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AB INTERNATIONAL GROUP CORP.

Date Filed : Oct 16, 2020

S-11abqq_s1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIESACT OF 1933

 

AB INTERNATIONALGROUP CORP.

(Exact name of registrant as specified in itscharter)

 

Nevada   6794   37-1740351
(State of Incorporation)  

(Primary Standard Industrial

Classification Number)

 

(IRS Employer

Identification Number)

 

48 Wall Street, Suite 1009, New York, NY 10005

(852) 2622-2891

(Address, including zip code, and telephonenumber, including area code,

of registrant’s principal executive offices)

 

Please send copies of all communications to:

 

The Doney Law Firm

4955 S. Durango Rd. Ste. 165

Las Vegas, NV 89113
Tel. No.: (702) 982-5686
(Address, including zip code, and telephone, including area code)

 

Approximate date of proposed sale to the public:From time to time after the effective date of this registration statement.

 

Ifany of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 underthe Securities Act of 1933, check the following box. 

 

Ifthis Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please checkthe following box and list the Securities Act registration statement number of the earlier effective registration statement forthe same offering. 

 

Ifthis Form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and listthe Securities Act registration statement number of the earlier effective registration statement for the same offering. 

 

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and listthe Securities Act registration statement number of the earlier effective registration statement for the same offering. 

 

Indicate by check mark whether the registrantis 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

  

Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of securities to be registered  

Number of shares of

common stock to be registered (1)

   

Proposed

Maximum

Offering

Price Per

Share

(2)

   

Proposed

Maximum

Aggregate

Offering

Price

   

Amount of

Registration

Fee

                       
Common Stock     21,444,261     $ 0.0175     $ 375,274.56     $ 48.71

 

(1) Peak One (the selling stockholder identified in this prospectus) may offer up to  21,444,261 shares of common stock to be used for drawdowns and warrant exercises in connection with the July 30, 2020 Equity Purchase Agreement (the “Financing Agreement”) we entered into with Peak One. The shares being registered hereunder include such indeterminate number of shares of our Common Stock as may be issuable with respect to the shares being registered hereunder to prevent dilution by reason of any stock dividend, stock split, recapitalization or other similar transaction.
   
(2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) and (g) under the Securities Act, based on the average of the high and low prices reported for the shares of Common Stock as reported on the OTCQB on October 12, 2020.

 

The registrant hereby may amend this registrationstatement on such date or dates as may be necessary to delay our effective date until the registrant shall file a further amendmentwhich specifically states that this registration statement shall, thereafter, become effective in accordance with Section 8(a)of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, actingpursuant to Section 8(a) may determine.

 

 

 
 

 

PRELIMINARY PROSPECTUS SUBJECTTO COMPLETION DATED OCTOBER 16, 2020

 

The information in this prospectusis not complete and may be changed. These securities may not be sold until the registration statement filed with the Securitiesand Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not solicitingan offer to buy these securities in any state where the offer or sale is not permitted.

 

AB International Group Corp.

21,444,261 Shares of Common Stock

 

Peak One (the selling stockholder identifiedin this prospectus) may offer up to 21,444,261 shares of common stock to be used for drawdowns and warrant exercises in connectionwith the Financing Agreement. If issued presently, the 21,444,261 shares of Common Stock registered for resale by Peak One wouldrepresent approximately 21.6% of our issued and outstanding shares of common stock as of October 12, 2020. Additionally, as ofOctober 12, 2020, the 21,444,261 shares of Common Stock registered for resale herein would represent approximately 25.8% of theCompany’s public float. In connection with a prior registration statement on Form S-1, (File No. 333-246252), Peak One sold6,218,746 shares of common stock. Because the total amount of shares to be sold pursuant to the Financing Agreement may not exceedone-third of our public float in a 12 month period, the 6,218,746 shares already sold by Peak One must be added to the amount registeredin this offering, or 21,444,261 shares, for a total amount of 27,663,007 shares, which collectively is 33.3% of our public float.

 

Peak One (the selling stockholder identifiedin this prospectus) may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and prevailingmarket prices at the time of sale, at varying prices, or at negotiated prices.

 

We will not receive any proceeds from the saleof the shares of our common stock by Peak One. However, we will receive proceeds from our initial sale of shares to Peak One pursuantto the Financing Agreement. We will sell shares to Peak One at a price equal to the lesser of the lowest closing price precedingthe put date, or 88% of the lowest closing price of our common stock during the ten (10) consecutive trading day period beginningon the date on which we deliver a put notice to Peak One (the “Market Price”).

 

Peak One is an “underwriter” withinthe meaning of the Securities Act of 1933, and any broker-dealers or agents that are involved in selling the shares may be deemedto be “underwriters” within the meaning of the Securities Act of 1933 in connection with such sales. In such event,any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemedto be underwriting commissions or discounts under the Securities Act of 1933.

 

Peak One may sell the shares of common stockdescribed in this Prospectus in a number of different ways and at varying prices. See “Plan of Distribution” for moreinformation about how Peak One may sell the shares of common stock being registered pursuant to this Prospectus.

 

Our common stock is traded on OTC Markets underthe symbol “ABQQ”. On October 12, 2020, the reported closing price for our common stock was $0.0175 per share.

 

Prior to this offering, there has been a verylimited market for our securities. While our common stock is on the OTC Markets, there has been negligible trading volume. Thereis no guarantee that an active trading market will develop in our securities.

 

This offering is highly speculative andthese securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entireinvestment. See “Risk Factors” beginning on page 10. Neither the Securities and Exchange Commission nor any state securitiescommission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representationto the contrary is a criminal offense.

 

The date of this prospectus is _____ __, 2020.

 

 
 

Table of Contents

 

The following table of contents has been designedto help you find information contained in this prospectus. We encourage you to read the entire prospectus.

 

Prospectus Summary 1
Risk Factors 2
Cautionary Note Regarding Forward-Looking Statements 10
Use of Proceeds 10
Determination of Offering Price 11
Dilution  11
Selling Stockholders 11
The Offering  12
Plan of Distribution 13
Description of Securities to be Registered  14
Transfer Agent and Registrar  17
Legal Matters  17
Experts  17
Business  17
Market Price of the Registrant’s Common Equity and Related Stockholder Matters  19
Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
Directors, Executive Officers 23
Executive Compensation 28
Security Ownership of Certain Beneficial Owners and Management 29
Index to Consolidated Financial Statements F-1

 

You may only rely on the information containedin this prospectus or that we have referred you to. We have not authorized any person to give you any supplemental informationor to make any representations for us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buyany securities other than the Common Stock offered by this prospectus. This prospectus does not constitute an offer to sell ora solicitation of an offer to buy any Common Stock in any circumstances in which such offer or solicitation is unlawful. Neitherthe delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create anyimplication that there has been no change in our affairs since the date of this prospectus is correct as of any time after itsdate. You should not rely upon any information about our company that is not contained in this prospectus. Information containedin this prospectus may become stale. You should not assume the information contained in this prospectus or any prospectus supplementis accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus, any prospectussupplement or of any sale of the shares. Our business, financial condition, results of operations, and prospects may have changedsince those dates. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictionswhere offers and sales are permitted.

 

In this prospectus, “AB International”the “Company,” “we,” “us,” and “our” refer to AB International Group Corp., a Nevadacorporation.

   

 
 

PROSPECTUS SUMMARY

 

You should carefully read all information inthe prospectus, including the financial statements and their explanatory notes under the Financial Statements prior to making aninvestment decision.

 

This summary highlights selected informationappearing elsewhere in this prospectus. While this summary highlights what we consider to be important information about us, youshould carefully read this entire prospectus before investing in our Common Stock, especially the risks and other information wediscuss under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Conditionand Results of Operation” and our consolidated financial statements and related notes beginning on page F-1. Our fiscal yearend is August 31 and our fiscal years ended August 31, 2018 and 2019 are sometimes referred to herein as fiscal years 2018 and2019, respectively. Some of the statements made in this prospectus discuss future events and developments, including our futurestrategy and our ability to generate revenue, income and cash flow. These forward-looking statements involve risks and uncertaintieswhich could cause actual results to differ materially from those contemplated in these forward-looking statements. See “CautionaryNote Regarding Forward-Looking Statements”. Unless otherwise indicated or the context requires otherwise, the words “we,”“us,” “our”, the “Company” or “our Company” or “AB International” referto AB International Group Corp., a Nevada corporation, and our each of our subsidiaries.

 

Overview

 

We are an intellectual property (IP) and movieinvestment and licensing firm, focused on acquisitions and development of various intellectual property. We are engaged to acquisitionand distribution of movies. We have a Patent License to a video synthesis and release system for mobile communications equipment,in which the technology is the subject of a utility model patent in the People's Republic of China. We had launched a businessapplication (Ai Bian Quan Qiu) through smartphones and official social media accounts based on WeChat platform in February 2019,utilizing Artificial Intelligence, it is a matching platform for performers, advertiser merchants, and owners for more efficientservices. We generate revenues through an agency service fee from each matched performance.  Due to the quarantine and continuouscontrol imposed by the state and local governments in areas affected by COVID-19, merchant advertising events have been suspendedfor 7 months. The Company decided to shut down the Ai Bian Quan Qiu platform, which has created an adverse impact on the businessand financial condition and hampered its ability to generate revenue and access sources of liquidity on reasonable terms.

 

On April 22, 2020, the Company has announcedthe first phase development of its highly anticipated video streaming service, the Company expects a full launch this year. Theonline service will be marketed and distributed in the world under the brand name ABQQ.tv. ABQQ.tv is expected to generate a newand profitable revenue stream immediately following its launch derived from its hybrid subscription and advertising business model.

 

Peak One Equity Purchase Agreement and RegistrationRights Agreement

 

On July 30, 2020, we entered into an EquityPurchase Agreement (the “Financing Agreement”) with Peak One. Although we are not mandated to sell shares under theFinancing Agreement, the Financing Agreement gives us the option to sell to Peak One, up to $10,000,000 worth of our common stockover the period ending twenty-four (24) months after the date the Registration Statement of which this prospectus forms a partis deemed effective. In consideration for Peak One’s execution and performance under the Financing Agreement, the Companyissued a warrant to purchase 750,000 shares of Common Stock, as Warrant Shares (as defined in the Financing Agreement), to PeakOne in July 2020.

 

On July 30, 2020,we also entered into a registration rights agreement with Peak One (the “RegistrationRights Agreement”) whereby we are obligated to file a registration statement to register the resale of the purchase shares.The Registration Statement of which this prospectus forms a part is being filed tocomply with the Registration Rights Agreement. We must our reasonable efforts to keep the registration statement continuously effectiveunder the Securities Act until all of the Warrant Shares and purchase shares have been sold there under or pursuant to Rule 144.

 

Summary of the Offering

 

Shares currently outstanding (1):   98,103,494
     
Shares being offered:   21,444,261
     
Shares Outstanding after the offering:   119,547,755 assuming each share offered for resale hereby is sold.
     
Offering Price per share:   Peak One (the selling stockholder identified in this prospectus) may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and prevailing market prices at the time of sale, at varying prices or at negotiated prices.
     
Use of Proceeds:   We will not receive any proceeds from the sale of the shares of our common stock by Peak One (the selling stockholder identified in this prospectus). However, we will receive proceeds from our initial sale of shares to Peak One, pursuant to the Financing Agreement. The proceeds from the initial sale of shares will be used for the purpose of working capital and that the Board of Directors, in good faith deem to be in the best interest of the Company.
     
Trading Symbol:   ABQQ
     
Risk Factors:   See “Risk Factors” beginning on page 2 and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock.

 

(1) The number of shares of our Common Stock outstanding prior to andto be outstanding immediately after this offering, as set forth in the table above, is based on 98,103,494 shares outstanding asof October 12, 2020, and excludes the 21,444,261 shares of Common Stock issuable in this offering.

  

 1 

 

RISK FACTORS

 

This investment has a high degree of risk.Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus.If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the valueof our stock could go down. This means you could lose all or a part of your investment.

 

Special Information Regarding Forward-LookingStatements

 

Some of the statements in this prospectus are“forward-looking statements.” These forward-looking statements involve certain known and unknown risks, uncertaintiesand other factors which may cause our actual results, performance or achievements to be materially different from any future results,performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, thefactors set forth herein under “Risk Factors.” The words “believe,” “expect,” “anticipate,”“intend,” “plan,” and similar expressions identify forward-looking statements. We caution you not to placeundue reliance on these forward-looking statements. We undertake no obligation to update and revise any forward-looking statementsor to publicly announce the result of any revisions to any of the forward-looking statements in this document to reflect any futureor developments. However, the Private Securities Litigation Reform Act of 1995 is not available to us as a non-reporting issuer.Further, Section 27A(b)(2)(D) of the Securities Act and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state thatthe safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering.

 

Risk Related to Covid 19

 

Our business and future operationsmay be adversely affected by epidemics and pandemics, such as the recent COVID-19 outbreak.

We may face risks related to healthepidemics and pandemics or other outbreaks of communicable diseases, which could result in a widespread health crisis that couldadversely affect general commercial activity and the economies and financial markets of the country as a whole. For example, therecent outbreak of COVID-19, which began in China, has been declared by the World Health Organization to be a “pandemic,”has spread across the globe, including the United States of America. A health epidemic or pandemic or other outbreak of communicablediseases, such as the current COVID-19 pandemic, poses the risk that we, or potential business partners may be disrupted or preventedfrom conducting business activities for certain periods of time, the durations of which are uncertain, and may otherwise experiencesignificant impairments of business activities, including due to, among other things, operational shutdowns or suspensions thatmay be requested or mandated by national or local governmental authorities or self-imposed by us, our customers or other businesspartners. While it is not possible at this time to estimate the impact that COVID-19 could have on our business, potential customers,potential suppliers or other current or potential business partners, the continued spread of COVID-19, the measures taken by thelocal and federal government, actions taken to protect employees, and the impact of the pandemic on various business activitiescould adversely affect our results of operations and financial condition.

The COVID-19 pandemic has requiredour management to focus their attention primarily on responding to the challenges presented by the pandemic, including ensuringcontinuous operations, and adjusting our operations to address changes in the virtual payments industry. Due to measures imposedby the local governments in areas affected by COVID-19, businesses have been suspended due to quarantine intended to contain thisoutbreak and many people have been forced to work from home in those areas. As a result, advertiser merchants orders for eventhas been suspended, which has had an adverse impact on our business and financial condition and has hampered our ability to generaterevenue and access usual sources of liquidity on reasonable terms.

“Ai Bian Quan Qiu” utilizesthe artificial intelligence (AI) matching technology to instantly and accurately match performers and advertisers or merchants.The company charges agency service fees for each successful event matched through the platform. It’s one of our main businessand revenue streaming. Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generatedfrom the performance matching platform (Ai Bian Quan Qiu) since the end of January, 2020. In February of 2020, the Company decidedthat 80% of the carrying amount of Ai Bian Quan Qiu platform and its Wechat official account should be impaired. The platform operatinghasn’t restart, most of the users are no longer use this services.

Risks Associated With Doing Businessin Hong Kong

Politicalconsideration of Hong Kong 

While we are planning to move ourprincipal business location to New York in the near future, our business operations are principally based in Hong Kong. Accordingly,our business operation and financial conditions will be affected by the political and legal developments in Hong Kong. Any adverseeconomic, social and/or political conditions, material social unrest, strike, riot, civil disturbance or disobedience, as wellas significant natural disasters, may affect the market may adversely affect our business operations. Hong Kong is a special administrativeregion of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely, Hong Kong’sconstitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent judicialpowers, including that of final adjudication under the principle of “one country, two systems”. However, there is noassurance that there will not be any changes in the economic, political and legal environment in Hong Kong in the future. Sincea substantial part of our operations is based in Hong Kong, any change of such political arrangements may pose immediate threatto the stability of the economy in Hong Kong, thereby directly and adversely affecting our results of operations and financialpositions.

 2 

 

The Hong Kong protests that begunin 2019 are ongoing protests in Hong Kong (the “Hong Kong Protests”) triggered by the introduction of the FugitiveOffenders amendment bill by the Hong Kong government. If enacted, the bill would have allowed the extradition of criminal fugitiveswho are wanted in territories with which Hong Kong does not currently have extradition agreements, including mainland China. Thisled to concerns that the bill would subject Hong Kong residents and visitors to the jurisdiction and legal system of mainland China,thereby undermining the region’s autonomy and people’s civil liberties. Various sectors of the Hong Kong economy havebeen adversely affected as the protests turned increasingly violent. Most notably, the airline, retail, and real estate sectorshave seen their sales decline.

Under the Basic Law of the Hong KongSpecial Administrative Region of the People’s Republic of China, Hong Kong is exclusively in charge of its internal affairsand external relations, while the government of the PRC is responsible for its foreign affairs and defense. As a separate customsterritory, Hong Kong maintains and develops relations with foreign states and regions. We cannot assure that the Hong Kong Protestswill not affect Hong Kong’s status as a Special Administrative Region of the People’s Republic of China and therebyaffecting its current relations with foreign states and regions.

Our revenue is susceptible to theongoing Hong Kong Protests as well as any other incidents or factors which affect the stability of the social, economic and politicalconditions in Hong Kong. Any drastic events may adversely affect our business operations. Such adverse events may include changesin economic conditions and regulatory environment, social and/or political conditions, civil disturbance or disobedience, as wellas significant natural disasters. Given the relatively small geographical size of Hong Kong, any of such incidents may have a widespreadeffect on our business operations, which could in turn adversely and materially affect our business, results of operations andfinancial condition.

We cannot assure that the Hong KongProtests will end in the near future and that there will be no other political or social unrest in the near future or that therewill not be other events that could lead to the disruption of the economic, political and social conditions in Hong Kong. If suchevents persist for a prolonged period of time or that the economic, political and social conditions in Hong Kong are to be disrupted,our overall business and results of operations may be adversely affected.

Costs of conducting businessin Hong Kong and globally

Because we operate our business inHong Kong and other countries, our business is subject to risks associated with doing business globally. Accordingly, our businessand financial results in the future could be adversely affected due to a variety of factors, including: changes in a specificcountry’s or region’s political and cultural climate or economic condition; unexpected changes in laws and regulatoryrequirements in local jurisdictions; difficulty of effective enforcement of contractual provisions in local jurisdictions; inadequateintellectual property protection in certain countries; enforcement of anti-corruption and anti-bribery laws; trade-protectionmeasures, import or export licensing requirements and fines, penalties or suspension or revocation of export privileges; the effectsof applicable local tax regimes and potentially adverse tax consequences; and significant adverse changes in local currency exchangerates.

Risks Related to Our Financial Conditionand Business

 

Because we have a limited operating history,you may not be able to accurately evaluate our operations.

 

We are a startup company. We have had limitedoperations to date and have generated limited revenues. Therefore, we have a limited operating history upon which to evaluate themerits of investing in our company. Potential investors should be aware of the difficulties normally encountered by new companiesand the high rate of failure of such enterprises.  The likelihood of success must be considered in light of the problems,expenses, difficulties, complications and delays encountered in connection with the operations that we plan to undertake.  Thesepotential problems include, but are not limited to, unanticipated problems relating to the ability to generate sufficient cashflow to operate our business, and additional costs and expenses that may exceed current estimates. We expect to incur significantlosses into the foreseeable future.  We recognize that if the effectiveness of our business plan is not forthcoming, we willnot be able to continue business operations.   There is no history upon which to base any assumption as to the likelihoodthat we will prove successful, and it is doubtful that we will continue to generate operating revenues or ever achieve profitableoperations.  If we are unsuccessful in addressing these risks, our business will most likely fail.

 

 3 

 

We are dependent on outside financingfor continuation of our operations.

 

Because we have generated limited revenuesand currently operate at a loss, we are completely dependent on the continued availability of financing in order to continue ourbusiness. There can be no assurance that financing sufficient to enable us to continue our operations will be available to us inthe future.

 

Wehave sold several convertible promissory notes with discount to market conversions that have the effect of driving down our stockprice, from which we may never recover.     

 

In 2019 and 2020, we have issued several convertiblepromissory notes to accredited investors. These notes contain terms that allow for discounted conversions from the company’sstock price, with most at a 40% discount. These notes also contain strict terms for compliance and penalty provisions that couldcost us more than the principal and accrued interest. They also have most favored nation clauses that force us to offer more favorableterms in subsequent offerings. If we are unable to secure a better form of financing, or pay off the notes before they convert,we could experience a significant drop in our stock price and we may go out of business.

 

Investors may experience dilution oftheir ownership interests because of the future issuance of additional shares of our common stock.

 

We may issue additional shares of our commonstock or other securities that are convertible into or exercisable for common stock in the future in connection with hiring orretaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes,resulting in the dilution of the ownership interests of our stockholders at that time. At October 14, 2020, we had convertiblenotes with an aggregate principal amount of $558,700 that may convert into our common stock at a conversion price equal to a pricewhich is a 40% discount to the lowest trading price in the twenty(20) days prior to the day that the Holder requests conversionand warrants to purchase an aggregate of 30,033 shares of our common stock at a weighted average exercise price of $12.5 per share.We had to reduce the exercise price per share of certain of the warrants as result of a provision that allows the holder to reducethe exercise price in the event of a more favored exercised price used by the company. The adjustment to $0.01672 per share resultedfrom our issuing such restricted stock at a price per share less than the exercise price of such warrants.

 

The exercise of such outstanding convertiblenotes and warrants and the future issuance of any such additional shares of common stock, will result in further dilution of yourinvestment and may create downward pressure on the trading price of the common stock. There can also be no assurance that we willnot be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capitalraising efforts, including at a price (or exercise prices) below the price at which shares of our common stock are currently tradedon the OTCQB, and new investors could gain rights superior to those of our stockholders at that time.

 

Risks Related to Legal Uncertainty

 

Compliance with changing regulation ofcorporate governance and public disclosure may result in additional expenses.

 

Changing laws, regulations and standards relatingto corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating uncertaintyfor companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in manycases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance isprovided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and highercosts necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standardsof corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulationsand standards, and this investment may result in increased general and administrative expenses and a diversion of management timeand attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulationsand standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, ourreputation may be harmed.

 

If we fail to comply with the new rulesunder the Sarbanes-Oxley Act related to accounting controls and procedures, or if material weaknesses or other deficiencies arediscovered in our internal accounting procedures, our stock price could decline significantly.

 

We are exposed to potential risks from legislationrequiring companies to evaluate internal controls under Section 404(a) of the Sarbanes-Oxley Act of 2002. As a smaller reportingcompany and emerging growth company, we will not be required to provide a report on the effectiveness of its internal controlsover financial reporting until our second annual report, and we will be exempt from auditor attestation requirements concerningany such report so long as we are an emerging growth company or a smaller reporting company. We have not yet evaluated whetherour internal control procedures are effective and therefore there is a greater likelihood of material weaknesses in our internalcontrols, which could lead to misstatements or omissions in our reported financial statements as compared to issuers that haveconducted such evaluations.

  

If material weaknesses and deficiencies aredetected, it could cause investors to lose confidence in our company and result in a decline in our stock price and consequentlyaffect our financial condition. In addition, if we fail to achieve and maintain the adequacy of our internal controls, we may notbe able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting inaccordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenuerecognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. Ifwe cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors couldlose confidence in our reported financial information, and the trading price of our common stock could drop significantly. In addition,we cannot be certain that additional material weaknesses or significant deficiencies in our internal controls will not be discoveredin the future.

 

 4 

 

Risks Associated with Management and ControlPersons

 

If we fail to attract and retain qualifiedsenior executive and key technical personnel, our business will not be able to expand.

