FingerMotion, Inc. - Quarter Report: 2019 May (Form 10-Q)

 

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 31, 2019

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________________ to _______________________

 

Commission File Number: 000-55477

 

Fingermotion, Inc.

(Exact name of registrant as specified in its charter)

 

DELAWARE	20-0077155
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1460 Broadway New York, New York 10036	(347) 349-5339
(Address of principal executive offices, including Zip Code)	Registrant’s telephone number, including area code

 

 

        N/A       

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

 

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 Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

 

The registrant had 25,370,953 shares of common stock outstanding as of July 9, 2019.

 

 

 

Fingermotion, Inc.

Form 10-Q for the Quarter ended May 31, 2019

 

TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements - unaudited	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	22
PART II – OTHER INFORMATION
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 6.	Exhibits	24
Signatures		25

 

 

 

		May 31, 2019				February 28, 2019
		(unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	151,622			$	1,337,245
Accounts receivable			606,365				493,808
Equipment (net of $3,976 and $2,844 depreciation)			15,662				10,606
Prepayment and deposit			4,057,549				2,570,724
Other receivables			173,268				25,309
Right-of-use asset			35,871				-
TOTAL ASSETS		$	5,040,337			$	4,437,692
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities
Accounts payable		$	1,965,081			$	1,239,280
Accrual and other payables			421,351				296,007
Due to related parties			1,223,606				1,880,373
Convertible notes payable			370,000				370,000
Note payable			66,000				66,000
Lease liability			36,353				-
TOTAL LIABILITIES			4,082,391				3,851,660
SHAREHOLDERS' EQUITY
Preferred stock, par value $.0001 per share; Authorized 1,000,000 shares; issued and outstanding -0- shares.			-				-
Common Stock, par value $.0001 per share; Authorized 200,000,000 shares; issued and outstanding 25,370,953 shares and 24,763,753 issued and outstanding at May 31, 2019 and February 28, 2019 respectively			2,537				2,476
Additional paid-in capital			6,787,135				5,414,897
Accumulated deficit			(5,835,500	)			(4,822,389	)
Accumulated other comprehensive income			3,774				(8,952	)
TOTAL SHAREHOLDERS' EQUITY			957,946				586,032
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	5,040,337			$	4,437,692

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		Three Months Ended May 31,
		2019				2018
		(Unaudited)				(Unaudited)
Revenue		$	933,269			$	183,130
Cost of revenue			(851,643	)			(152,507	)
Gross profit			81,626				30,623
Amortization & depreciation			(11,018	)			(50,087	)
General & administrative expenses			(1,088,818	)			(275,944	)
Total operating expenses			(1,099,836	)			(326,031	)
Net loss from operations			(1,018,210	)			(295,408	)
Other income (expense):
Interest income			427				-
Interest expense			(4,819	)			(4,973	)
Exchange rate gain (loss)			(372	)			8,097
Written off of goodwill			(8,838	)			-
Other income			19,186				-
Total other income (expense)			5,584				3,124
Net Loss		$	(1,012,626	)		$	(292,284	)
Other comprehensive income:
Foreign currency translation adjustments			12,726				-
Comprehensive loss		$	(999,900	)		$	(292,284	)
Loss Per Share - Basic		$	(0.04	)		$	(0.02	)
Loss Per Share - Diluted		$	(0.04	)		$	(0.02	)
Wgt Ave Common Shares Outstanding - Basic			25,370,953				17,554,237
Wgt Ave Common Shares Outstanding - Diluted			25,163,910				17,554,237

---

		Common Stock								Capital Paid in Excess of Par Value				Shares to be Issued				Deficit Accumulated				Accumulated Other Comprehensive Income				Total
		Shares				Amount																				Total
Balance at March 1, 2018			17,432,753			$	1,743			$	1,655,130			$	150,000			$	(1,909,514	)		$	-			$	(102,641	)
Common stock issued for cash			275,000				28				329,973				(150,000	)											180,001
Stock subscribed			-				-				-				-												-
Net Loss			-				-				-				-				(292,284	)			-				(292,284	)
Balance at May 31, 2018			17,707,753			$	1,771			$	1,985,103			$	-			$	(2,201,798	)		$	-			$	(214,924	)

