NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
AUGUST 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 Krygyzstan. The Company's fiscal year end is
August 31.
On January 22, 2016, our former sole
officer, who owned 83% of our outstanding common shares, sold all of his common shares to unrelated investor Jianli Deng. After
the stock sale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designed for movie
trailer promotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphone
makers, online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins
to movie distributors or other video advertisers in China. We created the app “Amoney” for the Android smartphone platform
to develop a WeChat micro-shop that was designed to display and deliver a variety of information and links for download or online
watch prices in the China market.
For the year ended August 31, 2016,
we generated revenue of $28,200 from one company that paid us to post their movie trailers on our smartphone app for a one month
period. On November 16, 2017, however, we sold the mobile application (Amoney) because we believed there were too many competitors
in the market. We remained 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 to us a worldwide license to a video synthesis and release system
for mobile communications equipment (the “Technology”). The 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 were 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 October 10, 2017, we completed
the payment of all amounts due under the Agreement.
Our License to the Technology generates
revenue through sub-license monthly fees from a smartphone app on Android devices. This app was already existing and licensed at
the time we acquired the Technology.
We are in the process of using the underlying
Technology to create a smartphone video mix app and social video sharing platform. We are developing this new apps for use with
iOS and Android smartphones and we expect to launch the app sometime in the beginning of next year. We expect that this new app
will transform the way users create and share art talent and fun. The app is expected to take advantage of the core design philosophy
of “My film anyone, anywhere, anytime be together.” Similar and competitive innovative video and community apps have
been activated on over 2 million unique devices in China as of December 31, 2017 and precipitated the duet video synthesis phenomenon
in China. Today, the word “Meitu” is used as a verb for “enhancing images”, and TikTok is a short video
sharing platform. Our Videomix app, yet to be released, is expected to be used as a verb for “enhancing videos synthesis
production,” but also as a brand that represents talent, trendiness, youthfulness and funniness.
To better meet our users’ demands
for higher quality selfies, we are also planning to launch the Patent (Mobile communication equipment video synthesis production
and distribution system) License Program. The program markets our Technology to big brand smartphones makers to highlight our patent
apps integrate proprietary video synthesis production and distribution system processing algorithms and specialized video processors,
which generate high-quality selfies duet video synthesis. We have been in discussion with these smartphone makers about our initiatives
and selling points in an effort to increase sales. Revenue from this program will be generated by license fees for each smartphone
with this video synthesis production and distribution system function.
Fundamentally, we view ourselves as
a mobile Internet company with our core asset being our massive, active and fast-growing user base through registered patent--Mobile
communication equipment video synthesis production and distribution system.
We believe that the VideoMix app will
become an important part of users’ social lives online. We believe the provision of relevant products, content and services
will help us monetize our user base and enable us to create value for our users at the same time. We intend to continue to drive
our near-term revenue growth through patent--Mobile communication equipment video synthesis production and distribution system
license fees from smartphone makers, since China’s large smartphone market continues to present significant opportunities.
Our goal is that at least 10% of smartphones in China will eventually contain this integrated patent function. If we meet this
goal, which would equate to around 40 million smartphones, which in turn result in about 200 million RMB in revenue generated from
patent license fees. As we have not yet commercialized the app for sale, we do not expect to achieve any revenues until we launch
the app and make it available under our program, and we can provide no assurances that we will be able to achieve commercialization
or our revenue goals for the app. According to preliminary data of the IDC Quarterly Mobile Phone Tracker, the Chinese smartphone
market shipped 105 million units during the second quarter of 2018. Following our successful monetization through smartphones,
we have also identified three other major opportunities for monetization, including content use fees, advertising fees, KOL agency
fees.
On March 10, 2018, we acquired intellectual
property from Aura Blocks Ltd. for $200,000 in cash. On March 19, 2018, we entered into consulting agreements (the “Consulting
Agreements”) with four consultants (the “Consultants”). The Consulting Agreements have terms or either two or
three years. Under the Consulting Agreements the Consultants will provide services to us in Hong Kong and China related to blockchain
technology and krypto kiosks. In consideration for the services provided by the Consultants, we have issued the Consultants a total
of 1,100,000 shares of our common stock.