 

We are dependent on the continued availabilityof Chiyuan Deng, and the availability of new employees to implement our business plans. The market for skilled employees is highlycompetitive, especially for employees in the service industry. Although we expect that our compensation programs will be intendedto attract and retain the employees required for us to be successful, there can be no assurance that we will be able to retainthe services of all our key employees or a sufficient number to execute our plans, nor can there be any assurance we will be ableto continue to attract new employees as required.

 

Our personnel may voluntarily terminate theirrelationship with us at any time, and competition for qualified personnel is intense. The process of locating additional personnelwith the combination of skills and attributes required to carry out our strategy could be lengthy, costly and disruptive.

 

If we lose the services of key personnel, orfail to replace the services of key personnel who depart, we could experience a severe negative effect on our financial resultsand stock price. In addition, there is intense competition for highly qualified bilingual and “people friendly” personnelin the locations where we principally operate. The loss of the services of any key personnel, marketing or other personnel or ourfailure to attract, integrate, motivate and retain additional key employees could have a material adverse effect on our business,operating and financial results and stock price.

 

Risks Related to Our Legal Status

 

As an “emerging growth company”under the JOBS Act, we are permitted to rely on exemptions from certain disclosure requirements.

 

We qualify as an “emerging growth company”under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. Forso long as we are an emerging growth company, we will not be required to:

 

  have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

 

  comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

  submit certain executive compensation matters to shareholder advisory votes, such as say-on-pay and say-on-frequency; and

 

  disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executives compensation to median employee compensation.

  

In addition, Section 107 of the JOBS Act alsoprovides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) ofthe Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delaythe adoption of certain accounting standards until those standards would otherwise apply to private companies. We have electedto take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparableto those of companies that comply with such new or revised accounting standards.

 

 5 

 

We will remain an “emerging growth company”for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenuesexceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the SecuritiesExchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issuedmore than $1 billion in non-convertible debt during the preceding three year period.

 

Even if we no longer qualify for the exemptionsfor an emerging growth company, we may still be, in certain circumstances, subject to scaled disclosure requirements as a smallerreporting company. For example, smaller reporting companies, like emerging growth companies, are not required to provide a compensationdiscussion and analysis under Item 402(b) of Regulation S-K or auditor attestation of internal controls over financial reporting.

 

Until such time, however, we cannot predictif investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our commonstock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be morevolatile.

 

Risks Related to Our Securities and theOver the Counter Market

 

If a market for our common stock doesnot develop, shareholders may be unable to sell their shares.

 

Our common stock is quoted under the symbol“ABQQ” on the OTCQB operated by OTC Markets Group, Inc, an electronic inter-dealer quotation medium for equity securities.We do not currently have an active trading market. There can be no assurance that an active and liquid trading market will developor, if developed, that it will be sustained.

 

Our securities are very thinly traded. Accordingly,it may be difficult to sell shares of our common stock without significantly depressing the value of the stock. Unless we are successfulin developing continued investor interest in our stock, sales of our stock could continue to result in major fluctuations in theprice of the stock. 

 

Our common stock price may be volatileand could fluctuate widely in price, which could result in substantial losses for investors.

 

The market price of our common stock is likelyto be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control,including:

 

  • technological innovations or new productsand services by us or our competitors;
  • government regulation of our products andservices;
  • the establishment of partnerships with othertechnology companies;
  • intellectual property disputes;
  • additions or departures of key personnel;
  • sales of our common stock
  • our ability to integrate operations, technology,products and services;
  • our ability to execute our business plan;
  • operating results below expectations;
  • loss of any strategic relationship;
  • industry developments;
  • economic and other external factors; and
  • period to period fluctuations in our financialresults.

Because we have nominal revenues to date, youshould consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above.

  

In addition, the securities markets have fromtime to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particularcompanies. These market fluctuations may also materially and adversely affect the market price of our common stock.

 

 6 

 

As a new investor, you will experiencesubstantial dilution as a result of future equity issuances.

 

In the event we are required to raise additionalcapital it may do so by selling additional shares of common stock thereby diluting the shares and ownership interests of existingshareholders.

 

Our stock is a penny stock. Trading ofour stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which maylimit a stockholder’s ability to buy and sell our stock.

 

Our stock is a penny stock. The Securitiesand Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security thathas a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certainexceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealerswho sell to persons other than established customers and “accredited investors”. The term “accredited investor”refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 orannual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior toa transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a formprepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market.The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation ofthe broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each pennystock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information,must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writingbefore or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a pennystock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock isa suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosurerequirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subjectto these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

 

In addition to the “penny stock”rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules thatrequire that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investmentis suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealersmust make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectivesand other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there isa high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial IndustryRegulatory Authority’ requirements make it more difficult for broker-dealers to recommend that their customers buy our commonstock, which may limit your ability to buy and sell our stock.

 

Rule 144 sales in the future may havea depressive effect on our stock price as an increase in supply of shares for sale, with no corresponding increase in demand willcause prices to fall.

 

All of the outstanding shares of common stockheld by the present officers, directors, and affiliate stockholders are “restricted securities” within the meaningof Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to aneffective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under theAct and as required under applicable state securities laws. Rule 144 provides in essence that a person who is an affiliate or officeror director who has held restricted securities for six months may, under certain conditions, sell every three months, in brokeragetransactions, a number of shares that does not exceed the greater of 1.0% of a company’s outstanding common stock. Thereis no limit on the amount of restricted securities that may be sold by a non-affiliate after the owner has held the restrictedsecurities for a period of six months if the company is a current reporting company under the 1934 Act. A sale under Rule 144 orunder any other exemption from the Act, if available, or pursuant to subsequent registration of shares of common stock of presentstockholders, may have a depressive effect upon the price of the common stock in any market that may develop.  

 

 7 

 

FINRA sales practice requirements mayalso limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “penny stock”rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommendingan investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for thatcustomer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must makereasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and otherinformation. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low pricedsecurities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommendthat their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect onthe market for our shares.

 

Failure to achieve and maintain effectiveinternal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our businessand operating results.

 

It may be time consuming, difficult and costlyfor us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-OxleyAct. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implementappropriate additional internal controls, processes and reporting procedures.

 

If we fail to comply in a timely manner withthe requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy anymaterial weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financialstatements, cause investors to lose confidence in our reported financial information and have a negative effect on the tradingprice of our common stock.

 

Pursuant to Section 404 of the Sarbanes-OxleyAct and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and,furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting andtesting our internal control procedures in order to satisfy these requirements, which is likely to result in increased generaland administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities.While our management is expending significant resources in an effort to complete this important project, there can be no assurancethat we will be able to achieve our objective on a timely basis. Failure to achieve and maintain an effective internal controlenvironment or complete our Section 404 certifications could have a material adverse effect on our stock price.

 

In addition, in connection with our on-goingassessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses”in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. Amaterial weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihoodthat a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines“significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financialstatements that is more than inconsequential will not be prevented or detected.

 

In the event that a material weakness is identified,we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify.However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipateand react to changes in our business and the economic and regulatory environments and to expend significant resources to maintaina system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you thatthe measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequatecontrols over our financial process and reporting in the future.

 

Any failure to complete our assessment of ourinternal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improvedcontrols, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reportingobligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the resultsof the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknessesthat we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internalcontrol over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls couldalso cause investors to lose confidence in our reported financial information, which could have a negative effect on the tradingprice of our common stock.

 

 8 

 

We do not intend to pay dividends.

 

We do not anticipate paying cash dividendson our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legallyavailable to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment andamount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things,the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our boardof directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are rapid,there is no assurance with respect to the amount of any such dividend.

 

Risks Related to the Offering

 

Our existing stockholders may experiencesignificant dilution from the sale of our common stock pursuant ot the Peak One Financing Agreement.

 

The sale of our common stock to Peak One inaccordance with the Financing Agreement may have a dilutive impact on our shareholders. As a result, the market price of our commonstock could decline. In addition, the lower our stock price is at the time we exercise our put options, the more shares of ourcommon stock we will have to issue to Peak One in order to exercise a put under the Financing Agreement. If our stock price decreases,then our existing shareholders would experience greater dilution for any given dollar amount raised through the offering.

 

The perceived risk of dilution may cause ourstockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk ofdilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our commonstock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressiveprice declines in our common stock.

 

The issuance of shares pursuant to thePeak One Financing Agreement may have significant dilutive effect.

 

Depending on the number of shares we issuepursuant to the Peak One Financing Agreement, it could have a significant dilutive effect upon our existing shareholders. Althoughthe number of shares that we may issue pursuant to the Financing Agreement will vary based on our stock price (the higher our stockprice, the less shares we have to issue), there may be a potential dilutive effect to our shareholders, based on different potentialfuture stock prices, if the full amount of the Financing Agreement is realized. Dilution is based upon common stock put to PeakOne and the stock price discounted to the lesser of the lowest closing price preceding the put date, or 88% of the lowest closingprice of our common stock during the ten (10) consecutive trading day period beginning on the date on which we deliver a put noticeto Peak One (the “Market Price”)..

 

Peak One will pay less than the then-prevailingmarket price of our common stock which could cause the price of our common stock to decline.

 

Our common stock to be issued under the PeakOne Financing Agreement will be purchased at the lesser of the lowest closing price preceding the put date, or 88% of the lowestclosing price of our common stock during the ten (10) consecutive trading day period beginning on the date on which we delivera put notice to Peak One (the “Market Price”)..

 

Peak One has a financial incentive to sellour shares immediately upon receiving them to realize the profit between the discounted price and the market price. If Peak Onesells our shares, the price of our common stock may decrease. If our stock price decreases, Peak One may have further incentiveto sell such shares. Accordingly, the discounted sales price in the Financing Agreement may cause the price of our common stockto decline.

 

We may not have access to the full amountunder the Financing Agreement.

 

The lowest closing price of the Company’scommon stock during the ten (10) consecutive trading day period immediately preceding the filing of this Registration Statementwas approximately $0.0162. At that price we would be able to sell shares to Peak One under the Financing Agreement at the discountedprice of $0.014256. At that discounted price, the 21,444,261 shares of Common Stock to be issued in connection with the FinancingAgreement would only represent approximately $305,709, which is far below $10,000,000 (the full amount of the Financing Agreement).

 

 9 

CAUTIONARY NOTE REGARDING FORWARD-LOOKINGSTATEMENTS

 

This prospectus contains forward-looking statements.Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by thefact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertaintiesand include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies andopportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable byuse of the words “may,” “will,” “should,” “anticipate,” “estimate,”“plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,”“management believes,” “we believe,” “we intend” or the negative of these words or other variationson these words or comparable terminology. These statements may be found under the sections entitled “Management’s Discussionand Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectusgenerally. In particular, these include statements relating to future actions, prospective products, market acceptance, futureperformance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies such as legalproceedings and financial results.

 

Examples of forward-looking statementsin this prospectus include, but are not limited to, our expectations regarding our business strategy, business prospects, operatingresults, operating expenses, working capital, liquidity and capital expenditure requirements. Important assumptions relating tothe forward-looking statements include, among others, assumptions regarding demand for our products, the cost, terms and availabilityof components, pricing levels, the timing and cost of capital expenditures, competitive conditions and general economic conditions.These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us,which in turn are based on currently available information. These assumptions could prove inaccurate. Although we believe thatthe estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.

Important factors that could cause actualresults to differ materially from the results and events anticipated or implied by such forward-looking statements include, butare not limited to:

 

  changes in the market acceptance of our products;
     
  increased levels of competition;
     
  changes in political, economic or regulatory conditions generally and in the markets in which we operate;
     
  our relationships with our key customers;
     
  our ability to retain and attract senior management and other key employees;
     
  our ability to quickly and effectively respond to new technological developments;
     
  our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and
     
  other risks, including those described in the “Risk Factors” discussion of this prospectus.

 

We operate in a very competitive and rapidlychanging environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assessthe impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materiallyfrom those contained in any forward-looking statement. The forward-looking statements in this prospectus are based on assumptionsmanagement believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should notplace undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they aremade, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light ofnew information, future events, or otherwise.

 

USE OF PROCEEDS

 

We will not receive any proceedsfrom the sale of the shares of our Common Stock by Peak One (the selling stockholder identified in this prospectus). However, wewill receive proceeds from our initial sale of shares to Peak One, pursuant to the Financing Agreement. We will also receive proceedsif the warrant issued to Peak One is exercised for cash. The proceeds from the initial sale of shares will be used for the purposeof working capital or for other purposes that the Board of Directors, in good faith deem to be in the best interest of the Company.

 10 

 

DETERMINATION OF OFFERING PRICE

 

We have not set an offering price for the sharesregistered hereunder, as the only shares being registered are those sold pursuant to the Peak One Financing Agreement. Peak Onemay sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and prevailing market pricesat the time of sale, at varying prices or at negotiated prices.

 

DILUTION

 

Not applicable. The shares registeredunder this registration statement are not being offered for purchase by the Company. The shares are being registered on behalfof Peak One (the selling stockholder identified in this prospectus) pursuant to the Peak One Financing Agreement. 

SELLING STOCKHOLDERS

Peak One (the selling stockholder identifiedin this prospectus) may offer up to 21,444,261 shares of common stock to be used for drawdowns and warrant exercises in connectionwith the Financing Agreement. If issued presently, the shares of common stock registered for resale by Peak One would representapproximately 21.6% of our issued and outstanding shares of common stock as of October 12, 2020 and 33% of our public float whenthe prior registered offering of 6,218,746 shares are added to it.

 

We may require Peak One (the selling stockholderidentified in this prospectus) to suspend the sales of the shares of our common stock being offered pursuant to this prospectusupon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in anymaterial respect or that requires the changing of statements in those documents in order to make statements in those documentsnot misleading.

 

Peak One (the selling stockholder identifiedin this prospectus) may from time to time offer and sell under this prospectus any or all of the shares of common stock describedunder the column “Shares of Common Stock Being Offered” in the table below.

 

Peak One will be deemed to be an underwriterwithin the meaning of the Securities Act. Any profits realized by Peak One (the selling stockholder identified in this prospectus)may be deemed to be underwriting commissions.

 

Information concerning the selling stockholdermay change from time to time and, if necessary, we will amend or supplement this prospectus accordingly. We cannot give an estimateas to the number of shares of common stock that will actually be held by the selling stockholder upon termination of this offering,because the selling stockholders may offer some or all of the common stock under the offering contemplated by this prospectus oracquire additional shares of common stock. The total number of shares that may be sold, hereunder, will not exceed the number ofshares offered, hereby. Please read the section entitled “Plan of Distribution” in this prospectus.

 

The manner in which Peak One (the selling stockholderidentified in this prospectus) acquired or will acquire shares of our common stock is discussed below under “The Offering.”

 

The following table sets forth the name ofeach selling stockholder, the number of shares of our common stock beneficially owned by such stockholder before this offering,the number of shares to be offered for such stockholder’s account and the number and (if one percent or more) the percentageof the class to be beneficially owned by such stockholder after completion of the offering. The number of shares owned are thosebeneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative of beneficialownership for any other purpose. Under such rules, beneficial ownership includes any shares of our common stock as to which a personhas sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within60 days, through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatictermination of a power of attorney or revocation of a trust, discretionary account or similar arrangement, and such shares aredeemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options,warrants or other rights, but are not deemed outstanding for computing the percentage of any other person. Beneficial ownershippercentages are calculated based on 98,103,494 shares of our common stock outstanding as of October 12, 2020.

 

 11 

 

Unless otherwise set forth below, (a) the personsand entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the sellingstockholder’s name, subject to community property laws, where applicable, and (b) no selling stockholder had any position,office or other material relationship within the past three years, with us or with any of our predecessors or affiliates. The numberof shares of common stock shown as beneficially owned before the offering is based on information furnished to us or otherwisebased on information available to us at the timing of the filing of the registration statement of which this prospectus forms apart.

 

   

Shares

Owned by

the Selling

Stockholders

  Shares of
Common Stock
    Number of Shares to be Owned by Selling Stockholder After the Offering and Percent of Total Issued and Outstanding Shares  
Name of Selling Stockholder  

before the

Offering (1)

  Being
Offered
    # of
Shares (2)
    % of
Class (2)
 
Peak One Opportunity Fund, L.P. (3)   0     21,444,261 (4 )     0       0 %

 

Notes:

 

  (1) Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to options, warrants and convertible debentures currently exercisable or convertible, or exercisable or convertible within 60 days, are counted as outstanding. The actual number of shares of common stock issuable upon the conversion of the convertible debentures is subject to adjustment depending on, among other factors, the future market price of our common stock, and could be materially less or more than the number estimated in the table.

 

  (2) Because the selling stockholders may offer and sell all or only some portion of the 21,444,261 shares of our common stock being offered pursuant to this prospectus and may acquire additional shares of our common stock in the future, we can only estimate the number and percentage of shares of our common stock that any of the selling stockholders will hold upon termination of the offering.

 

  (3) Jason Goldstein, Manager of Peak One Opportunity Fund, L.P. exercises voting and dispositive power with respect to the shares of our common stock that are beneficially owned by Peak One Opportunity Fund, L.P.

 

  (4) Consists of up to 21,444,261 shares of Common Stock to be issuedin connection with drawdowns and warrant exercises.

 

THE OFFERING

On July 30, 2020, we entered into an EquityPurchase Agreement (the “Financing Agreement”) with Peak One Opportunity Fund, L.P. (“Peak One”) Althoughwe are not mandated to sell shares under the Financing Agreement, the Financing Agreement gives us the option to sell to Peak One,up to $10,000,000 worth of our common stock over the period ending twenty-four (24) months after the date this Registration Statementis deemed effective. Peak One (the selling stockholder identified in this prospectus) may offer up to 21,444,261 shares of commonstock to be used for drawdowns and warrant exercises in connection with the Financing Agreement.

 

On July 30, 2020, we alsoentered into a registration rights agreement with Peak One (the “Registration Rights Agreement”) whereby we are obligatedto file a registration statement to register the resale of the purchase shares. The Registration Statement of which thisprospectus forms a part is being filed to comply with the Registration Rights Agreement.We must our reasonable efforts to keep the registration statement continuously effective under the Securities Act until all ofthe Warrant Shares and purchase shares have been sold there under or pursuant to Rule 144.

 

There is no assurance the market price of ourcommon stock will increase in the future. The number of common shares that remain issuable may not be sufficient, dependent uponthe share price, to allow us to access the full amount contemplated under the Financing Agreement. If the bid/ask spread remainsthe same we will not be able to place a put for the full commitment under the Financing Agreement. Based on the lowest closingprice of our common stock during the ten (10) consecutive trading day period preceding the filing date of this registration statementof $0.0162, the registration statement covers the offer and possible sale of approximately $305,691 worth of our shares (a discountedprice of $0.014256) which is far below $10,000,000 (the full amount of the Financing Agreement).

 

 12 

 

Peak One is not permitted to engage in shortsales involving our common stock during the term of the commitment period. In accordance with Regulation SHO, however, sales ofour common stock by Peak One after delivery of a put notice of such number of shares reasonably expected to be purchased by PeakOne under a put will not be deemed a short sale.

 

In addition, we must deliver the other requireddocuments, instruments and writings required. Peak One is not required to purchase the put shares unless:

 

  Our registration statement with respect to the resale of the shares of common stock delivered in connection with the applicable put shall have been declared effective;

 

  We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the registrable securities; and

 

  We shall have filed all requisite reports, notices, and other documents with the SEC in a timely manner.

 

As we draw down on the equity line of credit,shares of our common stock will be sold into the market by Peak One. The sale of these shares could cause our stock price to decline.In turn, if our stock price declines and we issue more puts, more shares will come into the market, which could cause a furtherdrop in our stock price. You should be aware that there is an inverse relationship between the market price of our common stockand the number of shares to be issued under the equity line of credit. If our stock price declines, we will be required to issuea greater number of shares under the equity line of credit. We have no obligation to utilize the full amount available under theequity line of credit.

 

Neither the Financing Agreement nor any ofour rights or Peak One’s rights thereunder may be assigned to any other person.

 

 PLAN OF DISTRIBUTION

Eachof the selling stockholders named above and any of their pledgees and successors-in-interest may, from time to time, sell anyor all of their shares of common stock on OTC Markets or any other stock exchange, market or trading facility on which the sharesof our common stock are traded or in private transactions. These sales may be at fixed prices and prevailing market prices atthe time of sale, at varying prices or at negotiated prices. The selling stockholders may use any one or more of the followingmethods when selling shares:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

  privately negotiated transactions;

 

  broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; or

 

  a combination of any such methods of sale.

 

Broker-dealers engaged by the selling stockholdersmay arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the sellingstockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated,but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customarybrokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliancewith FINRA IM-2440.

 

 13 

Peak One is an underwriter within the meaningof the Securities Act of 1933 and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters”within the meaning of the Securities Act of 1933 in connection with such sales. In such event, any commissions received by suchbroker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissionsor discounts under the Securities Act of 1933. Peak One has informed us that it does not have any written or oral agreement orunderstanding, directly or indirectly, with any person to distribute the common stock of our company. Pursuant to a requirementby FINRA, the maximum commission or discount to be received by any FINRA member or independent broker-dealer may not be greaterthan 8% of the gross proceeds received by us for the sale of any securities being registered pursuant to Rule 415 promulgated underthe Securities Act of 1933.

  

Discounts, concessions, commissions and similarselling expenses, if any, attributable to the sale of shares will be borne by the selling stockholder. The selling stockholdermay agree to indemnify any agent, dealer, or broker-dealer that participates in transactions involving sales of the shares if liabilitiesare imposed on that person under the Securities Act of 1933.

 

We are required to pay certain fees and expensesincurred by us incident to the registration of the shares covered by this prospectus. We have agreed to indemnify the selling stockholdersagainst certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933. We will not receiveany proceeds from the resale of any of the shares of our common stock by the selling stockholders. We may, however, receive proceedsfrom the sale of our common stock under the Financing Agreement with Peak One. We may also receive proceeds from the cash exerciseof the warrant in favor of Peak One. Neither the Financing Agreement with Peak One nor any rights of the parties under the FinancingAgreement with Peak One may be assigned or delegated to any other person.

 

We have entered into an agreement with PeakOne to keep this prospectus effective until Peak One has sold all of the common shares purchased by it under the Financing Agreementand has no right to acquire any additional shares of common stock under the Financing Agreement.

 

The resale shares will be sold only throughregistered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, theresale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption fromthe registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations underthe Securities Exchange Act of 1934, any person engaged in the distribution of the resale shares may not simultaneously engagein market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M,prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions ofthe Securities Exchange Act of 1934 and the rules and regulations thereunder, including Regulation M, which may limit the timingof purchases and sales of shares of the common stock by the selling stockholders or any other person. We will make copies of thisprospectus available to the selling stockholders.

 

DESCRIPTION OF SECURITIES TO BE REGISTERED

General

 

We are authorized to issue an aggregate of 1,000,000,000 sharesof common stock, $0.001 par value per share and 10,000,000 shares of preferred stock in one or more series and to fix the votingpowers, preferences and other rights and limitations of the preferred stock. As of October 12, 2020, we had 98,103,494 shares ofcommon stock outstanding and 100,000 shares of preferred stock issued and outstanding.

 

Each share of common stock shall have one (1)vote per share. Our common stock does not provide a preemptive, subscription or conversion rights and there are no redemption orsinking fund provisions or rights. Our common stock holders are not entitled to cumulative voting for election of Board of Directors.

 

 14 

Dividends

 

We have not paid any dividends on our commonstock since our inception and do not intend to pay any dividends in the foreseeable future.

 

The declaration of any future cash dividendsis at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position,our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in theforeseeable future, but rather to reinvest earnings, if any, in our business operations.

