Notes to the Condensed Consolidated Financial
Statements
Note 1 – Nature of Business
and basis of Presentation
FingerMotion, Inc. fka Property Management
Corporation of America (the “Company”) was incorporated on January 23, 2014 under the laws of the State of Delaware.
The Company then offered management and consulting services to residential and commercial real estate property owners who rent
or lease their property to third party tenants.
The Company changed its name to FingerMotion,
Inc. on July 13, 2017 after a change in control. In July 2017 the Company acquired all of the outstanding shares of Finger Motion
Company Limited (“FMCL”), a Hong Kong corporation that is an information technology company which specialize in operating
and publishing mobile games.
Pursuant to the Share Exchange Agreement
with FMCL, effective July 13, 2017 (the “Share Exchange Agreement”, the Company agreed to exchange the outstanding
equity stock of FMCL held by the FMCL Shareholders for shares of common stock of the Company. At the Closing Date, the Company
issued 12,000,000 shares of common stock to the FMCL shareholders. In addition, the Company issued 600,000 shares to other consultants
in connection with the transactions contemplated by the Share Exchange Agreement.
The transaction was accounted for as
a “reverse acquisition” since, immediately following completion of the transaction, the shareholders of FMCL effectuated
control of the post-combination Company. For accounting purposes, FMCL was deemed to be the accounting acquirer in the transaction
and, consequently, the transaction is treated as a recapitalization of FMCL (i.e., a capital transaction involving the issuance
of shares by the Company for the shares of FMCL). Accordingly, the consolidated assets, liabilities and results of operations of
FMCL became the historical financial statements of FingerMotion, Inc. and its subsidiaries, and the Company’s assets, liabilities
and results of operations were consolidated with FMCL beginning on the acquisition date. No step-up in basis or intangible assets
or goodwill were recorded in this transaction.
As a result of the Share Exchange Agreement
and the other transactions contemplated thereunder, FMCL became a wholly owned subsidiary of the Company. FMCL, a Hong Kong corporation,
was formed in April 6, 2016.
On October 16, 2018, the Company through
its indirect wholly-owned subsidiary, Shanghai JiuGe Business Management Co., Ltd. (“JiuGe Management”), entered into
a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Shanghai JiuGe
Information Technology Co., Ltd. (“JiuGe Technology”) became JiuGe Management’s contractually controlled affiliate.
The use of VIE agreements is a common structure used to acquire PRC corporations, particularly in certain industries in which foreign
investment is restricted or forbidden by the PRC government. The VIE Agreements include a Consulting Services Agreement, a Loan
Agreement, a Power of Attorney Agreement, a Call Option Agreement, and a Share Pledge Agreement in order to secure the connection
and commitments of the JiuGe Technology.
On March 7, 2019, JiuGe Technology also
acquired Beijing XunLian (“BX”), a wholly-owned subsidiary that provides bulk distribution of SMS messages for JiuGe
customers at discounted rates.
