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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
☒ |
Quarterly Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly
period ended May 31, 2024
|
☐ |
Transition Report pursuant to 13 or
15(d) of the Securities Exchange Act of 1934
|
|
For the transition
period from __________ to__________
|
|
Commission
File Number: 000-55979 |
AB International
Group Corp.
(Exact name of registrant
as specified in its charter)
Nevada |
37-1740351 |
(State or other
jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.) |
144 Main Street,
Mt. Kisco, NY 10549 |
(Address of principal
executive offices)
|
(914)
202-3108 |
(Registrant’s
telephone number) |
_______________________________________________________ |
(Former
name, former address and former fiscal year, if changed since last report) |
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 past 90 days.
[X] Yes [ ] No
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted 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
such fi les). [X] Yes [ ] No
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☐ Large accelerated
filer |
☐ Accelerated
filer |
☒ Non-accelerated
Filer |
☒
Smaller reporting company |
|
☐ Emerging
growth company |
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 [X] No
State
the number of shares outstanding for each of the issuer’s classes of common stock, as of the latest practicable date:
2,331,965,321 common shares as of July 12, 2024.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our unaudited consolidated
financial statements included in this Form 10-Q are as follows:
F-1 |
Consolidated Balance
Sheets as of May 31, 2024 and August 31, 2023 (unaudited); |
F-2 |
Consolidated Statements of Operations
for the three and nine months ended May 31, 2024 and 2023 (unaudited); |
F-3 |
Consolidated Statements of Changes in
Stockholders’ Equity for the three and nine months ended May 31, 2024 and 2023 (unaudited); |
F-4 |
Consolidated Statements of Cash Flows
for the nine months ended May 31, 2024 and 2023 (unaudited); and |
F-5 |
Notes to Consolidated Financial Statements
(unaudited) |
AB
INTERNATIONAL GROUP CORP.
Consolidated
Balance Sheets
(Unaudited)
| |
May 31, | |
August 31, |
| |
2024 | |
2023 |
| |
| |
|
ASSETS | |
| | | |
| | |
Current
Assets | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 165,428 | | |
$ | 117,096 | |
Accounts
receivable | |
| 254,720 | | |
| — | |
Total
Current Assets | |
| 420,148 | | |
| 117,096 | |
| |
| | | |
| | |
Property and
equipment, net | |
| 4,929 | | |
| 8,254 | |
Right of use
operating lease assets, net | |
| 545,113 | | |
| 696,380 | |
Intangible
assets, net | |
| 709,410 | | |
| 1,455,110 | |
Purchase deposits
for intangible assets, non-current | |
| 30,000 | | |
| 300,000 | |
Security
deposit | |
| 46,006 | | |
| 45,240 | |
TOTAL
ASSETS | |
$ | 1,755,606 | | |
$ | 2,622,080 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current
Liabilities | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
$ | 124,268 | | |
$ | 156,763 | |
Accounts
payable and accrued liabilities - related party | |
| 6,388 | | |
| 6,388 | |
Loan
from related parties | |
| 286,679 | | |
| 748,285 | |
Current
portion of obligations under operating leases | |
| 245,665 | | |
| 211,507 | |
Deferred
revenue | |
| 25,600 | | |
| — | |
Total
Current Liabilities | |
| 688,600 | | |
| 1,122,943 | |
| |
| | | |
| | |
Obligations
under operating leases, non-current | |
| 423,350 | | |
| 608,149 | |
Total
Liabilities | |
| 1,111,950 | | |
| 1,731,092 | |
| |
| | | |
| | |
Stockholders’
Equity | |
| | | |
| | |
Preferred stock, $0.001 par
value, 10,000,000 preferred shares authorized; | |
| | | |
| | |
Series A preferred
stock, 100,000 and 100,000 shares issued and outstanding, as of May 31, 2024 and August 31, 2023, respectively | |
| 100 | | |
| 100 | |
Series B preferred
stock, 0 and 20,000 shares issued and outstanding, as of May 31, 2024 and August 31, 2023, respectively | |
| — | | |
| 20 | |
Series C preferred
stock, 0 and 174,421 shares issued and outstanding, as of May 31, 2024 and August 31, 2023, respectively | |
| — | | |
| 175 | |
Series D preferred
stock, 0 and 0 shares issued and outstanding, as of May 31, 2024 and August 31, 2023, respectively | |
| — | | |
| — | |
Common stock, $0.001 par
value, 10,000,000,000 shares authorized; 2,331,965,321 and 1,285,283,385 shares issued and outstanding, as of May
31, 2024 and August 31, 2023, respectively | |
| 2,331,965 | | |
| 1,285,283 | |
Additional
paid-in capital | |
| 11,017,874 | | |
| 11,993,408 | |
Accumulated
deficit | |
| (12,706,283 | ) | |
| (12,387,998 | ) |
Total
Stockholders’ Equity | |
| 643,656 | | |
| 890,988 | |
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 1,755,606 | | |
$ | 2,622,080 | |
The
accompanying notes are an integral part of these financial statements.
AB INTERNATIONAL GROUP
CORP.
Consolidated Statements
of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nine Months
Ended | |
Three Months
Ended |
| |
May 31, | |
May 31, |
| |
2024 | |
2023 | |
2024 | |
2023 |
| |
| |
| |
| |
|
REVENUE | |
| | | |
| | | |
| | | |
| | |
Copyrights and license | |
$ | 1,438,308 | | |
$ | 791,225 | | |
$ | 553,019 | | |
$ | 433,939 | |
Theatre admissions and food and
beverage sales | |
| 267,856 | | |
| 317,415 | | |
| 68,492 | | |
| 139,450 | |
Consulting
services | |
| 179,147 | | |
| — | | |
| 76,800 | | |
| — | |
Total
revenue | |
| 1,885,311 | | |
| 1,108,640 | | |
| 698,311 | | |
| 573,389 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING COSTS AND EXPENSES | |
| | | |
| | | |
| | | |
| | |
Amortization expenses | |
| (1,441,489 | ) | |
| (2,530,435 | ) | |
| (369,006 | ) | |
| (751,192 | ) |
Theatre operating costs | |
| (136,397 | ) | |
| (139,567 | ) | |
| (32,316 | ) | |
| (60,859 | ) |
General and administrative expenses | |
| (673,182 | ) | |
| (1,165,160 | ) | |
| (161,566 | ) | |
| (361,002 | ) |
Related party
salary and wages | |
| (15,049 | ) | |
| (185,500 | ) | |
| — | | |
| (44,500 | ) |
Total
Operating Costs And Expenses | |
| (2,266,117 | ) | |
| (4,020,662 | ) | |
| (562,888 | ) | |
| (1,217,553 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income
(Loss) From Operations | |
| (380,806 | ) | |
| (2,912,022 | ) | |
| 135,423 | | |
| (644,164 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSES) | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 693 | | |
| 495 | | |
| — | | |
| 337 | |
Interest expense – related
party | |
| (25,953 | ) | |
| — | | |
| (5,170 | ) | |
| — | |
Other income | |
| 87,781 | | |
| — | | |
| 2,781 | | |
| — | |
Total
Other Income (Expenses) | |
| 62,521 | | |
| 495 | | |
| (2,389 | ) | |
| 337 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Income tax
benefit | |
| — | | |
| — | | |
| — | | |
| — | |
NET
INCOME (LOSS) | |
| (318,285 | ) | |
| (2,911,527 | ) | |
| 133,034 | | |
| (643,827 | ) |
Preferred shares dividend | |
| — | | |
| (14,545 | ) | |
| — | | |
| (3,916 | ) |
Net
income (loss) available to common stockholders | |
$ | (318,285 | ) | |
$ | (2,926,072 | ) | |
$ | 133,034 | | |
$ | (647,743 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME
(LOSS) PER SHARE: BASIC | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | 0.00 | | |
$ | (0.00 | ) |
NET INCOME
(LOSS) PER SHARE: DILUTED | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | 0.00 | | |
$ | (0.00 | ) |
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING: BASIC | |
| 2,274,452,844 | | |
| 760,304,024 | | |
| 2,331,965,321 | | |
| 1,066,652,211 | |
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING: DILUTED | |
| 2,274,452,844 | | |
| 760,304,024 | | |
| 2,332,065,321 | | |
| 1,066,652,211 | |
The
accompanying notes are an integral part of these financial statements.
