FingerMotion, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - 54 - Table of Contents FINGERMOTION, INC. CONSOLIDATED FINANCIAL STATEMENTS For the year ended February 28, 2025 (Expressed in U.S. Dollars) Index to the Financial Statements Contents Page(s) Report of Independent Registered Public Accounting Firm (Firm ID 6967 ) F-2 Consolidated Balance Sheets at February 28, 2025 and February 29, 2024 F-3 Consolidated Statements of Operations for the years ended February 28, 2025 and February 29, 2024 F-4 Consolidated Statement of Stockholders’ Equity for the years ended February 28, 2025 and February 29, 2024 F-5 Consolidated Statements of Cash Flows for the years ended February 28, 2025 and February 29, 2024 F-6 Notes to the Consolidated Financial Statements F-7 F- 1 Table of Contents 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, 2025 and February 29, 2024, and the related consolidated statements of operations, Stockholders’ equity, and cash flows for each of the years in the two-year period ended February 28, 2025 and February 29, 2024, and the related notes (collectively referred to as the consolidated 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, 2025 and February 29, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended February 28, 2025 and February 29, 2024, 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 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of Matters The February 29, 2024 consolidated financial statements, which were audited by another auditor, have been restated (See Note 16). /s/ CT International LLP We have served as the Company’s auditor since 2024 San Francisco, California May 29, 2025 F- 2 Table of Contents FingerMotion, Inc. Consolidated Balance Sheets February 28, February 29, 2025 2024 (Restated) ASSETS Current Assets Cash and cash equivalents $ 1,128,135 $ 1,517,232 Accounts receivable, net 32,659,437 8,588,538 Inventories 136,020 — Prepayment and deposit 7,016,803 5,734,744 Other receivables 1,096,965 2,515,593 Total Current Assets 42,037,360 18,356,107 Non-current Assets Equipment 23,260 45,706 Intangible assets 9,758 30,456 Right-of-use asset 126,581 13,734 Deferred tax asset 6,623,492 — Total Non-current Assets 6,783,091 89,896 TOTAL ASSETS $ 48,820,451 $ 18,446,003 LIABILITIES AND SHAREHOLDER’S DEFICIT Current Liabilities Accounts payable $ 24,560,361 $ 5,153,359 Accrual and other payables 9,323,641 1,595,760 Loan payable, current portion 1,133,745 — Lease liability, current portion 116,808 4,796 Total Current Liabilities 35,134,555 6,753,915 Non-current Liabilities Lease liability, non-current portion 9,986 — Deferred tax liabilities 16,954 — Total Non-current Liabilities 26,940 — TOTAL LIABILITIES $ 35,161,495 $ 6,753,915 STOCKHOLDERS’ 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 57,141,186 shares and 52,545,350 issued and outstanding at February 28, 2025 and February 29, 2024 respectively 5,714 5,254 Additional paid-in capital 47,304,416 40,292,778 Additional paid-in capital - stock options 1,473,996 1,233,619 Accumulated deficit ( 34,187,384 ) ( 29,074,580 ) Accumulated other comprehensive income ( 943,276 ) ( 767,011 ) Stockholders’ equity before non-controlling interests 13,653,466 11,690,060 Non-controlling interests 5,490 2,028 TOTAL STOCKHOLDERS’ EQUITY 13,658,956 11,692,088 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 48,820,451 $ 18,446,003 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Table of Contents FingerMotion, Inc. Consolidated Statements of Operations Year Ended February 28, February 29, 2025 2024 (Restated) Revenue $ 35,607,614 $ 35,791,685 Cost of revenue ( 32,843,907 ) ( 31,929,967 ) Gross profit 2,763,707 3,861,718 Amortization & depreciation ( 156,497 ) ( 70,909 ) General & administrative expenses ( 6,445,771 ) ( 6,583,481 ) Marketing cost ( 276,258 ) ( 140,052 ) Research & development ( 632,767 ) ( 699,559 ) Credit impairment loss ( 439,613 ) — Stock compensation expenses ( 761,802 ) ( 185,406 ) Total operating expenses ( 8,712,708 ) ( 7,679,407 ) Net loss from operations ( 5,949,001 ) ( 3,817,689 ) Other income (expense): Interest income 87,063 62,646 Interest expense ( 164,059 ) ( 121,451 ) Exchange rate gain (loss) 15,738 ( 1,857 ) Other income 21,796 66,334 Total other income (expense) ( 39,462 ) 5,672 Net Loss before income tax $ ( 5,988,463 ) $ ( 3,812,017 ) Income tax benefit 879,121 — Net Loss $ ( 5,109,342 ) $ ( 3,812,017 ) Less: Net profit (loss) attributable to the non-controlling interest 3,462 ( 514 ) Net loss attributable to the Company’s stockholders $ ( 5,112,804 ) $ ( 3,811,503 ) Other comprehensive income: Foreign currency translation adjustments ( 176,265 ) ( 375,319 ) Comprehensive loss $ ( 5,289,069 ) $ ( 4,186,822 ) Less: comprehensive income (loss) attributable to non-controlling interest ( 602 ) 450 Comprehensive loss attributable to the Company $ ( 5,288,467 ) $ ( 4,187,272 ) NET LOSS PER SHARE Loss Per Share - Basic $ ( 0.09 ) $ ( 0.07 ) Loss Per Share - Diluted $ ( 0.09 ) $ ( 0.07 ) NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY Loss Per Share - Basic $ ( 0.09 ) $ ( 0.07 ) Loss Per Share - Diluted $ ( 0.09 ) $ ( 0.07 ) Weighted Average Common Shares Outstanding - Basic 55,613,386 52,168,747 Weighted Average Common Shares Outstanding - Diluted 55,613,386 52,168,747 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Table of Contents FingerMotion, Inc. Consolidated Statement of Stockholders’ 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, 2024 (As restated) 52,545,350 5,254 40,292,778 1,233,619 ( 29,074,580 ) ( 767,011 ) 11,690,060 2,028 11,692,088 Common stock issued for cash 4,428,336 443 6,642,061 — — — 6,642,504 — 6,642,504 Common stock issued for professional service 167,500 17 369,577 — — — 369,594 — 369,594 Additional paid-in capital - stock options — — — 240,377 — — 240,377 — 240,377 Accumulated other comprehensive income — — — — — ( 176,265 ) ( 176,265 ) — ( 176,265 ) Net loss — — — — ( 5,112,804 ) — ( 5,112,804 ) 3,462 ( 5,109,342 ) Balance at February 28, 2025 57,141,186 5,714 47,304,416 1,473,996 ( 34,187,384 ) ( 943,276 ) 13,653,466 5,490 13,658,956 ` 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, 2023 (As originally reported) 49,432,214 4,943 37,406,415 632,664 ( 24,691,314 ) ( 391,692 ) 12,961,016 11,284 12,972,300 Prior Period Adjustments — — — — ( 571,763 ) 15,351 ( 556,412 ) ( 8,742 ) ( 565,154 ) Balance at March 1, 2023 (As restated) 49,432,214 4,943 37,406,415 632,664 ( 25,263,077 ) ( 376,341 ) 12,404,604 2,542 12,407,146 Common stock issued for cash 280,000 28 839,972 — — — 840,000 — 840,000 Common stock issued for professional service 155,000 15 285,472 — — — 285,487 — 285,487 Execution of convertible notes 2,465,816 247 1,682,466 — — — 1,682,713 — 1,682,713 Cashless exercise of warrants 121,422 12 ( 12 ) — — — — — — Deemed net-stock exercise of options 90,898 9 78,465 ( 78,474 ) — — — — — Additional paid-in capital - stock options — — — 679,429 — — 679,429 — 679,429 Accumulated other comprehensive income — — — — — ( 390,670 ) ( 390,670 ) — ( 390,670 ) Net loss — — — — ( 3,811,503 ) — ( 3,811,503 ) ( 514 ) ( 3,812,017 ) Balance at February 29, 2024 (As restated) 52,545,350 5,254 40,292,778 1,233,619 ( 29,074,580 ) ( 767,011 ) 11,690,060 2,028 11,692,088 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Table of Contents FingerMotion, Inc. Consolidated Statements of Cash Flows Year Ended February 28, February 29, 2025 2024 (Restated) Net loss $ ( 5,109,342 ) $ ( 3,812,017 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Share based compensation expenses 609,971 263,286 Amortization and depreciation 46,707 70,909 Amortization of right-of-use assets 109,790 — Provision for expected credit losses 439,613 — Deferred income taxes ( 6,665,539 ) — Changes in operating assets and liabilities (Increase) decrease in accounts receivable, net ( 24,860,498 ) ( 7,919,533 ) (Increase) decrease in prepayment and deposit ( 1,365,105 ) ( 1,525,857 ) (Increase) decrease in other receivable 1,399,140 ( 65,266 ) (Increase) decrease in inventories ( 137,354 ) — Increase (decrease) in accounts payable 19,665,662 5,168,763 Increase (decrease) in accrual and other payables 7,788,318 499,252 Increase (decrease) in due to lease liability ( 100,668 ) ( 6,857 ) Net Cash used in operating activities ( 8,179,304 ) ( 7,327,320 ) Cash flows from investing activities Purchase of equipment ( 4,115 ) ( 376 ) Net cash used in investing activities ( 4,115 ) ( 376 ) Cash flows from financing activities Repayment of convertible notes — ( 1,135,333 ) Proceed from loan payable 1,596,806 — Repayment of loan payable ( 463,061 ) — Common stock issued for cash 6,642,504 840,000 Net cash provided by (used in) financing activities 7,776,249 ( 295,333 ) Effect of exchange rates on cash and cash equivalents 18,073 ( 99,980 ) Net change in cash ( 389,097 ) ( 7,723,009 ) Cash at beginning of year 1,517,232 9,240,241 Cash at end of year $ 1,128,135 $ 1,517,232 Major non-cash transactions: Execution of convertible note / Conversion of loan payables to shares $ — $ 1,682,713 Supplemental disclosures of cash flow information: Interest paid $ 164,059 $ 36,634 Taxes paid $ 8,941 $ — The accompanying notes are an integral part of these consolidated financial statements. 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 formed on April 6, 2016, that is an information technology company which then specialized 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. 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 operational control of 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 2021where 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. Shanghai KeShunXiang Automobile Service Co., Ltd. was incorporated on April 10, 2024 for the purpose of venturing into the communication and streaming services in China. It is 99% owned by JiuGe Technology. 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, 2025 and February 29, 2024: Assets and liabilities of the VIE Schedule of variable interest entity February 28, 2025 February 29, 2024 Current assets $ 9,647,455 $ 10,578,657 Non-current assets 512,958 53,109 Total assets $ 10,160,413 $ 10,631,766 Current liabilities $ 12,925,255 $ 9,654,896 Non-current liabilities 26,940 — Total liabilities $ 12,952,195 $ 9,654,896 Assets and liabilities of the VIE Subsidiaries February 28, 2025 February 29, 2024 Current assets $ 29,073,164 $ 4,826,781 Non-current assets 5,598,659 6,088 Total assets $ 34,671,823 $ 4,832,869 Current liabilities $ 34,137,259 $ 9,181,719 Non-current liabilities — — Total liabilities $ 34,137,259 $ 9,181,719 F- 8 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) Operating Result of VIE For the Year Ended February 28, 2025 For the Year Ended February 29, 2024 Revenue $ 4,548,991 $ 18,032,927 Cost of revenue ( 3,687,430 ) ( 11,820,554 ) Gross profit (loss) $ 861,561 $ 6,212,373 Amortization and depreciation ( 133,091 ) ( 25,243 ) General and administrative expenses ( 1,899,146 ) ( 2,193,054 ) Marketing cost ( 95,829 ) ( 22,555 ) Research & development ( 298,345 ) ( 316,479 ) Credit impairment