Note 2 - Summary of Principal Accounting
Policies
Principles of Consolidation and Presentation
The condensed consolidated financial
statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The
condensed 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.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and 2018
Notes to the Condensed Consolidated Financial
Statements
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 & VIE Subsidiary are included in the accompanying consolidated financial statements of the Company as of November
30, 2019 and February 28, 2019:
Assets and liabilities of the VIE
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
Current assets
|
|
$
|
2,145,543
|
|
|
$
|
2,674,890
|
|
Non-current assets
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
$
|
2,145,543
|
|
|
$
|
2,674,890
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
2,779,130
|
|
|
$
|
3,023,805
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
—
|
|
Total liabilities
|
|
$
|
2,779,130
|
|
|
$
|
3,023,805
|
|
Assets and liabilities of the VIE Subsidiary
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
Current assets
|
|
$
|
2,267,562
|
|
|
$
|
—
|
|
Non-current assets
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
$
|
2,267,562
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
1,917,651
|
|
|
$
|
—
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
—
|
|
Total liabilities
|
|
$
|
1,917,651
|
|
|
$
|
—
|
|
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and 2018
Notes to the Condensed Consolidated Financial
Statements
Note 2 - Summary of Principal Accounting
Policies (continued)
Operating
Result of VIE
|
|
For the Nine Months Ended November 30, 2019
|
|
|
|
(Unaudited)
|
|
Revenue
|
|
$
|
1,754,793
|
|
Cost of Revenue
|
|
|
(1,513,799
|
)
|
Gross Profit
|
|
$
|
240,994
|
|
|
|
|
|
|
Amortization and Depreciation
|
|
|
(33,384
|
)
|
General and Administrative Expenses
|
|
|
(955,240
|
)
|
Total Operating Expenses
|
|
$
|
(988,624
|
)
|
|
|
|
|
|
Net Loss from Operations
|
|
$
|
(747,630
|
)
|
|
|
|
|
|
Interest Income
|
|
|
894
|
|
Other Income
|
|
|
441,840
|
|
Interest Expense
|
|
|
(616
|
)
|
Total Other Income
|
|
$
|
442,118
|
|
Net Loss
|
|
$
|
(305,512
|
)
|
Operating
Result of VIE Subsidiary
Results from March 7, 2019 through November
30, 2019
|
|
For the Nine Months Ended November 30, 2019
|
|
|
(Unaudited)
|
Revenue
|
|
$
|
3,910,686
|
|
Cost of Revenue
|
|
|
(3,425,864
|
)
|
Gross Profit
|
|
$
|
484,822
|
|
|
|
|
|
|
Amortization and Depreciation
|
|
|
—
|
|
General and Administrative Expenses
|
|
|
(130,852
|
)
|
Total Operating Expenses
|
|
$
|
(130,852
|
)
|
|
|
|
|
|
Net Profit from Operations
|
|
$
|
353,970
|
|
|
|
|
|
|
Interest Income
|
|
|
182
|
|
Other Income
|
|
|
9,842
|
|
Interest Expense
|
|
|
—
|
|
Total Other Income
|
|
$
|
10,024
|
|
Net Profit
|
|
$
|
363,994
|
|
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and 2018
Notes to the Condensed Consolidated Financial
Statements
Note 2 - Summary of Principal Accounting
Policies (continued)
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 unaudited condensed
consolidated financial position, statements of operations and cash flows.
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 globally accredited hosting provider. Management believes that alternate sources are available; however, disruption or
terminat ion 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.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and 2018
Notes to the Condensed Consolidated Financial
Statements
Note 2 - Summary of Principal Accounting
Policies (continued)
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.
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 FASB Accounting Standard Codification (“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.
Under 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.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and 2018
Notes to the Condensed Consolidated Financial
Statements
Note 2 - Summary of Principal Accounting
Policies (continued)
Revenue Recognition (continued)
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.
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.
Note 3 - Going Concern
The accompanying unaudited 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 $7,098,730 and $4,822,389 as at November 30, 2019 and February 28, 2019 respectively, and had a net loss of $2,275,868 and $936,322
for the nine months ended November 30, 2019 and 2018, 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.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and 2018
Notes to the Condensed Consolidated Financial
Statement
Note 4 - Revenue
We recorded $5,665,479 and $783,842
in revenue, respectively, for the nine months ended November 30, 2019 and 2018. The increase of $4,881,637 resulted from the consolidation
of the VIE entities & its subsidiary and the new business model.
|
|
For the Nine Months Ended November 30,
|
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
Gaming
|
|
$
|
—
|
|
|
$
|
314,157
|
|
Mobile Recharge
|
|
|
1,754,793
|
|
|
|
469,685
|
|
SMS
|
|
|
3,910,686
|
|
|
|
—
|
|
|
|
$
|
5,665,479
|
|
|
$
|
783,842
|
|
Note 5 – Equipment
At November 30, 2019 and February 28,
2019, the company has the following amounts related to tangible assets:
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
29,741
|
|
|
$
|
13,450
|
|
Less: accumulated depreciation
|
|
|
(7,519
|
)
|
|
|
(2,844
|
)
|
Net equipment
|
|
$
|
22,222
|
|
|
$
|
10,606
|
|
No significant residual value is estimated
for the equipment. Depreciation expense for the nine months ended November 30, 2019 and 2018 totaled $4,851 and $261, respectively.
