized 1,000,000 shares; issued and outstanding - 0 - shares. — — Common Stock, par value $ .0001 per share; Authorized 200,000,000 shares; issued and outstanding 42,627,260 shares and 38,903,494 issued and outstanding at February 28, 2022 and February 28, 2021 respectively 4,263 3,890 Additional paid-in capital 21,730,941 14,170,815 Additional paid-in capital - stock options 356,328 — Accumulated deficit ( 17,152,172 ) ( 12,208,728 ) Accumulated other comprehensive income 137,911 140,906 Stockholders’ equity before non-controlling interests 5,077,271 2,106,883 Non-controlling interests 10,979 8,083 TOTAL SHAREHOLDERS’ EQUITY 5,088,250 2,114,966 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,366,905 $ 7,341,504 F- 3 Table of Contents FingerMotion, Inc. Consolidated Statements of Operations Year Ended February 28, February 28, 2022 2021 Revenue $ 22,927,415 $ 16,683,570 Cost of revenue ( 20,113,294 ) ( 15,036,876 ) Gross profit 2,814,121 1,646,694 Amortization & depreciation ( 57,894 ) ( 27,055 ) Impairment — ( 41,045 ) General & administrative expenses ( 5,280,582 ) ( 4,246,880 ) Marketing cost ( 641,917 ) ( 364,160 ) Research & development ( 923,387 ) ( 552,343 ) Stock compensation expenses ( 777,576 ) ( 640,394 ) Total operating expenses ( 7,681,356 ) ( 5,871,877 ) Net loss from operations ( 4,867,235 ) ( 4,225,183 ) Other income (expense): Interest income 21,150 3,277 Interest expense ( 170,141 ) ( 273,594 ) Exchange rate gain (loss) ( 2,021 ) 1,853 Gain on disposal of subsidiary — 8,298 Other income 77,699 107,275 Total other income (expense) ( 73,313 ) ( 152,891 ) Net Loss before income tax $ ( 4,940,548 ) $ ( 4,378,074 ) Income tax expenses — — Net Loss $ ( 4,940,548 ) $ ( 4,378,074 ) Less: Net profit attributable to the non-controlling interest 2,896 3,900 Net loss attributable to the Company’s shareholders $ ( 4,943,444 ) $ ( 4,381,974 ) Other comprehensive income: Foreign currency translation adjustments ( 2,995 ) 136,942 Comprehensive loss $ ( 4,946,439 ) $ ( 4,245,032 ) Less: comprehensive income (loss) attributable to non-controlling interest 257 535 Comprehensive loss attributable to the Company $ ( 4,946,696 ) $ ( 4,245,567 ) NET LOSS PER SHARE Loss Per Share - Basic $ ( 0.12 ) $ ( 0.13 ) Loss Per Share - Diluted $ ( 0.12 ) $ ( 0.13 ) NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY Loss Per Share - Basic $ ( 0.12 ) $ ( 0.13 ) Loss Per Share - Diluted $ ( 0.12 ) $ ( 0.13 ) Weighted Average Common Shares Outstanding - Basic 40,840,413 33,702,858 Weighted Average Common Shares Outstanding - Diluted 40,840,413 33,702,858 F- 4 Table of Contents FingerMotion, Inc. Consolidated Statement of Shareholders’ Equity ` Accumulated Capital Paid Additional Other Common Stock in Excess Paid-in capital Accumulated Comprehensive Stockholders’ Non-controlling Shares Amount of Par Value stock options Deficit Income equity interest Total Balance at March 1, 2021 38,903,494 3,890 14,170,815 — ( 12,208,728 ) 140,906 2,106,883 8,083 2,114,966 Common stock issued for cash 1,136,566 114 5,114,385 — — — 5,114,499 — 5,114,499 Common stock issued for professional service 125,000 13 579,987 — — — 580,000 — 580,000 Execution of convertible notes 2,477,200 248 1,940,752 — — — 1,941,000 — 1,941,000 Stock subscribed / (cancelled) ( 15,000 ) ( 2 ) ( 74,998 ) — — — ( 75,000 ) — ( 75,000 ) Additional paid-in capital - stock options — — — 356,328 — — 356,328 — 356,328 Accumulated other comprehensive income — — — — — ( 2,995 ) ( 2,995 ) — ( 2,995 ) Net (Loss) — — — — ( 4,943,444 ) — ( 4,943,444 ) 2,896 ( 4,940,548 ) Balance at February 28, 2022 42,627,260 4,263 21,730,941 356,328 ( 17,152,172 ) 137,911 5,077,271 10,979 5,088,250 Accumulated Capital Paid Additional Other Common Stock in Excess Shares to be Paid-in capital Comprehensive Stockholders’ Non-controlling Shares Amount of Par Value stock options Deficit Income equity interest Total Balance at March 1, 2020 25,847,953 2,585 7,521,587 — ( 7,826,754 ) 3,964 ( 298,618 ) 4,183 ( 294,435 ) Common stock issued for cash 3,847,334 384 4,886,116 — — — 4,886,500 — 4,886,500 Common stock issued for professional service 8,858,207 886 778,147 — — — 779,033 — 779,033 Execution of convertible notes 500,000 50 999,950 — — — 1,000,000 — 1,000,000 Stock subscribed / (cancelled) ( 150,000 ) ( 15 ) ( 14,985 ) — — — ( 15,000 ) — ( 15,000 ) Accumulated other comprehensive income — — — — — 136,942 136,942 — 136,942 Net (Loss) — — — — ( 4,381,974 ) — ( 4,381,974 ) 3,900 ( 4,378,074 ) Balance at February 28, 2021 38,903,494 3,890 14,170,815 — ( 12,208,728 ) 140,906 2,106,883 8,083 2,114,966 F- 5 Table of Contents FingerMotion, Inc. Consolidated Statements of Cash Flows Year Ended February 28, February 