 

Warrants

 

Asof October 14, 2020, we have issued warrants to purchase 30,033 shares of Common Stock issuable with a weighted average exerciseprice of $12.5.     

 

Options

 

As of October 12, 2020, we have no optionsissued.  

 

Securities Authorized for Issuance UnderEquity Compensation Plans

 

We have no equity compensation plans.

 

Preferred Stock

 

The Company has authorized 10,000,000 sharesof preferred stock. The board of directors has the authority to issue these shares and to set dividends, voting and conversionrights, redemption provisions, liquidation preferences, and other rights and restrictions.

 

On September 4, 2020, we filed a certificateof designation for 100,000 shares of Series A Preferred Stock. The Series A Preferred Stock has the right to vote 51% of the totalvote of shareholders and concerts to common stock on a one for one conversion. Our Chief Executive Officer, Chiyuan Deng, ownsall 100,000 shares.

 

Anti-Takeover Effects of Various Provisionsof Nevada Law

 

Provisions of the Nevada Revised Statutes,our articles of incorporation, as amended, and bylaws could make it more difficult to acquire us by means of a tender offer, aproxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, would be expectedto discourage certain types of takeover practices and takeover bids our Board may consider inadequate and to encourage personsseeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our abilityto negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us will outweigh the disadvantagesof discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in animprovement of their terms.

 

Blank Check Preferred

 

Our articles of incorporation permit our Boardto issue preferred stock with voting, conversion and exchange rights that could negatively affect the voting power or other rightsof our Common Stockholders. The issuance of our preferred stock could delay or prevent a change of control of our Company.

 

Amendments to our Articles of Incorporationand Bylaws

 

Under the Nevada Revised Statutes, our articlesof incorporation may not be amended by stockholder action alone.

 

Nevada Anti-Takeover Statute

 

We may be subject to Nevada’s Combination with InterestedStockholders Statute (Nevada Corporation Law Sections 78.411-78.444) which prohibits an “interested stockholder” fromentering into a “combination” with the corporation, unless certain conditions are met. An “interested stockholder”is a person who, together with affiliates and associates, beneficially owns (or within the prior two years, did beneficially own)10% or more of the corporation’s capital stock entitled to vote. 

 15 

Limitations on Liability and Indemnificationof Officers and Directors

 

The Nevada Revised Statutes limits or eliminatesthe personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’fiduciary duties as directors.

 

The limitation of liability and indemnificationprovisions under the Nevada Revised Statutes and in our articles of incorporation and bylaws may discourage stockholders from bringinga lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihoodof derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit usand our stockholders. However, these provisions do not limit or eliminate our rights, or those of any stockholder, to seek non-monetaryrelief such as injunction or rescission in the event of a breach of a director’s fiduciary duties. Moreover, the provisionsdo not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affectedto the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officerspursuant to these indemnification provisions.

 

Authorized but Unissued Shares

 

Our authorized but unissued shares of CommonStock and preferred stock will be available for future issuance without stockholder approval, except as may be required under thelisting rules of any stock exchange on which our Common Stock is then listed. We may use additional shares for a variety of corporatepurposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. Theexistence of authorized but unissued shares of Common Stock and preferred stock could render more difficult or discourage an attemptto obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

 

Penny Stock Considerations

 

Our shares will be “penny stocks”as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00per share. Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers whoengage in certain transactions involving a penny stock. Under the penny stock regulations, a broker-dealer selling a penny stockto anyone other than an established customer must make a special suitability determination regarding the purchaser and must receivethe purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.

 

In addition, under the penny stock regulations,the broker-dealer is required to:

 

  Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

 

  Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

 

  Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value, and information regarding the limited market in penny stocks; and

 

  Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.

 

Because of these regulations, broker-dealersmay encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholdersor other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity inthe secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if oursecurities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decreasein the price of our securities. Our shares in all probability will be subject to such penny stock rules and our shareholders will,in all likelihood, find it difficult to sell their securities.

 

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TRANSFER AGENT AND REGISTRAR

 

The transfer agent of our Common Stock is CorporationStock Transfer, Inc. Their address is 3200 Cherry Creek South Drive, Suite 430. Denver, CO 80209.

 

LEGAL MATTERS

 

The Doney Law Firm, Las Vegas, Nevada, willpass upon the validity of the securities being offered by this prospectus.

 

EXPERTS

 

The consolidated financial statements for theCompany as of August 31, 2019 and August 31, 2018 and for the years then ended included in this prospectus have been audited byYu Certified Public Accountant PC, an independent registered public accounting firm, to the extent and for the periods set forthin our report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditingand accounting.

 

BUSINESS

 

Overview

 

AB International Group Corp. (the "Company","we" or "us") was incorporated under the laws of the State of Nevada on July 29, 2013 and originally intendedto purchase used cars in the United States and sell them in Krygyzstan. The Company's fiscal year end is August 31.

 

On January 22, 2016, our former sole officer,who owned 83% of our outstanding common shares, sold all of his common shares to unrelated investor, Jianli Deng. After the stocksale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designed for movie trailerpromotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphone makers,online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins to moviedistributors or other video advertisers in China. We created the app “Amoney” for the Android smartphone platform todevelop a WeChat micro-shop that was designed to display and deliver a variety of information and links for download or onlinewatch prices in the China market.

 

On June 1, 2017, we entered into a Patent LicenseAgreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television Company Limited, a companyincorporated in China (“Licensor”), granted to us a worldwide license to a video synthesis and release system for mobilecommunications equipment (the “Technology”). The Technology is the subject of a utility patent in the People’sRepublic of China. Under the Agreement, we are able to utilize, improve upon, and sub-license the technology for an initial periodof one year from October 1, 2017 to September 30, 2018, subject to a right to renew. We were obligated to pay the Licensor $500,000within 30 days of the date of the Agreement and a royalty fee in the amount of 20% of any proceeds resulting from our utilizationof the Technology, whether in the form of sub-licensing fees or sales of licensed products. Our Chief Executive Officer, ChiyuanDeng and former Chief Executive Officer, Jianli Deng, jointly own and control Licensor. On October 10, 2017, we completed the paymentof $500,000 initial payment amount due under the Agreement. In October of 2019, the term of this sublicensing agreement was renewedand extended until October 31, 2020.

 

Our License to the Technology generates revenuethrough sub-license monthly fees from a smartphone app on Android devices. This app was already existing and licensed at the timewe acquired the Technology.

  

On March 10, 2018, we acquired intellectualproperty for $200,000 from All In One Media Ltd, previously named as Aura Blocks Ltd. On March 19, 2018, we entered into consultingagreements (the “Consulting Agreements”) with four consultants (the “Consultants”). The Consulting Agreementshave terms or either two or three years. Under the Consulting Agreements the Consultants will provide services to us in Hong Kongand China related to blockchain technology and krypto kiosks. In consideration for the services provided by the Consultants, wehave issued the Consultants a total of 1,100,000 shares of our common stock. On November 10, 2018, the Company sold this intellectualproperty to China IPTV Industry Park Holdings Ltd. for $80,000.

 

 17 

 

On March 21, 2018, we acquired the intellectualassets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operationof cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plansto generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposesto bring a physical aspect to something that is otherwise very abstract to people. We also issued to JPC Fintech Limited 2,400,000common shares with a market value of $72,000 exchange of KryptoKiosk Limited’s assets consist mostly of intellectual property,including, but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rightsand personal property.

 

We planned to generate revenue through sub-licensingfees for the operation of cryptocurrency ATMs. Through the foregoing, we proposed to bring a physical aspect to something thatis otherwise very abstract to people. We planned to invest in machines and sell sub-licenses in the Asia Pacific region with futureworld-wide expansion. We had promoted and marketed the ATM business for 6 months or until around August 2018, because the BTC andcryptocurrencies price went down. The IP, however, was never transferred to us. We have repeatedly requested from Messrs. Grounds,Vickery and Shakespare access to the domains and websites and other information concerning the IP assets. As of the date of thisannual report, no such information has been provided. In addition, the IP including domain names were transferred to others whileMessrs. Vickery and Shakespare were officers of our company. As a result, we ceased promotions and marketing on the ATM businessand relations cryptocurrencies business in September 2018. On November 21, 2018, we had sent the final notice that JPC Fintechhas materially breached the agreement. We requested that JPC Fintech Ltd. return its stock certificate received in the transactionto our transfer agent for immediate cancellation. We have not yet received the certificate for termination. In February of 2020,100% of the intellectual assets of KryptoKiosk Limited ‘s carrying value $48,000 net of amortization is written off sincethe IP was never transferred to us and no revenue was generated from this intellectual asset.

 

On May 9, 2018, we entered into an investoragreement with iCrowdU Inc. We agreed to purchase 228,013 shares of iCrowdU Inc. at a share price of $1.228 for total considerationof $280,000. iCrowdU Inc. offers an online platform and mobile app for crowd funding services targeting the global crowd fundingmarket.

 

Furthermore, it was agreed to exchange 2,000,000shares of our common stock for 2,000,000 shares of common stock in iCrowdU Inc. This share exchange was made as collateral in advanceof an investment of $1,935,000 by us into iCrowdU Inc., which never occurred.

 

On or about May 9, 2018, we entered into consultancyagreements with Alexander Holtermann, Ian Wright and Luis Hadic. Each of Messrs. Holtermann, Wright and Hadic received 200,000shares of our common stock under the consultancy agreements.

 

On or about July 26, 2018, we entered intoan investment agreement with iCrowdU Inc. for the purchase of 40% of iCrowdU in exchange for 8,000,000 shares of our common stockthat would be split between Messrs. Holtermann and Wright at 70% and 30%, respectively, and an investment of $10,000,000. The 8,000,000shares were cut but not delivered to Messrs. Holtermann and Wright and no part of the $10,000,000 was invested by us into iCrowdUInc.

 

On or about July 31, 2018, we entered intoemployment agreements with Messrs. Holtermann and Wright for the consideration provided for under the agreements.

 

On October 25, 2018, the above parties enteredinto an Agreement for Termination and Release that terminated all outstanding agreements among the parties and released each partyfrom the other. We agreed to settle outstanding expenses and costs incurred by iCrowdU Inc., in the sum of $6,444.90. In addition,all parties agreed to return any shares received from the above agreements, save we shall be permitted to retain the 228,013 sharespurchased in iCrowdU Inc. Finally, we agreed to amend our Current Report on Form 8-K concerning certain disclosures made therein.We amended the report as per the agreement.

 

On September 5, 2018, the Company entered intoan agreement to acquire a movie copyright for $768,000 from All In One Media Ltd, which holds 200,000 common shares of the Companyas of August 31, 2019 and is previously named as Aura Blocks Limited. The remaining balance to Aura Blocks Limited is $153,600as of August 31, 2019. The Company has obtained the exclusive permanent broadcasting right outside the mainland China and is expectedto generate revenues from showing the movie online, in theaters, and on TV outside the mainland China once this movie is completedin June, 2019. In August of 2019, the Company sold this movie copyright to China IPTV Industry Park Holding Ltd for $857,600 witha gain of $89,538.

 

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 In December of 2018, we engaged StarEastnet,a software developer that holds 171,000 common shares of the Company as of August 31, 2019, to start developing a performance matchingplatform (Ai Bian Quan Qiu) and a WeChat official account to advertise the platform. The matching platform is to arrange performanceevents for celebrities and performers. Performers can set their schedules and quotes on the platform. The platform will maximizetheir profits from performance events by optimizing their schedules based upon quotes and event locations and save time from commutingamong different events. “Ai Bian Quan Qiu” utilizes the artificial intelligence (AI) matching technology to instantlyand accurately match performers and advertisers or merchants. The company charges agency service fees for each successful eventmatched through the platform. Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generatedfrom the performance matching platform (Ai Bian Quan Qiu) since the end of January, 2020. In February of 2020, the Company decidedthat 80% of the carrying amount of Ai Bian Quan Qiu platform and its Wechat official account should be impaired. Due to the quarantineand continuous control imposed by the state and local governments in areas affected by COVID-19, merchant advertising events havebeen suspended for 7 months. The Company decided to shut down the Ai Bian Quan Qiu platform, which has created an adverse impacton the business and financial condition and hampered its ability to generate revenue and access sources of liquidity on reasonableterms.

 

In June, 2019, the Company completed the developmentof a video mix APP for social video sharing via iOS and Android smartphones. This app was originally planned to take advantageof the core design philosophy of “My film anyone, anywhere, anytime be together” as similar and competitive innovativevideo and community apps have been activated on over 2 million unique devices in China as of December 31, 2017 and precipitatedthe duet video synthesis phenomenon in China. However, the Company decided to focus on the “Ai Bian Quan Qiu” platformas its main business and thus sold the video mix APP to Anyone Pictures Limited, which holds 242,980 common shares of the Company,for $422,400 with a gain of $59,792 in August of 2019.

 

In August of 2019, the Company entered intoa one-year loan agreement to lend $1,047,040 at an annual interest rate of 10% to All In One Media Ltd, previously named as AuraBlocks Limited, for producing films and digital videos in Hong Kong. The term of note receivable is from August 1, 2019 to July31, 2020.

 

On September 4, 2019, the Company entered into another loan agreementto lend $1,049,600 at an annual interest rate of 10% to All In One Media Ltd, previously named as Aura Blocks Limited. The termof note receivable is from September 4, 2019 to March 3, 2020. This loan balance was paid off in full on May 4th, 2020.

 

On April 22, 2020, the Company has announced the first phase developmentof its highly anticipated video streaming service, the Company expects a full launch this year. The online service will be marketedand distributed in the world under the brand name ABQQ.tv. ABQQ.tv is expected to generate a new and profitable revenue streamimmediately following its launch derived from its hybrid subscription and advertising business model. The Company’s decisionto accelerate the development and launch date of the video streaming service was largely a result of the mandatory quarantine implementedfor the COVID-19 pandemic, as the video streaming increased by as much as 70% during the quarantine period in February and Marchthis year.

 

Competition

 

Our main business is sub-licensea patent of video synthesis and release system for mobile communications equipment to smartphone apps and smartphone makers. Weare in the process of using the underlying technology to create a smartphone video mix app as well as the social video sharingplatform. The main competitors are short video apps, we are going to discuss become a cooperation partner of them which generatedsub-license patent of video synthesis and release system monthly fee from them.

 

Employees

 

We currently have 8 employees. 

  

MARKET PRICE OF THE REGISTRANT’S COMMONEQUITY AND RELATED STOCKHOLDER MATTERS

 

Market for Common Equity

 

Our common stock is quoted on the OTCQB underthe symbol “ABQQ”. Price quotations on the OTCQB reflect inter-dealer prices, without retail mark-up, markdown or commission,and may not necessarily represent actual transactions.

 

 19 

   

Holders

 

As of October 12, 2020, there were approximately540 record holders of our Common Stock.

 

Dividends

 

We have not paid cash dividends on our commonstock and we do not anticipate paying a dividend in the foreseeable future.

 

Equity Compensation Plans

 

Wedo not have any formal equity compensation plans.   Wehave issued the following securities as compensation for officers and directors as detailed in the Section titled “ExecutiveCompensation.”

MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

You should read the following discussionof our financial condition and results of operations in conjunction with financial statements and notes thereto included elsewherein this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause orcontribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the section labeled“Risk Factors.”

 

This section of the prospectus includesa number of forward-looking statements that reflect our current views with respect to future events and financial performance.Forward-looking statements are often identified by words like “believe,” “expect,” “estimate,”“anticipate,” “intend,” “project,” and similar expressions, or words that, by their nature,refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the dateof this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual resultsto differ materially from historical results or our predictions.

 

The following is a discussion of the consolidatedfinancial condition and results of operations for the fiscal years ended August 31, 2019 and 2018. It should be read in conjunctionwith our audited Consolidated Financial Statements, the Notes thereto, and the other financial information included in the Company’sAnnual Report on Form 10-K for the fiscal year ended August 31, 2019 filed with the Securities and Exchange Commission on October22, 2019. For purposes of the following discussion, fiscal 2019 or 2019 refers to the year ended August 31, 2019 and fiscal 2018or 2018 refers to the year ended August 31, 2018.

 

Results of operations for the years ended August 31, 2019 and2018

 

Revenues

 

We generated $433,567 in revenues from continued operations duringthe year ended August 31, 2019, as compared with $250,112 in revenues from continued operations for the same period ended August31, 2018. Forty-five percent and 100% of revenue was generated from one customer during the years ended August 31, 2019 and 2018,respectively.

 

Our cost of revenues was $174,533 for the year ended August 31,2019, as compared with $150,022 for the same period ended August 31, 2018.

 

We had gross profit of $259,034 for the year ended August 31, 2019,as compared with a gross loss of $100,090 for the year ended August 31, 2018.

 

We expect to continue to achieve steadily increasing revenues withinthe coming months. However, as we are a start-up, we have limited operating history to rely upon and we cannot guarantee that ourbusiness plan will be successful.  

 

 20 

 

Operating Expenses

 

We incurred operating expenses in the amount of $702,088 for theyear ended August 31, 2019, compared with operating expenses of $977,328 for the year ended August 31, 2018. Our operating expensesfor the year ended August 31, 2019 mainly consisted of general and administrative expenses of $525,109, and related party - salariesand wages of $176,979. Our operating expenses for the year ended August 31, 2018 mainly consisted of general and administrativeexpenses of $897,587, and related party - salaries and wages of $79,741.

 

We anticipate our operating expenses will increase as we undertakeour plan of operations, including increased costs associated with marketing, personnel, and other general and administrative expenses,along with increased professional fees associated with SEC compliance as our business grows more complex and more expensive tomaintain.

 

Income from Discontinued Operations

 

On November 16, 2017, the Company sold the copyright and all otherrights in a film named “Gong Fu Nv Pai” copyright and the mobile application (Amoney) assets to an unrelated partyfor $253,000 cash.

 

The sales of intangible assets qualified as a discontinued operationof the Company and accordingly, the Company has excluded results of the operations from its Consolidated Statements of Operationsto present this revenue and expenses from these intangible assets in discontinued operations.

 

The following table shows the results of operations of mobile applicationand copyright for year ended August 31, 2019 and 2018 which are included in the gain from discontinued operations:

 

   Years ended
   August 31,
   2019   2018
Revenue  $—      $49,920
Cost of revenue   —       11,912
Income Tax Provision   —       —  
Gain from discontinued operations  $—      $38,008

 

Net (Loss) Income

 

We incurred a net loss in the amount of $404,635 for the year endedAugust 31, 2019, as compared with a net loss of $1,111,950 for the year ended August 31, 2018.

 

Liquidity and Capital Resources

 

As of August 31, 2018, we had $553,669 in current assets consistingof cash, accounts receivable, and prepaid expenses. Our total current liabilities as of August 31, 2018 were $145,961. As a result,we have working capital of $407,707 as of August 31, 2018.

 

Operating activities used $866,887 in cash for the year ended August31, 2018, as compared with $166,522 in cash provided for the year ended August 31, 2017. Our negative operating cash flow in 2018was mainly the result of our net loss of $1,157,238 from continuing operations, offset mainly by consulting fees paid in stockin the amount of $196,250 and amortization of intangible assets of $106,000. Our positive operating cash flow in 2017 was mainlythe result of our net income from discontinued operations of $325,826, offset mainly by our net loss from continuing operationsof $184,394.

 

Investing activities used $227,000 in cash for the year ended August31, 2018, as compared with $500,000 used for the year ended August 31, 2017. Our negative investing cash flow for the year endedAugust 31, 2018 is the result of our purchase of intangible assets for our cryptocurrency business and our investment in iCrowdU,offset by the sale of the copyright and all other rights in a film named “Gong Fu Nv Pai” copyright and the mobileapplication (Amoney) assets to an unrelated party.

 

Financing activities provided $1,156,924 cash for the year endedAugust 31, 2018, as compared with $313,816 for the year ended August 31, 2017. Our positive financing cash flow for both periodswas mainly proceeds from the sale of our common stock.

 

There can be no assurance that we will be successful in raisingadditional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired.There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

 

Off Balance Sheet Arrangements

 

As of August 31, 2018, there were no off balance sheet arrangements.

 

Going Concern

 

As of August 31, 2018, we had an accumulated deficit of $1,047,386and net loss of $1,111,950 and net cash used in operations of $866,887 for the year ended August 31, 2018. Losses have principallyoccurred as a result of the substantial resources required for general and administrative expenses associated with our operations.Our continuation as a going concern through August 31, 2019 is dependent upon the continued financial support from our stockholdersor external financing. Management believes the existing stockholders will provide the additional cash to meet with our obligationsas they become due. However, there is no assurance that we will be successful in securing sufficient funds to sustain the operations.

 

These conditions raise substantial doubt about our ability to continueas a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverabilityand 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 providesthe opportunity for the Company to continue as a going concern.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that allregistrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicatedthat a “critical accounting policy” is one which is both important to the portrayal of a company’s financialcondition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of theneed to make estimates about the effect of matters that are inherently uncertain.

 

Our critical accounting policies are set forthin Note 2 to the financial statements.

 

Recently Issued Accounting Pronouncements

 

We do not expect the adoption of recently issuedaccounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

Results of Operations for the Three andNine Months Ended May 31, 2020 and 2019

 

Revenues

 

Our total revenue reported for the three monthsended May 31, 2020 was $76,800, compared with $120,227 for the three months ended May 31, 2019. Our total revenue reported forthe nine months ended May 31, 2020 was $371,543, compared with $272,674 for the nine months ended May 31, 2019.

 

62% and 84% of revenue was generated from onecustomer during the nine months ended May 31, 2020 and May 31, 2019, respectively.

  

The increase in revenue for the nine monthsended May 31, 2020 over the nine months ended May 31, 2019 is attributable to increased revenue from sublicensing the VideoMixpatent to Anyone Pictures Limited and the new revenue stream of performance matching service fees generated from the Fan Dou HePai Wechat Official account. The decrease in revenue for the three months ended May 31, 2020 over the three months ended May31, 2019 was due to the performance matching platform “Fan Dou He Pai” not generating any revenue during the threemonths ended May 31, 2020 as the outbreak of COVID-19 forbid crowd-gathering for any commercial performances.

 

Due to the quarantine and continuous control imposedby the state and local governments in areas affected by COVID-19, merchant advertising events have been suspended for 7 months.The Company decided to shut down the Ai Bian Quan Qiu platform, which has created an adverse impact on the business and financialcondition and hampered its ability to generate revenue and access sources of liquidity on reasonable terms.

 

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We expect to continue to achieve steadily increasingrevenues within the coming months. However, as we are a start-up, we have limited operating history to rely upon and we cannotguarantee that our business plan will be successful.

 

Our cost of revenues was $42,192 for the threemonths ended May 31, 2020, as compared with $44,452 for the three months ended May 31, 2019. Our cost of revenues was $137,217for the nine months ended May 31, 2020, as compared with $124,660 for the nine months ended May 31, 2019.

 

As a result, we had gross profit of $34,608for the three months ended May 31, 2020, as compared with gross profit of $75,774 for the three months ended May 31, 2019. We hadgross profit of $234,326 for the nine months ended May 31, 2020, as compared with gross profit of $148,013 for the nine monthsended May 31, 2019.

 

We had a gross profit margin of 45% for thethree months ended May 31, 2020, a decrease from 63% over the three months ended May 31, 2019. We had a gross profit margin of63% for the nine months ended May 31, 2020, an increase from 54% over the nine months ended May 31, 2019

 

The reason for the increase in our gross profitmargin in 2020 over 2019 is attributable to revenue from the Wechat Official account for the Fan Dou He Pai performance matchingplatform that started generating revenue in February, 2019.