AB INTERNATIONAL GROUP
CORP.
Consolidated
Statements of Changes in Stockholders' Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Common
Stock | |
Preferred
Stock | |
| |
| |
| |
|
| |
Number
of Shares | |
Amount | |
Number
of Shares | |
Amount | |
Additional
Paid-in Capital | |
Accumulated
Deficit | |
Unearned
Compensation | |
Total
Equity |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– February 28, 2023 | |
| 880,904,816 | | |
$ | 880,905 | | |
| 368,975 | | |
$ | 369 | | |
$ | 12,366,636 | | |
$ | (11,068,230 | ) | |
$ | (51,586 | ) | |
| $2,128,094 |
|
Preferred
Shares series C converted into common shares | |
| 293,378,569 | | |
| 293,378 | | |
| (65,264 | ) | |
| (65 | ) | |
| (293,313 | ) | |
| — | | |
| — | | |
| — |
|
Dividend
in connection with Preferred shares Series C | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,916 | | |
| — | | |
| — | | |
| 3,916 |
|
Stock
based compensation - consultants | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 27,600 | | |
| 27,600 |
|
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (647,743 | ) | |
| — | | |
| (647,743) |
|
Balance
– May 31, 2023 | |
| 1,174,283,385 | | |
$ | 1,174,283 | | |
| 303,711 | | |
$ | 304 | | |
$ | 12,077,239 | | |
$ | (11,715,973 | ) | |
$ | (23,986 | ) | |
$ | 1,511,867 |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
- August 31, 2022 | |
| 384,512,583 | | |
$ | 384,512 | | |
| 455,850 | | |
$ | 456 | | |
$ | 12,636,838 | | |
$ | (8,789,901 | ) | |
$ | (209,957 | ) | |
$ | 4,021,948 |
|
Issuance
of common shares | |
| 200,000,000 | | |
| 200,000 | | |
| — | | |
| — | | |
| (53,525 | ) | |
| — | | |
| — | | |
| 146,475 |
|
Preferred
shares Series C issuance | |
| — | | |
| — | | |
| 90,275 | | |
| 90 | | |
| 68,910 | | |
| — | | |
| — | | |
| 69,000 |
|
Preferred
shares series C converted into common shares | |
| 589,770,802 | | |
| 589,771 | | |
| (242,414 | ) | |
| (242 | ) | |
| (589,529 | ) | |
| — | | |
| — | | |
| — |
|
Dividend
in connection with Preferred shares series C | |
| — | | |
| — | | |
| — | | |
| — | | |
| 14,545 | | |
| — | | |
| — | | |
| 14,545 |
|
Stock
based compensation - consultants | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 185,971 | | |
| 185,971 |
|
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,926,072 | ) | |
| — | | |
| (2,926,072) |
|
Balance
– May 31, 2023 | |
| 1,174,283,385 | | |
$ | 1,174,283 | | |
| 303,711 | | |
$ | 304 | | |
| 12,077,239 | | |
| (11,715,973 | ) | |
| (23,986 | ) | |
| 1,511,867 |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– February 29, 2024 | |
| 2,331,965,321 | | |
$ | 2,331,965 | | |
| 100,000 | | |
$ | 100 | | |
$ | 11,012,704 | | |
$ | (12,839,317 | ) | |
$ | — | | |
$ | 505,452 | |
Imputed
Interest | |
| — | | |
| — | | |
| — | | |
| — | | |
| 5,170 | | |
| — | | |
| — | | |
| 5,170 | |
Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 133,034 | | |
| — | | |
| 133,034 | |
Balance
– May 31, 2024 | |
| 2,331,965,321 | | |
$ | 2,331,965 | | |
| 100,000 | | |
$ | 100 | | |
$ | 11,017,874 | | |
$ | (12,706,283 | ) | |
$ | — | | |
$ | 643,656 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– August 31, 2023 |
|
| 1,285,283,385 | | |
$ | 1,285,283 | | |
| 294,421 | | |
$ | 295 | | |
$ | 11,993,408 | | |
$ | (12,387,998 | ) | |
$ | — | | |
$ | 890,988 |
|
Issuance
of restricted common shares to officer for service |
|
| 225,000,000 | | |
| 225,000 | | |
| — | | |
| — | | |
| (180,000 | ) | |
| — | | |
| — | | |
| 45,000 |
|
Preferred
shares series C converted into common shares |
|
| 1,056,681,936 | | |
| 1,056,682 | | |
| (174,421 | ) | |
| (175 | ) | |
| (1,056,507 | ) | |
| — | | |
| — | | |
| — |
|
Preferred
shares series B cancellation |
|
| — | | |
| — | | |
| (20,000 | ) | |
| (20 | ) | |
| 20 | | |
| — | | |
| — | | |
| — |
|
Common
shares cancellation |
|
| (235,000,000 | ) | |
| (235,000 | ) | |
| — | | |
| — | | |
| 235,000 | | |
| — | | |
| — | | |
| — |
|
Imputed
Interest |
|
| — | | |
| — | | |
| — | | |
| — | | |
| 25,953 | | |
| — | | |
| — | | |
| 25,953 |
|
Net
loss |
|
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (318,285 | ) | |
| — | | |
| (318,285) |
|
Balance
– May 31, 2024 | |
| 2,331,965,321 | | |
$ | 2,331,965 | | |
| 100,000 | | |
$ | 100 | | |
$ | 11,017,874 | | |
$ | (12,706,283 | ) | |
$ | — | | |
$ | 643,656 | |
The accompanying
notes are an integral part of these financial statements.
AB INTERNATIONAL
GROUP CORP.
