AB INTERNATIONAL GROUP CORP. - Quarter Report: 2018 May (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

16^TH FLOOR, RICH TOWERS, 2 BLENHEIM AVENUE

TSIM SHA TSUI, KOWLOON, HONG KONG

Tel. 852-2622-2891

(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 ¨

If an emerging growth company, indicate by check mark 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 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: 76,300,000 shares of common stock as of July 20, 2018.

TABLE OF CONTENTS

ITEM 1. FINANCIAL STATEMENTS

AB INTERNATIONAL GROUP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

AB INTERNATIONAL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

AB INTERNATIONAL GROUP CORP.

CONDENSED CONSOLIDATED 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 CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

May 31, 2018

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”) and originally intended to purchase used cars in the United States and sell them in Kyrgyzstan. 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 and is currently focusing on the creation of a mobile app marketing engine to be used for movie trailer promotion through a mobile smartphone app in China.

On November 16, 2017, the Company sold the copyright and all other rights in a film named “Gong Fu Nv Pai” copyright and the mobile application (Amoney). Currently, the Company is focused on the acquisition and development of intellectual property.

On January 18, 2018 the Company and Wellington Shields & Co.(“Wellington”) Entered into an Engagement agreement in connection with an offering of $20,000,000. Effective on June 30, 2018, the Company and Wellington agree as follows to amend the engagement agreement.

On June 1, 2017, the Company entered into a Patent License Agreement which granted the Company a worldwide license to a video synthesis and release system for mobile communications equipment (the “Technology”). The agreement allows the Company to utilize, improve upon, and sublicense the Technology. The Company plans to generate revenue through sub-licensing fees from apps and smartphone makers, and sales of licensed products as well as video mix apps.

On March 21, 2018, the Company acquired the intellectual assets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operation of cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plans to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposes to bring a physical aspect to something that is otherwise very abstract to people. The Company plans to invest in machines and sell sub-licenses in the Asia Pacific region with future world-wide expansion.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

In the opinion of the company’s management, the accompanying unaudited interim financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the company as of May 31, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended May 31, 2018 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the company’s Annual Report on Form 10-K for the year ended August 31, 2017 filed with the SEC on January 12, 2018.

Basis of Consolidation

The financial statements have been prepared on a consolidated basis, with the Company’s fully owned subsidiary App Board Limited. No intercompany balances or transactions exist during the nine month period ended May 31, 2018.

Accounts Receivable

Accounts receivable consist of amounts due from promotional services provided. 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 during the nine months ended May 31, 2018 and 2017, and no write-off for bad debt were recorded for the nine months ended May 31, 2018, and 2017.

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 and license fees from its patent once the criteria has been met, the product has been delivered, and the Company has received payment from the vendor.

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 months ended May 31, 2018 and 2017.

NOTE 3 – DISCONTINUED OPERATIONS

On November 16, 2017, the Company sold the copyright and all other rights in a film named “Gong Fu Nv Pai” copyright and the mobile application (Amoney) assets to an unrelated party for $253,000 cash.

The sales of intangible assets qualified as a discontinued operation of the Company and accordingly, the Company has excluded results of the operations from its Consolidated Statements of Operations to present this revenue and expenses from these intangible assets in discontinued operations.

The following table shows the results of operations of mobile application and copyright for three and nine months ended May 31, 2018 and 2017 which are included in the gain from discontinued operations:

NOTE 4 – INTANGIBLE ASSETS

As of May 31, 2018, and August 31, 2017, the balance of intangible assets are as follows;

Amortization expenses for nine months ended May 31, 2018, and 2017, was $89,312 and $15,000, respectively.

During the nine months ended May 31, 2018, the Company sold the copyright and all other rights and the mobile application (Amoney) assets to an unrelated party for $253,000. The Company recorded gain on sales of assets of $57,200 as discontinued operations during the nine months ended May 31, 2018.

On March 10, 2018, the Company acquired intellectual property from Aura Blocks Ltd. for $200,000.

On March 21, 2018, the Company acquired all the intangible assets held by KryptoKiosk Limited, a Hong Kong company (“Krypto”). In consideration for the acquisition of the shares the Company paid the seller 2,400,000 shares, at market value of $72,000.

NOTE 5 – INVESTMENT IN ICROWDU INC.

On May 9, 2018, the Company entered into an investor agreement with iCrowdU Inc. The Company agreed to purchase 228,013 shares of iCrowdU Inc. at a share price of $1.228 for total consideration of $280,000. iCrowdU Inc. offers an online platform and mobile app for crowd funding services targeting the global crowd funding market.