		Common Stock								Capital Paid in Excess of Par Value				Shares to be Issued				Deficit Accumulated				Accumulated Other Comprehensive Income				Total
		Shares				Amount
Balance at March 1, 2019			24,763,753			$	2,476			$	5,414,897			$	-			$	(4,822,389	)		$	(8,952	)		$	586,032
Impact of Adoption of ASU 2016-02, Leases (Topic 842)			-				-				-				-				(485	)							(485	)
Common stock issued for cash			607,200				61				1,137,404																1,137,465
Common stock issued for professional service			-				-				234,834																234,834
Stock subscribed			-				-				-				-												-
Accumulated other comprehensive income			-				-				-				-				-				12,726				12,726
Net (Loss)			-				-				-				-				(1,012,626	)			-				(1,012,626	)
Balance at May 31, 2019			25,370,953			$	2,537			$	6,787,135			$	-			$	(5,835,500	)		$	3,774			$	957,946

---

		Three Months Ended May 31,				Three Months Ended May 31,
		2019  (Unaudited)				2018 (Unaudited)
Net loss		$	(1,012,626	)		$	(292,284	)
Adjustments to reconcile decrease in net assets to net cash provided by operating activities:
Share based compensation expenses			405,744				-
Amortization and depreciation			11,018				50,087
Written off of goodwill			8,838				-
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable			(112,557	)			(49,010	)
(Increase) decrease in prepayment and deposit			(1,486,825	)			(360,047	)
(Increase) decrease in other receivable			(147,959	)			(32,456	)
(Increase) decrease in right-of-use asset			(35,871	)			-
Increase (decrease) in accounts payable			725,801				186,666
Increase (decrease) in accrual and other payables			125,344				-
Increase (decrease) in due to related parties			(656,767	)			-
Increase (decrease) in due to lease liability			36,353				-
Cash used in operating activities			(2,139,507	)			(497,044	)
Cash flows from investing activities
Purchase of equipment			(6,188	)			-
Net cash used in investing activities			(6,188	)			-
Cash flows from financing activities
Notes payable			-				316,000
Proceeds from issuance of shares			957,717				180,001
Net cash provided by financing activities			957,717				496,001
Effect of exchange rates on cash and cash equivalents			2,355				-
Net change in cash			(1,185,623	)			(1,043	)
Cash at beginning of period			1,337,245				10,551
Cash at end of period		$	151,622			$	9,508
			-
Supplemental disclosures of cash flow information:
Interest paid		$	-			$	-
Taxes paid		$	-			$	-

---

 

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.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

 

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 are included in the accompanying consolidated financial statements of the Company as of May 31, 2019 and February 28, 2019:

 

 

 

Operating Result of VIE

  

 

FINGERMOTION, INC.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

 

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 global accredited hosting provider. Management believes that alternate sources are available; however, disruption or termination of this relationship could adversely affect our operating results in the near-term.

 

Identifiable Intangible Assets

 

Identifiable intangible assets are recorded at cost and are amortized over 3-10 years. Similar to tangible property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

Impairment Of Long-Lived Assets

 

The Company classifies its long-lived assets into: (i) computer and office equipment; (ii) furniture and fixtures, (iii) leasehold improvements, and (iv) finite – lived intangible assets.

  

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be fully recoverable. It is possible that these assets could become impaired as a result of technology, economy or other industry changes. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, relief from royalty income approach, quoted market values and third-party independent appraisals, as considered necessary.

 

 

FINGERMOTION, INC.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

 

Impairment Of Long-Lived Assets (continued)

 

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.

 

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.

 

 

Revenue Recognition (continued)

 

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 $5,835,500 and $4,822,389 as at May 31, 2019 and February 28, 2019 respectively, and had a net loss of $1,012,626 and $292,284 for the three months ended May 31, 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.

 

 

Note 4 - Revenue

 

We recorded $933,269 and $ 183,130 in revenue, respectively, for the three months ended May 31, 2019 and 2018. The increase of $750,139 resulted from the consolidation of the VIE entities & its subsidiary and the new business model.

 

 

 

FINGERMOTION, INC.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

 

 

Note 5 – Equipment

 

As of May 31, 2019 and February 28, 2019, the company has the following amounts related to tangible assets:

 

 

No significant residual value is estimated for the equipment. Depreciation expense for the three months ended May 31, 2019 and 2018 totaled $1,235 and $87, respectively.

 

Note 6 – Intangible Assets

 

As of May 31, 2019 and Feb 28, 2019 the company has the following amounts related to intangible assets:

 

 

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.

 

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 JiangXi and China Unicom Online.

 

 

 

FINGERMOTION, INC.

Three Months ended May 31, 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 May 31, 2019, total right-of-use assets and operating lease liabilities were $35,871 and $36,353, 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 three months ended May 31, 2019.

