AB INTERNATIONAL GROUP CORP. - Quarter Report: 2017 May (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

2360 CORPORATE CIRCLE, STE. 400

HENDERSON NV 89074

Tel. 852-635-91332

(Address and telephone number of principal executive offices)

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 last 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 29,650,000 shares of common stock as of July 14, 2017.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AB INTERNATIONAL GROUP CORP.

CONDENSED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these condensed, unaudited financial statements.

AB INTERNATIONAL GROUP CORP.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these condensed, unaudited financial statements.

AB INTERNATIONAL GROUP CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these condensed, unaudited financial statements.

AB INTERNATIONAL GROUP CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

May 31, 2017

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

AB INTERNATIONAL GROUP CORP. (the “Company”, “we” or “us”) was incorporated under the laws of the State of Nevada on July 29, 2013 (“Inception”). The Company’s fiscal year end is August 31.

On January 22, 2016, the Company's former sole officer, who owned 83% of the Company's outstanding common shares, sold all his common shares to un-related investors. Subsequently, the Company modified its business plan. Currently, the Company is focused on the acquisition and development of intellectual property. The Company has licensed certain intellectual property and is in the process of using the underlying technology to create a smartphone app marketing engine to be used for movie trailer promotion in China. To date, all revenues have been transacted in Hong Kong Dollars.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

The accompanying condensed financial statements of the Company have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the periods presented. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Form 10-K for the year ended August 31, 2016. The results of operations for the period ended May 31, 2017, are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2017.

The preparation of the financial statements in conformity with generally accepted accounting principles, in the United States of America, require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Intangible Assets

Intangible assets are stated at cost and depreciated as follows:

The intangible assets were acquired from a third-party provider. Amortized costs of the intangible asset are recorded as cost of sales, as the intangible asset is directly related to generation of revenues in the Company.

Impairment of Intangible Assets

We account for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

No impairment losses have been incurred by the Company.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” ("ASC-605"), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. The Company has recognized the revenues associated with mobile app sales once the criteria has been met, the product has been delivered, and collectability is reasonably assured from the individual customer. To date, the Company’s sales primarily involved transactions whereby the customers utilized the Company’s mobile applications to interact with potential moviegoers, and direct the users of the applications to movie trailer websites and applications.

Accounts Receivable

Accounts receivable consist of amounts due from promotional services provided through app sales. Amounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. No amount for bad debt expense has been recorded by the Company.

Foreign Currency Translation 

The Company’s functional currency is the US dollar. Certain balances and transactions included in the financial statements are in Hong Kong dollars and are translated into US dollar using current exchange rates or the spot rate, if applicable. Gains and losses from foreign currency translations are immaterial for separate classification for the period ending May 31, 2017.

Basic and Diluted Income (Loss) Per Share

The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

No potentially dilutive debt or equity instruments were issued or outstanding during the nine month periods ended May 31, 2017 and 2016.

Recent accounting pronouncements

Management has reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company other than those relating to the revised requirements related to revenue recognition, which are required for annual periods beginning subsequent to December 15, 2016.

NOTE 3 – INTANGIBLE ASSETS

As of May 31, 2017, and August 31, 2017, the balance of intangible assets are as follows;

Amortization expenses for nine months ended May 31, 2017, and 2016, was $$15,000 and $0, respectively.

During the nine months ended May 31, 2017, the Company purchased the copyright and all other rights in a film named “Gong Fu Nv Pai” for $134,280 cash from a non-related party.

NOTE 4 – RELATED PARTY TRANSACTIONS

In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.

During the nine-month period ended May 31, 2017, a shareholder was repaid $1,184 for operating expenses. As at May 31, 2017 and August 31, 2016, the Company owed $1,613 and $2,797 to this shareholder, respectively. The amounts are due on demand, unsecured, and non-interest bearing.

NOTE 5 – EQUITY

The Company has 75,000,000 shares of common stock authorized with a par value of $ 0.001 per share.

During the nine months ended May 31, 2017, the company issued common stock, as follows;

As at May 31, 2017 and August 31, 2016, 29,650,000 and 26,150,000 issued and outstanding shares of common stock were held by approximately 13 shareholders of record.

NOTE 6 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to May 31, 2017 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements except below;

On June 1, 2017, the Company entered into patent license agreement. The agreement shall be for a term of 5 years commencing on the effective date and the Company shall pay the licensor a non-refundable, up-from payment of $500,000 and a royalty of 20% of the gross revenue realized from it sale of licensed products and sub-licensing of others under the agreement.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

FORWARD LOOKING STATEMENTS

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

GENERAL

We were incorporated in the State of Nevada on July 29, 2013. We initially planned to be in the business of purchasing used cars in the United States and selling them to customers in Kyrgyzstan.

On January 22, 2016, the Company's former sole officer, who owned 83% of the Company's outstanding common shares, sold all his common shares to un-related investor Jianli Deng, the Company's current Chief Executive Officer and sole Director. After the stock sale, the Company modified its business plan and presently focuses on revenues generated from a mobile app marketing engine, mobile communications, and patent acquisitions.

We may borrow funds from our officers and shareholders for working capital, however, they have no formal commitment, arrangement or legal obligation to advance or loan funds to the Company.