The Company has agreed to purchase up to 51% of iCrowdU Inc. for a total investment of $10,000,000.

During the nine months ended Mary 31, 2018, the Company issued 2,000,000 common shares in relation to the iCrowdU Inc. acquisition.

NOTE 6 – 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.

In May 2018, the Company appointed Ian Wright as Chief Operational Officer, and Luis Hadic as Chief Financial Officer.

During the nine months ended May 31, 2018, a shareholder paid an invoice of $74 on behalf of the Company. As at May 31, 2018 and August 31, 2017, the Company owed $1,687 and $1,613 to this shareholder, respectively. The amounts are due on demand, unsecured, and non-interest bearing.

During the nine months ended May 31, 2018 and 2017, $27,300 and $22,500 was paid to two related parties as salaries and wages.

NOTE 7 – STOCKHOLDERS’ EQUITY

Effective as of June 6, 2018, the Company amended its Articles of Incorporation to increase its authorized common stock to One Billion (1,000,000,000) shares, par value $0.001 per share.

During the nine months ended May 31, 2018, the Company issued common shares, as follows:

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

AB INTERNATIONAL GROUP CORP. was incorporated under the laws of the State of Nevada on July 29, 2013 (“Inception”) and originally intended to purchase used cars in the United States and sell them in Krygyzstan. 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 investor Jianli Deng. After the stock sale, the Company modified its business to focus on the creation of a mobile app marketing engine. Mr. Deng served until August 28, 2017, as the Company’s Chief Executive Officer and sole Director, at which point he resigned all positions held with the Company.

Currently, the Company is focused on the acquisition and development of intellectual property. On June 1, 2017, we entered into a Patent License Agreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television Company Limited, a company incorporated in China (“Licensor”), granted the Company a worldwide license to a video synthesis and release system for mobile communications equipment (the “Technology”), which Technology is the subject of a utility model patent in the People’s Republic of China. Under the Agreement we are able to utilize, improve upon, and sub-license the technology for an initial period of 5 years, subject to a right to renew for an additional 5 year term. We used the underlying technology to create a smartphone app marketing engine to be used for movie trailer promotion in China, which we sold on November 16, 2017, for $103,000. The Company was obligated to pay the Licensor $500,000 within 30 days of the date of the Agreement and a royalty fee in the amount of 20% of any proceeds resulting from our utilization of the Technology, whether in the form of sub-licensing fees or sales of licensed products. Our Chief Executive Officer, Chiyuan Deng and former Chief Executive Officer, Jianli Deng, jointly own and control Licensor.

On March 21, 2018, the Company acquired the assets of a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operation of cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plans to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposes to bring a physical aspect to something that is otherwise very abstract to people. The Company plans to invest in machines and sell sub-licenses in the Asia Pacific region with future world-wide expansion.

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.

NINE MONTH PERIOD ENDED MAY 31, 2018 COMPARED TO THE NINE MONTH PERIOD ENDED MAY 31, 2017

REVENUE. During the nine month periods ended May 31, 2018 and May 31, 2017 we generated $177,152 and $0 of revenue, respectively.

COST OF SALES. During the nine month periods ended May 31, 2018 and May 31, 2017 we incurred $112,830 and $0 of cost of revenue, respectively.

OPERATING EXPENSES. During the nine month periods ended May 31, 2018 and May 31, 2017, we incurred general and administrative expenses of $706,330 and $71,561, respectively, and related party salary and wages of $27,300 and $22,500, 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 loss for the nine month period ended May 31, 2018 was $669,308 compared to a net loss of $94,061 during the nine month period ended May 31, 2017.

THREE MONTH PERIOD ENDED MAY 31, 2018 COMPARED TO THE THREE MONTH PERIOD ENDED MAY 31, 2018

REVENUE. During the three month periods ended May 31, 2018 and May 31, 2017 we generated $71,040 and $0 of revenue, respectively.

COST OF SALES. During the three month periods ended May 31, 2018 and May 31, 2017 we incurred $41,608 and $0 of cost of revenue, respectively.

OPERATING EXPENSES. During the three month periods ended May 31, 2018 and May 31, 2017, we incurred general and administrative expenses of $477,033 and $24,872, respectively, and related party salary and wages of $10,600 and $7,500, 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 loss for the three month period ended May 31, 2018 was $458,201 compared to a net loss of $32,372 during the three month period ended May 31, 2017.