28, 2022 2021 Net (loss) $ ( 4,940,548 ) $ ( 4,378,074 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Share based compensation expenses 777,576 640,394 Amortization and depreciation 57,894 27,055 Impairment of intangible assets — 41,045 Gain on disposal of subsidiary — ( 8,298 ) Change in operating assets and liabilities: (Increase) decrease in accounts receivable ( 775,837 ) ( 1,437,329 ) (Increase) decrease in prepayment and deposit ( 2,684,965 ) 1,975,673 (Increase) decrease in other receivable ( 32,545 ) ( 906,265 ) (Increase) decrease in inventories ( 6 ) ( 1,401 ) Increase (decrease) in accounts payable 1,114,653 ( 230,118 ) Increase (decrease) in accrual and other payables 639,107 2,509 Increase (decrease) in due to lease liability ( 3,191 ) 3,191 Net Cash provided by (used in) operating activities ( 5,847,862 ) ( 4,271,618 ) Cash flows from investing activities Purchase of equipment ( 14,394 ) ( 16,996 ) Purchase of intangible assets ( 11,678 ) ( 221,489 ) Net cash provided by (used in) investing activities ( 26,072 ) ( 238,485 ) Cash flows from financing activities Repayment to related parties — ( 1,351,107 ) Execution of convertible notes — ( 1,000,000 ) Proceed from loan payable 299,695 1,654,207 Common stock issued for cash 5,114,499 5,886,500 Cancellation of shares — ( 15,000 ) Net cash provided by (used in) financing activities 5,414,194 5,174,600 Effect of exchange rates on cash and cash equivalents 70,956 83,301 Net change in cash ( 388,784 ) 747,798 Cash at beginning of period 850,717 102,919 Cash at end of period $ 461,933 $ 850,717 Major non-cash transactions: Conversion of loan payables to shares $ 1,941,000 $ — Supplemental disclosures of cash flow information: Interest paid $ — $ — Taxes paid $ — $ — F- 6 Table of Contents Note 1 – Nature of Business and basis of Presentation FingerMotion, Inc. fka Property Management Corporation of America (the “Company”) was incorporated on January 23, 2014 under the laws of the State of Delaware. The Company then offered management and consulting services to residential and commercial real estate property owners who rent or lease their property to third party tenants. The Company changed its name to FingerMotion, Inc. on July 13, 2017 after a change in control. In July 2017 the Company acquired all of the outstanding shares of Finger Motion Company Limited (“FMCL”), a Hong Kong corporation that is an information technology company which specialize in operating and publishing mobile games. Pursuant to the Share Exchange Agreement with FMCL, effective July 13, 2017 (the “Share Exchange Agreement”, the Company agreed to exchange the outstanding equity stock of FMCL held by the FMCL Shareholders for shares of common stock of the Company. At the Closing Date, the Company issued 12,000,000 shares of common stock to the FMCL shareholders. In addition, the Company issued 600,000 shares to other consultants in connection with the transactions contemplated by the Share Exchange Agreement. The transaction was accounted for as a “reverse acquisition” since, immediately following completion of the transaction, the shareholders of FMCL effectuated control of the post-combination Company. For accounting purposes, FMCL was deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of FMCL (i.e., a capital transaction involving the issuance of shares by the Company for the shares of FMCL). Accordingly, the consolidated assets, liabilities and results of operations of FMCL became the historical financial statements of FingerMotion, Inc. and its subsidiaries, and the Company’s assets, liabilities and results of operations were consolidated with FMCL beginning on the acquisition date. No step-up in basis or intangible assets or goodwill were recorded in this transaction. As a result of the Share Exchange Agreement and the other transactions contemplated thereunder, FMCL became a wholly owned subsidiary of the Company. FMCL, a Hong Kong corporation, was formed in April 6, 2016. On October 16, 2018, the Company through its indirect wholly-owned subsidiary, Shanghai JiuGe Business Management Co., Ltd. (“JiuGe Management”), entered into a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Shanghai JiuGe Information Technology Co., Ltd. (“JiuGe Technology”) became JiuGe Management’s contractually controlled affiliate. The use of VIE agreements is a common structure used to acquire PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government. The VIE Agreements include a Consulting Services Agreement, a Loan Agreement, a Power of Attorney Agreement, a Call Option Agreement, and a Share Pledge Agreement in order to secure the connection and commitments of the JiuGe Technology. On