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, 2022

☐ 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: 001-41187

FINGERMOTION, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-0077155
(State or other jurisdiction of organization)		(I.R.S. employer identification no.)

1460 Broadway

New York, New York

10036

(Address of principal executive offices)

(Zip code)

(347) 349-5339

(Registrant’s telephone number, including area code)

None

(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
Common Stock, $0.0001 par value		FNGR		The Nasdaq Stock Market LLC

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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided 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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 42,807,260 shares of common stock outstanding as of July 12, 2022.

FINGERMOTION, INC.

FORM 10-Q

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION	1

ITEM 1. FINANCIAL STATEMENTS	1
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
Three Months Ended May 31, 2022 Compared to Three Months Ended May 31, 2021	31
Liquidity and Capital Resources	34
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 4 – CONTROLS AND PROCEDURES	35
Evaluation of Disclosure Controls and Procedures	35
Changes in internal control over financial reporting	36

PART II – OTHER INFORMATION	37
ITEM 1 – LEGAL PROCEEDINGS	37
ITEM 1A. RISK FACTORS	37
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	57
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES	58
ITEM 4 – MINE SAFETY DISCLOSURES	58
ITEM 5 – OTHER INFORMATION	58
ITEM 6 – EXHIBITS	58

-i-


	May 31,			February 28,
	2022			2022
	(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	805,548		$	461,933
Accounts receivable		3,723,477			4,875,149
Inventories		1,331			1,407
Prepayment and deposit		2,843,751			3,331,342
Other receivables		1,454,752			1,539,265
Current Assets		8,828,859			10,209,096
Non-current Assets
Equipment		22,706			26,808
Intangible assets		108,312			125,932
Right-of-use asset		245,589			5,069
Non-current Assets		376,607			157,809

TOTAL ASSETS	$	9,205,466		$	10,366,905

LIABILITIES AND SHAREHOLDER’S DEFICIT

Current Liabilities
Accounts payable	$	1,975,280		$	3,588,289
Accrual and other payables		2,481,135			1,685,297
Convertible notes payable		730,000			—
Lease liability, current portion		126,676			5,069
Current Liabilities		5,313,091			5,278,655
Non-current Liabilities
Lease liability, non-current portion		118,913			—
Non-current Liabilities		118,913			—

TOTAL LIABILITIES	$	5,432,004		$	5,278,655

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 42,777,260 shares and 42,627,260 issued and outstanding at May 31, 2022 and February 28, 2022 respectively		4,278			4,263

Additional paid-in capital		22,166,176			21,730,941

Additional paid-in capital - stock options		356,328			356,328

Accumulated deficit		(18,596,295	)		(17,152,172	)

Accumulated other comprehensive income		(167,459	)		137,911

Stockholders’ equity before non-controlling interests		3,763,028			5,077,271

Non-controlling interests		10,434			10,979

TOTAL SHAREHOLDERS’ EQUITY		3,773,462			5,088,250

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,205,466		$	10,366,905


	Three Months Ended
	May 31,			May 31,
	2022			2021
Revenue	$	4,855,123		$	5,996,489
Cost of revenue		(4,478,052	)		(5,376,792	)

Gross profit		377,071			619,697

Amortization & depreciation		(14,172	)		(14,421	)
General & administrative expenses		(1,239,550	)		(1,179,747	)
Marketing Cost		(57,191	)		(85,007	)
Research & Development		(211,647	)		(135,429	)
Stock compensation expenses		(289,931	)		(60,975	)

Total operating expenses		(1,812,491	)		(1,475,579	)

Net loss from operations		(1,435,420	)		(855,882	)

Other income (expense):
Interest income		757			1,270
Interest expense		(14,831	)		(92,566	)
Exchange gain (loss)		(272	)		675
Other income		5,098			36,997
Total other income (expense)		(9,248	)		(53,624	)

Net loss before income tax	$	(1,444,668	)	$	(909,506	)
Income tax expenses		—			—
Net Loss	$	(1,444,668	)	$	(909,506	)

Less: Net profit attributable to the non-controlling interest		(545	)		2,384

Net loss attributable to the Company’s shareholders	$	(1,444,123	)	$	(911,890	)

Other comprehensive income:
Foreign currency translation adjustments		(305,370	)		60,184
Comprehensive loss	$	(1,749,493	)	$	(851,706	)
Less: comprehensive income (loss) attributable to non-controlling interest		(89	)		164
Comprehensive loss attributable to the Company	$	(1,749,404	)	$	(851,870	)

NET LOSS PER SHARE
Loss Per Share - Basic	$	(0.03	)	$	(0.02	)
Loss Per Share - Diluted	$	(0.03	)	$	(0.02	)

NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY
Loss Per Share - Basic	$	(0.03	)	$	(0.02	)
Loss Per Share - Diluted	$	(0.03	)	$	(0.02	)

Weighted Average Common Shares Outstanding - Basic		42,693,999			38,933,892
Weighted Average Common Shares Outstanding - Diluted		42,693,999			38,933,892


