UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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FINGERMOTION, INC.
FORM 10-Q
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-1-
FINGERMOTION, INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended August 31, 2023
(Unaudited - Expressed in U.S. Dollars)
-2-
| FingerMotion, Inc. |
| Condensed Consolidated Balance Sheets |
| August 31, | February 28, | |||||||
| 2023 | 2023 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepayment and deposit | ||||||||
| Other receivables | ||||||||
| Total Current Assets | ||||||||
| Non-current Assets | ||||||||
| Equipment | ||||||||
| Intangible assets | ||||||||
| Right-of-use asset | ||||||||
| Total Non-current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDER’S DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrual and other payables | ||||||||
| Stock subscription payables | ||||||||
| Convertible notes payable, current portion | ||||||||
| Lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liabilities | ||||||||
| Convertible note payable, non-current portion | ||||||||
| Lease liability, non-current portion | ||||||||
| Total Non-current Liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred stock, par value $ per share; Authorized shares; issued and outstanding -- shares. | ||||||||
| Common Stock, par value $ per share; Authorized shares; issued and outstanding shares and issued and outstanding at August 31, 2023 and February 28, 2023 respectively | ||||||||
| Additional paid-in capital | ||||||||
| Additional paid-in capital - stock options | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Stockholders’ equity before non-controlling interests | ||||||||
| Non-controlling interests | ||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
-3-
| FingerMotion, Inc. |
| Unaudited Condensed Consolidated Statements of Operations |
| Three Months Ended | Six Months Ended | |||||||||||||||
| August 31, | August 31, | August 31, | August 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||||
| Amortization & Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General & administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Marketing Cost | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Research & Development | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock compensation expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Exchange gain (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss before income tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income tax expenses | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: Net profit (loss) attributable to the non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss attributable to the Company’s shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: Comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss attributable to the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET PROFIT (LOSS) PER SHARE | ||||||||||||||||
| Loss Per Share - Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Loss Per Share - Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| NET PROFIT (LOSS) PER SHARE ATTRIBUTABLE TO THE COMPANY | ||||||||||||||||
| Loss Per Share - Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Loss Per Share - Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted Average Common Shares Outstanding - Basic | ||||||||||||||||
| Weighted Average Common Shares Outstanding - Diluted | ||||||||||||||||
-4-
FingerMotion, Inc.
Unaudited Condensed Consolidated Statement of Shareholders’ Equity
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Capital Paid | Additional | Other | ||||||||||||||||||||||||||||||||||
| Common Stock | in Excess | Paid-in capital | Accumulated | Comprehensive | Stockholders’ | Non-controlling | ||||||||||||||||||||||||||||||
| Shares | Amount | of Par Value | stock options | Deficit | Income | equity | interest | Total | ||||||||||||||||||||||||||||
| Balance at March 1, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||||||||||
| Common stock issued for professional service | ||||||||||||||||||||||||||||||||||||
| Execution of convertible notes | ||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | — | |||||||||||||||||||||||||||||||||||
| Net profit (loss) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance at May 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||||||||||
| Common stock issued for professional service | ||||||||||||||||||||||||||||||||||||
| Cashless exercise of warrants | ( | ) | ||||||||||||||||||||||||||||||||||
| Additional paid-in capital – stock options | — | |||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at August 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
-5-
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Capital Paid | Additional | Other | ||||||||||||||||||||||||||||||||||
| Common Stock | in Excess | Paid-in capital | Accumulated | Comprehensive | Stockholders’ | Non-controlling | ||||||||||||||||||||||||||||||
| Shares | Amount | of Par Value | stock options | Deficit | Income | equity | interest | Total | ||||||||||||||||||||||||||||
| Balance at March 1, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||||||||||
| Common stock issued for professional service | ||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at May 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||||||||||
| Common stock issued for professional service | ||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at August 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
-6-
| FingerMotion, Inc. |
| Unaudited Condensed Consolidated Statements of Cash Flows |
| Six Months Ended | ||||||||
| August 31, | August 31, | |||||||
| 2023 | 2022 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Share based compensation expenses | ||||||||
| Amortization and depreciation | ||||||||
| Impairment of fixed assets | ||||||||
| Change in operating assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| (Increase) decrease in prepayment and deposit | ( | ) | ||||||
| (Increase) decrease in others receivable | ( | ) | ||||||
| (Increase) decrease in inventories | ||||||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Increase (decrease) in accrual and other payables | ( | ) | ( | ) | ||||
| Increase (decrease) in due to lease liability | ( | ) | ||||||
| Net Cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceed from convertible note | ||||||||
| Repayment of convertible note | ( | ) | ||||||
| Common stock issued for cash | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rates on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Major non-cash transactions: | ||||||||
| Conversion of loan payables to shares | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
-7-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
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 shares of common stock to the FMCL shareholders. In addition, the Company issued shares to other consultants in connection with the transactions contemplated by the Share Exchange Agreement.