On March 21, 2018, we 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. We also issued to JPC Fintech Limited (“JPC
Fintech”) 2,400,000 common shares with a market value of $72,000 exchange of KryptoKiosk Limited’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.
We planned to generate revenue through
sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing, we proposed to bring a physical aspect to something
that is otherwise very abstract to people. We planned to invest in machines and sell sub-licenses in the Asia Pacific region with
future world-wide expansion. We had promoted and marketed the ATM business for 6 months or until around August 2018, because the
BTC and cryptocurrencies price went down.. The IP, however, was never transferred to us, We have repeatedly requested from Messrs.
Grounds, Vickery and Shakespare access to the domains and websites and other information concerning the IP assets. As of the date
of this annual report, no such information has been provided. In addition, the IP including domain names were transferred to others
while Messrs. Vickery and Shakespare were officers of our company. As a result, we ceased promotions and marketing on the ATM business
and relations cryptocurrencies business in September 2018. On November 21, 2018, we had sent the final notice that JPC Fintech
has materially breached the agreement. We requested that JPC Fintech Ltd. return its stock certificate received in the transaction
to our transfer agent for immediate cancellation. We have not yet received the certificate for termination.
On May 9, 2018, we entered into an investor
agreement with iCrowdU Inc. We 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.
Furthermore, it was agreed to exchange
2,000,000 shares of our common stock for 2,000,000 shares of common stock in iCrowdU Inc. This share exchange was made as collateral
in advance of an investment of $1,935,000 by us into iCrowdU Inc., which never occurred.
On or about May 9, 2018, we entered
into consultancy agreements with Alexander Holtermann, Ian Wright and Luis Hadic. Each of Messrs. Holtermann, Wright and Hadic
received 200,000 shares of our common stock under the consultancy agreements.
On or about July 26, 2018, we entered
into an investment agreement with iCrowdU Inc. for the purchase of 40% of iCrowdU in exchange for 8,000,000 shares of our common
stock that would be split between Messrs. Holtermann and Wright at 70% and 30%, respectively, and an investment of $10,000,000.
The 8,000,000 shares were cut but not delivered to Messrs. Holtermann and Wright and no part of the $10,000,000 was invested by
us into iCrowdU Inc.
On or about July 31, 2018, we entered
into employment agreements with Messrs. Holtermann and Wright for the consideration provided for under the agreements.
On October 25, 2018, the above parties
entered into an Agreement for Termination and Release that terminated all outstanding agreements among the parties and released
each party from the other. We agreed to settle outstanding expenses and costs incurred by iCrowdU Inc., in the sum of $6,444.90.
In addition, all parties agreed to return any shares received from the above agreements, and we shall be permitted to retain the
228,013 shares purchased in iCrowdU Inc. Finally, we agreed to amend our Current Report on Form 8-K concerning certain disclosures
made therein. We amended the report as per the agreement.
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 Company’s year-end is August 31. The financial statements have been prepared on a consolidated basis,
with their fully owned subsidiary App Board Limited. No intercompany balances or transactions exist during the period ended August
31, 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 period ended August 31, 2018.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the
financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash
flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash
equivalents.
Foreign Currency Transactions
The Company’s planned operations
are outside of the United States, which results in exposure to market risks from changes in foreign currency rates. The financial
risk arise from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company
does not use derivative instruments to reduce its exposure to foreign currency risk. Non monetary assets and liabilities are translated
at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues
and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements
into U.S. dollars are included in current results of operations.
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 years ended August 31, 2018 and 2017, and no write-off
for bad debt were recorded for the years ended August 31, 2018 and 2017.
Prepaid Expenses
Prepaids consist of filing fees and
advances related to consulting fees that have been paid in advance. The prepaid balances are amortized when the related expense
is incurred.
Intangible Assets
Intangible assets are stated at cost
and depreciated as follows:
|
·
|
Mobile application product:
straight-line method over the estimated life of the asset, which has been determined by management to be 3 years
|
|
·
|
Movie copyrights: income
forecast method for a period not to exceed 10 years
|
|
·
|
Patent: straight-line
method over the term of 5 years based on the patent license agreement
|
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.