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
| |
Nine Months
Ended |
| |
May 31, |
| |
2024 | |
2023 |
| |
| |
|
CASH FLOWS FROM OPERATING
ACTIVITIES | |
| | | |
| | |
Net loss | |
$ | (318,285 | ) | |
$ | (2,926,072 | ) |
Adjustments to reconcile
net loss to net cash used in operating activities: | |
| | | |
| | |
Executive
salaries and consulting fees paid in stock | |
| — | | |
| 185,971 | |
Depreciation
of fixed asset | |
| 3,325 | | |
| 3,332 | |
Amortization
of intangible asset | |
| 1,441,489 | | |
| 2,519,934 | |
Gain
from sales of software in progress | |
| (85,000 | ) | |
| — | |
Imputed
interest on officer loan | |
| 25,953 | | |
| — | |
Non-cash
dividend expense for preferred shares | |
| — | | |
| 14,545 | |
Non-cash
lease expense | |
| 626 | | |
| 25,752 | |
Changes in operating
assets and liabilities: | |
| | | |
| | |
Accounts
receivable | |
| (254,720 | ) | |
| (310,000 | ) |
Prepaid
expenses | |
| — | | |
| 10,665 | |
Rent
security & electricity deposit | |
| (766 | ) | |
| — | |
Purchase
deposits (paid) refunded | |
| (30,000 | ) | |
| 420,000 | |
Purchase of movie and TV series
broadcast right and copyright | |
| (695,789 | ) | |
| (243,276 | ) |
Accounts payable
and accrued liabilities | |
| 12,505 | | |
| (173,023 | ) |
Accounts payable
and accrued liabilities – related party | |
| — | | |
| 6,388 | |
Deferred
revenue | |
| 25,600 | | |
| (1,225 | ) |
Net cash provided by (used in)
operating activities | |
| 124,938 | | |
| (467,009 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING
ACTIVITIES | |
| | | |
| | |
Loan (repayment
to) proceeds from related parties | |
| (76,606 | ) | |
| 302,156 | |
Proceeds from
common stock issuances | |
| — | | |
| 146,475 | |
Proceeds
from preferred share C issuances | |
| — | | |
| 69,000 | |
Net cash (used in) provided by
financing activities | |
| (76,606 | ) | |
| 517,631 | |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 48,332 | | |
| 50,622 | |
Cash and cash
equivalents – beginning of period | |
| 117,096 | | |
| 84,223 | |
Cash and
cash equivalents – end of period | |
$ | 165,428 | | |
$ | 134,845 | |
| |
| | | |
| | |
Supplemental Cash Flow Disclosures | |
| | | |
| | |
Cash
paid for interest | |
$ | — | | |
$ | — | |
Cash
paid for income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Non-Cash Investing and Financing
Activities: | |
| | | |
| | |
Settlement
of accrued CEO salaries with common stock | |
$ | 45,000 | | |
$ | — | |
Net off
purchase deposit with loan from related parties for sales of software | |
$ | 300,000 | | |
| | |
Transfer
from purchase deposit to intangible assets | |
$ | — | | |
$ | 461,724 | |
The accompanying
notes are an integral part of these consolidated financial statements.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
The accompanying unaudited
consolidated financial statements of AB International Group Corp. (the “Company”) have been prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to
Form 10-Q and Article 8 of Regulation S-X of the Securities Exchange Commission. Certain information and footnote disclosures normally
included in consolidated financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet
as of August 31, 2023 derived from the audited consolidated financial statements at that date, but does not include all the information
and footnotes required by GAAP. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2023.
The unaudited consolidated
financial statements as of and for the three and nine months ended May 31, 2024 and 2023, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition, results
of operations and cash flows. The results of operations for the three and nine months ended May 31, 2024 and 2023 are not necessarily
indicative of the results to be expected for any other interim period or for the entire year.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The financial
statements have been prepared on a consolidated basis, with the Company’s wholly owned subsidiary App Board Limited and AB Cinemas
NY, Inc. All intercompany balances and transactions have been eliminated in consolidation.
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
The Company
considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts
receivable
Accounts receivable is
presented at invoiced amount net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for
estimated losses. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there
is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company
considers many factors, including the age of the balance, customer’s payment history, its current credit-worthiness and current
economic trends. Accounts are written off after efforts at collection prove unsuccessful. No allowance was recorded for the three
and nine months ended May 31, 2024 and 2023, respectively.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign
Currency Transactions
The
financial risk arises 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. Gains and losses from translation of foreign currency
into U.S. dollars are included in current results of operations.
Prepayments
Prepayments
primarily consist of payments made to acquire the copyrights and distribution rights of movies, TV
shows and music, etc. Prepayments are classified as either current or non-current
based on the nature and the terms of the respective agreements. These prepayments are unsecured and are reviewed periodically to determine
whether their carrying value has become impaired. The allowance is also based on management’s best estimate of specific losses
on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized
may differ from management’s estimate of credit worthiness and the economic environment. Prepayments are written off against the
allowances only after exhaustive collection efforts. No allowance was recorded for the three and nine months ended May 31, 2024
and 2023, respectively.
Property
and Equipment, net
Property,
plant and equipment are stated at cost less accumulated depreciation and amortization. Leasehold improvement is related to the enhancements
paid by the Company to leased offices. Leasehold improvement represents capital expenditures for direct costs of renovation or acquisition
and design fees incurred. The amortization of leasehold improvements commences once the renovation is completed and ready for the Company’s
intended use.
The
straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:
|
|
Estimated
Useful Life |
Furniture |
|
7 years |
Appliances |
|
5 years |
Leasehold
improvement |
|
Lesser
of useful life and lease term |
Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures
for major renewals and betterments that substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated
statements of operations in other income or expenses.
Intangible
Assets
Intangible
assets are recorded at the lower of cost or estimated fair value and amortized as follows:
|
• |
Movie copyrights
and broadcast rights: straight-line method over the estimated life of the asset, which has been determined by management
to be 2 years |
|
• |
NFT MMM platform:
straight-line method over the estimated life of the asset, which has been determined by management to be 2 years |
Amortized
costs of the intangible asset are recorded as amortization expenses in the consolidated statements of operations.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Lease
property under operating lease
The
Company adopted ASU No. 2016-02—Leases (Topic 842) since June 1, 2019, using a modified retrospective transition method permitted
under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does
not require previously reported balances to be adjusted. In addition, the Company elected the package of practical expedients permitted
under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.
Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities on the consolidated balance sheets.
The standard did not materially impact the Company’s consolidated net earnings and cash flows.
Impairment
of Long-lived asset
The
Company evaluates its long-lived assets or asset group, including intangible assets with indefinite and finite lives, for impairment.
Intangible assets with indefinite lives that are not subject to amortization are tested for impairment at least annually or more frequently
if events or changes in circumstances indicate that the assets might be impaired in accordance with ASC 350. Such impairment test compares
the fair values of assets with their carrying values with an impairment loss recognized when the carrying values exceed fair values.