					Capital Paid in		Additional Paid-in					Accumulated
	Common Stock				Excess of Par		capital stock		Accumulated			Other Comprehensive			Stockholders’			Non-controlling
	Shares		Amount		Value		options		Deficit			Income			equity			interest			Total
Balance at March 1, 2022		42,627,260		4,263		21,730,941		356,328		(17,152,172	)		137,911			5,077,271			10,979			5,088,250

Common stock issued for cash		—		—		—		—		—			—			—			—			—
Common stock issued for professional service		150,000		15		435,235		—		—			—			435,250			—			435,250
Accumulated other comprehensive income		—		—		—		—		—			(305,370	)		(305,370	)		—			(305,370	)
Net (Loss)		—		—		—		—		(1,444,123	)		—			(1,444,123	)		(545	)		(1,444,668	)

Balance at May 31, 2022		42,777,260		4,278		22,166,176		356,328		(18,596,295	)		(167,459	)		3,763,028			10,434			3,773,462

	Common Stock				Capital Paid in Excess of Par		Additional Paid-in capital stock		Accumulated			Accumulated Other Comprehensive		Stockholders’			Non-controlling
	Shares		Amount		Value		options		Deficit			Income		equity			interest		Total
Balance at March 1, 2021		38,903,494		3,890		14,170,815		—		(12,208,728	)		140,906		2,106,883			8,083		2,114,966

Common stock issued for cash		86,666		9		179,990		—		—			—		179,999			—		179,999
Common stock issued for professional service		5,000		1		9,999		—		—			—		10,000			—		10,000
Accumulated other comprehensive income		—		—		—		—		—			60,184		60,184			—		60,184
Net (Loss)		—		—		—		—		(911,890	)		—		(911,890	)		2,384		(909,506	)

Balance at May 31, 2021		38,995,160		3,900		14,360,804		—		(13,120,618	)		201,090		1,445,176			10,467		1,455,643

Schedule of variable interest entity
	May 31, 2022		February 28, 2022
	(unaudited)
Current assets	$	4,995,626	$	4,503,346
Non-current assets		259,023		21,042
Total assets	$	5,254,649	$	4,524,388

Current liabilities	$	9,394,090	$	8,556,844
Non-current liabilities		118,913		—
Total liabilities	$	9,513,003	$	8,556,844

	For the Three Months Ended May 31, 2022			For the Three Months Ended May 31, 2021
	(unaudited)			(unaudited)
Revenue	$	1,438,367		$	373,151
Cost of revenue		(1,149,147	)		(109,046	)
Gross profit (loss)	$	289,220		$	264,105

Amortization and depreciation		(1,719	)		(2,068	)
General and administrative expenses		(582,112	)		(538,671	)
Marketing cost		(57,131	)		(51,079	)
Research & development		(111,455	)		(135,429	)
Total operating expenses	$	(752,417	)	$	(727,247	)

Profit (loss) from operations	$	(463,197	)	$	(463,142	)

Interest income		705			1,215
Other income		5,098			139
Total other income (expense)	$	5,803		$	1,354

Tax expense		—			—

Net profit (loss)	$	(457,394	)	$	(461,788	)

Schedule of Revenue
	For the three months ended
	May 31, 2022		May 31, 2021
	(unaudited)		(unaudited)
Telecommunication Products & Services	$	1,516,125	$	1,737,080
SMS & MMS Business		3,338,998		4,160,694
Big Data		—		98,715
	$	4,855,123	$	5,996,489

Schedule of intangible assets
	May 31, 2022			February 28, 2022
	(unaudited)
Licenses	$	200,000		$	200,000
Mobile applications		220,513			233,167
		420,513			433,167
Less: accumulated amortization		(271,156	)		(266,190	)
Impairment of intangible assets		(41,045	)		(41,045	)
Net intangible assets	$	108,312		$	125,932

Schedule of prepaid expense
	May 31, 2022		February 28, 2022
	(unaudited)
Telecommunication Products & Services
Deposit Paid / Prepayment	$	2,475,727	$	2,396,550
Deposit received		—		—
Net Prepaid expenses for Telecommunication Products & Services	$	2,475,727	$	2,396,550
Others prepayment		271,564		369,256
Prepayment and deposit	$	2,747,291	$	2,765,806


2023	$	131,340
Thereafter		120,395
Less: imputed interest		(6,146	)
Total lease liability	$	245,589


	Three Months Ended
	May 31,			May 31,
	2022			2021
Net (loss)	$	(1,444,668	)	$	(909,506	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share based compensation expenses		379,013			60,975
Amortization and depreciation		14,172			14,421

Change in operating assets and liabilities:
(Increase) decrease in accounts receivable		887,094			1,415,203
(Increase) decrease in prepayment and deposit		326,836			(2,812,004	)
(Increase) decrease in others receivable		975			(10,307	)
(Increase) decrease in inventories		—			(967	)
Increase (decrease) in accounts payable		(1,418,270	)		(170,474	)
Increase (decrease) in accrual and other payables		832,880			473,587
Increase (decrease) in due to lease liability		—			(2,108	)
Net Cash provided by (used in) operating activities		(421,968	)		(1,941,180	)

