FingerMotion, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - 51 - Table of Contents FINGERMOTION, INC. CONSOLIDATED FINANCIAL STATEMENTS For the year ended February 28, 2023 (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, 2023 and February 28, 2022 F-3 Consolidated Statements of Operations for the years ended February 28, 2023 and February 28, 2022 F-4 Consolidated Statement of Shareholders’ Equity for the years ended February 28, 2023 and February 28, 2022 F-5 Consolidated Statements of Cash Flows for the years ended February 28, 2023 and February 28, 2022 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, 2023 and 2022, 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, 2023 and 2022, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended February 28, 2023 and 2022 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 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 30, 2023 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, 2023 2022 ASSETS Current Assets Cash and cash equivalents $ 9,240,241 $ 461,933 Accounts receivable 1,334,884 4,875,149 Inventories — 1,407 Prepayment and deposit 4,139,061 3,331,342 Other receivables 2,551,665 1,539,265 Total Current Assets 17,265,851 10,209,096 Non-current Assets Equipment 78,098 26,808 Intangible assets 73,066 125,932 Right-of-use asset 130,109 5,069 Total Non-current Assets 281,273 157,809 TOTAL ASSETS $ 17,547,124 $ 10,366,905 LIABILITIES AND SHAREHOLDER’S DEFICIT Current Liabilities Accounts payable $ 27,371 $ 3,588,289 Accrual and other payables 1,096,225 1,685,297 Stock subscription payables 60,000 — Convertible notes payable, current portion 730,000 — Lease liability, current portion 122,924 5,069 Total Current Liabilities 2,036,520 5,278,655 Non-current Liabilities Convertible notes payable, non-current portion 2,533,333 — Lease liability, non-current portion 4,971 — Total Non-current Liabilities 2,538,304 — TOTAL LIABILITIES $ 4,574,824 $ 5,278,655 SHAREHOLDERS’ EQUITY Preferred stock, par value $ 0.0001 per share; Authorized 1,000,000 shares; issued and outstanding - 0 - shares. — — Common Stock, par value $ 0.0001 per share; Authorized 200,000,000 shares; issued and outstanding 49,432,214 shares and 42,627,260 issued and outstanding at February 28, 2023 and February 28, 2022 respectively 4,943 4,263 Additional paid-in capital 37,406,415 21,730,941 Additional paid-in capital - stock options 632,664 356,328 Accumulated deficit ( 24,691,314 ) ( 17,152,172 ) Accumulated other comprehensive income ( 391,692 ) 137,911 Stockholders’ equity before non-controlling interests 12,961,016 5,077,271 Non-controlling interests 11,284 10,979 TOTAL SHAREHOLDERS’ EQUITY 12,972,300 5,088,250 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 17,547,124 $ 10,366,905 F- 3 Table of Contents FingerMotion, Inc. Consolidated Statements of Operations Year Ended February 28, February 28, 2023 2022 Revenue $ 34,054,205 $ 22,927,415 Cost of revenue ( 31,735,735 ) ( 20,113,294 ) Gross profit 2,318,470 2,814,121 Amortization & depreciation ( 63,103 ) ( 57,894 ) General & administrative expenses ( 5,675,113 ) ( 5,280,582 ) Marketing cost ( 430,291 ) ( 641,917 ) Research & development ( 797,549 ) ( 923,387 ) Stock compensation expenses ( 2,018,479 ) ( 777,576 ) Total operating expenses ( 8,984,535 ) ( 7,681,356 ) Net loss from operations ( 6,666,065 ) ( 4,867,235 ) Other income (expense): Interest income 52,015 21,150 Interest expense ( 566,083 ) ( 170,141 ) Exchange rate gain (loss) ( 776 ) ( 2,021 ) Other income ( 357,928 ) 77,699 Total other income (expense) ( 872,772 ) ( 73,313 ) Net Loss before income tax $ ( 7,538,837 ) $ ( 4,940,548 ) Income tax expenses — — Net Loss $ ( 7,538,837 ) $ ( 4,940,548 ) Less: Net profit attributable to the non-controlling interest 305 2,896 Net loss attributable to the Company’s shareholders $ ( 7,539,142 ) $ ( 4,943,444 ) Other comprehensive income: Foreign currency translation adjustments ( 529,603 ) ( 2,995 ) Comprehensive loss $ ( 8,068,745 ) $ ( 4,946,439 ) Less: comprehensive income (loss) attributable to non-controlling interest ( 533 ) 257 Comprehensive loss attributable to the Company $ ( 8,068,212 ) $ ( 4,946,696 ) NET LOSS PER SHARE Loss Per Share - Basic $ ( 0.17 ) $ ( 0.12 ) Loss Per Share - Diluted $ ( 0.17 ) $ ( 0.12 ) NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY Loss Per Share - Basic $ ( 0.17 ) $ ( 0.12 ) Loss Per Share - Diluted $ ( 0.17 ) $ ( 0.12 ) Weighted Average Common Shares Outstanding - Basic 44,014,060 40,840,413 Weighted Average Common Shares Outstanding - Diluted 44,014,060 40,840,413 