For long-lived assets and intangible assets with finite lives that are subject to depreciation and amortization are tested for impairment
whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use
of the assets) indicate that the carrying amount of an asset or a group of long-lived assets may not be recoverable. When these events
occur, the Company evaluates impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected
to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than
the carrying amount of the assets, the Company would recognize an impairment loss based on the excess of the carrying amount of the asset
group over its fair value. Impairment losses are included in the general and administrative expense. There was no impairment loss during
the three and nine months ended May 31, 2024 and 2023, respectively.
Revenue
Recognition
The Company adopted ASC
Topic 606, “Revenue from Contracts with Customers”, using the modified retrospective approach. ASC 606 establishes principles
for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer
of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange
for those goods or services recognized as performance obligations are satisfied.
To determine revenue recognition
for contracts with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify
the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that
it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance
obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company derives its
revenues primarily from five sources: (1) selling copyrights of movies or TV shows; (2) licensing NFT MMM platform and providing technical
service; (3) movie theater admissions and food and beverage sales; (4) embedded marketing service; (5) consulting services.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition (continued)
Revenue
from selling copyrights of movies or TV shows:
The Company recognizes
revenue when a master copy of a movie or TV show is delivered, the IP is authorized and transferred to customers. The Company’s
contracts with customers are primarily on a fixed-price basis and do not contain cancelable and refund-type provisions.
Revenue
from licensing NFT MMM platform and providing technical service fee:
The Company
derives revenue from NFTMM platform license fees, which includes accessing the NFTMM platform and platform data on both app and website.
The Company's contract has a two-year term and is non-cancelable and non-refundable. In accordance with ASC 606, a 'right to access'
license is recognized over the license period. Initial technical service fee comprises of installation, implementation and necessary
training required by the customer. These services fees are recognized as the services are delivered at a point in time.
Revenue from
movie theater admissions and food and beverage sales:
The Company
recognizes admissions and food and beverage revenues based on a gross transaction price, which are recorded at a point in time when a
film is exhibited to a customer and when a customer takes possession of food and beverage offerings. The Company defers 100% of
the revenue associated with the sales of gift cards and exchange tickets until such time as the items are redeemed or estimated income
from non-redemption is recorded.
Revenue
from embedded marketing service:
The Company
derives revenue from providing the services of embedded marketing through adding advertisement into movies and TV series. The Company
recognizes revenue when the advertisement is added to the movies and TV series.
Revenue
from consulting services:
The Company
derives revenue from providing consulting services in connection with the sales of the software-in-progress and the restructuring of
a company. The consulting service fees are recognized when the services are delivered.
Contract Assets and
Liabilities
Payment terms are established
on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. Contact assets
are recognized for in related accounts receivable. Contract liabilities are recognized for contracts where payment has been received
in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is placed and
when shipment or delivery occurs.
As of May 31, 2024, other
than deferred revenue and accounts receivable, the Company had no material contract assets, contract liabilities or deferred contract
costs recorded on its consolidated balance sheets.
As of August 31, 2023,
the Company had no material contract assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheets.
AB
INTERNATIONAL GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition (continued)
Disaggregation of revenue
The Company disaggregates
its revenue from contracts by revenue streams, as the Company believes it best depicts how the nature, amount, timing and uncertainty
of the revenue and cash flows are affected by economic factors.
The following table presents
sales by revenue streams for the three and nine months ended May 31, 2024 and 2023, respectively:
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Sales by Revenue Stream (Details) |
|
|
|
|
|
|
|
|
| |
Three months
ended |
| |
May
31, 2024 | |
May
31, 2023 |
Copyrights sales | |
$ | — | | |
$ | 250,000 | |
Embedded marketing service | |
| 382,019 | | |
| — | |
Consulting services | |
| 76,800 | | |
| — | |
NFT licenses | |
| 171,000 | | |
| 183,939 | |
Theatre admissions | |
| 47,011 | | |
| 90,385 | |
Food and beverage
sales | |
| 21,481 | | |
| 49,065 | |
Total revenue | |
$ | 698,311 | | |
$ | 573,389 | |
|
|
|
|
|
|
|
|
|
| |
Nine months
ended |
| |
May
31, 2024 | |
May
31, 2023 |
Copyrights sales | |
$ | 531,800 | | |
$ | 250,000 | |
Embedded marketing service | |
| 507,508 | | |
| — | |
Consulting services | |
| 179,147 | | |
| — | |
NFT licenses | |
| 399,000 | | |
| 541,225 | |
Theatre admissions | |
| 182,353 | | |
| 206,303 | |
Food and beverage
sales | |
| 85,503 | | |
| 111,112 | |
Total revenue | |
$ | 1,885,311 | | |
$ | 1,108,640 | |
Fair
Value of Financial Instruments
ASC 820,
“Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy
based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s
categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
It prioritizes the inputs into three levels that may be used to measure fair value:
Level
1 – Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2 – Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset
or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities
in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3 – Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or liabilities.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ASC 820
describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and
(3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical
or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value
amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach
is based on the amount that would currently be required to replace an asset.
The carrying
values of cash, accounts payable, and accrued liabilities approximate fair value due to their short-term nature. The fair values of warrant
liabilities and derivative liabilities embedded in convertible notes are determined by level 3 inputs.
No liabilities measured
at fair value on a recurring basis as of May 31, 2024 and August 31, 2023.
Basic
and Diluted Earnings (Loss) Per Share
The Company computes earnings
per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires
companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the
weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential
common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented,
or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or
decrease loss per share) are excluded from the calculation of diluted EPS. As of May 31, 2024, the total number of warrants outstanding
was 50,000,000 (See Note 9). No warrants were included in the diluted earnings per share as they would be anti-dilutive. No preferred
stocks were included in the diluted earnings per share as they would be anti-dilutive.
Reclassification
Certain
prior period amounts have been reclassified to conform to the current period presentation.
Warrants
Warrants
are classified as equity and the proceeds from issuing warrants in conjunction with convertible notes are allocated based on the relative
fair values of the base instrument of convertible notes and the warrants by following the guidance of ASC 470-20-25-2.
Proceeds
from the sale of a debt instrument with stock purchase warrants (detachable call options) shall be allocated to the two elements based
on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion
of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be allocated
to the debt instrument portion of the transaction. This usually results in a discount (or, occasionally, a reduced premium), which shall
be accounted for as interest expense under Topic 835 Interest.
Income
Taxes
The
Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Income taxes are accounted for
using the asset and liability approach. Under this approach, income tax expense is recognized for the amount of taxes payable or refundable
for the current year. Deferred income taxes assets and liabilities are recognized when temporary differences exist between the tax bases
of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated
statement of operations in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company
records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether
it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for
those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit
that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Share-Based
Compensation
The
Company follows the provisions of ASC 718, “Compensation - Stock Compensation,” which establishes the accounting for employee
share-based awards. For employee share-based awards, share-based compensation cost is measured at the grant date based on the fair value
of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire
award.