 

Operating Expenses 

 

Operating expenses increased to $344,422 forthe three months ended May 31, 2020 from $296,531 for the three months ended May 31, 2019. Operating expenses increased to $866,517for the nine months ended May 31, 2020 from $627,545 for the nine months ended May 31, 2019.

 

Our operating expenses for the nine monthsended May 31, 2020 consisted of general and administrative expenses of $619,032, research and development expenses of $108,800and related party salary and wages of $138,685. In contrast, our operating expenses for the nine months ended May 31, 2019 consistedof general and administrative expenses of $363,211 and related party salary and wages of $264,334.

 

We experienced an increase in generaland administrative expenses in 2020 over 2019, mainly as a result of increased rent, salaries, valuation fees, consulting fees,issuance expense for convertible notes, travel and entertainment, and depreciation expense, etc. Related party salary decreasedin 2020 from 2019 due to decreased stock-based compensation as a result of a decline in the Company’s valuation.  

 

The increase in researchand development expense was due to $108,800 long-term prepayment expensed as research and development expense in Q3, FY2020, becausethe Ai Bian Quan Qiu” platform did not generate any revenue during the COVID-19 period in Q2 (after January 23, 2020) andQ3, FY2020 and the Company impaired 80% of the “Ai Bian Quan Qiu” platform intangible asset value in Q2 2020.

 

We anticipate our operating expenses will increaseas we undertake our plan of operations, including increased costs associated with marketing, personnel, and other general and administrativeexpenses, along with increased professional fees associated with SEC compliance as our business grows more complex and more expensiveto maintain.

 

Other Income (Expenses)

 

We had other expenses of $6,060 for the threemonths ended May 31, 2020 as compared with nominal other income for the three months ended May 31, 2019. We had other expensesof $99,013 for the nine months ended May 31, 2020, as compared with other expenses of $119,912 for the nine months ended May 31,2019. Our other expenses for the nine months ended May 31, 2020 is mainly the result of interest expense of $44,697 and a $54,316loss on change in fair value of derivative liability.

 

Net (Loss) Income

 

We incurred a net loss in the amount of $315,874for the three months ended May 31, 2020, as compared with a net loss of $220,719 for the same period ended May 31, 2019. We incurreda net loss in the amount of $731,205 for the nine months ended May 31, 2020, as compared with a net loss of $599,444 for the sameperiod ended May 31, 2019.

 

 22 

 

Liquidity and Capital Resources

 

As of May 31, 2020, we had $2,994,482 in currentassets consisting of cash, prepaid expenses, accounts receivable, related party receivable, note receivable and interest receivable.Our total current liabilities as of May 31, 2020 were $565,190. As a result, we have working capital of $2,429,292 as of May 31,2020.

 

Operating activities used $218,045 in cashfor the nine months ended May 31, 2020, as compared with $615,849 used in cash provided for the same period ended May 31, 2019.Our negative operating cash flow in 2020 was mainly the result of our long-term prepayment of $1,011,200 and our net loss of $731,205,offset mainly by $1,280,000, on asset disposal in connection with our loan to All In One Media. Our negative operating cash flowin 2019 was mainly the result of our net loss of $599,444 and change in our prepaid expenses of $455,362.

 

Investing activities used $0 in cash for thenine months ended May 31, 2020, as compared with $78,272 used for the nine months ended May 31, 2019. Our negative investing cashflow for May 31, 2019 was the result of $99,584 for the development of intangible assets, and $58,688 for office renovations, offsetby $80,000 in the sale of intangible assets.

 

Financing activities provided $344,352 forthe nine months ended May 31, 2020, as compared with $416,081provided in financing activities for the nine months ended May 31,2019. Our positive financing cash flow for May 31, 2020 was the result of proceeds from convertible notes and warrants while thepositive financing cash flow for May 31, 2019 was the result of proceeds from the issuance of our common stock.

 

Based upon our current financial condition, we do not have sufficientcash to operate our business at the current level for the next twelve months. We intend to fund operations through increased salesand debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We planto seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we willbe successful in raising additional funding. If we are not able to secure additional funding, the implementation of our businessplan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms orat all.

 

We believe that the current cash balances together withrevenue anticipated to be generated from operations will not be sufficient to meet our current working capital needs. We willseek further funding from either share issuances or debt financing. Should we not be successful, we may have to curtail our operationssignificantly. Due to the COVID-19 pandemic, our ability to generate revenue has been significantly impacted. We anticipate thatwe will restart generating revenue once we launch the video streaming service. However, it is difficult to determine when we maystart to generate revenue from operation. 

 

Off Balance Sheet Arrangements

 

As of May 31, 2020, there were no off balancesheet arrangements.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that allregistrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicatedthat a “critical accounting policy” is one which is both important to the portrayal of a company’s financialcondition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of theneed to make estimates about the effect of matters that are inherently uncertain.

 

Our critical accounting policies are set forthin Note 2 to the financial statements.

  

Recently Issued Accounting Pronouncements

 

We do not expect theadoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial positionor cash flow. 

DIRECTORS AND EXECUTIVEOFFICERS

  Our current executive officer and directoris as follows:

 

Name   Age   Position
Chiyuan Deng     56     Chief Executive Officer, Principal Executive Officer and Director
Jianli Deng     26     Director
Brandy Gao     34     Chief Financial Officer and Chief Accounting Officer
Ho Fai Lam     63     Director
Ruiyu Guan     51     Director

  

 23 

 

Chiyuan Deng

 

Mr. Deng is an investor, producer, and director of Chinese films.He has worked as Vice Chairman of the Guangdong Province Film and TV Production Industry Association and Vice Secretary Generalof the China City Image Project Advancement Committee. He has extensive investment and management experience, including in theareas of corporate development and business investment activities. Mr. Deng graduated from Guangzhou Broadcast TV University in1987. Mr. Deng is Jianli Deng’s father.

 

Mr. Deng does not hold and has not held over the past five yearsany other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subjectto the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the InvestmentCompany Act of 1940.

 

We have chosen Mr. Deng as our director because of his experiencein the movie production business.

 

Jianli Deng

 

Mr. Deng is a producer of numerous international film and musicproductions involving mixed media. He is the creator of a mobile phone application which brings video merging functions containingsophisticated video editing technology normally utilized by computers to the smart phone. Mr. Deng attended Hong Kong Open Universitywhere he studied music marketing and management. Mr. Deng is Chiyuan Deng’s son.

 

Mr. Deng does not hold and has not held over the past five yearsany other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subjectto the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the InvestmentCompany Act of 1940.

 

Brandy Gao

 

Ms. Gao has more than 10 years of professional service experiencein a variety of industries including software, media, telecommunications, FinTech, pharmaceuticals, biotech, healthcare, financialservices, real estate, manufacturing, and retail. She played leadership roles at PwC and KPMG before starting HG, LLP as a foundingpartner.

 

Ms. Gao does not hold and has not held over the past five yearsany other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subjectto the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the InvestmentCompany Act of 1940.

 

 24 

 

Ho Fai Lam

 

From Jan 2014 to present, Mr. Lam is a director of Gay Giano CompanyLimited, a company holding patent and trademarks in the fashion industry.

 

Mr. Lam has over 20 years’ experience in treasury managementin the banking industry and 10 years of corporate finance experience.

 

Mr. Lam does not hold and has not held over the past five yearsany other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subjectto the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the InvestmentCompany Act of 1940.

 

Ruiyu Guan

 

From May 2014 to present, Ms. Guan has served as Secretary Generalof Guangdong Jin Shi Gold L.L.C. in China.

 

Ms Guan does not hold and has not held over the past five yearsany other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subjectto the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the InvestmentCompany Act of 1940.

 

Other Significant Employees

 

Other than our executive officer, we do not currently have any significantemployees.

 

Term of Office

 

Our directors are appointed for a one-year term to hold office untilthe next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers areappointed by our board of directors and hold office until removed by the board, subject to their respective employment agreements.

 

Family Relationships

 

There are no family relationships between or among the directors,executive officers or persons nominated or chosen by us to become directors or executive officers, aside from Jianli and ChiyuanDeng, who are father and son.

 

Involvement in Certain Legal Proceedings

 

During the past 10 years, none of our current executive officers,nominees for directors, or current directors have been involved in any legal proceeding identified in Item 401(f) of RegulationS-K, including:

 

 25 

 

  1. Any petition under the Federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing;

 

  2. Any conviction in a criminal proceeding or being named a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

  3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:

 

  i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;  

 

ii.       Engagingin any type of business practice; or

 

  iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

 

  4. Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures Trading Commission, securities, investment, insurance or banking activities, or to be associated with persons engaged in any such activity;

 

  5. Being found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 

  6. Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

  7. Being subject to, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 

i.       Any Federalor State securities or commodities law or regulation; or

 

  ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 

  iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

 26 

 

  8. Being subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

During the past 5 years, none of our promoter or control personhas been involved in any legal proceeding in any of the following:

 

  1. Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.

 

  2. Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses).

 

  3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.

 

  4. Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

  5. Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.

 

  6. Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.

 

  7. Administrative proceedings related to their involvement in any type of business, securities, or banking activity.

 

Audit Committee

 

The Board of Directors hasan audit committee to assist the Board of Directors in the execution of its responsibilities. Our audit committee is comprisedsolely of non-employee, independent directors as defined by NYSE American market listing standards.

 

The Audit Committee was establishedin October of 2019 and is comprised of Directors Ruiyu Guan and Ho Fai Lam, and is chaired by Director Lam.

 

The Audit Committee approvesthe selection of our independent accountants and meets and interacts with the independent accountants to discuss issues relatedto financial reporting. In addition, the Audit Committee reviews the scope and results of the audit with the independent accountants,reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accountingprocedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performanceof the independent auditor.

 

For the fiscal year endingAugust 31, 2019, the Audit Committee:

 

1. Reviewed and discussed theaudited financial statements with management, and

2. Reviewed and discussed thewritten disclosures and the letter from our independent auditors on the matters relating to the auditor's independence.

 

Based upon the Audit Committee’sreview and discussion of the matters above, the board of directors authorized inclusion of the audited financial statements forthe year ended August 31, 2019 to be included in this Annual Report.

 

The Board has determined thatMr. Lam of the Audit Committee qualifies as an audit committee financial expert as defined under applicable SEC rules and alsomeets the additional criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Securities ExchangeAct of 1934, as amended.

 

 27 

 

EXECUTIVE COMPENSATION

 

The table below summarizesall compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended August 31,2020 and 2019.

 

  SUMMARY COMPENSATION TABLE 

Name

and

principal

position

Year Salary($)

Bonus

($)

 

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation

($)

Total

($)

Chiyuan Deng
PresidentCEO and Director

2019

2020

 

0

_

0

0

100,000

_

0

0

0

0

0

0

0

0

100,000

_

Linqing Ye

Former COO

2019

2020

 

14,976

0

0

0

5,639

0

0

0

0

0

0

0

0

0

20,615

_

Jianli Deng

Former Secretary, Treasurer

2019

2020

0

_

 

0

0

50,000

_

 

 

0

0

0

0

0

0

0

0

50,000

_

Lijun Yu

Former Chief Marketing Officer

2019

2020

0

_

0

_

5,369

0

0

0

0

0

0

0

0

5,639

_

Brandy Gao

CFO

2019

2020

0

15,000

0

0

435

0

0

0

0

0

0

0

0

0

435

15,000

Dennis Chung

CTO

2019

2020

0

0

0

0

290

0

0

0

0

0

0

0

0

0

290

0

 

On July 30, 2018, we entered into an employment agreement with ChiyuanDeng to serve as our President. The agreement is for six years and we issued Mr. Deng 400,000 shares for his services. Under theagreement, Mr. Deng is eligible for a bonus if provided by the board, vacation, medical, insurance and other benefits.

 

On July 31, 2018, we entered into an employment agreement with JianliDeng to serve as our Secretary and Treasurer. The agreement is for six years and we issued Mr. Deng 200,000 shares for his services.Under the agreement, Mr. Deng is eligible for a bonus if provided by the board, vacation, medical, insurance and other benefits.

 

OnFebruary 8, 2019, we entered into a six year Employment Agreement with Miss Yu to serve as Chief Marketing Officer. We agreedto issue to Miss Yu 200,000 shares of common stock upon execution and she is eligible for an annual bonus, paid vacation and healthinsurance benefits. Upon her death or disability, Miss Yu is entitled to $1,000,000 prior to all taxes and other withholdings.Miss Yu is entitled to severance benefits upon certain conditions.   

 

On February 8, 2019, we entered into a six year Employment Agreementwith Mr. Linqing Ye to serve as Chief Operating Officer. We agreed to issue to Mr. Ye 200,000 shares of common stock upon executionand he is eligible for an annual bonus, paid vacation and health insurance benefits. Upon his death or disability, Mr. Ye is entitledto $1,000,000 prior to all taxes and other withholdings. Mr. Ye is entitled to severance benefits upon certain conditions.

 

On August 29, 2020, we entered into a Separation Agreement and Releasewith each of Jianli Deng, Lijun Yu and Linqing Ye. Pursant to the agreements, Mr. Deng resigned as Secretary and Treasurer, Mr.Yu resigned as Chief Marketing Officer and Mr. Ye resigned as Chief Operating Officer. Mr. Deng will remain on as a member of ourboard of directors.

 

The Separation and Release Agreement cancelled the employment agreementsfor each of Messrs. Deng, Yu and Ye, and provided them each an indebtedness payment within five (5) business days of the agreements.Mr. Deng will receive $110,000 USD, Miss Yu will receive $110,000 USD and Mr. Ye will receive $120,000 USD. We received a releaseof all claims from these prior officers.

 

On September 11, 2020, we issued a total of 100,000 shares of ournewly designated Series A Preferred Stock to Chiyuan Deng in connection with Mr. Deng’s amended employment agreement.

 

 28 

 

The table below summarizes all unexercised options,stock that has not vested, and equity incentive plan awards for each named executive officer as of August 31, 2019.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS STOCK AWARDS
Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive  Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price  ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#)

Market Value of Shares or Units

of Stock That Have Not Vested ($)

Equity Incentive  Plan Awards:  Number of Unearned  Shares, Units or Other Rights That Have

 Not Vested (#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not  Vested (#)
Chiyuan Deng - - - - - - - - -
Linqing Ye - - - - - - - - -
Jianli Deng - - - - - - - - -
Lijun Yu - - - - - - - - -
Brandy Gao - - - - - - - - -
Dennis Chung - - - - - - - - -

 

Director Compensation

 

EffectiveOctober 17, 2019, the Company has appointed Mr. Ho Fai Lam and Ms. Gigi Ruiyu Guan as members of Board of Directors. As non-employeedirectors, Mr. Lam and Ms. Guan will be entitled to participate in our Director Compensation Plan. Under Plan, independent directorswill receive $1,000 for each meeting of the Board of Directors attended in person and $1,000 for each two meetings of the Boardof Directors in which they participate by telephone or video conference. Additionally, they will receive an annual payment of (i)2,000 shares of the Company’s common stock, par value $0.001, which shall be paid in quarterly grants of 500 shares, and(ii) an option to purchase 2,000 shares of the Company’s common stock, a quarter of which shall vest each quarter. This Planis based on three-year term of office.

 

On September 29, 2020, our board of directorsapproved a change in director compensation from shares to cash compensation.

 

For the year 2019-2020, the Board of Directorshereby approves of the payment of US$9,000 as the fee for each Director.

 

For the year 2020-2021, the Board of Directorshereby approves of the payment of US$9,000 as the fee for each Director.

 

SecurityOwnership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth, as of October 12, 2020 certain informationas to shares of our common stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding commonstock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group:

 

Name and Address of
Beneficial Owner
  Common Stock     Series A
Preferred Stock
    Number of Shares Owned     Percent of  Class(1)(2)     Number of Shares Owned     Percent of  Class(1)(2)
Chiyuan Deng(3)     2,129,400       2.2%     100,000       100%
Brandy Gao     2,000       *       -       -
Jianli Deng     400,000       *       -       -
Ho Fai Lam     -       -       -       -
Ruiyu Guan     -       -       -       -
All Directors and Executive Officers as a Group (3 persons)     2,531,400       2.6%     100,000       100%
5% Holders                              
Arikeri Pathikonda Sivakumar     12,500,000                  12.7%                

 

* Less than 1%

 

  (1) Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of voting stock listed as owned by that person or entity.

 

  (2) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficialownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shareswhich the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants.The percent of class is based on 98,103,494 shares of common stock issued and outstanding as of October 12, 2020.

 

  (3) Includes 2,029,400 shares and 100,000 shares that may be acquiredwithin 60 days on conversion of the 100,000 shares of Series A Preferred Stock

 

 29 

Transactions with Related Persons

 

Except as provided in “Description ofBusiness” and “Executive Compensation” set forth above, for the past two fiscal years there have not been, andthere is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant inwhich the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-endfor the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of ourcapital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect materialinterest.

 

 

The Company has entered into a patent licenseagreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”). The agreementis for a term of 5 years commencing on the effective date on June 1, 2017. The Company has already paid the licensor a non-refundable,up-from payment of $500,000 and shall pay a royalty of 20% of the gross revenue realized from the sale of licensed products andsub-licensing of this patent every year. The royalty expenses during the year ended August 31, 2019 and 2018 are $60,928 and $50,022,respectively.

 

In December, 2018, the Company appointedBrandy Gao as Chief Financial Officer and issued 100,000 shares as compensation. In February 2019, the Company appointedLinqing Ye as Chief Operational Officer and Lijun Yu as Chief Marketing Officer, and issued 10,000,000 shares to each of themas compensation. During the year ended August 31, 2019, $210,584 was paid to five executives in the form of stock-basedcompensation and $$14,976 cash salary was paid to the Chief Operational Officer.

 

As of August 31, 2019, the company has $35,348related party receivable from Youall Perform Services Ltd, owned by the Company’s Board of Director Jianli Deng. Youall PerformServices Ltd collected revenue from the performance matching platform (Ai Bian Quan Qiu) on behalf of the Company.

 

The Company rented an office from Zestv StudiosLtd., owned by the Chief Executive Officer Chiyuan Deng, and incurred a total related party payable of $5,504 as there is a one-monthlag in payment of the office rent.

 

 30 

 

PART I. Financial Information 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

  

  Page
   
Consolidated Financial Statements of AB International Group Corp. and Subsidiaries  
   
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of August 31, 2019 and 2018 F-3
Consolidated Statements of Operations for the Years Ended August 31, 2019 and 2018 F-4
Consolidated Statements of Stockholders’ Equity for the Years Ended August 31, 2019 F-5
Consolidated Statements of Cash Flows for the Years Ended August 31, 2019 and 2018 F-6
Notes to Consolidated Financial Statements F-7

 

 

  Page
   
Consolidated Financial Statements of AB International Group Corp. and Subsidiaries  
   
Consolidated Balance Sheets as of May 31, 2020 and August 31, 2019 F-18
Consolidated Statements of Operations for the Three and Nine Months Ended May 31, 2020 and 2019 F-19
Consolidated Statements of Stockholders’ Equity for Nine Months Ended May 31, 2020 and May 31, 2019 F-20
Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 2020 and 2019 F-21
Notes to Consolidated Financial Statements F-22

 

 F-1 

  

Yu Certified Public AccountantPC

Professionalism, Expertise, Integrity

 

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To theShareholders and Board of Directors of
AB International Group Corp

 

Opinionon the Financial Statements

 

Wehave audited the accompanying consolidated balance sheets of AB International Group Corp (the “Company”) as of August31, 2019, and 2018, and the related consolidated statements of operations, statements of changes in stockholders’ equityand consolidated statements of cash flows for the years then ended, and the related notes (collectively referred to as the financialstatements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financialpositions of AB International Group Corp as of August 31, 2019, and 2018, and the results of their operations and their cash flowsfor the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basisfor Opinion

 

Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthe Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordancewith the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and thePCAOB.

 

Weconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsto obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to erroror fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting.As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for thepurpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,we express no such opinion.

 

Ouraudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due toerror or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principlesused and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.We believe that our audits provide a reasonable basis for our opinion.

  

 

/s/ YuCertified Public Accountant PC

 

We haveserved as the Company's auditor since 2017.

 

New York,New York

October21, 2019

 

Certified Public Accountants

99 Madison Avenue, Suite601, New York NY 10016

Tel: 646-430-5761

Email: Info@yucpa.net

 

 F-1 

 

ABINTERNATIONAL GROUP CORP.

CONSOLIDATEDBALANCE SHEETS

 

   As of August 31,
   2019  2018
       
 ASSETS         
 Current Assets         
    Cash and cash equivalents  $1,564,750   $210,202
    Prepaid expenses   21,970    333,867
    Accounts receivable   35,300    9,600
    Related party receivable   34,994    —  
    Note receivable   1,047,040    —  
    Interest receivable   8,725    —  
    Receivable on asset disposal   1,280,000    —  
       Total Current Assets   3,992,779    553,669
          
 Fixed assets, net   20,124    —  
 Leasehold improvement, net   134,523    —  
 Intangible assets, net   413,793    641,000
 Other assets   15,027    —  
 TOTAL ASSETS  $4,576,246   $1,194,669
          
 LIABILITIES AND STOCKHOLDERS’ EQUITY         
 Current Liabilities         
    Accounts payable and accrued liabilities  $116,664   $88,577
    Due to shareholder   2,037    2,037
    Tax payable   64,564    55,347
    Other payable   161,856    —  
 Total Current Liabilities   345,122    145,961
          
 Stockholders’ Equity         
 Common stock, $0.001 par value, 1,000,000,000 shares authorized;   4,822,016 and 147,325,000 shares issued and outstanding, as of August 31, 2019 and August 31, 2018, respectively   4,822    147,325
 Additional paid-in capital   6,520,980    2,866,868
 Retained earnings (deficit)   (1,452,020)   (1,047,386)
 Unearned shareholders' compensation   (842,657)   (918,100)
 Total Stockholders’ Equity   4,231,125    1,048,707
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $4,576,246   $1,194,669

 

Theaccompanying notes are an integral part of these consolidated financial statements.

 

 F-2 

 

AB INTERNATIONAL GROUPCORP.

CONSOLIDATEDSTATEMENTS OF OPERATIONS

 

   For the Years Ended
   August, 31
   2019  2018
       
Revenue  $433,567   $250,112
Cost of revenue   174,533    150,022
Gross Profit   259,034    100,090
          
OPERATING EXPENSES         
General and administrative expenses   525,109    897,587
Related party salary and wages   176,979    79,741
      Total Operating Expenses   702,088    977,328
          
OTHER INCOME (EXPENSES)         
Gain on sale of intangible assets   29,330    —  
Interest income   9,089     
Impairment of investment in iCrowdU   —     (280,000)
      Total other income (expenses)   38,419    (280,000)
          
LOSS FROM CONTINUED OPERATIONS         
Income Tax Provision   —      —  
Net loss from continuing operations   (404,635)   (1,157,238)
          
Discontinued operations, net of tax benefits         
Net income from discontinued operations   —      38,008
Gain/(loss) on sale of intangible assets   —      7,280
INCOME FROM DISCONTINUED OPERATIONS   —      45,288
          
NET INCOME (LOSS)  $(404,635)  $(1,111,950)
          
NET INCOME (LOSS) FROM CONTINUED OPERATIONS PER SHARE: BASIC AND DILUTED  $(0.11)  $(1.00)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS PER SHARE: BASIC AND DILUTED  $0.00   $0.04
          
NET INCOME PER SHARE: BASIC AND DILUTED  $(0.11)  $(0.96)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED   3,767,041    1,162,792

 

The accompanying notesare an integral part of these consolidated financial statements.

 

 F-3 

 

ABINTERNATIONAL GROUP CORP.

CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY

 

    Common Stock                    
    Number of Shares    Amount    Additional Paid-in Capital    Accumulated Deficit    Unearned Shareholders’ Compensation    Total Equity
                              
Balance - August 31,  2018   147,325,000   $147,325   $2,866,868   $(1,047,386)  $(918,100)  $1,048,707
                              
Common shares issued to officers for services   20,100,000    20,100    96,480    —      2,219   118,799
Common shares issued to consultants for services   5,275,000    5,275    30,354    —      —      35,629
Common shares returned for cancelled acquisition of iCrowdU Inc.   (40,600,000)   (40,600)   —      —      30,600    (10,000)
Common shares issued for cash  at $0.02 per share   48,000,000    48,000    912,000    —      —      960,000
Balance before the reverse split   180,100,000    180,100    3,905,702    (1,047,386)   (885,281)   2,153,136
Reverse stock split   (176,497,984)   (176,498)   176,498    —      —      —  
Balance after the reverse split - June 5, 2019   3,602,016    3,602    4,082,200    (1,047,386)   (885,281)   2,153,136
                              
Common shares issued for cash at $2 per share   1,220,000    1,220    2,438,780    —      —       2,440,000
Common shares issued to officers for services   —      —      —      —      42,623    42,623
Net loss   —      —      —      (404,635)   —      (404,635)
Balance - August 31,  2019   4,822,016   $4,822   $6,520,980   $(1,452,020)  $(842,657)  $4,231,125

  

The accompanying notesare an integral part of these consolidated financial statements.

 

 F-4 

 

AB INTERNATIONAL GROUPCORP.

CONSOLIDATED STATEMENTSOF CASH FLOWS

 

   For the Years Ended
   August, 31
   2019  2018
       
CASH FLOWS FROM OPERATING ACTIVITIES         
Net loss from continuing operations  $(404,635)  $(1,157,238)
Net income from discontinued operations, net of tax benefit   —      45,288
Adjustments to reconcile net income (loss) to net cash from operating activities:         
Executive salaries and consulting fees paid in stock   197,052    196,250
Depreciation of tangible asset   13,079    —  
Amortization of intangible asset   126,791    106,000
Loss/(gain) on sales of intangible assets   120,000    (7,280)
Impairment of investment in iCrowdU   —      280,000
Changes in operating assets and liabilities:         
Accounts receivable   (25,700)   (59,520)
Receivable on asset disposal   (1,280,000)   —  
Interest receivable   (8,725)   —  
Related party receivable   (34,994)   —  
Prepaid expenses   301,897    (288,032)
Rent security & electricity deposit   (15,027)   —  
Accounts payable and accrued liabilities   140,223    (80,087)
Accrued payroll   (112,136)   (2,500)
Tax payable   9,217    —  
Other payable   161,856    —  
Change in assets (liabilities) from discontinued operations   —      100,232
Net cash used in operating activities   (811,102)   (866,887)
          
CASH FLOWS FROM INVESTING ACTIVITIES         
Sales of intangible asset   80,000    253,000
Note receivable   (1,047,040)   —  
Investment in iCrowdU   —      (280,000)
Renovation of an office and an offline display store   (167,726)   —  
Development of intangible asset   (99,584)   (200,000)
Net cash used in / (provided by) investing activities   (1,234,350)   (227,000)
          
CASH FLOWS FROM FINANCING ACTIVITIES         
Proceeds from shareholder   —      424
Proceeds from common stock issuances   3,400,000    1,156,500
Net cash provided by financing activities   3,400,000    1,156,924
          
Net increase (decrease) in cash and cash equivalents   1,354,549    63,037
Cash and cash equivalents - beginning of the year   210,202    147,164
Cash and cash equivalents - end of the year  $1,564,750   $210,201
          
Supplemental Cash Flow Disclosures         
   Cash paid for interest  $—     $—  
   Cash paid for income taxes  $—     $—  
          
Non-Cash Activities:         
Common shares returned for cancelled acquisition of iCrowdU  $(10,000)  $—  
Prepaid expense reversed for cancelled acquisition of iCrowdU  $10,000   $—  
Common shares issued for acquisition of investment  $—     $10,000
Issuance of common stock for acquisition of intangible asset  $—     $72,000
Stock reverse split (50:1)  $—     $—  

 

The accompanying notesare an integral part of these consolidated financial statements.

 

 F-5 

 

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended August 31, 2019 and 2018

 

NOTE 1 - ORGANIZATIONAND BUSINESS OPERATIONS

 

AB International Group Corp. (the "Company","we" or "us") was incorporated under the laws of the State of Nevada on July 29, 2013 and originally intendedto purchase used cars in the United States and sell them in Krygyzstan. The Company's fiscal year end is August 31.

 

On January 22, 2016, our former sole officer,who owned 83% of our outstanding common shares, sold all of his common shares to unrelated investor Jianli Deng. After the stocksale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designed for movie trailerpromotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphone makers,online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins to moviedistributors or other video advertisers in China. We created the app “Amoney” for the Android smartphone platform todevelop a WeChat micro-shop that was designed to display and deliver a variety of information and links for download or onlinewatch prices in the China market.

 

On June 1, 2017, we entered into a Patent LicenseAgreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television Company Limited, a companyincorporated in China (“Licensor”), granted to us a worldwide license to a video synthesis and release system for mobilecommunications equipment (the “Technology”). The Technology is the subject of a utility patent in the People’sRepublic of China. Under the Agreement, we are able to utilize, improve upon, and sub-license the technology for an initial periodof one year from October 1, 2017 to September 30, 2018, subject to a right to renew. We were obligated to pay the Licensor $500,000within 30 days of the date of the Agreement and a royalty fee in the amount of 20% of any proceeds resulting from our utilizationof the Technology, whether in the form of sub-licensing fees or sales of licensed products. Our Chief Executive Officer, ChiyuanDeng and former Chief Executive Officer, Jianli Deng, jointly own and control Licensor. On October 10, 2017, we completed the paymentof $500,000 initial payment amount due under the Agreement. In October, 2018, the term of this sublicensing agreement was renewedand extended until October 31, 2019.

 

Our License to the Technology generates revenuethrough sub-license monthly fees from a smartphone app on Android devices. This app was already existing and licensed at the timewe acquired the Technology.

 

On March 10, 2018, we acquired intellectualproperty for $200,000 from All In One Media Ltd, previously named as Aura Blocks Ltd. On March 19, 2018, we entered into consultingagreements (the “Consulting Agreements”) with four consultants (the “Consultants”). The Consulting Agreementshave terms or either two or three years. Under the Consulting Agreements the Consultants will provide services to us in Hong Kongand China related to blockchain technology and krypto kiosks. In consideration for the services provided by the Consultants, wehave issued the Consultants a total of 1,100,000 shares of our common stock. On November 10, 2018, the Company sold this intellectualproperty to China IPTV Industry Park Holdings Ltd. for $80,000.

 

On March 21, 2018, we acquired the intellectualassets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operationof cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plansto generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposesto bring a physical aspect to something that is otherwise very abstract to people. We also issued to JPC Fintech Limited 2,400,000common shares with a market value of $72,000 exchange of KryptoKiosk Limited’s assets consist mostly of intellectual property,including, but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rightsand personal property.

 

 F-6 

 

We planned to generate revenue through sub-licensingfees for the operation of cryptocurrency ATMs. Through the foregoing, we proposed to bring a physical aspect to something thatis otherwise very abstract to people. We planned to invest in machines and sell sub-licenses in the Asia Pacific region with futureworld-wide expansion. We had promoted and marketed the ATM business for 6 months or until around August 2018, because the BTC andcryptocurrencies price went down. The IP, however, was never transferred to us. We have repeatedly requested from Messrs. Grounds,Vickery and Shakespare access to the domains and websites and other information concerning the IP assets. As of the date of thisannual report, no such information has been provided. In addition, the IP including domain names were transferred to others whileMessrs. Vickery and Shakespare were officers of our company. As a result, we ceased promotions and marketing on the ATM businessand relations cryptocurrencies business in September 2018. On November 21, 2018, we had sent the final notice that JPC Fintechhas materially breached the agreement. We requested that JPC Fintech Ltd. return its stock certificate received in the transactionto our transfer agent for immediate cancellation. We have not yet received the certificate for termination.

 

On May 9, 2018, we entered into an investoragreement with iCrowdU Inc. We agreed to purchase 228,013 shares of iCrowdU Inc. at a share price of $1.228 for total considerationof $280,000. iCrowdU Inc. offers an online platform and mobile app for crowd funding services targeting the global crowd fundingmarket.

 

Furthermore, it was agreed to exchange 2,000,000shares of our common stock for 2,000,000 shares of common stock in iCrowdU Inc. This share exchange was made as collateral in advanceof an investment of $1,935,000 by us into iCrowdU Inc., which never occurred.

 

On or about May 9, 2018, we entered into consultancyagreements with Alexander Holtermann, Ian Wright and Luis Hadic. Each of Messrs. Holtermann, Wright and Hadic received 200,000shares of our common stock under the consultancy agreements.

 

On or about July 26, 2018, we entered intoan investment agreement with iCrowdU Inc. for the purchase of 40% of iCrowdU in exchange for 8,000,000 shares of our common stockthat would be split between Messrs. Holtermann and Wright at 70% and 30%, respectively, and an investment of $10,000,000. The 8,000,000shares were cut but not delivered to Messrs. Holtermann and Wright and no part of the $10,000,000 was invested by us into iCrowdUInc.

 

On or about July 31, 2018, we entered intoemployment agreements with Messrs. Holtermann and Wright for the consideration provided for under the agreements.

 

On October 25, 2018, the above parties enteredinto an Agreement for Termination and Release that terminated all outstanding agreements among the parties and released each partyfrom the other. We agreed to settle outstanding expenses and costs incurred by iCrowdU Inc., in the sum of $6,444.90. In addition,all parties agreed to return any shares received from the above agreements, save we shall be permitted to retain the 228,013 sharespurchased in iCrowdU Inc. Finally, we agreed to amend our Current Report on Form 8-K concerning certain disclosures made therein.We amended the report as per the agreement.

 

On September 5, 2018, the Company enteredinto an agreement to acquire a movie copyright for $768,000 from All In One Media Ltd, which holds 200,000 common shares ofthe Company as of August 31, 2019 and is previously named as Aura Blocks Limited. The remaining balance to Aura BlocksLimited is $153,600 as of August 31, 2019. The Company has obtained the exclusive permanent broadcasting right outside themainland China and is expected to generate revenues from showing the movie online, in theaters, and on TV outside themainland China once this movie is completed in June, 2019. In August of 2019, the Company sold this movie copyright to ChinaIPTV Industry Park Holding Ltd for $857,600 with a gain of $89,538.

 

In December of 2018, we engaged StarEastnet,a software developer that holds 171,000 common shares of the Company as of August 31, 2019, to start developing a performance matchingplatform (Ai Bian Quan Qiu) and a WeChat official account to advertise the platform. The matching platform is to arrange performanceevents for celebrities and performers. Performers can set their schedules and quotes on the platform. The platform will maximizetheir profits from performance events by optimizing their schedules based upon quotes and event locations and save time from commutingamong different events. “Ai Bian Quan Qiu” utilizes the artificial intelligence (AI) matching technology to instantlyand accurately match performers and advertisers or merchants. The company charges agency service fees for each successful eventmatched through the platform. Due to the quarantine and continuous control imposed by the state and local governments in areasaffected by COVID-19, merchant advertising events have been suspended for 7 months. The Company decided to shut down the Ai BianQuan Qiu platform, which has created an adverse impact on the business and financial condition and hampered its ability to generaterevenue and access sources of liquidity on reasonable terms.

 

 F-7 

 

In June, 2019, the Company completed the developmentof a video mix APP for social video sharing via iOS and Android smartphones. This app was originally planned to take advantageof the core design philosophy of “My film anyone, anywhere, anytime be together” as similar and competitive innovativevideo and community apps have been activated on over 2 million unique devices in China as of December 31, 2017 and precipitatedthe duet video synthesis phenomenon in China. However, the Company decided to focus on the “Ai Bian Quan Qiu” platformas its main business and thus sold the video mix APP to Anyone Pictures Limited, which holds 242,980 common shares of the Company,for $422,400 with a gain of $59,792 in August of 2019.

 

In August of 2019, the Company entered intoa one-year loan agreement to lend $1,047,040 at an annual interest rate of 10% to All In One Media Ltd, previously named as AuraBlocks Limited, for producing films and digital videos in Hong Kong. The term of note receivable is from August 1, 2019 to July31, 2020. The Company expects to have similar short term note receivables for the next few years.

 

NOTE 2 –SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financialstatements of the Company have been prepared in accordance with generally accepted accounting principles in the United Statesof America and are presented in US dollars. The Company’s year-end is August 31. The financial statements have been preparedon a consolidated basis, with their fully owned subsidiary App Board Limited. No intercompany balances or transactions exist duringthe period ended August 31, 2019.

 

Basis of Consolidation

 

The financial statements have been preparedon a consolidated basis, with the Company’s fully owned subsidiary App Board Limited registered and located in Hong Kong.No intercompany balances or transactions exist during the year period ended August 31, 2019.

 

Use of Estimates

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United States requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date thefinancial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differfrom those estimates.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows,the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

 

Foreign Currency Transactions

 

The Company’s planned operations areoutside of the United States, which results in exposure to market risks from changes in foreign currency rates. The financial riskarise from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company doesnot use derivative instruments to reduce its exposure to foreign currency risk. Non-monetary assets and liabilities are translatedat historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenuesand expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statementsinto U.S. dollars are included in current results of operations.

 

 F-8 

 

Accounts Receivable

 

Accounts receivable consist of amounts duefrom promotional services provided. Amounts receivable are recorded at the invoiced amount and do not bear interest. The allowancefor doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable.No amount for bad debt expense has been recorded by the Company during the year ended August 31, 2019 and 2018, and no write-offfor bad debt were recorded for the year ended August 31, 2019, and 2018.

 

Prepaid Expenses

 

Prepaid expenses primarily consist of consultingfees that have been paid in advance and prepayments of financial adviser fee, OTC market annual fee, and website and domain fee.The prepaid balances are amortized when the related expense is incurred.

 

Note Receivable

 

Note receivable is a one-year note bearingannual interest of 10% with the principal payable annually at the end of the term. Interest is due and payable, at the electionof the Company, in cash on the Maturity Date, as applicable, or if the note receivable is prepaid earlier, on such prepayment date.Therefore, interest income is recorded along with interest receivable throughout the note period.

 

Fixed Asset

 

Fixed asset consists of furnitureEstimated and appliances acquired for the office. The balance is stated at cost less accumulated depreciation. Depreciationis computed using the straight-line method over estimated useful lives listed below:

 

Estimated Useful Life
Furniture  5 years
Appliances  7 years

 

Leasehold Improvement

 

Leasehold improvement is related to the enhancementspaid by the Company to leased office and store. Leasehold improvement represents capital expenditures for direct costs of renovationor acquisition and design fees incurred. The amortization of leasehold improvements commences once the renovation is completedand ready for the Company’s intended use. Leasehold improvement is amortized over the lease term of 3 years.

 

Intangible Assets

 

Intangible assets are stated at cost and depreciatedas follows:

 

§Mobile application product: straight-line method over the estimatedlife of the asset, which has been determined by management to be 3 years
§Movie copyrights: income forecast method for a period not to exceed10 years
§Patent: straight-line method over the term of 5 years based on thepatent license agreement 

 

Amortized costs of the intangible asset arerecorded as cost of sales, as the intangible asset is directly related to generation of revenues in the Company.

 

 F-9 

 

Revenue Recognition

The Company adopted ASCTopic 606, “Revenue from Contracts with Customers”, applying the modified retrospective method.

In accordance with ASCTopic 606, revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount thatreflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies thefollowing five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations undereach of its agreements:

§the contract with a customer;
§identify the performance obligations in the contract;
§determine the transaction price;
§allocate the transaction price to performance obligations in thecontract; and
§recognize revenue as the performance obligation is satisfied.

 

The Company does notbelieve that significant management judgements are involved in revenue recognition, but the amount and timing of the Company’srevenues could be different for any period if management made different judgments or utilized different estimates. Generally, theCompany recognizes revenue under ASC Topic 606 for its performance obligation.

The Company generates revenue from sub-licensinga patent and charging a service fee from the “Ai Bian Quan Qiu” platform for actors and commercial events matching.

 

The sub-licensing revenue is recognized monthlybased upon the number of users who download the APP that utilizes the Company’s patent. The monthly royalty the Company chargesAnyone Pictures Limited is $12.8 per 1000 APP users. During the year of 2019, both parties agreed to charge the sublicensing feebased upon a fixed number 2,000,000 users.

 

The “Ai Bian Quan Qiu” platformservice revenue is derived principally from providing matching service to merchants who are looking for actors to perform at theiradvertising events. The Company recognizes revenue upon a matching event is accepted by actors with a service fee of 10% of theactors’ quote for performing at the events. For the service fee revenue from the “Ai Bian Quan Qiu” platform,the Company does not control the specified goods or services before that is transferred to the customers and thus the Company isan agent. Therefore, this service revenue is recognized at a net basis.

 

Leasing

The Company has operating leases foran office and a store for display with expiration dates through 2022. The Company determines whether an arrangement is or includesan embedded lease at contract inception. Lease expense is recognized on a straight-line basis over the lease term.

Income Taxes

 

The Company accounts for income taxes pursuantto FASB ASC 740 “Income Taxes”. Under ASC 740 deferred income taxes are provided on a liability method wherebydeferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilitiesare recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assetsand liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxesrepresents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferredtax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

ASC 740 also provides criteria for the recognition,measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position onthe income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by therelevant taxing authority. At August 31, 2019, there was unrecognized tax benefits. Please see Notes 11 for details.

 

 F-10 

 

Value-Added Taxes

 

The Company generates revenue in People's Republicof China (PRC) via the “Ai Bian Quan Qiu” platform and is subject to a value-added tax at an effective rate of 6%.In accordance with PRC law, the Company is also subject to surcharges, which includes urban maintenance and construction taxesand additional education fees on VAT payable.

 

For the year ended August 31, 2019, the Company’srevenue generated from the “Ai Bian Quan Qiu” platform is subject to VAT at a rate of 6% and subject to surchargesat a rate of 12% of the VAT payable. The Company did not incur any VAT tax for the year ended August 31, 2018 as the “AiBian Quan Qiu” platform did not start generating revenue until February, 2019.

 

Basic and Diluted Income (Loss) Per Share

 

The Company computes income (loss) per sharein accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earningsper share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) availableto common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) pershare gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes allpotential common shares if their effect is anti-dilutive.

 

No potentially dilutive debt or equity instrumentswere issued or outstanding as of August 31, 2019 and August 31, 2018.

 

The earnings per share after the reverse stocksplit is presented retrospectively as if the reverse split had occurred at the very beginning of the business.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases.The standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognizein its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right touse the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accountingpolicy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessorsare required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018.

 

In September 2017, the FASB has issued ASUNo. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases(Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescissionof Prior SEC Staff Announcements and Observer Comments.” The amendments in ASU No. 2017-13 amends the early adoption dateoption for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may stilladopt using the public company adoption guidance in the related ASUs, as amended. The effective date is the same as the effectivedate and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.

 

In February 2018, theFASB issued guidance to address the income tax accounting treatment of the tax effects within other comprehensive income due tothe enactment of the Tax Cuts and Jobs Act (the “Act”). This guidance allows entities to elect to reclassify the taxeffects of the change in the income tax rates from other comprehensive income to retained earnings. The guidance is effectivefor periods beginning after December 15, 2018 although early adoption is permitted. The Company has evaluated and concluded thatthere was no impact on its consolidated financial position and results of operations.

 F-11 

 

In March 2018, the FASBissued ASU 2018-05: “Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.118”. The amendments in this ASU add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No.118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includesDecember 22, 2017 – the date on which the Tax Cuts and Jobs Act was signed into law. The Company has evaluated and concludedthat there was no impact on its consolidated financial position and results of operations.

In June 2018, the FASBissued ASU 2018-07: “Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-BasedPayment Accounting”. This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently onlyincludes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently,the accounting for share-based payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic505-50, Equity—Equity-Based Payments to Nonemployees. The amendments in this ASU are effective for public companies for fiscalyears beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendmentsare effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contractswith Customers. The Company does not currently expect the adoption of the amendment to have a material impact on its consolidatedfinancial position and results of operations.

In July 2018, the FSABissued ASU 2018-10 ASC Topic 842: “Codification Improvements to Leases” The amendments are to address stakeholders’questions about how to apply certain aspects of the new guidance in Accounting Standards Codification (ASC) 842, Leases. The clarificationsaddress the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification,lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transitionadjustments. The amendments in ASC Topic 842 are effective for EGC for fiscal years beginning after December 15, 2019, and interimperiods within fiscal years beginning after December 15, 2020. While early application is permitted, including adoption in an interimperiod, the Company has not elected to early adopt. The Company is currently evaluating the impact of this accounting standardupdate on its consolidated financial statements.

In July 2018, the FASBissued ASU 2018-11, Leases (Topic 842). This update provides entities with an additional (and optional) transition method to adoptthe new leases standard. Under this method, an entity initially applies the new leases standard at the adoption date and recognizesa cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparativeperiod’s financials will remain the same as those previously presented. Entities that elect this optional transition methodmust provide the disclosures that were previously required. The Company is evaluating the effect this new guidance will have onour consolidated financial statements and related disclosures.

NOTE 3 –PREPAID EXPENSES

 

On June 1, 2018, the Company entered into anagreement with an outside phone apps designer to develop a VideoMix smartphone app for video synthesis and sharing. In June of2019, the Company completed the VideoMix development and reclassified the previously recognized prepaid expense related to thisVideomix development as intangible asset. In August of 2019, the Company sold the video mix APP to Anyone Pictures Limited for$422,400 with a gain of $59,792.

 

On September 5, 2018, the Company acquireda movie copyright from Aura Blocks Limited at a purchase price of $768,000. As of August 31, 2019, the Company has one remainingpayment of $153,600 recorded in other payable. The Company sold this movie copyright to China IPTV Industry Park Holding Ltd for $857,600with a gain of $89,538.

 

Prepaid expense as of August 31, 2019 includes$6,667 prepaid consulting fees net of amortization, $3,500 prepayment of financial advisor fee, $11,000 prepayment of OTC marketannual fee, and $803 prepaid website and domain fee.

 

 F-12 

 

NOTE 4 –RECEIVABLE ON ASSET DISPOSAL

 

Receivable on Asset Disposal is comprised of$1,280,000 receivable from sales of two intangible assets, a Videomix APP and a movie copyright. The receivable amount from thesales of the movie copyright and the Videomix APP are $857,600 and $422,400, respectively. Refer to NOTE 14 for the subsequentcollection of this receivable balance.

 

NOTE 5 – NOTE RECEIVABLE

 

Note receivable relates to the one-year loanof $1,280,000 the Company lends to All In One Media Ltd at an annual interest rate of 10%. The loan principal is due at the endof the term on July 31, 2020. The Company has generated an interest income and an interest income receivable of $8,725 for themonth of August, 2019.

 

NOTE 6 –DISCONTINUED OPERATIONS

 

On November 16, 2017, the Company sold thecopyright and all other rights in a film named “Gong Fu Nv Pai” copyright and the mobile application (Amoney) assetsto an unrelated party for $253,000 cash.

 

The sales of intangible assets qualified asa discontinued operation of the Company and accordingly, the Company has excluded results of the operations from its ConsolidatedStatements of Operations to present this revenue and expenses from these intangible assets in discontinued operations.

