UNITED STATES

SECURITIES AND EXCHANGECOMMISSION

Washington, D.C.20549

 

FORM S-1

 

REGISTRATION STATEMENTUNDER THE SECURITIES ACT OF 1933

 

ABINTERNATIONAL GROUP CORP.

(Exact name of registrantas specified in its charter)

 

NV			37-1740351
(State of Incorporation)			(IRS Employer Identification Number)

 

48Wall Street, Suite1009,

NewYork, NY10005

(212)918-4519

(Address, includingzip code, and telephone number, including area code,

of registrant’sprincipal executive offices)

 

Copies of all correspondenceto: 

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 dateof commencement of proposed sale of the securities 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 under theSecurities 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 check thefollowing box and list the Securities Act registration statement number of the earlier effective registration statement for the sameoffering. ☐

 

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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smallerreporting 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 for complyingwith any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

CALCULATION OF REGISTRATIONFEE

 

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			200,000,000			$	.0054			$	1,080,000			$	100.12
Common Stock Underlying Warrants			50,000,000				.0054				270,000				25.03
Total			250,000,000								1,350,000				125.15

 

 

(1)	Alumni Capital LP (the selling stockholder identified in this prospectus) may offer up to 250,000,000 shares of common stock to be used for drawdowns and warrant exercises in connection with an August 2, 2022 Common Stock Purchase Agreement (the “Purchase Agreement”) and Common Stock Purchase Warrant we entered into with Alumni Capital LP. 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 OTCPink on July 29, 2022.

 

 

The Registrant herebyamends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall filea further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) ofthe Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission,acting pursuant to said Section 8(a), may determine.

 

 

The information in this prospectusis not complete and may be changed. The Selling Stockholders may not sell these securities until the registration statement filed withthe Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not solicitingan offer to buy these securities in any state where the offer, solicitation or sale is not permitted.

 

PRELIMINARYPROSPECTUS, SUBJECT TO COMPLETION, DATED AUGUST 3, 2022

 

AB INTERNATIONALGROUP CORP.

 

Up to 250,000,000Shares of Common Stock

 

Pursuant to this prospectus,Alumni Capital LP, a Delaware Limited Partnership (referred to herein as “Alumni Capital”), is offering on a resale basisfrom time to time an aggregate of up to 250,000,000 shares of common stock, par value $0.001 per share (the “Common Stock), ofAB International Group Corp. (“AB International,” “we,” “us”, “our” or the “Company”),a Nevada corporation. Shares amounting to 200,000,000 shares of Common Stock are purchasable by Alumni Capital pursuant to the termsand conditions of the Purchase Agreement that we entered into with Alumni Capital on August 2, 2022 (the “Purchase Agreement”).Pursuant to the Purchase Agreement, we have the right to “put”,” or sell, at our discretion, up to $1,000,000 worthof shares of Common Stock to Alumni Capital. This arrangement is also sometimes referred to herein as the “Equity Line.”Shares amounting to 50,000,000 are purchasable upon exercise at $0.02 per share by Alumni Capital pursuant to the terms and conditionsof a Common Stock Purchase Warrant.

 

We are not selling anyshares of Common Stock under this prospectus and will not receive any of the proceeds from the sale of the Common Stock by Alumni Capital(referred to herein as the “Selling Stockholder”). However, we may receive up to an aggregate of $1 million in proceeds fromthe sale of our Common Stock to Alumni Capital pursuant to the Equity Line and up to $1 million in proceeds if Alumni Capital exercisesthe Common Stock Purchase Warrant.

 

The Selling Stockholdermay sell all or a portion of the shares being offered pursuant to this Prospectus at fixed prices, at prevailing market prices at thetime of sale, at varying prices or at negotiated prices. For additional information regarding the methods of sale you should refer tothe section entitled “Plan of Distribution” in this Prospectus.

 

The Selling Stockholderis considered an underwriter within the meaning of the Securities Act of 1933, and any broker-dealers or agents that are involved inselling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection withsuch sales. In such event, any commissions received by such broker-dealers or agents, and any profit on the resale of the shares purchasedby them, may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. 

 

The Common Stock isquoted on the OTCPink, under the symbol “ABQQ.” On July 29, 2022, the last reported sale price of the Common Stock on theOTCPink was $0.0054 per share.

 

Investing in ourcommon stock involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully the risksthat we have described on page 5 of this prospectus under the caption “Risk Factors” and in the documents incorporated byreference into this prospectus.

 

Neither the Securitiesand Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectusis truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectusis August 3, 2022.

 

 

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS	1
PROSPECTUS SUMMARY	2
RISK FACTORS	5
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	11
USE OF PROCEEDS	12
DILUTION	12
SELLING STOCKHOLDERS	12
PLAN OF DISTRIBUTION	13
DESCRIPTION OF CAPITAL STOCK	14
DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS, AND CONTROL PERSONS	17
EXECUTIVE COMPENSATION	21
BUSINESS	22
MARKET PRICE OF THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS	24
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	26
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS	32
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT	33
LEGAL MATTERS	33
EXPERTS	33
WHERE YOU CAN FIND MORE INFORMATION	34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	35

 

We have not, and theSelling Stockholders have not, authorized anyone to provide you with information other than that contained or incorporated by referencein this prospectus and any applicable prospectus supplement or amendment. We have not, and the Selling Stockholders have not, authorizedany person to provide you with different information. This prospectus is not an offer to sell, nor is it an offer to buy, these securitiesin any jurisdiction where the offer is not permitted. The information contained or incorporated by reference in this prospectus and anyapplicable prospectus supplement or amendment is accurate only as of its date. Our business, financial condition, results of operations,and prospects may have changed since that date.

 

 

ABOUTTHIS PROSPECTUS

 

This prospectus is partof a registration statement that we have filed with the Securities and Exchange Commission (the “SEC”) pursuant to whichthe Selling Stockholder named herein may, from time to time, offer and sell or otherwise dispose of the securities covered by this prospectus.You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on thefront cover of this prospectus or that any information we have incorporated by reference is correct on any date subsequent to the dateof the document incorporated by reference, even though this prospectus is delivered or securities are sold or otherwise disposed of ona later date. It is important for you to read and consider all information contained in this prospectus, including the Information Incorporatedby Reference herein, in making your investment decision. You should also read and consider the information in the documents to whichwe have referred you under the captions “Where You Can Find More Information” and “Incorporation of Information byReference” in this prospectus.

 

Neither we nor the SellingStockholder have authorized any dealer, salesman or other person to give any information or to make any representation other than thosecontained or incorporated by reference in this prospectus. You must not rely upon any information or representation not contained orincorporated by reference in this prospectus. This prospectus does not constitute an offer to sell or the solicitation of an offer tobuy any of our securities other than the securities covered hereby, nor does this prospectus constitute an offer to sell or the solicitationof an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in suchjurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselvesabout, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions.

 

We further note thatthe representations, warranties and covenants made in any agreement that is filed as an exhibit to any document that is incorporatedby reference in the accompanying prospectus were made solely for the benefit of the parties to such agreement, including, in some cases,for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty orcovenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, suchrepresentations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

PROSPECTUS SUMMARY

 

The following isa summary of what we believe to be the most important aspects of our business and the offering of our securities under this prospectus.We urge you to read this entire prospectus, including the more detailed financial statements, notes to the financial statements and otherinformation incorporated by reference from our other filings with the SEC. Each of the risk factors could adversely affect our business,operating results and financial condition, as well as adversely affect the value of an investment in our securities.

 

Overview

 

The Company was incorporatedunder the laws of the State of Nevada on July 29, 2013. The Company's fiscal year end is August 31.

 

We are an intellectualproperty (IP) and movie investment and licensing firm, focused on acquisitions and development of various intellectual property, includingthe acquisition and distribution of movies. In February 2019, we launched a business application (Ai Bian Quan Qiu) through smartphonesand official social media accounts utilizing Artificial Intelligence. It is a matching platform for performers, advertiser merchants,and owners for more efficient services. We previously generated revenues through an agency service fee from each matched performance.Due to the quarantine and continuous control imposed by the state and local governments in areas affected by COVID-19, merchant advertisingevents have been suspended for 7 months. The Company decided to suspend the Ai Bian Quan Qiu platform, which, at the time, created anadverse impact on the business and financial condition and hampered its ability to generate revenue and access sources of liquidity onreasonable terms. As a result, we decide to focus mainly the IP transactions and online video streaming. Our management and operationsare from the New York City, the international media center.

 

On April 22, 2020, theCompany announced the first phase development of its video streaming service. The online service will be marketed and distributed inthe world under the brand name ABQQ.tv. The Company's professional team are sourcing such dramas and films to provide video streamingservice on the ABQQ.tv. The video streaming website www.ABQQ.tv was officially launched on December 29, 2020. As of May 31, 2022, theCompany acquired 59 movie broadcast rights and a 15-episode TV drama series. The Company will continue marketing and promoting the ABQQ.tvwebsite through Google Ads and acquire additional broadcast rights for movies and TV series, and plan to charge subscription fees oncethe Company has obtained at least 200 broadcast rights of movie and TV series.

 

On October 21, 2021,the Company entered into a Lease Agreement (the “Lease”) with Martabano Realty Corp. (the “Landlord”), pursuantto which the Company agreed to lease approximately 8,375 square feet of in what is known as the Mt. Kisco Theatre at 144 Main Street,Mount Kisco, New York. The term of the Lease is five years plus free rent period. Commencing in month four, the Company's monthly baserent obligation will be approximately $6,979, which amount will increase in year three to $13,260, year four at $13,658 and the finalyear at $14,067 in accordance with the terms of the Lease. The Lease contains customary provisions for real property leases of this type,including provisions allowing the Landlord to terminate the Lease upon a default by the Company.

 

The space was formerlyused as a theatre with a total of 5 screens and 466 sets for screening films. The former theatre opened on December 21, 1962 with HayleyMillsin “In Search of the Castaways.” It was a replacement for the town’s other movie theatre that burned down. Itwas later twinned and further divided into 5 screens. It was operated for years by Lesser Theaters, then bought by Clearview Cinemas.In June, 2013 it was taken over by Bow-Tie Cinemas when they took most Clearview locations. It lasted until March, 2020 when it was closedby the Covid-19 pandemic. It was announced in September 2020 that the closure would be permanent. The Company intends to continue touse the space as a theatre with a total of 5 screens and 466 sets for screening films. It’s the first theatre of ABQQ Cinemas inAmerica as the new business line of the Company.

 

On April 27, 2022, wepurchased a unique Non-Fungible Token (“NFT”) movie and music marketplace, named as the NFT MMM, from Stareastnet PortalLimited, which including an APP “NFT MMM” on Google Play, and full right to the website: starestnet.io. NFTs are digitalassets with a unique identifier that is stored on a blockchain, and NFTs are tradable rights of digital assets (pictures, music, films,and virtual creations) where ownership is recorded in blockchain smart contracts. As the expert of IP transactions specialized in themedia industry, we believe that NFTs provide great potential in the intellectual property protection domain. It can promote transparencyand liquidity and open the market to innovators who aim to commercialize their IP efficiently. We are actively launching movie and TVdrama copyrights NFTs to buyers on the NFT MMM, and expect to generate revenues from the transactions incurred on the platform.

 

Subsequent to quarterend, on June 22, 2022, we entered an agreement with Zestv Studios Limited, a Hong Kong entity 100% owned by our Chief Executive OfficerChiyuan Deng, to transfer the mainland China copyright and broadcast right for the movie “Too Simple” to Zestv Studios Limited.The total transfer price was $750,000.

 

 

Covid-19

 

The full extent of theimpact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving factors that we maynot be able to accurately predict at the present time. In an effort to contain COVID-19 or slow its spread, governments around the worldhave enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents to theirhomes or places of residence, and practice social distancing when engaging in essential activities. We anticipate that these actionsand the global health crisis caused by COVID-19 will negatively impact business activity across the globe. The movie industry in generalhas changed dramatically as a result of the pandemic restrictions. While movie theaters struggle to stay alive, online streaming programminghas increased. We have endeavored to stay with the trend for streaming services to remain competitive. We have experienced the negativeimpact in our results of operations and in our financial condition for the year ended August, 2020, especially with respect to the moviedistribution end of our business. These impacts concern delays in delivering our movies and IP because of health restrictions imposedon certain public events that concern our business, including, among other things, theaters, indoor and outdoor performances, filmingrestrictions, music festivals, concerts and other such events, Some of these restrictions include pandemic government mandated shutdownsand others restrictions on capacity gathered at these events, with some jurisdictions imposing fines or revocation of business licensing,and other restrictions. As a result of these factors, our revenue was reduced from March to May of 2020. With immediate closures, theresultant industry and business specific delays have negatively affected our company.

 

We plan to focus onthe video streaming and other web-based applications and expand our business into those areas that we believe we situate the companyfor continued and increased revenues. As the pandemic is forecasted to worsen in the United States and other areas around the globe,we believe that the demand for our IP, online products and services offerings increases. While we cannot guarantee that the negativeeffects of the pandemic will not interfere with our ability to generate revenues, we intend to strengthen our position in this dynamicmarket and position the company to best suit its stockholders.

 

Specific to our companyoperations, during the pandemic period, we have enacted precautionary measures to protect the health and safety of our employees andpartners. These measures include closing our office, having employees work from home, and eliminating all travel. While having employeeswork from home may have a negative impact on efficiency and may result in negligible increases in costs, it does have an impact on ourability to execute on our agreements to deliver our core products.

 

We will continue toactively monitor the situation and may take further actions that alter our business operations as may be required by federal, state,local or foreign authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders.It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on ourcustomers, partners, or vendors, or on our financial results.

 

Description of the Purchase Agreementand the Common Stock Purchase Warrant

 

OnAugust 2, 2022, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delawarelimited partnership. Pursuant to the Purchase Agreement, the Company has the right, but not the obligation to cause Alumni Capital topurchase up to $1 million of our common stock at the Investment Amount (defined below) during the period beginning on the execution dateof the Purchase Agreement and ending on the earlier of (i) the date on which the Alumni Capital has purchased $1 million of our commonstock shares pursuant to the Purchase Agreement or (ii) December 31, 2022.

 

Pursuantto the Purchase Agreement, the “Investment Amount” means seventy five percent (75%) of the lowest traded price of the CommonStock five Business Days prior to the Closing of a Purchase Notice. No Purchase Notice will be made without an effective registrationstatement and no Purchase Notice will be in an amount less than twenty-five thousand dollars ($25,000) or greater than five hundred thousanddollars ($500,000).

 

ThePurchase Agreement provides that the number of our common stock shares to be sold to Alumni Capital will not exceed the number of sharesthat, when aggregated together with all other shares of our common stock which the investor is deemed to beneficially own, would resultin the investor owning more than 9.99% of our outstanding common stock.

 

Inconsideration for Alumni Capital’s execution and performance under the Purchase Agreement, the Company issued to Alumni Capitala Common Stock Purchase Warrant dated August 2, 2022 to purchase 50,000,000 shares of Common Stock at an exercise price of $0.02 pershare.

 

ThePurchase Agreement contains certain representations, warranties, covenants and events of default. The Closing occurred following thesatisfaction of customary closing conditions. 

 

 

THE OFFERING

 

Common stock to be offered by the Selling Stockholder		Up to 250,000,000 Shares
Shares of Common Stock outstanding before this offering		376,758,463 shares, as of August 1, 2022
Shares of Common Stock outstanding after this offering		626,758,463 shares.  This assumes that the Company has fully committed on the Equity Line up to the maximum of shares allowable under this Prospectus and has exercised the Common Stock Purchase Warrant.
Use of Proceeds		We will not receive any proceeds from the sale of Common Stock by the Selling Stockholder. We may receive up to an aggregate of $1 million in proceeds from the sale of our Common Stock to Alumni Capital pursuant to the Equity Line and up to $1 million in proceeds from the exercise of the Common Stock Purchase Warrant.
Plan of Distribution		The Selling Stockholder may, from time to time, sell any or all of their shares of our Common Stock on the stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be fixed or negotiated prices. For further information, see “Plan of Distribution” beginning on page 5.
Risk Factors		This investment involves a high degree of risk. See “Risk Factors” for a discussion of factors you should consider carefully before making an investment decision.
OTCPink symbol		“ABQQ.”

  

RISK FACTORS

 

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

 

Risk Related to Covid 19

 

Our business andfuture operations may be adversely affected by epidemics and pandemics, such as the recent COVID-19 outbreak.

 

We may face risks relatedto health epidemics and pandemics or other outbreaks of communicable diseases, which could result in a widespread health crisis thatcould adversely 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 orpandemic or other outbreak of communicable diseases, such as the current COVID-19 pandemic, poses the risk that we, or potential businesspartners may be disrupted or prevented from conducting business activities for certain periods of time, the durations of which are uncertain,and may otherwise experience significant impairments of business activities, including due to, among other things, operational shutdownsor suspensions that may be requested or mandated by national or local governmental authorities or self-imposed by us, our customers orother business partners. While it is not possible at this time to estimate the impact that COVID-19 could have on our business, potentialcustomers, potential suppliers or other current or potential business partners, the continued spread of COVID-19, the measures takenby the local 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 pandemichas required our 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 imposed by thelocal governments in areas affected by COVID-19, businesses have been suspended due to quarantine intended to contain this outbreak andmany people have been forced to work from home in those areas. As a result, advertiser merchants orders for event has been suspended,which has had an adverse impact on our business and financial condition and has hampered our ability to generate revenue and access usualsources of liquidity on reasonable terms.

 

Risks Related to Our Financial Condition

 

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

 

We have had limitedoperations to date and have generated limited revenues. Therefore, we have a limited operating history upon which to evaluate the meritsof investing in our company. Potential investors should be aware of the difficulties normally encountered by new companies and the highrate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complicationsand delays encountered in connection with the operations that we plan to undertake. These potential problems include, but are not limitedto, unanticipated problems relating to the ability to generate sufficient cash flow to operate our business, and additional costs andexpenses that may exceed current estimates. We expect to incur significant losses into the foreseeable future. We recognize that if theeffectiveness of our business plan is not forthcoming, we will not be able to continue business operations. There is no history uponwhich to base any assumption as to the likelihood that we will prove successful, and it is doubtful that we will continue to generateoperating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likelyfail.

 

 

Weare dependent on outside financing for continuation of our operations.

 

Becausewe have generated limited revenues and currently operate at a loss, we are completely dependent on the continued availability of financingin order to continue our business. There can be no assurance that financing sufficient to enable us to continue our operations will beavailable to us in the future.

 

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

 

In2020 and 2021, we have issued several convertible promissory notes to accredited investors. These notes contain terms that allow fordiscounted conversions from the company’s stock price, with most at a 40% discount. These notes also contain strict terms for complianceand penalty provisions that could cost us more than the principal and accrued interest. They also have most favored nation clauses thatforce us to offer more favorable terms in subsequent offerings. If we are unable to secure a better form of financing, or pay off thenotes before they convert, we could experience a significant drop in our stock price and face other negative consequences. Because weare penny stock, and there is a limited market for our shares, investor may not be able to recoup their investment and noteholders maynot be able to sell their converted shares into the market. We may be forced to pay off the convertible debt, with existing or raisedfunds, which might not be available. We could be at risk of default with the noteholders. If that happens, we may be forced to defendthe lawsuits, liquidate assets, etc., which would be costly and turn management’s attention away from the business. We could goout of business and you could lose your entire investment.

 

RisksRelated to Legal Uncertainty

 

Compliancewith changing regulation of corporate governance and public disclosure may result in additional expenses.

 

Changinglaws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 andnew SEC regulations, are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subjectto varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolveover time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliancematters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining highstandards of 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 time andattention 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, our reputationmay be harmed.

 

Ifwe fail to comply with the new rules under the Sarbanes-Oxley Act related to accounting controls and procedures, or if material weaknessesor other deficiencies are discovered in our internal accounting procedures, our stock price could decline significantly.

 

Weare exposed to potential risks from legislation requiring companies to evaluate internal controls under Section 404(a) of the Sarbanes-OxleyAct of 2002. As a smaller reporting company we will be exempt from auditor attestation requirements concerning any suchreport so long as we are a smaller reporting company. We have not yet evaluated whether our internal control procedures are effectiveand therefore there is a greater likelihood of material weaknesses in our internal controls, which could lead to misstatements or omissionsin our reported financial statements as compared to issuers that have conducted such evaluations.

 

Ifmaterial weaknesses and deficiencies are detected, it could cause investors to lose confidence in our company and result in a declinein our stock price and consequently affect our financial condition. In addition, if we fail to achieve and maintain the adequacy of ourinternal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls overfinancial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly thoserelated to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financialfraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investorscould lose 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.

 

 

Risks Associated with Management andControl Persons

 

Ifwe fail to attract and retain qualified senior executive and key technical personnel, our business will not be able to expand.

 

Weare dependent on the continued availability of Chiyuan Deng, and the availability of new employees to implement our business plans. Themarket for skilled employees is highly competitive, especially for employees in the service industry. Although we expect that our compensationprograms will be intended to attract and retain the employees required for us to be successful, there can be no assurance that we willbe able to retain the services of all our key employees or a sufficient number to execute our plans, nor can there be any assurance wewill be able to continue to attract new employees as required.

 

Ourpersonnel may voluntarily terminate their relationship with us at any time, and competition for qualified personnel is intense. The processof locating additional personnel with the combination of skills and attributes required to carry out our strategy could be lengthy, costlyand disruptive.

 

Ifwe lose the services of key personnel, or fail to replace the services of key personnel who depart, we could experience a severe negativeeffect on our financial results and stock price. In addition, there is intense competition for highly qualified bilingual and “peoplefriendly” personnel in the locations where we principally operate. The loss of the services of any key personnel, marketing orother personnel or our failure to attract, integrate, motivate and retain additional key employees could have a material adverse effecton our business, operating and financial results and stock price.

 

Mr.Deng owns a significant percentage of the voting power of our stock and will be able to exercise significant influence over the compositionof our Board of Directors, matters subject to stockholder approval and our operations.

 

Asof the date of this filing, Chiyuan Deng owns 100,000 shares of our Series A Preferred Stock, which has the voting power of 51% of thetotal vote of shareholders. As a result of his equity ownership interest, voting power and the contractual rights described above, Mr.Deng currently is in a position to influence, subject to our organizational documents and Nevada law, the composition of our Board ofDirectors and the outcome of corporate actions requiring stockholder approval, such as mergers, business combinations and dispositionsof assets, among other corporate transactions. In addition, this concentration of voting power could discourage others from initiatinga potential merger, takeover or other change of control transaction that may otherwise be beneficial to us, which could adversely affectthe market price of our securities.

 

Risks Related to Our Securities and theOver the Counter Market

 

If a market forour common stock does not develop, shareholders may be unable to sell their shares.

 

Our common stock isquoted under the symbol “ABQQ” on the OTCPink operated by OTC Markets Group, Inc, an electronic inter-dealer quotation mediumfor equity securities. We do not currently have an active trading market. There can be no assurance that an active and liquid tradingmarket will develop or, if developed, that it will be sustained.

 

Our securities are verythinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of thestock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result inmajor fluctuations in the price of the stock.

 

Our common stock pricemay be volatile and could fluctuate widely in price, which could result in substantial losses for investors.

 

  

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

 

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technological innovations or new products and services by us or our competitors;

 

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government regulation of our products and services;

 

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the establishment of partnerships with other technology 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 financial results.

 

Because we have nominalrevenues to date, you should consider any one of these factors to be material. Our stock price may fluctuate widely as a result of anyof the above.

 

In addition, the securitiesmarkets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performanceof particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

 

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

 

In the event we arerequired to raise additional capital we may do so by selling additional shares of common stock thereby diluting the shares and ownershipinterests of existing shareholders.

 

 

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

   

Our stock is a pennystock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equitysecurity that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject tocertain exceptions. 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 or annualincome exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transactionin a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SECwhich provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also mustprovide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salespersonin the transaction and monthly account statements showing the market value of each penny stock 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 orin writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealermust make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’swritten agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity inthe secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the abilityof broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketabilityof, our common stock.

 

In addition to the “pennystock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rulesthat require 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 objectives andother information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probabilitythat speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority’requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your abilityto buy and sell our stock.

 

Rule 144 salesin the future may have a depressive effect on our stock price as an increase in supply of shares for sale, with no corresponding increasein demand will cause prices to fall.

 

All of the outstandingshares of common stock held by the present officers, directors, and affiliate stockholders are “restricted securities” withinthe meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuantto an effective 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 brokerage transactions,a number of shares that does not exceed the greater of 1.0% of a company’s outstanding common stock. There is no limit on the amountof restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of six monthsif the company is a current reporting company under the 1934 Act. A sale under Rule 144 or under any other exemption from the Act, ifavailable, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect uponthe price of the common stock in any market that may develop.

 

 

FINRA sales practicerequirements may also limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “pennystock” 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 that customer.Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable effortsto obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretationsof these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at leastsome customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock,which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

We do not intendto pay dividends.

