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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. 

 

 1 

 

TABLE OF CONTENTS
    Page

 

PART I – FINANCIAL INFORMATION

 

Item 1: Financial Statements (Unaudited) 3
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
Item 3: Quantitative and Qualitative Disclosures About Market Risk 9
Item 4: Controls and Procedures 9

 

PART II – OTHER INFORMATION

 

Item 1: Legal Proceedings 10
Item 1A: Risk Factors 10
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 10
Item 3: Defaults Upon Senior Securities 10
Item 4: Mine Safety Disclosures 10
Item 5: Other Information 10
Item 6: Exhibits 10

 

 2 

 

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)

 

 3 

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.

 

 F-1 

 

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 (Loss) Before Income Tax Benefit   (318,285)   (2,911,527)   133,034    (643,827)
                     
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.

 

 F-2 

 

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.

 

 F-3 

 

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. 

 

 F-4 

 

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.

 

 F-5 

 

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.

 

 F-6 

 

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.

 

 F-7 

 

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.

 

 F-8 

 

 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:

               
   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. 

 

 F-9 

 

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.

 

 F-10 

 

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.

  

 F-11 

 

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 

 

 F-12 

 

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.

 

 F-13 

 

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  

 

 F-14 

 

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.

 

 F-15 

 

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.

 

 F-16 

 

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.

 

 F-17 

 

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.

 

 F-18 

 

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.

 

 F-19 

 

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)

 

 F-20 

 

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.

 

                                   
    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)

 

 F-21 

 

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)