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, 2022 42,627,260 4,263 21,730,941 356,328 ( 17,152,172 ) 137,911 5,077,271 10,979 5,088,250 Common stock issued for cash 3,077,500 308 12,019,692 — — — 12,020,000 — 12,020,000 Common stock issued for professional service 1,005,688 100 1,971,989 — — — 1,972,089 — 1,972,089 Execution of convertible notes 1,000,000 100 1,572,661 — — — 1,572,761 — 1,572,761 Cashless exercise of warrants 1,721,766 172 111,132 — — — 111,304 — 111,304 Additional paid-in capital - stock options — — — 276,336 — — 276,336 — 276,336 Accumulated other comprehensive income — — — — — ( 529,603 ) ( 529,603 ) — ( 529,603 ) Net (Loss) — — — — ( 7,539,142 ) — ( 7,539,142 ) 305 ( 7,538,837 ) Balance at February 28, 2023 49,432,214 4,943 37,406,415 632,664 ( 24,691,314 ) ( 391,692 ) 12,961,016 11,284 12,972,300 ` 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 F- 5 Table of Contents FingerMotion, Inc. Consolidated Statements of Cash Flows Year Ended February 28, February 28, 2023 2022 Net (loss) $ ( 7,538,837 ) $ ( 4,940,548 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Share based compensation expenses 2,361,475 777,576 Amortization and depreciation 63,103 57,894 Impairment of fixed assets 1,257 — Cashless exercise of warrants 111,304 — Change in operating assets and liabilities: (Increase) decrease in accounts receivable 3,100,387 ( 775,837 ) (Increase) decrease in prepayment and deposit ( 1,074,983 ) ( 2,684,965 ) (Increase) decrease in other receivable ( 1,872,266 ) ( 32,545 ) (Increase) decrease in inventories 1,280 ( 6 ) Increase (decrease) in accounts payable ( 3,237,152 ) 1,114,653 Increase (decrease) in accrual and other payables ( 527,489 ) 639,107 Increase (decrease) in due to lease liability ( 2,212 ) ( 3,191 ) Net Cash provided by (used in) operating activities ( 8,614,133 ) ( 5,847,862 ) Cash flows from investing activities Purchase of equipment ( 74,817 ) ( 14,394 ) Purchase of intangible assets — ( 11,678 ) Net cash provided by (used in) investing activities ( 74,817 ) ( 26,072 ) Cash flows from financing activities Proceed form convertible notes 5,530,000 — Proceed form loan payable — 299,695 Repayment of convertible notes ( 266,667 ) — Advances from stock subscription payable 60,000 — Common stock issued for cash 12,020,000 5,114,499 Net cash provided by (used in) financing activities 17,343,333 5,414,194 Effect of exchange rates on cash and cash equivalents 123,925 70,956 Net change in cash 8,778,308 ( 388,784 ) Cash at beginning of year 461,933 850,717 Cash at end of year $ 9,240,241 $ 461,933 Major non-cash transactions: Execution of convertible note / Conversion of loan payables to shares $ 1,572,761 $ 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 JiuGe Technology. On March 7, 2019, JiuGe Technology also acquired 99% of the 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 mobile phone sales in China. It is 99% owned by JiuGe Technology. On February 5, 2021, JiuGe Technology 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, 2023 and February 28, 2022: Assets and liabilities of the VIE Schedule of variable interest entity February 28, 2023 February 28, 2022 Current assets $ 6,706,994 $ 4,503,346 Non-current assets 196,477 21,042 Total assets $ 6,903,471 $ 4,524,388 Current liabilities $ 11,220,948 $ 8,556,844 Non-current liabilities 4,971 — Total liabilities $ 11,225,919 $ 8,556,844 Assets and liabilities of the VIE Subsidiary February 28, 2023 February 28, 2022 Current assets $ 1,313,056 $ 5,330,206 Non-current assets 7,304 9,121 Total assets $ 1,320,360 $ 5,339,327 Current liabilities $ 219,724 $ 4,162,414 Non-current liabilities — — Total liabilities $ 219,724 $ 4,162,414 F- 8 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) Operating Result of VIE For the Year Ended February 28, 2023 For the Year Ended February 28, 2022 Revenue $ 17,278,300 $ 2,971,031 Cost of revenue ( 15,800,926 ) ( 867,154 ) Gross profit (loss) $ 1,477,374 $ 2,103,877 Amortization and depreciation ( 15,055 ) ( 7,948 ) General and administrative expenses ( 2,177,107 ) ( 2,313,818 ) Marketing cost ( 416,849 ) ( 562,637 ) Research & development ( 391,151 ) ( 583,874 ) Total operating expenses $ ( 3,000,162 ) $ ( 3,468,277 ) Profit (loss) from operations $ ( 1,522,788 ) $ ( 1,364,400 ) Interest income 51,545 20,971 Other income 69,966 17,403 Total other income (expense) $ 121,511 $ 38,374 Tax expense — — Net profit (loss) $ ( 1,401,277 ) $ ( 1,326,026 ) Operating Result of VIE Subsidiary For the Year Ended February 28, 2023 For the Year Ended February 28, 2022 Revenue $ 16,338,405 $ 