 

We do not anticipatepaying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Evenif funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration,payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among otherthings, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors ourboard of 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.

 

We have the rightto issue additional common stock and preferred stock without consent of shareholders. This would have the effect of diluting investors’ownership and could decrease the value of their investment.

 

We are authorized to issue up to 1,000,000,000 sharesof common stock, of which there were 376,758,463 shares issued and outstanding as of August 2, 2022. In addition, our articles of incorporationauthorizes the issuance of up to 10,000,000 shares of preferred stock, the rights, preferences, designations and limitations of whichmay be set by the Board of Directors. We have designated and authorized, one 100,000 share of Series A Preferred Stock, 20,000 sharesof Series B Convertible Preferred Stock, 1,000,000 shares of Series C Preferred Stock, and 5,075 shares of Series D Preferred Stock. Asof August 2, 2022, there were issued and outstanding (i) 100,000 shares of our Series A Preferred Stock, (ii) 20,000 shares of our SeriesB Preferred Stock, (iii) 365,349 shares of our Series C Preferred Stock, and (iv) 0 shares of our Series D Convertible Preferred Stock.

 

The shares of authorizedbut undesignated preferred stock may be issued upon filing of an amended certificate of incorporation and the payment of required fees;no further shareholder action is required. If issued, the rights, preferences, designations and limitations of such preferred stock wouldbe set by our Board and could operate to the disadvantage of the outstanding common stock. Such terms could include, among others, preferencesas to dividends and distributions on liquidation. We have designated four series of preferred stock, four of which have shares issuedand outstanding. A description of the terms, rights and preferences of these series of preferred stock are described under “Descriptionof Securities” beginning on page 3.

 

Risks Related to the Offering

 

Ourexisting stockholders may experience significant dilution from the sale of our common stock pursuant to the Alumni Capital Purchase Agreement.

 

Thesale of our common stock to Alumni Capital in accordance with the Purchase Agreement may have a dilutive impact on our shareholders.As a result, the market price of our common stock could decline. In addition, the lower our stock price is at the time we exercise ourput options, the more shares of our common stock we will have to issue to Alumni Capital in order to exercise a put under the PurchaseAgreement. If our stock price decreases, then our existing shareholders would experience greater dilution for any given dollar amountraised through the offering.

 

Theperceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock.Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors to engage inshort sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling could furthercontribute to progressive price declines in our common stock.

 

 

Theissuance of shares pursuant to the Alumni Capital Purchase Agreement may have significant dilutive effect.

 

Dependingon the number of shares we issue pursuant to the Alumni Capital Purchase Agreement, it could have a significant dilutive effect uponour existing shareholders. Although the number of shares that we may issue pursuant to the Purchase Agreement will vary based on ourstock price (the higher our stock price, the less shares we have to issue), there may be a potential dilutive effect to our shareholders,based on different potential future stock prices, if the full amount of the

  

PurchaseAgreement is realized. Dilution is based upon common stock put to Alumni Capital and the stock price discounted to seventy five percent(75%) of the lowest traded price of the Common Stock five Business Days prior to the Closing of a Purchase Notice during which the PurchasePrice of the Common Stock is valued.

 

AlumniCapital will pay less than the then-prevailing market price of our common stock which could cause the price of our common stock to decline.

 

Ourcommon stock to be issued under the Alumni Capital Purchase Agreement will be purchased at 75% of the lowest traded price of the CommonStock five Business Days prior to the Closing of a Purchase Notice.

 

AlumniCapital has a financial incentive to sell our shares immediately upon receiving them to realize the profit between the discounted priceand the market price. If Alumni Capital sells our shares, the price of our common stock may decrease. If our stock price decreases, AlumniCapital may have further incentive to sell such shares. Accordingly, the discounted sales price in the Purchase Agreement may cause theprice of our common stock to decline.

 

Wemay not have access to the full amount under the Purchase Agreement.

 

The lowest traded price of the Company’s commonstock during the five (5) consecutive trading day period immediately preceding the filing of this Registration Statement was approximately$0.0046. At that price we would be able to sell shares to Alumni Capital under the Purchase Agreement at the discounted price of $0.00345.At that discounted price, the 200,000,000 shares of Common Stock to be issued in connection with the Purchase Agreement would only representapproximately $690,000, which is far below $1,000,000 (the full amount of the Purchase Agreement).

 

CAUTIONARY NOTE REGARDINGFORWARD-LOOKING STATEMENTS

 

All statements otherthan statements of historical facts contained in or incorporated by reference into this prospectus, including statements regarding ourfuture results of operations and financial position, business strategy, prospective products, product approvals, research and developmentcosts, commercialization plans and timing, other plans and objectives of management for future operations, and future results of currentand anticipated products are forward-looking statements. These statements involve known and unknown risks, uncertainties and other importantfactors that may cause our actual results, performance or achievements to be materially different from any future results, performanceor achievements expressed or implied by the forward-looking statements.

 

In some cases, you canidentify forward-looking statements by terms such as “may,” “will,” “should,” “expect,”“plan,” “aim,” “anticipate,” “could,” “intend,” “target,” “project,”“contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue”or the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions.We have based these forward-looking statements largely on our current expectations and projections about future events and financialtrends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speakonly as of the date of this prospectus and are subject to a number of risks, uncertainties and assumptions including those listed inthe ‘‘Risk Factors’’ incorporated by reference into this prospectus from our Annual Report on Form 10-K,as updated by subsequent reports. Forward-looking statements are subject to inherent risks and uncertainties, some of which cannot bepredicted or quantified and some of which are beyond our control. The events and circumstances reflected in our forward-looking statementsmay not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover,we operate in a dynamic industry and economy. New risk factors and uncertainties may emerge from time to time, and it is not possiblefor management to predict all risk factors and uncertainties that we may face. Except as required by applicable law, we do not plan topublicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events,changed circumstances or otherwise.

 

 

USE OF PROCEEDS

 

We will not receiveany of the proceeds from the sale of shares of our Common Stock in this offering. The Selling Stockholder will receive all of the proceedsfrom this offering. However, we may receive up to an aggregate of $1 million in proceeds from the sale of our Common Stock to AlumniCapital pursuant to the Equity Line and up to $1 million in proceeds from the exercise of the Common Stock Purchase Warrant.

 

The Selling Stockholderswill pay any underwriting discounts and commissions and expenses incurred by the Selling Stockholders for brokerage, accounting, taxor legal services or any other expenses incurred by the Selling Stockholders in disposing of the shares. We will bear all other costs,fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, allregistration and filing fees, fees and expenses of our counsel, certain expenses of counsel to the Selling Stockholder and our independentregistered public accountants.

  

DILUTION

 

The sale of our commonstock to Alumni Capital in accordance with the Purchase Agreement and Common Stock Warrant will have a dilutive impact on our stockholders.As a result, our net loss per share could increase in future periods and the market price of our common stock could decline. In addition,the lower our stock price is at the time we exercise our Purchase Notice, the more shares of our common stock we will have to issue toAlumni Capital in order to drawdown pursuant to the Purchase Agreement. If our stock price decreases during the pricing period, thenour existing stockholders would experience greater dilution.

 

SELLING STOCKHOLDER

 

We are registeringshares of Common Stock in order to permit the Selling Stockholder to offer the shares for resale from time to time.

 

The following tablesets forth:

 

·                 the Selling Stockholder and other information regarding the beneficial ownership of the shares of Common Stock by the Selling Stockholder;

 

·                 the number of shares of Common Stock beneficially owned by the Selling Stockholder, based on its ownership of the shares of Common Stock,as of August 2, 2022, without regard to any limitations on exercises prior to the sale of the shares covered by this prospectus;

 

·                 the number of shares that may be offered by the Selling Stockholder pursuant to this prospectus;

 

·                 the number of shares to be beneficially owned by the Selling Stockholder and their affiliates following the sale of any shares coveredby this prospectus; and

 

·                 the percentage of our issued and outstanding Common Stock to be beneficially owned by the Selling Stockholder and their affiliates followingthe sale of all shares covered by this prospectus, based on the Selling Stockholder’s ownership of Common Stock as of August 2,2022.

 

This prospectus generallycovers the (i) resale of all shares received by the Selling Stockholder in connection with the transactions contemplated by the PurchaseAgreement and (ii) resale of all shares of Common Stock that are issuable upon exercise by the Selling Stockholder of the Common StockPurchase Warrant.

  

 

The Selling Stockholdermay sell all, some or none of its shares in this offering. See “Plan of Distribution.”

 

		Number of shares of Beneficially Owned Prior to		Maximum Number of shares of Common Stock to be Sold Pursuant to this		Number of shares of Common Stock Beneficially Owned After Offering(1)(2)
Name of Selling Stockholder		Offering(1)		Prospectus		Number		Percent
Alumni Capital LP (3)		50,000,000(4)		250,000,000(5)		0		0%

  

(1)             Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect toshares of Common Stock. Shares of Common Stock subject to derivative securities exercisable, or exercisable within 60 days, are countedas outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computingthe percentage of any person.

 

(2)             Assumes that the Selling Stockholder sells all shares of Common Stock registered under this prospectus held by such Selling Stockholder.

 

(3)

Ashkan Mapar, Manager of Alumni Capital, exercises voting and dispositive power with respect to the shares of our common stock that are beneficially owned by Alumni Capital.

 

(4)             Represents the amount of Warrant Shares under the Common Stock Purchase Warrant (without consideration of the 4.99% ownership limitationimposed by the Warrant).

 

(5)             Represents the amount of Common Stock issuable pursuant to the Purchase Agreement and Common Stock Purchase Warrant.

 

PLAN OF DISTRIBUTION

 

The SellingStockholder may, from time to time, sell any or all of shares of our Common Stock covered hereby on the OTCPink or any other stock exchange,market or trading facility on which the shares are traded or in private transactions. The Selling Stockholder may sell  all or aportion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, atvarying prices or at negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling shares:

 

·           on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

·           in the over-the-counter market;

·           in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

·           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 asprincipal to facilitate the transaction;

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

·           an exchange distribution in accordance with the rules of the applicable exchange;

·           privately negotiated transactions;

 ·           in transactions through broker-dealers that agree with the selling stockholder to sell a specified number of such shares at a stipulatedprice per share;

·           through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·           a combination of any such methods of sale; or

·           any other method permitted pursuant to applicable law.

 

The SellingStockholder may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealersengaged by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissionsor discounts from the Selling Stockholder (or, if any broker- dealer acts as agent for the purchaser of securities, from the purchaser)in amounts to be negotiated, provided such amounts are in compliance with FINRA Rule 2121. Discounts, concessions, commissions andsimilar selling expenses, if any, that can be attributed to the sale of Common Stock will be paid by the selling stockholder and/or thepurchasers.

 

The SellingStockholder and any broker-dealers or agents that are involved in selling the shares are deemed to be “underwriters” withinthe meaning of the Securities Act in connection with such sales. With respect to any shares of Common Stock issued pursuant to the EquityLine are resold hereunder, the Selling Stockholder is deemed as an underwriter and any broker-dealers that are involved in selling suchshares is deemed as an underwriter. In such event, any commissions received by such broker-dealers or agents and any profit on the resaleof the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act, and such broker-dealersor agents will be subject to the prospectus delivery requirements of the Securities Act.

 

 

We arerequired to pay certain fees and expenses incurred by us incident to the registration of the shares covered by this prospectus. We haveagreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under theSecurities Act of 1933. We will not receive any proceeds from the resale of any of the shares of our common stock by the Selling Stockholder.We may, however, receive proceeds from the sale of our common stock under the Purchase Agreement with Alumni Capital and cash exercisesof the Common stock Purchase Warrant. Neither the Purchase Agreement with Alumni Capital nor any rights of the parties under the PurchaseAgreement with Alumni Capital may be assigned or delegated to any other person.

 

We haveentered into an agreement with Alumni Capital to keep this prospectus effective until Alumni Capital has sold all of the common sharespurchased by it under the Purchase Agreement and has no right to acquire any additional shares of common stock under the Purchase Agreement.

 

Under applicablerules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the resale shares may notsimultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined inRegulation M, prior to the commencement of the distribution. In addition, the selling stockholder will be subject to applicable provisionsof the Securities Exchange Act of 1934 and the rules and regulations thereunder, including Regulation M, which may limit the timing ofpurchases and sales of shares of the common stock by the Selling Stockholder or any other person. We will make copies of this prospectusavailable to the Selling Stockholder.

  

DESCRIPTION OF CAPITALSTOCK

 

General

 

We are authorized to issue an aggregate of 1,000,000,000shares of 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 August 1, 2022, there were issued and outstanding(i) 376,758,463 shares of common stock, (ii) 100,000 shares of our Series A Preferred Stock, (iii) 20,000 shares of our Series B PreferredStock, (iv) 365,349 shares of our Series C Preferred Stock, and (v) 0 shares of our Series D Convertible Preferred Stock.

 

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

 

Dividends

 

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

 

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

 

Warrants

 

In consideration forAlumni Capital’s execution and performance under the Purchase Agreement, the Company issued to Alumni Capital a Common Stock PurchaseWarrant dated August 2, 2022 to purchase 50,000,000 shares of Common Stock at an exercise price of $0.02 per share.

 

Options

 

Currently, we have nooptions outstanding to purchase our common stock.

 

Securities Authorized for Issuance UnderEquity Compensation Plans

 

We have no equity compensationplans.

 

 

Preferred Stock

 

The Company has authorized10,000,000 shares of preferred stock. The board of directors has the authority to issue these shares and to set dividends, voting andconversion rights, redemption provisions, liquidation preferences, and other rights and restrictions.

 

Series A Preferred Stock

 

On September 4, 2020,we filed a certificate of designation for 100,000 shares of Series A Preferred Stock. The Series A Preferred Stock has the right to vote51% of the total vote of shareholders and concerts to common stock on a one for one conversion. Our Chief Executive Officer, ChiyuanDeng, owns all 100,000 shares.

 

Series B Preferred Stock

 

On January 8, 2021,we filed a certificate of destination for 20,000 shares of Series B Preferred Stock. The Series B Preferred Stock is entitled to a liquidationpreference of $16 per share, the stated value of the Series B Preferred Stock, over our common stock and Series A Preferred Stock inthe event of a dissolution, liquidation or winding up of the company. The Series B Preferred Stock does not have voting rights, but after36 months the holders may convert each share of their preferred stock into 1,000 shares of common stock. The holders of shares of SeriesB Preferred Stock have no dividend rights except as may be declared by the Board in its sole and absolute discretion, out of funds legallyavailable for that purpose. Our Chief Executive Officer, Chiyuan Deng, owns all 20,000 shares.

 

Series C Preferred Stock

 

On January 28, 2021,we filed a certificate of designation for 1,000,000 shares of the Series C Preferred Stock. The shares of Series C Preferred Stock havea stated value of $1.00 per share, are convertible into Common Stock after one hundred and eighty (180) days at a price per share equalto 75% of the average of the lowest three (3) VWAPs for the Common Stock during the ten (10) Trading Day (as defined in the Certificateof Designation) period ending on the last complete Trading Day prior to the Conversion Date (as defined in the Certificate of Designation)(the “Conversion Price”), and earn dividends at the rate of twelve percent (12%) per annum. Upon an Event of Default (asdefined in the Certificate of Designation), the Series C Preferred Stock earn dividends at the rate of twenty two percent (22%) per annum.The shares of Series C Preferred Stock do not have voting rights, and rank: (a) senior with respect to dividend rights and rights ofliquidation with the Common Stock and Series A Preferred Stock; (b) junior with respect to dividends and right of liquidation with respectto our Series B Preferred Stock; and (c) junior with respect to dividends and right of liquidation to all existing indebtedness of theCompany. We may redeem the Series C Preferred Stock in accordance with the terms of the Certificate of Designation prior to the one hundredeightieth (180th) day following the date of issuance of the Series C Preferred Stock. We currently have 365,349 shares of Series C PreferredStock outstanding.

 

Series D Preferred Stock

 

On April 12, 2021, wefiled a certificate of designation for 5,075 shares of the Company’s Series D Preferred Stock. .

 

Below is a summary descriptionof the material rights, designations and preferences of the Series D Preferred Stock (all capitalized terms not otherwise defined hereinshall have that definition assigned to it as per the Certificate of Designation).

 

The Company has theright to redeem the Series D Preferred Stock, in accordance with the following schedule:

 

§

If all of the Series D Preferred Stock are redeemed within ninety (90) calendar days from the issuance date thereof, the Company shall have the right to redeem the Series D Preferred Stock upon three (3) business days’ of written notice at a price equal to one hundred and fifteen percent (115%) of the Stated Value together with any accrued but unpaid dividends.

 

§

If all of the Series D Preferred Stock are redeemed after ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance date thereof, the Company shall have the right to redeem the Series D Preferred Stock upon three (3) business days of written notice at a price equal to one hundred and twenty percent (120%) of the Stated Value together with any accrued but unpaid dividends; and

 

§

If all of the Series D Preferred Stock are redeemed after one hundred and twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof, the Company shall have the right to redeem the Series D Preferred Stock upon three (3) business days of written notice at a price equal to one hundred and twenty five percent (125%) of the Stated Value together with any accrued but unpaid dividends.

 

 

The Company shall paya dividend of three percent (8%) per annum on the Series D Preferred Stock. Dividends shall be paid quarterly, and at the Company’sdiscretion, in cash or Series D Preferred Stock calculated at the purchase price. The Stated Value of the Series D Preferred Stock is$1,200 per share.

 

The Series D PreferredStock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forthin the Certificate of Designation).

 

Each share of the SeriesD Preferred Stock is convertible, at any time and from time to time from and after the issuance at the option of the Holder thereof,into that number of shares of Common Stock (subject to Beneficial Ownership Limitations) determined by dividing the Stated Value of suchshare by $0.149.

 

There are also PurchaseRights and Most Favored Nation Provisions. We currently have 0 shares of Series D Preferred Stock outstanding.

  

Anti-Takeover Effects of Various Provisionsof Nevada Law

 

Provisions of the NevadaRevised Statutes, our articles of incorporation, as amended, and bylaws could make it more difficult to acquire us by means of a tenderoffer, a proxy 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 persons seekingto acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our ability to negotiatewith the proponent of an unfriendly or unsolicited proposal to acquire or restructure us will outweigh the disadvantages of discouragingtakeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of theirterms.

 

Blank Check Preferred

 

Our articles of incorporationpermit our Board to issue preferred stock with voting, conversion and exchange rights that could negatively affect the voting power orother rights of 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 RevisedStatutes, our articles of incorporation may not be amended by stockholder action alone.

 

Nevada Anti-Takeover Statute

 

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

Limitations on Liability and Indemnificationof Officers and Directors

 

The Nevada Revised Statuteslimits or eliminates the personal liability of directors to corporations and their stockholders for monetary damages for breaches ofdirectors’ fiduciary duties as directors.

 

The limitation of liabilityand indemnification provisions under the Nevada Revised Statutes and in our articles of incorporation and bylaws may discourage stockholdersfrom bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducingthe likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefitus and 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 provisions donot alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to theextent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuantto these indemnification provisions.

 

  

Authorized but Unissued Shares

 

Our authorized but unissuedshares of Common Stock and preferred stock will be available for future issuance without stockholder approval, except as may be requiredunder the listing rules of any stock exchange on which our Common Stock is then listed. We may use additional shares for a variety ofcorporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans.The existence 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 “pennystocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of lessthan $5.00 per share. Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealerswho engage 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 receive thepurchaser’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-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of sellingshareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activityin the 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 decrease in theprice 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.

 

DIRECTORS, EXECUTIVEOFFICERS, PROMOTERS, AND CONTROL PERSONS

 

Our current executive officer and directoris as follows:

 

Name		Age				Position
Chiyuan Deng			58			Chief Executive Officer, Principal Executive Officer
Jianli Deng			28			Chief Financial Officer and Director, Appointed on June 24, 2022
Jimmy Chue			65			Chief Investment Officer
Ho Fai Lam			65			Director

 

 

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 Associationand Vice Secretary General of the China City Image Project Advancement Committee. He has extensive investment and management experiencein China, including in the areas of corporate development and business investment activities. Mr. Deng graduated from Guangzhou BroadcastTV University in 1987. Mr. Deng is Jianli Deng’s father.

 

Mr. Deng does not holdand has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investmentcompany under the Investment Company Act of 1940.

  

Jianli Deng

 

Mr.Deng is a producer of numerous international film and music productions involving mixed media. He is the creator of a mobile phone applicationwhich brings video merging functions containing sophisticated video editing technology normally utilized by computers to the smart phone.Mr. Deng attended Hong Kong Open University where he studied music marketing and management. Mr. Deng is the company’s CEO anddirector of the board period January 2016 to August 2017. Period August 2018 to August 2020, he is the company’s secretary andtreasurer. Mr. Deng is the managing director of a private company Zestv Studios Limited since September 2020 to present.

 

Mr.Deng does not hold and has not held over the past five years any other directorships in any company with a class of securities registeredpursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registeredas an investment company under the Investment Company Act of 1940.

 

Wehave chosen Mr. Deng as our director because of his experience in the movie production business.

 

Ho Fai Lam

 

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

 

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

 

Mr. Lam does not holdand has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investmentcompany under the Investment Company Act of 1940.

 

 

Jimmy Chue

 

Wall Street career spansfor more than three decades. Working with prestiges firms such as Merrill Lynch and Prudential Securities as a senior analysis of operations.Founding Member and CIO of Healthier2gether, Senior Partner at Silver Bear Capital, and Cofounder of a new entity in formation namedWorld Global Partners Inc.

 

Mr. Chue does not holdand has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investmentcompany under the Investment Company Act of 1940.

 

Other Significant Employees

 

Other than our executiveofficer, we do not currently have any significant employees.

 

Term of Office

 

Our directors are appointedfor a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordancewith our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board, subject to their respectiveemployment agreements.

 

Family Relationships

 

There are no familyrelationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executiveofficers, aside from Chiyuan and Jianli Deng, 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 identifiedin Item 401(f) of Regulation S-K, including:

 

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.       AnyFederal or 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

 

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.

 

Audit Committee

 

TheBoard of Directors has an audit committee to assist the Board of Directors in the execution of its responsibilities. Our audit committeeis comprised solely of non-employee, independent directors as defined by NYSE American market listing standards.

 

TheAudit Committee was established in October of 2019 and was comprised of Directors Ruiyu Guan and Ho Fai Lam, and is chaired by DirectorLam. It is now comprised of Jianli Deng and Ho Fai Lam, with Lam as the chair.

TheAudit Committee approves the selection of our independent accountants and meets and interacts with the independent accountants to discussissues related to financial reporting. In addition, the Audit Committee reviews the scope and results of the audit with the independentaccountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internalaccounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and theperformance of the independent auditor.

 

Forthe fiscal year ending August 31, 2021, the Audit Committee:

 

1. Reviewed anddiscussed the audited financial statements with management, and

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

 

Basedupon the Audit Committee’s review and discussion of the matters above, the board of directors authorized inclusion of the auditedfinancial statements for the years ended August 31, 2021 and 2020 to be included in this Prospectus.

 

TheBoard has determined that Mr. Lam of the Audit Committee qualifies as an audit committee financial expert as defined under applicableSEC rules and also meets the additional criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under theSecurities Exchange Act of 1934, as amended.

 

Compliance with Section 16(a) Of theExchange Act

 

Section16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registeredclass of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownershipof common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholdersare required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solelyon a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended August 31, 2021,there have been no late reports, failures to file or transactions not timely reported, aside from one transaction not timely reportedfor Mr. Chiyuan Deng.

 

Code of Ethics

 

We have adopted a CorporateCode of Business Conduct and Ethics and Financial Code of Ethics. These are attached as exhibits to our Annual Report for the year endedAugust 31, 2019.

 

 

EXECUTIVE COMPENSATION

 

Thetable below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal yearsended August 31, 2021 and 2020.

 

	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 President, CEO, and Director	2021 2020	180,000 0	50,000	30,100 100,000	0 0	0 0	0 0	9,000 9,000	269,100 109,000
Brandy Gao CFO, resigned in December 2021	2021 2020	25,000 15,000	0 0	0 145	0 0	0 0	0 0	0 0	25,000 15,145
Jimmy Chue Chief Investment Officer	2021	55,685	0	7,527	0	0	0	0	63,212
Linqing Ye Former COO	2021 2020	0  0	0 0	0 9,667	0 0	0 0	0 0	0 120,000	0 129,667
Jianli Deng Former Secretary, Treasurer and Director	2021 2020	0 0	0 0	0 50,000	0 0	0 0	0 0	0 119,000	0 169,000
Lijun Yu Former Chief Marketing Officer	2021 2020	0 0	0 0	0 9,667	0 0	0 0	0 0	0 110,000	0 119,667

 

 

OnJuly 30, 2018, we entered into an employment agreement with Chiyuan Deng to serve as our President. The agreement is for six years andwe issued Mr. Deng 400,000 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.