March 7, 2019, JiuGe Technology also acquired 99% of equity interest of Beijing XunLian (“BX”), a subsidiary that provides bulk distribution of SMS messages for JiuGe customers at discounted rates. Finger Motion Financial Company Limited was incorporated on January 24, 2020 and is 100% owned by FingerMotion, Inc. The company has been activated for the insurtech business during the last quarter of the fiscal year where the Big Data division secured its first contract and recorded revenue. Shanghai TengLian JiuJiu Information Communication Technology Co., Ltd. was incorporated on December 23, 2020 for the purpose of venturing into the mobile phone sales in China. It is 99% owned by JiuGe Technology. On February 5, 2021, JiuGe Technology has disposed of its 99% owned subsidiary, Suzhou BuGuNiao Digital Technology Co., Ltd which was established to venture into R&D projects. Note 2 - Summary of Principal Accounting Policies Principles of Consolidation and Presentation The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the financial statements of the Company, and its wholly-owned subsidiaries. All intercompany accounts, transactions, and profits have been eliminated upon consolidation. F- 7 Table of Contents Note 2 - Summary of Principal Accounting Policies (continued) Variable interest entity Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements, the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. JiuGe Technology’s actual stockholders do not hold any kick-out rights that affect the consolidation determination. Through the VIE agreements disclosed in Note 1, the Company is deemed the primary beneficiary of JiuGe Technology. Accordingly, the results of JiuGe Technology have been included in the accompanying consolidated financial statements. JiuGe Technology has no assets that are collateral for or restricted solely to settle their obligations. The creditors of JiuGe Technology do not have recourse to the Company’s general credit. The following assets and liabilities of the VIE and VIE’s subsidiaries are included in the accompanying consolidated financial statements of the Company as of February 28, 2022 and February 28, 2021: Schedule of Variable Interest Entities Assets and liabilities of the VIE February 28, 2022 February 28, 2021 Current assets $ 4,503,346 $ 2,251,100 Non-current assets 21,042 45,503 Total assets $ 4,524,388 $ 2,296,603 Current liabilities $ 8,556,844 $ 4,906,955 Non-current liabilities — — Total liabilities $ 8,556,844 $ 4,906,955 Assets and liabilities of the VIE Subsidiary February 28, 2022 February 28, 2021 Current assets $ 5,330,206 $ 4,177,156 Non-current assets 9,121 — Total assets $ 5,339,327 $ 4,177,156 Current liabilities $ 4,162,414 $ 3,318,450 Non-current liabilities — — Total liabilities $ 4,162,414 $ 3,318,450 F- 8 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) Operating Result of VIE For the Year Ended February 28, 2022 For the Year Ended February 28, 2021 Revenue $ 2,971,031 $ 1,912,012 Cost of revenue ( 867,154 ) ( 1,112,697 ) Gross profit (loss) $ 2,103,877 $ 799,315 Amortization and depreciation ( 7,948 ) ( 7,102 ) General and administrative expenses ( 2,313,818 ) ( 1,709,543 ) Marketing cost ( 562,637 ) ( 364,160 ) Research & development ( 583,874 ) ( 170,006 ) Total operating expenses $ ( 3,468,277 ) $ ( 2,250,811 ) Profit (loss) from operations $ ( 1,364,400 ) $ ( 1,451,496 ) Interest income 20,971 3,166 Other income 17,403 24,126 Total other income (expense) $ 38,374 $ 27,292 Tax expense — — Net profit (loss) $ ( 1,326,026 ) $ ( 1,424,204 ) Operating Result of VIE Subsidiary For the Year Ended February 28, 2022 For the Year Ended February 28, 2021 Revenue $ 19,824,966 $ 14,738,480 Cost of revenue ( 18,886,139 ) ( 13,924,179 ) Gross profit (loss) $ 938,827 $ 814,301 Amortization and depreciation ( 990 ) ( 713 ) General and administrative expenses ( 597,962 ) ( 432,365 ) Marketing cost ( 79,280 ) — Research & development ( 31,505 ) ( 55,965 ) Total operating expenses $ ( 709,737 ) $ ( 489,043 ) Profit (loss) from operations $ 229,090 $ 325,258 Interest income 83 47 Other income 60,296 64,709 Total other income (expense) $ 60,379 $ 64,756 Tax expense — — Net profit (loss) $ 289,469 $ 390,014 F- 9 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) Use of Estimates The preparation of the Company’s financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates. Certain Risks and Uncertainties The Company relies on cloud-based hosting through a global accredited hosting provider. Management believes that alternate sources are available; however, disruption or termination of this relationship could adversely affect our operating results in the near-term. Identifiable Intangible Assets Identifiable intangible assets are recorded at cost and are amortized over 3 - 10 years . Similar to tangible property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment of Long-Lived Assets The Company classifies its long-lived assets into: (i) computer and office equipment; (ii) furniture and fixtures, (iii) leasehold improvements, and (iv) finite – lived intangible assets. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary. The Company makes various assumptions and estimates regarding estimated future cash flows and other factors in determining the fair values of the respective assets. The assumptions and estimates used to determine future values and remaining useful lives of long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as the Company’s business strategy and its forecasts for specific market expansion. Accounts Receivable and Concentration of Risk Accounts receivable, net is stated at the amount the Company expects to collect, or the net realizable value. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. Lease Operating and finance lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. When the rate implicit to the lease cannot be readily determined, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use asset includes any lease payments made and lease incentives received prior to the commencement date. Operating lease right-of-use assets also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. F- 10 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) Cash and Cash Equivalents Cash and cash equivalents represent cash on hand, demand deposits, and other short-term highly liquid investments placed with banks, which have original maturities of three months or less and are readily convertible to known amounts of cash. Property and Equipment Property and equipment are stated at cost. Depreciation of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the estimated useful lives of the assets. Estimated useful lives range from three to seven years . Land is classified as held for sale when management has the ability and intent to sell, in accordance with ASC Topic 360-45. Earnings Per Share Basic (loss) earnings per share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share. FASB Accounting Standard Codification Topic 260 (“ASC 260”), “Earnings Per Share,” requires that employee equity share options, non-vested shares and similar equity instruments granted to employees be treated as potential common shares in computing diluted earnings per share. Diluted earnings per share should be based on the actual number of options or shares granted and not yet forfeited, unless doing so would be anti-dilutive. The Company uses the “treasury stock” method for equity instruments granted in share-based payment transactions provided in ASC 260 to determine diluted earnings per share. Antidilutive securities represent potentially dilutive securities which are excluded from the computation of diluted earnings or loss per share as their impact was antidilutive. Revenue Recognition The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) beginning on January 1, 2018 using the modified retrospective approach. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of ASC 606 and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606. The Company recognizes revenue from providing hosting and integration services and licensing the use of its technology platform to its customers. The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer (for licensing, revenue is recognized when the Company’s technology is used to provide hosting and integration services); (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of fees is probable. We account for our multi-element arrangements, such as instances where we design a custom website and separately offer other services such as hosting, which are recognized over the period for when services are performed. F- 11 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) Income Taxes The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. Non-controlling interest Non-controlling interests held 1% of the shares of two of our subsidiaries are recorded as a component of our equity, separate from the Company’s equity. Purchase or sales of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings. Recently Issued Accounting Pronouncements The Company does not believe recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows. Note 3 - Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $ 17,152,172 and $ 12,208,728 as at February 28, 2022 and February 28, 2021 respectively, and had a net loss of $ 4,940,548 and $ 4,378,074 for the years ended February 28, 2022 and February 28, 2021, respectively. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing to fund operations, implement its business model, and ultimately, attain profitable operations. The Company will need to secure additional funds through various means, including equity and debt financing or any similar financing. There can be no assurance that the Company will be able to obtain additional equity or debt financing, if and when needed, on terms acceptable to the Company, or at all. Any additional equity or debt financing may involve substantial dilution to the Company’s stockholders, restrictive covenants or high interest costs. The Company’s long-term liquidity also depends upon its ability to generate revenues and achieve profitability. Note 4 - Revenue We recorded $22,927,415 and $16,683,570 in revenue, respectively, for the years ended February 28, 2022 and February 28, 2021. Schedule of Revenues February 28, 2022 February 28, 2021 Telecommunication Products & Services $ 8,657,277 $ 3,211,103 SMS & MMS Business 14,138,720 13,439,390 Big Data 131,418 33,077 Revenues $ 22,927,415 $ 16,683,570 F- 12 Table of Contents Note 5 – Equipment At February 28, 2022 and February 28, 2021, the company has the following amounts related to tangible assets: Schedule of Equipment February 28, 2022 February 28, 2021 Equipment $ 62,347 $ 47,953 Less: accumulated depreciation ( 35,539 ) ( 21,500 ) Net equipment $ 26,808 $ 26,453 No significant residual value is estimated for the equipment. Depreciation expense for the years ended February 28, 2022 and February 28, 2021 At February 28, 2022 and February 28, 2021 totaled $ 14,039 and $ 11,150 , respectively. Note 6 – Intangible Assets At February 28, 2022 and February 28, 2021, the company has the following amounts related to intangible assets: Schedule of Intangible Assets February 28, 2022 February 28, 2021 Licenses $ 200,000 $ 200,000 Mobile applications 233,167 221,489 Gross Intangible Assets 433,167 421,489 Less: accumulated amortization ( 266,190 ) ( 219,234 ) Impairment of intangible assets ( 41,045 ) ( 41,045 ) Net intangible assets $ 125,932 $ 161,210 No significant residual value is estimated for these intangible assets. Amortization expense for the years ended February 28, 2022 and February 28, 2021 totaled $46,956 and $15,905, respectively. Note 7 – Prepayment and Deposit Prepaid expenses consist of the deposit pledge to the vendor for stocks credits for resale. Our current vendors are China Unicom and China Mobile for our Telecommunication Products & Services business and our SMS & MMS business. Deposits also includes payments placed into the e-commerce platforms where we offer our products and services. The platforms are PinDuoDuo, Tmall and JD.com. Schedule of Prepayment and Deposit February 28, 2022 February 28, 2021 Telecommunication Products & Services Deposit Paid / Prepayment $ 2,396,550 $ 333,646 Deposit received — — Net Prepaid expenses for Telecommunication Products & Services $ 2,396,550 $ 333,646 Others prepayment 369,256 143,288 Prepayment and deposit $ 2,765,806 $ 476,934 February 28, 2022 February 28, 2021 SMS & MMS Business Deposit Paid / Prepayment $ 565,536 $ 169,443 Deposit received Net Prepaid expenses for SMS $ 565,536 $ 169,443 Others prepayment — — Prepayment and deposit $ 565,536 $ 169,443 F- 13 Table of Contents Note 8 – Right-of-use Asset and Lease Liability The Company has entered into lease agreements with various third parties. The terms of operating leases are one to two years. These operating leases are included in “Right-of-use Asset” on the Company’s Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are included in “Lease liability” on the Company’s Consolidated Balance Sheet. Additionally, the Company has entered into various short-term operating leases with an initial term of twelve months or less. These leases are not recorded on the Company’s balance sheet. All operating lease expense is recognized on a straight-line basis over the lease term in the year ended February 28, 2022. Information related to the Company’s right-of-use assets and related lease liabilities were as follows: February 28, 2022 February 28, 2021 Right-of-use asset Right-of-use asset, net $ 5,069 $ 49,314 Lease Liability Current lease liability $ 5,069 $ 47,569 Non-current lease liability — 4,936 Total lease liability $ 5,069 $ 52,505 Remaining lease term and discount rate February 28, 2022 Weighted-average remaining lease term 2 months Weighted-average discount rate 2.48 % Commitments The following table summarizes the future minimum lease payments due under the Company’s operating leases as of February 28, 2022: Schedule of Future Lease Minimum