LIQUIDITY AND CAPITAL RESOURCES

As of May 31, 2018, our total assets were $1,676,432 compared to $954,031 in total assets at August 31, 2017. Total assets as of May 31, 2018 comprised cash and cash equivalents of $680,317, accounts receivable of $23,680 prepaid expenses of $20,835, $669,600 in intangible assets and investment at cost of $282,000, while as at August 31, 2017 total assets comprised cash of $147,164, accounts receivable of $88,320, prepaid expenses of $35,835 and $682,712 in intangible assets. As of May 31, 2018 and August 31, 2017, our current liabilities were $107,045 and $228,124 respectively.

Stockholders’ equity was $1,569,387 as of May 31, 2018 compared to $725,907 as of August 31, 2017.

CASH FLOWS FROM OPERATING ACTIVITIES

For the nine month period ended May 31, 2018, net cash used in operating activities was ($396,421) compared to net cash flows used in operating activities of $62,024 for the nine month period ended May 31, 2017.

CASH FLOWS FROM INVESTING ACTIVITIES

We used $227,000 in investment activities in the nine months ended May 31, 2018, and used $138,240 in investing activities during the nine months ended May 31, 2017.

CASH FLOWS FROM FINANCING ACTIVITIES

We generated $1,156,574 in net cash from financing activities during the nine months ended May 31, 2018, compared to $313,816 in net cash from financing activities during the nine months ended May 31, 2017.

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, 2018, 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 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, 2018. 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, 2018 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 January 15, 2018, the Company entered into a consulting agreement (the “PS Agreement”) with PacificShore Ventures, Inc. (the “Consultant”). The term of the PS Agreement ends on July 15, 2019. Under the PS Agreement the Consultant will provide services to the Company in related to merger and acquisition strategies, business plan execution, and media strategies. In consideration for the services provided by the Consultant the Company has issued the Consultant 1,800,000 shares of the Company’s common stock. The Consultant is an accredited investor. The shares were issued pursuant to the exemption from registration provided by Rule 4(a)(2) of the Act. The Consultant acquired the shares for its own account and was provided access to both information regarding the Company and the Company’s officers and directors. The certificate representing the shares contains a standard restrictive legend.

On May 9, 2018, the Company entered into an investor agreement (the “ICU Agreement”) with ICrowdU Inc. (the “ICrowdU”). Pursuant to the ICU Agreement the Company purchased 2,228,013 shares of common stock of ICrowdU for $280,000 and 2,000,000 shares of common stock of the Company. The ICU Agreement further provides for the Company to acquire additional shares of common stock of ICrowdU at set prices in the future, upon the closing of which ICrowdU will contribute back to the Company the 2,000,000 shares of common stock of the Company described above. Ian Wright, the Company’s Chief Operating Officer, is a founder and Chief Operating Officer of ICrowdU. The shares were issued pursuant to the exemption from registration provided by Rule 4(a)(2) of the Act. ICrowdU acquired the shares for its own account and was provided access to both information regarding the Company and the Company’s officers and directors. The certificate representing the shares contains a standard restrictive legend. A copy of the Agreement is attached hereto as an Exhibit.

On May 30, 2018, the Company and Wellington Shields & Co. (“Wellington”) entered into an offering agreement amendment #1 (the “Amendment”) which amended that certain Letter Agreement between the Company and Wellington dated January 18, 2018 (the “Letter Agreement”). The Letter Agreement provided the engagement of Wellington as the Company’s placement agent in connection with a private offering of securities of the Company. The Amendment extended the term of the Letter Agreement to November 30, 2018. Upon the execution of the Amendment the Company issued Wellington 100,000 shares of the Company’s common stock, and paid Wellington a nonrefundable consulting fee of $25,000.

In May 2018, the Company entered into consulting agreements (the “Consulting Agreements”) with four consultants (the “Consultants”). The Consulting Agreements have three year terms. Under the Consulting Agreements one of the Consultants will provide services to the Company in Hong Kong and China related to blockchain app development, and the other three Consultants will provide services to the Company in Hong Kong and the United States related to investor relations and public relations. In consideration for the services provided by the Consultants, the Company has issued the Consultants a total of 800,000 shares of the Company’s common stock. The Consultants are accredited investors. The shares were issued pursuant to the exemption from registration provided by Rule 4(a)(2) of the Act. The Consultants acquired the shares for their own accounts and were provided access to both information regarding the Company and the Company’s officers and directors. The certificates representing the shares contain 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.