Note 6 – Intangible Assets
At November 30, 2019 and February 28,
2019, the company has the following amounts related to intangible assets:
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
Less: accumulated amortization
|
|
|
(200,000
|
)
|
|
|
(200,000
|
)
|
Net intangible assets
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
No significant residual value is estimated
for these intangible assets. The remaining amortization period of the Company’s amortizable intangible assets have been totally
amortized as of February 28, 2019.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and
2018
Notes to the Condensed Consolidated Financial
Statements
Note 7 – Prepaid expenses
Prepaid expenses consist of the deposit
pledge to the vendor for stocks credits for resale. The significant movement was mainly due to inception of Finger Motion (CN)
Limited and its China entities on October 16, 2018. Our current vendors are China Unicom and China Mobile for Mobile Recharge and
China Mobile for SMS.
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Deposit Paid / Prepayment
|
|
$
|
2,551,050
|
|
|
$
|
44,570,540
|
|
Deposit received
|
|
|
(1,810,660
|
)
|
|
|
(43,237,936
|
)
|
Net Prepaid expenses for Mobile recharge
|
|
$
|
740,390
|
|
|
$
|
1,332,604
|
|
Other deposit
|
|
|
2,037,876
|
|
|
|
1,238,120
|
|
Prepayment and deposit
|
|
$
|
2,778,266
|
|
|
$
|
2,570,724
|
|
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Deposit Paid / Prepayment
|
|
$
|
613,694
|
|
|
$
|
—
|
|
Deposit received
|
|
|
|
|
|
|
—
|
|
Net Prepaid expenses for SMS
|
|
$
|
613,694
|
|
|
$
|
—
|
|
Other deposit
|
|
|
—
|
|
|
|
—
|
|
Prepayment and deposit
|
|
$
|
613,694
|
|
|
$
|
—
|
|
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and
2018
Notes to the Condensed Consolidated Financial
Statements
Note 8 – Right-of-use Asset
and Lease Liability
The Company has entered into lease agreements
with various third parties. The terms of operating leases are one to two years. These operating leases are included in "Right-of-use
Asset" on the Company's Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for
the lease term. The Company’s obligation to make lease payments are included in "Lease liability" on the Company's
Consolidated Balance Sheet. Upon adoption of ASC Topic 842, Leases (Topic 842), based on the present value of the lease payments
for the remaining lease term of the Company's existing leases, the Company recorded net right-of-use assets of $78,263 and lease
liability of $78,263 on January 1, 2019. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are
recognized at commencement date based on the present value of lease payments over the lease term. As of November 30, 2019, total
right-of-use assets and operating lease liabilities were $16,305 and $16,627 respectively.
Additionally, the Company has entered
into various short-term operating leases with an initial term of twelve months or less. These leases are not recorded on the Company's
balance sheet. All operating lease expense is recognized on a straight-line basis over the lease term in the nine months ended
November 30, 2019.