The transaction was accounted for as a “reverse acquisition” since, immediately following completion of the transaction, the shareholders of FMCL effectuated control of the post-combination Company. For accounting purposes, FMCL was deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of FMCL (i.e., a capital transaction involving the issuance of shares by the Company for the shares of FMCL). Accordingly, the consolidated assets, liabilities and results of operations of FMCL became the historical financial statements of FingerMotion, Inc. and its subsidiaries, and the Company’s assets, liabilities and results of operations were consolidated with FMCL beginning on the acquisition date. No step-up in basis or intangible assets or goodwill were recorded in this transaction.
As a result of the Share Exchange Agreement and the other transactions contemplated thereunder, FMCL became a wholly owned subsidiary of the Company. FMCL, a Hong Kong corporation, was formed in April 6, 2016.
On October 16, 2018, the Company through its indirect wholly-owned subsidiary, Shanghai JiuGe Business Management Co., Ltd. (“JiuGe Management”), entered into a series of agreements known as variable interest agreements (the “VIE Agreements”) pursuant to which Shanghai JiuGe Information Technology Co., Ltd. (“JiuGe Technology”) became JiuGe Management’s contractually controlled affiliate. The use of VIE agreements is a common structure used to acquire PRC corporations, particularly in certain industries in which foreign investment is restricted or forbidden by the PRC government. The VIE Agreements include a Consulting Services Agreement, a Loan Agreement, a Power of Attorney Agreement, a Call Option Agreement, and a Share Pledge Agreement in order to secure the connection and commitments of JiuGe Technology.
On March 7, 2019, JiuGe Technology also acquired 99% of the equity interest of Beijing XunLian (“BX”), a subsidiary that provides bulk distribution of SMS messages for JiuGe Technology 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 2021 where the Big Data division secured its first contract and recorded revenue.
Shanghai TengLian JiuJiu Information Communication Technology Co., Ltd. was incorporated on December 23, 2020 for the purpose of venturing into the mobile phone sales in China. It is 99% owned by JiuGe Technology.
On February 5, 2021, JiuGe Technology disposed of its 99% owned subsidiary, Suzhou BuGuNiao Digital Technology Co., Ltd., which was established to venture into R&D projects.
-8-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
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.
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.