Investments in Companies Accounted
for Using the Cost Method
In accordance
with ASC 320-10, “Investments – Debit and Equity Securities,” investments in other non-consolidated entities
are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise
significant influence over the operating and financial policies of the investee. Under ASC 325-20, cost method investments are
recorded initially at historical cost. Dividends on cost method investments received as part of the investor’s share of net
earnings of the investee after the date of investment (i.e., a return on investment) are recorded as income. Please refer to Note
5 for details.
The Company
evaluates its investments in companies accounted for by the cost method for impairment when there is evidence or indicators that
a decrease in value may be other than temporary.
Income Taxes
The Company accounts for income taxes
pursuant to FASB ASC 740 “
Income Taxes
”. Under ASC 740 deferred income taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision
for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and
liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 also provides criteria for the
recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax
position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon
audit by the relevant taxing authority. At August 31, 2018, there was unrecognized tax benefits. Please see Notes 8 for details.
Revenue Recognition
Revenues are recognized when control
of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company
expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine
the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
·
|
the contract with a customer;
|
|
·
|
identify the performance
obligations in the contract;
|
|
·
|
determine the transaction
price;
|
|
·
|
allocate the transaction
price to performance obligations in the contract; and
|
|
·
|
recognize revenue as
the performance obligation is satisfied.
|
The Company has recognized the revenues
associated with mobile app sales 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 years ended August 31, 2018 and 2017.
Recent accounting pronouncements
We have 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 subsequent
to December 15, 2016.
NOTE 3 – GOING CONCERN UNCERTAINTIES
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of
assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As of August 31, 2018, the Company had
an accumulated deficit of $1,047,386 and net loss of $1,111,950 and net cash used in operations of $866,887 for the year ended
August 31, 2018. Losses have principally occurred as a result of the substantial resources required for general and administrative
expenses associated with our operations. The continuation of the Company as a going concern through August 31, 2019 is dependent
upon the continued financial support from its stockholders or external financing. Management believes the existing stockholders
will provide the additional cash to meet with the Company’s obligations as they become due. However, there is no assurance
that the Company will be successful in securing sufficient funds to sustain the operations.
These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to
reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities
that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional
funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
NOTE 4 – PREPAID
EXPENSES
On June 1, 2018, the Company
entered into an agreement with an outside phone apps designer. A smartphone apps was designed and its ownership belongs to the
Company. Its main use is smartphone video synthesis and sharing. The first payment paid to designer was $307,200, which is included
in the prepaid expenses of $333,867 as of August 31, 2018 in the consolidated balance sheets. As of August 31, 2018, the app was
under development.
NOTE 5 – ACQUISITION
On May 9, 2018, the Company entered into an
investor agreement with iCrowdU Inc (“iCrowdU”). The Company has agreed to purchase up to 51% of iCrowdU for a total
investment of $10,000,000. This investment was executed via the following steps.
|
1.
|
228,013 shares of iCrowdU at a share price of $1,228 for total consideration
of $280,000
|
|
2.
|
$3,935,000 at a share price of US $1.82 in exchange for 10.8104%
of iCrowdU
|
|
3.
|
$5,785,000 at a share price of US $0.268118 in exchange for 39.0495%
of iCrowdU
|
As noted in Note 1, the
Company only completed step 1. Mutual release of any further obligation related to the acquisition has been agreed as noted in
Note 1. As a result, the Company invested a total of $280,000 in exchange for 228,013 shares, equivalent to a 1.14% ownership of
iCrowdU. The investment has been recorded at cost less impairment. To be conservative, full impairment has been recognized as of
August 31, 2018, due to management’s perspective on this unsuccessful investment.
NOTE 6 – 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 cash of $253,000. The Company recorded gain on sales of assets of $7,280 as discontinued operations during
the year ended August 31, 2018.