Cash flows from investing activities
Purchase of equipment		—			(4,401	)
Net cash provided by (used in) investing activities		—			(4,401	)

Cash flows from financing activities
Proceed from convertible note		730,000			—
Proceed from loan payable		—			299,695
Advances from stock subscription payable		—			1,347,000
Common stock issued for cash		—			179,999
Net cash provided by (used in) financing activities		730,000			1,826,694

Effect of exchange rates on cash and cash equivalents		35,583			57,922

Net change in cash		343,615			(60,965	)

Cash at beginning of period		461,933			850,717

Cash at end of period	$	805,548		$	789,752

Major non-cash transactions:
Conversion of loan payables to shares	$	—		$	—


	Number of Warrants			Weighted Average Exercise Price
Balance, February 28, 2020		—		$	—
Issued in Connection with October 2020 Offering		488,500		$	2.10
Issued in connection with January 2021 Offering		1,604,334		$	3.00
Exercised		(25,000	)	$	2.00
Balance, February 28, 2021		2,067,834		$	2.80
Exercised		(221,666	)	$	2.44
Balance, February 28, 2022		1,846,168		$	2.84
Exercised		—			—
Balance, May 31, 2022		1,846,168		$	2.84


		Number of Warrants		Remaining Contractual
Exercise Price		Outstanding		Life (Years)		Expiry Date
$	2.00		288,500		0.38	18-Oct-22
$	3.00		50,000		0.38	18-Oct-22
$	3.00		1,507,668		0.62	12-Jan-23
$	2.84		1,846,168

Schedule of valuation assumptions
	May 31, 2022			February 28, 2022
Expected Risk Free Interest Rate		1.06	%		1.06	%
Expected Volatility		15.27	%		15.27	%
Expected Life in Years		5.0			5.0
Expected Dividend Yield		—			—
Weighted-Average Grant Date Fair Value	$	6.46		$	6.46

Schedule of stock option activity
	Number of Stock Options		Exercise Price
Balance, February 28, 2022		4,545,500	$	8.00
Granted		—		—
Cancelled/Forfeited		—		—
Expired		—		—
Balance, May 31, 2022		4,545,500	$	8.00


		May 31, 2022		February 28, 2022
Number of Options Exercised on Forfeiture Basis		—		—
Number of Options Exercised on Cash Basis		—		—
Total Number of Options Exercised		—		—

Number of Shares Issued on Cash Exercise		—		—
Number of Shares Issued on Forfeiture Basis		—		—
Total Number of Shares Issued Upon Exercise of Options		—		—

Cash Received from Exercise of Stock Options	$	—	$	—
Total Intrinsic Value of Options Exercised	$	—	$	—

Schedule of unvested restricted stock
	Number of Unvested			Weighted Average
	Stock Options			Grant Date Fair Value
Balance, February 28, 2021		—			—
Granted		4,545,500		$	6.46
Vested		(909,000	)	$	6.46
Balance, February 28, 2022		3,636,500		$	6.46
Granted		—			—
Vested		—			—
Balance, May 31, 2022		3,636,500		$	6.46

	Schedule of Stock Options
		Options Outstanding						Options Exercisable
Range of Exercise Prices		Outstanding at May 31, 2022		Exercise Price		Weighted Average Remaining Contractual Term (Years)		Exercisable at May 31, 2022		Exercise Price		Weighted Average Remaining Contractual Term (Years)
	$ 7.00 to $ 9.00		4,545,500	$	8.00		4.58		909,000	$	8.00		4.58

			4,545,500	$	8.00		4.58		909,000	$	8.00		4.58

	●	a consulting services agreement through which JiuGe Management is mainly engaged in data marketing, technical services, technical consulting and business consultancy to JiuGe Technology (the “JiuGe Technology Consulting Services Agreement”);

	●	a loan agreement through which JiuGe Management grants a loan to the Legal Representative of JiuGe Technology for the purpose of capital contribution (the “JiuGe Technology Loan Agreement”);

	●	a power of attorney agreement under which the owner of JiuGe Technology has vested their collective voting control over JiuGe Technology to JiuGe Management and will only transfer their equity interests in JiuGe Technology to JiuGe Management or its designee(s) (the “JiuGe Technology Power of Attorney Agreement”);

	●	a call option agreement under which the owner of JiuGe Technology has granted to JiuGe Management the irrevocable and unconditional right and option to acquire all of their equity interests in JiuGe Technology or transfer these rights to a third party (the “JiuGe Technology Call Option Agreement”); and

	●	a share pledge agreement under which the owner of JiuGe Technology has pledged all of their rights, titles and interests in JiuGe Technology to JiuGe Management to guarantee JiuGe Technology’s performance of its obligations under the JiuGe Technology Consulting Services Agreement (the “JiuGe Technology Share Pledge Agreement”).

SEC Form 10-Q filed by FingerMotion Inc.