19,824,966 Cost of revenue ( 15,934,808 ) ( 18,886,139 ) Gross profit (loss) $ 403,597 $ 938,827 Amortization and depreciation ( 1,013 ) ( 990 ) General and administrative expenses ( 328,113 ) ( 597,962 ) Marketing cost ( 13,442 ) ( 79,280 ) Research & development ( 82,874 ) ( 31,505 ) Total operating expenses $ ( 425,442 ) $ ( 709,737 ) Profit (loss) from operations $ ( 21,845 ) $ 229,090 Interest income 224 83 Other income 52,110 60,296 Total other income (expense) $ 52,334 $ 60,379 Tax expense — — Net profit (loss) $ 30,489 $ 289,469 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 3 to seven 7 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 $ 24,691,314 and $ 17,152,172 as at February 28, 2023 and February 28, 2022 respectively, and had a net loss of $ 7,538,837 and $ 4,940,548 for the years ended February 28, 2023 and February 28, 2022, respectively. The Company’s continuation as a going concern depends 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 can 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 $ 34,054,205 and $ 22,927,415 in revenue, respectively, for the years ended February 28, 2023 and February 28, 2022. Schedule of revenue For the Year Ended February 28, 2023 For the Year Ended February 28, 2022 Telecommunication Products & Services $ 27,006,978 $ 8,657,277 SMS & MMS Business 6,609,727 14,138,720 Big Data 437,500 131,418 $ 34,054,205 $ 22,927,415 F- 12 Table of Contents Note 5 – Equipment At February 28, 2023 and February 28, 2022, the company has the following amounts related to tangible assets: Schedule of property, plant and equipment February 28, 2023 February 28, 2022 Equipment $ 120,996 $ 62,347 Less: accumulated depreciation ( 42,898 ) ( 35,539 ) Net equipment $ 78,098 $ 26,808 No significant residual value is estimated for the equipment. Depreciation expense for the years ended February 28, 2023 and February 28, 2022 totaled $ 20,801 and $ 14,039 , respectively. Note 6 – Intangible Assets At February 28, 2023 and February 28, 2022, the company has the following amounts related to intangible assets: Schedule of intangible assets February 28, 2023 February 28, 2022 Licenses $ 200,000 $ 200,000 Mobile applications 212,128 233,167 412,128 433,167 Less: accumulated amortization ( 298,017 ) ( 266,190 ) Impairment of intangible assets ( 41,045 ) ( 41,045 ) Net intangible assets $ 73,066 $ 125,932 No significant residual value is estimated for these intangible assets. Amortization expense for the years ended February 28, 2023 and February 28, 2022 totaled $ 42,302 and $ 46,956 , respectively. Note 7 – Prepayment and Deposit Prepaid expenses consist of the deposit pledge to the vendor for stock credits for resale. Our current vendors are China Unicom and China Mobile for our Telecommunication Products & Services business and our SMS & MMS business. Deposits include payments placed into the e-commerce platforms where we offer our products and services. The platforms are PinDuoDuo, Tmall, and JD.com. Schedule of prepaid expense February 28, 2023 February 28, 2022 Telecommunication Products & Services Deposit Paid / Prepayment $ 2,492,795 $ 2,396,550 Deposit received — — Net Prepaid expenses for Telecommunication Products & Services $ 2,492,795 $ 2,396,550 Others prepayment 1,047,631 369,256 Prepayment and deposit $ 3,540,426 $ 2,765,806 February 28, 2023 February 28, 2022 SMS & MMS Business Deposit Paid / Prepayment $ 598,635 $ 565,536 Deposit received Net Prepaid expenses for SMS $ 598,635 $ 565,536 Others prepayment — — Prepayment and deposit $ 598,635 $ 565,536 F- 13 Table of Contents Note 8 – Other Receivables Schedule of other receivables February 28, 2023 February 28, 2022 Other receivables represent: Advances to suppliers $ 1,082,636 $ 948,128 In-transit capital injection for a subsidiary 720,979 — Others 748,050 591,137 $ 2,551,665 $ 1,539,265 Note 9 – 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 Consolidated balance sheet. All operating lease expense is recognized on a straight-line basis over the lease term in the year ended February 28, 2023. Information related to the Company’s right-of-use assets and related lease liabilities were as follows: Schedule of operating leases assets and liabilities February 28, 2023 February 28, 2022 Right-of-use asset Right-of-use asset, net $ 130,109 $ 5,069 Lease Liability Current lease liability $ 122,924 $ 5,069 Non-current lease liability 4,971 — Total lease liability $ 127,895 $ 5,069 Remaining lease term and discount rate February 28, 2023 Weighted-average remaining lease term 13 months Weighted-average discount rate 4.75 % Commitments The following table summarizes the future minimum lease payments due under the Company’s operating leases as of February 28, 2023: Schedule of future minimum lease payments due 2023 $ 131,337 Thereafter — Less: imputed interest ( 3,441 ) Total lease liability $ 127,895 Note 10 – Convertible Notes Payable A Note Payable having a Face Value of $ 730,000 on May 1, 2022 and accruing interest at 20 % is due on April 30, 2023 . The note is convertible anytime from the date of issuance into $ 0.0001 par value Common Stock at $ 4.00 per share. A secured, two-year, interest-free convertible promissory note with a principal amount of $ 4,800,000 was issued on August 9, 2022 representing a funded amount of $4,000,000 and a coupon of 20% (the “Note”). The principal amount is payable commencing 180 days after the issuance in 18 consecutive monthly payments, at the option of the Company, to be made in either cash, shares of common stock of the Company, or a combination of cash and shares of the common stock of the Company. The note shall be available to be converted by the holder any time after the earlier of 6 months from the date of issuance or the date of effectiveness of the registration statement covering the applicable conversion shares into $ 0.0001 par value Common stock at $ 2.00 per share subject to adjustment as provided therein. An event of default under the Note occurred on November 4, 2022 and on November 21, 2022 pursuant to section 2.1(e) of the Note in relation to the closing of our private placements of shares of common stock in the aggregate amount of 2,887,500 shares at a price of $ 4.00 per share for gross proceeds of $ 11,550,000 (the “Private Placement Proceeds”). Section 2.2 of the Note provides for the remedies upon an event of default, which as described in the Note, the holder may at any time at its option declare the Note immediately due and payable at an amount of 110% or 120% of the outstanding principal amount (the “Mandatory Default Amount”) depending on the type of event of default. In addition, upon an event of default, subject to any applicable cure periods, the holder may (a) from time-to-time demand that all or a portion of the outstanding principal amount be converted into shares of our common stock at the lower of (i) the conversion price (currently $2.00 per share) and (ii) 80% of the average of the three (3) lowest daily VWAPs during the twenty (20) days prior to the delivery of the conversion notice, or (b) exercise or otherwise enforce any one or more of the holder’s rights, powers, privileges, remedies and interests under the Note, the Purchase Agreement, the other transaction documents or applicable law. F- 14 Table of Contents Note 10 – Convertible Notes Payable (continued) The Mandatory Default Amount for an event of default under Section 2.1(e) of the Note is 110% of the outstanding principal amount of the Note, which is $ 5,280,000 . However, the holder has not declared the Mandatory Default Amount due and payable, which is the trigger for accelerating the Mandatory Default Amount to be due and payable. In addition, section 5.7 of the Purchase Agreement provides that if we issued any equity interests, other than “Exempted Securities” (as defined in the Purchase Agreement), for aggregate proceeds to us of greater than $10,000,000 during the term of the Purchase Agreement, excluding offering costs and other expenses, unless otherwise waived in writing by and at the discretion of the holder, we will direct 25% of such proceeds from such issuance to repay the Note. We have advised the holder that the aggregate Private Placement Proceeds exceeds $10,000,000 and the holder does not seek to waive or require payment of 25% of the proceeds as repayment of the Note. Note 11 - Common Stock On March 7, 2022 the Company issued 5,000 shares of our common stock at a deemed price of $5.00 per share to one entity pursuant to a consulting agreement. On March 23, 2022, the Company issued 10,000 shares of our common stock at a deemed price of $3.66 per share to one individual pursuant to a consulting agreement. On March 23, 2022, the Company issued an aggregate of 25,000 shares of our common stock at a deemed price of $2.85 per share to two individuals and one entity pursuant to consulting agreements. On April 14, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $5.00 per share to one entity pursuant to a consulting agreement. On April 28, 2022, the Company issued 50,000 shares of our common stock at a deemed price of $2.61 per share to one entity pursuant to a consulting agreement. On April 28, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $2.56 per share to one entity pursuant to a consulting agreement. On April 28, 2022, the Company issued 20,000 shares of our common stock at a deemed price of $2.51 per share to one individual pursuant to a consulting agreement. On May 10, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $5.00 per share to one entity pursuant to a consulting agreement. On May 10, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $3.66 per share to one individual pursuant to a consulting agreement. On May 12, 2022, the Company issued 20,000 shares of our common stock at a deemed price of $2.03 per share to one entity pursuant to a consulting agreement as amended. On July 5, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $5.00 per share to one entity pursuant to a consulting agreement. On July 5, 2022, the Company issued an aggregate of 25,000 shares of our common stock at a deemed price of $2.85 per share to two individuals and one entity pursuant to consulting agreements. On August 3, 2022, the Company issued 50,000 shares of our common stock at a deemed price of $1.22 per share to one entity pursuant to a consulting agreement. On October 19, 2022, the Company issued an aggregate of 25,000 shares of our common stock at a deemed price of $2.85 per share to two individuals and one entity pursuant to consulting agreements. F- 15 Table of Contents Note 11 - Common Stock (continued) On October 19, 2022, the Company issued 20,000 shares of our common stock at a deemed price of $1.70 per share to one entity pursuant to a consulting agreement. On October 19, 2022, the Company issued 10,000 shares of our common stock at a deemed price of $3.66 per share to one individual pursuant to a consulting agreement. On October 19, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $2.56 per share to one entity pursuant to a consulting agreement. On October 24, 2022, the Company issued 100,000 shares of our common stock at price of $2.00 per share to 2 individuals pursuant to the exercise of warrants. On October 24, 2022, the Company issued 70,000 shares of our common stock at price of $3.00 per share to one individual pursuant to the exercise of warrants. On November 3, 2022, the Company issued 20,000 shares of our common stock at price of $3.00 per share to 2 individuals pursuant to the exercise of warrants. On November 3, 2022, the Company issued 5,000 shares of our common stock at a deemed price of $1.70 per share to one entity pursuant to a consulting agreement. On November 3, 2022, the Company issued 25,000 shares of our common stock at a deemed price of $1.22 per share to one entity pursuant to a consulting agreement. On November 3, 2022, the Company issued 200,000 shares of our common stock at a deemed price of $0.74 per share to one individual pursuant to a consulting agreement. On November 4, 2022, the Company issued an aggregate of 1,887,500 shares of common stock at a price of $4.00 per share to eleven individuals due to the closing of its private placement at $4.00 per share for aggregate gross proceeds of $7,550,000. In connection with the closing of the private placement on November 4, 2022, the Company issued 91,875 shares of common stock at price of $4.00 per share for a total value of $367,500 to one individual as finder’s fees. On November 21, 2022, the Company issued 1,000,000 shares of common stock at a price of $4.00 per share to one entity due to the closing of its private placement at $4.00 per share for aggregate gross proceeds of $4,000,000. On January 19, 2023, the Company issued 5,000 shares of our common stock at a deemed price of $1.70 per share to one entity pursuant to a consulting agreement. On January 19, 2023 , the Company issued an aggregate of 25,000 shares of our common stock at a deemed price of $2.85 per share to two individuals and one entity pursuant to consulting agreements. On January 19, 2023, the Company issued 125,000 shares of our common stock at a deemed price of $1.44 per share to one entity pursuant to a consulting agreement. On January 19, 2023, the Company issued 16,313 shares of our common stock at a deemed price of $5.19 per share to one entity pursuant to a consulting agreement. On January 19, 2023, the Company issued 40,000 shares of our common stock at a deemed price of $4.15 per share to one entity pursuant to a consulting agreement. On February 7, 2023, the Company issued 1,721,766 shares of common stock at deemed price of $1.75 per share to its primary lender pursuant to the cashless exercise of warrants of the convertible promissory note (the “Note”) issued to the Company’s primary lender on August 9, 2022. On February 7, 2023, the Company issued 25,000 shares of our common stock at a deemed price of $1.22 per share to one entity pursuant to a consulting agreement. F- 16 Table of Contents Note 11 - Common Stock (continued) On February 16, 2023, the Company issued 500,000 shares of common stock at price of $ 2.00 per share to its primary lender pursuant to the conversion of $ 1,000,000 of principal amount of the convertible promissory note (the “Note”) issued to the Company’s primary lender on August 9, 2022. On February 22, 2023, the Company issued 500,000 shares of common stock at price of $ 2.00 per share to its primary lender pursuant to the conversion of $ 1,000,000 of principal amount of the convertible promissory note (the “Note”) issued to the Company’s primary lender on August 9, 2022 On February 28, 2023, the Company issued 150,000 shares of our common stock at a deemed price of $ 0.74 per share to one individual pursuant to a consulting agreement. On February 28, 2023, the Company issued 7,500 shares of our common stock at a deemed price of $ 2.47 per share to one entity pursuant to a consulting agreement. As of February 28, 2023, and February 28, 2022, there were 49,432,214 and 42,627,260 shares of the Company’s common stock issued and outstanding, and none of the preferred shares were issued and outstanding. Stock Purchase Warrants A continuity schedule of outstanding stock purchase warrants as at February 28, 2023, and the changes during the periods, is as follows: Schedule of outstanding share purchase warrants 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 Issued in Connection with August 2022 Offering 3,478,261 $ 1.75 Expired ( 50,000 ) $ 3.00 Issued in Connection with August 2022 Offering 168,000 $ 1.75 Issued in Connection with September 2022 Offering 350,000 $ 5.00 Issued in Connection with November 2022 Offering 28,312 $ 8.22 Issued in Connection with November 2022 Offering 10,000 $ 6.70 Exercised ( 100,000 ) $ 2.00 Exercised ( 90,000 ) $ 3.00 Issued in Connection with October 2022 Offering 125,000 $ 5.00 Cashless Exercised ( 3,478,261 ) $ 1.75 Balance, February 28, 2023 2,287,480 $ 3.32 During Fiscal 2023 and Fiscal 2022, we received cash proceeds totaling $ 470,000 and $ 539,998 , respectively, from the exercise of stock purchase warrants. On August 9, 2022, the Company entered into a Securities Purchase Agreement with an investor (the “Investor”), pursuant to which the Company issued to the Investor a common stock purchase warrant (the “Warrant”) to acquire 3,478,261 shares of common stock of the Company, which is subject to reduction by 50% upon effectiveness of the registration statement covering the underlying shares. On February 6, 2023, the Investor exercised the Warrant on the cashless exercise basis for all 3,478,261 warrants, resulting in the issuance of 1,721,766 shares of common stock. On October 19, 2022, the Company’s board of directors authorized a six month extension to the expiry date of the common stock purchase warrants that the Company issued on October 19, 2020 which have an expiry date of October 19, 2022 and an exercise price of $2.00 per share (the “October 2020 Warrants”). The new expiry date of the October 2020 Warrants is April 19, 2023. In addition, 50,000 stock purchase warrants at an exercise price of $3.00 per share have expired. F- 17 Table of Contents Stock Purchase Warrants (continued) On November 3, 2022, the Company issued 350,000 common stock purchase warrants to purchase 350,000 shares of its common stock at a price of $5.00 per share until September 19, 2024 to one individual pursuant to a consulting agreement. On November 29, 2022, the Company issued 168,000 common stock purchase warrants to purchase 168,000 shares of its common stock at a price of $1.75 per share until August 9, 2027 to The Benchmark Company, LLC (“Benchmark”) pursuant to a financial advisory agreement. On November 29, 2022, the Company issued 28,312 common stock purchase warrants to purchase 28,312 shares of its common stock at a price of $8.22 per share until November 4, 2025, to Benchmark pursuant to a financial advisory agreement. On November 29, 2022, the Company issued 10,000 common stock purchase warrants to purchase 10,000 shares of its common stock at a price of $6.70 per share until November 21, 2025, to Benchmark pursuant to a financial advisory agreement. During the quarter ended November 30, 2022, the Company received $470,000 from the exercise of warrants for the purchase of 100,000 shares of common stock