 

OnSeptember 11, 2020, we entered into an amended employment agreement with Chiyuan Deng, our Chief Executive Officer. Pursuant the amendedagreement, we amended the compensation to Mr. Deng to include a salary of $180,000 annually, a reduction in common stock received underhis initial employment agreement, a potential for a bonus in cash or shares, and the issuance of 100,000 shares of our newly createdSeries A Preferred Stock. Effective May 24, 2022, we amended the employment agreement for Mr. Chiyuan Deng, our Chief Executive Officer.The amended employment agreement allows us to pay Mr. Deng in shares of common stock at the market rate in lieu of cash payments on hissalary. No other changes were made to the employment agreement.

 

On February 22, 2021,we entered into an employment agreement with Jimmy Chue to serve as Chief Investment Officer (CIO). The CIO will be compensated withan annual base salary of $78,000, and eligible for a bonus of at least 50% of the annual salary payable in a lump sum at such time asmay be determined by the Board of Directors. The Company also issued 500,000 restricted shares of the Company’s common stock, parvalue $0.001 per share, to the CIO as Restricted Stock Award.

 

OnAugust 29, 2020, we entered into a Separation Agreement and Release with each of Jianli Deng, Lijun Yu and Linqing Ye. Pursuant to theagreements, Mr. Deng resigned as Secretary and Treasurer, Mr. Yu resigned as Chief Marketing Officer and Mr. Ye resigned as Chief OperatingOfficer. Mr. Deng will remain on as a member of our board of directors. The Separation and Release Agreement cancelled the employmentagreements for 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 release ofall claims from these prior officers.

 

 

OnDecember 31, 2021, Brandy Gao resigned as Chief Financial Officer of the Company. The term of her contract with the Company ended onthe last day of 2021.

 

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

—

—

—

—

—

—

—

—

—

Jimmy Chue

—

—

—

—

—

—

—

—

—

 

Director Compensation

 

OnSeptember 29, 2020, our board of directors approved a change in director compensation from shares to cash compensation.

 

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

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

 

BUSINESS

 

Company Overview 

 

We are an intellectualproperty (IP) and movie investment and licensing firm, focused on acquisitions and development of various intellectual property, includingthe acquisition and distribution of movies. In February 2019, we launched a business application (Ai Bian Quan Qiu) through smartphonesand official social media accounts utilizing Artificial Intelligence. It is a matching platform for performers, advertiser merchants,and owners for more efficient services. We previously generated revenues through an agency service fee from each matched performance.Due to the quarantine and continuous control imposed by the state and local governments in areas affected by COVID-19, merchant advertisingevents have been suspended for 7 months. The Company decided to suspend the Ai Bian Quan Qiu platform, which, at the time, created anadverse impact on the business and financial condition and hampered its ability to generate revenue and access sources of liquidity onreasonable terms. As a result, we decide to focus mainly the IP transactions and online video streaming. Our management and operationsare from the New York City, the international media center.

 

 

On April 22, 2020, theCompany announced the first phase development of its video streaming service. The online service will be marketed and distributed inthe world under the brand name ABQQ.tv. The Company's professional team are sourcing such dramas and films to provide video streamingservice on the ABQQ.tv. The video streaming website www.ABQQ.tv was officially launched on December 29, 2020. As of May 31, 2022, theCompany acquired 59 movie broadcast rights and a 15-episode TV drama series. The Company will continue marketing and promoting the ABQQ.tvwebsite through Google Ads and acquire additional broadcast rights for movies and TV series, and plan to charge subscription fees oncethe Company has obtained at least 200 broadcast rights of movie and TV series.

 

On October 21, 2021,the Company entered into a Lease Agreement (the “Lease”) with Martabano Realty Corp. (the “Landlord”), pursuantto which the Company agreed to lease approximately 8,375 square feet of in what is known as the Mt. Kisco Theatre at 144 Main Street,Mount Kisco, New York. The term of the Lease is five years plus free rent period. Commencing in month four, the Company's monthly baserent obligation will be approximately $6,979, which amount will increase in year three to $13,260, year four at $13,658 and the finalyear at $14,067 in accordance with the terms of the Lease. The Lease contains customary provisions for real property leases of this type,including provisions allowing the Landlord to terminate the Lease upon a default by the Company.

 

The space was formerlyused as a theatre with a total of 5 screens and 466 sets for screening films. The former theatre opened on December 21, 1962 with HayleyMillsin “In Search of the Castaways.” It was a replacement for the town’s other movie theatre that burned down. Itwas later twinned and further divided into 5 screens. It was operated for years by Lesser Theaters, then bought by Clearview Cinemas.In June, 2013 it was taken over by Bow-Tie Cinemas when they took most Clearview locations. It lasted until March, 2020 when it was closedby the Covid-19 pandemic. It was announced in September 2020 that the closure would be permanent. The Company intends to continue touse the space as a theatre with a total of 5 screens and 466 sets for screening films. It’s the first theatre of ABQQ Cinemas inAmerica as the new business line of the Company.

 

On April 27, 2022, wepurchased a unique Non-Fungible Token (“NFT”) movie and music marketplace, named as the NFT MMM, from Stareastnet PortalLimited, which including an APP “NFT MMM” on Google Play, and full right to the website: stareastnet.io. NFTs are digitalassets with a unique identifier that is stored on a blockchain, and NFTs are tradable rights of digital assets (pictures, music, films,and virtual creations) where ownership is recorded in blockchain smart contracts. As the expert of IP transactions specialized in themedia industry, we believe that NFTs provide great potential in the intellectual property protection domain. It can promote transparencyand liquidity and open the market to innovators who aim to commercialize their IP efficiently. We are actively launching movie and TVdrama copyrights NFTs to buyers on the NFT MMM, and expect to generate revenues from the transactions incurred on the platform.

 

Subsequent to quarterend, on June 22, 2022, we entered an agreement with Zestv Studios Limited, a Hong Kong entity 100% owned by our Chief Executive OfficerChiyuan Deng, to transfer the mainland China copyright and broadcast right for the movie “Too Simple” to Zestv Studios Limited.The total transfer price was $750,000.

 

 Competition

 

Ourmain business is sub-license a patent of video synthesis and release system for mobile communications equipment to smartphone apps andsmartphone makers. We are in the process of using the underlying technology to create a smartphone video mix app as well as the socialvideo sharing platform. The main competitors are short video apps, we are going to discuss becoming a cooperation partner of them whichgenerated sub-license patent of video synthesis and release system monthly fee from them.

 

Employees 

 

Wecurrently have 4 employees.  

 

 

MARKET PRICE OF THEREGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

 

MarketInformation

 

Ourcommon stock is quoted under the symbol “ABQQ” on the OTCPink operated by OTC Markets Group, Inc. 

 

Thereis currently no active trading market for our securities. There is no assurance that a regular trading market will develop, or if developed,that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company.

 

Penny Stock

 

TheSecurities Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securitiesexchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securitiesis provided by the exchange or system.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock,to deliver a standardized risk disclosure document prepared by the Commission, that: (a) contains a description of the nature and levelof risk in the market for penny stocks in both public offerings and secondary trading;(b) contains a description of the broker's or dealer'sduties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirementsof Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocksand the significance of the spread between the bid and ask  price;(d) contains a toll-free telephone number for inquiries ondisciplinary actions;(e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and;(f) containssuch other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.

 

Thebroker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with; (a) bid and offer quotationsfor the penny stock;(b) the compensation of the broker-dealer and its salesperson in the transaction;(c) the number of shares to whichsuch bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and(d) a monthly account statements showing the market value of each penny stock held in the customer's account.

 

Inaddition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealermust make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser'swritten acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, anda signed and dated copy of a written suitability statement.

 

Thesedisclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subjectto these penny stock rules. Therefore, because our common stock is subject to the penny stock rules, stockholders may have difficultyselling those securities.

 

Holdersof Our Common Stock 

 

As ofAugust 2, 2022, we had 376,758,463 shares of our common stock issued and outstanding, held by approximately 559 shareholders of record,with others holding shares in street name.

 

Dividends

 

Wehave never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The paymentof cash dividends on our common stock will depend on earnings, financial condition and other business and economic factors at such timeas the board of directors may consider relevant. If we do not pay cash dividends, our common stock may be less valuable because a returnon your investment will only occur if its stock price appreciates.

 

 

SecuritiesAuthorized for Issuance under Equity Compensation Plans

 

Wehave no equity compensation plans.

 

UnregisteredSales of Equity Securities

 

Commonshares

 

•

The Company issued 19,000,000 shares of common stock for cash at $0.0140 per share and 4,000,000 shares of common stock for cash at $0.0715 per share.

•

The Company issued 25,406,238 shares of common stock from note conversion. Refer to Note 9 of the consolidated financial statements for the year ended August 31, 2021 for further details.

•

The Company issued 56,407,922 shares of common stock from warrant exercises. Refer to Note 10 of the consolidated financial statements for the year ended August 31, 2021 for further details.

•

261,111 shares of common stock returned to the Company due to officer resignations.

 

	•	The Company issued 31,646,633 shares of put shares for cash at $0.015312, $0.014256, $ 0.01452, $0.077528, $0.09856, $0.11, $0.0715, $0.0563, $0.0528, $0.04875, $0.05764, and $0.0344 per share.
	•	As stock-based compensation the Company issued 500,000 shares to the Chief Investment Offer and 1,000,000 shares to the Chief Executive Officer.
	•	The Company issued 24,528,637 of common shares from preferred shares series C & D conversion.
	•	The Company issued 17,700,000 shares of stock for consulting services.
	•	The Company issued 5,500,000 shares of put shares for cash at $0.02288 and $0.02719 per share
	•	The Company issued 3,146,854 of common shares from preferred shares series D conversions
	•	The Company issued 1,800,000 shares of common stock for cash at $0.01548 per share and 3,000,000 shares of common stock for cash at $0.01716 per share and 2,300,000 shares of common stock for cash at $0.01729 per share and 2,300,000 shares of common stock for cash at $0.01100 per share.
	•	As stock-based compensation the Company issued 5,000,000 shares to the Chief Investment Offer and 10,000,000 shares to the Chief Executive Officer.
	•	The Company issued 5,521,473 of common shares from preferred shares series D conversions
	•	The Company issued 30,000,000 shares of stock for consulting services.
	•	On April 7, 2022, the Company issued 2,841,389 shares of common stock for the conversion of Series C preferred stock.
	•	From June 13, 2022 to July 7, 2022, the Company issued 33,986,292 common shares for the conversion of Series C preferred stock.

 

 

Preferredshares

TheCompany authorized 10,000,000 shares of preferred shares with a par value $0.001. During the year ended August 31, 2021, the Companyissued 100,000 shares of Series A Preferred shares at par value $0.001, and 20,000 shares of Series B Preferred shares at $16 per share,280,025 shares of Series C Preferred shares and its dividend shares were converted to 7,140,360 common shares in August, 2021, and 798shares of Series D Preferred shares were converted to 17,388,277 common shares in August, 2021.

 

Basedupon the Series C Preferred Share purchase agreement, each share of Series C Preferred Stock carries an annual dividend in the amountof 12.0% of the Stated Value (the “Dividend Rate”). Which shall be cumulative, payable solely upon redemption, liquidationor conversion. Upon the occurrence of an Event of Default, the Dividend Rate shall automatically increase to 22.0%. As of August 31,2021, the Company has dividend expense of $16,801 and dividend payable of $0 on Series C Preferred Shares.

 

Basedupon the Series D Preferred Share purchase agreement, each share of Series D Preferred Stock shall be entitled to receive, and the Corporationshall pay, cumulative dividends of 8.0% per annum, payable quarterly, beginning on the Original Issuance Date and ending on the datethat such share of Preferred Share has been converted or redeemed (the “Dividend End Date”). As of August 31, 2021, the Companyhas dividend expense of $9,034 and dividend payable of $1,834 on Series D Preferred Shares and included in the accrued liabilities inthe balance sheet.

 

OnSeptember 3, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby the investor purchasedfrom the Company 234,300 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $203,500.

OnNovember 2, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased fromthe Company 98,325 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $85,450. 

 

Duringthe quarter ended November 30, 2021, the Company issued 153 shares of series D preferred stock to the investor for the purchase priceof $153,000. After the payment of transaction-related expenses, net proceeds to the Company from the issuance of the Series D PreferredStock was$140,760. 

 

OnDecember 20, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby the investor purchasedfrom the Company 34 shares of Series D Convertible Preferred Stock of the Company for a purchase price of $34,000.

OnJanuary 21, 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased fromthe Company 89,490 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $78,050.

 

OnJune 1, 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased from theCompany 147,775 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $128,500. The closing occurredon June 16, 2022.

 

OnJuly 30, 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased fromthe Company 92,000 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $80,000. The closing occurredon July 30, 2022.

 

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

 

Youshould read the following discussion of our financial condition and results of operations in conjunction with financial statements andnotes thereto included elsewhere in 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 thatcould cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the sectionlabeled “Risk Factors.”

 

Thissection of the prospectus includes a number of forward-looking statements that reflect our current views with respect to future eventsand 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 asof the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actualresults to differ materially from historical results or our predictions.

 

 

COVID-19

 

Thefull extent of the impact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolvingfactors that we may not be able to accurately predict at the present time. In an effort to contain COVID-19 or slow its spread, governmentsaround the world have enacted various measures, including orders to close all businesses not deemed “essential,” isolateresidents to their homes or places of residence, and practice social distancing when engaging in essential activities. We anticipatethat these actions and the global health crisis caused by COVID-19 will negatively impact business activity across the globe. The movieindustry in general has changed dramatically as a result of the pandemic restrictions. While movie theaters struggle to stay alive, onlinestreaming programming has increased. We have endeavored to stay with the trend for streaming services to remain competitive. We haveexperienced the negative impact in our results of operations and in our financial condition for the year ended August, 2020, especiallywith respect to the movie distribution end of our business. These impacts concern delays in delivering our movies and IP because of healthrestrictions imposed on certain public events that concern our business, including, among other things, theaters, indoor and outdoorperformances, filming restrictions, music festivals, concerts and other such events, Some of these restrictions include pandemic governmentmandated shutdowns and others restrictions on capacity gathered at these events, with some jurisdictions imposing fines or revocationof business licensing, and other restrictions. As a result of these factors, our revenue was reduced from March to May of 2020. Withimmediate closures, the resultant industry and business specific delays have negatively affected our company.

 

Weplan to focus on the video streaming and other web-based applications and expand our business into those areas that we believe will situatethe company for continued and increased revenues. As the pandemic is forecasted to worsen in the United States and other areas aroundthe globe, we believe that the demand for our IP, online products and services offerings increases. While we cannot guarantee that thenegative effects of the pandemic will not interfere with our ability to generate revenues, we intend to strengthen our position in thisdynamic market and position the company to best suit its shareholders.

 

Specificto our company operations, during the pandemic period, we have enacted precautionary measures to protect the health and safety of ouremployees and partners. These measures include closing our office, having employees work from home, and eliminating all travel. Whilehaving employees work from home may have a negative impact on efficiency and may result in negligible increases in costs, it does havean impact on our ability to execute on our agreements to deliver our core products.

 

Wewill continue to actively monitor the situation and may take further actions that alter our business operations as may be required byfederal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, partners andstockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including theeffects on our customers, partners, or vendors, or on our financial results.

 

Results of Operationsfor the Three and Nine Months Ended May 31, 2022 and 2021

 

Revenues 

 

Ourtotal revenue reported for the nine months ended May 31, 2022 was $2,056,000, compared with $102,400 for the nine months ended May 31,2021. The increase in revenue for the nine months ended May 31, 2022 over the same period last year was mainly attributable to the Companysold the mainland China copyright and broadcast right of the movie “Love over the world”, “Our treasures” and“QiQingKuaiChe” for $1,800,000, and sold the mainland China copyrights and broadcast rights of the movie “LuShang”and “Huafeng” for total $256,000. For the same period last year, we had to shutdown of the performance matching platform(Ai Bian Quan Qiu). Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generated from theperformance matching platform (Ai Bian Quan Qiu) since the end of January, 2020.

 

Totalrevenue for the three months ended May 31, 2022 was $256,000, compared with negative revenue of $51,200 for the three months ended May31, 2021. The increase was mainly due to we sold the mainland China copyrights and broadcast rights of the movie “LuShang”and “Huafeng” for total $256,000.

 

Ourcost of revenues was $2,235,534 for the nine months ended May 31, 2022, as compared with $878,601 for the nine months ended May 31, 2021.Most of the increase in cost of revenues for the nine months ended May 31, 2022 was the result of amortizing movie copyrights and broadcastrights due to the Company obtained more movie copyrights and broadcast rights.

 

 

Ourcost of revenues was $862,400 for the three months ended May 31, 2022, as compared with $423,674 for thethree months ended May 31, 2021. Most of the increase in cost of revenues for the three months ended May 31, 2022 was the result of amortizingmovie copyrights and broadcast rights due to the Company obtained more movie copyrights and broadcast rights.

 

Asa result, we had a gross loss of $179,534 for the nine months ended May 31, 2022, as compared with a gross loss of $776,201 for the ninemonths ended May 31, 2021. The negative gross profit for the nine months ended May 31, 2022 was attributable to the amortization of moviebroadcast rights exceeded the revenue from the copyright sales of films.

 

Asa result, we had a gross loss of $606,400 for the three months ended May 31, 2022, as compared with a gross loss of $474,874 for thethree months ended May 31, 2021. The increase in gross loss for the three months ended May 31, 2022 was attributable to the amortizationof movie broadcast rights exceeded the revenue from the copyright sales of films.

 

OnApril 27, 2022, we purchased a unique Non-Fungible Token movie and music marketplace, named as the NFT MMM, from Stareastnet Portal Limited,which including an APP “NFT MMM” on Google Play, and full right to the website: starestnet.io. We are actively launchingmovie NFT to buyers on the NFT MMM, and expect to generate transaction revenues from the platform.

 

Inaddition, we are increasing the marketing activities to achieve enough customers to start subscriptions for ABQQ.tv. and as well as generatingrevenue from the NYC cinema box office sales.

 

Operating Expenses 

 

Operatingexpenses decreased to $1,448,288 for the nine months ended May 31, 2022 from $1,466,979 for the nine months ended May 31, 2021. Our operatingexpenses for nine months ended May 31, 2022 consisted of general and administrative expenses of $1,106,121 and related party salary andwages of $342,167. In contrast, our operating expenses for the nine months ended May 31, 2021 consisted of general and administrativeexpenses of $1,208,142 and related party salary and wages of $258,837.

  

Operatingexpenses decreased to $421,317 for the three months ended May 31, 2022 from $517,845 for the three months ended May 31, 2021. Our operatingexpenses for three months ended May 31, 2022 consisted of general and administrative expenses of $370,067 and related party salary andwages of $51,250. In contrast, our operating expenses for the three months ended May 31, 2021 consisted of general and administrativeexpenses of $443,345 and related party salary and wages of $74,500.

 

Weanticipate our operating expenses will increase as we undertake our plan of operations, including increased costs associated with marketing,personnel, and other general and administrative expenses, along with increased professional fees associated with SEC and COVID complianceas our business grows more complex and more expensive to maintain. On the COVID front, we expect that restrictions will ease moving forward,but there may still be setbacks as variants to the virus emerge and governments take lockdown measures in response. These and other costsfor COVID expenditures may increase our operational costs in fiscal 2022 at various levels of operation.

 

Other Income/Expenses

 

Wehad other expense of $141,945 for the nine months ended May 31, 2022, as compared with other expenses of $413,702 for the nine monthsended May 31, 2021.

 

Wehad other expense of $141,945 for the three months ended May 31, 2022, as compared with other expenses of $87,153 for the three monthsended May 31, 2021.

 

Ourother expenses for the nine and three months ended May 31, 2022 were the penalty expense recorded in connection with the conversion ofits Series C preferred stocks due to the fact that the Company was late filing the Form 10-Q for the period ended February 28, 2022.

 

Ourother expenses for the nine and three months ended May 31, 2021 were mainly the result of interest expense and the loss from prepaidconvertible notes and warrant exercises. 

 

 

Net Loss

 

Weincurred a net loss in the amount of $1,769,767 for the nine months ended May 31, 2022, as compared with a net loss of $2,601,535 forthe nine months ended May 31, 2021. 

 

Weincurred a net loss in the amount of $1,169,662 for the three months ended May 31, 2022, as compared with a net loss of $1,079,872 forthe three months ended May 31, 2021.

 

Liquidity and CapitalResources

 

Asof May 31, 2022, we had $382,215 in current assets consisting of cash, accounts receivable and prepaid expenses. Our total current liabilitiesas of May 31, 2022 were $1,646,294. As a result, we have a working deficit of $1,264,079 as of May 31, 2022 as compared with a workingdeficit of $228,669 as of August 31, 2021.

  

Operatingactivities used $478,498 in cash for the nine months ended May 31, 2022, as compared with $4,043,032 used in cash for the same periodended May 31, 2021. Our negative operating cash flow in nine months ended May 31, 2022 was mainly the result of our net loss for thenine months combined with operating changes in purchase of copyrights and broadcast rights and changes in the long-term prepayments,offset by the amortization of intangible assets and increased account payable and accrued liabilities. Our negative operating cash flowin the same period in 2021 was mainly the result of our net loss for the nine months combined with operating changes in purchase of copyrightsand broadcast rights, offset by the amortization of intangible assets.

 

Investingactivities used $280,000 for the nine months ended May 31, 2022, as compared with $5,000 used for the nine months ended May 31, 2021.Our negative investing cash flow for May 31, 2022 was mainly the result of the purchase of NFT MMM, a unique Non-Fungible Token movieand music marketplace.

 

Financingactivities provided $998,007 for the nine months ended May 31, 2022, as compared with $1,660,166 provided in financing activities forthe nine months ended May 31, 2021. Our positive financing cash flow for the period ended May 31, 2022 was the result of proceeds fromissuance of our common stock and preferred stock. Our positive financing cash flow for the period ended May 31, 2021 was the result ofproceeds from issuance of convertible notes and convertible notes and sales of our common stock and preferred stock.

 

Basedupon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelvemonths. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficientto fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure fundingfor operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additionalfunding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be availableto us on acceptable terms or at all.

 

Going Concern

 

Theaccompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplatesthe realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. As of May 31,2022, the Company had an accumulated deficit of approximately $8.37 million and a negative working capital of $1.26 million. For thenine months ended May 31, 2022, the Company incurred a net loss of approximately $1.77 million and had negative cash flows of approximately$0.48 million from its operations. Although, the Company generated revenue of approximately $2.06 million as the result of selling themainland China copyrights and broadcast rights for five movies (“Love over the world”, “Our treasures”, “Confusion”,“Huafeng” and “Lushang”) for the nine months ended May 31, 2022, the future operations of the Company dependon its ability to realize forecasted revenues, achieve profitable operations, and depend on whether or not the Company could obtain thecontinued financial support from its stockholders or external financing. Management believes the existing stockholders will provide theadditional cash to meet the Company’s obligations as they become due. However, there is no assurance that the Company will be successfulin securing sufficient funds to sustain the operations.

 

Thesefactors, among others, raise the substantial doubt regarding the Company’s ability to continued as a going concern. The financialstatements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets orthe amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that theactions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Companyto continue as a going concern.

 

 

Off Balance Sheet Arrangements

 

Asof May 31, 2022, there were no off-balance sheet arrangements.

 

Results of operationsfor the years ended August 31, 2021 and 2020

 

Revenues 

 

Ourtotal revenue reported for the year ended August 31, 2021 was $115,091, compared with $448,343 for the year ended August 31, 2020.

 

Thedecrease in revenue for the years ended August 31, 2021 over the years ended August 31, 2020 is mainly attributable to the terminationof the sublicensing agreement with Anyone Picture in January, 2021. As such, there has been no revenues generated from sub-licensingthe patent since the end of December, 2020.

        

89%and 69% of revenue was generated from one customer during the years ended August 31, 2021 and August 31, 2020, respectively.

 

Ourcost of revenues was $1,494,328 for the years ended August 31, 2021, as compared with $177,577 for the years ended August 31, 2020. Mostof the increase in cost of revenues for the years ended August 31, 2021 was the result of amortizing movie broadcast rights, not presentin the same period 2020.

 

Asa result, we had gross loss of $1,379,237 for the years ended August 31, 2021, as compared with gross profit of $270,766 for the yearsended August 31, 2020. The decrease in gross profit margin for the years ended August 31, 2021 is largely to the high cost of amortizingmovie broadcast rights.

 

Wehope to generate increased revenue in the future by achieving enough customers to start subscriptions for ABQQ.tv and generating moviebox office revenue from our new movie theatre in New York.

 

OperatingExpenses 

 

Operatingexpenses increased to $1,844,670 for the years ended August 31, 2021 from $1,640,093 for the years ended August 31, 2020.

 

Ouroperating expenses for year ended August 31, 2021 consisted of general and administrative expenses of $1,511,333 and related party salaryand wages of $333,337. In contrast, our operating expenses for the years ended August 31, 2020 consisted of general and administrativeexpenses of $1,346,525, research and development expenses of $108,800 and related party salary and wages of $184,768.