 

Information related to the Company's right-of-use assets and related lease liabilities were as follows:

 

 

 

 

 

 

Note 9 - Convertible notes payables

 

A Note Payable having a Face Value of $50,000 at May 31, 2019 and accruing interest at 10% is due February 8, 2019. The note is convertible anytime from the date of issuance into $0.0001 par value Common Stock at $2.50 per share.

 

A Note Payable having a Face Value of $50,000 at May 31, 2019 and accruing interest at 10% is due February 23, 2019. The note is convertible anytime from the date of issuance into $0.0001 par value Common Stock at $2.00 per share.

 

A Note Payable having a Face Value of $100,000 at May 31, 2019 and accruing interest at 10% is due March 28, 2019. The note is convertible anytime from the date of issuance into $0.0001 par value Common Stock at $1.00 per share.

 

A Note Payable having a Face Value of $50,000 at May 31, 2019 and accruing interest at 10% is due May 3, 2019. The note is convertible anytime from the date of issuance into $0.0001 par value Common Stock at $2.50 per share.

 

A Note Payable having a Face Value of $50,000 at May 31, 2019 and accruing interest at 10% is due May 18, 2019. The note is convertible anytime from the date of issuance into $0.0001 par value Common Stock at $2.50 per share.

 

A Note Payable having a Face Value of $70,000 at May 31, 2019 and accruing interest at 10% is due May 18, 2019. The note is convertible anytime from the date of issuance into $0.0001 par value Common Stock at $2.50 per share.

 

We estimate that the fair value of these convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. Any gain or loss will be recognized at conversion. As of May 31, 2019, all the convertible notes were due and have not been converted. The Company is working on the extension with note holders.

 

 

Note 10 - Note payable

 

A Note Payable having a Face Value of $66,000 at May 31, 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.

 

 

FINGERMOTION, INC.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

 

Note 11 - Common Stock (continued)

 

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 607,200 shares of common stock for the three months ended May 31, 2019 for cash of $1,137,465, including100,000 shares of common stock to consultants.

 

Note 12 - Common Stock Subscribed

 

The Company has 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.

 

Note 13 - Earnings Per Share

 

The following table sets forth the computation of basic and diluted earnings per common share:

 

 

 

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 three months ended May 31, 2019 and 2018.

 

 

FINGERMOTION, INC.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

Note 14 - Income Taxes (continued)

 

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 three months ended May 31, 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 three months ended May 31, 2019.

                                

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 three months ended May 31, 2019 and 2018 are as follows:

 

  

As of May 31, 2019 and February 28, 2019, the Company has a deferred tax asset of $212,649 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. As of May 31, 2019 and February 28, 2019, the valuation allowance was $212,649 and $236,331, respectively.

 

 

 

FINGERMOTION, INC.

Three Months ended May 31, 2019 and 2018

Notes to the Condensed Consolidated Financial Statements

 

 

Note 15 - Related Parties Transaction

 

a)

Related parties:

 

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 May 31, 2019 and February 28, 2019:

 

 

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 May 31, 2019 through the financial statement issuance date for subsequent event disclosure consideration and noted, no significant subsequent event that needs to be disclosed, other than as set forth below.

 

On July 7, 2019, JiuGe Technology entered into that certain Yunnan Unicom Electronic Sales Platform Construction and Operation Cooperation Agreement (the “Cooperation Agreement”) with China United Network Communications Limited Yunnan Branch (“China Unicom”). Under the Cooperation Agreement, JiuGe Technology is responsible for constructing and operating China Unicom’s electronic sales platform through which consumers can purchase various goods and services from China Unicom, including mobile telephones, mobile telephone service, broadband data services, terminals, “smart” devices and related financial insurance. The Cooperation Agreement provides that JiuGe Technology is required to construct and operate the platform’s webpage in accordance with China Unicom’s specifications and policies, and applicable law, and bear all expenses in connection therewith. As consideration for the services it provides under the Cooperation Agreement, JiuGe Technology receives a percentage of the revenue received from all sales it processes for China Unicom on the platform. The Cooperation Agreement expires three years from the date of its signature, but it may be terminated by (i) JiuGe Technology upon three months’ written notice or (ii) by China Unicom unilaterally. The Cooperation Agreement contains customary representations from each party regarding such party’s authority to enter into and perform under the Cooperation Agreement, and provides customary events of default, including for various types of failure to perform.

 

 

 

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