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 the year ended August 31, 2018 and 2017 which are included in the gain from
discontinued operations:
|
|
Year Ended August 31,
|
|
|
2018
|
|
2017
|
Revenue
|
|
$
|
49,920
|
|
|
$
|
408,085
|
Cost of revenue
|
|
|
(11,912
|
)
|
|
|
(26,912)
|
Income Tax Provision
|
|
|
—
|
|
|
|
(55,347)
|
Gain on sale of intangible asset
|
|
|
7,280
|
|
|
|
—
|
Income from discontinued operations
|
|
$
|
45,288
|
|
|
$
|
325,826
|
The following table shows the assets
and liabilities of the discontinued operation as of August 31, 2018 and 2017 which are included in the consolidated balance sheets
as the total of current assets, non-current assets and current liabilities:
|
|
August 31,
|
|
|
2018
|
|
2017
|
Accounts receivable
|
|
|
—
|
|
|
|
88,320
|
Total current assets
|
|
$
|
—
|
|
|
$
|
88,320
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
—
|
|
|
|
207,712
|
Total non-current assets
|
|
$
|
—
|
|
|
$
|
207,712
|
NOTE 7 – INTANGIBLE ASSETS
As of August 31, 2018, and August 31,
2017, the balance of intangible assets are as follows;
|
|
August
31, 2018
|
|
August
31, 2017
|
Patent
|
|
|
500,000
|
|
|
|
500,000
|
Intellectual property: Aura
|
|
|
200,000
|
|
|
|
—
|
Intellectual property: Kryptokiosk
|
|
|
72,000
|
|
|
|
—
|
Total cost
|
|
|
772,000
|
|
|
|
500,000
|
Accumulated amortization
|
|
|
(131,000
|
)
|
|
|
(25,000)
|
Intangible asset, net
|
|
$
|
641,000
|
|
|
$
|
475,000
|
Amortization expenses for the years
ended August 31, 2018 and 2017, was $106,000 and $25,000, respectively.
During the year ended August 31, 2017,
the Company purchased the copyright and all other rights in a film named “Gong Fu Nv Pai” for $138,240 cash from a
non-related party which is included in discontinued operation. During the year ended August 31, 2018, the Company sold the copyright
and all other rights and the mobile application (Amoney) assets to an unrelated party for $253,000 (Note 6).
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.
On June 1, 2017, the Company entered
into patent license agreement with a related party. 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. During the year ended August 31, 2017,
the Company has paid $361,760 and $138,240 was recorded as accounts payable. On October 10, 2017, the Company fully paid $138,240.
NOTE 8 – 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. In July, 2018, the Company appointed Alexander
Holtermann as Chief Executive Officer, Chiyuan Deng as President, and Jianli Deng as secretary and treasurer. On October 18, 2018,
the Company entered into an Agreement For Termination And Release and accepted the resignation of Alexander, Ian Wright and Luis
Hadic. In August, Ying Zhang has resigned as vice president and director.
During the year ended August 31, 2018,
a shareholder has advanced the Company $424 for operating expenses. During the year ended August 31, 2017, a shareholder was repaid
$1,184. As at August 31, 2018 and 2017, the Company owed $2,037 and $1,613 to this shareholder, respectively. The amounts are due
on demand, unsecured, and non-interest bearing.
During the year ended August 31, 2018
and 2017, $79,741 was paid to four related parties and $30,000 was paid to two related parties as salaries and wages, respectively.
Among the $79,741, $67,241 was paid to two executives and two former directors of the Company, and $12,500 was paid to two related
parties in the form of stock compensation. Please see Note 9 for details of the stock compensation.
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 sublicense the technology
for an initial period of 5 years, subject to a right to renew for an additional 5 year term. We are in the process of using the
underlying technology to create a smartphone app marketing engine to be used for movie trailer promotion in China. The Company
is obligated to pay the Licensor a $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, joint owns and controls Licensor
During the year ended August 31, 2017, the Company paid $361,760 and $138,240 was recorded as accounts payable. On October 10,
2017, the Company paid the balance owing of $138,204 (Note 7).
NOTE 9 – EQUITY
Effective as of June 6, 2018, AB International
Group Corporation 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 year ended August 31, 2018,
the Company issued common shares, as follows:
|
·
|
38,550,000 shares to
the Company’s majority shareholder and third parties for proceeds of $1,156,500.
|
|
·
|
6,725,000 shares for
consulting services of $184,350 to 16 consultants.
|
|
·
|
2,400,000 shares in consideration
for the purchase of intangible assets held by KryptoKiosk.
|
|
·
|
2,000,000 shares for
acquisition of shares of iCrowdU as collateral and 8,000,000 shares as consideration. The 10,000,000 shares have been returned
to and cancelled by the Company by the date of the report due to the Agreement FOR Termination And Release as in Note 1.