 

The following table shows the results of operationsof mobile application and copyright for year ended August 31, 2019 and 2018 which are included in the gain from discontinued operations:

 

   Years ended
   August 31,
   2019  2018
Revenue  $—     $49,920
Cost of revenue   —      (11,912)
Income Tax Provision   —      —  
Gain from discontinued operations  $—     $38,008

 

NOTE 7 – LEASEHOLD IMPROVEMENT

 

Leasehold improvement relates to renovationand upgrade of an office and an offline display store. There is a total cost of $165,760 due to the construction company, including$146,752 for renovation of the office and the store and $19,008 related to office furniture and appliances the construction companypurchased on behalf of the Company. As of August 31, 2019, the Company has paid $161,088 to the construction company with a remainingunpaid balance of $4,672 recorded in other payable. As the renovation is completed as of August 31, 2019, the Company capitalizedthe renovation cost as leasehold improvement and the cost of furniture and appliances as fixed asset. The leasehold improvementis depreciated over 3 years which equal the terms of the operating lease for renting an office.

 

 F-13 

 

NOTE 8 – INTANGIBLE ASSETS

 

As of August 31, 2019, and August 31, 2018,the balance of intangible assets are as follows;

 

   August 31,
   2019  2018
 Patent  $500,000   $500,000
 Intellectual property: Aura   —      200,000
 Intellectual property: Kryptokiosk   72,000    72,000
 Wechat official account   99,584    —  
 Total cost   671,584    772,000
 Accumulated amortization   (257,791)   (131,000)
 Intangible asset, net                                        $413,793   $641,000

 

Amortization expenses for year ended August31, 2019 and 2018 was $126,791 and $106,000 respectively.

 

On November 10, 2018, the Company sold the$200,000 intellectual property from Aura Blocks Limited for $80,000 with a realized loss of $120,000. In August of 2019, the Companysold the movie copyright to China IPTV Industry Park Holding Ltd for $857,600 with a gain of $89,538 and the Videomix APP to AnyonePictures Limited for $422,400 with a gain of $59,792.

 

NOTE 9 –OTHER PAYABLE

 

Other payable primarily consists of the lastinstallment of $153,600 to Aura Blocks Limited for purchasing the movie copyright, $3,584 payable for a cloud hosting service,and $4,672 remaining payment for the office renovation.

 

NOTE 10– RELATEDPARTY TRANSACTIONS

 

In support of the Company’s efforts andcash requirements, it may rely on advances from related parties until such time that the Company can support its operations orattains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment forcontinued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances areconsidered temporary in nature and have not been formalized by a promissory note. During the year ended August 31, 2018, a shareholderpaid an invoice of $74 on behalf of the Company. During the year ended August 31, 2019, there are no such related party transactions.

 

The Company has entered into a patent licenseagreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”). The agreementis for a term of 5 years commencing on the effective date on June 1, 2017. The Company has already paid the licensor a non-refundable,up-from payment of $500,000 and shall pay a royalty of 20% of the gross revenue realized from the sale of licensed products andsub-licensing of this patent every year. The royalty expenses during the year ended August 31, 2019 and 2018 are $60,928 and $50,022,respectively.

 

In December, 2018, the Company appointed BrandyGao as Chief Financial Officer and issued 100,000 shares as compensation. In February 2019, the Company appointed Linqing YeasChief Operational Officer and Lijun Yu as Chief Marketing Officer, and issued 10,000,000 shares to each of them as compensation.During the year ended August 31, 2019, $162,003 was paid to six executives in the form of stock-based compensation and $14,976cash salary was paid to the Chief Operational Officer.

 

As of August 31, 2019, the company has $35,348related party receivable from Youall Perform Services Ltd, owned by the Company’s Board of Director Jianli Deng. Youall PerformServices Ltd collected revenue from the performance matching platform (Ai Bian Quan Qiu) on behalf of the Company.

 

The Company rented an office from Zestv StudiosLtd., owned by the Chief Executive Officer Chiyuan Deng, and incurred a total related party payable of $5,504 as there is a one-monthlag in payment of the office rent.

 

 F-14 

 

NOTE 11– EQUITY

 

Effective as of June 6, 2018, AB InternationalGroup Corporation amended its Articles of Incorporation to increase its authorized common stock to One Billion (1,000,000,000)shares, par value $0.001 per share.

 

During the year ended August 31, 2019, thefollowing 40,600,000 common shares were returned to the Company due to the termination of the Investor Agreement to acquire 51%ownership of iCrowdU Inc:

 

§2,000,000 shares for acquisition of shares of iCrowdU as collateraland 8,000,000 shares as consideration.

 

§20,200,000 issued to Alexander Holtermann for employment as ChiefExecutive Officer, 10,200,000 to Ian Wright for employment as Chief Operational Officer, and 200,000 to Eichbaum Financial ReportingServices Inc. for consulting fees.

 

In June, 2019, the Company incurred a 50:1common reverse stock split . Prior to approval of the reverse split the Company had a total of 177,100,000 issued and outstandingshares of common stock, par value $0.001. On the effective date of the reverse split, the Company has a total of 3,602,016 issuedand outstanding shares of common stock, par value $0.001. 

 

Upon the Reverse Split becoming effective,the par value per share of common stock will remain unchanged at $0.001 per share. As a result, on the effective date of the ReverseSplit, the stated capital on the Company’s balance sheet attributable to our common stock will be reduced proportionally,based on the exchange ratio of the Reverse Split, from its present amount, and the additional paid-in capital account will be creditedwith the amount by which the stated capital is reduced. The net income or loss and net book value per share of common stock willbe increased, because there will be fewer shares of common stock outstanding.

 

The Company issued the following common sharesduring year ended August 31, 2019:

 

§1,975,000 shares issued for consulting services of $59,250 to twothird-party consultants during Q1, 2019 and 3,300,000 common shares for consulting services of $99,000 to nine third-party consultantsduring Q3, 2019

 

§20,100,000 shares for services from officers: 10,000,000 issued toLinqing Ye for employment as Chief Operational Officer, 10,000,000 issued to Lijun Yu for employment as Chief Marketing Officer,100,000 to Brandy Gao for employment as Chief Financial Officer.

 

§18,000,000 common shares issued at $0.02 per share to five unrelatedparties for proceeds of $360,000 during Q2, 2019. The five unrelated parties include Anyone Pictures Limited, Kangdi Liu, LijunYu, Zestv Features Limited, and All In One Media Limited.

 

§13,000,000 common shares issued at $0.02 per share to three unrelatedparties, including 3,000,000 to Kangdi Liu and 10,000,000 Bonus Media Investment Limited during Q3, 2019 for total proceeds of$260,000 during Q3, 2019.

 

§3,000,000 common shares issued at $0.02 per share to an unrelatedthird party Zestv Features Limited in Q4, 2019 before the 50:1 reverse stock split for a total proceed of $60,000.

 

§20,000,000 common shares to the Chief Executive Officer Chiyuan Dengwith 14,000,000 issued at $0.02 per share in Q3, 2019 and 600,000 shares issued at $2 per share in Q4, 2019 after the 50:1 reversestock split for total cash proceeds of $1,480,000.

 

§620,000 common shares issued at $2 per share after the reversestock split to five unrelated party, including 100,000 to All In One Media Limited, 60,000 to KangDi Liu, 130,000 to Anyone PicturesLimited, 165,000 to StarEastNet, and 165,000 to Baoyu Chen, for total proceeds of $1,240,000

 

The Company has 4,822,016 issued and outstandingshares of common stock as of August 31, 2019 and 147,325,000 issued and outstanding shares of common stock as of August 31, 2018,prior to the stock reverse split. These common shares were held by approximately 513 and 32 shareholders of record at August 31,2019 and 2018, respectively.

 

 F-15 

 

NOTE 12– INCOME TAXES

 

On December 22, 2017, the United States enactedthe Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completedthe accounting for the effects of the Act. The Company’s financial statements for the year ended August 31, 2019 reflectcertain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes.

 

Components of net deferred tax assets, includinga valuation allowance, are as follows as of August 31, 2019 and August 31, 2018:

   August 31,
   2019  2018
Deferred tax asset attributable to:         
Net operating loss carry over  $201,056   $149,948
Less: valuation allowance   (201,056)   (149,948)
Net deferred tax asset  $—     $—  

 

The valuation allowance for deferred tax assetswas $201,056 as of August 31, 2019 and $149,948 as of August 31, 2018. In assessing the recovery of the deferred tax assets, managementconsiders whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimaterealization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporarydifferences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxableincome, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not thedeferred tax assets would not be realized as of August 31, 2019 and August 31, 2018.

 

Reconciliation between the statutory rate andthe effective tax rate is as follows at August 31, 2019 and August 31, 2018:

 

   2019  2018
Federal statutory tax rate   21%   21%
Change in valuation allowance   (21%)   (21%)
Effective tax rate   0%   0%

 

The Company’s fully owned subsidiaryApp Board Limited registered and located in Hong Kong. It is governed by the income tax law of the Hong Kong and is subject toa tax rate of 16.5%.

 

During the years ended August 31, 2019 and2018, the Company and its subsidiary have incurred a loss of ($404,635) and ($1,111,950), respectively. As a result, the Companyand its subsidiary did not incur any income tax during the years ended August 31, 2019 and 2018.

 

NOTE 13 – CONCENTRATION RISK

 

45% and 100% of revenue was generated fromone customer during the year ended August 31, 2019 and 2018, respectively.

 

100% of account receivables was due from onecustomer as of August 31, 2019 and August 31, 2018.

 

 F-16 

 

NOTE 14 – COMMITMENTS AND CONTINGENCIES

 

Operating lease

 

The Company leases office premises and a displaystore under non-cancelable operating lease agreements with an option to renew the lease. The rental expense for the year endedAugust 31, 2019 and 2018 was $34,381 and $19,456 respectively. All leases are on a fixed payment basis. None of the leases includecontingent rentals. The Company had lease commitment of $229,120 as of August 31, 2019, of which $87,245 was within one year.

 

Future lease commitments

 

FY 2020   $87,245 
FY 2021   $87,245 
FY 2022   $54,630 
Total   $229,120 

 

NOTE 15 –SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, the Company has analyzed its operationssubsequent to August 31, 2019 to the date these financial statements were issued.

 

On September 2, 2019, the Company paid off the balance of $153,600to Aura Blocks Limited to acquire the movie copyright. On September 3, 2019, the Company collected the sales proceeds of $857,600from selling the movie copyright. On September 24 and October 16, 2019, the Company collected $422,400 from Anyone Pictures Limitedfor the sales of the Videomix APP. Therefore, $1,280,000 receivable from sales of two intangible assets has been collected.

 

On September 4, 2019, the Company entered into another loan agreementto lend $1,049,600 at an annual interest rate of 10% to All In One Media Ltd, previously named as Aura Blocks Limited, for producingfilms and digital videos in Hong Kong. The term of note receivable is from September 4, 2019 to March 3, 2020.

 

Effective October 17, 2019, the Company has appointed Mr. Ho FaiLam and Ms. Gigi Ruiyu Guan as members of Board of Directors. As non-employee directors, Mr. Lam and Ms. Guan will be entitledto participate in our Director Compensation Plan. Under Plan, independent directors will receive $1,000 for each meeting of theBoard of Directors attended in person and $1,000 for each two meetings of the Board of Directors in which they participate by telephoneor video conference. Additionally, they will receive an annual payment of (i) 2,000 shares of the Company’s common stock,par value $0.001, which shall be paid in quarterly grants of 500 shares, and (ii) an option to purchase 2,000 shares of the Company’scommon stock, a quarter of which shall vest each quarter. This Plan is based on three-year term of office.

 

 F-17 

 

 

PART I. FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

 

AB INTERNATIONAL GROUP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   May 31,  August 31,
   2020  2019
     (Unaudited)     (Audited)
          
 ASSETS         
 Current Assets         
    Cash and cash equivalents  $1,691,057   $1,564,750
    Prepaid expenses   21,739    21,970
    Accounts receivable   112,100    35,300
    Related party receivable   87,581    34,994
    Note receivable   1,047,040    1,047,040
    Interest receivable   34,965    8,725
    Receivable on asset disposal   —      1,280,000
       Total Current Assets   2,994,482    3,992,779
          
 Fixed assets, net   17,337    20,124
 Leasehold improvement, net   97,537    134,523
 Intangible assets, net   213,947    413,793
 Long-term prepayment   1,011,200    —  
 Other assets   15,027    15,027
 TOTAL ASSETS  $4,349,530   $4,576,246
          
 LIABILITIES AND STOCKHOLDERS’ EQUITY         
 Current Liabilities         
    Accounts payable and accrued liabilities  $66,720   $116,664
    Convertible note and derivative liability   435,273    —  
    Due to shareholder   2,863    2,037
    Tax payable   56,750    64,564
    Other payable   3,584    161,856
 Total Current Liabilities   565,190    345,121
          
 Stockholders’ Equity         
 Common stock, $0.001 par value, 1,000,000,000 shares authorized; 4,822,016 and 4,822,016 shares issued and outstanding, as of May 31, 2020 and August 31, 2019, respectively   4,822    4,822
 Additional paid-in capital   6,677,965    6,520,980
 Accumulated deficit   (2,183,225)   (1,452,020)
 Unearned shareholders' compensation   (715,222)   (842,657)
 Total Stockholders’ Equity   3,784,340    4,231,125
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $4,349,530   $4,576,246

 

The accompanying notes are an integral partof these financial statements.

 

 F-18 

ABINTERNATIONAL GROUP CORP.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS 

(Unaudited)

 

   Nine Months Ended  Three Months Ended
   May 31,  May 31,
   2020  2019  2020  2019
             
Revenue  $371,543   $272,674   $76,800   $120,227
Cost of revenue   137,217    124,660    42,192    44,452
Gross Profit   234,326    148,013    34,608    75,774
                    
OPERATING EXPENSES                   
General and administrative expenses   (619,032)   (363,211)   (185,789)   (233,281)
Research and development expenses   (108,800)   —      (108,800)   —  
Related party salary and wages   (138,685)   (264,334)   (49,833)   (63,250)
      Total Operating Expenses   (866,517)   (627,545)   (344,422)   (296,531)
                    
OTHER INCOME (EXPENSES)                   
Loss on sale of intangible assets   —      (120,000)   —      —  
Interest expense   (44,697)   88    (2,070)   38
Gain /loss from change in fair value   (54,316)   —      (3,990)   —  
      Total other income (expenses)   (99,013)   (119,912)   (6,060)   38
                    
LOSS FROM OPERATIONS                   
Income tax provision   —      —      —      —  
Net loss from operations   (731,205)   (599,444)   (315,874)   (220,719)
                    
NET INCOME (LOSS)  $(731,205)  $(599,444)  $(315,874)  $(220,719)
                    
NET INCOME (LOSS) PER SHARE: BASIC  $(0.15)  $(0.20)  $(0.04)  $(0.07)
NET INCOME (LOSS) PER SHARE: DILUTED  $(0.15)  $(0.20)  $(0.04)  $(0.07)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC   4,822,016    3,021,538    4,822,016    3,189,826
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED   4,972,792    3,021,538    4,972,792    3,189,826

    

The accompanying notes are anintegral part of these financial statements.

 F-19 

 

AB INTERNATIONAL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’EQUITY

(Unaudited)

 

   Common Stock       
   Number of Shares  Amount  Additional Paid-in Capital  Accumulated Deficit  Unearned Shareholders' Compensation  Total Equity
                   
Balance - August 31,  2018   147,325,000   $147,325   $2,866,868   $(1,047,386)  $(918,100)  $1,048,707
Common shares returned for cancelled acquisition of iCrowdU Inc.   (40,600,000)   (40,600)   —      —      30,600    (10,000)
Common shares issued at $0.02 per share   45,000,000    45,000    855,000    —      —      900,000
Common shares issued to officers for services   20,100,000    20,100    582,900    —      2,799    605,799
Common shares issued for third party services   5,275,000    5,275    152,975    —      —      158,250
Net loss                  (599,444)   —      (599,444)
Balance - May 31,  2019   177,100,000   $177,100   $4,457,743  $(1,646,829)  $(884,701)  $2,103,313
                              
Balance - August 31,  2019   4,822,016   $4,822   $6,520,980   $(1,452,020)  $(842,657)  $4,231,125
Common shares issued to officers for services   —      —      —      —      127,435    127,435
Common shares issued for third party services   —      —      —      —      —      —  
Warrant shares issued in conjunction with convertible notes   —      —      156,985    —      —      156,985
Net loss   —      —      —      (731,205)   —      (731,205)
Balance - May 31,  2020   4,822,016   $4,822   $6,677,965  $(2,183,225)  $(715,222)  $3,784,340

  

The accompanying notes are an integral partof these financial statements.

 

 F-20 

 

AB INTERNATIONAL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS

(Unaudited)

 

   Nine Months Ended
   May 31,
   2020  2019
       
CASH FLOWS FROM OPERATING ACTIVITIES         
Net loss from operations  $(731,205)  $(599,444)
Adjustments to reconcile net income (loss) to net cash from operating activities:         
Executive salaries and consulting fees paid in stock   127,435    305,584
Depreciation of fixed asset   39,325    —  
Amortization of intangible asset   88,731    89,904
Impairment of intangible asset   111,115    —  
Loss/(gain) on sales of intangible assets   —      120,000
Gain /Loss from change in fair value of derivatives   54,316    —  
Interest expense   193,591    —  
Changes in operating assets and liabilities:         
Accounts receivable   (76,800)   (25,700)
Receivable on asset disposal   1,280,000    —  
Interest receivable   (26,240)   —  
Related party receivable   (52,588)   (44,834)
Prepaid expenses   231    (455,362)
Rent security & electricity deposit   —      (14,541)
Long-term prepayment   (1,011,200)   —  
Accounts payable and accrued liabilities   (49,945)   95,080
Accrued payroll   —      (86,536)
Tax payable   (7,814)   —  
Due to shareholder   826    —  
Other payable   (157,824)   —  
Net cash used in operating activities   (218,045)   (615,849)
          
CASH FLOWS FROM INVESTING ACTIVITIES         
Sales of intangible asset   —      80,000
Renovation of an office and an offline display store   —      (58,688)
Development of intangible asset   —      (99,584
Net cash used in / (provided by) investing activities   —      (78,272)
          
CASH FLOWS FROM FINANCING ACTIVITIES         
Proceeds from issuance of convertible notes and warrants   344,352    —  
Proceeds from common stock issuances   —      900,000
Net cash provided by financing activities   344,352    900,000
          
Net increase (decrease) in cash and cash equivalents   126,307    205,879
Cash and cash equivalents - beginning of the quarter   1,564,750    210,202
Cash and cash equivalents - end of the quarter  $1,691,057   $416,081
          
Supplemental Cash Flow Disclosures         
   Cash paid for interest  $—     $—  
   Cash paid for income taxes  $—     $—  
          
Non-Cash Activities:         
Issuance of warrants in conjunction with convertible notes  $156,985   $—  
Common shares returned for cancelled acquisition of iCrowdU  $—     $(10,000)
Prepaid expense reversed for cancelled acquisition of iCrowdU  $—     $10,000
Issuance of common stock for services  $—     $305,584

 

The accompanying notes are anintegral part of these financial statements.

 F-21 

 

AB INTERNATIONAL GROUP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

For the nine months ended May 31, 2020 and May31, 2019

(Unaudited)

 

NOTE 1 - ORGANIZATIONAND BUSINESS OPERATIONS

 

AB International Group Corp. (the "Company","we" or "us") was incorporated under the laws of the State of Nevada on July 29, 2013 and originally intendedto purchase used cars in the United States and sell them in Krygyzstan. The Company's fiscal year end is August 31.

 

On January 22, 2016, our former sole officer,who owned 83% of our outstanding common shares, sold all of his common shares to unrelated investor Jianli Deng. After the stocksale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designed for movie trailerpromotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphone makers,online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins to moviedistributors or other video advertisers in China. We created the app “Amoney” for the Android smartphone platform todevelop a WeChat micro-shop that was designed to display and deliver a variety of information and links for download or onlinewatch prices in the China market.

 

On June 1, 2017, we entered into a Patent LicenseAgreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television Company Limited, a companyincorporated in China (“Licensor”), granted to us a worldwide license to a video synthesis and release system for mobilecommunications equipment (the “Technology”). The Technology is the subject of a utility patent in the People’sRepublic of China. Under the Agreement, we are able to utilize, improve upon, and sub-license the technology for an initial periodof one year from October 1, 2017 to September 30, 2018, subject to a right to renew. We were obligated to pay the Licensor $500,000within 30 days of the date of the Agreement and a royalty fee in the amount of 20% of any proceeds resulting from our utilizationof the Technology, whether in the form of sub-licensing fees or sales of licensed products. Our Chief Executive Officer, ChiyuanDeng and former Chief Executive Officer, Jianli Deng, jointly own and control Licensor. On October 10, 2017, we completed the paymentof $500,000 initial payment amount due under the Agreement. In October of 2019, the term of this sublicensing agreement was renewedand extended until October 31, 2020.

 

Our License to the Technology generates revenuethrough sub-license monthly fees from a smartphone app on Android devices. This app was already existing and licensed at the timewe acquired the Technology.

 

On March 10, 2018, we acquired intellectualproperty for $200,000 from All In One Media Ltd, previously named as Aura Blocks Ltd. On March 19, 2018, we entered into consultingagreements (the “Consulting Agreements”) with four consultants (the “Consultants”). The Consulting Agreementshave terms or either two or three years. Under the Consulting Agreements the Consultants will provide services to us in Hong Kongand China related to blockchain technology and krypto kiosks. In consideration for the services provided by the Consultants, wehave issued the Consultants a total of 1,100,000 shares of our common stock. On November 10, 2018, the Company sold this intellectualproperty to China IPTV Industry Park Holdings Ltd. for $80,000.

 

On March 21, 2018, we acquired the intellectualassets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operationof cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plansto generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposesto bring a physical aspect to something that is otherwise very abstract to people. We also issued to JPC Fintech Limited 2,400,000common shares with a market value of $72,000 exchange of KryptoKiosk Limited’s assets consist mostly of intellectual property,including, but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rightsand personal property.

 

We planned togenerate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing, we proposed to bringa physical aspect to something that is otherwise very abstract to people. We planned to invest in machines and sell sub-licensesin the Asia Pacific region with future world-wide expansion. We had promoted and marketed the ATM business for 6 months or untilaround August 2018, because the BTC and cryptocurrencies price went

 

 F-22 

 

down. The IP, however, was never transferred to us. We haverepeatedly requested from Messrs. Grounds, Vickery and Shakespare access to the domains and websites and other information concerningthe IP assets. As of the date of this annual report, no such information has been provided. In addition, the IP including domainnames were transferred to others while Messrs. Vickery and Shakespare were officers of our company. As a result, we ceased promotionsand marketing on the ATM business and relations cryptocurrencies business in September 2018. On November 21, 2018, we had sentthe final notice that JPC Fintech has materially breached the agreement. We requested that JPC Fintech Ltd. return its stock certificatereceived in the transaction to our transfer agent for immediate cancellation. We have not yet received the certificate for termination.In February of 2020, 100% of the intellectual assets of KryptoKiosk Limited‘s carrying value $48,000 net of amortizationis written off since the IP was never transferred to us andno revenue was generated from this intellectual asset.

 

On May 9, 2018, we entered into an investoragreement with iCrowdU Inc. We agreed to purchase 228,013 shares of iCrowdU Inc. at a share price of $1.228 for total considerationof $280,000. iCrowdU Inc. offers an online platform and mobile app for crowd funding services targeting the global crowd fundingmarket.

 

Furthermore, it was agreed to exchange 2,000,000shares of our common stock for 2,000,000 shares of common stock in iCrowdU Inc. This share exchange was made as collateral in advanceof an investment of $1,935,000 by us into iCrowdU Inc., which never occurred.