of the Company at a price of $2.00 per share from 2 individuals and the purchase of 90,000 shares of common stock of the Company at a price of $3.00 per shares from 3 individuals. On January 13, 2023, the Company’s board of directors has authorized a six month extension to the expiry date of the common stock purchase warrants that the Company issued on January 13, 2021 which have an expiry date of January 13, 2023 and an exercise price of $3.00 per share (the “January 2021 Warrants”). The new expiry date of the January 2021 Warrants is July 13, 2023. On February 28, 2023, the Company issued 125,000 common stock purchase warrants to purchase 125,000 shares of its common stock at a price of $ 5.00 per share until October 1, 2024 to one entity pursuant to a consulting agreement. A summary of stock purchase warrants outstanding and exercisable as at February 28, 2023 is as follows: Schedule of share purchase warrants outstanding and exercisable Number of Warrants Remaining Contractual Exercise Price Outstanding Life (Years) Expiry Date $ 2.00 188,500 0.14 19-Apr-2023 $ 3.00 1,417,668 0.37 13-Jul-2023 $ 1.75 168,000 4.44 9-Aug-2027 $ 5.00 350,000 1.56 19-Sep-2024 $ 8.22 28,312 2.68 4-Nov-2025 $ 6.70 10,000 2.73 21-Nov-2025 $ 5.00 125,000 1.89 1-Oct-2024 $ 3.32 2,287,480 F- 18 Table of Contents Stock Options On December 28, 2021, we granted an aggregate of 4,545,000 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 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. At our annual meeting of stockholders held on February 17, 2023, the stockholders approved an amendment to the exercise price of the outstanding stock options from $8.00 to $3.84. 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: Schedule of valuation assumptions February 28, 2023 February 28, 2022 Expected Risk-Free Interest Rate 1.06 % 1.06 % Expected Volatility 15.27 % 15.27 % Expected Life in Years 5.0 5.0 Expected Dividend Yield — — Weighted-Average Grant Date Fair Value $ 6.46 $ 6.46 A continuity schedule of outstanding stock options as of February 28, 2023, and the changes during the period, is as follows: Schedule of stock option activity Number of Stock Options Exercise Price Balance, February 28, 2022 3,636,000 $ 8.00 Vested ( 714,200 ) — Cancelled/Forfeited ( 779,200 ) 8.00 Expired — — Balance, February 28, 2023 2,142,600 $ 3.84 The table below sets forth the number of issued shares and cash received upon exercise of stock options: Schedule of number of issued shares and cash received upon exercise of stock options February 28, 2023 February 28, 2022 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- 19 Table of Contents Stock Options (continued) A continuity schedule of outstanding unvested stock options at February 28, 2023, and the changes during period, is as follows: Schedule of unvested restricted stock Number of Unvested Weighted Average Stock Options Grant Date Fair Value Balance, February 28, 2021 — — Granted 4,545,000 $ 6.46 Vested ( 909,000 ) $ 6.46 Balance, February 28, 2022 3,636,000 $ 6.46 Granted — — Vested ( 714,200 ) — Cancelled / Forfeited ( 779,200 ) 6.46 Balance, February 28, 2023 2,142,600 $ 6.46 As of February 28, 2023, the aggregate intrinsic value of all outstanding stock options granted was estimated at $ 0 as the current price is lower than the revised strike price. A summary of stock options outstanding and exercisable as of February 28, 2023 is as follows: Schedule of stock options Options Outstanding Options Exercisable Range of Exercise Prices Outstanding at February 28, 2023 Exercise Price Weighted Average Remaining Contractual Term (Years) Exercisable at February 28, 2023 Exercise Price Weighted Average Remaining Contractual Term (Years) $ 7.00 to $ 9.00 2,142,600 $ 3.84 3.83 1,623,200 $ 3.84 3.83 2,142,600 $ 3.84 3.83 1,623,200 $ 3.84 3.83 Note 12 - Earnings Per Share The following table sets forth the computation of basic and diluted earnings per common share: Schedule of basic and diluted earnings per common share For the years ended February 28, 2023 February 28, 2022 Numerator - basic and diluted Net Loss $ ( 7,538,837 ) $ ( 4,940,548 ) Denominator Weighted average number of common shares outstanding — basic 44,014,060 40,840,413 Weighted average number of common shares outstanding — diluted 44,014,060 40,840,413 Loss per common share — basic $ ( 0.17 ) $ ( 0.12 ) Loss per common share — diluted $ ( 0.17 ) $ ( 0.12 ) F- 20 Table of Contents Note 13 - 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, 2023 and February 28, 2022. 