Recent
Accounting Pronouncements
In October 2021, the FASB
issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract
assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing
consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts
with customers not acquired in a business combination. The amendments are effective for the fiscal year beginning after December 15,
2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption
of ASU 2021-04 to have a material effect on the consolidated financial statements.
In June 2022, the FASB
issued ASU No. 2022-03, "Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual
Sale Restrictions," which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual
restrictions that prohibit the sale of the equity securities. The guidance will be effective for fiscal years beginning after December
15, 2023 and interim periods within those fiscal years. The Company does not expect the adoption to have a material impact on the consolidated
financial statements.
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on the Company’s consolidated balance sheets, statements of operations and statements of cash flows.
NOTE
3 – GOING CONCERN
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 May 31, 2024, the
Company had an accumulated deficit of approximately $12.7 million and a working capital deficit of approximately $0.3 million. For the
nine months ended May 31, 2024, the Company incurred a net loss of approximately $0.3 million. 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 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
factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated
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 provide the opportunity for the
Company to continue as a going concern.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
4 – PROPERTY AND EQUIPMENT
The Company
capitalized the renovation cost as leasehold improvement and the cost of furniture and appliances as fixed assets. Leasehold improvement
relates to renovation and upgrade of the leased office.
The depreciation expense
was $3,325 and $3,332 for the nine months ended May 31, 2024 and 2023, respectively.
As of May 31, 2024 and
August 31, 2023, the balance of property and equipment was as follows:
| |
May
31, 2024 | |
August
31, 2023 |
Leasehold improvement | |
$ | 146,304 | | |
$ | 146,304 | |
Appliances
and furniture | |
| 25,974 | | |
| 25,974 | |
Total cost | |
| 172,278 | | |
| 172,278 | |
Accumulated
depreciation | |
| (167,349 | ) | |
| (164,024 | ) |
Property
and equipment, net | |
$ | 4,929 | | |
$ | 8,254 | |
NOTE
5 – INTANGIBLE ASSETS
As of May 31, 2024 and
August 31, 2023, the balance of intangible assets was as follows:
| |
May
31, 2024 | |
August
31, 2023 |
Movie copyrights -
Love over the world | |
$ | 853,333 | | |
$ | 853,333 | |
Sitcom copyrights - Chujian | |
| 640,000 | | |
| 640,000 | |
Movie copyrights - A story as a
picture | |
| 422,400 | | |
| 422,400 | |
Movie copyrights - Our treasures | |
| 936,960 | | |
| 936,960 | |
Movie broadcast right- On the way | |
| 256,000 | | |
| 256,000 | |
Movie copyrights - Too simple | |
| 1,271,265 | | |
| 1,271,265 | |
Movie copyrights - Confusion | |
| 1,024,000 | | |
| 1,024,000 | |
Movie copyrights - Amazing Data | |
| 300,000 | | |
| 300,000 | |
Movie copyrights - Nice to meet
you | |
| 300,000 | | |
| 300,000 | |
Movie copyrights – 6 movies | |
| 695,789 | | |
| — | |
TV drama copyright - 20 episodes | |
| 295,000 | | |
| 295,000 | |
Movie broadcast rights –
59 movies | |
| 2,439,840 | | |
| 2,439,840 | |
NFT MMM platform | |
| 280,000 | | |
| 280,000 | |
Total cost | |
| 9,714,587 | | |
| 9,018,798 | |
Accumulated
amortization | |
| (9,005,177 | ) | |
| (7,563,688 | ) |
Intangible
assets, net | |
$ | 709,410 | | |
$ | 1,455,110 | |
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
5 – INTANGIBLE ASSETS (continued)
The amortization expense
for the nine months ended May 31, 2024 and 2023 was $1,441,489 and $2,519,934, respectively. Estimated future amortization expense is
as follows:
Twelve months ending
May 31, |
|
Amortization
expense |
2024 |
|
|
$ |
590,239 |
|
2025 |
|
|
|
119,171 |
|
Total |
|
|
$ |
709,410 |
|
In March
2022, the Company signed a purchase agreement with All In One Media Ltd to acquire the copyrights and broadcast rights for five movies
at a price of $1,500,000. These copyrights and broadcast rights allow the Company to broadcast these movies outside the mainland
China. On November 29, 2022, both parties entered into an amended agreement to deliver the copyrights and broadcast rights of two movies
(Amazing data and Nice to meet you) to the Company on November 30, 2022 for a total price of $600,000. As of August 31, 2022, $356,724
was paid and recorded as purchase deposit for intangible asset. On November 30, 2022, the company received the copies of two movies.
The purchase deposit of $356,724 was transferred to intangible assets and the unpaid balance of $243,276 was recorded as accounts payable
and was paid in December 2022. Per amended agreement, the remaining three movies will be delivered upon receiving the payment of minimum
$300,000 per movie from the Company before December 31, 2022. The agreement was terminated on December 31, 2022 due to the fact that
the Company did not make the payments for the remaining movies.
In March 2022, the Company
signed a purchase agreement with Anyone Pictures Limited to acquire the copyright for broadcasting a 25-episode TV drama series outside
of mainland China, at a price of $525,000. Five standalone episodes were delivered in December 2022. On February 21, 2023, both parties
entered into a supplementary agreement to determine the delivery of the remaining 20 standalone episodes. As a result, Anyone Pictures
Limited agreed to refund $420,000 to the Company and the Company had received the full amount as of August 31, 2023.
On August 6, 2022, the
Company licensed NFT MMM platform to a third party to allow the access of NFT MMM platform and platform data on both app and website
for one year starting from August 20, 2022 for a monthly license fee of $60,000. Subsequent to the license renewal on November 1, 2023,
the Company would continue licensing the NFT MMM platform to the same third party from November 1, 2023 until October 31, 2025 for a
monthly license fee of $57,000. The Company remains the ownership and copyright of the NFT MMM platform, including the APP “NFT
MMM” on Google Play, and the website: starestnet.io. For the nine months ended May 31, 2024 and 2023, the Company recognized
license revenue of $399,000 and $541,225, respectively.
On
May 31, 2023, the Company entered into an agreement with Capitalive Holdings Limited to sell the offline broadcast
rights of total 59 movies for a price
of $250,000. The granted broadcast rights are globally exclusive, with the exception of Mainland China.
On September 10, 2023,
the Company entered into an agreement with All In One Media Ltd to acquire the copyrights for 4 movies at a price of $104,714. These
copyrights allow the Company to transfer these movies to other parties outside the mainland China. On November 27, 2023, the Company
further acquired mainland China copyrights of these 4 movies from All In One Media Ltd. at price of $378,513.
On September 30, 2023,
the Company entered into another agreement with All In One Media Ltd to acquire the copy rights and broadcast rights for 2 movies for
a price of $212,562. These copyrights allow the Company to broadcast these movies globally.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
5 – INTANGIBLE ASSETS (continued)
In November 2023, the
Company entered into an agreement with Anyone Pictures Limited to sell the Mainland China copyrights of 1 movie for a price of $180,000
and the offline broadcast rights of another movie for a price of $211,800.