loss ( 87,409 ) — Total operating expenses $ ( 2,513,820 ) $ ( 2,557,331 ) Profit (loss) from operations $ ( 1,652,259 ) $ 3,655,042 Interest income 86,907 62,078 Other income 19,701 69,781 Total other income (expense) $ 106,608 $ 131,859 Tax expense 354,229 — Net profit (loss) $ ( 1,191,422 ) $ 3,786,901 Operating Result of VIE Subsidiaries For the Year Ended February 28, 2025 For the Year Ended February 29, 2024 Revenue $ 31,053,615 $ 15,199,260 Cost of revenue ( 29,151,468 ) ( 20,109,413 ) Gross profit (loss) $ 1,902,147 $ ( 4,910,153 ) Amortization and depreciation ( 956 ) ( 967 ) General and administrative expenses ( 816,590 ) ( 335,575 ) Marketing cost ( 180,429 ) ( 117,498 ) Research & development ( 88,017 ) ( 82,488 ) Credit impairment loss ( 333,228 ) — Total operating expenses $ ( 1,419,220 ) $ ( 536,528 ) Profit (loss) from operations $ 482,927 $ ( 5,446,681 ) Interest income 27 363 Other income (expense) 1,253 ( 3,447 ) Total other income (expense) $ 1,280 $ ( 3,084 ) Tax expense ( 137,987 ) — Net profit (loss) $ 346,220 $ ( 5,449,765 ) 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. Segment reporting ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in consolidated financial statements for detailing the Company’s business segments. Based on the criteria established by ASC 280, The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s CODM, specifically the Company’s CEO and CFO, for making decisions, allocating resources and assessing performance. The Company does not distinguish revenues, costs and expenses between segments in its internal reporting, but instead reports costs and expenses by nature as a whole. Based on the management’s assessment, the Company determines that it has only one operating segment and therefore one reportable segment as defined by ASC 280. Furthermore, the whole of the Group’s revenue is derived in or from China with all operation being carried out in China, and the Company’s long-lived assets are located in China, no geographical segments are presented. As such, all financial segment information required by the authoritative guidance can be found in these consolidated financial statements. Foreign Currency Translation and Transactions The Company’s reporting currency is the US dollar. The functional currencies of the Company’s foreign subsidiaries are their respective local currencies (China Renminbi, Singapore dollar and Hongkong dollar), which are the monetary unit of account of the principal economic environment in which the Company’s foreign subsidiaries operate. Assets and liabilities of the foreign subsidiaries are translated into US dollars at exchange rates in effect at each period end. Revenues and expenses are translated at average exchange rates in effect during the period. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss)as a component of stockholders’ equity. 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. F- 10 Table of Contents 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, Net Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for credit losses for estimated losses. Management considers the following factors when determining the collectability of specific accounts: historical experience, creditworthiness of the clients, aging of the receivables and other specific circumstances related to the accounts. Allowance for credit losses is made and recorded into administrative expenses based on the aging of accounts receivable and on any specifically identified receivables that may become uncollectible. Accounts receivable which are deemed to be uncollectible are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our assessment considered the estimates of expected credit and collectability trends. Volatility in market conditions and evolving credit trends are difficult to predict and may cause variability and volatility that may have an impact on our allowance for credit losses in future periods. Refer to note 8 for allowances for credit losses recognized in profit or loss by the Company during the years ended February 28, 2025 and February 29, 2024. Concentration of Credit Risks Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and other receivable. The Company’s cash and cash equivalents are placed with high-credit-quality financial institutions, and at times exceed federally insured limits. To date, the Company has not experienced any credit loss relating to its cash and cash equivalents. For year ended February 28, 2025, the Company sold about 91 % of its total revenue to three major customers and the amounts due from these companies represent approximately 92 % of the total accounts receivable at February 28, 2025. For the years ended February 29, 2024, the Company sold about 74 % of its total revenue to five major customers and the amounts due from these companies represent approximately 86 % of the total accounts receivable at February 29, 2024. For year ended February 28, 2025, the Company purchased about 93 % of its total purchase from three major suppliers and the amounts due to these companies represent approximately 83 % of the total accounts payable at February 28, 2025. For the years ended February 29, 2024, the Company purchased about 74 % of its total purchase from four major suppliers. The amounts due to these companies represent approximately 49 % of the total accounts payable at February 29, 2024. 