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, 2023 and February 28, 2022. The People’s Republic of China (PRC) JiuGe Management, JiuGe Technology, Beijing XunLian and Shanghai TengLian JiuJiu 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, 2023 and February 28, 2022 are as follows: Schedule of effective income tax rate reconciliation For the years ended February 28, 2023 February 28, 2022 (unaudited) (unaudited) 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, 2023 and February 28, 2022, the Company has a deferred tax asset of $ 1,884,786 and $ 1,235,861 , 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, 2023 and February 28, 2022, the valuation allowance was $ 1,884,786 and $ 1,235,861 respectively. Schedule of deferred tax assets and liabilities February 28, 2023 February 28, 2022 Deferred tax asset from operating losses carry-forwards $ 1,884,786 $ 1,235,861 Valuation allowance ( 1,884,786 ) ( 1,235,861 ) Deferred tax asset, net $ — $ — F- 21 Table of Contents Note 14 - Commitments and Contingencies On August 9, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Investor, pursuant to which the Company issued to the Investor the Note in the principal amount of $ 4,800,000 and the Warrant to acquire 3,478,261 shares of common stock of the Company (each, a “Warrant Share”). A total of $4,000,000 was funded under the Note (representing the principal amount less a coupon of 20%). The conversion price of the Note is equal to $2.00, subject to customary adjustments, however, if new securities, other than exempted securities, are issued by the Company at a price less than the conversion price, the conversion price shall be reduced to such price. An event of default under the Note occurred on November 4, 2022 and on November 21, 2022 pursuant to section 2.1(e) of the Note in relation to the closing of our private placements of shares of common stock in the aggregate amount of 2,887,500 shares at a price of $ 4.00 per share for gross proceeds of $ 11,550,000 (the “Private Placement Proceeds”). Section 2.2 of the Note provides for the remedies upon an event of default, which as described in the Note, the holder may at any time at its option declare the Note immediately due and payable at an amount of 110% or 120% of the outstanding principal amount (the “Mandatory Default Amount”) depending on the type of event of default. In addition, upon an event of default, subject to any applicable cure periods, the holder may (a) from time-to-time demand that all or a portion of the outstanding principal amount be converted into shares of our common stock at the lower of (i) the conversion price (currently $2.00 per share) and (ii) 80% of the average of the three (3) lowest daily VWAPs during the twenty (20) days prior to the delivery of the conversion notice, or (b) exercise or otherwise enforce any one or more of the holder’s rights, powers, privileges, remedies and interests under the Note, the Purchase Agreement, the other transaction documents or applicable law. The Mandatory Default Amount for an event of default under Section 2.1(e) of the Note is 110% of the outstanding principal amount of the Note, which is $ 5,280,000 . However, the holder has not declared the Mandatory Default Amount due and payable, which is the trigger for accelerating the Mandatory Default Amount to be due and payable. On February 15, 2023 and February 22, 2023, the Investor provided notice of partial conversion of the Note of 500,000 shares respectively on each date amounting to a total conversion of $ 2,000,000 of principal amount. On March 17, 2023, the Investor again provided notice of conversion of the Note of 2,465,816 shares amounting to a total of conversion of $ 2,128,000 of principal amount. On or about April 6, 2023, the Company paid the full outstanding balance of the Note which also includes the 10% Mandatory Default Amount. In addition, section 5.7 of the Purchase Agreement provides that if we issued any equity interests, other than “Exempted Securities” (as defined in the Purchase Agreement), for aggregate proceeds to us of greater than $10,000,000 during the term of the Purchase Agreement, excluding offering costs and other expenses, unless otherwise waived in writing by and at the discretion of the holder, we will direct 25% of such proceeds from such issuance to repay the Note. We have advised the holder that the aggregate Private Placement Proceeds exceeds $10,000,000 and the holder does not seek to waive or require payment of 25% of the proceeds as repayment of the Note. 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- 22 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.