The granted broadcast rights are globally exclusive, with the exception of Mainland China.
On November 21, 2023,
the Company entered into an agreement with Capitalive Holdings Limited to sell offline broadcast rights of 1 movie for a price of $140,000.
The granted broadcast rights are globally exclusive, with the exception of Mainland China.
NOTE 6 – LEASES
The Company leased
certain office space in Hong Kong from Zestv Studios Limited, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng,
under operating lease for three years from May 1, 2019 to April 30, 2022 with annual rental of $66,048 (HKD 516,000).
On May 1, 2022, the Company signed a new operating lease agreement with Zestv Studios Limited to lease its Hong Kong office premise for
two years from May 1, 2022 to April 2024 with annual rental of $66,048 (HKD 516,000). The lease was early terminated as of
August 31, 2023.
In September 2023,
the Company entered into a one month lease with a third party for an office space in Hong Kong, incurring a monthly rent of $766.
The lease was ceased as of November 30, 2023.
On October 21, 2021, the
Company signed a lease agreement to lease “the Mt. Kisco Theatre”, a movie theater, for five years plus the free rent period
which commences four months from the lease commencement date. The theatre consists of approximately 8,375 square feet, and the total
monthly rent is $14,366 for the first two years, and $20,648 for the third year including real estate related taxes and landlord’s
insurance.
Total lease expense for
the nine months ended May 31, 2024 and 2023 was $155,815 and $217,140, respectively. All leases are on a fixed payment basis. The Company’s
lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following is a schedule
of maturities of lease liabilities:
Twelve months ending May
31, |
|
|
2025 |
|
|
$ |
249,362 |
|
2026 |
|
|
|
254,183 |
|
2027 |
|
|
|
171,640 |
|
Total future minimum lease payments |
|
|
|
675,185 |
|
Less: imputed interest |
|
|
|
(6,170 |
) |
Total |
|
|
$ |
669,015 |
|
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
7 – PURCHASE DEPOSITS FOR INTANGIBLE ASSETS
The
balance of purchase deposits for intangible assets which relates to the acquisition of copyrights and broadcast rights for movies and
TV dramas and software was as follows:
| |
May
31, 2024 | |
August
31, 2023 |
| |
| |
|
Purchase deposit for
software | |
$ | — | | |
$ | 300,000 | |
Purchase deposit
for copyright and broadcast right for a movie | |
| 30,000 | | |
| — | |
Total purchase
deposits for intangible assets | |
$ | 30,000 | | |
$ | 300,000 | |
On June 8, 2023, the Company
entered into software development contract for the creation of the streaming software designed for use on both the website and mobile
applications. Pursuant to the contract’s terms, the Developer is contractually obliged to deliver the software by September 8,
2024, which corresponds to the upcoming 15-month period. The costs of the software amount to $1,500,000. As of August 31, 2023, the Company
has remitted an initial payment of $300,000 to the Developer. On November 28, 2023, both parties entered into an amended agreement to
sell the software-in-progress to the Developer for $385,000. The amount was received through Zestv Studios Limited as of November 30,
2023 and used to reduce the amount of loan from CEO (see Note 8). The Company recognized a gain on the sales of software of $85,000.
From December 1, 2023 to August 31, 2024, the Company is obliged to provide consulting services to the Developer regarding the design
and development of the software-in-progress. The monthly consulting fee is $25,600.
On February
23, 2024, the Company entered into an agreement to acquire the copyright and broadcast right of a movie. As of May 31, 2024, the Company
has paid a purchase deposit of $30,000.
NOTE
8 – RELATED PARTY TRANSACTIONS
Loan
from related parties
In support of the Company’s
efforts and cash requirements, it may rely on advances from stockholders until such time that the Company can support its operations
or attains adequate financing through sales of its equity or traditional debt financing. On June 1, 2023, Chiyuan Deng, the Chief Executive
Officer, as the Company stockholders, entered into a line of credit agreement with the Company. Chiyuan Deng agreed to provide a line
of credit to the Company for a total amount of no more than $1,500,000, including the previous shareholder loan balance of $697,281.
The amount under this line of credit is non-interest bearing and due on demand starting from June 1, 2023. As of May 31, 2024 and August
31, 2023, the Company has recognized an imputed interest at 5% per annum of the balances. As of May 31, 2024 and August 31, 2023, the
Company had loans outstanding from Chiyuan Deng with a balance of $286,679 and $748,285, respectively.
Accounts
payable and accrued liabilities - related party - Youall Perform Services Ltd.
Youall
Perform Services Ltd is owned by Jianli Deng, the former Chief Financial Officer. In September 2019, the Company entered into an agreement
with Youall Perform Services Ltd for two transactions. 1) The Company pays Youall Perform Services Ltd. 10% of the revenue
generated from the “Ai Bian Quan Qiu” platform every month to reimburse the valued-added tax, tax surcharges, and foreign
transaction fee Youall Perform Services Ltd. has been paying on behalf of the Company. 2) Youall Perform Services Ltd. will provide IT
consulting service for “Ai Bian Quan Qiu” platform upgrade and maintenance at a total cost of $128,000, out of which
$108,800 has been paid.
As there has been no revenue
from the “Ai Bian Quan Qiu” platform due to COVID-19 since mid-January, 2020, $108,800 prepayment was expensed
as research and development expense in FY2020. In July 2020, the Company changed the service scope of this agreement and turned it into
a two-year website maintenance contract to maintain the website ABQQ.TV which was launched on December 29, 2020. The website maintenance
service began on January 1, 2021 and ended on December 31, 2022. The contract amount remains at $128,000, out of which $108,800 was
previously paid and $19,200 was scheduled to be due on the twenty first month of service term. During the year ended
August 31, 2023, the Company made payment of $12,812 with the accounts payable – related party balance to Youall Perform Services
Ltd of $6,388 as of August 31, 2023. As of May 31, 2024, the related part balance to Youall Perform Services Ltd was $6,388.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 – RELATED
PARTY TRANSACTIONS (continued)
Accounts payable and
accrued liabilities – related party - Zestv Studios Limited
On
December 1, 2020, the Company entered an agreement with Zestv Studios Limited, a Hong Kong entity 100% owned by Chiyuan Deng, the Chief
Executive Officer, to grant Zestv Studios Limited the distribution right for the movie “Love over the world” and charge Zestv
Studios Limited movie royalties. The Company’s royalty revenue is stipulated to equal 43% of the after-tax movie box office revenue
deducting movie issuance costs. The movie box office revenue is tracked by a movie distributor Huaxia Film Distribution Co. Ltd (hereafter
“Hua Xia”) in China as it connects with all movie theaters in China and can track the total movie box office revenue online
in real time. Although Zestv Studios Limited has paid royalty revenue to the Company, Zestv Studios Limited failed to collect cash from
Hua Xia. As of August 31, 2021, the Company had a refund payable of $916,922 for the movie royalty revenue net of the movie distribution
commission fee to Zestv Studios Limited.
