Our unaudited consolidated financial
statements included in this Form 10-Q are as follows:
These interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information
and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation
have been included. Operating results for the interim period ended May 31, 2019 are not necessarily indicative of the results that
can be expected for the full year.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
May 31, 2019
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
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.
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 in the end of July 2019. 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, 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 on the end of August 2019. 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 are expected
to 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. 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 November 10, 2018, the Company sold this intellectual property from Aura Blocks Limited to China
IPTV Industry Park Holdings Ltd. for $80,000.
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 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, save 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.
On September 5, 2018, the Company entered
into an agreement with Aura Blocks Limited to acquire a movie copy right for $768,000. The Company has paid $460,862 as of May
31, 2019. The Company has obtained the exclusive permanent broadcasting right outside the mainland China and is expected to generate
revenues from showing the movie online, in theaters, and on TV outside the mainland China once this movie is completed in the end
of December 2019. This movie will also be included in the video library for the Company’s VideoMix app.
In December of 2018, we started developing
a performance matching platform (Fan Dou He Pai) and a WeChat official account to advertise the platform. The matching platform
is to arrange performance events for celebrities and performers. Performers can set their schedules and quotes on the platform.
The platform will maximize their profits from performance events by optimizing their schedules based upon quotes and event locations
and save time from commuting among different events. “Fan Dou He Pai” utilizes the artificial intelligence (AI) matching
technology to instantly and accurately match performers and advertisers or merchants. The company charges agency service fees for
each successful event matched through the platform.
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 May
31, 2019.
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 nine months period ended May 31, 2019.
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 nine months ended May 31, 2019 and 2018, and no write-off
for bad debt were recorded for the nine months ended May 31, 2019, and 2018.
Prepaid Expenses
Prepaid expenses primarily consist of
consulting fees that have been paid in advance, installments to acquire a movie copy right, payments to software development companies
to develop the VideoMix mobile app, and a prepayment to the Company’s financial adviser. 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.
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 May 31, 2019, 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 as of May 31, 2019 and August 31, 2018.
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.
The Company had an accumulated deficit
of $1,646,829 as of May 31, 2019 and net loss of $599,444 and net cash used in operations of $615,849 for the nine months ended
May 31, 2019. 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 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 to develop a VideoMix smartphone app for video synthesis and sharing.
The first payment of $307,200 to the app designer was recorded as prepaid expense. As of May 31, 2019, the Company has completed
the VideoMix development and entered into testing procedures.
On September 5, 2018, the
Company acquired a movie copy right from Aura Blocks Limited at a purchase price of $768,000. The Company has paid $460,862 as
of May 31, 2019.
Prepaid expense as of May
31, 2019 includes $307,200 payment to the designer to develop the VideoMix phone app, $460,862 payment to acquire the movie copy
right, $9,167 prepaid consulting fees net of amortization, and $2,000 prepayment of financial advisor fee.
NOTE 5 –
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 nine months ended May 31, 2019 and 2018 which are included in the gain from
discontinued operations:
|
|
Nine months ended
|
|
|
May
31,
|
|
|
2019
|
|
2018
|
Revenue
|
|
$
|
—
|
|
|
$
|
49,920
|
Cost of revenue
|
|
|
—
|
|
|
|
11,912
|
Income Tax Provision
|
|
|
—
|
|
|
|
—
|
Gain from discontinued operations
|
|
$
|
—
|
|
|
$
|
38,008
|
NOTE 6 – CONSTRUCTION IN PROGRESS
Construction in progress relates to
renovation and upgrade of an office and an offline display store. The Company has paid $58,688 to the construction company as of
May 31, 2019. This renovation is expected to be completed in July, 2019.
NOTE 7 – INTANGIBLE ASSETS
As of May 31, 2019, and August 31, 2018,
the balance of intangible assets are as follows;
|
|
May 31, 2019
|
|
August 31, 2018
|
Patent
|
|
$
|
500,000
|
|
|
$
|
500,000
|
Intellectual property: Aura
|
|
|
—
|
|
|
|
200,000
|
Intellectual property: Kryptokiosk
|
|
|
72,000
|
|
|
|
72,000
|
Wechat official account
|
|
|
99,584
|
|
|
|
—
|
Total cost
|
|
|
671,584
|
|
|
|
772,000
|
Accumulated amortization
|
|
|
(220,904
|
)
|
|
|
(131,000)
|
Intangible asset, net
|
|
$
|
450,680
|
|
|
$
|
641,000
|
Amortization expenses for nine months
ended May 31, 2019 and 2018 was $89,904 and $89,312, respectively.
On November 10, 2018, the Company sold the
$200,000 intellectual property from Aura Blocks Limited for $80,000 with a realized loss of $120,000.
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. During the nine months ended May 31, 2018,
a shareholder paid an invoice of $74 on behalf of the Company. During the nine months ended May 31, 2019, there are no such related
party transactions.
The Company has entered into a patent
license agreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”). The
agreement is for a term of 5 years commencing on the effective date on June 1, 2017. The Company has already paid the licensor
a non-refundable, up-from payment of $500,000 and shall pay a royalty of 20% of the gross revenue realized from the sale of licensed
products and sub-licensing of this patent every year. The royalty expenses during the nine-month ended May 31, 2019 and 2018 are
$45,568 and $35,430, respectively.