-9-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 2 - Summary of Principal Accounting Policies (Continued)
The following assets and liabilities of the VIE and VIE’s subsidiaries are included in the accompanying condensed consolidated financial statements of the Company as of August 31, 2023 and February 28, 2023:
Assets and liabilities of the VIE
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| Current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
Assets and liabilities of the VIE Subsidiary
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| Current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities | $ | ( | ) | $ | ||||
| Non-current liabilities | ||||||||
| Total liabilities | $ | ( | ) | $ | ||||
-10-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 2 - Summary of Principal Accounting Policies (Continued)
Operating Result of VIE
| For the Six Months Ended August 31, 2023 | For the Six Months Ended August 31, 2022 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ( | ) | ( | ) | ||||
| Gross profit | $ | $ | ||||||
| Amortization and depreciation | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Marketing cost | ( | ) | ( | ) | ||||
| Research & development | ( | ) | ( | ) | ||||
| Total operating expenses | $ | ( | ) | $ | ( | ) | ||
| Net profit (loss) from operations | $ | $ | ( | ) | ||||
| Interest income | ||||||||
| Other income | ||||||||
| Total other income | $ | $ | ||||||
| Tax expense | ||||||||
| Net profit (loss) | $ | $ | ( | ) | ||||
Operating Result of VIE Subsidiary
| For the Six Months Ended August 31, 2023 | For the Six Months Ended August 31, 2022 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ( | ) | ( | ) | ||||
| Gross profit | $ | $ | ||||||
| Amortization and depreciation | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Marketing cost | ( | ) | ( | ) | ||||
| Research & development | ( | ) | ( | ) | ||||
| Total operating expenses | $ | ( | ) | $ | ( | ) | ||
| Net profit (loss) from operations | $ | $ | ( | ) | ||||
| Interest income | ||||||||
| Other income | ||||||||
| Total other income | $ | $ | ||||||
| Tax expense | ||||||||
| Net profit (loss) | $ | $ | ( | ) | ||||
-11-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 2 - Summary of Principal Accounting Policies (Continued)
Use of Estimates
The preparation of the Company’s financial statements in conformity with generally accepted accounting principles of the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.
Certain Risks and Uncertainties
The Company relies on cloud-based hosting through a global accredited hosting provider. Management believes that alternate sources are available; however, disruption or termination of this relationship could adversely affect our operating results in the near-term.
Identifiable Intangible Assets
Identifiable
intangible assets are recorded at cost and are amortized over
Impairment of Long-Lived Assets
The Company classifies its long-lived assets into: (i) computer and office equipment; (ii) furniture and fixtures, (iii) leasehold improvements, and (iv) finite – lived intangible assets.
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary.
The Company makes various assumptions and estimates regarding estimated future cash flows and other factors in determining the fair values of the respective assets. The assumptions and estimates used to determine future values and remaining useful lives of long-lived assets are complex and subjective. They can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as the Company’s business strategy and its forecasts for specific market expansion.
Accounts Receivable and Concentration of Risk
Accounts receivable, net is stated at the amount the Company expects to collect, or the net realizable value. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change.
-12-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 2 - Summary of Principal Accounting Policies (Continued)
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.
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.
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.
-13-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 2 - Summary of Principal Accounting Policies (Continued)
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.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Non-controlling interest
Non-controlling interests held 1% of the shares of two of our subsidiaries are recorded as a component of our equity, separate from the Company’s equity. Purchase or sales of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
Recently Issued Accounting Pronouncements
The Company does not believe recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
-14-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 3 - Going Concern
The
accompanying condensed 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 $
The Company’s continuation as a going concern is dependent on its ability to obtain additional financing to fund operations, implement its business model, and ultimately, attain profitable operations. The Company will need to secure additional funds through various means, including equity and debt financing or any similar financing. There can be no assurance that the Company will be able to obtain additional equity or debt financing, if and when needed, on terms acceptable to the Company, or at all. Any additional equity or debt financing may involve substantial dilution to the Company’s stockholders, restrictive covenants or high interest costs. The Company’s long-term liquidity also depends upon its ability to generate revenues and achieve profitability.