On June 23, 2022, the
Company sold the mainland China copyright and broadcast right of the movie “Too Simple” to Zestv Studios Limited for a price
of $750,000. The Company remains to have all copyright of outside of mainland China. The Company used this proceed to off-set the refund
payable balance to Zestv Studios Limited with additional payment of $151,795 during the year ended August 31, 2022. The Company repaid
$15,127 during the nine months ended May 31, 2023.
On
November 28, 2023, the Company sold the software-in-progress to the Developer for $385,000. Zestv Studios Limited collected the payment
on behalf of the Company. The payment of $385,000 reduced the loan from related parties as of November 30, 2023 (See Note 7).
The Company also rented
office space from Zestv Studios Limited. The lease was early terminated on August
31, 2023. For the nine months ended May 31, 2024 and 2023, the Company incurred related party
office rent expense of $0
and $49,536,
respectively.
During
the three months ended May 31, 2024, Zestv Studios Limited further loaned a total amount of $78,289 to the Company for its working capital
needs. The loan is non-interest bearing and due on demand. The amount was fully settled as of May 31, 2024.
As
of May 31, 2024 and August 31, 2023, the Company had $0 payable to Zestv Studios Limited.
Executives’
salaries
On September
11, 2020 and May 24, 2022, the Company entered into two amended employment agreements with Chiyuan Deng, the Chief Executive Officer.
Pursuant the amended agreements,
the Company amended the compensation to Mr. Deng to include a salary of $180,000 annually, a reduction in common stock received
under his initial employment agreement, a potential for a bonus in cash or shares, and the issuance of 100,000 shares of Series
A Preferred Stock at par value $0.001. Mr. Deng returned 266,667 shares common stock to the Company received under his initial employment
agreement. The Chief Executive Officer opted to forgo his salaries effective from October 2023.
During the nine months
ended May 31, 2024, the Company incurred total compensation of $15,049 for the Chief Executive Officer. During the nine months ended
May 31, 2023, the Company incurred total compensation of $153,000 for Chief Executive Officer and Chief Financial Officer. The Company
also incurred total compensation of $0 and $32,500, respectively, for Chief Investment Officer during the nine months ended May 31,
2024 and 2023, respectively.
NOTE
9 – STOCKHOLDERS’ EQUITY
Common
shares
The Company
had the following activities for the nine months ended May 31, 2024:
Issuance
of restricted common shares
On October 5, 2023, the
Board of Directors resolved to issue 225,000,000 shares of the Company’s restricted common stock, par value $0.001 per share, to
Chiyuan Deng, the Chief Executive Officer, to pay off his accrued executive salaries of $45,000.
Conversion of Series
C preferred shares to common shares
During the nine months
ended May 31, 2024, the Company issued a total of 1,056,681,936 common shares as the result of the conversion of total 174,421 Series
C preferred shares.
Reverse Stock split
As previously disclosed in the Company’s
Form 10-Q for the quarter ended May 31, 2023, on June 12, 2023, the Board of Directors approved a reverse split for the Company’s
issued and outstanding common stock, at a ratio of 1 share for every 10,000 shares, contingent upon receiving a market effectiveness
date from FINRA.
On April 22, 2024, the Board of Directors approved
a reverse split of the Corporation’s issued and outstanding common stock, which has a par value $0.001 per share. The reverse split
ratio has been determined at 1 for 2,000 shares. The effectiveness of this reverse split is contingent upon receiving a market effective
date from the Financial Industry Regulatory Authorization (FINRA).
Cancellation of Common
shares
On February 5, 2024, our
majority shareholder, officer and director, Chiyuan Deng, cancelled 235,000,000 shares of his common stock in the Company.
The Company had the following
activities for the nine months ended May 31, 2023:
Increasing authorized
number of common shares
On October 11, 2022, the
Company filed amendment to Articles of Incorporation to increase the authorized number of common shares from 1,000,000,000 shares to
10,000,000,000 shares. This increasing of authorized number of common shares has been retroactively reflected in the consolidated financial
statements and notes thereto.
Conversion of Series
C preferred shares to common shares
During the three months ended November 30, 2022, the
Company issued a total of 75,037,786 common shares as the result of the conversion of total 96,075 Series C preferred
shares.
During the three months ended February 28, 2023, the
Company issued a total of 221,354,447 common shares as the result of the conversion of total 81,075 Series C preferred
shares.
During the three months ended May 31, 2023, the Company
issued a total of 293,378,569 common shares as the result of the conversion of total 65,264 Series C preferred shares.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 – STOCKHOLDERS’ EQUITY (continued)
Common
shares (continued)
Subscription of Common
shares
On August 2, 2022, the Company entered into a common stock purchase agreement with Alumni Capital LP, a Delaware limited partnership.
Pursuant to the agreement, Alumni Capital LP shall purchase $1.0 million of common stocks as per the Company’s discretions
after a Registration Statement is declared effective by the Securities and Exchange Commission. The purchase price is number of
common stocks in a Purchase Notice issued by the Company multiplied by 75% of the lowest traded price of the Common Stock five Business
Days prior to the Closing, which is no later than five business days after the Purchase Notice Date.
The Company plans to use the proceeds from the sale of the common stocks for general corporate and working capital purposes and acquisitions
or assets, businesses or operations or for other purposes that the Board of Directors, in good faith deem to be in the best interest
of the Company. The registration of these securities was effective on September 13, 2022.
Pursuant to this agreement, during
the nine months ended May 31, 2023, Alumni Capital LP subscribed for a total of 200,000,000 common shares for total proceeds
of $146,475. The agreement expired on December 31, 2022.
As of May 31, 2024 and
August 31, 2023, the Company had 2,331,965,321 and 1,285,283,385 common shares issued and outstanding, respectively.
A summary
of the status of the Company’s warrants as of May 31, 2024 and August 31, 2023 is presented below.
| |
Number
of warrants |
| |
Original
shares issued | |
Anti-dilution
Adjusted |
Warrants as of August 31,
2022 | |
| 50,000,000 | | |
| — | |
Warrants granted
during the year | |
| — | | |
| — | |
Warrants as of August 31, 2023 | |
| 50,000,000 | | |
| — | |
Warrants
granted during the nine months | |
| — | | |
| — | |
Exercisable as of May 31, 2024 | |
| 50,000,000 | | |
| — | |
Preferred shares
The Company had the following
activities for the nine months ended May 31, 2024:
During the nine months
ended May 31, 2024, the Company converted a total 174,421 Series C preferred shares into common shares.
On November
30, 2023, the Board of Directors of the Company resolved to withdraw the Amended Certificate of Designation for the Company’s Series
C and Series D Preferred shares.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
9 – STOCKHOLDERS’ EQUITY (continued)
Preferred
shares (continued)
On December 1, 2023, the
Board of Directors of the Company resolved to withdraw the Certificate of Designation for the Company’s Series B Preferred Stock.
The Company’s Series B Preferred Stock was cancelled during the three months ended February 29, 2024.