 

Weexperienced an increase in general and administrative expenses in 2021 over 2020, mainly as a result of increased consulting fees, transactioncosts for issuing preferred shares, rent, salaries, valuation fees, travel and entertainment, and depreciation expense, etc.

 

Weexperienced an increase in related party salary and wages as the Chief Executive Officer started receiving cash salary in the fiscalyear of 2021 and received both cash bonus and stock-based compensation in February, 2021. During the years ended August 31, 2021, theCompany paid the Chief Executive Officer $180,000 salary, $50,000 bonus in cash, and $30,100 stock-based compensation. $25,000 salarywas paid in cash to Chief Financial Officer. In addition, the Company hired Chief Investment Officer on February 22, 2021 and $55,685cash salary and $7,527 stock-based compensation were paid to Chief Investment Officer for the years ended August 31, 2021. During theyears ended August 31, 2020, $169,768 was paid to five executives in the form of stock-based compensation and $15,000 cash salary waspaid to the Chief Financial Officer. 

 

Weanticipate our operating expenses will increase as we undertake our plan of operations, including increased costs associated with marketing,personnel, and other general and administrative expenses, along with increased professional fees associated with SEC and COVID complianceas our business grows more complex and more expensive to maintain. On the COVID front, we expect that restrictions will ease moving forward,but there may still be setbacks as variants to the virus emerge and governments take lockdown measures in response. These and other costsfor COVID expenditures may increase our operational costs in fiscal 2022 at various levels of operation.

 

 

OtherExpenses

 

Wehad other expenses of $439,537 for the years ended August 31, 2021, as compared with other expenses of $153,744 for the year ended August31, 2020. Our other expenses in 2021 were mainly the result of interest expense and the loss from prepaid convertible notes and warrantexercises. Our other expenses for 2020 was the result of interest expenses and a loss from a change in fair value.

 

NetLoss

 

Weincurred a net loss in the amount of $3,608,097 for the years ended August 31, 2021, as compared with a net loss of $1,523,071 for theyears ended August 31, 2020. 

 

Liquidityand Capital Resources

 

Asof August 31, 2021, we had $879,282 in current assets consisting of cash, prepaid expenses, related party receivables, subscription receivable,and other receivable. Our total current liabilities as of August 31, 2021 were $1,107,951. As a result, we have a negative working capitalof $228,669 as of August 31, 2021 as compared with a positive working capital of $1,840,732 as of August 31, 2020.

 

Operatingactivities used $5,141,166 in cash for the years ended August 31, 2021, as compared with $1,263,370 used in cash for the same periodended August 31, 2020. Our negative operating cash flow in 2021 was mainly the result of our net loss for the year combined with changesin other receivable, accounts payable and accrued liabilities, prepayment and costs for acquiring movie and TV series broadcast rightand copyright, and offset by related party payable. Our negative operating cash flow in 2020 was mainly the result of our net loss forthe year combined with changes in account receivable, other payable, prepayment for acquiring movie and TV series broadcast right andcopyright, and offset by a receivable on disposed assets.

 

Investingactivities used $5,000 in cash for the years ended August 31, 2021, as compared with $1,047,040 provided for the years ended August 31,2020.

 

Financingactivities provided $2,823,359 for the years ended August 31, 2021, as compared with $1,106,641 provided in financing activities forthe years ended August 31, 2020. Our positive financing cash flow for August 31, 2021 was the result of proceeds from convertible notesand sales of our common stock and preferred stock, offset by payments for warrant termination and prepayments for convertible notes.Our positive financing cash flow for August 31, 2020 was the result of proceeds from convertible notes and sales of our common stock.

 

Basedupon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelvemonths. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficientto fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure fundingfor operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additionalfunding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be availableto us on acceptable terms or at all.

 

Off BalanceSheet Arrangements

 

Asof August 31, 2021, there were no off-balance sheet arrangements.

 

CriticalAccounting Policies

 

InDecember 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussionand Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of acompany’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, oftenas a result of the need to make estimates about the effect of matters that are inherently uncertain.

 

Ourcritical accounting policies are set forth in Note 2 to the financial statements.

 

 

CertainRelationships and Related Person Transactions

 

Exceptas provided in “Description of Business” and “Executive Compensation” set forth above, for the past two fiscalyears there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were orwill be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of ourtotal assets at year-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or moreof any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct orindirect material interest.

 

YouallPerform Services Ltd, owned by the son of the Company’s Chief Executive Offer and the Company’s former Secretary and TreasurerJianli Deng, collects revenue from the performance matching platform “Ai Bian Quan Qiu” via a Wechat official account onbehalf of the Company. Due to the COVID-19 impact, the Company ceased operation of the “Ai Bian Quan Qiu” platform in January,2020. For the years ended August 31, 2021 and 2020, the Company recognized revenue of $0 and $141,143 from this performance matchingplatform, respectively. The balance of related party receivable from Youall Perform Services Ltd was $1,439 and $87,581 as of August31, 2021 and 2020, respectively.

 

InSeptember 2019, the company entered into an agreement with Youall Perform Services Ltd for two transactions. 1) The Company pays YouallPerform Services Ltd. 10% of the revenue generated from the “Ai Bian Quan Qiu” platform every month to reimburse the valued-addedtax, tax surcharges, and foreign transaction fee Youall Perform Services Ltd. Has been paying on behalf of the Company. 2) Youall PerformServices Ltd. will provide IT consulting service for “Ai Bian Quan Qiu” platform upgrade and maintenance at a total costof $128,000, out of which $108,800 has been paid. As there has been no revenue from the “Ai Bian Quan Qiu” platform due toCOVID-19 since mid-January, 2020, $108,800 long-term prepayment was expensed as research and development expense in FY2020. In July 2020,the Company changed the service scope of this agreement and turned it into a website maintenance contract over the next two years. Themajor website of this Company is ABQQ.tv for video streaming. The contract amount remains to be $128,000, out of which $108,800was previously paid and $19,200 will be due on the twenty first month afterthe launch of the website www.abqq.tv. The websitemaintenance service began on January 1, 2021 and will end on December 31, 2022. The Company will pay Youall Perform Services Ltd theremaining balance of $19,200 in September, 2022.

 

TheCompany has entered into a patent license agreement with a related party Guangzhou Shengshituhua Film and Television Company Limited(“Licensor”) 100% owned by the Chief Executive Officer Chiyuan Deng. The agreement is for a term of 5 years commencing onthe effective date on June 1, 2017. The Company has already paid the licensor a non-refundable, up-from payment of $500,000 and shallpay a royalty of 20% of the gross revenue realized from the sale of licensed products and sub-licensing of this patent every year. Theroyalty expenses during the years ended August 31, 2021 and August 31, 2020 are $25,600 and $61,440, respectively. In January, 2021,the Company’s sublicensing agreement to generate royalty revenues was terminated with Anyone Picture. As such, there has been noroyalty expenses since the end of December, 2020 given there has been no sublicensing royalty revenue generated from the patent. Oncethe Company finds another company to sublicense the patent, it will generate royalty revenue and pay royalty expense again.

  

TheCompany rented an office from ZESTV STUDIOS LIMITED, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng. On December1, 2020, the Company entered an agreement with ZESTV STUDIOS LIMITED to grant ZESTV STUIDIOS LIMITED the distribution right for the movie“Love over the world” and charge ZESTV STUIDIOS LIMITED movie royalties. The Company’s royalties revenue is stipulatedto equal 43% of the after-tax movie box office revenue deducting movie issuance costs. The movie box office revenue is tracked by a moviedistributor Huaxia Film Distribution Co. Ltd (hereafter “Hua Xia”) in China as it connects with all movie theaters in Chinaand can track the total movie box office revenue online in real time. Although ZESTV STUDIOS LIMITED has paid royalties revenue to theCompany, ZESTV STUDIOS LIMITED failed to collect cash from Hua Xia. The Company will refund ZESTV STUDIOS LIMITED the movie royalties.As of August 31, 2021, the Company incurred related party payable of $16,512 for the office rent and $916,922 of refund for the movieroyalites revenue net of the movie distribution commission fee.   

  

OnAugust 29, 2020, the Company entered into a Separation Agreement and Release with each of Jianli Deng, Lijun Yu and Linqing Ye. Pursuantto the agreements, Mr. Deng resigned as Secretary and Treasurer, Ms. Yu resigned as Chief Marketing Officer and Mr. Ye resigned as ChiefOperating Officer. Mr. Deng will remain on as a member of our board of directors. The Separation and Release Agreement cancelled theemployment agreements for each of Messrs. Deng, Yu and Ye, and provided them each an indebtedness payment within five (5) business daysof the agreements. Mr. Deng will receive $110,000, Ms. Yu will receive $110,000 and Mr. Ye will receive $120,000. We received a releaseof all claims from these prior officers. In addition, Mr. Deng, Ms. Yu, and Mr. Ye agreed to return to the Company their unvested restrictedshares of 130,556, 147,222, and 147,222, respectively.

 

OnJune 22, 2022, we entered an agreement with Zestv Studios Limited, a Hong Kong entity 100% owned by our Chief Executive Officer ChiyuanDeng, to transfer the mainland China copyright and broadcast right for the movie “Too Simple” to Zestv Studios Limited. Thetotal transfer price was $750,000.

 

 

SECURITY OWNERSHIPOF BENEFICIAL OWNERS AND MANAGEMENT

 

The following tablesets forth, as of August 2, 2022 information as to shares of our common stock owned by (i) each person known by us to beneficially ownmore than 5% of our outstanding common stock, (ii) each of our directors, and (iii) all of our executive officers and directors as agroup:

 

Name and Address of Beneficial Owner		Common Stock								Series A Preferred Stock						Series B Preferred Stock
		Number of Shares Owned				Percent of  Class(1)(2)				Number of Shares Owned				Percent of  Class(1)(2)		Number of Shares Owned	Percent of  Class(1)(2)
Chiyuan Deng(3)			36,312,733				9.1%				100,000				100%	20,000	100%
Jianli Deng			269,444				*				—				—	—	—
Jimmy Chue			5,500,000				1.5%				—				—	—	—
Ho Fai Lam			—				—				—				—	—	—
Ruiyu Guan			—				—				—				—	—	—
All Directors and Executive Officers as a Group (5 persons)			42,082,177				10.6%				100,000				100%	20,000	100%
5% Holders
											—				—	—	—

 

* 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, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which 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 376,758,463 shares of common issued and outstanding, 100,000 shares of Series A Preferred Stock, and 20,000 shares of Series B Preferred Stock as of August 2, 2022.

 

(3)

Includes 100,000 shares that may be converted of the 100,000 shares of Series A Preferred Stock and 20,000,000 shares that may be converted of the 20,000 shares of Series B Preferred Stock.

  

LEGAL MATTERS

 

Thevalidity of the shares of Common Stock offered by this prospectus will be passed upon for us by The Doney Law Firm, Las Vegas, Nevada.

 

EXPERTS

 

Theconsolidated financial statements for the Company as of August 31, 2020 and for the year then ended included in this prospectus havebeen audited by Yu Certified Public Accountant PC. The consolidated financial statements for the Company as of August 31, 2021 and forthe year then ended included in this prospectus have been audited by RotenbergMeril. Both are independent registered public accountingfirms, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon such report given uponthe authority of said firm as experts in auditing and accounting. 

 

  

WHERE YOU CAN FINDMORE INFORMATION

 

Weare subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and file annual, quarterly and currentreports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other informationat the SEC’s public reference facilities at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of thesedocuments by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more informatsion aboutthe operation of the public reference facilities. SEC filings are also available at the SEC’s web site at http://www.sec.gov.

 

Thisprospectus is only part of a registration statement on Form S-1 that we have filed with the SEC under the Securities Act and thereforeomits certain information contained in the registration statement. We have also filed exhibits and schedules with the registration statementthat are excluded from this prospectus, and you should refer to the applicable exhibit or schedule for a complete description of anystatement referring to any contract or other document. You may inspect a copy of the registration statement, including the exhibits andschedules, without charge, at the public reference room or obtain a copy from the SEC upon payment of the fees prescribed by the SEC.

 

 

INDEX TO CONSOLIDATEDFINANCIAL STATEMENTS

  

	Page
Consolidated Financial Statements of AB International Group Corp. and Subsidiaries
Consolidated Balance Sheets as of May 31, 2022 (Unaudited) and August 31, 2021	F-1
Consolidated Statements of Operations for the Three and Nine Months Ended May 31, 2022 and 2021 (Unaudited)	F-2
Consolidated Statements of Stockholders’ Equity for Nine Months Ended May 31, 2022 and 2021 (Unaudited)	F-3
Consolidated Statements of Cash Flows  for the Nine Months Ended May 31, 2022 and 2021 (Unaudited)	F-4
Notes to Consolidated Financial Statements	F-5

 

	Page
Consolidated Financial Statements of AB International Group Corp. and Subsidiaries
Reports of Independent Registered Public Accounting Firms	F-15
Consolidated Balance Sheets as of August 31, 2021 and 2020	F-19
Consolidated Statements of Operations for the Years Ended August 31, 2021 and 2020	F-20
Consolidated Statements of Stockholders’ Equity for the Years Ended August 31, 2021 and 2020	F-21
Consolidated Statements of Cash Flows for the Years Ended August 31, 2021 and 2020	F-22
Notes to Consolidated Financial Statements	F-23

 

 

  

ABINTERNATIONAL GROUP

ConsolidatedBalance Sheets

(Unaudited) 

		May 31,				August 31,
		2022				2021
ASSETS
Current Assets
Cash and cash equivalents		$	371,762			$	132,253
Accounts receivable			8,120				—
Prepaid expenses			2,333				13,566
Related party receivable			—				1,439
Subscription receivable			—				87,239
Other receivable			—				644,785
Total Current Assets			382,215				879,282
Fixed assets and leasehold improvement, net			13,803				53,705
Right of use operating lease assets, net			1,069,557				47,827
Intangible assets, net			3,513,272				3,998,805
Long-term prepayment			1,796,265				761,600
Other assets			45,241				16,508
TOTAL ASSETS		$	6,820,353			$	5,757,727
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	333,905			$	118,283
Related party payable			1,049,341				933,434
Current portion of obligations under operating leases			229,014				48,226
Due to stockholders			25,088				2,347
Other payable			3,827				3,827
Dividend payable			5,119				1,834
Total Current Liabilities			1,646,294				1,107,951
Obligations under operating leases, non-current			920,900				—
Total Liabilities			2,567,194				1,107,951
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 preferred shares authorized;
Series A preferred stock, 100,000 and 100,000 shares issued and outstanding, as of May 31, 2022 and August 31, 2021, respectively			100				100
Series B preferred stock, 20,000 and 20,000 shares issued and outstanding, as of May 31, 2022 and August 31, 2021, respectively			20				20
Series C preferred stock, 283,890 and 0 shares issued and outstanding, as of May 31, 2022 and August 31, 2021, respectively			284				—
Series D preferred stock, 0 and 0 shares issued and outstanding, as of May 31, 2022 and August 31, 2021, respectively			—				—
Common stock, $0.001 par value, 1,000,000,000 shares authorized; 327,841,919 and 226,589,735 shares issued and outstanding, as of May 31, 2022 and August 31, 2021, respectively			327,842				226,590
Additional paid-in capital			12,595,751				11,009,517
Accumulated deficit			(8,366,088	)			(6,578,978	)
Unearned compensation			(304,750	)			(7,473	)
Total Stockholders’ Equity			4,253,159				4,649,776
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	6,820,353			$	5,757,727

 

Theaccompanying notes are an integral part of these financial statements. 

   

ABINTERNATIONAL GROUP CORP.

ConsolidatedStatements of Operations

(Unaudited)   

		Nine Months Ended								Three Months Ended
		May 31,								May 31,
		2022				2021				2022				2021
Revenue		$	2,056,000			$	102,400			$	256,000			$	(51,200	)
Cost of revenue			(2,235,534	)			(878,601	)			(862,400	)			(423,674	)
Gross Profit (Loss)			(179,534	)			(776,201	)			(606,400	)			(474,874	)
OPERATING EXPENSES
General and administrative expenses			(1,106,121	)			(1,208,142	)			(370,067	)			(443,345	)
Related party salary and wages			(342,167	)			(258,837	)			(51,250	)			(74,500	)
Total Operating Expenses			(1,448,288	)			(1,466,979	)			(421,317	)			(517,845	)
Loss From Operations			(1,627,822	)			(2,243,180	)			(1,027,717	)			(992,719	)
OTHER INCOME (EXPENSES)
Rent income			—				1,920				—				—
Interest expense, net			—				(156,815	)			—				(28,161	)
Penalty expenses			(141,945	)							(141,945	)
Gain /(Loss) from change in fair value			—				64,584				—				45,490
Gain/(Loss) from lease termination			—				(3,251	)			—				—
Gain/(Loss) from prepaid convertible note			—				(232,797	)			—				(104,482	)
Gain/(Loss) from warrant termination			—				(12,343	)			—				—
Gain/(Loss) from warrant exercise			—				(75,000	)			—				—
Total Other Expenses			(141,945	)			(413,702	)			(141,945	)			(87,153	)
Loss Before Income Tax Provision			(1,769,767	)			(2,656,882	)			(1,169,662	)			(1,079,872	)
Income tax provision			—				55,347				—				—
NET LOSS			(1,769,767	)			(2,601,535	)			(1,169,662	)			(1,079,872	)
Preferred shares dividend expense			(17,343	)			(7,009	)			(14,504	)			(7,009	)
Net loss available to common stock holders		$	(1,787,110	)		$	(2,608,544	)		$	(1,184,166	)		$	(1,086,881	)
NET LOSS PER SHARE: BASIC		$	(0.01	)		$	(0.01	)		$	(0.00	)		$	(0.01	)
NET LOSS PER SHARE: DILUTED		$	(0.01	)		$	(0.01	)		$	(0.00	)		$	(0.01	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC			267,359,634				174,927,364				321,035,615				174,927,364
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED			267,359,634				174,927,364				321,035,615				174,927,364

  

The accompanyingnotes are an integral part of these financial statements.

    

 

AB INTERNATIONALGROUP CORP.

Consolidated Statementsof Changes in Stockholders' Equity

(Unaudited) 

			Common Stock								Preferred Stock
			Number of Shares				Amount				Number of Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Unearned Compensation				Total Equity
Balance – February 28, 2021			173,434,466			$	173,434				400,025			$	400			$	8,825,968			$	(4,492,544	)		$	(14,973	)		$	4,492,286
Common shares issued for cash			4,000,000				4,000				—				—				282,000				—				—				286,000
Put Shares issued for cash			5,056,633				5,057				—				—				493,954				—				—				499,011
Common shares issued to officers for services			—				—				—				—				—				—				3,750				3,750
Common shares issued for consulting services			8,200,000				8,200				—				—				237,800				—				—				246,000
Preferred shares converted into common shares			3,880,152				3,880				—				—				173,043				—				—				176,923
Preferred shares series D issuance			—				—				95				—				73,077				—				—				73,077
Warrants termination and exercised			—				—				—				—				—				—				—				—
Net loss			—				—				—				—				—				(1,086,881	)			—				(1,086,881	)
Balance - May 31,2021			194,571,251			$	194,571				400,120			$	400			$	10,085,842			$	(5,579,425	)		$	(11,223	)		$	4,690,166
Balance - February 28,  2022			295,158,062			$	295,158				542,152			$	542			$	12,398,694			$	(7,181,922	)		$	(401,351	)		$	5,111,121
Preferred shares series C issuance			—				—				96,075				96				73,504				—				—				73,600
Preferred shares series C converted into common shares			29,044,512				29,045				(234,300	)			(234	)			(28,811	)			—				—				—
Penalty and dividend in connection with Preferred shares series C			—				—				—				—				156,003				—				—				156,003
Preferred shares series D converted into common shares			3,639,345				3,639				(37	)			—				(3,639	)			—				—				—
Stock based compensation - consultants			—				—				—				—				—				—				96,601				96,601
Net loss			—				—				—				—				—				(1,184,166	)			—				(1,184,166	)
Balance - May 31, 2022			327,841,919			$	327,842				403,890			$	404			$	12,595,751			$	(8,366,088	)		$	(304,750	)		$	4,253,159
Balance - August 31,  2020			46,661,417			$	46,661				—				—			$	7,271,983			$	(2,970,880	)		$	(391,667	)		$	3,956,097
Common shares issued for cash			23,000,000				23,000				—				—				529,000				—				—				552,000
Common shares issued from note conversions			25,406,238				25,406				—				—				158,347				—				—				183,753
Common shares issued from warrant exercises			56,407,922				56,408				—				—				81,358				—				—				137,766
Common shares returned due to officer resignations			(261,111	)			(261	)			—				—				(391,405	)			—				391,667				—
Put Shares issued for cash			20,276,633				20,277				—				—				1,215,862				—				—				1,236,139
Common shares issued to officers for services			1,500,000				1,500				—				—				43,500				—				(11,223	)			33,777
Common shares issued for consulting services			17,700,000				17,700				—				—				513,300				—				—				531,000
Preferred shares converted into common shares			3,880,152				3,880				—				—				173,043				—				—				176,923
Preferred shares series A issuance			—				—				100,000				100				—				—				—				100
Preferred shares series B issuance			—				—				20,000				20				319,980				—				—				320,000
Preferred shares series C issuance			—				—				280,025				280				243,220				—				—				243,500
Preferred shares series D issuance			—				—				95				—				73,077				—				—				73,077
Warrants termination and exercised			—				—				—				—				(145,423	)			—				—				(145,423	)
Net loss			—				—				—				—				—				(2,608,544	)			—				(2,608,544	)
Balance - May 31,  2021			194,571,251			$	194,571				400,120			$	400			$	10,085,842			$	(5,579,425	)		$	(11,223	)		$	4,690,166
Balance - August 31,  2021			226,589,735			$	226,590				120,000			$	120			$	11,009,517			$	(6,578,978	)		$	(7,473	)		$	4,649,776
Put Shares issued for cash			14,900,000				14,900				—				—				268,282				—				—				283,182
Preferred shares series C issuance			—				—				518,190				518				440,067				—				—				440,585
Preferred shares series C converted into common shares			29,044,512				29,045				(234,300	)			(234	)			(28,811	)			—				—				—
Penalty and dividend in connection with Preferred shares series C			—				—				—				—				156,003				—				—				156,003
Preferred shares series D issuance			—				—				187				—				187,000				—				—				187,000
Preferred shares series D and dividend shares converted into common shares			12,307,672				12,307				(187	)			—				(12,307	)			—				—				—
Common shares issued to officers for services			45,000,000				45,000				—				—				576,000				—				(297,277	)			323,723
Net loss			—				—				—				—				—				(1,787,110	)			—				(1,787,110	)
Balance - May 31,  2022			327,841,919			$	327,842				403,890			$	404			$	12,595,751			$	(8,366,088	)		$	(304,750	)		$	4,253,159

  

 

The accompanyingnotes are an integral part of these financial statements. 

  

 

AB INTERNATIONALGROUP CORP.

Consolidated Statementsof Cash Flows

(Unaudited)  

		Nine Months Ended
		May 31,
		2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(1,787,110	)		$	(2,608,544	)
Adjustments to reconcile net loss to net cash from operating activities:
Executive salaries and consulting fees paid in stock			323,723				564,877
Depreciation of fixed asset			39,902				39,748
Amortization of intangible asset			2,235,533				853,001
Loss/(gain) from change in fair value of derivatives			—				(64,584	)
Loss/(gain) from lease termination			—				3,251
Loss/(gain) from warrant termination			—				12,343
Loss/(gain) from warrant exercise			—				75,000
Loss/(gain) prepaid convertible note			—				232,797
Interest expense			—				156,822
Non-cash note conversion fees			—				8,750
Non-cash dividend expense for preferred shares			17,343				—
Non-cash penalty expense			141,945				—
Non -cash lease expense			79,957				1,761
Changes in operating assets and liabilities:
Accounts receivable			(8,120	)			137,700
Interest receivable			—				26,240
Related party receivable			1,439				86,142
Prepaid expenses			11,233				9,024
Rent security & electricity deposit			(28,733	)			1,987
Long-term prepayment			(1,151,480	)			—
Purchase of movie and TV series broadcast right and copyright			(708,400	)			(3,539,369	)
Accounts payable and accrued liabilities			215,622				(267,149	)
Related party payable			115,907				283,896
Due to / from stockholders			22,741				(218	)
Tax payable			—				(56,750	)
Other payable			—				243
Net cash used in operating activities			(478,498	)			(4,043,032	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment			—				(5,000	)
Purchase of intangible assets			(280,000	)			—
Net cash used in investing activities			(280,000	)			(5,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible notes			—				233,017
Proceeds from common stock issuances			370,422				1,530,619
Proceeds from preferred share B issuances			—				320,000
Proceeds from preferred share C issuances			440,585				243,500
Proceeds from preferred share D issuances			187,000				250,000
Payments for warrant termination			—				(95,000	)
Prepayments of convertible notes			—				(821,970	)
Net cash provided by financing activities			998,007				1,660,166
Net increase (decrease) in cash and cash equivalents			239,509				(2,387,866	)
Cash and cash equivalents –beginning of the period			132,253				2,455,061
Cash and cash equivalents – end of the period		$	371,762			$	67,195
Supplemental Cash Flow Disclosures
Cash paid for interest		$	—			$	—
Cash paid for income taxes		$	—			$	—
Non-Cash Investing and Financing Activities:
Cashless warrant exercises		$	—			$	137,766
Convertible notes converted to common shares		$	—			$	(183,752	)
Transfer from other receivable to long term prepayment		$	644,785				—
Transfer from long term prepayment to intangible assets		$	761,600				—
Additions to ROU assets from operating lease liabilities		$	1,207,789			$	27,421
Common shares returned due to officer resignations		$	—			$	(391,667	)

 

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

  

 

 

AB INTERNATIONALGROUP CORP.