Note 4 - Revenue
We
recorded $
| For the six months ended | ||||||||
| August 31, 2023 | August 31, 2022 | |||||||
| (unaudited) | (unaudited) | |||||||
| Telecommunication Products & Services | $ | $ | ||||||
| SMS & MMS Business | ||||||||
| Big Data | ||||||||
| $ | $ | |||||||
Note 5 – Equipment
At August 31, 2023 and February 28, 2023, the company has the following amounts related to tangible assets:
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| Equipment | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Net equipment | $ | $ | ||||||
No
significant residual value is estimated for the equipment. Depreciation expense for the six months ended August 31, 2023 and 2022 totalled
$
-15-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 6 – Intangible Assets
At August 31, 2023 and February 28, 2023, the company has the following amounts related to intangible assets:
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| Licenses | $ | $ | ||||||
| Mobile applications | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Impairment of intangible assets | ( | ) | ( | ) | ||||
| Net intangible assets | $ | $ | ||||||
No
significant residual value is estimated for these intangible assets. Amortization expense for the six months ended August 31, 2023 and
2022 totalled $
Note 7 – Prepayment and Deposit
Prepaid expenses consist of the deposit pledge to the vendor for stocks credits for resale. Our current vendors are China Unicom and China Mobile for our Telecommunication Products & Services business and our SMS & MMS business. Deposits also includes payments placed into the e-commerce platforms where we offer our products and services. The platforms are PinDuoDuo, Tmall and JD.com.
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| Telecommunication Products & Services | ||||||||
| Deposit Paid / Prepayment | $ | $ | ||||||
| Deposit received | ||||||||
| Net Prepaid expenses for Telecommunication Products & Services | $ | $ | ||||||
| Others prepayment | ||||||||
| Prepayment and deposit | $ | $ | ||||||
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| SMS & MMS Business | ||||||||
| Deposit Paid / Prepayment | $ | $ | ||||||
| Deposit received | ||||||||
| Net Prepaid expenses for SMS | $ | $ | ||||||
| Others prepayment | ||||||||
| Prepayment and deposit | $ | $ | ||||||
-16-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 8 – Other Receivables
At August 31, 2023 and February 28, 2023, the company has the following amounts related to other receivables:
| August 31, 2023 | February 28, 2023 | |||||||
| (unaudited) | ||||||||
| Other receivables represent: | ||||||||
| Advances to suppliers | $ | $ | ||||||
| In-transit capital injection for a subsidiary | ||||||||
| Others | ||||||||
| Other receivables | $ | $ | ||||||
Note 9 – Right-of-use Asset and Lease Liability
The Company has entered into lease agreements with various third parties. The terms of operating leases are one to two years. These operating leases are included in “Right-of-use Asset” on the Company’s Condensed 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 Condensed 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 Condensed Consolidated Balance Sheet. All operating lease expense is recognized on a straight-line basis over the lease term in the six months ended August 31, 2023.
Information related to the Company’s right-of-use assets and related lease liabilities were as follows:
| August 31, 2023 | February 28, 2023 | |||||||
| Right-of-use asset | (unaudited) | |||||||
| Right-of-use asset, net | $ | $ | ||||||
| Lease liability | ||||||||
| Current lease liability | $ | $ | ||||||
| Non-current lease liability | ||||||||
| Total lease liability | $ | $ | ||||||
| Remaining lease term and discount rate | August 31, 2023 | |||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % | |||
Commitments
The following table summarizes the future minimum lease payments due under the Company’s operating leases as of August 31, 2023:
| 2023 | $ | |||
| Thereafter | ||||
| Less: imputed interest | ( | ) | ||
| $ |
-17-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 10 - Convertible Note Payable
A
Note Payable having a Face Value of $
On
April 28, 2023, the Company repaid the Note Payable of $
A
secured, two-year, interest-free convertible promissory note with a principal amount of $
An
event of default under the Note occurred on November 4, 2022 and on November 21, 2022 pursuant to section 2.1(e) of the Note in relation
to the closing of our private placements of shares of common stock in the aggregate amount of shares at a price of $ per
share for gross proceeds of $
Section 2.2 of the Note provided for the remedies upon an event of default, which as described in the Note, the holder may at any time at its option declare the Note immediately due and payable at an amount of 110% or 120% of the outstanding principal amount (the “Mandatory Default Amount”) depending on the type of event of default. In addition, upon an event of default, subject to any applicable cure periods, the holder may (a) from time-to-time demand that all or a portion of the outstanding principal amount be converted into shares of our common stock at the lower of (i) the conversion price ($2.00 per share) and (ii) 80% of the average of the three (3) lowest daily VWAPs during the twenty (20) days prior to the delivery of the conversion notice, or (b) exercise or otherwise enforce any one or more of the holder’s rights, powers, privileges, remedies and interests under the Note, the Purchase Agreement, the other transaction documents or applicable law.