 

On or about May 9, 2018, we entered into consultancyagreements with Alexander Holtermann, Ian Wright and Luis Hadic. Each of Messrs. Holtermann, Wright and Hadic received 200,000shares of our common stock under the consultancy agreements.

 

On or about July 26, 2018, we entered intoan investment agreement with iCrowdU Inc. for the purchase of 40% of iCrowdU in exchange for 8,000,000 shares of our common stockthat would be split between Messrs. Holtermann and Wright at 70% and 30%, respectively, and an investment of $10,000,000. The 8,000,000shares were cut but not delivered to Messrs. Holtermann and Wright and no part of the $10,000,000 was invested by us into iCrowdUInc.

 

On or about July 31, 2018, we entered intoemployment agreements with Messrs. Holtermann and Wright for the consideration provided for under the agreements.

 

On October 25, 2018, the above parties enteredinto an Agreement for Termination and Release that terminated all outstanding agreements among the parties and released each partyfrom the other. We agreed to settle outstanding expenses and costs incurred by iCrowdU Inc., in the sum of $6,444.90. In addition,all parties agreed to return any shares received from the above agreements, save we shall be permitted to retain the 228,013 sharespurchased in iCrowdU Inc. Finally, we agreed to amend our Current Report on Form 8-K concerning certain disclosures made therein.We amended the report as per the agreement.

 

On September 5, 2018, the Company entered intoan agreement to acquire a movie copyright for $768,000 from All In One Media Ltd, which holds 200,000 common shares of the Companyas of August 31, 2019 and is previously named as Aura Blocks Limited. The remaining balance to Aura Blocks Limited is $153,600as of August 31, 2019. The Company has obtained the exclusive permanent broadcasting right outside the mainland China and is expectedto generate revenues from showing the movie online, in theaters, and on TV outside the mainland China once this movie is completedin June, 2019. In August of 2019, the Company sold this movie copyright to China IPTV Industry Park Holding Ltd for $857,600 witha gain of $89,538.

 

In December of 2018, we engaged StarEastnet,a software developer that holds 171,000 common shares of the Company as of August 31, 2019, to start developing a performance matchingplatform (Ai Bian Quan Qiu) and a WeChat official account to advertise the platform. The matching platform is to arrange performanceevents for celebrities and performers. Performers can set their schedules and quotes on the platform. The platform will maximizetheir profits from performance events by optimizing their schedules based upon quotes and event locations and save time from commutingamong different events. “Ai Bian Quan Qiu” utilizes the artificial intelligence (AI) matching technology to instantlyand accurately match performers and advertisers or merchants. The company charges agency service fees for each successful eventmatched through the platform. Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generatedfrom the performance matching platform (Ai Bian Quan Qiu) since the end of January, 2020. In February of 2020, the Company decidedthat 80% of the carrying amount of Ai Bian Quan Qiu platform and its Wechat official account was impaired. Due to the quarantineand continuous control imposed by the state and local governments in areas affected by COVID-19, merchant advertising events havebeen suspended for 7 months. The Company decided to shut down the Ai Bian Quan Qiu platform, which has created an adverse impacton the business and financial condition and hampered its ability to generate revenue and access sources of liquidity on reasonableterms.

 

 F-23 

 

In June, 2019, the Company completed the developmentof a video mix APP for social video sharing via iOS and Android smartphones. This app was originally planned to take advantageof the core design philosophy of “My film anyone, anywhere, anytime be together” as similar and competitive innovativevideo and community apps have been activated on over 2 million unique devices in China as of December 31, 2017 and precipitatedthe duet video synthesis phenomenon in China. However, the Company decided to focus on the “Ai Bian Quan Qiu” platformas its main business and thus sold the video mix APP to Anyone Pictures Limited, which holds 242,980 common shares of the Company,for $422,400 with a gain of $59,792 in August of 2019.

 

In August of 2019, the Company entered intoa one-year loan agreement to lend $1,047,040 at an annual interest rate of 10% to All In One Media Ltd, previously named as AuraBlocks Limited, for producing films and digital videos in Hong Kong. The term of note receivable is from August 1, 2019 to July31, 2020.

 

On September 4, 2019, the Company entered into another loan agreementto lend $1,049,600 at an annual interest rate of 10% to All In One Media Ltd, previously named as Aura Blocks Limited. The termof note receivable is from September 4, 2019 to March 3, 2020. This loan balance was paid off in full on May 4th, 2020.

 

On April 22, 2020, the Company has announced the first phasedevelopment of its highly anticipated video streaming service, the Company expects a full launch this year. The onlineservice will be marketed and distributed in the world under the brand name ABQQ.tv. ABQQ.tv is expected to generate a new andprofitable revenue stream immediately following its launch derived from its hybrid subscription and advertising businessmodel. The Company’s decision to accelerate the development and launch date of the video streaming service was largelya result of the mandatory quarantine implemented for the COVID-19 pandemic, as the video streaming increased by as much as70% during the quarantine period in February and March this year.

 

NOTE 2 –SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements of the Company havebeen prepared in accordance with generally accepted accounting principles in the United States of America and are presented inUS dollars. The Company’s year-end is August 31. The financial statements have been prepared on a consolidated basis, withtheir fully owned subsidiary App Board Limited.

 

Basis of Consolidation

 

The financial statements have been preparedon a consolidated basis, with the Company’s fully owned subsidiary App Board Limited registered and located in Hong Kong.No intercompany balances or transactions exist during the period ended May 31, 2020 and May 31, 2019.

 

Use of Estimates

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United States requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date thefinancial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differfrom those estimates.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows,the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

 

 F-24 

 

Foreign Currency Transactions

 

The Company’s planned operations areoutside of the United States, which results in exposure to market risks from changes in foreign currency rates. The financial riskarise from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company doesnot use derivative instruments to reduce its exposure to foreign currency risk. Non-monetary assets and liabilities are translatedat historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenuesand expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statementsinto U.S. dollars are included in current results of operations.

 

Accounts Receivable

 

Accounts receivable consist of amounts duefrom Anyone Pictures Limited for the sub-licensing fee revenue. Amounts receivable are recorded at the invoiced amount and do notbear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit lossesin its existing accounts receivable. No amount for bad debt expense has been recorded by the Company during the nine months endedMay 31, 2020 and May 31, 2019, and no write-off for bad debt were recorded for the nine months ended May 31, 2020 and May 31, 2019.

 

Prepaid Expenses

 

Prepaid expenses primarily consist of consultingfees that have been paid in advance and prepayments of OTC market annual fee, website domain fee, TV promotion fee, and investorrelation fee.

 

The prepaid balances are amortized when therelated expense is incurred.

 

Note Receivable

 

Note receivable is a one-year note bearingannual interest of 10% with the principal payable annually at the end of the term. Interest is due and payable, at the electionof the Company, in cash on the Maturity Date, as applicable, or if the note receivable is prepaid earlier, on such prepayment date.Therefore, interest income is recorded along with interest receivable throughout the note period.

 

Fixed Asset

 

Fixed asset consists of furniture and appliancesacquired for the office. The balance is stated at cost less accumulated depreciation. Depreciation is computed using the straight-linemethod over estimated useful lives listed below:

 

    Estimated Useful Life
Furniture   7 years
Appliances   5 years

  

Leasehold Improvement

 

Leasehold improvement is related to the enhancementspaid by the Company to leased office and store. Leasehold improvement represents capital expenditures for direct costs of renovationor acquisition and design fees incurred. The amortization of leasehold improvements commences once the renovation is completedand ready for the Company’s intended use. Leasehold improvement is amortized over the lease term of 3 years.

 

 F-25 

 

Intangible Assets

 

Intangible assets are stated at cost and depreciatedas follows:

 

  Mobile application product: straight-line method over the estimated life of the asset, which has been determined by management to be 3 years

  Movie copyrights: income forecast method for a period not to exceed 10 years

  Patent: straight-line method over the term of 5 years based on the patent license agreement 

 

Amortized costs of the intangible asset arerecorded as cost of sales, as the intangible asset is directly related to generation of revenues in the Company.

 

Revenue Recognition

The Company adopted ASC Topic 606,“Revenue from Contracts with Customers”, applying the modified retrospective method.

In accordance with ASC Topic 606,revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflectsthe consideration that the Company expects to receive in exchange for those goods or services. The Company applies the followingfive steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each ofits agreements:

  the contract with a customer;

  identify the performance obligations in the contract;

  determine the transaction price;

  allocate the transaction price to performance obligations in the contract; and

  recognize revenue as the performance obligation is satisfied.

 

The Company does not believe thatsignificant management judgements are involved in revenue recognition, but the amount and timing of the Company’s revenuescould be different for any period if management made different judgments or utilized different estimates. Generally, the Companyrecognizes revenue under ASC Topic 606 for its performance obligation.

The Company generates revenue from sub-licensinga patent and charging a service fee from the “Ai Bian Quan Qiu” platform for actors and commercial events matching.

 

The sub-licensing revenue is recognized monthlybased upon the number of users who download the APP that utilizes the Company’s patent. The monthly royalty the Company chargesAnyone Pictures Limited is $12.8 per 1000 APP users. During the year of 2019, both parties agreed to charge the sublicensing feebased upon a fixed number 2,000,000 users.

 

The “Ai Bian Quan Qiu” platformservice revenue is derived principally from providing matching service to merchants who are looking for actors to perform at theiradvertising events. The Company recognizes revenue upon a matching event is accepted by actors with a service fee of 10% of theactors’ quote for performing at the events. For the service fee revenue from the “Ai Bian Quan Qiu” platform,the Company does not control the specified goods or services before that is transferred to the customers and thus the Company isan agent. Therefore, this service revenue is recognized at a net basis.

 

Leasing

The Company has operatingleases for an office and a store for display with expiration dates through 2022. The Company determines whether an arrangementis or includes an embedded lease at contract inception. Lease expense is recognized on a straight-line basis over the lease term.

 F-26 

 

Impairment of Long-lived asset

 

The Company evaluatesits long-lived assets or asset group, including intangible assets with indefinite and finite lives, for impairment. Intangibleassets with indefinite lives that are not subject to amortization are tested for impairment at least annually or more frequentlyif events or changes in circumstances indicate that the assets might be impaired in accordance with ASC 350. Such impairment testcompares the fair values of assets with their carrying values with an impairment loss recognized when the carrying values exceedfair values. For long-lived assets and intangible assets with finite lives that are subject to depreciation and amortization aretested for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions thatwill impact the future use of the assets) indicate that the carrying amount of an asset or a Group of long-lived assets may notbe recoverable. When these events occur, the Company evaluates impairment by comparing the carrying amount of the assets to futureundiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expectedundiscounted cash flows is less than the carrying amount of the assets, the Company would recognize an impairment loss based onthe excess of the carrying amount of the asset group over its fair value.

Impairmentlosses are included in G&A expense. The impairment loss of intangible assets was $111,115, including $48,000 for the intellectualassets acquired from KryptoKiosk Limited and $63,115 for the performance matching platform “Ai Bian Quan Qiu” and itsWeChat official account.

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 inputsand minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the levelof independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization withinthe fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizesthe inputs into three levels that may be used to measure fair value:

 

Level 1 - Level 1 applies to assets or liabilitiesfor which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Level 2 applies to assets or liabilitiesfor which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similarassets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volumeor infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or canbe derived principally from, or corroborated by, observable market data.

 

Level 3 - Level 3 applies to assets or liabilitiesfor which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair valueof the assets or liabilities.

 

The carrying values of cash, accounts payable,and accrued liabilities approximate fair value. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level1" inputs, which consist of quoted prices in active markets for identical assets. The fair values of warrant liabilities andderivative liabilities embedded in convertible notes are determined by level 3 inputs.

 

Accounting for Derivative Instruments

The Company accountsfor derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” (ASC 815) and all derivativeinstruments are reflected as either assets or liabilities at fair value in the balance sheet.

The Company usesestimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer aliability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimatingfair values is to first look at observable market prices for identical assets and liabilities in active markets, where available.When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities,prepayment speeds, default rates and credit spreads (including for the Company's liabilities), relying first on observable datafrom active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., dependingon current market conditions. Transaction costs are not included in the determination of fair value. When possible, the Companyseeks to validate the model's output to market transactions. Depending on the availability of observable inputs and prices, differentvaluation models could produce materially different fair value estimates. The values presented may not represent future fair valuesand may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchicalframework associated with the three levels of price transparency utilized in measuring financial instruments at fair value asdiscussed above. Changes in fair value are recognized in the period incurred as either gains or losses.

 F-27 

 

Warrants

 

Warrants areclassified as equity and the proceeds from issuing warrants in conjunction with convertible notes are allocated based on the relativefair values of the base instrument of convertible notes and the warrants by following the guidance of ASC 470-20-25-2 as below:

Proceeds fromthe sale of a debt instrument with stock purchase warrants (detachable call options) shall be allocated to the two elements basedon the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. Theportion of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shallbe allocated to the debt instrument portion of the transaction. This usually results in a discount (or, occasionally, a reducedpremium), which shall be accounted for as interest expense under Topic 835 Interest.

Income Taxes

 

The Company accounts for income taxes pursuantto FASB ASC 740 “Income Taxes”. Under ASC 740 deferred income taxes are provided on a liability method wherebydeferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilitiesare recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assetsand liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxesrepresents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferredtax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

ASC 740 also provides criteria for the recognition,measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position onthe income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by therelevant taxing authority. At May 31, 2020, there was unrecognized tax benefits. Please see Notes 13 for details.

 

Value-Added Taxes

 

The Company generates revenue in People's Republicof China (PRC) via the “Ai Bian Quan Qiu” platform and is subject to a value-added tax at an effective rate of 6%.In accordance with PRC law, the Company is also subject to surcharges, which includes urban maintenance and construction taxesand additional education fees on VAT payable.

 

For the nine months ended May 31, 2020, theCompany’s revenue generated from the “Ai Bian Quan Qiu” platform is subject to VAT at a rate of 6% and subjectto surcharges at a rate of 12% of the VAT payable.

 

Basic and Diluted Income (Loss) Per Share

 

The Company computes income (loss) per sharein accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earningsper share on the face of the statement of operations. The earnings per share after the reverse stock split is presented retrospectivelyas if the reverse split had occurred at the very beginning of the business. Basic loss per share is computed by dividing net income(loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Dilutedloss per share is computed using the weighted average number of common shares and potential common shares outstanding during theperiod for warrants, options and restricted shares under treasury stock method, and for convertible debts under if-convertiblemethod, if dilutive. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during theperiod and excludes all potential common shares if their effects are anti-dilutive.

 

In accordance with the Company’s convertiblenote agreements, the Note Holders have the option to convert all or any lesser portion of the outstanding principal amount andaccrued but unpaid interest into common stock at a conversion price equal to a price which is 55% or 60% of the lowest tradingprice during the 10 or 20 days prior to the day that the Holder requests conversion. 55% is applicable to EMA Financial whereas60% applies for the other counterparties. The lowest trading price during 10 days prior to conversion is applicable to East Capital andEast Capital, whereas the other counterparties utilize the lowest trading price during the preceding 20 days. The number of dilutedshares from convertible notes is calculated with the assumption of converting all the outstanding principal balance and unpaidinterest expense to common shares at the beginning of the period or at the time of issuance, if later.

 

 F-28 

 

The number of diluted shares from warrantsis the upper limit to which warrants can be converted into common shares.

 

As of May 31, 2020, 101,716 potentially dilutedshares were from convertible notes and 49,060 potentially diluted shares were from warrants. 49,060 diluted shares are the maximumnumber of common shares these warrants can be converted into. No potentially dilutive debt or equity instruments were issued oroutstanding as of August 31, 2019.

 

   Nine Months Ended
   May 31,
Diluted shares not included in basic loss per share computation  2020  2019
Warrants   49,060    —  
Convertible notes   101,716    —  

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases.The standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognizein its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right touse the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accountingpolicy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessorsare required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018.

 

In September 2017, the FASB has issued ASUNo. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases(Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission ofPrior SEC Staff Announcements and Observer Comments.” The amendments in ASU No. 2017-13 amends the early adoption date optionfor certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may still adoptusing the public company adoption guidance in the related ASUs, as amended. The effective date is the same as the effective dateand transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.

 

In February 2018, the FASB issuedguidance to address the income tax accounting treatment of the tax effects within other comprehensive income due to the enactmentof the Tax Cuts and Jobs Act (the “Act”). This guidance allows entities to elect to reclassify the tax effects of thechange in the income tax rates from other comprehensive income to retained earnings. The guidance is effective for periods beginningafter December 15, 2018 although early adoption is permitted. The Company has evaluated and concluded that there was no impacton its consolidated financial position and results of operations.

In March 2018, the FASB issued ASU 2018-05:“Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. The amendmentsin this ASU add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118, which expresses the viewof the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 –the date on which the Tax Cuts and Jobs Act was signed into law. The Company has evaluated and concluded that there was no impacton its consolidated financial position and results of operations.

In June 2018, the FASB issued ASU2018-07: “Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting”.This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based paymentsto employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-basedpayments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity—Equity-BasedPayments to Nonemployees. The amendments in this ASU are effective for public companies for fiscal years beginning after December15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscalyears beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoptionis permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Companydoes not currently expect the adoption of the amendment to have a material impact on its consolidated financial position and resultsof operations.

 F-29 

 

In July 2018, the FSAB issued ASU2018-10 ASC Topic 842: “Codification Improvements to Leases” The amendments are to address stakeholders’ questionsabout how to apply certain aspects of the new guidance in Accounting Standards Codification (ASC) 842, Leases. The clarificationsaddress the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification,lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transitionadjustments. The amendments in ASC Topic 842 are effective for EGC for fiscal years beginning after December 15, 2019, and interimperiods within fiscal years beginning after December 15, 2020. While early application is permitted, including adoption in an interimperiod, the Company has not elected to early adopt. The Company is currently evaluating the impact of this accounting standardupdate on its consolidated financial statements.

In July 2018, the FASB issued ASU2018-11, Leases (Topic 842). This update provides entities with an additional (and optional) transition method to adopt the newleases standard. Under this method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effectadjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period’sfinancials will remain the same as those previously presented. Entities that elect this optional transition method must providethe disclosures that were previously required. The Company is evaluating the effect this new guidance will have on our consolidatedfinancial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13,“Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,”to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair valuemeasurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policyfor timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The new standard requiresdisclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginningafter December 15, 2019.

 

NOTE 3 –PREPAID EXPENSES

 

Prepaid expense was $21,739 and $21,970 asof May 31, 2020 and August 31, 2019, respectively. Prepaid expense at May 31, 2020 included $15,333 prepaid consulting fees, $2,000prepayment of OTC market annual fee, $219 prepaid website and domain fee, $1,853 prepaid TV promotion fee, and $2,333 prepaid investorrelation fee.

 

NOTE 4 – NOTE RECEIVABLE

 

Note receivable relates to two loan agreementsentered with All In One Media, previously named as Aura Blocks Limited, in August and September of 2019, respectively. The notereceivable entered in August, 2019 is a one-year loan of $1,047,040 the Company lends to All In One Media Ltd at an annual interestrate of 10%. The loan principal is due on July 31, 2020. The note receivable entered in September, 2019 is to lend $1,049,600 atan annual interest rate of 10% to All In One Media Ltd with a term from September 4, 2019 to March 3, 2020.

 

On May 4th, 2020, All In One Media paid offthe loan principal of $1,049,600 with 5 months’ interest of $43,717. The Company has received 2 months’ extra interestincome due to the delay in payment from All In One Media Ltd. As of May 31, 2020, and August 31, 2019, the Note receivable balancewas both $1,047,040 and the interest receivable balance was $34,965 and $8,725, respectively. For the nine months ended May 31,2020, the Company has generated an interest income of $148,549 from these two note receivables.

 

NOTE 5 – FIXED ASSETS AND LEASEHOLDIMPROVEMENT

 

The Company capitalized the renovation costas leasehold improvement and the cost of furniture and appliances as fixed asset. Leasehold improvement relates to renovation andupgrade of an office and an offline display store. The leasehold improvement is depreciated over 3 years which equal the termsof the operating lease for renting an office. The furniture and appliances are depreciated over 7 and 5 years, respectively.

 

 F-30 

 

The total original cost was $167,278, including$146,304 for renovation of the office and the store and $20,974 office furniture and appliances. The accumulated depreciation was$52,404 and $12,631 at May 31, 2020 and August 31, 2019, respectively.

 

   May 31,  August 31,
   2020  2019
 Appliances and furniture  $20,974   $20,974
 Leasehold improvement   146,304    146,304
 Total cost   167,278    167,278
 Accumulated depreciation   (52,404)   (12,631)
 Property and equipment, net  $114,874   $154,647

 

NOTE 6 – INTANGIBLE ASSETS

 

As of May 31, 2020 and August 31, 2019, thebalance of intangible assets are as follows;

 

   May 31,  August 31,
   2020  2019
 Patent  $500,000   $500,000
 Intellectual property: Kryptokiosk   —      72,000
 Ai Bian Quan Qiu platform   19,917    99,584
 Total cost   519,917    671,584
 Accumulated amortization   (305,970)   (257,791)
 Intangible asset,net                                        $213,947   $413,793

 

Amortization expenses for nine months endedMay 31, 2020 and 2019 was $88,731 and $89,904, respectively.

 

NOTE 7 - LONG-TERMPREPAYMENT

 

In September 2019,the Company entered into an agreement with its related party Youall Perform Services Ltd. for upgrading software of the “AiBian Quan Qiu” platform at a cost of $128,000. $108,800 was paid upon signing the agreement and recorded as long-term prepaymentin Q1, FY2020. As COVID-19 restricted crowd-gathering, “Ai Bian Quan Qiu” platform did not generate any revenue inQ2 and Q3, FY2020. The Company impaired 80% of the “Ai Bian Quan Qiu” platform intangible asset value in Q2 2020. Assuch, $108,800 prepayment was expensed as research and development expense in Q3, FY2020.

 

As of May 31, 2020,the long-term prepayment balance of $1,011,200 relates to three movie copyrights. In November 2019, the Company acquired two moviecopyrights at a price of $256,000 for “Lushang” and $115,200 for “Qi Qing Kuai Che”. Both of them havebeen fully paid and recorded as long-term prepayment. The estimated earliest release date of these two movies will be in the thirdquarter of FY2021. In January 2020, the Company acquired another movie copyright “Ai Bian Quan Qiu” at a price of $870,978.As of May 31, 2020, $640,000 has been paid and recorded as long-term prepayment for this movie copyright.

 

NOTE 8 - CONVERTIBLENOTES

 

On November 18, 2019, the Company closed aprivate financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible note(the “Note”). The Note has an original principal amount of $250,000, and upon issuance, the Company is expected toreceive net proceeds of $228,333 after subtracting an original issue discount of $21,667 per the Note agreement. This Note carriesa prorated original issue discount of up to $21,667 (the “OID”), to cover the Holder’s monitoring costs associatedwith the purchase and sale of the Note, which is included in the principal balance of this Note.

 

 F-31 

 

As part of initial closing the outstandingprincipal amount shall be $75,000 and the Holder shall pay $68,500 of the consideration (the “First Tranche”). Outof $68,500 consideration, the Company has received $64,737 cash from EMA Financial with the remaining $3,763 spent as legal expensefor note issuance and due diligence fees.

 

The term of the convertible note is 9 monthswith the maturity date on August 18, 2020. The interest rate of 10.0% per annum. Upon an event of default, the interest rate willbe equal to the 24.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversionfeatures. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day periodending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 55.0%of the lowest traded price for the common stock on the principal market during the 20 consecutive trading Days on which at least100 shares of common stock were traded including and immediately preceding the Conversion Date.