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

For the nine and threemonths ended May 31, 2022 and 2021

(Unaudited)

 

NOTE1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basisof Presentation

 

The accompanying unauditedconsolidated financial statements of AB International Group Corp. (the “Company”) have been prepared in accordance with accountingprinciples generally accepted in the United States (“GAAP”) for interim financial information and with the instructions toForm 10-Q and Article 8 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certaininformation and footnote disclosures normally included in consolidated financial statements have been omitted pursuant to such rulesand regulations. The consolidated balance sheet as of August 31, 2021 derives from the audited consolidated financial statements at thatdate, but does not include all the information and footnotes required by GAAP. These unaudited consolidated financial statements shouldbe read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Reporton Form 10-K for the year ended August 31, 2021.

 

The unaudited consolidatedfinancial statements as of and for the three and nine months ended May 31, 2022 and 2021, in the opinion of management, include all adjustments,consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition, resultsof operations and cash flows. The results of operations for the three and nine months ended May 31, 2022 and 2021 are not necessarilyindicative of the results to be expected for any other interim period or for the entire year. 

 

ForeignCurrency Transactions

 

Currently the Companydoes not 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. Revenues andexpenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements intoU.S. dollars are included in current results of operations.

  

FairValue of Financial Instruments

 

ASC 820, “FairValue Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the useof observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy basedon the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorizationwithin the 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 – Level1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Level2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liabilitysuch as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in marketswith insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs areobservable or can be derived principally from, or corroborated by, observable market data.

 

Level 3 – Level3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurementof the fair value of the assets or liabilities.

 

The carrying valuesof cash, accounts payable, and accrued liabilities approximate fair value due to their short-term nature. The fair values of warrantliabilities and derivative liabilities embedded in convertible notes are determined by level 3 inputs. 

 

F-5

Table of Contents

 

Accountingfor Derivative Instruments

 

TheCompany accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” (ASC 815) and allderivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.

 

TheCompany uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfera liability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fairvalues is to first look at observable market prices for identical assets and liabilities in active markets, where available. When theseare not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepaymentspeeds, default rates and credit spreads (including for the Company's liabilities), relying first on observable data from active markets.Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions.Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model's outputto market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materiallydifferent fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizesits fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparencyutilized in measuring financial instruments at fair value as discussed above. Changes in fair value are recognized in the period incurredas either gains or losses.

  

Basicand Diluted Income (Loss) Per Share

 

The Company computesincome (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic anddiluted earnings per share on the face of the statement of operations. The earnings per share after the reverse stock split is presentedretrospectively as if the reverse split had occurred at the very beginning of the business. Basic loss per share is computed by dividingnet income (loss) available to common stockholders 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 the periodfor warrants, options and restricted shares under treasury stock method, and for convertible debts and convertible preferred stock underif-convertible method, if dilutive. Diluted income (loss) per share gives effect to all dilutive potential common shares outstandingduring the period and excludes all potential common shares if their effects are anti-dilutive.

 

TheCompany had preferred shares and had no convertible notes and warrants as of May 31, 2022. For the three months ended May 31, 2022 and2021, and for the nine months ended May 31, 2022 and 2021, no potentially diluted shares were included in the diluted loss per shareas they would be anti-dilutive. 

 

NOTE2 – GOING CONCERN

 

The accompanying consolidatedfinancial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realizationof assets and the discharge of liabilities in the normal course of business for the foreseeable future. As of May 31, 2022, the Companyhad an accumulated deficit of approximately $8.37million and a negative working capital of $1.26million. For the nine months ended May 31, 2022, the Company incurred a net loss of approximately$1.77 million.Although, the Company generated revenue of approximately $2.06million as the result of selling the mainland China copyrights and broadcast rights for fivemovies (“Love over the world”, “Our treasures”, “Confusion”, “Huafeng” and “Lushang”)for the nine months ended May 31, 2022, the future operations of the Company depend on its ability to realize forecasted revenues, achieveprofitable operations, and depend on whether or not the Company could obtain the continued financial support from its stockholders orexternal financing. Management believes the existing stockholders will provide the additional cash to meet the Company’s obligationsas they become due. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain the operations.

 

These factors, amongothers, raise the substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements donot include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts andclassifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presentlybeing taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a goingconcern.

 

F-6

Table of Contents

 

NOTE3 –PREPAID EXPENSES

 

Prepaid expense was$2,333 and$13,566 asof May 31, 2022 and August 31, 2021, respectively. Prepaid expense as of May 31, 2022 primarily includes prepayment of the OTC marketannual fee.

 

NOTE4 – SUBSCRIPTION RECEIVABLE

 

Subscription receivableis cash not yet collected from the stockholders for issuance of common stock. As of May 31, 2022, the company had no subscription receivable.As of August 31, 2021, the subscription receivable balance of $87,239was the result of 3,000,000 Put shares to Peak One Opportunity Fund LP.

 

NOTE5 – FIXED ASSETS AND LEASEHOLD IMPROVEMENT

 

The Company capitalizedthe renovation cost as leasehold improvement and the cost of furniture and appliances as fixed asset. Leasehold improvement relates torenovation and upgrade of an office and an offline display store. The leasehold improvement is depreciated over 3years which equal the terms of the operating lease for renting an office. The furniture andappliances are depreciated over 7and 5years, respectively.

 

The depreciation expensewas $39,902 and$39,748 fornine months ended May 31, 2022 and 2021, respectively.

 

		May 31, 2022				August 31, 2021
Leasehold improvement		$	146,304			$	146,304
Appliances and furniture			25,974				25,974
Total cost			172,278				172,278
Accumulated depreciation			(158,475	)			(118,573	)
Property and equipment, net		$	13,803			$	53,705

 

NOTE6 – INTANGIBLE ASSETS

 

As of May 31, 2022and August 31, 2021, the balance of intangible assets are as follows;

     

		May 31, 2022				August 31, 2021
Patent license right		$	500,000			$	500,000
Movie copyrights - Love over the world			853,333				853,333
Sitcom copyrights - Chujian			640,000				640,000
Movie copyrights - Huafeng			422,400				422,400
Movie copyrights - Our treasures			936,960				936,960
Movie copyrights - LuShang			256,000				—
Movie copyrights - QiQingKuaiChe			1,024,000				—
TV drama copyright – 15 episodes			190,000				—
Movie and TV series broadcast rights			2,439,840				2,439,840
NFT MMM platform			280,000				—
Total cost			7,542,533				5,792,533
Less: Accumulated amortization			(4,029,261	)			(1,793,728	)
Intangible asset, net		$	3,513,272			$	3,998,805

 

Intangible assets include:1) a patent license right obtained from Guangzhou Shengshituhua Film and Television Company Limited as a worldwide license to a videosynthesis and release system for mobile communications equipment (See Note 10); 2) copyrights for the movie “Love over the world”,“Huafeng”, “Our treasures”, “LuShang”, “QiQingKuaiChe”, the sitcom “Chujian”,copyright for one TV drama series, and 3) broadcast rights for fifty-nine movie and TV series; 3) On April 27, 2022, the Company purchaseda unique Non-Fungible Token movie and music marketplace, named as the NFT MMM, from Stareastnet Portal Limited, which including an APP“NFT MMM” on Google Play, and full right to the website: starestnet.io.

 

The amortization expense for threemonths ended May 31, 2022 and 2021 was $862,399and $428,794,respectively. The amortization expense for nine months ended May 31, 2022 and 2021 was $2,235,533and $853,001,respectively.

 

On January 24, 2022,the Company sold the mainland China copyrights and broadcast rights of the movie “Love over the world”, “Our treasures”and “QiQingKuaiChe” received $1,800,000.On May 2, 2022, the Company sold the mainland China copyright and broadcast right of the movie “Huafeng” to a third partyat a price of $128,000.The Company remains to have all copyright of outside of mainland China. On May 3, 2022, the Company sold the mainland China copyrightand broadcast right of the movie “LuShang” to a third party at a price of $128,000.The Company remains to have all copyright of outside of mainland China.

 

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The estimated amortizationexpense for each of the two succeeding years is as follows. The intangible assets as of May 31, 2022 will be fully amortized in the fiscalyear of 2024.

 

Period ending May 31				Amortization expense
	2023			$	2,760,402
	2024			$	752,870

 

NOTE7 – RIGHTS-TO-USE OPERATING LEASE ASSETS, NET 

 

Rights-to-use leaseassets, net consisted of the following:

 

		May 31, 2022				August 31, 2021
Right-to-use gross asset		$	1,431,026			$	223,237
Less: accumulated amortization			(361,469	)			(175,410	)
Right-to-use asset, net		$	1,069,557			$	47,827

 

NOTE8 – LONG-TERM PREPAYMENT

 

Thelong-term prepayment balance relates to movie copyrights and broadcast rights for movies as below:

 

Name of movie		May 31, 2022				August 31, 2021
Prepayment of Movie - LuShang		$	—			$	256,000
Prepayment of Movie - QiQingKuaiChe			—				505,600
Prepayment of TV drama series			525,000				—
Prepayment of Movie - Too Simple			1,271,265				—
Total long-term prepayment		$	1,796,265			$	761,600

 

•

In October 2019, the Company acquired a broadcast right of “LuShang” (English name: “On the Way”) from All In One Media Ltd for online streaming at a price of $256,000 This broadcast right permits online streaming globally and has been fully paid. “LuShang” has been approved for screening by the Chinese government in February 2022. The Company recognized an intangible asset of $256,000 in March 2022 when the movie is available for online broadcasting after one month it’s released in mainland China cinemas. The Company sold the mainland China copyright and broadcast right of this movie in May 2022 (See Note 6).

 

	•	In November 2019, the Company acquired a broadcast right of “QiQingKuaiChe” (English name: “Confusion”) from All In One Media Ltd for online streaming at a price of $115,200. This broadcast right only allows online streaming outside China. In July 2021, the Company acquired the full movie copyright for both domestic and overseas with an additional cost of $908,800, and the total price is $1,024,000. In March 2022, the Company made the full payment and the movie copyright is recognized as an intangible asset. The Company sold the mainland China copyright and broadcast right of this movie in January 2022 (See Note 6).
	•	The Company acquired a movie copyright of “Too Simple” from Guang Dong Honor Pictures Ltd in July 2021 at a price of $1,271,265, which was to be paid in installments. As of May 31, 2022 and August 31, 2021, $1,271,265 and $644,785 was paid and recorded in long-term prepayment and other receivable, respectively. On December 31, 2021, the Company entered into a termination contract with Guang Dong Honor Pictures Ltd to cancel the purchase of copyright and to receive a full refund before May 31, 2022. The Company further negotiated with Guang Dong Honor Pictures and on June 23, 2022, both parties agreed to resume the purchase transaction.
	•	On March 2, 2022, the Company signed a purchase agreement to acquire the copyright to broadcast a 25-episode TV drama series outside of mainland China. The fill episode is expected to deliver to the Company by the end of October 2022.

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NOTE9 – FAIR VALUE MEASUREMENTS

The Company appliesASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair valueand expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

 

ASC 820 establishesa three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1 — Observableinputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

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

 

ASC 820 describes threemain approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach.The market approach uses prices and other relevant information generated from market transactions involving identical or comparable 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 amount thatwould currently be required to replace an asset.

 

Derivative liabilitiesof conversion features in convertible notes are classified within Level 3. We estimate the fair values of these liabilities at May 31,2021 by using Monte Carlo simulation based on the remaining contractual terms, risk-free interest rates, and expected volatility of thestock prices, etc. The assumptions used, including the market value of stock prices in the future and the expected volatilities, weresubjective unobservable inputs.

  

Liabilities measuredat fair value on a recurring basis 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)

Total Fair value at May 31, 2022

Derivative liabilities

$

—

$

—

$

—

$

—

 

 

			Derivative liabilities embedded in convertible notes
Fair value at August 31, 2020		$	64,584
Increase from note issuances			74,187
Decrease from note conversions			(33,490	)
Changes in the fair value			58,090
Fair value at November 30, 2020		$	163,371
Increase from note issuances			—
Decrease from note prepayment			(136,320	)
Changes in the fair value			18,439
Fair value at February 28, 2021		$	45,490
Increase from note issuances			—
Decrease from note prepayment			(45,490	)
Fair value at May 31, 2021		$	—

 

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NOTE10– RELATED PARTY TRANSACTIONS

 

Insupport of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Companycan support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formalwritten commitment for continued support by stockholders. Amounts represent advances or amounts paid in satisfaction of liabilities.The advances are considered temporary in nature and have not been formalized by a promissory note. As of May 31, 2022 and August 31,2021, the Company had due to stockholders of $25,088and $2,347,respectively. 

 

Youall Perform ServicesLtd, owned by the son of the Company’s Chief Executive Offer and the Company’s former Secretary and Treasurer Jianli Deng,collects revenue from the performance matching platform “Ai Bian Quan Qiu” via a Wechat official account on behalf of theCompany. Due to the COVID-19 impact, the Company ceased operation of the “Ai Bian Quan Qiu” platform in January 2020. Forthe three and nine months ended May 31, 2022 and 2021, the Company didn’t recognize any revenue from this performance matchingplatform, respectively. The balance of related party receivable from Youall Perform Services Ltd was $0and $1,439as of May 31, 2022 and August 31, 2021, respectively.

 

In September 2019,the Company entered into an agreement with Youall Perform Services Ltd for two transactions. 1) The Company pays Youall Perform ServicesLtd. 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 on behalf ofthe Company. 2) Youall Perform Services Ltd. will provide IT consulting service for “Ai Bian Quan Qiu” platform upgrade andmaintenance at a total cost of $128,000,out of which $108,800has been paid. As there has been no revenue from the “Ai Bian Quan Qiu” platformdue to COVID-19 since mid-January, 2020, $108,800long-term prepayment was expensed as research and development expense in FY2020. In July2020, the Company changed the service scope of this agreement and turned it into a website maintenance contract over the next two years.The major website of this Company is ABQQ.tv for video streaming. The contract amount remains to be $128,000,out of which $108,800was previously paid and $19,200will be due on the twenty first month after the launch of the website www.abqq.tv.The website maintenance service began on January 1, 2021 and will end on December 31, 2022. The Company will pay Youall Perform ServicesLtd the remaining balance of $19,200in September, 2022.

  

The Company has enteredinto a patent license agreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”)100% owned by the Chief Executive Officer Chiyuan Deng. The agreement is for a term of 5years commencing on the effective date on June1, 2017 and may be renewed at the Company’s written election conveyed to Licensor beforethe end of the term for a further term of five years. The Company has already paid the licensor a non-refundable, up-from payment of$500,000and shall pay a royalty of 20%of the gross revenue realized from the sale of licensed products and sub-licensing of thispatent every year. The royalty expenses during the nine months ended May 31, 2022 and 2021 were $0and $30,720,respectively, during the three months ended May 31, 2022 and 2021 were $0and $15,360,respectively. In January 2021, the Company’s sublicensing agreement to generate royalty revenues was terminated with Anyone Picture.As such, there has been no royalty expenses since the end of December 2020 given there has been no sublicensing royalty revenue generatedfrom the patent.

  

The Company rentedan office from Zestv Studios Limited, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng (See Note 14). On December1, 2020, the Company entered an agreement with Zestv Studios Limited to grant Zestv Studios Limited the distribution right for the movie“Love over the world” and charge Zestv Studios Limited movie royalties. The Company’s royalty revenue is stipulatedto equal 43% of the after-tax movie box office revenue deducting movie issuance costs. The movie box office revenue is tracked by a moviedistributor Huaxia Film Distribution Co. Ltd (hereafter “Hua Xia”) in China as it connects with all movie theaters in Chinaand can track the total movie box office revenue online in real time. Although Zestv Studios Limited has paid royalty revenue to theCompany, Zestv Studios Limited failed to collect cash from Hua Xia. The Company will refund Zestv Studios Limited the movie royalties.As of May 31, 2022 and August 31, 2021, the Company had refund of movie royalties revenue net of movie distribution commission fee payableto Zestv Studios Limited of $763,770and $933,434,respectively. During the three months ended May 31, 2022, Zestv Studios Limited also loaned total of $285,571to the Company as the working capital. The loan is non-interest bearing and due on demand.

 

As of May 31, 2022and August 31, 2021, the Company had total related party payable to Zestv Studios Limited of $1,049,341and $933,434,respectively.

 

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On September 11, 2020,the Company entered into an amended employment agreement with Chiyuan Deng, our Chief Executive Officer. Pursuant the amended agreement,the Company amended the compensation to Mr. Deng to include a salary of $180,000annually, a reduction in common stock issued to Mr. Deng, a potential for a bonus in cashor shares, and the issuance of 100,000shares of our newly created Series A Preferred Stock at par value $0.001..Mr. Deng returned 261,111 sharescommon stock to the Company received under his initial employment agreement.

 

During the nine monthsended May 31, 2022 and 2021, the Company paid CEO and CFO total salary of $342,167and $258,837,respectively. During the three months ended May 31, 2022 and 2021, the Company paid CEO and CFO total salary of $51,250and $74,500,respectively.

 

NOTE11 – STOCKHOLDERS’ EQUITY

 

The Company has the following equity activitiesduring the nine months ended May 31, 2022:

 

Common shares

 

	•	The Company issued 2,500,000 and 3,000,000 shares of put shares to Peak One for cash at $0.02288, and $0.02719, respectively, per share during Q1 2022.
	•	The Company issued 3,146,854 of common shares to GHS Investments, LLC, from preferred shares series D conversion during Q1 2022.
	•	The Company issued 1,800,000 shares of common stock for cash at $0.01548 per share, and 3,000,000 shares of common stock for cash at $0.01716 per share, and 2,300,000 shares of common stock for cash at $0.01729 per share, and 2,300,000 shares of common stock for cash at $0.0110 per share to Peak One during Q2 2022.
	•	As stock-based compensation for annual bonus for calendar year of 2021, the Company issued 5,000,000 shares restricted common stock to the Chief Investment Officer and 10,000,000 shares restricted common stock to the Chief Executive Officer all at market price $0.0138 per share Q2 2022.
	•	The Company issued 5,521,473 of common shares to GHS Investments, LLC from preferred shares series D conversion Q2 2022.
	•	The Company issued 30,000,000 shares of restricted stock at market price $0.0138 per share to seven consultants for 6 months to 18 months consulting services of movies and NFT related business in Q2 2022.
	•	On March 10, 2022, the Company issued 5,638,298 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	On March 11, 2022, the Company issued 3,639,345 shares to GHS Investments, LLC for the conversion of Series D preferred stock.
	•	On March 15, 2022, the Company issued 2,819,149 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	On March 16, 2022, the Company issued 2,329,670 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	On March 21, 2022, the Company issued 4,764,045 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	On March 24, 2022, the Company issued 6,235,294 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	On March 30, 2022, the Company issued 4,416,667 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	On April 7, 2022, the Company issued 2,841,389 shares to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.

 

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Preferred shares

 

OnSeptember 3, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby the investor purchasedfrom the Company 234,300shares of Series C Convertible Preferred Stock of the Company for a purchaseprice of $203,500.The closing occurred on September 3, 2021. After payment of transaction-related expenses, net proceeds to the Company from the sale andissuance of the Series C Preferred Stock totaled $184,000.

 

On November 2, 2021,the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased from the Company 98,325shares of Series C Convertible Preferred Stock of the Company for a purchase price of $85,450. Theclosing occurred on October 21, 2021. After payment of transaction-related expenses, net proceeds to the Company from the sale and issuanceof the Series C Preferred Stock totaled $75,368.

 

During the quarterended November 30, 2021, the Company issued 153shares of series D preferred stock to the investor for the purchase price of $153,000.After the payment of transaction-related expenses, net proceeds to the Company from the issuance of the Series D Preferred Stock was$140,760.

 

On December 20, 2021,the Company issued 34shares of series D preferred stock to the investor for the purchase price of $34,000.After the payment of transaction-related expenses, net proceeds to the Company from the issuance of the Series D Preferred Stock was$31,267.

 

On January 21, 2022,the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased from the Company 89,490shares of Series C Convertible Preferred Stock of the Company for a purchase price of $78,035. Theclosing occurred on January 21, 2022. After payment of transaction-related expenses, net proceeds to the Company from the sale and issuanceof the Series C Preferred Stock totaled $68,529.

 

On March 16, 2022,the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased from the Company 96,075shares of Series C Convertible Preferred Stock of the Company for a purchase price of $83,500.After payment of transaction-related expenses, net proceeds to the Company from the sale and issuanceof the Series C Preferred Stock totaled $73,600.

 

The Company also recordeda penalty expense of $141,945 whichwas in connection with the conversion of Series C preferred stocks due to the fact that the Company was late filing the Form 10-Q forthe period ended February 28, 2022.

 

NOTE 12– INCOME TAXES

 

Components of net deferredtax assets, including a valuation allowance, are as follows:

 

		May 31, 2022				August 31, 2021
Deferred tax asset attributable to:
Net operating loss carry over		$	1,246,974			$	871,681
Less: valuation allowance			(1,246,974	)			(871,681	)
Net deferred tax asset		$	—			$	—

 

The valuation allowancefor deferred tax assets was $1,246,974as of May 31, 2022 and $871,681as of August 31, 2021. In assessing the recovery of the deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differencesbecome deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and taxplanning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assetswould not be realized as of May 31, 2022 and August 31, 2021

 

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Reconciliation betweenthe statutory rate and the effective tax rate is as follows:

		Nine months ended
		May 31,
		2022				2021
Federal statutory tax rate			21	%			21	%
Change in valuation allowance			(21	%)			(21	%)
Effective tax rate			0	%			0	%

 

The Company's futurebusiness will focus on local cinemas and websites in the United States. During the nine months ended May 31, 2022 and 2021, the Companyand its subsidiary have incurred a consolidated net loss of $1,769,767and $2,601,535,respectively and had net loss carryforward from prior years. As a result, the Company and its subsidiary did not incur any income taxduring the three and nine months ended May 31, 2022 and 2021.

 

NOTE 13– CONCENTRATION OF RISK

 

Credit risk

 

Financial instrumentsthat potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The Hong Kong Deposit ProtectionBoard pays compensation up to a limit of HKD 500,000 (approximately $64,000) if the bank with which an individual/a company hold itseligible deposit fails. As of May 31, 2022 and August 31, 2021, cash balance of $371,762and $131,796,respectively, were maintained at financial institutions in Hong Kong, and were subject to credit risk. In the US, the insurance coverageof each bank is $250,000.The Company didn’t deposit with financial institutions located in US and were not subject to credit risk. While management believesthat these financial institutions and third-party fund holders are of high credit quality, it also continually monitors their creditworthiness.

 

NOTE 14– COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

From time to time,the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. There areno pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of its operations and thereare no proceedings in which any of the Company’s directors, officers, or affiliates, or any registered or beneficial stockholder,is an adverse party or has a material interest adverse to the Company’s interest.

 

Operatinglease 

 

On November 22, 2020,the Company closed down a display store and terminated its lease, which has an original term from February 23, 2019 to February 22, 2022,as a result of the COVID-19 impact and uncertainties of the economy in Hong Kong.

 

The Company leasedcertain office space in Hong Kong from Zestv Studios Limited, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng,under operating lease for threeyears from May 1, 2019 to April 30, 2022 with annual rental of $66,048(HK$ 516,000). On May 1, 2022, the Company signed a new operating lease agreement with ZestvStudios Limited to lease its Hong Kong office premise for twoyears from May 1, 2022 to April 2024 with annual rental of $66,048(HK$ 516,000).

 

The Company lease officespace in Singapore under operating lease from April 13, 2021 to March 31, 2022 with monthly rental of $716(SGD 974).

 

The Company leasesoffice space at 48 Wall Street, New York, under operating lease for oneyear from September 1, 2021 to August 31, 2022 with annual rental of $20,400.

 

On October 21, 2021,the Company signed a lease agreement to lease “the Mt. Kisco Theatre”, a movie theater, for fiveyears plus the free rent period which commences four months from the lease commencement date.The theatre consists of approximately 8,375 square feet, and the total monthly rent is $14,366for the first year, including real estate related taxes and landlord’s insurance.

