AB INTERNATIONAL GROUP CORP. - Quarter Report: 2018 February (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: 73,500,000 shares of common stock as of April 12, 2018.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

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)

February 28, 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 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 April 9, 2018, the Company acquired 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 February 28, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended February 28, 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 registered and located in Hong Kong. No intercompany balances or transactions exist during the six month period ended February 28, 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 six months ended February 28, 2018 and 2017, and no write-off for bad debt were recorded for the six months ended February 28, 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 six months ended February 28, 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 six months ended February 28, 2018 and 2017 which are included in the gain from discontinued operations:

NOTE 4 – INTANGIBLE ASSETS

As of February 28, 2018, and August 31, 2017, the balance of intangible assets are as follows;

Amortization expenses for six months ended February 28, 2018, and 2017, was $61,912 and $10,000, respectively.

During the three months ended February 28, 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 three months ended February 28, 2018.

NOTE 5 – 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 six months ended February 28, 2018, a shareholder paid an invoice of $74 on behalf of the Company. As at February 28, 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 six months ended February 28, 2018 and 2017, $16,700 and $15,000 was paid to two related parties as salaries and wages.

NOTE 6 – SUBSEQUENT EVENTS

On April 9, 2018, the Company acquired all of the issued and outstanding stock of KryptoKiosk Limited, a Hong Kong company (“Krypto”). In consideration for the acquisition of the shares the Company paid the seller HK$2, and, in addition, paid the Seller USD$200,000 in consideration for the retirement in full of a debt in the amount of USD$1,200,000 owed by Krypto to the Seller. Krypto’s assets consist mostly of intellectual property, including, but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rights and personal property.

Subsequent to February 28, 2018, the Company issued the following shares of common stock:

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 April 9, 2018, the Company acquired 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.

THREE MONTH PERIOD ENDED FEBRUARY 28, 2018 COMPARED TO THE THREE MONTH PERIOD ENDED FEBRUARY 28, 2017

REVENUE. During the three month periods ended February 28, 2018 and February 28, 2017 we generated $65,280 and $0 of revenue, respectively.

COST OF SALES. During the three month periods ended February 28, 2018 and February 28, 2017 we incurred $38,056 and $0 of cost of revenue, respectively.

OPERATING EXPENSES. During the three month periods ended February 28, 2018 and February 28, 2017, we incurred general and administrative expenses of $177,839 and $21,842, respectively, and related party salary and wages of $10,400 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 February 28, 2018 was $134,004 compared to a net income of $50,082 during the three month period ended February 28, 2017.

SIX MONTH PERIOD ENDED FEBRUARY 28, 2018 COMPARED TO THE SIX MONTH PERIOD ENDED FEBRUARY 28, 2018

REVENUE. During the six month periods ended February 28, 2018 and February 28, 2017 we generated $106,112 and $0 of revenue, respectively.

COST OF SALES. During the six month periods ended February 28, 2018 and February 28, 2017 we incurred $71,222 and $0 of cost of revenue, respectively.

OPERATING EXPENSES. During the six month periods ended February 28, 2018 and February 28, 2017, we incurred general and administrative expenses of $209,297 and $46,689, respectively, and related party salary and wages of $16,700 and $15,000, 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 six month period ended February 28, 2018 was $95,899 compared to a net income of $55,564 during the six month period ended February 28, 2017.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2018, our total assets were $899,308 compared to $954,031 in total assets at August 31, 2017. Total assets as of February 28, 2018 comprised cash of $158,553, accounts receivable of $49,920, prepaid expenses of $265,835 and $425,000 in intangible assets 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 February 28, 2018 and August 31, 2017, our current liabilities were $89,300 and $228,124 respectively.

Stockholders’ equity was $810,008 as of February 28, 2018 compared to $725,907 as of August 31, 2017.

CASH FLOWS FROM OPERATING ACTIVITIES

For the six month period ended February 28, 2018, net cash used in operating activities were $241,685 compared to net cash flows used in operating activities of $33,125 for the six month period ended February 28, 2017.

CASH FLOWS FROM INVESTING ACTIVITIES

We generated $253,000 in investment activities in the six months ended February 28, 2018, and we neither generated, nor used, funds in investing activities during the six months ended February 28, 2017.

CASH FLOWS FROM FINANCING ACTIVITIES

We generated $74 in net cash from financing activities during the six months ended February 28, 2018, compared to ($1,184) in net cash from financing activities during the six months ended February 28, 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 February 28, 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 February 28, 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 February 28, 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

None.

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.