Lease Payment 2022 $ 5,085 Thereafter — Less: imputed interest ( 16 ) Total lease liability $ 5,069 Note 9 – Loan Payable The following table summarizes loan principal due by the Company as of February 28, 2022: Schedule of Loan Payable Lender Term February 28, 2022 February 28, 2021 Liew Yow Ming From April 8, 2020 to April 7, 2022 $ — $ 758,063 Liew Yow Ming From April 16, 2020 to April 15, 2022 — 351,244 Liew Yow Ming From July 29, 2020 to July 28, 2021 — 544,900 Liew Yow Ming From August 1, 2021 to January 31, 2022 — — Due to Related Parties $ — $ 1,654,207 Due to Related Parties, Current Current portion $ — $ 544,900 Due to Related Parties, Non-Current Non-current portion $ — $ 1,109,307 Liew Yow Ming is a non-controlling stockholder of the Company. Loans from Mr. Liew Yow Ming were fixed at rate of 20% per annum. Interest expenses incurred on loans payable for the year ended February 28, 2022 and February 28, 2021 were $ 170,141 and $ 242,756 , respectively. On July 28, 2021, the Company has received a conversion notice from Liew Yow Ming for the conversion of the note to convert all US$ 545,000 for shares of common stock of the Company, which was converted on August 16, 2021 into 218,000 shares of our common stock at a price of $2.50 per share. F- 14 Table of Contents Note 9 – Loan Payable (continued) On July 29, 2021, the Company has received a conversion notice from Liew Yow Ming for the conversion of the note to convert all US$ 350,000 for shares of common stock of the Company, which was converted on August 16, 2021 into 700,000 shares of our common stock at a price of $0.50 per share. On August 27, 2021, the Company has received a conversion notice from Liew Yow Ming for the conversion of the note to convert all US$ 750,000 for shares of common stock of the Company, which was converted on August 27, 2021 into 1,500,000 shares of our common stock at a price of $0.50 per share. On August 27, 2021, the Company has received a conversion notice from Liew Yow Ming for the conversion of the note to convert all US$ 296,000 for shares of common stock of the Company, which was converted on August 17, 2021 into 59,200 shares of our common stock at a price of $5.00 per share. Note 10 - Common Stock The Company issued 12,705,541 shares of common stock for the year ended February 28, 2021 for consideration of $5,665,533, including 8,858,207 shares of common stock to consultants. The Company issued 500,000 shares of common stock at a deemed price of $2.00 per share during the fiscal year ended February 28, 2021 pursuant to the conversion of promissory notes in the aggregate amount of $1,000,000. The Company cancelled 150,000 shares of common stock during the fiscal year ended February 28, 2021 pursuant to a financial advisory service agreement. On March 29, 2021, the Company issued 10,000 shares of our common stock at $2.00 per share to one individual pursuant to the exercise of warrants. On April 14, 2021, the Company issued 5,000 shares of our common stock at price of $2.00 per share to one individual pursuant to a consulting agreement. On May 7, 2021, the Company issued (i) 70,000 shares of our common stock at $2.00 per share to 2 individuals and one entity pursuant to the exercise of warrants, and (ii) 6,666 shares of our common stock at $3.00 to one entity pursuant to the exercise of warrants. On June 1, 2021, the Company issued 25,000 shares of our common stock at a deemed price of $5.00 per shares to one individual pursuant to a consulting agreement. On July 13, 2021, the Company issued (i) 568,900 shares of our common stock at price of $5.00 per share to 17 individuals and 2 entities (ii) 45,000 shares of our common stock at $2.00 per share to 2 individuals pursuant to the exercise of warrants, (iii) 60,000 shares of our common stock at $3.00 per share to one individual pursuant to the exercise of warrants, (iv) 5,000 shares of our common stock at deemed price of $2.00 per share to one individual pursuant to a consulting agreement, and (v) 25,000 shares of our common stock at a deemed price of $5.00 per share to one individual pursuant to a consulting agreement. On August 16, 2021, the Company issued 218,000 shares of common stock at $2.50 per share and 700,000 shares of common stock at $0.50 per share to one individual pursuant to the conversion of promissory notes. On August 27, 2021, the Company issued 1,500,000 shares of common stock at $0.50 per share and 59,200 shares of common stock at $5.00 per share to one individual pursuant to the conversion of promissory notes. On October 28, 2021, the Company issued 5,000 shares of our common stock at deemed price of $2.00 per share to one individual pursuant to a