RESULTS OF OPERATION

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

THREE MONTH PERIOD ENDED MAY 31, 2017 COMPARED TO THE THREE MONTH PERIOD ENDED MAY 31, 2016

REVENUE. During the three month periods ended May 31, 2017 and May 31, 2016 we generated $67,968 and $0 of revenue, respectively.

COST OF SALES. During the three month periods ended May 31, 2017 and May 31, 2016 we incurred $5,000 and $0 of cost of sales, respectively.

OPERATING EXPENSES. During the three month periods ended May 31, 2017 and May 31, 2016, we incurred general and administrative expenses of $24,872 and $21,520, respectively, and related party wages of $7,500 and $0, respectively. General and administrative expenses incurred were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, developmental costs, and marketing expenses.

NET INCOME. Our net income for the three month period ended May 31, 2017 was $26,616 compared to a net loss of $21,520 from continuing operations during the three month period ended May 31, 2016.

NINE MONTH PERIOD ENDED MAY 31, 2017 COMPARED TO THE NINE MONTH PERIOD ENDED MAY 31, 2016

REVENUE. During the nine month periods ended May 31, 2017 and May 31, 2016 we generated $195,221 and $0 of revenue, respectively.

COST OF SALES. During the nine month periods ended May 31, 2017 and May 31, 2016 we incurred $15,000 and $0 of cost of revenue, respectively.

OPERATING EXPENSES. During the nine month periods ended May 31, 2017 and May 31, 2016, we incurred general and administrative expenses of $71,561 and $32,080, respectively, and related party wages of $22,500 and $0, respectively. General and administrative expenses incurred were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, developmental costs, and marketing expenses.

NET INCOME. Our net income for the nine month period ended May 31, 2017 was $81,642 compared to a net loss of $32,080 from continuing operations and a net loss from discontinued operations of $627 during the nine month period ended May 31, 2016.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 2017, our total assets were $676,909 compared to $314,498 in total assets at August 31, 2016. Total assets as of May 31, 2017 comprised cash of $404,426, accounts receivable of $17,024, prepaid expenses of $35,835 and $219,624 in intangible assets while as at August 31, 2016 total assets comprised cash of $166,826, accounts receivable of $28,200, prepaid expenses of $22,501 and $96,384 in intangible assets. As of May 31, 2017 and August 31, 2016, our current liabilities were $10,254 and $80,023 respectively.

Stockholders' equity was $666,117 as of May 31, 2017 compared to $234,475 as of August 31, 2016.

CASH FLOWS FROM OPERATING ACTIVITIES

We have just begun generating positive cash flows from operating activities. For the nine month period ended May 31, 2017, net cash flows from operating activities were $62,024 compared to net cash flows used in operating activities was $25,167 for the nine month period ended May 31, 2016.

CASH FLOWS FROM INVESTING ACTIVITIES

We used $138,240 in investment activities in the three months ended May 31, 2017, and we neither generated, nor used, funds in investing activities during the three months ended May 31, 2016.

CASH FLOWS FROM FINANCING ACTIVITIES

We generated $313,816 in net cash from financing activities during the nine months ended May 31, 2017, compared to generating $92,300 in net cash from financing activities during the nine months ended May 31, 2016.

PLAN OF OPERATION AND FUNDING

We expect that working capital requirements will continue to be funded through a combination of cash flow from operations, our existing funds, further issuances of securities and loans from our principal shareholder. Our working capital requirements are expected to increase in line with the growth of our business.

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next 12 months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds from business operations and the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to developmental expenses associated with a start-up business. We intend to finance these expenses with further issuances equity and/or debt securities. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

MATERIAL COMMITMENTS

As of May 31, 2017, we had no material commitments.

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

GOING CONCERN

The independent auditors' audit report accompanying our August 31, 2016 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our principal executive officer and principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2017. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended May 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 5, 2017, the Company sold 3,000,000 shares of its common stock to a related party (main shareholder of the Company) at $0.01 per share for total proceeds of $300,000. The shares were sold pursuant to the exemption from registration set forth in Rule 506 of Regulation D as promulgated under the Securities Act of 1933, as amended, constitute "restricted securities" as that term is defined in Rule 144 promulgated under the Act, and contains a standard restrictive legend.

On May 5, 2017, the Company sold 150,000 shares of its common stock to a unrelated party at $0.01 per share for total proceeds of $15,000. The shares were sold pursuant to the exemption from registration set forth in Rule 506 of Regulation D as promulgated under the Securities Act of 1933, as amended, constitute "restricted securities" as that term is defined in Rule 144 promulgated under the Act, and contains a standard restrictive legend.

On May 18, 2017, the Company issued 350,000 shares of its common stock to two unrelated parties in consideration for services valued at $35,000. The shares were issued pursuant to the exemption from registration set forth in Rule 506 of Regulation D as promulgated under the Securities Act of 1933, as amended, constitute "restricted securities" as that term is defined in Rule 144 promulgated under the Act, and contains a standard restrictive legend.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There has not been any material default in any Company indebtedness. The Company has not issued any preferred stock or other senior securities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our Company.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits:

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.