The
Mandatory Default Amount for an event of default under Section 2.1(e) of the Note is 110% of the outstanding principal amount of the
Note, which is $
On
February 15, 2023 and February 22, 2023, the Investor provided notice of partial conversion of the Note of shares respectively
on each date amounting to a total conversion of $
In addition, section 5.7 of the Purchase Agreement provides that if we issued any equity interests, other than “Exempted Securities” (as defined in the Purchase Agreement), for aggregate proceeds to us of greater than $10,000,000 during the term of the Purchase Agreement, excluding offering costs and other expenses, unless otherwise waived in writing by and at the discretion of the holder, we will direct 25% of such proceeds from such issuance to repay the Note. We have advised the holder that the aggregate Private Placement Proceeds exceeded $10,000,000 and the holder did not seek to waive or require payment of 25% of the proceeds as repayment of the Note.
-18-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 11 - Common Stock
The
Company issued shares of common stock for the year ended February 28, 2022 for consideration of $
The
Company issued shares of common stock during the fiscal year ended February 28, 2022 pursuant to the conversion of promissory
notes in the aggregate amount of $
The Company cancelled shares of common stock during the fiscal year ended February 28, 2022 pursuant to a financial advisory service agreement.
On March 7, 2022 the Company issued shares of our common stock at deemed price of $ per share to one entity pursuant to a consulting agreement.
On March 23, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one individual pursuant to a consulting agreement.
On March 23, 2022, the Company issued an aggregate of shares of our common stock at a deemed price of $ per share to two individuals and one entity pursuant to consulting agreements.
On April 14, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On April 28, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On April 28, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On April 28, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one individual pursuant to a consulting agreement.
On May 10, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On May 10, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one individual pursuant to a consulting agreement.
On May 12, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement as amended.
On July 5, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On July 5, 2022, the Company issued an aggregate of shares of our common stock at a deemed price of $ per share to two individuals and one entity pursuant to consulting agreements.
On August 3, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On October 19, 2022, the Company issued an aggregate of shares of our common stock at a deemed price of $ per share to two individuals and one entity pursuant to consulting agreements.
On October 19, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
-19-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 11 - Common Stock (continued)
On October 19, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one individual pursuant to a consulting agreement.
On October 19, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On October 24, 2022, the Company issued shares of our common stock at price of $ per share to two individuals pursuant to the exercise of warrants.
On October 24, 2022, the Company issued shares of our common stock at price of $ per share to one individual pursuant to the exercise of warrants.
On November 3, 2022, the Company issued shares of our common stock at price of $ per share to two individuals pursuant to the exercise of warrants.
On November 3, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On November 3, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On November 3, 2022, the Company issued shares of our common stock at a deemed price of $ per share to one individual pursuant to a consulting agreement.
On November 4, 2022, the Company issued an aggregate of shares of common stock at a price of $ per share to eleven individuals due to the closing of its private placement at $ per share for aggregate gross proceeds of $7,550,000.
In
connection with the closing of the private placement on November 4, 2022, the Company issued shares of common stock at price of
$ per share for a total value of $
On November 21, 2022, the Company issued 0 shares of common stock at a price of $ per share to one entity due to the closing of its private placement at $ per share for aggregate gross proceeds of $4,000,000.