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- 11 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. Cost of Revenue Cost of revenue consists of telecommunication products and services, and SMS & MMS business for operators or other suppliers, and purchase cost of emergency equipment for command and communication. Research and Development Research and development costs are expensed as incurred. Research and development expenses for Sapientus include compensation, employee benefits, stock-based compensation, materials and components purchased for research and development. F- 12 Table of Contents Selling, General and Administrative Selling, general and administrative expenses include compensation, employee benefits, stock-based compensation, professional service fees, allocation of facility costs, depreciation and amortization associated with general selling and administrative overhead activities. 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. F- 13 Table of Contents Note 2 - Summary of Principal Accounting Policies (Continued) 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 (i) Recently adopted accounting pronouncements In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted this ASU on March 1, 2024, which did not have a material impact on the Company’s consolidated financial statements. Refer to Note 2, Segment Reporting for the inclusion of the new required disclosures. (ii) Recently issued accounting pronouncements not yet adopted In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. A reporting entity is required to 1) disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities (DD&A) (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e); 2) include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements; 3) disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and 4) disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures. 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 $ 34,187,384 and $ 29,074,580 as at February 28, 2025 and February 29, 2024 respectively, and had a net loss of $ 5,109,342 and $ 3,812,017 for the years ended February 28, 2025 and February 29, 2024, 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. F- 14 Table of Contents Note 4 - Revenue We recorded $ 35,607,614 and $ 35,791,685 in revenue, respectively, for the years ended February 28, 2025 and February 29, 2024. Schedule of revenue For the Year Ended February 28, 2025 For the Year Ended February 29, 2024 Telecommunication Products & Services $ 27,205,347 $ 32,790,946 SMS & MMS 8,191,308 2,672,826 DaGe Platform 80,592 — Command & Communication 188,576 — Big Data ( 58,209 ) 327,913 $ 35,607,614 $ 35,791,685 Note 5 – Equipment At February 28, 2025 and February 29, 2024, the company has the following amounts related to tangible assets: Schedule of property, plant and equipment February 28, 2025 February 29, 2024 Equipment $ 103,945 $ 117,961 Less: accumulated depreciation ( 80,685 ) ( 72,255 ) Net equipment $ 23,260 $ 45,706 No significant residual value is estimated for the equipment. Depreciation expense for the years ended February 28, 2025 and February 29, 2024 totaled $ 26,249 and $ 30,536 , respectively. F- 15 Table of Contents Note 6 – Intangible Assets At February 28, 2025 and February 29, 2024, the company has the following amounts related to intangible assets: Schedule of intangible assets February 28, 2025 February 29, 2024 Licenses $ — $ 200,000 Mobile applications 201,993 204,684 201,993 404,684 Less: accumulated amortization ( 192,235 ) ( 374,228 ) Net intangible assets $ 9,758 $ 30,456 No significant residual value is estimated for these intangible assets. Amortization expense for the years ended February 28, 2025 and February 29, 2024 totaled $ 20,458 and $ 40,373 , 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, 2025 February 29, 2024 Deposit $ 6,631,704 $ 5,192,533 Prepayment 385,099 542,211 $ 7,016,803 $ 5,734,744 Note 8 – Accounts Receivable, net Schedule of accounts receivable February 28, 2025 February 29, 2024 Accounts receivable $ 33,094,782 $ 8,588,538 Less: allowance for credit losses ( 435,345 ) — $ 32,659,437 $ 8,588,538 The Company normally allows credit terms to customers ranging from 90 to 150 days. The Company seeks to maintain strict control over its accounts receivable. Overdue accounts receivable are reviewed regularly by the Board of Directors. Activities related to allowance for credit losses are presented below. Schedule of allowance for credit losses February 28, 2025 February 29, 2024 At beginning of year $ — $ — Provision for the year 435,345 — At end of year $ 435,345 $ — F- 16 Table of Contents Note 9 – Other Receivables Schedule of other receivables February 28, 2025 February 29, 2024 Other receivables represent: Advances to suppliers $ 745,935 $ 1,491,348 Security deposit 336,558 1,015,489 Others 14,472 8,756 Other receivables $ 1,096,965 $ 2,515,593 F- 17 Table of Contents Note 10 – 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, 2025. 