Information related to the Company's
right-of-use assets and related lease liabilities were as follows:
|
|
November 30, 2019
|
|
|
(Unaudited)
|
|
|
|
Right-of-use assets in exchange for operating lease obligations
|
|
$
|
78,263
|
|
Less: accumulated depreciation
|
|
|
(61,958
|
)
|
Right-of-use assets, net
|
|
|
16,305
|
|
|
|
|
|
|
Lease liability
|
|
|
16,627
|
|
Weighted-average remaining lease term
|
|
|
2 years
|
|
Weighted-average discount rate
|
|
|
2.48
|
%
|
Due in 12 months period ended November 30,
|
|
|
|
|
November 30, 2019
|
|
|
(Unaudited)
|
|
|
|
2020
|
|
$
|
16,730
|
|
Thereafter
|
|
|
—
|
|
Less: imputed interest
|
|
|
(103
|
)
|
Total lease liability
|
|
$
|
16,627
|
|
|
|
|
|
|
Current lease liability
|
|
$
|
16,627
|
|
Non-current lease liability
|
|
|
—
|
|
Total lease liability
|
|
$
|
16,627
|
|
|
|
|
|
|
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and
2018
Notes to the Condensed Consolidated Financial
Statements
Note 9 - Convertible notes payables
As of November 30, 2019, all the due
convertible notes have been converted into $0.0001 par value Common Stock. 242,000 shares at $1.00 per share and 66,000 shares
at $2.50 per share.
Note 10 - Note payable
A Note Payable having a Face Value of
$66,000 at November 30, 2019 and accruing interest at 0% is due May 21, 2021.
Note 11 - Common Stock
On June 21, 2017, the Company filed Articles
of Amendment to its Amended Articles of Incorporation with the Secretary of State of the State of Delaware effecting a 1 for 4
reverse stock split of the Company's common stock and increase in the authorized shares of common stock to 200,000,000 and a name
change of the Company from Property Management Corporation of America to FingerMotion, Inc. (the "Corporate Actions").
The Corporate Actions and the Amended Articles became effective on June 21, 2017.
Effective July 13, 2017 (the “Closing
Date”), the Company entered into that certain Share Exchange Agreement (the “Share Exchange Agreement”) by and
among the Company, Finger Motion Company Limited, a Hong Kong corporation (“FMCL”) and certain shareholders of FMCL
(the “FMCL Shareholders”). Pursuant to the Share Exchange Agreement, the Company agreed to exchange the outstanding
equity stock of FMCL held by the FMCL Shareholders for shares of common stock of the Company.
At the Closing Date, the Company issued
approximately 12,000,000 shares of common stock to the FMCL shareholders. In addition, the Company issued 600,000 shares to consultants
in connection with the transactions contemplated by the Share Exchange Agreement, and up to 2,562,500 additional shares to accredited
investors.
The Company issued approximately 2,856,000
shares of common stock during the fiscal year ended February 28, 2018, of which 1,350,000 were issued to consultants at $0.035
per share. 400,000, 470,000 and 636,000 shares were issued to investors at a per share purchase price of $0.50, $1.00 and $1.50,
respectively.
The Company issued approximately 7,331,000
shares of common stock during the year ended February 28, 2019 for cash of $3,760,500.
The Company issued approximately
798,200 shares of common stock for the nine months ended November 30, 2019 for cash of $1,364,955, including 200,000 shares of
common stock to consultants.
Note 12 - Common Stock Subscribed
The Company received $150,000 from the
subscription of common stock during the year ended February 28, 2018. As of February 28, 2019, the Company issued all of the shares
of the subscribed common stock to assigned investors.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and
2018
Notes to the Condensed Consolidated Financial
Statements
Note 13 - Earnings Per Share
The following table sets forth the computation of basic and
diluted earnings per common share:
|
|
For the nine months ended November 30,
|
|
|
2019
|
|
2018
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Numerator - basic and diluted
|
|
|
|
|
Net Loss
|
|
$
|
(2,275,868
|
)
|
|
$
|
(936,322
|
)
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding—basic
|
|
|
25,847,953
|
|
|
|
17,723,371
|
|
Weighted average number of common shares outstanding—diluted
|
|
|
25,532,997
|
|
|
|
17,723,371
|
|
Loss per common share — basic
|
|
$
|
(0.09
|
)
|
|
$
|
(0.05
|
)
|
Loss per common share — diluted
|
|
$
|
(0.09
|
)
|
|
$
|
(0.05
|
)
|
Note 14 - 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 nine months ended November 30, 2019 and 2018.
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 nine months ended November 30, 2019 and 2018.