On January 19, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On January 19, 2023, the Company issued an aggregate of shares of our common stock at a deemed price of $ per share to two individuals and one entity pursuant to consulting agreements.
On January 19, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On January 19, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On January 19, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On February 7, 2023, the Company issued shares of common stock at deemed price of $ per share to its primary lender pursuant to the cashless exercise of warrants of the convertible promissory note (the “Note”) issued to the Company’s primary lender on August 9, 2022.
-20-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Note 11 - Common Stock (continued)
On February 7, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On
February 15, 2023, the Company issued
shares of common stock at price of $
per share to its primary lender pursuant to the conversion of $
On
February 22, 2023, the Company issued shares of common stock at price of $ per share to its primary lender pursuant to the
conversion of $
On February 28, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one individual pursuant to a consulting agreement.
On February 28, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On
March 17, 2023, the Company issued shares of common stock at price of $ per share to our primary lender pursuant to the
conversion of $
On April 18, 2023, the Company issued shares of common stock at a price of $ per share pursuant to the exercise of warrants.
On April 24, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
On July 17, 2023, the Company issued shares of our common stock at a deemed price of $ per share to The Benchmark Company, LLC (“Benchmark”) pursuant to the cashless exercise of warrants.
On August 3, 2023, the Company issued shares of our common stock at a price of $ per share to three individuals pursuant to the exercise of warrants.
On August 3, 2023, the Company issued shares of our common stock at a deemed price of $ per share to one entity pursuant to a consulting agreement.
As of August 31, 2023 there were shares of the Company’s common stock issued and outstanding, and none of the preferred shares were issued and outstanding.
-21-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022
Notes to the Condensed Consolidated Financial Statements
Share Purchase Warrants
A continuity schedule of outstanding share purchase warrants as at August 31, 2023, and the changes during the periods, is as follows:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, February 28, 2020 | $ | |||||||
| Issued in Connection with October 2020 Offering | $ | |||||||
| Issued in connection with January 2021 Offering | $ | |||||||
| Exercised | ( | ) | $ | |||||
| Balance, February 28, 2021 | $ | |||||||
| Exercised | ( | ) | $ | |||||
| Balance, February 28, 2022 | $ | |||||||
| Issued in Connection with August 2022 Offering | $ | |||||||
| Expired | ( | ) | $ | |||||
| Issued in Connection with August 2022 Offering | $ | |||||||
| Issued in Connection with September 2022 Offering | $ | |||||||
| Issued in Connection with November 2022 Offering | $ | |||||||
| Issued in Connection with November 2022 Offering | $ | |||||||
| Exercised | ( | ) | $ | |||||
| Exercised | ( | ) | $ | |||||
| Issued in Connection with October 2022 Offering | $ | |||||||
| Cashless Exercised | ( | ) | $ | |||||
| Balance, February 28, 2023 | $ | |||||||
| Exercised | ( | ) | $ | |||||
| Expired | ( | ) | $ | |||||
| Exercised | ( | ) | $ | |||||
| Expired | ( | ) | $ | |||||
| Cashless Exercised | ( | ) | $ | |||||
| Balance, August 31, 2023 | $ | |||||||
During
Fiscal 2023 and Fiscal 2022, we received cash proceeds totalling $
On
August 9, 2022, the Company entered into a Securities Purchase Agreement with an investor (the “Investor”), pursuant to which
the Company issued to the Investor a common stock purchase warrant (the “Warrant”) to acquire
On
February 6, 2023, the Investor exercised the Warrant on the cashless exercise basis for all
On
October 19, 2022, the Company’s board of directors authorized a six month extension to the expiry date of the common stock purchase
warrants that the Company issued on October 19, 2020 which have an expiry date of
On
November 3, 2022, the Company issued common stock purchase warrants to purchase
-22-
FINGERMOTION, INC.
Six months ended August 31, 2023 and 2022