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, 2025 February 29, 2024 Right-of-use asset Right-of-use asset, net $ 126,581 $ 13,734 Lease Liability Current lease liability $ 116,808 $ 4,796 Non-current lease liability 9,986 — Total lease liability $ 126,794 $ 4,796 Remaining lease term and discount rate February 28, 2025 Weighted-average remaining lease term 14 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, 2025: Schedule of future minimum lease payments due 2026 $ 120,309 2027 10,026 Less: imputed interest ( 3,541 ) $ 126,794 The following summarizes cash flow information related to leases for the year ended February 28, 2025: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from leases $ 124,400 F- 18 Table of Contents Note 11 - Common Stock On March 29, 2024, the Company issued 17,500 shares of our common stock at a deemed price of $ 2.80 per share to one entity pursuant to consulting agreements, dated February 27, 2023 and February 24, 2024. On March 29, 2024, the Company issued 150,000 shares of our common stock under its 2023 Stock Incentive Plan at a deemed price of $ 2.15 per share to two individuals pursuant to consulting agreements. On October 11, 2024, the Company issued 1,095,000 shares of common stock to 15 individuals due to the closing of its private placement at $1.50 per share for gross proceeds of $ 1,642,500 . In connection with the closing of the private placement, the Company paid cash finder’s fees of an aggregate of $ 158,000 to three individuals. On December 20, 2024, the Company entered into a securities purchase agreement (the “ Purchase Agreement ”) with certain institutional investors (the “ Purchasers ”), which provided for the issuance and sale, in a registered direct offering by the Company of (i) 3,333,336 shares of its common stock, par value $0.0001 per share (the “ Common Stock ”) and (ii) warrants (the “ Common Warrants ”) to purchase up to an aggregate of 5,000,004 shares of its common stock (the “ Offering ”) at a combined purchase price of $1.50 per share and one and one-half Common Warrants. As of February 28, 2025, and February 29, 2024, there were 57,141,186 and 52,545,350 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, 2025, and the changes during the periods, is as follows: Schedule of Purchase Warrants Number of Warrants Weighted Average Exercise Price Balance, February 29, 2024 513,312 $ 5.21 Expired ( 475,000 ) 5.00 Issued in Connection with December 2024 Offering 5,000,004 1.50 Issued in Connection with December 2024 Offering 250,000 1.88 Balance, February 28, 2025 5,288,316 $ 1.56 On September 19, 2024, 350,000 stock purchase warrants having an exercise price of $ 5.00 per share expired. On October 1, 2024, 125,000 stock purchase warrants having an exercise price of $ 5.00 per share expired. On December 20, 2024, the Company entered into a securities purchase agreement (the “ Purchase Agreement ”) with certain institutional investors (the “ Purchasers ”), which provided for the issuance and sale, in a registered direct offering by the Company of (i) 3,333,336 shares of its common stock, par value $0.0001 per share (the “ Common Stock ”) and (ii) warrants (the “ Common Warrants ”) to purchase up to an aggregate of 5,000,004 shares of its common stock (the “ Offering ”) at a combined purchase price of $1.50 per share and one and one-half Common Warrants. The Common Warrants are exercisable upon issuance and expire five years from the date of issuance. In connection with the Offering, the Company entered into a Placement Agency Agreement (the “ Placement Agency Agreement ”) on December 20, 2024 with Roth Capital Partners, LLC (the “ Placement Agent ”), as the exclusive placement agent in connection with the Offering. As compensation to the Placement Agent, the Company paid the Placement Agent a cash fee of 7.0% of the aggregate gross proceeds raised in the Offering and issued to the Placement Agent a placement agent warrant to purchase up to 250,000 shares of Common Stock at an exercise price of $1.88 per share (the “ Placement Agent Warrant ”) for a term of five years from the date of commencement of sales in the Offering. F- 19 Table of Contents A summary of stock purchase warrants outstanding and exercisable as at February 28, 2025 is as follows: Schedule of share purchase warrants outstanding and exercisable Number of Warrants Remaining Contractual Exercise Price Outstanding Life (Years) Expiry Date 8.22 28,312 0.68 November 4, 2025 6.70 10,000 0.73 November 21, 2025 1.50 5,000,004 4.82 December 23, 2029 1.88 250,000 4.82 December 23, 2029 1.56 5,288,316 F- 20 Table of Contents Stock Options On December 28, 2021, the Company granted an aggregate of 4,545,000 stock options pursuant to the Company’s 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 stockholder approved an amendment to the exercise price of the outstanding stock options from $8.00 to $3.84. The strike price adjustment did not affect the fair value. 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, 2025 February 29, 2024 Expected Risk-Free Interest Rate 1.06 % 1.06 % Expected Volatility 15.27 % 15.27 % Expected Life in Years 1.83 2.83 Expected Dividend Yield — — Weighted-Average Grant Date Fair Value $ 6.46 $ 6.46 On July 28, 2023, the Company granted an aggregate of 2,648,500 stock options pursuant to the Company’s 2023 Stock Incentive Plan having an exercise price of $ 4.62 per share and an expiry date of five years from the date of grant to 22 individuals who were employees and consultants of the Company’s subsidiaries and contractually controlled affiliate. 