In December, 2018, the Company appointed
Brandy Gao as Chief Financial Officer and issued 100,000 shares as compensation. In February 2019, the Company appointed Linqing
Yeas Chief Operational Officer and Lijun Yu as Chief Marketing Officer, and issued 10,000,000 shares to each of them as compensation.
During the nine months ended May 31, 2019, $264,334 was paid to five executives in the form of stock-based compensation.
As of May 31, 2019, the company has
$44,834 related party receivable from Youall Perform Services Ltd, owned by the Company’s Board of Director Jianli Deng.
Youall Perform Services Ltd collected revenue from the performance matching platform (Fan Dou He Pai) on behalf of the Company.
The Company rented an office from Zestv
Studios Ltd., owned by the Chief Executive Officer Chiyuan Deng, and incurred a total related party payable of $16,512 for a security
deposit of $11,008 and the first month’s rent of $5,504.
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 nine months ended May 31,
2019, the following 40,600,000 common shares were returned to the Company due to the termination of the Investor Agreement to acquire
51% ownership of iCrowdU Inc:
|
·
|
2,000,000 shares for
acquisition of shares of iCrowdU as collateral and 8,000,000 shares as consideration.
|
|
·
|
20,200,000 issued to
Alexander Holtermann for employment as Chief Executive Officer, 10,200,000 to Ian Wright for employment as Chief Operational Officer,
and 200,000 to Eichbaum Financial Reporting Services Inc. for consulting fees.
|
The Company issued the following common
shares during nine months ended May 31, 2019:
|
·
|
1,975,000 shares for
consulting services of $59,250 to two third-party consultants.
|
|
·
|
18,000,000 common shares
to five unrelated parties for proceeds of $360,000.
|
|
·
|
20,100,000 shares for
services of officers: 10,000,000 issued to Linqing Ye for employment as Chief Operational Officer, 10,000,000 issued to Lijun Yu
for employment as Chief Marketing Officer, 100,000 to Brandy Gao for employment as Chief Financial Officer.
|
|
·
|
3,300,000 common shares
for consulting services of $99,000 to nine third-party consultants.
|
|
·
|
27,000,000 common shares
to one related party, the Chief Executive Officer Chiyuan Deng, and two unrelated parties, Kangdi Liu and Bonus Media Investment
Limited, for proceeds of $540,000.
|
As of May 31, 2019 and August 31, 2018,
177,100,000 and 147,325,000 issued and outstanding shares of common stock were held by approximately 512 and 32 shareholders of
record, respectively.
NOTE 10– INCOME TAXES
As of May 31, 2019, 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. The Company’s financial statements for the nine months ended May 31,
2019 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 as of May 31, 2019 and August 31, 2018:
|
|
May
31, 2019
|
|
August
31, 2018
|
Deferred
tax asset attributable to:
|
|
|
|
|
|
|
|
Net
operating loss carry over
|
|
$
|
263,819
|
|
|
$
|
149,948
|
Less:
valuation allowance
|
|
|
(263,819
|
)
|
|
|
(149,948)
|
Net
deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
The valuation allowance for deferred
tax assets was $263,819 as of May 31, 2019 and $149,948 as of August 31, 2018. 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 May 31, 2019 and August 31, 2018.
Reconciliation between the statutory
rate and the effective tax rate is as follows at May 31, 2019 and August 31, 2018:
|
|
2019
|
|
2018
|
Federal statutory tax rate
|
|
|
21
|
%
|
|
|
21%
|
Change in valuation allowance
|
|
|
(21
|
%)
|
|
|
(21%)
|
Effective tax rate
|
|
|
0
|
%
|
|
|
0%
|
NOTE 11 – CONCENTRATION
RISK
64% and 100% of revenue was generated
from one customer during the nine months ended May 31, 2019 and 2018, respectively.
100% of account receivables was due
from one customer as of May 31, 2019 and August 31, 2018.
NOTE 12 – COMMITMENTS
AND CONTINGENCIES
Operating lease
The Company leases office premises and a display
store under non-cancelable operating lease agreements with an option to renew the lease. The rental expense for the nine months
ended May 31, 2019 and 2018 was $12,569 and $0, respectively. All leases are on a fixed payment basis. None of the leases include
contingent rentals. The Company had lease commitment of $256,435 as of May 31, 2019, of which $56,397 was within one year.
Future lease commitments
2019
|
|
$
|
56,397
|
2020
|
|
$
|
87,245
|
2021
|
|
$
|
87,245
|
2020
|
|
$
|
25,549
|
Total
|
|
$
|
256,435
|
NOTE 13
– SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to May 31, 2019 to the date these financial statements were issued.
On June 17, 2019, we conducted a one
for fifty reverse stock split of our outstanding common stock. Prior to approval of the reverse split we had a total of 177,100,000
issued and outstanding shares of common stock, par value $0.001. On the effective date of the reverse split, we have a total of
to 3,542,000 issued and outstanding shares of common stock, par value $0.001.
During July of 2019, the Company obtained
a new round of financing for $2.5 million. As of July 15, 2019, the Company has received the full amount of $2.5 million financing.