 

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The cash lease expensefor the nine months ended May 31, 2022 and 2021 was $135,648and $69,905,respectively. The cash lease expense for the three months ended May 31, 2022 and 2021 was $82,527and $21,612,respectively. All leases are on a fixed payment basis. None of the leases include contingent rentals. The Company had lease commitmentof $1,171,693 asof May 31, 2022. 

 

In accordance withASC 250-10-45-14, the adoption of ASC 842 lease accounting standard has resulted in $215,604and $71,665lease expenses for the nine months ended May 31, 2022 and 2021, respectively, including bothcash and non-cash lease expenses.

		May 31, 2022				August 31, 2021
Total Lease Payments		$	1,171,694			$	48,822
Less: imputed interest		$	(21,780	)		$	(596	)
Present value of lease liabilities		$	1,149,914			$	48,226
Current portion of obligations under operating leases		$	229,014			$	48,226
Obligations under operating leases, non-current		$	920,900			$	0

 

 

For future lease payment for next five yearsas follow

 

May 31,		Amount
2023		$	238,443
2024			258,064
2025			249,362
2026			254,183
2027			171,642
Total lease payments		$	1,171,694

 

NOTE15 – SUBSEQUENT EVENTS  

 

In accordance withASC 855-10, the Company has analyzed its operations subsequent to July 10, 2022 to the date these financial statements were issued.

 

Issuance of CommonStock

 

On June 13, 2022, theCompany issued 5,672,727 common shares for the conversion of Series C preferred stock.

 

On June 21, 2022, theCompany issued 7,090,909 common shares for the conversion of Series C preferred stock.

 

On June 27, 2022, theCompany issued 7,428,571 common shares for the conversion of Series C preferred stock.

 

On July 5, 2022, theCompany issued 9,069,767 common shares for the conversion of Series C preferred stock.

 

On July 7, 2022, theCompany issued 4,724,318 common shares for the conversion of Series C preferred stock.

 

Issuance of SeriesC preferred stock

 

On June 1, 2022, theCompany entered into a securities purchase agreement with an accredited investor, whereby investor purchased from the Company 147,775shares of Series C Convertible Preferred Stock of the Company for a purchase price of $128,500. The closing occurred on June 16,2022. After payment of transaction-related expenses, net proceeds to the Company from the sale and issuance of the Series C PreferredStock totaled $115,000. The Company intends to use the proceeds from the Preferred Stock for general working capital purposes.

 

Copyright TransferAgreement

 

On June 22, 2022, theCompany entered an agreement with Zestv Studios Limited, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng, totransfer the mainland China copyright and broadcast right for the movie “Too Simple” to Zestv Studios Limited. The totaltransfer price is $750,000.

 

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Reportof Independent Registered Public Accounting Firm

 

 

To the Board of Directorsand Stockholders of

AB International Group Corp.

 

Opinion on the Financial Statements

 

Wehave audited the accompanying consolidated balance sheet of AB International Group Corp. (the “Company”) as of August 31,2021, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended,and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referredto above present fairly, in all material respects, the financial position of AB International Group Corp. as of August 31, 2021, andthe results of their operations and their cash flows for the year then ended in conformity with accounting principles generally acceptedin the United States of America.

 

GoingConcern

 

Theaccompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in thefinancial statements, the Company has limited operations and it has yet to attain profitability, has negative working capital, has anaccumulated deficit at August 31, 2021, and is dependent on debt and equity financing to fund its operations, all of which raise substantialdoubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are disclosedin Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basisfor Opinion

 

Thesefinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (PCAOB) and are required to be independent with respect to the Company inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission andthe PCAOB.

 

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

 

Ouraudit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesa reasonable basis for our opinion.

 

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Critical Audit Matter

 

Thecritical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matterdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

 

Intangible Assets/Impairments

 

Description of the Matter

 

As disclosedin Note 2 "Summary of Significant Accounting Policies" - Intangible Assets, movie copyrights and broadcast rights are statedat the lower of cost or amortized cost or estimated fair value. Auditing the Company’s impairment evaluation for movie copyrightsand broadcast rights is challenging and subjective as the key inputs into the analysis include estimates of future anticipated revenuesand box office performance, which may differ from future actual results. These estimates are based in part on the historical performanceof similar films, test audience results when available, information regarding competing film releases, and critic reviews.

 

How We Addressedthe Matter in Our Audit

 

We obtainedan understanding over the Company’s movie copyrights and broadcast rights impairment review process. To test the assessment ofmovie copyrights and broadcast rights for impairment, we obtained management’s forecasts of revenue and our audit procedures included,among others, checking mathematical accuracy, reviewing and testing the completeness and accuracy of any underlying data as well as thesignificant assumptions mentioned above.

 

/s/ Rotenberg Meril SolomonBertiger & Guttilla, P.C.

We have served as theCompany's auditor since 2021

Saddle Brook, New Jersey

January 11, 2022

 

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YuCertified Public Accountant PC

Professionalism,Expertise, Integrity

 

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board ofDirectors and Shareholders of
AB International Group Corp

 

Opinionon the Financial Statements

 

Wehave audited the accompanying consolidated balance sheet of AB International Group Corp (the “Company”) as of August 31,2020, and the related consolidated statements of operations, statements of changes in stockholders’ equity and consolidated statementsof cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion,the financial statements referred to above present fairly, in all material respects, the financial position of AB International GroupCorp as of August 31, 2020, and the results of their operations and their cash flows for the year then ended in conformity with accountingprinciples generally accepted in the United States of America.

 

Emphasisof Matter - Going Concern

 

Theaccompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 tothe financial statements, although the Company has limited operations it has yet to attain profitability. This raises substantial doubtabout its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 2. Thefinancial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Emphasisof Matter - Adoption of New Accounting Standards

Asdiscussed in Note 2 to the consolidated financial statements, the Company has adopted Accounting Standards Codification Topic 842, Leases,effective September 1, 2019.

 

Basisfor Opinion

 

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

 

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Weconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Companyis 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 the purpose of expressing an opinionon 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 to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our auditsprovide a reasonable basis for our opinion.

  

 

 

/s/ Yu CertifiedPublic Accountant PC

 

We have servedas the Company's auditor from 2018 to 2021.

 

New York, NewYork

December 9, 2020

 

CertifiedPublic Accountants

99Madison Avenue, Suite 601, New York NY 10016

Email:info@yucpa.net

 

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AB INTERNATIONALGROUP

Consolidated BalanceSheets

 

		August 31,				August 31,
		2021				2020
			(Audited)				(Audited)
ASSETS
Current Assets
Cash and cash equivalents		$	132,253			$	2,455,061
Prepaid expenses			13,566				11,024
Account receivable			—				137,700
Related party receivable			1,439				87,581
Subscription receivable			87,239				61,500
Interest receivable			—				26,240
Other receivable			644,785				—
Total Current Assets			879,282				2,779,106
Fixed assets, net			17,128				16,408
Leasehold improvement, net			36,577				85,345
Right of use operating lease assets, net			47,827				126,354
Intangible assets, net			3,998,805				175,000
Long-term prepayment			761,600				1,742,080
Other assets			16,508				18,427
TOTAL ASSETS		$	5,757,727			$	4,942,720
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	118,283			$	359,475
Related party payable			933,434				5,504
Current portion of obligations under operating leases			48,226				73,664
Convertible note and derivative liability			—				438,921
Due to shareholder			2,347				476
Tax payable			—				56,750
Other payable			3,827				3,584
Dividend payable			1,834				—
Total Current Liabilities			1,107,951				938,374
Obligations under operating leases, non-current			—				48,249
Total Liabilities			1,107,951				986,623
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 preferred shares authorized;			—				—
Series A preferred stock, 100,000 and 0 shares issued and outstanding, as of August 31, 2021 and August 31, 2020, respectively			100				—
Series B preferred stock, 20,000 and 0 shares issued and outstanding, as of August 31, 2021 and August 31, 2020, respectively			20				—
Series C preferred stock, 0 and 0 shares issued and outstanding, as of August 31, 2021 and August 31, 2020, respectively			—				—
Series D preferred stock, 0 and 0 shares issued and outstanding, as of August 31, 2021 and August 31, 2020, respectively			—				—
Common stock, $0.001 par value, 1,000,000,000 shares authorized;  226,589,735 and 46,661,417 shares issued and outstanding, as of   August 31, 2021 and August 31, 2020, respectively			226,590				46,661
Additional paid-in capital			11,009,517				7,271,983
Accumulated deficit			(6,578,978	)			(2,970,881)
Unearned shareholders’ compensation			(7,473	)			(391,666)
Total Stockholders’ Equity			4,649,776				3,956,097
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	5,757,727			$	4,942,720

 

The accompanyingnotes are an integral part of these financial statements. 

 

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AB INTERNATIONALGROUP CORP.

Consolidated Statementsof Operations

(Audited)

		Years ended
		August 31,
		2021				2020
Revenue		$	115,091			$	448,343
Cost of revenue			(1,494,328	)			(177,577)
Gross Profit (Loss)			(1,379,237	)			270,766
OPERATING EXPENSES
General and administrative expenses			(1,511,333	)			(1,346,525)
Research and development expenses			—				(108,800)
Related party salary and wages			(333,337	)			(184,768)
Total Operating Expenses			(1,844,670	)			(1,640,093)
Loss From Operations			(3,223,907	)			(1,369,327)
OTHER INCOME (EXPENSES)
Rent income			1,920				—
Interest expense			(156,822	)			(255,512)
Interest income			7				166,352
Preferred shares dividend expense			(25,835	)			—
Gain (Loss) from change in fair value			64,584				(64,584)
Loss from lease termination			(3,251	)			—
Loss from prepaid convertible note			(232,797	)			—
Loss from warrant termination			(12,343	)			—
Loss from warrant exercise			(75,000	)			—
Total Other Expenses			(439,537	)			(153,744)
Loss Before Income Tax Provision			(3,663,444	)			(1,523,071)
Income tax benefit			55,347				—
NET LOSS		$	(3,608,097	)		$	(1,523,071)
NET LOSS PER SHARE: BASIC		$	(0.02	)		$	(0.21)
NET LOSS PER SHARE: DILUTED		$	(0.02	)		$	(0.02)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC			194,571,251				7,186,259
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED			194,571,251				81,964,690

     

The accompanyingnotes are an integral part of these financial statements.

 

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AB INTERNATIONAL GROUP CORP.

Consolidated Statementsof Changes in Stockholders' Equity

(Audited)

			Common Stock								Preferred Stock
			Number of Shares				Amount				Number of Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Unearned Shareholders' Compensation				Total Equity
Balance - August 31,  2019			4,822,016			$	4,822				—			$	—			$	6,520,980			$	(1,452,020	)		$	(842,657	)		$	4,231,125
Common shares issued for cash at $0.0350 or $0.0205 per share			21,000,000				21,000				—				—				554,500				—				—				575,500
Common shares issued from note conversions			18,014,401				18,014				—				—				291,880				—				—				309,894
Common shares issued from warrant exercises			3,250,000				3,250				—				—				39,997				—				—				43,247
Common shares issued to officers for services			—				—				—				—				—				—				169,768				169,768
Common shares returned due to officer resignations			(425,000	)			(425	)			—				—				(280,797	)			—				281,222				—
Warrant shares issued in conjunction with convertible notes			—				—				—				—				145,423				—				—				145,423
Adjustment due to ASC 842 adoption for lease																			—				4,211				—				4,211
Net loss			—				—				—				—				—				(1,523,071	)			—				(1,523,071)
Balance - August 31,  2020			46,661,417			$	46,661				—			$	—			$	7,271,983			$	(2,970,880	)		$	(391,667	)		$	3,956,097
Common shares issued for cash			23,000,000				23,000				—				—				529,000				—				—				552,000
Common shares issued from note conversions			25,406,238				25,406				—				—				158,347				—				—				183,753
Common shares issued from warrant exercises			56,407,922				56,408				—				—				81,358				—				—				137,766
Common shares returned due to officer resignations			(261,111	)			(261	)			—				—				(391,405	)			—				391,667				—
Put Shares issued for cash			31,646,633				31,647				—				—				1,662,904				—				—				1,694,551
Common shares issued to officers for services			1,500,000				1,500				—				—				43,500				—				(7,473	)			37,527
Common shares issued for consulting services			17,700,000				17,700				—				—				513,300				—				—				531,000
Preferred shares series A issuance			—				—				100,000				100				—				—				—				100
Preferred shares series B issuance			—				—				20,000				20				319,980				—				—				320,000
Preferred shares series C issuance			—				—				280,025				280				243,220				—				—				243,500
Preferred shares series D issuance			—				—				798				1				722,999				—				—				723,000
Preferred shares series C dividend shares			—				—				19,322				19				16,782				—				—				16,802
Preferred shares series D dividend shares			—				—				6				0				7,200				—				—				7,200
Preferred shares and dividend shares converted into common shares			24,528,637				24,529				(300,151	)			(300	)			(24,228	)			—				—				—
Termination of issued warrants			—				—				—				—				(145,423	)			—				—				(145,423)
Net loss			—				—				—				—				—				(3,608,097	)			—				(3,608,097)
Balance - August 31,  2021			226,589,735			$	226,590				120,000			$	120			$	11,009,517			$	(6,578,978	)		$	(7,473	)		$	4,649,776

         

  Theaccompanying notes are an integral part of these financial statements.

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AB INTERNATIONALGROUP CORP.

Consolidated Statementsof Cash Flows

(Audited)

		Years Ended
		August 31,
		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(3,608,097	)		$	(1,523,071)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Executive salaries and consulting fees paid in stock			568,627				169,768
Depreciation of fixed asset			53,048				52,446
Amortization of intangible asset			1,468,728				113,731
Impairment of intangible asset			—				125,062
Loss/(gain) from change in fair value of derivatives			(64,584	)			64,584
Loss/(gain) from lease termination			3,251				—
Loss/(gain) from warrant termination			12,343				—
Loss/(gain) from warrant exercise			75,000				—
Loss/(gain) prepaid convertible notes			232,797				—
Non-cash interest for convertible notes			156,822				255,512
Non-cash note conversion fees			8,750				24,750
Non-cash dividend expense for preferred shares			25,835				—
Non-cash lease expense			1,590				(230)
Changes in operating assets and liabilities:
Accounts receivable			137,700				(102,400)
Receivable on asset disposal			—				1,280,000
Interest receivable			26,240				(17,515)
Related party receivable			86,142				(52,588)
Other receivable			(644,785	)			—
Prepaid expenses			(2,542	)			10,946
Rent security & electricity deposit			1,920				(3,400)
Purchase of movie and TV series broadcast right and copyright			(4,312,053	)			(1,742,080)
Accounts payable and accrued liabilities			(241,192	)			248,314
Related party payable			927,930				—
Due to / from shareholders			1,871				(1,561)
Tax payable			(56,750	)			(7,814)
Other payable			243				(157,824)
Net cash used in operating activities			(5,141,166	)			(1,263,370)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds collected from note receivable			—				1,047,040
Purchase of furniture and equipment			(5,000	)			—
Net cash provided by /(used in) investing activities			(5,000	)			1,047,040
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible notes			233,017				592,641
Proceeds from common stock issuances			2,220,812				514,000
Proceeds from preferred share B issuances			320,000				—
Proceeds from preferred share C issuances			243,500				—
Proceeds from preferred share D issuances			723,000				—
Payments for warrant termination			(95,000	)			—
Prepayments of convertible notes			(821,970	)			—
Net cash provided by financing activities			2,823,359				1,106,641
Net increase (decrease) in cash and cash equivalents			(2,322,808	)			890,311
Cash and cash equivalents – beginning of the year			2,455,061				1,564,750
Cash and cash equivalents – end of the year			132,253				2,455,061
Supplemental Cash Flow Disclosures
Cash paid for interest			—				—
Cash paid for income taxes			—				—
Non-Cash Investing and Financing Activities:
Cashless warrant exercises		$	137,766			$	(43,247)
Issuance of warrants in conjunction with convertible notes		$	—			$	145,423
Convertible notes converted to common shares		$	(183,752	)		$	(309,894)
Additions to ROU assets from operating lease liabilities		$	27,421			$	228,510
Common shares returned due to officer resignations		$	(391,667	)		$	(228,222)
Preferred shares series C dividend paid in shares		$	16,802			$	—
Preferred shares series D dividend paid in shares		$	7,200			$	—
Preferred shares and dividend shares converted into common shares		$	990,502			$	—

 

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

 

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AB INTERNATIONALGROUP CORP.

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

For the years endedAugust 31, 2021 and August 31, 2020

(Audited)

 

NOTE1 – ORGANIZATION AND BUSINESS OPERATIONS

 

AB International GroupCorp. (the “Company”, “we” or “us”) was incorporated under the laws of the State of Nevada on July29, 2013. The Company's fiscal year end is August 31.

 

Weare an intellectual property (IP) and movie investment and licensing firm, focused on acquisitions and development of various intellectualproperty. We are engaged to acquisition and distribution of movies. We have a patent license to a video synthesis and release systemfor mobile communications equipment, in which the technology is the subject of a utility model patent in the People’s Republicof China. We had launched a business application (Ai Bian Quan Qiu) through smartphones and official social media accounts based on WeChatplatform in February 2019, utilizing Artificial Intelligence, it is a matching platform for performers, advertiser merchants, and ownersfor more efficient services. We generate revenues through an agency service fee from each matched performance.

 

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 JianliDeng. After the stock sale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designedfor movie trailer promotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphonemakers, online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins tomovie distributors 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 online watchprices in the China market.

 

On June 1, 2017 weentered into a Patent License Agreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television CompanyLimited, a company incorporated in China (“Licensor”), granted to us a worldwide license to a video synthesis and releasesystem for mobile communications 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 a term of fiveyears commencing on the June 1, 2017 (Effective Date) and subject to a right to renew foranother five years. 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 utilization of the Technology, whether in the form ofsub-licensing fees or sales of licensed products. Our Chief Executive Officer, Chiyuan Deng and former Chief Executive Officer, JianliDeng, jointly own and control Licensor. On October 10, 2017, we completed the payment of $500,000initial payment amount due under the Agreement. The term of this sublicensing agreement wasrenewed and extended for another five years in October of 2019. 

 

Our License to theTechnology generates revenue through sub-license monthly fees from a smartphone app on Android devices. This smartphone app was alreadyexisting and licensed at the time we acquired the Technology of video synthesis. In January, 2021, our sublicensing agreement with AnyonePicture to generate revenues was terminated. As such, there has been no revenues generated from sub-licensing the Technology since theend of December, 2020.

 

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On March 21, 2018,we acquired the intellectual assets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia,which enable the operation of cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal.The Company planned to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing theCompany proposed to bring a physical aspect to something that is otherwise very abstract to people. We also issued to JPC Fintech Limited2,400,000common shares with a market value of $72,000exchange of KryptoKiosk Limited’s assets consist mostly of intellectual property, including,but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rights and personalproperty. We planned to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing,we proposed to bring a physical aspect to something that is otherwise very abstract to people. We planned to invest in machines and sellsub-licenses in the Asia Pacific region with future world-wide expansion. We had promoted and marketed the ATMbusiness for 6 months or until around August 2018, because the BTC and cryptocurrencies price went down. The IP, however, wasnever transferred to us. We have repeatedly requested from Messrs. Grounds, Vickery and Shakespare access to the domains and websitesand other information concerning the IP assets. As of the date of this annual report, no such information has been provided. In addition,the IP including domain names were transferred to others while Messrs. Vickery and Shakespare were officers of our company. As a result,we ceased promotions and marketing on the ATM business and relations cryptocurrencies business in September 2018. On November 21, 2018,we had sent the final notice that JPC Fintech has materially breached the agreement. We requested that JPC Fintech Ltd. return its stockcertificate received in the transaction to our transfer agent for immediate cancellation. We have not yet received the certificate fortermination. In February of 2020, 100% of the intellectual assets of KryptoKiosk Limited’s carrying value $48,000net of amortization is written off since the IP was never transferred to us and no revenuewas generated from this intellectual asset.

 

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

  

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In December of 2018,we engaged StarEastnet, a software developer that holds 171,000common 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 maximize theirprofits from performance events by optimizing their schedules based upon quotes and event locations and save time from commuting amongdifferent events. “Ai Bian Quan Qiu” utilizes the artificial intelligence (AI) matching technology to instantly and accuratelymatch performers and advertisers or merchants. The company charges agency service fees for each successful event matched through theplatform. Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generated from the performancematching platform (Ai Bian Quan Qiu) since the end of January, 2020. The Company decided to impair 100% of the carrying amount of AiBian Quan Qiu platform and its Wechat official account.

 

In June, 2019, theCompany completed the development of a video mix APP for social video sharing via iOS and Android smartphones. This app was originallyplanned to take advantage of the core design philosophy of “My film anyone, anywhere, anytime be together” as similar andcompetitive innovative video and community apps have been activated on over 2 million unique devices in China as of December 31, 2017and precipitated the duet video synthesis phenomenon in China. However, the Company decided to focus on the “Ai Bian Quan Qiu”platform as its main business and thus sold the video mix APP to Anyone Pictures Limited, which holds 242,980common shares of the Company, for $422,400with a gain of $59,792in August of 2019. Due to the quarantine and continuouscontrol imposed by the state and local governments in areas affected by COVID-19, merchant advertising events were suspended. The Companydecided to shut down the Ai Bian Quan Qiu platform and no revenue was generated after January 31, 2020. As a result, it has created anadverse impact on the business and financial condition and hampered its ability to generate revenue and access sources of liquidity onreasonable terms.

 

In August of 2019,the Company entered into a oneyear loan agreement to lend $1,047,040at an annual interest rate of 10%to All In One Media Ltd, previously named as Aura Blocks Limited, for producing films anddigital videos in Hong Kong. The term of note receivable was from August 1, 2019 to July 31, 2020. This loan principal balance was paidoff in full in July, 2020. All the interest income of $95,979was received by August 31, 2020.

 

On September 4, 2019, the Company enteredinto another loan agreement to lend $1,049,600at an annual interest rate of 10%to All In One Media Ltd, previously named as Aura Blocks Limited. The term of note receivablewas from September 4, 2019 to March 3, 2020. This loan balance was paid off in full on May 4^th, 2020 with two months’extension. All the interest income of $70,021was received by November 13, 2020. 

 

On April 22, 2020,the Company announced the first phase development of its video streaming service. The online service will be marketed and distributedin the world under the brand name ABQQ.tv. The Company’s professional team are sourcing such dramas and films to provide videostreaming service on the ABQQ.tv. The video streaming website www.ABQQ.tv was officially launched on December 29, 2020. As of August31, 2021, the Company acquired 4 movie copyrights and 59 movie broadcast rights. The Company will continue marketing and promoting theABQQ.tv website through GoogleAds and acquire additional broadcast rights for movies and TV series, and plan to charge subscription feesonce the Company has obtained at least 200 broadcast rights of movie and TV series.

 

NOTE2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basisof Presentation

 

The financial statementsof the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and arepresented in US dollars. The Company’s year-end is August 31.

 

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Basisof Consolidation

 

The financial statementshave been prepared on a consolidated basis, with the Company’s fully owned subsidiary App Board Limited registered and locatedin Hong Kong. All intercompany balances and transactions have been eliminated in consolidation.

 

GoingConcern Uncertainties

 

The accompanying consolidatedfinancial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realizationof assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

As of August 31, 2021,the Company had an accumulated deficit of approximately $6.6 million and a working capital deficit of $228,669. For the year ended August31, 2021, the Company incurred a net loss of approximately $3.6 million and the net cash used in operations was $5,141,166.Losses have principally occurred as a result of the substantial resources required for general and administrative expenses associatedwith our operations. The continuation of the Company as a going concern through August 31, 2022 is dependent upon the continued financialsupport from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash tomeet the Company’s obligations as they become due. However, there is no assurance that the Company will be successful in securingsufficient funds to sustain the operations.

 

These conditions raisesubstantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustmentsto reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilitiesthat may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additionalfunding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

  

Useof Estimates

 

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

 

Cashand Cash Equivalents

 

The Company considersall highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

 

ForeignCurrency Transactions

 

The Company’splanned operations are outside of the United States, which results in exposure to market risks from changes in foreign currency rates.The financial risk arises from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently theCompany does not use derivative instruments to reduce its exposure to foreign currency risk. Non-monetary assets and liabilities aretranslated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year.Revenues and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statementsinto U.S. dollars are included in current results of operations.

 

AccountReceivable

 

Account receivableconsisted of amounts due from Anyone Pictures Limited for the sub-licensing fee revenue. Amount receivable balances are recorded at theinvoiced amount and do not bear interest. As the sublicensing agreement with Anyone Picture was terminated in January, 2021, there wasno account receivable balance as of August 31, 2021. The allowance for doubtful accounts is the Company’s best estimate of theamount of probable credit losses in its existing accounts receivable. Noamount for bad debt expense was recorded by the Company during the years ended August 31,2021 and August 31, 2020, and nowrite-offs for bad debt were recorded for the years ended August 31, 2021 and August 31,2020.