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: Schedule of valuation assumptions February 28, 2025 February 29, 2024 Expected Risk-Free Interest Rate 5.37 % 5.37 % Expected Volatility 25.48 % 25.48 % Expected Life in Years 3.41 4.41 Expected Dividend Yield — — Weighted-Average Grant Date Fair Value $ 4.58 $ 4.58 A continuity schedule of outstanding stock options as at February 28, 2025, and the changes during the period, is as follows: Schedule of stock option activity Number of Stock Options Exercise Price Balance, February 29, 2024 6,039,100 $ 4.18 Cancelled/Forfeited — — Balance, February 28, 2025 6,039,100 $ 4.18 F- 21 Table of Contents Stock Options (continued) 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, 2025 February 29, 2024 Number of Options Exercised on Forfeiture Basis — 89,502 Number of Options Exercised on Cash Basis — — Total Number of Options Exercised — 89,502 Number of Shares Issued on Cash Exercise — — Number of Shares Issued on Forfeiture Basis — 90,898 Total Number of Shares Issued Upon Exercise of Options — 90,898 Cash Received from Exercise of Stock Options $ — $ — Total Intrinsic Value of Options Exercised $ — $ — A continuity schedule of outstanding unvested stock options at February 28, 2025, and the changes during the period, is as follows Schedule of unvested restricted stock Number of Unvested Weighted Average Stock Options Grant Date Fair Value Balance, February 29, 2024 3,547,200 $ 5.34 Vested – July 28, 2024 ( 529,700 ) $ 4.58 Vested – December 28, 2024 ( 714,200 ) $ 6.46 Balance, February 28, 2025 2,303,300 $ 5.47 As at February 28, 2025, the aggregate intrinsic value of the outstanding stock options granted on 28 December 2021 was estimated at $ 0 as the current price as of February 28, 2025 is $ 1.19 which is lower than the strike price while the aggregate intrinsic value of the outstanding stock options granted on July 28, 2023 is $ 0 as the current price as of February 28, 2025 is lower than the strike price. A summary of stock options outstanding and exercisable as at February 28, 2025 is as follows: Schedule of stock options Options Outstanding Options Exercisable Range of Exercise Prices Outstanding at February 28, 2025 Exercise Price Weighted Average Remaining Contractual Term (Years) Exercisable at February 28, 2025 Exercise Price Weighted Average Remaining Contractual Term (Years) $ 7.00 to $ 9.00 3,390,600 $ 3.84 1.83 2,676,400 $ 3.84 1.83 $ 4.00 to $ 5.00 2,648,500 $ 4.62 3.41 1,059,400 $ 4.62 3.41 6,039,100 3,735,800 F- 22 Table of Contents 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, 2025 February 29, 2024 Numerator – basic and diluted Net Loss $ ( 5,109,342 ) $ ( 3,812,017 ) Denominator Weighted average number of common shares outstanding —basic 55,613,386 52,168,747 Weighted average number of common shares outstanding —diluted 55,613,386 52,168,747 Loss per common share — basic $ ( 0.09 ) $ ( 0.07 ) Loss per common share — diluted $ ( 0.09 ) $ ( 0.07 ) 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, 2025 and February 29, 2024. Hong Kong Finger Motion Company Limited, Finger Motion (CN) Limited and Finger Motion Financial Company Limited were incorporated in Hong Kong and Hong Kong’s profits tax rate is 16.5 % . These companies did not earn any income that was derived in Hong Kong for the years ended February 28, 2025 and February 29, 2024. The People’s Republic of China (PRC) JiuGe Management, Beijing XunLian, Shanghai TengLian JiuJiu and Shanghai KeShunXiang were incorporated in the People’s Republic of China and subject to PRC income tax at 25 % . JiuGe Technology was incorporated in the People’s Republic of China and subject to PRC income tax at 15 % as high-tech enterprise. 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 years ended February 28, 2025 and February 29, 2024, are as follows: Schedule of effective income tax rate reconciliation For the years ended February 28, 2025 February 29, 2024 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 ( 10.0 %) ( 25.0 %) Effective tax rate 15.0 % 0.0 % F- 23 Table of Contents Note 13 – Income Taxes (continued) At February 28, 2025 and February 29, 2024, the valuation allowance was $ 3,188,969 . Schedule of income tax expenses February 28, 2025 February 29, 2024 Current tax $ 5,786,417 $ — Deferred tax benefit ( 6,665,538 ) — Total provision for (benefit from) income tax expense $ ( 879,121 ) $ — The reconciliations of income tax expenses computed by applying the statutory income tax rates, ranging from 15% to 25%, to the Company’s income tax expenses for the presented years are as follows : Schedule of reconciliations of income tax expenses February 28, 2025 February 29, 2024 Loss before income tax expenses $ ( 5,988,461 ) $ ( 3,823,361 ) Income tax credit computed at various statutory income tax rate (15% to 25%) ( 1,035,381 ) — Reconciling items: Tax incentive – R&D Credit ( 144,047 ) — Income not subject to tax in China ( 11,118 ) — Non-deductible expenses 311,425 — Total provision for (benefit from) income tax $ ( 879,121 ) $ — Deferred tax has resulted primarily from future tax deductible or creditable temporary differences. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The significant components of the Company’s deferred tax account balances are as follows: Schedule of deferred tax assets February 28, 2025 February 29, 2024 Deferred tax assets Net operating losses carryforward $ 3,316,740 $ 2,677,168 Accruals and reserves 6,476,962 511,082 Lease liability 19,029 719 Total deferred tax assets 9,812,461 3,188,969 Less: Valuation allowance 3,188,969 3,188,969 Total deferred tax assets, net of valuation allowance 6,623,492 — Deferred tax liabilities Right-of-use asset ( 16,954 ) — Total deferred tax liabilities ( 16,954 ) — Net deferred tax assets (liabilities) $ 6,606,538 $ — F- 24 Table of Contents Note 14 - Commitments and Contingencies Legal proceedings The Company is not aware of any material outstanding claim and litigation against it. Note 15 – Loan Payable On June 1, 2024, the Company’s wholly owned subsidiary, Finger Motion Company Limited (the “ Borrower ”), entered into a loan agreement with Dr. Liew Yow Ming (the “ Lender ”) whereby the Lender agreed to advance a short-term loan facility of SGD$370,000 (the “ Loan ”) to the Borrower for working capital purposes. As of the date hereof, the full amount of the Loan has been drawn upon by the Borrower. Each drawdown portion of the Loan is due one (1) year from the date of the drawdown, unless extended by the Lender. If the Lender agrees, the Borrower may prepay the whole or any part of the Loan by providing the Lender not less than three (3) business days prior written notice and subject to payment of interest accrued thereon. Any prepayment of the Loan shall be in an amount of SGD$50,000 or multiples thereof. The Loan shall bear interest at the rate of 1.67% per month, any such interest to accrue from day to day and to be calculated based on a 365-day year, and is payable on a monthly basis on or before the last day of each successive month. On July 18, 2024, the Company’s wholly owned subsidiary, Finger Motion Company Limited (the “ Borrower ”), entered into a loan agreement with Dr. Liew Yow Ming (the “ Lender ”) whereby the Lender agreed to advance a short-term loan facility of SGD$1,500,000 (the “ Loan ”) to the Borrower for working capital purposes. As of September 4, 2024, the full amount of the Loan has been drawn upon by the Borrower. Each drawdown portion of the Loan is due one (1) year from the date of the drawdown, unless extended by the Lender. If the Lender agrees, the Borrower may prepay the whole or any part of the Loan by providing the Lender not less than three (3) business days prior written notice and subject to payment of interest accrued thereon. Any prepayment of the Loan shall be in an amount of SGD$50,000 or multiples thereof. The Loan shall bear interest at the rate of 1.50% per month, any such interest to accrue from day to day and to be calculated based on a 365-day year, and is payable on a monthly basis on or before the last day of each successive month. On November 4, 2024, the Company’s wholly owned subsidiary, Finger Motion Company Limited (the “ Borrower ”), entered into a loan agreement (the “ Loan Agreement ”) with Rita Chou Phooi Har (the “ Lender ”) whereby the Lender agreed to advance a short-term loan facility of SGD$250,000 (the “ Loan ”) to the Borrower for working capital purposes. As of November 7, 2024, the full amount of the Loan has been drawn upon by the Borrower. The Loan is due one (1) year from the date of the drawdown, unless extended by the Lender. If the Lender agrees, the Borrower may prepay the whole or any part of the Loan by providing the Lender not less than three (3) business days prior written notice and subject to payment of interest accrued thereon. Any prepayment of the Loan shall be in an amount of SGD$50,000 or multiples thereof. The Loan shall bear interest at the rate of 1.67% per month, any such interest to accrue from day to day and to be calculated based on a 365-day year, and is payable on a monthly basis on or before the last day of each successive month. On February 14, 2025, the Company repaid 2 short-term loans of SGD$370,000 and SGD$250,000. Note 16 - Restatement of Previously Issued Financial Statements The accumulated deficit as of February 28, 2023, Consolidated Balance Sheet as of February 29, 2024, and the related Consolidated Statements of Operations, Stockholders’ Equity and Cash Flows for the fiscal year ended February 29, 2024, have been restated for errors made with regard to revenue and stock options further described below. In accordance with ASC 250 – Accounting Changes and Error Corrections and Staff Accounting Bulletins No. 99 – Materiality and No. 108 – Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , the Company has evaluated the materiality of the error and determined that the impacts were not material, individually or in the aggregate, to the Company’s previously issued consolidated financial statements for any of the prior quarters or annual periods in which they occurred. The following is a description of the areas in which the errors were identified and for which we made correcting adjustments to our Consolidated Financial Statements. (1) Revenue - Upon further review of the classification and timing of certain customer payments, we refined our revenue recognition approach to better align with the performance obligations specified in the underlying contracts. These refinements included reclassifying certain amounts as prepayments and addressing instances of over-recognition of revenue, where revenue was previously recognized ahead of the fulfillment of related performance obligations. The adjustments ensure that revenue is recognized in a manner that more accurately reflects the timing and substance of service delivery. (2) Stock options - As part of our review of stock-based compensation, we refined certain assumptions used in the valuation and accounting treatment of stock option grants. These refinements resulted in adjustments to better reflect the expense recognition in accordance with applicable accounting standards and ensure consistency with our current methodology. F- 25 Table of Contents Note 16 - Restatement of Previously Issued Financial Statements (continued) The following table presents the effect or restatements of the Company’s previously issued consolidated balance sheet: Schedule of consolidated balance sheet As of February 29, 2024 As Previously Reported Adjustments As Restated Account receivable, net 9,153,692 ( 565,154 ) 8,588,538 Prepayment 5,538,401 196,343 5,734,744 Accumulated Deficit ( 28,448,833 ) ( 