The People’s
Republic of China (PRC)
JiuGe Management,
JiuGe Technology and Beijing XunLian were incorporated in the People’s Republic of China and subject to PRC income tax at
25%. JiuGe Management, JiuGe Technology and Beijing XunLian did not generate taxable income in the People’s Republic of China
for the nine months ended November 30, 2019.
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and
2018
Notes to the Condensed Consolidated Financial
Statements
Note 14 - Income Taxes (continued)
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 nine months ended November 30, 2019 and 2018 are as follows:
|
|
For the nine months ended November 30,
|
|
|
2019
|
|
2018
|
|
|
(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 November 30, 2019 and February 28,
2019, the Company has a deferred tax asset of $568,967 and $236,331, 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 November 30, 2019 and February 28, 2019, the valuation allowance was $568,967 and $236,331,
respectively.
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset from operating losses carry-forwards
|
|
$
|
568,967
|
|
|
$
|
236,331
|
|
Valuation allowance
|
|
|
(568,967
|
)
|
|
|
(236,331
|
)
|
Deferred tax asset, net
|
|
$
|
—
|
|
|
$
|
—
|
|
FINGERMOTION, INC.
Nine Months ended November 30, 2019 and
2018
Notes to the Condensed Consolidated Financial
Statements
|
Note 15 -
|
Related Parties Transaction
|
Name of related parties
|
|
Relationship with the Company
|
|
|
|
Ms. Li Li
|
|
Non-controlling Stockholder, Director of JiuGe Technology.
|
|
b)
|
The Company had the following related party balances at November 30, 2019 and February 28, 2019:
|
|
|
November 30, 2019
|
|
February 28, 2019
|
|
|
(Unaudited)
|
|
|
Due to related parties:
|
|
|
|
|
Ms. Li Li
|
|
$
|
(1,205,789
|
)
|
|
$
|
(1,685,428
|
)
|
Note 16 - Commitments and Contingencies
Legal proceedings
The Company is not aware of any material
outstanding claim and litigation against them.
Note 17 - Subsequent Events
The Company has evaluated all transactions
from November 30, 2019 through the financial statement issuance date for subsequent event disclosure consideration and noted no
significant subsequent event requiring disclosure.
Cautionary Note Regarding Forward-Looking
Statements
This Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties. Forward-looking statements give our current expectations of forecasts
of future events. All statements other than statements of current or historical fact contained in this quarterly report, including
statements regarding our future financial position, business strategy, new products, budgets, liquidity, cash flows, projected
costs, regulatory approvals or the impact of any laws or regulations applicable to us, and plans and objectives of management for
future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,”
“could,” “should,” “estimate,” “expect,” “intend,” “may,”
“plan,” “project,” “will,” and similar expressions, as they relate to us, are intended to identify
forward-looking statements.
We have based these forward-looking statements
on our current expectations about future events. While we believe these expectations are reasonable, such forward-looking statements
are inherently subject to risks and uncertainties, many of which are beyond our control. Our actual future results may differ materially
from those discussed or implied in our forward-looking statements for various reasons. Factors that could contribute to such differences
include, but are not limited to:
|
·
|
international, national and local general economic and market conditions;
|
|
·
|
the ability of the Company to sustain, manage or forecast its growth;
|
|
·
|
the ability of the Company to manage its VIE contracts;
|
|
·
|
the ability of the Company to maintain its relationships and licenses in China;
|
|
·
|
competition and changes in the Chinese telecommunications market;
|
|
·
|
fluctuations and difficulty in forecasting operating results;
|
|
·
|
business disruptions, such as technological failures and/or cybersecurity breaches;
|
|
·
|
and the other factors discussed below in Item 2. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” in Item 1A. “Risk Factors” in our Annual
Report on Form 10-K for the year ended February 28, 2019 and in other filings we make with the Securities and Exchange Commission.
|
Given these risks and uncertainties, you are
cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report
are made only as of the date hereof. We do not undertake any obligation to update any such statements or to publicly announce the
results of any revisions to any of such statements to reflect future events or developments.