consulting agreement. On November 5, 2021, the Company issued 276,000 shares of our common stock at price of $5.00 per share to 4 individuals. F- 15 Table of Contents Note 10 - Common Stock (continued) On December 7, 2021, the Company issued 30,000 shares of our common stock at price of $3.00 per share to 2 individuals pursuant to the exercise of warrants. On January 7, 2022, the Company issued 55,000 shares of our common stock at deemed price of $5.00 per share to two entities pursuant to a consulting agreement. On January 12, 2022, the company cancelled 15,000 shares of our common stock issued to 1 individual pursuant to a consulting agreement. On February 4, 2022, the Company issued 5,000 shares of our common stock at deemed price of $5.00 per share to one entity pursuant to a consulting agreement. On February 7, 2022, the Company issued 70,000 shares of our common stock at price of $5.00 per share to 4 individuals As of February 28, 2022, and February 28, 2021, there were 42,627,260 and 38,903,494 shares of the Company’s common stock issued and outstanding, and none of the preferred shares were issued and outstanding. Share Purchase Warrants A continuity schedule of outstanding share purchase warrants as at February 28, 2022, and the changes during the periods, is as follows: Number of Warrants Weighted Average Exercise Price Balance, February 28, 2020 — $ — Issued in Connection with October 2020 Offering 488,500 $ 2.10 Issued in connection with January 2021 Offering 1,604,334 $ 3.00 Exercised ( 25,000 ) $ 2.00 Balance, February 28, 2021 2,067,834 $ 2.80 Exercised ( 221,666 ) $ 2.44 Balance, February 28, 2022 1,846,168 $ 2.84 During Fiscal 2022 and Fiscal 2021, we received cash proceeds totaling $539,998 and $50,000, respectively, from the exercise of share purchase warrants. A summary of share purchase warrants outstanding and exercisable as at February 28, 2022 is as follows: Number of Warrants Remaining Contractual Exercise Price Outstanding Life (Years) Expiry Date $ 2.00 288,500 0.64 18-Oct-22 $ 3.00 50,000 0.64 18-Oct-22 $ 3.00 1,507,668 0.87 12-Jan-23 $ 2.84 1,846,168 F- 16 Table of Contents Stock Options On December 28, 2021, we granted an aggregate of 4,545,500 stock options pursuant to our 2021 Stock Incentive Plan having an exercise price of $8.00 per share and an expiry date of five years from the date of grant to 40 individuals who were directors, officers, employees and consultants of the Company. We relied upon the exemption from registration under the U.S. Securities Act provided by Rule 903 of Regulation S promulgated under the U.S. Securities Act for the grant of stock options to the individuals who are non-U.S. persons, and upon the exemption from registration under Section 4(a)(2) of the U.S. Securities Act for two individuals who are U.S. persons. The stock options are all subject to vesting provisions of 20% on the date of grant and 20% on each of the first, second, third and fourth anniversary of the date of grant. The fair value of these stock options was estimated at the date of grant, using the Black-Scholes Option Valuation Model , with the following weighted average assumptions: Year Ended February 28, 2022 2021 Expected Risk Free Interest Rate 1.06 % — Expected Volatility 15.27 % — Expected Life in Years 5.0 — Expected Dividend Yield — — Weighted-Average Grant Date Fair Value $ 6.46 — A continuity schedule of outstanding stock options as at February 28, 2022, and the changes during the fiscal year periods, is as follows: Number of Stock Options Exercise Price Balance, February 28, 2021 - - Granted 4,545,500 $ 8.00 Cancelled/Forfeited — — Expired — — Balance, February 28, 2022 4,545,500 $ 8.00 The table below sets forth the number of shares issued and cash received upon exercise of stock options: Year Ended February 28, 2022 2021 Number of Options Exercised on Forfeiture Basis - - Number of Options Exercised on Cash Basis - - Total Number of Options Exercised - - Number of Shares Issued on Cash Exercise - - Number of Shares Issued on Forfeiture Basis - - Total Number of Shares Issued Upon Exercise of Options - - Cash Received from Exercise of Stock Options $ - $ - Total Intrinsic Value of Options Exercised $ - $ - F- 17 Table of Contents A continuity schedule of outstanding unvested stock options at February 28, 2022, and the changes during the fiscal year periods, is as follows: Number of Unvested Weighted Average Stock Options Grant Date Fair Value Balance, February 28, 2020 — — Granted — — Vested — — Cancelled/Forfeited — — Balance, February 28, 2021 — — Granted 4,545,500 $ 6.46 Vested - 909,000 $ 6.46 Balance, February 28, 2022 3,636,500 $ 6.46 As at February 28, 2022, the aggregate