625,747 ) ( 29,074,580 ) Accumulated Other Comprehensive Income ( 782,362 ) 15,351 ( 767,011 ) Additional Paid-in Capital – Stock Options 1,037,276 196,343 1,233,619 The following table presents the effect of the restatements and reclassification on the Company’s previously issued and reported consolidated statement of operations: Schedule of consolidated statement of operations As of February 29, 2024 As Previously Reported Adjustments As Restated Less: Net profit attributable to the non-controlling interest ( 54,498 ) 53,984 ( 514 ) Net loss attributable to the Company’s shareholders ( 3,757,519 ) ( 53,984 ) ( 3,811,503 ) Foreign currency translation adjustments ( 390,670 ) 15,351 ( 375,319 ) Comprehensive loss ( 4,148,189 ) ( 38,633 ) ( 4,186,822 ) Less: comprehensive income (loss) attributable to non-controlling interest 260 190 450 Comprehensive loss attributable to the Company ( 4,148,449 ) ( 38,823 ) ( 4,187,272 ) F- 26 Table of Contents The following table presents the effect or restatements of the Company’s previously issued and reported Consolidated Statement of Stockholders’ Equity: Schedule of stockholders’ equity Shares Amount Capital paid in excess of par value APIC - Stock Options Accumulated Deficit Accumulated OCI Stockholder’s Equity NCI Total Balance at February 29, 2024, as previously stated 52,545,350 5,254 40,292,778 1,037,276 ( 28,448,833 ) ( 782,362 ) 12,104,113 ( 43,214 ) 12,060,899 Prior period adjustment — — — — ( 571,763 ) 15,351 ( 556,412 ) ( 8,742 ) ( 565,154 ) Effect of reclassification to net loss — — — — ( 53,984 ) — ( 53,984 ) 53,984 — Correction of stock incentive plan recognition — — — 196,343 — — 196,343 — 196,343 Balance at February 29, 2024, as restated 52,545,350 5,254 40,292,778 1,233,619 ( 29,074,580 ) ( 767,011 ) 11,690,060 2,028 11,692,088 The following table presents the effect of the restatements of the Company’s previously issued consolidated statement of cash flows: Schedule of consolidated statement of cash flows As of February 29, 2024 As Previously Reported Adjustments As Restated Share based compensation expenses 730,209 ( 466,923 ) 263,286 (Increase) decrease in accounts receivable ( 7,855,567 ) ( 63,966 ) ( 7,919,533 ) (Increase) decrease in prepayment and deposit ( 1,507,836 ) ( 18,021 ) ( 1,525,857 ) (Increase) decrease in other receivable ( 1,444,834 ) 1,379,568 ( 65,266 ) Increase (decrease) in accounts payable 5,126,949 41,814 5,168,763 Increase (decrease) in accrual and other payables 495,042 4,210 499,252 Increase (decrease) in due to lease liability ( 6,802 ) ( 55 ) ( 6,857 ) Net Cash Used in Operating Activities ( 8,203,947 ) 876,627 ( 7,327,320 ) Effect of exchange rates on cash and cash equivalents 776,647 ( 876,627 ) ( 99,980 ) F- 27 Table of Contents Note 17 – Subsequent Events On March 3, 2025, the Company issued 27,500 shares of its common stock at a deemed price of $ 1.86 per share to one entity pursuant to a consulting agreement. On May 28, 2025, the Company issued an aggregate of 940,000 shares of its common stock at a price of $ 2.50 per share to eight individuals due to the closing of a private placement for aggregate gross proceeds of $ 2,350,000 . Except for the above, the Company has determined that it does not have any other material subsequent events to disclose in these consolidated financial statements. F- 28 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On September 10, 2024, our Board of Directors as well as our Audit Committee approved and authorized the termination of Centurion ZD CPA & Co. (“Centurion”), as our independent registered public accounting firm. On the same date, our Board of Directors as well as our Audit Committee approved and authorized the engagement of the accounting firm of CT International LLP (“CT International”), as our new independent registered public accounting firm. Centurion’s report on our financial statements dated May 29, 2024, for the two most recent fiscal years ended February 29, 2024 and February 28, 2023, did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles. In connection with the audit of our financial statements for the two most recent fiscal years ended February 29, 2024 and February 28, 2023, and in the subsequent interim period through the effective date of termination of Centurion on September 10, 2024, there were no disagreements, resolved or not, with Centurion on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Centurion, would have caused Centurion to make reference to the subject matter of the disagreements in connection with its report on the financial statements for such years. During our two most recent fiscal years ended February 29, 2024 and February 28, 2023 and in the subsequent interim period through the effective date of termination of Centurion on September 10, 2024, there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K. During the two most recent fiscal years ended February 29, 2024 and February 28, 2023 and the subsequent interim period through the effective date of appointment of CT International on September 10, 2024, we had not, nor had any person on our behalf, consulted with CT International regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor had CT International provided to us a written report or oral advice regarding such principles or audit opinion on any matter that was the subject of a disagreement as set forth in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as set forth in Item 304(a)(1)(v) of Regulation S-K with our former independent registered public accounting firm.