The Company had the following
activities for the nine months ended May 31, 2023:
On
September 6, 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased from
the Company 90,275 shares of Series C Convertible Preferred Stock of the Company for a gross proceed of $78,500. After
deduction of transaction-related expenses, net proceed to the Company was $69,000. The Company intends to use the proceeds from
the Preferred Stock for general working capital purposes.
The
Company recorded dividend expenses of $14,545 on Series C and D Preferred shares for the nine months ended May 31, 2023.
NOTE 10 –
INCOME TAXES
The Company and its fully
owned subsidiary, AB Cinemas NY, Inc, were incorporated in the United States and are subject to a statutory income tax rate at 21%. The
Company’s fully owned subsidiary, App Board Limited, was registered in Hong Kong and is subject to a statutory income tax rate
at 16.5%.
As of May 31, 2024 and
August 31, 2023, the components of net deferred tax assets, including a valuation allowance, were as follows:
|
|
May 31,
2024 |
|
August
31, 2023 |
Deferred tax asset
attributable to: |
|
|
|
|
|
|
|
|
Net operating
loss carry over |
|
$ |
2,144,053 |
|
|
$ |
2,077,213 |
|
Less: valuation
allowance |
|
|
(2,144,053 |
) |
|
|
(2,077,213 |
) |
Net deferred
tax asset |
|
$ |
— |
|
|
$ |
— |
|
The valuation allowance
for deferred tax assets was $2,144,053 and $2,077,213 as of May 31, 2024 and August 31, 2023, respectively. 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, 2024 and August 31, 2023.
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10
– INCOME TAXES (continued)
Reconciliation between
the statutory rate and the effective tax rate is as follows for the nine months ended May 31, 2024 and 2023, respectively:
|
|
|
|
|
|
|
|
|
| |
Nine months
ended |
| |
May 31, |
| |
2024 | |
2023 |
Federal
statutory tax rate | |
| 21 | % | |
| 21 | % |
Change
in valuation allowance | |
| (21 | %) | |
| (21 | %) |
Effective
tax rate | |
| 0 | % | |
| 0 | % |
During the nine months
ended May 31, 2024 and 2023, the Company and its subsidiaries generated net losses. As a result, the Company and its subsidiaries did
not incur any income tax for the nine months ended May 31, 2024 and 2023, respectively.
NOTE 11
– CONCENTRATION RISK
Concentration
For the nine months ended May
31, 2024, 43% and 35% of the total revenue was generated from two customers, respectively. For the nine months ended May 31, 2023, 49%
and 23% of the total revenue was generated from two customers, respectively.
For the three months
ended May 31, 2024, 66% and 24% of the total revenue was generated from two customers. For the three months ended May 31, 2023,
44% and 32% of the total revenue were generated from two customers, respectively.
As of May 31, 2024, 100% of the
Company’s accounts receivable balance was receivable from one customer. There were no accounts receivable as of August 31, 2023.
Credit risk
Financial instruments
that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The Hong Kong Deposit Protection
Board pays compensation up to a limit of HKD 500,000 (approximately $64,000) if the bank with which an individual/a company hold its
eligible deposit fails. As of May 31, 2024 and August 31, 2023, cash balance of $18 and $92,972, respectively, were maintained at financial
institutions in Hong Kong, and were subject to credit risk. In the US, the insurance coverage of each bank is $250,000. As of May 31,
2024 and August 31, 2023, cash balance of $165,410 and $24,124, respectively, were maintained at financial institutions in the US. While
management believes that these financial institutions are of high credit quality, it also continually monitors their creditworthiness.
NOTE 12
– COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the
Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. There is no
pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of its operations and there
are no proceedings in which any of the Company’s directors, officers, or affiliates, or any registered or beneficial stockholder,
is an adverse party or has a material interest adverse to the Company’s interest.
Operating
leases
The Company has several
lease agreements to rent office spaces and movie theatre with third-party vendors. (See Note 6)
AB INTERNATIONAL
GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
13 – SEGMENT INFORMATION
The Company reports information
about operating segments in accordance with ASC 280-10, Segment Reporting, which requires financial information to be reported based
on the way management organizes segments within a company for making operating decisions and evaluating performance. As the result of
business strategic changes, the Company has identified two reportable segments: Copyrights and license (“IP’) segment
and cinema segment.
The following table presents
summary information by segment for the nine months ended May 31, 2024 and 2023, respectively.
NOTE
13 – SEGMENT INFORMATION - Summary of Information by Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IP
Segment |
|
Cinema
Segment |
|
Total |
|
|
Nine
months ended |
|
Nine
months ended |
|
Nine
months ended |
|
|
May
31, |
|
May
31, |
|
May
31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Revenue |
|
$ |
1,617,455 |
|
$ |
791,225 |
|
$ |
267,856 |
|
$ |
317,415 |
|
$ |
1,885,311 |
|
$ |
1,108,640 |
Operating costs |
|
|
— |
|
|
— |
|
|
136,397 |
|
|
139,567 |
|
|
136,397 |
|
|
139,567 |
Depreciation and Amortization |
|
|
1,444,814 |
|
|
2,533,767 |
|
|
— |
|
|
— |
|
|
1,444,814 |
|
|
2,533,767 |
Interest expense (income) |
|
|
25,260 |
|
|
(495) |
|
|
— |
|
|
— |
|
|
25,260 |
|
|
(495) |
Segment assets |
|
|
1,590,495 |
|
|
3,276,524 |
|
|
165,111 |
|
|
14,849 |
|
|
1,755,606 |
|
|
3,291,373 |
Segment income (loss) |
|
$ |
(491,131) |
|
$ |
(3,054,265) |
|
$ |
172,846 |
|
$ |
142,738 |
|
$ |
(318,285) |
|
$ |
(2,911,527) |
The following table presents
summary information by segment for the three months ended May 31, 2024 and 2023, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IP
Segment |
|
Cinema
Segment |
|
Total |
|
|
Three
months ended |
|
Three
months ended |
|
Three
months ended |
|
|
May
31, |
|
May
31, |
|
May
31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Revenue |
|
$ |
629,819 |
|
$ |
433,939 |
|
$ |
68,492 |
|
$ |
139,450 |
|
$ |
698,311 |
|
$ |
573,389 |
Operating costs |
|
|
— |
|
|
— |
|
|
32,316 |
|
|
60,859 |
|
|
32,316 |
|
|
60,859 |
Depreciation and Amortization |
|
|
370,114 |
|
|
752,300 |
|
|
— |
|
|
— |
|
|
370,114 |
|
|
752,300 |
Interest expense (income) |
|
|
5,170 |
|
|
(337) |
|
|
— |
|
|
— |
|
|
5,170 |
|
|
(337) |
Segment assets |
|
|
1,590,495 |
|
|
3,276,524 |
|
|
165,111 |
|
|
14,849 |
|
|
1,755,606 |
|
|
3,291,373 |
Segment income (loss) |
|
$ |
106,188 |
|
$ |
(724,768) |
|
$ |
26,846 |
|
$ |
80,941 |
|
$ |
133,034 |
|
$ |
(643,827) |
AB
INTERNATIONAL GROUP CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)