 

In connection with the issuance of the Note,the Company granted EMA Financial a five-year cashless warrant (the “Warrant”) to purchase 30,000 shares of commonstock at an exercise price of $12.5 per share.

 

On December 13, 2019, the Company entered into a Securities PurchaseAgreement with Peak One Opportunity Fund, L.P., a Delaware limited partnership (“Peak One”), pursuant to which we issuedand sold to the Peak One a convertible promissory note. The Note has an original principal amount of $235,000, and upon issuance,the Company is expected to receive net proceeds of $211,500 after subtracting an original issue discount of $23,500 per the Noteagreement. This Note carries a prorated original issue discount of up to $23,500 (the “OID”), to cover the Holder’smonitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note.

 

As part of initial closing the outstandingprincipal amount shall be $85,000 and the Holder shall pay $76,500 of the consideration (the “First Tranche”). Outof $76,500 consideration, the Company has received $65,312 cash from Peak One with the remaining $11,188 spent as legal expensefor note issuance and due diligence fees.

 

The term of the convertible note is 1 yearwith the maturity date on December 09, 2020. The interest rate of 10.0% per annum. The convertible note has prepayment and conversionfeatures. The conversion price shall equal to the lesser of (a) $10.00 or (b) Sixty percent (60%) of the lowest closing bid price(as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date ofconversion of the Debentures (provided, further, that if either the Company is not DWAC Operational at the time of conversion orthe Conversion Price is less than $0.01 per share, then Sixty percent (60%) shall automatically adjust to Fifty percent (50%) ofthe lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately precedingthe date of conversion of the Debenture), subject in each case to equitable adjustments resulting from any stock splits, stockdividends, recapitalizations or similar events.

 

In connection with the issuance of the Note,the Company granted Peak One a five-year cashless warrant (the “Warrant”) to purchase 10,000 shares of common stockat an exercise price of $10 per share.

 

On January 8, 2020, the Company entered intoa Securities Purchase Agreement with Crown Bridge Partners, LLC., a New York limited company (“Crown Bridge”), pursuantto which the Company issued and sold to Crown a convertible promissory note, dated January 8, 2020, in the principal amount of$121,500. Upon issuance, the Company is expected to receive net proceeds of $109,500 after subtracting an original issue discountof $12,000 per the Note agreement. This Note carries a prorated original issue discount of up to $12,000 (the “OID”),to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principalbalance of this Note.

 

As part of initial closing the outstandingprincipal amount shall be $40,500 and the Holder shall pay $36,500 of the consideration (the “First Tranche”). Outof $68,500 consideration, the Company has received $34,992 cash from Crown Bridge with the remaining $1,508 spent as legal expensefor note issuance and due diligence fees.

 

The term of the convertible note is 1 yearwith the maturity date on January 8, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate willbe equal lesser (i) fifteen percent (15%) per annum or (ii) the maximum amount permitted by law from the due date thereof untilthe same is paid. The convertible note has prepayment and conversion features. The Conversion Price shall be the lesser of (i)the lowest closing price of the Common Stock during the previous

 

 F-32 

 

twenty (20) Trading Day period ending on the latest complete TradingDay prior to the date of this Note or (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustmentsfor stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securitiesof any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events)(also subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 60% multiplied bythe Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest one (1)Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete TradingDay prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of the (i) lowesttraded price and (ii) lowest closing bid price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the“Principal Market”) as reported by a reliable reporting service (“Reporting Service”) designated by theHolder (i.e. Bloomberg) or, if the Principal Market is not the principal trading market for such security, on the principal securitiesexchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security isnot available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quotedon the OTC Markets.

 

In connection with the issuance of the Note,the Company granted Crown Bridge a five-year cashless warrant (the “Warrant”) to purchase 4,680 shares of common stockat an exercise price of $12.5 per share.

 

On December 31, 2019, the Company closed aprivate financing with Auctus Fund, LLC, (“Auctus” or the “Holder”) by issuing a convertible note (the“Note”). The Note has an original principal amount of $75,000, and upon issuance, the Company is expected to receivenet proceeds of $75,000.

 

As part of initial closing the outstandingprincipal amount shall be $75,000 and the Holder shall pay $75,000 of the consideration (the “First Tranche”). Outof $75,000 consideration, the Company has received $59,342 cash from Auctus with the remaining $15,658 spent as legal expense fornote issuance and due diligence fees.

 

The term of the convertible note is 9 monthswith the maturity date on September 30, 2020. The interest rate of 10.0% per annum. Upon an event of default, the interest ratewill be equal the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted under law from the duedate thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price is the lesserof: (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest completeTrading Day prior to the date of this Note, and (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustmentsfor stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securitiesof any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discountrate of 40%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty(20) Trading Days on which at least 100 shares of Common Stock were traded including and immediately preceding the Conversion Date.“Trading Price” means, for any security as of any date, the lowest trade price on the OTC Pink, OTCQB or applicabletrading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if theOTC Pink is not the principal trading market for such security, the trading price of such security on the principal securitiesexchange or trading market where such security is listed or traded or, if no trading price of such security is available in anyof the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the “pinksheets” by the National Quotation Bureau, Inc.

 

On February 13, 2020, the Company closed aprivate financing with East Capital Investment Corporation (“East Capital” or the “Holder”) by issuinga convertible note (the “Note”). The Note has an original principal amount of $50,000, and upon issuance, the Companyis expected to receive net proceeds of $50,000.

 

As part of initial closing the outstandingprincipal amount shall be $50,000 and the Holder shall pay $50,000 of the consideration (the “First Tranche”). Outof $50,000 consideration, the Company has received $43,492 cash from EMA Financial with the remaining $6,508 spent as legal expensefor note issuance and due diligence fees.

 

The term of the convertible note is 1 yearwith the maturity date on February 13,2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversionfeatures. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) daysprior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.

 

 F-33 

 

On February 19, 2020, the Company closed aprivate financing with Fidelis Capital, LLC, (“Fidelis” or the “Holder”) by issuing a convertible note(the “Note”). The Note has an original principal amount of $50,000, and upon issuance, the Company is expected to receivenet proceeds of $50,000.

 

As part of initial closing the outstandingprincipal amount shall be $50,000 and the Holder shall pay $50,000 of the consideration (the “First Tranche”). Outof $50,000 consideration, the Company has received $43,487 cash from Fidelis with the remaining $6,513 spent as legal expense fornote issuance and due diligence fees.

 

The term of the convertible note is 1 yearwith the maturity date on February 19, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversionfeatures. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) daysprior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.

 

On March 12, 2020, the Company closed a privatefinancing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) by issuing a convertible note (the“Note”). The Note has an original principal amount of $38,500, and upon issuance, the Company is expected to receivenet proceeds of $35,000 after subtracting an original issue discount of $3,500 per the Note agreement.

 

As part of initial closing the outstandingprincipal amount shall be $38,500 and the Holder shall pay $35,000 of the consideration (the “First Tranche”). Outof $35,000 consideration, the Company has received $32,992 cash from Fidelis with the remaining $2,008 spent as legal expense fornote issuance and due diligence fees.

 

The term of the convertible note is 1 yearwith the maturity date on March 12, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversionfeatures. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) daysprior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties. In connectionwith the issuance of the Armada Note, the Company granted Armada a five-year cashless warrant (the “Warrant”) to purchase4,200 shares of the Company’s common stock at an exercise price of $12.50 per share.

 

The following table summarizes the convertiblenote and derivative liability in the balance sheet at May 31, 2020:

 

Balance, August 31, 2019  $—  
 Principal  $414,000
 Discount on Note issuance  $(49,472)
 Accrued interest expense  $16,429
 Derivative liability  $54,316
 Balance, May 31, 2020  $435,273

 

The Company valued its derivatives liabilityusing Monte Carlo simulation. Assumptions used as of May 31, 2020 include (1) risk-free interest rates of 0.14% - 0.18%, (2) expectedequity volatility of 58.3% - 91.1%, (3) zero dividends, (4) discount for lack of marketability of 35% (5) remaining terms and conversionprices as set forth in the convertible note agreement, and (6) the common stock price of the underlying share on the valuationdates.

 

The Company recognizes day one loss due toconvertible feature of $54,316 in the income statement for the nine months ended May 31, 2020.

 

NOTE 9 - WARRANTS

 

On December 9, 2019, January 8, 2020, January17, 2020, and March 12, 2020, the Company issued warrants to EMA Financial, Peak One Opportunity, Crown Bridge, and Armada in conjunctionwith their convertible notes (see Note 8). Classified as equity, these detachable warrants issued in a bundled transaction withconvertible notes are accounted for separately as additional paid-in capital for the portion of the proceeds allocated to them.The allocation of the sales proceeds between the base instrument of convertible notes and the warrants are allocated based on therelative fair values of the base instrument of convertible notes and the warrants following the guidance in ASC 470-20-25-2.

 

 F-34 

 

The fair value of the stock warrants grantedto EMA Financial was estimated at $85,156 on May 31, 2020 using the Black-Scholes pricing model, with the following assumptionused for the valuation: exercise price of $12 per share, average risk-free interest rate of 0.28%, expected dividend yield of zero,remaining contractual life of 4.64 years, and an average expected volatility of 61%.

 

The fair value of the stock warrants grantedto Peak One was estimated at $31,793 on May 31,2020 using the Black-Scholes pricing model, with the following assumption used forthe valuation: exercise price of $10 per share, average risk-free interest rate of 0.27%, expected dividend yield of zero, remainingcontractual life of 4.53 years, and an average expected volatility of 60.60%.

 

The fair value of the stock warrants grantedto Crown Bridge was estimated at $13,834 on May 31,2020 using the Black-Scholes pricing model, with the following assumption usedfor the valuation: exercise price of $12.5 per share, average risk-free interest rate of 0.28%, expected dividend yield of zero,remaining contractual life of 4.61, and an average expected volatility of 60.90%.

 

The fair value of the stock warrants grantedto Armada was estimated at $12,341 on the date granted using the Black-Scholes pricing model, with the following assumption usedfor the valuation: exercise price of $12.5 per share, average risk-free interest rate of 0.29%, expected dividend yield of zero,remaining contractual life of 4.78, and an average expected volatility of 61.54%.

 

A summary of the status of the Company’swarrants as of May 31, 2020 is presented below:

 

   Number of warrants
 Warrants as at August 31,2019   —  
 Warrants granted   49,060
 Exercised, forfeited or expired   —  
 Outstanding at May 31,2020   49,060
 Exercisable at May 31, 2020   10,000

 

Thefollowing table summarizes information about the Company’s warrants as of May 31,2020:

 

Warrants outstanding       Warrants exercisable
                                               
      Exercise price       Number outstanding       Weighted average remaining contractual life (in years)       Weighted average exercise price       Number exercisable       Weighted average exercise price
                                               
EMA Financial   $ 12.50       30,000       2.83     $ 8.39       —      $ — 
Peak One   $ 10.00       10,000       0.92     $ 2.24       10,000     $ 10.00
Crown Bridge   $ 12.50       4,680       0.46     $ 1.31       —      $ — 
Armada Partners   $ 12.50       4,200       0.41       1.07                
Total             49,060       4.62     $ 11.99       10,000     $ 10.00

 

 F-35 

 

NOTE 10 - FAIR VALUE MEASUREMENTS

 

The Company applies ASC 820, Fair ValueMeasurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosuresabout fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

 

ASC 820 establishes a three-tier fair valuehierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1 — Observable inputs that reflectquoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Include other inputs that aredirectly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs which are supported by little or no market activity.

 

ASC 820 describes three main approaches tomeasuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The marketapproach uses prices and other relevant information generated from market transactions involving identical or comparable assetsor liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurementis based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amountthat would currently be required to replace an asset.

 

Derivative liabilities of conversion featuresin convertible notes are classified within Level 3. We estimate the fair values of these liabilities at May 31, 2020 by usingMonte Carlo simulation based on the remaining contractual terms, risk-free interest rates, and expected volatility of the stockprices, etc. The assumptions used, including the market value of stock prices in the future and the expectedvolatilities, were subjective unobservable inputs.

 

Liabilitiesmeasured at fair value on a recurring basis as of May 31, 2020 are summarized below:

 

       Fair value measurement using:        
       Quoted prices in active markets for identical assets (Level 1)      

 Significant other observable inputs

  ( Level 2)

     

Unobservable inputs

( Level 3)

       Fair value at May 31, 2020
 Derivative liabilities   $ —       $ —       $ 54,316     $ 54,316

 

 

   Derivative liabilities embedded in convertible notes
    
 Fair value at September 1, 2019  $—  
 Increase in liability   18,084
 Fair value at November 30, 2019   18,084
 Increase in liability   34,683
 Changes in the fair value   (2,441)
 Fair value at February 29, 2020  $50,326
Increase in liability   4,650
Changes in the fair value   (660)
Fair value at May 31, 2020  $54,316

 

 F-36 

 

NOTE11– RELATED PARTY TRANSACTIONS

 

In support of the Company’s efforts andcash requirements, it may rely on advances from related parties until such time that the Company can support its operations orattains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment forcontinued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances areconsidered temporary in nature and have not been formalized by a promissory note. During the nine months ended May 31, 2020 and2019, there are no such related party transactions.

 

The Company has entered into a patent licenseagreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”). The agreementis for a term of 5 years commencing on the effective date on June 1, 2017. The Company has already paid the licensor a non-refundable,up-from payment of $500,000 and shall pay a royalty of 20% of the gross revenue realized from the sale of licensed products andsub-licensing of this patent every year. The royalty expenses during the nine months ended May 31, 2020 and 2019 are $46,080 and$45,568, respectively.

 

Youall Perform Services Ltd, owned by the Company’sBoard of Director Jianli Deng, has been collecting revenue on behalf of the Company from the performance matching platform “AiBian Quan Qiu”. As of May 31, 2020, the Company has $87,581 related party receivable from Youall Perform Services Ltd forthe revenue collected from “Ai Bian Quan Qiu” on behalf of the Company.

 

In September 2019, the company enteredinto an agreement with Youall Perform Services Ltd for two transactions. 1) Youall Perform Services Ltd. will provide ITconsulting service for “Ai Bian Quan Qiu” platform upgrade and maintenance at a total cost of $128,000, out ofwhich $108,800 has been paid. Since there was no revenue from “Ai Bian Quan Qiu” due to COVID-19 in Q2 and Q3 ofFY2020, $108,800 long-term prepayment is expensed as research and development expense in Q3, FY2020. 2) The Company paysYouall Perform Services Ltd. 10% of the revenue generated from the “Ai Bian Quan Qiu” platform every month toreimburse the valued-added tax, tax surcharges, and foreign transaction fee Youall Perform Services Ltd. has been paying onbehalf of the Company.

 

The Company rented an office from Zestv StudiosLtd., owned by the Chief Executive Officer Chiyuan Deng, and incurred a total related party payable of $5,504 as there is a one-monthlag in payment of the office rent.

 

During the nine months ended May 31, 2020,$127,435 was paid to five executives in the form of stock-based compensation and $11,250 cash salary was paid to the Chief FinancialOfficer.

 

NOTE 12– EQUITY

 

Effective as of June 6, 2018, AB InternationalGroup Corporation amended its Articles of Incorporation to increase its authorized common stock to One Billion (1,000,000,000)shares, par value $0.001 per share.

 

During the year ended August 31, 2019, thefollowing 40,600,000 common shares were returned to the Company due to the termination of the Investor Agreement to acquire 51%ownership of iCrowdU Inc:

 

  2,000,000 shares for acquisition of shares of iCrowdU as collateral and 8,000,000 shares as consideration.

 

  20,200,000 issued to Alexander Holtermann for employment as Chief Executive Officer, 10,200,000 to Ian Wright for employment as Chief Operational Officer, and 200,000 to Eichbaum Financial Reporting Services Inc. for consulting fees.

 

In June, 2019, the Company incurred a 50:1common reverse stock split. Prior to approval of the reverse split the Company had a total of 177,100,000 issued and outstandingshares of common stock, par value $0.001. On the effective date of the reverse split, the Company has a total of 3,602,016 issuedand outstanding shares of common stock, par value $0.001. 

 

 F-37 

 

Upon the Reverse Split becoming effective,the par value per share of common stock will remain unchanged at $0.001 per share. As a result, on the effective date of the ReverseSplit, the stated capital on the Company’s balance sheet attributable to our common stock will be reduced proportionally,based on the exchange ratio of the Reverse Split, from its present amount, and the additional paid-in capital account will be creditedwith the amount by which the stated capital is reduced. The net income or loss and net book value per share of common stock willbe increased, because there will be fewer shares of common stock outstanding.

 

The Company issued the following common sharesduring year ended August 31, 2019:

 

  1,975,000 shares issued for consulting services of $59,250 to two third-party consultants during Q1, FY2019 and 3,300,000 common shares for consulting services of $99,000 to nine third-party consultants during Q3, FY2019

 

  20,100,000 shares for services of the Chief Operational Officer, the Chief Marketing Officer, and the Chief Financial Officer.

 

  18,000,000 common shares issued at $0.02 per share to five unrelated parties for proceeds of $360,000 during Q2, FY2019. The five unrelated parties include Anyone Pictures Limited, Kangdi Liu, Lijun Yu, Zestv Features Limited, and All In One Media Limited.

 

  13,000,000 common shares issued at $0.02 per share to three unrelated parties, including 3,000,000 to Kangdi Liu and 10,000,000 Bonus Media Investment Limited during Q3, 2019 for total proceeds of $260,000 during Q3, FY2019.

 

  3,000,000 common shares issued at $0.02 per share to an unrelated third party Zestv Features Limited in Q4, FY2019 before the 50:1 reverse stock split for a total proceed of $60,000.

 

  20,000,000 common shares to the Chief Executive Officer Chiyuan Deng with 14,000,000 issued at $0.02 per share in Q3, FY2019 and 600,000 shares issued at $2 per share in Q4, FY2019 after the 50:1 reverse stock split for total cash proceeds of $1,480,000.

 

  620,000 common shares issued at $2 per share after the reverse stock split to five unrelated party, including 100,000 to All In One Media Limited, 60,000 to KangDi Liu, 130,000 to Anyone Pictures Limited, 165,000 to StarEastNet, and 165,000 to Baoyu Chen, for total proceeds of $1,240,000

 

There are no common shares issued during thenine months ended May 31, 2020. The Company has 4,822,016 issued and outstanding shares of common stock as of May 31, 2020 andAugust 31, 2019. These common shares were held by approximately 513 shareholders of record at May 31, 2020 and August 31, 2019.

 

During Q2 and Q3, FY2020 the Company issued four five-year warrantsto purchase 49,060 shares of common stock at an exercise price of either $10.00 per share or $12.50 per share.

 

NOTE 13– INCOME TAXES

 

On December 22, 2017, the United States enactedthe Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completedthe accounting for the effects of the Act. The Company’s financial statements for the year ended August 31, 2019 reflectcertain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes.

 

 F-38 

 

Components of net deferred tax assets, includinga valuation allowance, are as follows as of May 31, 2020 and August 31, 2019:

   May 31,  August 31,
   2020  2019
Deferred tax asset attributable to:         
Net operating loss carry over  $288,740   $201,056
Less: valuation allowance   (288,740)   (201,056)
Net deferred tax asset  $—     $—  

 

The valuation allowance for deferred tax assetswas $288,740 as of May 31, 2020 and $201,056 as of August 31, 2019. In assessing the recovery of the deferred tax assets, managementconsiders whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimaterealization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporarydifferences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxableincome, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not thedeferred tax assets would not be realized as of May 31, 2020 and August 31, 2019.

 

Reconciliation between the statutory rate andthe effective tax rate is as follows for the nine months ended May 31, 2020 and May 31, 2019:

 

   Nine months ended
   May 31,
   2020  2019
Federal statutory tax rate   21%   21%
Change in valuation allowance   (21%)   (21%)
Effective tax rate   0%   0%

 

The Company’s fully owned subsidiaryApp Board Limited registered and located in Hong Kong. It is governed by the income tax law of the Hong Kong and is subject toa tax rate of 16.5%.

 

During the nine months ended May 31, 2020 andMay 31, 2019, the Company and its subsidiary have incurred a loss of (731,205) and ($599,444), respectively. As a result, the Companyand its subsidiary did not incur any income tax during the nine months ended May 31, 2020 and May 31, 2019.

 

NOTE 14 – CONCENTRATION RISK

 

62% and 84% of revenue was generated from onecustomer during the nine months ended May 31, 2020 and May 31, 2019, respectively.

 

100% of account receivables was due from onecustomer as of May 31, 2020 and May 31, 2019.

 

NOTE 15 – COMMITMENTS AND CONTINGENCIES

 

Operating lease

 

The Company leases office premises and a displaystore under non-cancelable operating lease agreements with an option to renew the lease. On February 21, 2020, the display storelease for a monthly rent of $1,766 was updated with a lower monthly rent of $768 per month from 02/23/2020 to 02/22/2021and $968from 02/23/2021 to 02/22/2022. The rent expense for the nine months ended May 31, 2020 and 2019 was $61,440 and $12,570, respectively.All leases are on a fixed payment basis. None of the leases include contingent rentals. The Company had lease commitment of $168,205as of May 31, 2020, of which $45,069 was within one year.

 

 F-39 

 

Future lease commitments    
     
FY 2020  $45,069
FY 2021  $77,184
FY 2022  $45,952
Total  $168,205

 

NOTE16 – SUBSEQUENT EVENTS 

 

In accordance with ASC 855-10, the Companyhas analyzed its operations subsequent to May 31, 2020 to the date these financial statements were issued.

 

In December 2019, a novel strain of coronavirus(COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility inthe U.S. and international markets. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may resultin a material adverse impact on the Company’s financial position, operations and cash flows. It is too early to quantifythe impact this situation will have on company revenue and profits at this time. Possible areas that may be affected include, butare not limited to, disruption to the Company’s customers and revenue, labor workforce, unavailability of supplies used inoperations, etc. Accordingly, Management is evaluating the Company’s liquidity position, reduction in revenues, and reviewingthe analysis of the Company’s financial performance as the Company seeks to withstand the uncertainty related to the coronavirus.As no large-crowd gathering has been allowed since the outbreak of COVID-19, the Company has not generated any revenue from theAi Bian Quan Qiu performance matching platform. Consequently, the Company has decided to impair 80% of the intangible asset carryingvalue related to the Ai Bian Quan Qiu performance matching platform and its Wechat official account, given that it is uncertainwhether this platform will continue generating any revenue. Due to the quarantine and continuous control imposed by the state andlocal governments in areas affected by COVID-19, merchant advertising events have been suspended for 7 months. The Company decidedto shut down the Ai Bian Quan Qiu platform, which has created an adverse impact on the business and financial condition and hamperedits ability to generate revenue and access sources of liquidity on reasonable terms.

 

On July 1, 2020, the Company’s CEO Chiyuan Deng acquired9,000 shares of common stock at a price of $0.9389 per share.

 

Until July 7, 2020, $29,908 of the EMA Financialconvertible note was converted to 231,500 shares of common stock at 55% of the lowest trading price in the 20 days prior to theconversion dates. As the conversion fee of $5,000 has deducted the converted note value and the additional MFN principal of $15,000has been triggered when the conversion price is lower than $0.1, the remaining EMA Financial convertible note principal balancewas $65,092.5.

 

Until July 7, 2020, $50,000 of the Peak OneInvestments, LLC convertible note was converted to 224,752 shares of common stock at 60% of the lowest trading price in the 20days prior to the conversion dates. The remaining Peak One convertible note principal balance was $35,000.