|
|
·
|
60,000,000 shares for
services of officers: 20,000,000 issued to Chiyuan Deng for employment as President, 20,000,000 issued to Alexander Holtermann
for employment as Chief Executive Officer, 10,000,000 to Ian Wright for employment as Chief Operational Officer, and 10,000,000
to Jianli Deng for employment as Secretary and Treasurer. The arrangement with Alexander Holtermann and Ian Wright has been subsequently
terminated after August 31, 2018. The services of Chiyuan Deng and Jianli Deng caused salaries expenses of $12,500 incurred in
the year ended August 31, 2018.
|
During the year ended August 31, 2017,
the company issued common stock, as follows;
|
·
|
3,000,000 common shares,
for proceeds of $300,000 to a related party who is a major shareholder.
|
|
·
|
150,000 common shares,
for proceeds of $15,000 to an unrelated party.
|
|
·
|
350,000 common shares,
for services of $35,000 to two unrelated parties.
|
As at August 31, 2018 and 2017, 147,325,000
and 29,650,000 issued and outstanding shares of common stock were held by approximately 32 and 11 shareholders of record, respectively.
During the year ended August 31, 2018,
common stocks issued to Chiyuan Deng and Jianli Deng for salaries expenses to be accrued after the year end is recorded as unearned
compensation cost of $918,100.
NOTE 10 – INCOME TAXES
As of August 31, 2018, the Company had
no net operating loss carry forwards. Due to the change in control during the year, the Company determined there are no loss carry
forward amounts.
On December 22, 2017, the United States
enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has
completed the accounting for the effects of the Act during the quarter ended August 31, 2018. The Company’s financial statements
for the year ended August 31, 2018 reflect certain effects of the Act which includes a reduction in the corporate tax rate from
35% to 21% as well as other changes.
Components of net deferred tax assets,
including a valuation allowance, are as follows at August 31, 2018 and 2017:
|
|
Years Ended August 31,
|
|
|
2018
|
|
2017
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
Net operating loss carry over
|
|
$
|
149,948
|
|
|
$
|
—
|
Less: valuation allowance
|
|
|
(149,948
|
)
|
|
|
—
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
The valuation allowance for deferred
tax assets as of August 31, 2018 was $149,948, and $0 as of August 31, 2017. In assessing the recovery of the deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which
those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected
future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely
than not the deferred tax assets would not be realized as of August 31, 2018 and 2017.
Reconciliation between the statutory
rate and the effective tax rate is as follows at August 31, 2018 and 2017:
|
|
2018
|
|
2017
|
Federal statutory tax rate
|
|
|
(21%)
|
|
|
35%
|
Change in valuation allowance
|
|
|
21%
|
|
|
0%
|
Effective tax rate
|
|
|
0%
|
|
|
35%
|
NOTE 11 – CONCENTRATION
RISK
Approximately 83% and 45% of revenue
was incurred from one customer during the year ended August 31, 2018 and 2017, respectively.
100% of account receivables was due
from one customer as of August 31, 2018.
NOTE 12 – SUBSEQUENT EVENTS
On October 18, 2018, the Company entered
into an Agreement For Termination And Release with iCrowdU. The 10,000,000 shares have been returned to and cancelled by the Company
by the date of this report. The interests retained by the Company in iCrowdU is limited to the 228,013 shares acquired, equivalent
to a 1.14% ownership of iCrowdU. The Company accepted the resignation of Alexander Holtermann, Ian Wright and Luis Hadic. In August,
Ying Zhang has resigned as vice president and director. The shares issued to Alexander Holtermann of 20,000,000, Ian Wright of
10,000,000 and Luis Dadic of 200,000 for employment have been returned to and cancelled by the Company.
As a result of the situation stated
in Note 1, we ceased promotions and marketing on the ATM business and relations cryptocurrencies business in September 2018. On
November 21, 2018, we had sent the final notice that JPC Fintech has materially breached the agreement. We requested that JPC Fintech
Ltd. return its stock certificate received in the transaction to our transfer agent for immediate cancellation. We have not yet
received the certificate for termination.
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to August 31, 2018 to the date these financial statements were issued and has determined
that it does not have any additional material subsequent events to disclose in these financial statements.