 

PrepaidExpenses

 

Prepaid expenses primarilyconsist of prepayments of OTC market annual fee. The prepaid balances are amortized when the related expense is incurred.

 

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FixedAsset

 

Fixed asset consistsof furniture and appliances acquired for the office. The balance is stated at cost less accumulated depreciation. Depreciation is computedusing the straight-line method over estimated useful lives listed below:

 

				Estimated Useful Life
	Furniture			7 years
	Appliances			5 years

 

LeaseholdImprovement

 

Leasehold improvementis related to the enhancements paid by the Company to leased office and store. Leasehold improvement represents capital expendituresfor direct costs of renovation or acquisition and design fees incurred. The amortization of leasehold improvements commences once therenovation is completed and ready for the Company’s intended use. Leasehold improvement is amortized over the lease term of 3years.

 

IntangibleAssets

 

Intangible assets arestated at the lower of cost or amortized cost or estimated fair value and amortized as follows:

 

●

Movie copyrights and broadcast rights: straight-line method over the estimated life of the asset, which has been determined by management to be 2 years

 

●

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

 

Amortized costs ofthe intangible asset are recorded as cost of sales, as the intangible assets are directly related to generation of revenues in the Company.

 

Leaseproperty under operating lease

 

In February 2016, theFinancial Accounting Standards Board (“FASB”) issued updated guidance to improve financial reporting about leasing transactions.This guidance required organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights andobligations created by those leases. The original guidance required application on a modified retrospective basis with theearliest period presented. In August 2018, the FASB issued new guidance which included an option to not restate comparative periods intransition. Under this new guidance, a company applies the standard to leases in place as of the date of initial application,records a cumulative-effect adjustment to retained earnings as of the first day of the adoption year, and follows the new rules for allleases entered or modified going forward.  The Company adopted this new standard on June 1, 2020 with no retrospectiveadjustments to prior comparative periods. In accordance with ASC 250-10-45-14, a change in accounting principle made in an interim periodshall be reflected as if the entity had adopted the new principle on the first day of the adoption year, which is September 1, 2019 forthe Company. As such, the adoption of ASC 842 lease accounting standard has resulted in $196,813lease liabilities with corresponding $201,025ROU assets net of amortization as of September 1, 2019 based on the present valueof the remaining rental payments under current leasing standards for existing leases. The remaining balance of lease liabilitiesare presented within the current portion of lease liabilities and the non-current portion of lease liabilities on the Consolidated BalanceSheet. 

 

Impairmentof Long-lived asset

 

TheCompany evaluates its long-lived assets or asset group, including intangible assets with indefinite and finite lives, for impairment.Intangible assets with indefinite lives that are not subject to amortization are tested for impairment at least annually or more frequentlyif events or changes in circumstances indicate that the assets might be impaired in accordance with ASC 350. Such impairment test comparesthe fair values of assets with their carrying values with an impairment loss recognized when the carrying values exceed fair values.For long-lived assets and intangible assets with finite lives that are

 

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subjectto depreciation and amortization are tested for impairment whenever events or changes in circumstances (such as a significant adversechange to market conditions that will impact the future use of the assets) indicate that the carrying amount of an asset or a Group oflong-lived assets may not be recoverable. When these events occur, the Company evaluates impairment by comparing the carrying amountof the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. Ifthe sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company would recognize an impairmentloss based on the excess of the carrying amount of the asset group over its fair value.

  

Impairmentlosses are included in the general and administrative expense. There was no impairment loss during the year ended August 31, 2021. Forthe year ended August 31, 2020, the impairment loss of intangible assets was $125,062,including $48,000for the intellectual assets acquired from KryptoKiosk Limited and $77,062for the performance matching platform “Ai Bian Quan Qiu” and its WeChat officialaccount.

 

RevenueRecognition

 

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

  

In accordance withASC Topic 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 the followingfive steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of itsagreements:

 

●

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 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, the Companyrecognizes revenue under ASC Topic 606 for its performance obligation.

 

The Company generatesrevenue from sub-licensing a patent. The sub-licensing revenue is recognized monthly based upon the number of users who download theAPP that utilizes the Company’s patent. Themonthly royalty the Company charges Anyone Pictures Limited is $12.8 per 1000 APP users. Both parties agreed to charge the sublicensingfee based upon a fixed number 2,000,000 users. In January, 2021, our sublicensing agreement with Anyone Picture to generate revenueswas terminated. As such, there has been no revenues generated from sub-licensing the Technology since the end of December, 2020. Oncethe Company finds another company to sublicense the patent, it will generate royalty revenue again.

  

FairValue of Financial Instruments

 

ASC 820, “FairValue Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the useof observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy basedon the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorizationwithin the 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:

 

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Level 1 – Level1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Level2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liabilitysuch as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in marketswith insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs areobservable or can be derived principally from, or corroborated by, observable market data.

 

Level 3 – Level3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurementof the fair value of the assets or liabilities.

 

The carrying valuesof cash, accounts payable, and accrued liabilities approximate fair value due to their short-term nature. The fair values of warrantliabilities and derivative liabilities embedded in convertible notes are determined by level 3 inputs. 

 

Accountingfor Derivative Instruments

 

TheCompany accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” (ASC 815) and allderivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.

 

TheCompany uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfera liability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fairvalues is to first look at observable market prices for identical assets and liabilities in active markets, where available. When theseare not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepaymentspeeds, default rates and credit spreads (including for the Company's liabilities), relying first on observable data from active markets.Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions.Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model's outputto market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materiallydifferent fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizesits fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparencyutilized in measuring financial instruments at fair value as discussed above. Changes in fair value are recognized in the period incurredas either gains or losses.

 

Warrants

 

Warrantsare classified 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:

 

Proceedsfrom the 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. The portionof the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be allocatedto the debt instrument portion of the transaction. This usually results in a discount (or, occasionally, a reduced premium), which shallbe accounted for as interest expense under Topic 835 Interest.

  

IncomeTaxes

 

The Company accountsfor income taxes pursuant to FASB ASC 740 “Income Taxes”. Under ASC 740 deferred income taxes are provided on a liabilitymethod whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferredtax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amountsof assets and liabilities and their tax bases. Deferred tax assets

 

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are reduced by a valuationallowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will notbe realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferredtax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on thedate of enactment.

 

ASC 740 also providescriteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertaintax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained uponaudit by the relevant taxing authority. At August 31, 2021 and 2020, there were no unrecognized tax benefits. Please see Note 14 fordetails.

 

Value-AddedTaxes

 

The Company generatesrevenue in People's Republic of China (PRC) via the “Ai Bian Quan Qiu” platform and is subject to a value-added tax at aneffective rate of 6%.In accordance with PRC law, the Company is also subject to surcharges, which includes urban maintenance and construction taxes and additionaleducation fees on VAT payable.

 

The Company’srevenue generated from the “Ai Bian Quan Qiu” platform is subject to VAT at a rate of 6%and subject to surcharges at a rate of 12%of the VAT payable.

  

Basicand Diluted Income (Loss) Per Share

 

The Company computesincome (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic anddiluted earnings per share on the face of the statement of operations. The earnings per share after the reverse stock split is presentedretrospectively as if the reverse split had occurred at the very beginning of the business. Basic loss per share is computed by dividingnet 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 the periodfor warrants, options and restricted shares under treasury stock method, and for convertible debts under if-convertible method, if dilutive.Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period and excludes all potentialcommon shares if their effects are anti-dilutive.

 

In accordance withthe Company’s convertible note agreements, the NoteHolders have the option to convert all or any lesser portion of the outstanding principal amount and accrued but unpaid interest intocommon stock at a conversion price equal to a price which is 55%or60%ofthe lowest trading price during the 10 or 20 days prior to the day that the Holder requests conversion. 55% is applicable to EMA Financialwhereas 60% applies for the other counterparties. The lowest trading price during 10 days prior to conversion is applicable to East Capitaland Fidelis 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 unpaid interestexpense to common shares at the beginning of the period or at the time of issuance, if later.

 

The number of dilutedshares from warrants is the upper limit to which warrants can be converted into common shares and adjusted for anti-dilution clauses.

 

The Company has prepaidall the remaining convertible notes and exercised all the warrants as of August 31, 2021. As such, 0potentially diluted shares were from convertible notes and warrants as of August 31, 2021,whereas 6,614,769 potentiallydiluted shares were from convertible notes and 68,163,661potentially diluted shares were from warrants as of August 31, 2020.

 

		As of August 31,
Diluted shares NOT included in basic loss per share computation		2021				2020
Warrants			—				68,163,661
Convertible notes			—				6,614,769

 

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RecentAccounting Pronouncements

 

In February 2018, theFASB issued guidance 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 the changein the income tax rates from other comprehensive income to retained earnings. The guidance is effective for periods beginning after December15, 2018 although early adoption is permitted. The Company has evaluated and concluded that there was no impact on its consolidated financialposition and results of operations.

 

In March 2018, theFASB issued 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 expressesthe view of 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 impact onits consolidated financial position and results of operations.

 

Effective September1, 2019, the Company adopted ASU 2018-07: “Compensation – Stock Compensation (Topic 718) – Improvements to NonemployeeShare-Based Payment Accounting”. This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currentlyonly includes 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 Subtopic 505-50,Equity—Equity-Based Payments to Nonemployees. The Company has evaluated and concluded that there was no impact on its consolidatedfinancial position and results of operations.

 

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In August 2018, theFASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirementsfor Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurringor nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy,the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The new standardrequires disclosure 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.

 

In December 2019,the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” to remove specific exceptions to the general principlesin Topic 740 and to simplify accounting for income taxes. The standard is effective for public companies for fiscal years, and interimperiods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluatingthe impact of this accounting standard update on its consolidated financial statements.

 

In January 2020,the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,” whichclarifies the interaction of the accounting for equity investments under Topic 321 and investments accounted for under the equity methodof accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. Thestandard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15,2020. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidatedfinancial statements.

 

NOTE3 –PREPAID EXPENSES

 

Prepaid expense was$13,566 and $11,024as of August 31, 2021 and August 31, 2020, respectively. Prepaid expense as of August 31,2021 primarily includes $12,833prepayment of OTC market annual fee.

 

NOTE4 – SUBSCRIPTION RECEIVABLE

 

Subscriptionreceivable is cash not yet collected from the shareholders for issuance of common stock. As of August 31, 2021, the subscriptionreceivable balance of $87,239 wasthe remaining cash to be collected from the issuance of 3,000,000Put shares to Peak One Opportunity Fund LP. As of August 31, 2020, the subscriptionreceivable balance of $61,500 wascash to be collected from Mingpeng Ou for issuing 3,000,000 sharesof common stocks at a price of $0.0205 pershare. All the subscription receivables have been collected as of the date of issuance of these consolidated financialstatements.

 

NOTE5 – FIXED ASSETS AND LEASEHOLD IMPROVEMENT

 

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

 

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The depreciation expensewas $53,048 and$52,446 forthe years ended August 31, 2021 and August 31, 2020, respectively.

 

		August 31, 2021				August 31, 2020
Leasehold improvement		$	146,304			$	146,304
Appliances and furniture			25,974				20,974
Total cost			172,278				167,278
Accumulated depreciation			(118,573	)			(65,525)
Property and equipment, net		$	53,705			$	101,753

 

NOTE6 – INTANGIBLE ASSETS

 

As of August 31, 2021and August 31, 2020, the balance of intangible assets are as follows;

 

	August 31,				August 31,
	2021			2020
Patent	$	500,000		$	500,000
Movie copyrights - Love over the world		853,333			-
Sitcom copyrights - Chujian		640,000			-
Movie copyrights - Huafeng		422,400			-
Movie copyrights - Our treasures		936,960			-
Movie and TV series broadcast rights		2,439,840			-
Total cost		5,792,533			500,000
Less: Accumulated amortization		(1,793,728)			(325,000)
Intangible asset, net	$	3,998,805		$	175,000

 

Intangible assets include1) a patent obtained from Guangzhou Shengshituhua Film and Television Company Limited as a worldwide license to a video synthesis andrelease system for mobile communications equipment, 2) copyrights for the movie “Love over the world”, “Huafeng”,“Our treasures” and the sitcom “Chujian”, and 3) broadcast rights for fifty nine movie and TV series. The amortizationexpense for years ended August 31, 2021 and August 31, 2020 was $1,468,728and $113,731,respectively.

 

The estimated amortizationexpense for each of the three succeeding years is as follows. The intangible assets as of August 31, 2021 will be fully amortized inthe fiscal year of 2023.

 

Year ending August 31,			Amortization expense
2022			$	2,721,267
2023			$	1,277,538

 

NOTE7 – RIGHTS-TO-USE OPERATING LEASE ASSETS, NET 

 

Rights-to-use leaseassets, net consisted of the following:

 

		August 31, 2021				August 31, 2020
Right-to-use gross asset		$	223,237			$	228,510
Less: accumulated amortization			(175,410	)			(102,156)
Right-to-use asset, net		$	47,827			$	126,354

 

The right-of-useassets will be fully amortized in the fiscal year 2022.

 

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NOTE8 – LONG-TERM PREPAYMENT

 

InSeptember 2019, the Company entered into an agreement with Guangzhou Yuezhi Computer Ltd. For upgrading software of the “AiBian Quan Qiu” platform at a cost of $128,000.$108,800was paid upon signing the agreement and recorded as long-term prepayment in Q1, FY2020. AsCOVID-19 restricted crowd-gathering, “AiBian Quan Qiu” platform has not generated any revenue since mid-January, 2020, the Company impaired 80% of the “Ai Bian QuanQiu” platform intangible asset value in Q2 FY2020 and the remaining 20% intangible asset in Q4 FY2020.As such, $108,800prepayment was expensed as research and development expense from the previously recognizedlong-term prepayment asset in FY2020.

 

Asof August 31, 2021, the long-term prepayment balance of $761,600relates to movie copyrights and broadcast rights for movies as below:

 

•

In November 2019, the Company acquired a broadcast right of “Lushang” (English name: “On the Way”) from All In One Media Ltd for online streaming at a price of $256,000. This broadcast right permits online streaming globally and has been fully paid. As “Lushang” has not yet been approved for screening by the Chinese government, the payment of $256,000 was recorded as long-term prepayment

 

•

In November 2019, the Company acquired a broadcast right of “Qi Qing Kuai Che” (English name: “Confusion”) from All In One Media Ltd for online streaming at a price of $115,200. This broadcast right only allows online streaming outside China. In July 2021, the Company acquired the full movie copyright for both domestic and overseas with an additional cost of $908,800, and the total price is $1,024,000. As of August 31, 2021, $505,600 has been paid. As this movie has not yet been fully paid or approved for screening by the Chinese government, the total payment of $505,600 was recorded as long-term prepayment.

 

NOTE9 – CONVERTIBLE NOTES

 

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

 

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

 

The term of this convertiblenote is 9months with the maturity date on August18, 2020.  The interest rate of 10.0%per annum. Upon an event of default, the interest rate will be equal to the 24.0%per annum from the due date thereof until the same is paid. Theconvertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing priceduring the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “ClosingPrice”) or (ii) 55.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive tradingDays on which at least 100 shares of common stock were traded including and immediately preceding the Conversion Date.

 

In connection withthe issuance of the Note, the Company granted EMA Financial a five-year cashless warrant (the “Warrant”) to purchase 30,000shares of common stock at an exercise price of $12.5per share. As of November 30, 2020, EMA Financial exercised 100%of the total warrant shares to acquire 45,851,221common shares through cashless exercises.

 

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

 

As part of initialclosing the outstanding principal amount shall be $85,000and the Holder shall pay $76,500of the consideration (the “First Tranche”). Out of $76,500consideration, the Company has received $65,312cash from Peak One with the remaining $11,188spent as legal expense for note issuance and due diligence fees. Peak One has converted allthe convertible notes into 1,096,846common shares by July 16^th, 2020.

 

The term of this convertiblenote is 1year with the maturity date on December9, 2020. The interest rate of 10.0%per annum. Theconvertible note has prepayment and conversion features. 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 immediatelypreceding the date of the date of conversion of the Debentures (provided, further, that if either the Company is not DWAC Operationalat the time of conversion or the Conversion Price is less than $0.01 per share, then sixty percent (60%) shall automatically adjust toFifty percent (50%) of the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Daysimmediately preceding the date of conversion of the Debenture), subject in each case to equitable adjustments resulting from any stocksplits, stock dividends, recapitalizations or similar events.

 

In connection withthe issuance of the Note, the Company granted Peak One a five-year cashless warrant (the “Warrant”) to purchase 10,000shares of common stock at an exercise price of $10per share. As of November 30, 2020, Peak One exercised 100%of the total warrant shares to acquire 3,720,326common shares through cashless exercises.

 

On January 8, 2020,the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC, a New York limited company (“Crown Bridge”),pursuant to which the Company issued and sold to Crown a convertible promissory note, dated January 8, 2020, in the principal amountof $121,500.Upon issuance, the Company is expected to receive net proceeds of $109,500after subtracting an original issue discount of $12,000per 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 thepurchase and sale of the Note, which is included in the principal balance of this Note.

 

As part of initialfirst tranche closing on January 8^th, 2020 the outstanding principal amount shall be $40,500and the Holder shall pay $36,500of the consideration (the “First Tranche”). Out of $36,500consideration, the Company has received $34,992cash from Crown Bridge with the remaining $1,508spent as legal expense for note issuance and due diligence fees.

 

As part of the secondtranche closing on July 23^rd, 2020 the outstanding principal amount shall be $50,000and the Holder shall pay $47,500of the consideration (the “Second Tranche”). Out of $47,500consideration, the Company has received $42,987cash from Crown Bridge with the remaining $4,513spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on January8, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal lesser (i) fifteen percent (15%) per annum or (ii) the maximum amount permittedby law from the due date thereof until the same is paid. The convertible note has prepaymentand conversion features. TheConversion Price shall be the lesser of (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Dayperiod ending on the latest complete Trading Day prior to the date of this Note or (ii) the Variable Conversion Price (as defined herein)(subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’ssecurities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributionsand similar events) (also subject to adjustment as further described herein). The “Variable Conversion Price” shall mean60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowestone (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.

 

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“Trading Price”means, for any security as of any date, the lesser of the (i) lowest traded price and (ii) lowest closing bid price on the Over-the-CounterPink Marketplace, OTCPink, or applicable trading market (the “Principal Market”) as reported by a reliable reporting service(“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the Principal Market is not the principal tradingmarket for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowestintraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makersfor such security that are quoted on the OTC Markets

 

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

 

On December 31, 2019,the Company closed a private financing with Auctus Capital Partners, LLC, (“Auctus” or the “Holder”) by issuinga convertible note (the “Note”). The Note has an original principal amount of $75,000with no original discount upon issuance.

 

As part of initialclosing the outstanding principal amount shall be $75,000and the Holder shall pay $75,000of the consideration (the “First Tranche”). Out of $75,000consideration, the Company has received $59,342cash from Auctus with the remaining $15,658spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 9months with the maturity date on September30, 2020. The interest rate of 10.0%per annum. Upon an event of default, the interest rate will be equal the lesser of (i) twenty-fourpercent (24%)per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid. The convertible note hasprepayment and conversion features. Theconversion price is the lesser of: (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Day periodending on the latest complete Trading Day prior to the date of this Note, and (ii) the Variable Conversion Price (as defined herein)(subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’ssecurities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributionsand similar events). The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representinga discount rate of 40%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during thetwenty (20) Trading Days on which at least 100 shares of Common Stock were traded including and immediately preceding the ConversionDate. “Trading Price” means, for any security as of any date, the lowest tradeprice on the OTCPink, OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”)designated by the Holder or, if the OTCPink is not the principal trading market for such security, the trading price of such securityon the principal securities exchange or trading market where such security is listed or traded or, if no trading price of such securityis available in any of the foregoing manners, the average of the trading prices of any market makers for such security that are listedin the “pink sheets” by the National Quotation Bureau, Inc.

 

On February 13, 2020,the Company closed a private financing with East Capital Investment Corporation (“East Capital” or the “Holder”)by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000with no original discount upon issuance.

 

As part of initialclosing the outstanding principal amount shall be $50,000and the Holder shall pay $50,000of the consideration (the “First Tranche”). Out of $50,000consideration, the Company has received $43,492cash from EMA Financial with the remaining $6,508spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on February13, 2021. The interest rate of 10.0%per annum. The convertible note has prepayment and conversion features. Theconversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day thatthe Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.

 

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On February 19, 2020,the Company closed a private financing with Fidelis Capital, LLC, (“Fidelis” or the “Holder”) by issuing a convertiblenote (the “Note”). The Note has an original principal amount of $50,000with no original discount upon issuance.

 

As part of initialclosing the outstanding principal amount shall be $50,000and the Holder shall pay $50,000of the consideration (the “First Tranche”). Out of $50,000consideration, the Company has received $43,487cash from Fidelis with the remaining $6,513spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on February19, 2021. The interest rate of 10.0%per annum. The convertible note has prepayment and conversion features. Theconversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day thatthe Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.

 

 On March 12,2020, the Company closed a private financing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) byissuing a convertible note (the “Note”). The Note has an original principal amount of $38,500and an original issue discount of $3,500per the Note agreement.

 

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

 

The term of this convertiblenote is 1 year with the maturity date on March12, 2021. The interest rate of 10.0%per annum. The convertible note has prepayment and conversion features. Theconversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days prior to the day thatthe Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.In connection with the issuance of the Armada Note, the Company granted Armada a five-year cashless warrant (the “Warrant”)to purchase 4,200shares of the Company’s common stock at an exercise price of $12.50per share.

 

On July 17, 2020, theCompany closed a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertiblenote (the “Note”). The Note has an original principal amount of $50,000,and upon issuance, carries a prorated original issue discount of up to $2,500(the “OID”), to cover the Holder’s monitoring costs associated with thepurchase and sale of the Note, which is included in the principal balance of this Note.

 

As part of initialclosing the outstanding principal amount shall be $50,000and the Holder shall pay $47,500of the consideration. Out of $47,500consideration, the Company has received $42,987cash from EMA Financial with the remaining $4,513spent as legal expense for note issuance and due diligence fees.

 

The term of the convertiblenote is 1year with the maturity date on July17, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal to the 24.0% per annum from the due date thereof until the same is paid. The convertiblenote has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

On July 24, 2020, theCompany closed a private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuinga convertible note (the “Note”). The Note has an original principal amount of $130,000with no original discount upon issuance.

 

As part of initialclosing the outstanding principal amount shall be $130,000and the Holder shall pay $130,000of the consideration (the “First Tranche”). Out of $130,000consideration, the Company has received $116,079cash from Power up with the remaining $13,921spent as legal expense for note issuance and due diligence fees.

 

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The term of this convertiblenote is 1year with the maturity date on July24, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid. The convertiblenote has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

On August 18, 2020,the Company closed another private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) byissuing a convertible note (the “Note”). The Note has an original principal amount of $63,000with no original discount upon issuance.

 

As part of closingthe outstanding principal amount shall be $63,000and the Holder shall pay $63,000of the consideration (the “Second Tranche”). Out of $63,000consideration, the Company has received $54,939cash from Power up with the remaining $8,061spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on August18, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid. The convertiblenote has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

On September 1, 2020,the Company closed another private financing with Jefferson Street Capital LLC, (“Jefferson Street Capital” or the “Holder”)by issuing a convertible note (the “Note”). The Note has an original principal amount of $82,500with $7,500discount upon issuance.

 

As part of closingthe outstanding principal amount shall be $82,500and the Holder shall pay $75,000of the consideration. Out of $75,000consideration, the Company has received $68,949cash from Jefferson Street Capital with the remaining $6,051spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on September1, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid.The convertible note has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

On September 1, 2020,the Company closed another private financing with FirstFire Global Opportunities Fund, LLC, (“FirstFire Global” or the “Holder”)by issuing a convertible note (the “Note”). The Note has an original principal amount of $75,000with $3,750discount upon issuance.

 

As part of closingthe outstanding principal amount shall be $75,000and the Holder shall pay $71,250of the consideration. Out of $71,250consideration, the Company has received $61,498cash from FirstFire Global with the remaining $9,752spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 9months with the maturity date on June1, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal to the 24.0% per annum from the due date thereof until the same is paid.The convertible note has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

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On October 8, 2020,the Company closed another private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) byissuing a convertible note (the “Note”). The Note has an original principal amount of $55,000with no original discount upon issuance.

 

As part of closingthe outstanding principal amount shall be $55,000and the Holder shall pay $55,000of the consideration. Out of $55,000consideration, the Company has received $47,579cash from Power up with the remaining $7,421spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on October8, 2021. The interest rate of 10.0%per annum. Uponan event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid.The convertible note has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

On October 9, 2020,the Company closed another private financing with East Capital Investment Corp., (“East Capital” or the “Holder”)by issuing a convertible note (the “Note”). The Note has an original principal amount of $62,700with no original discount upon issuance.

  

As part of closingthe outstanding principal amount shall be $62,700and the Holder shall pay $62,700of the consideration. Out of $62,700consideration, the Company has received $54,992cash from Power up with the remaining $7,708spent as legal expense for note issuance and due diligence fees.