intrinsic value of all outstanding stock options granted was estimated at $0 as the current price is lower than the strike price. A summary of stock options outstanding and exercisable as at February 28, 2022 is as follows: Options Outstanding Options Exercisable Range of Exercise Prices Outstanding at February 28, 2022 Exercise Price Weighted Average Remaining Contractual Term (Years) Exercisable at February 28, 2022 Exercise Price Weighted Average Remaining Contractual Term (Years) $ 7.00 to $ 9.00 4,545,500 $ 8.00 4.83 909,000 $ 8.00 4.83 4,545,500 $ 8.00 4.83 909,000 $ 8.00 4.83 Note 11 - Earnings Per Share The following table sets forth the computation of basic and diluted earnings per common share: Schedule of Earning Per Share For the years ended February 28, 2022 February 28, 2021 Numerator - basic and diluted Net Loss $ ( 4,940,548 ) $ ( 4,378,074 ) Denominator Weighted average number of common shares outstanding —basic 40,840,413 33,702,858 Weighted average number of common shares outstanding —diluted 40,840,413 33,702,858 Loss per common share — basic $ ( 0.12 ) $ ( 0.13 ) Loss per common share — diluted $ ( 0.12 ) $ ( 0.13 ) F- 18 Table of Contents Note 12 - Income Taxes The Company and its subsidiaries file separate income tax returns. The United States of America FingerMotion, Inc. is incorporated in the State of Delaware in the U.S. and is subject to a U.S. federal corporate income tax of 21 % . The Company generated a taxable loss for the years ended February 28, 2022 and February 28, 2021. Hong Kong Finger Motion Company Limited is incorporated in Hong Kong and Hong Kong’s profits tax rate is 16.5 % . Finger Motion Company Limited did not earn any income that was derived in Hong Kong for the years ended February 28, 2022 and February 28, 2021. The People’s Republic of China (PRC) JiuGe Management, JiuGe Technology and Beijing XunLian were incorporated in the People’s Republic of China and subject to PRC income tax at 25 % . Income tax mainly consists of foreign income tax at statutory rates and the effects of permanent and temporary differences. The Company’s effective income tax rates for the years ended February 28, 2022 and February 28, 2021 are as follows: Schedule of Effective Income Tax Rate February 28, 2022 February 28, 2021 U.S. statutory tax rate 21.0 % 21.0 % Foreign income not registered in the U.S. ( 21.0 %) ( 21.0 %) PRC profit tax rate 25.0 % 25.0 % Changes in valuation allowance and others ( 25.0 %) ( 25.0 %) Effective tax rate 0.0 % 0.0 % At February 28, 2022 and February 28, 2021, the Company has a deferred tax asset of $1,235,861 and $1,095,494, resulting from certain net operating losses in U.S., respectively. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those net operating losses are available. The Company considers projected future taxable income and tax planning strategies in making its assessment. At present, the Company concludes that it is more-likely-than-not that the Company will be able to realize all of its tax benefits in the near future and therefore a valuation allowance has been provided for the full value of the deferred tax asset. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance. At February 28, 2022 and February 28, 2021, the valuation allowance was $1,235,861 and $1,095,494 respectively. Schedule of Deferred Tax Assets and Liabilities February 28, 2022 February 28, 2021 Deferred tax asset from operating losses carry-forwards $ 1,235,861 $ 1,095,494 Valuation allowance ( 1,235,861 ) ( 1,095,494 ) Deferred tax asset, net $ — $ — F- 19 Table of Contents Note 13 - Related Parties Transaction Name of related parties Relationship with the Company Mr Liew Yow Ming Non-controlling Stockholder b) The Company had the following related party balances at February 28, 2021 and February 28, 2022: Schedule of Related Parties Transactions February 28, 2022 February 28, 2021 Loan payables Mr. Liew Yow Ming $ — $ 1,654,207 Loans from Mr. Liew Yow Ming are fixed at an interest rate of 20% per annum with a fixed repayment term. Interest expenses incurred were $ 170,141 and $ 242,756 for the year ended February 28, 2022 and February 28, 2021, respectively. Note 14 - Commitments and Contingencies Legal proceedings The Company is not aware of any material outstanding claim and litigation against it. Note 15 – Subsequent Events Except for the above, the Company has determined that it does not have any material subsequent events to disclose in these consolidated financial statements. F- 20 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We did not have any disagreements on accounting and financial disclosures with our present accounting firm during the reporting period.