 

The term of this convertiblenote is 1year with the maturity date on October9, 2021. The interest rate of 10.0%per annum. The convertible note has prepayment and conversion features. Theconversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latestcomplete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded pricefor the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

 

The below table summarizesall the convertible notes issued during the year ended August 31, 2020.

 

Counterparties		Issuance date		Maturity date		Principal Amount				Purchase Price				Discount on Note issuance				Note issuance costs				Proceeds Received (USD)
EMA Financial		November 18, 2019		August 18, 2020		$	75,000			$	68,500			$	6,500			$	3,763			$	64,737
Peak One Opportunity		December 9, 2019		December 9, 2022		$	85,000			$	76,500			$	8,500			$	11,188			$	65,312
Crown Bridge (Tranche I)		January 8, 2020		January 8, 2021		$	40,500			$	36,500			$	4,000			$	1,508			$	34,992
Auctus Fund Note		December 31, 2019		September 30, 2020		$	75,000			$	75,000			$	-			$	15,658			$	59,342
East Capital		February 13, 2020		February 13, 2021		$	50,000			$	50,000			$	-			$	6,508			$	43,492
Fidelis Capital		February 19, 2020		February 19, 2021		$	50,000			$	50,000			$	-			$	6,513			$	43,487
Armada Partners		March 12, 2020		March 12, 2021		$	38,500			$	35,000			$	3,500			$	2,008			$	32,992
EMA Financial		July 17, 2020		July 17, 2021		$	50,000			$	47,500			$	2,500			$	4,513			$	42,987
Crown Bridge (Tranche II)		July 23, 2020		July 23, 2021		$	40,500			$	36,500			$	4,000			$	2,208			$	34,292
Power Up Lending (Tranche I)		July 24, 2020		July 24, 2021		$	130,000			$	130,000			$	-			$	13,921			$	116,079
Power Up Lending  (Tranche II)		August 18, 2020		August 18, 2021		$	63,000			$	63,000			$	-			$	8,061			$	54,939
						$	697,500			$	668,500			$	29,000			$	75,849			$	592,651

 

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The below table summarizesall the convertible notes issued during the year ended August 31, 2021.

 

Counterparties		Issuance date		Maturity Date		Principal Amount				Purchase Price				Discount on Note issuance				Note issuance costs				Proceeds Received (USD)
Jefferson Street Capital		September 1,2020		September 1, 2021			82,500				75,000				7,500				6,051				68,949
FirstFire Global		September 1,2020		June 1, 2021			75,000				71,250				3,750				9,752				61,498
Power Up Lending		October 8, 2020		October 8, 2021			55,000				55,000				-				7,421				47,579
East Capital		October 9, 2020		October 9, 2021			62,700				62,700				-				7,708				54,992
						$	275,200			$	263,950			$	11,250			$	30,932			$	233,018

 

The following tablesummarizes the convertible note and derivative liability in the balance sheet at August 31, 2021:

Balance, August 31, 2020		$	438,921
Issuance of Convertible Note Principal		$	275,200
Issuance of MFN Principal		$	15,000
Discount on Note issuance, net of amortization		$	75,075
Accrued interest expense		$	24,562
Converted Note Principal		$	(166,464)
Converted accrued and unpaid interest		$	(8,538)
Prepayment of Note Principal		$	(559,782)
Paid interest expense		$	(29,390)
Change in fair value of Derivative liability		$	(64,584)
Balance, August 31, 2021		$	—

 

The Company valuedits derivatives liability using Monte Carlo simulation. Assumptions used as of August 31, 2021 include (1) risk-free interest rates of0.06%,(2) expected equity volatility of 66.25%- 66.3%,(3) zero dividends, (4) discount for lack of marketability of 30%(5) remaining terms and conversion prices as set forth in the convertible note agreement,and (6) the common stock price of the underlying share on the valuation date of August 31, 2021.

 

The Company recognizesgain due to convertible feature of $64,584in the income statement for the year ended August 31, 2021.

 

The Company prepaidnine convertible notes during the year ended August 31, 2021 as below:

 

Convertible Notes	Beginning Principal after Note Conversion	Total Interest Accrued	Paid Date	Paid Principal	Paid Interest	Principal balance Outstanding	Payment amount	Loss from prepaid convertible note
Crown Bridge (Tranche I)	1,082	2,641	12/9/20	(1,082)	(2,641)	-	-	-
Crown Bridge (Tranche II)	40,500	1,545	12/9/20	(40,500)	(1,545)	-	72,5001	(26,732)1
EMA Financial	50,000	1,990	12/9/20	(50,000)	(1,990)	-	72,800	(20,810)
Power Up Lending	130,000	6,491	1/22/21	(130,000)	(6,491)	-	190,925	(54,434)
Power Up Lending	63,000	3,042	2/10/21	(63,000)	(3,042)	-	92,380	(26,338)
East Capital	62,700	3,114	4/7/21	(62,700)	(3,114)	-	87,467	(21,652)
Power Up Lending	55,000	2,746	4/7/21	(55,000)	(2,746)	-	80,797	(23,051)
Jefferson Street	82,500	4,097	3/1/21	(82,500)	(4,097)	-	116,975	(30,378)
FirstFire Global	75,000	3,724	3/1/21	(75,000)	(3,724)	-	108,125	(29,401)
Total	559,782	29,390	-	(559,782)	(29,390)	-	821,969	(232,796)

 

^1.The balance is the total of Crown Bridge Tranche I and Tranche II

 

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The Holders convertedconvertible notes to common shares during the year ended August 31, 2021 as below:

 

EMA Financial:

 

Conversion date		Beginning principal balance				Principal Amount Converted				Interest Amount Converted				MFN Principal				Total converted principals and unpaid interest				Closing Fee				Ending principal balance				Conversion Price				Converted Shares
September 1, 2020			5,285				5,285				5,154				—				10,439				1,000				—			$	0.00812				1,408,800
Total							5,285				5,154				—				10,439				1,000												1,408,800

 

Auctus Capital Partners:

 

Conversion date		Beginning principal balance				Principal Amount Converted				Interest Amount Converted				MFN Principal				Total converted principals and unpaid interest				Closing Fee				Ending principal balance				Conversion Price				Converted Shares
September 8, 2020			33,295				12,055				73				—				12,128				750				21,240			$	0.00510				2,525,000
September 18, 2020			21,240				15,233				58				—				15,291				750				6,007			$	0.00510				3,145,300
September 29, 2020			6,007				6,007				18				11,082				17,107				750				—			$	0.00480				3,720,200
October 22, 2020			—				—				—				3,918				3,918				750				—			$	0.00216				2,161,240
Total							33,295				149				15,000				48,444				3,000												11,551,740

 

*On September 29, 2020,$6,007of the Auctus Capital convertible note was converted to 17,107shares of common stock at a conversion price $0.0048,60%of the lowest trading price in the 20 days prior to the conversion dates. Additional most-favored-nation(MFN) principal of $15,000was triggered when the conversion price is lower than $0.1.The remaining Auctus Capital convertible note principal balance was $0,including $15,000MFN principal

 

East Capital:

 

Conversion date		Beginning principal balance				Principal Amount Converted				Interest Amount Converted				MFN Principal				Total converted principals and unpaid interest				Closing Fee				Ending principal balance				Conversion Price				Converted Shares
September 8, 2020			26,600				13,300				250				—				13,550				—				13,300			$	0.01020				1,328,431
September 25, 2020			13,300				13,300				129				—				13,429				—				—			$	0.00960				1,398,854
Total							26,600				379				—				26,979				—												2,727,285

 

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Fidelis Capital: 

 

Conversion date		Beginning principal balance				Principal Amount Converted				Interest Amount Converted				MFN Principal				Total converted principals and unpaid interest				Closing Fee				Ending principal balance				Conversion Price				Converted Shares
September 1, 2020			41,000				25,671				—				—				25,671				—				15,329			$	0.01218				2,107,648
September 9, 2020			15,329				15,329				2,605				—				17,934				—				—			$	0.01020				1,758,257
Total							41,000				2,605				—				43,605				—												3,865,905

 

Armada Partners:

 

Conversion date		Beginning principal balance				Principal Amount Converted				Interest Amount Converted				MFN Principal				Total converted principals and unpaid interest				Closing Fee				Ending principal balance				Conversion Price				Converted Shares
September 25, 2020			25,500				13,000				213				—				13,213				500				12,500			$	0.01020				1,344,363
October 6, 2020			12,500				12,500				38				—				12,538				500				—			$	0.00960				1,358,145
Total							25,500				251				—				25,751				1,000												2,702,508

 

Crown Bridge (TrancheI): 

 

Conversion date		Beginning principal balance				Principal Amount Converted				Interest Amount Converted				MFN Principal				Total converted principals and unpaid interest				Closing Fee				Ending principal balance				Conversion Price				Converted Shares
September 8, 2020			20,867				6,400				—				—				6,400				1,250				14,467			$	0.00765				1,000,000
September 22, 2020			14,467				5,635				—				—				5,635				1,250				8,832			$	0.00765				900,000
October 1, 2020			8,832				7,750				—				—				7,750				1,250				1,082			$	0.00720				1,250,000
Total							19,785								—				19,785				3,750												3,150,000

 

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In summary, the Companyhas either converted or prepaid all the outstanding convertible notes as of August 31, 2021. The below table lists conversions and prepaymentsduring each quarter in FY2021.

 

Sr. No.	Note	Total convertible note issued	Total principal converted as of 08/31/2020	Total principal converted as of 11/30/2020	Total principal paid off as of 2/28/2021	Total principal paid off as of 8/31/2021	Principal balance Outstanding as of 8/31/2021
1	EMA Financial	90,000	(84,716)	(5,285)	-	-	-
2	Peak One Opportunity	85,000	(85,000)	-	-	-	-
3	Auctus Fund Note	90,000	(41,705)	(48,295)	-	-	-
4	Crown Bridge (Tranche I)	40,500	(19,633)	(19,785)	(1,082)	-	-
5	East Capital	50,000	(23,400)	(26,600)	-	-	-
6	Fidelis Capital	50,000	(9,000)	(41,000)	-	-	-
7	Armada Partners	38,500	(13,000)	(25,500)	-	-	-
8	Crown Bridge (Tranche II)	40,500	-	-	(40,500)	-	-
9	EMA Financial (Issue Date: 7.17.2020)	50,000	-	-	(50,000)	-	-
10	Power Up Lending (Issue Date: 07.24.2020)	130,000	-	-	(130,000)	-	-
11	Power Up Lending (Issue Date: 08.18.2020)	63,000	-	-	(63,000)	-	-
12	East Capital (Issue Date: 10.09.2020)	62,700	-	-	-	(62,700)	-
13	Power Up Lending (Issue Date: 10.08.2020)	55,000	-	-	-	(55,000)	-
14	Jefferson Street (Issue Date: 09.01.2020)	82,500	-	-	-	(82,500)	-
15	FirstFire Global (Issue Date: 09.01.2020)	75,000	-	-	-	(75,000)	-
	Total	1,002,700	(276,454)	(166,464)	(284,582)	(275,200)	-

 

NOTE10 – WARRANTS

 

On December 9, 2019,January 8, 2020, January 17, 2020, March 12, 2020, and July 23, 2020 the Company issued warrants to EMA Financial, Peak One Opportunity,Crown Bridge, and Armada Partners in conjunction with their convertible notes (see Note 9). Classified as equity, these detachable warrantsissued in a bundled transaction with convertible notes are accounted for separately as additional paid-in capital for the portion ofthe proceeds allocated to them. The allocation of the sales proceeds between the base instrument of convertible notes and the warrantsare allocated based on the relative fair values of the base instrument of convertible notes and the warrants following the guidance inASC 470-20-25-2.

 

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On July 30, 2020, theCompany issued $750,000warrant shares to Peak One Opportunity in connection with the Equity Purchase Agreement,which is the “Financing Agreement” signed on July 30, 2020 to sell to Peak One up to $10,000,000 worth of the Company’scommon stock over the period ending twenty-four (24)months after the date the Registration Statement.

 

The fair value of thestock warrants granted to EMA Financial was estimated at $106,540on the date granted using the Black-Scholes pricing model, with the following assumptionused for the valuation: exercise price of $12per share, average risk-free interest rate of 0.89%,expected dividend yield of 0,remaining contractual life of 4.89years, and an average expected volatility of 58.11%.

 

The fair value of thestock warrants granted to Peak One was estimated at $39,515on the date granted using the Black-Scholes pricing model, with the following assumptionused for the valuation: exercise price of $10per share, average risk-free interest rate of 0.89%,expected dividend yield of 0,remaining contractual life of 4.78years, and an average expected volatility of 57.51%. Thefair value of the stock warrants granted to Crown Bridge (Tranche I) was estimated at $17,443on the date granted using the Black-Scholes pricing model, with the following assumptionused for the valuation: exercise price of $12.5per share, average risk-free interest rate of 0.89%,expected dividend yield of 0,remaining contractual life of 4.86years, and an average expected volatility of 57.97%.

 

The fair value of thestock warrants granted to Armada was estimated at $12,341on the date granted using the Black-Scholes pricing model, with the following assumptionused for the valuation: exercise price of $12.5per share, average risk-free interest rate of 0.29%,expected dividend yield of 0,remaining contractual life of 4.78years, and an average expected volatility of 61.54%.

 

The fair value of thestock warrants granted to Crown Bridge (Tranche II), issued on July 23, 2020 was estimated at $126,112on August 31, 2020 using the Black-Scholes pricing model, with the following assumption usedfor the valuation: exercise price of $0.00905per share, average risk-free interest rate of 0.28%,expected dividend yield of 0,remaining contractual life of 4.90years, and an average expected volatility of 55.33%.

 

The fair value of thestock warrants granted to Peak One, a standalone warrant issued on July 30, 2020 was estimated at $45,722on August 31, 2020 using the Black-Scholes pricing model, with the following assumption usedfor the valuation: exercise price of $0.1per share, average risk-free interest rate of 0.27%,expected dividend yield of 0,remaining contractual life of 4.92years, and an average expected volatility of 55.29%.

  

As of August 31, 2021,the Company exercised the following warrant shares to acquire common shares via cashless exercises as below:

 

Peak One warrantissued on December 9, 2019:

 

Date of Exercise	Anti Dilution Value of Warrant Shares	Anti Dilution Base (Exercise) Price (B)	Mkt Price (90 Day High Preceding Exercise date) (A)	# of WTS Shares Elected for purchase (Y)	Common Shares to be issued upon exercise (X) = Y(A-B)/A	Cashless Payment
July 20, 2020	$100,000	$  0.0300	$            21.00	250,358	250,000	$7,511
July 21, 2020	$92,489	$  0.0300	$            21.00	250,358	250,000	$7,511
July 23, 2020	$84,979	$  0.0300	$            21.00	250,358	250,000	$7,511
July 29, 2020	$77,468	$  0.0300	$            21.00	250,358	250,000	$7,511
August 4, 2020	$69,957	$  0.0300	$            21.00	250,358	250,000	$7,511
August 11, 2020	$62,446	$  0.0300	$            21.00	500,715	500,000	$15,021
August 21, 2020	$47,425	$  0.0300	$            21.00	500,715	500,000	$15,021
August 25, 2020	$32,403	$  0.0205	$            21.00	500,489	500,000	$10,260
August 31, 2020	$22,143	$  0.0205	$            21.00	500,489	500,000	$10,260
September 9, 2020	$11,883	$  0.0205	$            21.00	470,786	470,326	$9,651
Total				3,724,984	3,720,326	$ 97,768

 

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Peak One warrantissued on July 30, 2020

 

Date of Exercise	Anti Dilution Value of Warrant Shares	Anti Dilution Base (Exercise) Price (B)	Market Price (90 Day High Preceding Exercise date) (A)	# of WTS Shares Elected for purchase (Y)	Common Shares to be issued upon exercise (X) = Y(A-B)/A	Cashless Payment
October 8, 2020	$75,000	0.01672	$10.00	750,000	748,746	$12,540
December 21, 2020	$62,460	0.00609	$0.068	2,564,039	2,344,407	$15,615
December 28, 2020	$46,845	0.00609	$0.068	2,564,039	2,344,407	$15,615
January 6, 2021	$31,230	0.00609	$0.068	5,128,079	4,668,814	$31,230
Total				11,006,157	10,086,374	$75,000

 

EMA Financial warrantissued on January 17, 2020:

 

Date of Exercise	Anti Dilution Value of Warrant Shares	Anti Dilution Base (Exercise) Price (B)	Market Price (90 Day High Preceding Exercise date) (A)	# of WTS Shares Elected for purchase (Y)	Common Shares to be issued upon exercise (X) = Y(A-B)/A	Cashless Payment
September 8, 2020	$375,000	0.00812	$17.00	2,400,002	2,398,856	$19,488
September 14, 2020	$355,512	0.00812	$17.00	2,950,000	2,948,951	$23,954
September 22, 2020	$331,558	0.00812	$10.00	3,400,000	3,397,239	$27,608
September 25, 2020	$303,950	0.00812	$10.00	3,600,000	3,597,077	$29,232
October 1, 2020	$274,718	0.00812	$10.00	4,150,000	4,146,630	$33,698
October 12, 2020	$241,020	0.00812	$6.50	4,600,000	4,594,254	$37,352
October 19, 2020	$203,668	0.00812	$6.50	4,800,000	4,794,004	$38,976
October 29, 2020	$164,692	0.00812	$2.02	5,200,000	5,179,097	$42,224
November 5, 2020	$122,468	0.00812	$0.60	5,500,000	5,425,567	$44,660
November 11, 2020	$77,808	0.00812	$0.43	5,700,000	5,592,363	$46,284
November 20, 2020	$31,524	0.00812	$0.30	3,882,264	3,777,184	$31,524
Total				46,182,266	45,851,222	$375,000

 

If the Market Priceof one share of Common Stock is greater than the Exercise Price, the Holder may elect to receive Warrant Shares pursuant to a cashlessexercise, in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portionthereof remaining unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holdera number of Common Stock computed using the formula of X = Y (A-B)/A, where X, Y, A, B are as below.

 

X = the number of Warrant Sharesto be issued to Holder.

Y = the number of Warrant Sharesthat the Holder elects to purchase under this

Warrant (at the date of such calculation).

A = the Market Price (at the dateof such calculation).

B = Exercise Price (as adjustedto the date of such calculation).

 

The exercise pricesfor all the warrants are subject to anti-dilution adjustments. If the Company issues common stocks under a purchase agreement, issueoptions, or convert notes to common stocks at a lower price than the warrant exercise prices while the warrants are still outstanding,such lower price is the base price that the warrant exercise price can be reduced to. As such, the Holder will receive additional warrantshares to keep the same warrant value as the original issuance before the exercise price is adjusted down.

 

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A summary of the statusof the Company’s warrants as of August 31, 2021 is presented below. The number of shares is adjusted in accordance with the anti-dilutionadjustment and equals the original number of warrant shares times the original exercise prices divided by based prices. Base price iseither the note conversion price or the share issuance price used by the Company while the warrants are outstanding.

 

		Number of warrants
		Original shares issued				Anti-dilution Adjusted
Warrants as of August 31, 2020			793,920				68,163,661
Warrants granted			—				—
Exercised, forfeited or expired			(793,920	)			(68,163,661)
Outstanding as of August 31, 2021			—				—
Exercisable as of August 31, 2021			—				—

 

(1). Exercise priceis reduced to the latest base price. Base price is either the note conversion price or the share issuance price, which the Company usedwhile the warrants were outstanding.

(2). The number ofshares is adjusted in accordance with the anti-dilution clause per the warrant agreement and equals the original number of warrant sharestimes the original exercise prices divided by base price.

 

NOTE11 – FAIR VALUE MEASUREMENTS

 

The Company appliesASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair valueand expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

 

ASC 820 establishesa three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1 — Observableinputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

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

 

ASC 820 describes threemain approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach.The market approach uses prices and other relevant information generated from market transactions involving identical or comparable 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 amount thatwould currently be required to replace an asset.

 

Derivative liabilitiesof conversion features in convertible notes are classified within Level 3. We estimate the fair values of these liabilities at August31, 2021 by using Monte Carlo simulation based on the remaining contractual terms, risk-free interest rates, and expected volatilityof the stock prices, etc. The assumptions used, including the market value of stock prices in the future and the expected volatilities,were subjective unobservable inputs.

 

Liabilities measuredat fair value on a recurring basis as of August 31, 2021 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)

Total Fair value at August 31, 2021

Derivative liabilities

$

—

$

—

$

—

$

—

 

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		Derivative liabilities embedded in convertible notes
Fair value at August 31, 2020		$	64,584
Increase from note issuances			74,187
Decrease from note conversions			(33,490)
Changes in the fair value			58,090
Fair value at November 30, 2020		$	163,371
Increase from note issuances			—
Decrease from note prepayment			(136,321)
Changes in the fair value			18,439
Fair value at February 28, 2021		$	45,490
Decrease from note prepayment			(45,490)
Fair value at August 31, 2021			—

 

NOTE12– RELATED PARTY TRANSACTIONS

 

In support of the Company’sefforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operationsor attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continuedsupport by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporaryin nature and have not been formalized by a promissory note. As of August 31, 2021 and August 31, 2020, there are no such related partytransactions.

 

Youall Perform ServicesLtd, owned by the son of the Company’s Chief Executive Offer and the Company’s former Secretary and Treasurer Jianli Deng,collects revenue from the performance matching platform “Ai Bian Quan Qiu” via a Wechat official account on behalf of theCompany. Due to the COVID-19 impact, the Company ceased operation of the “Ai Bian Quan Qiu” platform in January, 2020. Forthe years ended August 31, 2021 and 2020, the Company recognized revenue of $0and $141,143from this performance matching platform, respectively. The balance of related party receivablefrom Youall Perform Services Ltd was $1,439and $87,581as of August 31, 2021 and 2020, respectively.

 

In September 2019,the Company entered into an agreement with Youall Perform Services Ltd for two transactions. 1) The Company pays Youall Perform ServicesLtd. 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 on behalf ofthe Company. 2) Youall Perform Services Ltd. will provide IT consulting service for “Ai Bian Quan Qiu” platform upgrade andmaintenance at a total cost of $128,000,out of which $108,800 has been paid. As there has been no revenue from the “Ai Bian Quan Qiu” platform due to COVID-19 sincemid-January, 2020, $108,800long-term prepayment was expensed as research and development expense in FY2020. In July2020, the Company changed the service scope of this agreement and turned it into a website maintenance contract over the next two years.The major website of this Company is ABQQ.tv for video streaming. The contract amount remains to be $128,000,out of which $108,800was previously paid and $19,200will be due on the twenty first month after the launch of the website www.abqq.tv.The website maintenance service began on January 1, 2021 and will end on December 31, 2022. The Company will pay Youall Perform ServicesLtd the remaining balance of $19,200in September, 2022.

 

The Company has enteredinto a patent license agreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”)100% owned by the Chief Executive Officer Chiyuan Deng. The agreement is for a term of 5years commencing on the effective date on June1, 2017. The Company has already paid the licensor a non-refundable, up-from payment of $500,000and shall pay a royalty of 20%of the gross revenue realized from the sale of licensed products and sub-licensing of thispatent every year. The royalty expenses during the years ended August 31, 2021 and August 31, 2020 are $25,600and $61,440,respectively. In January, 2021, the Company’s sublicensing agreement to generate royalty revenues was terminated with Anyone Picture.As such, there has been no royalty expenses since the end of December, 2020 given there has been no sublicensing royalty revenue generatedfrom the patent. Once the Company finds another company to sublicense the patent, it will generate royalty revenue and pay royalty expenseagain.

  

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The Company rentedan office from ZESTV STUDIOS LIMITED, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng. On December 1, 2020,the Company entered an agreement with ZESTV STUDIOS LIMITED to grant ZESTV STUIDIOS LIMITED the distribution right for the movie “Loveover the world” and charge ZESTV STUIDIOS LIMITED movie royalties. The Company’s royalties revenue is stipulated to equal43% of the after-tax movie box office revenue deducting movie issuance costs. The movie box office revenue is tracked by a movie distributorHuaxia Film Distribution Co. Ltd (hereafter “Hua Xia”) in China as it connects with all movie theaters in China and can trackthe total movie box office revenue online in real time. Although ZESTV STUDIOS LIMITED has paid royalties revenue to the Company, ZESTVSTUDIOS LIMITED failed to collect cash from Hua Xia. The Company will refund ZESTV STUDIOS LIMITED the movie royalties. As of August31, 2021, the Company incurred related party payable of $16,512 for the office rent and $916,922 of refund for the movie royalties revenuenet of the movie distribution commission fee to ZESTV STUDIOS LIMITED.

 

On August 29, 2020,the Company entered into a Separation Agreement and Release with each of Jianli Deng, Lijun Yu and Linqing Ye. Pursuant to the agreements,Mr. Deng resigned as Secretary and Treasurer, Ms. Yu resigned as Chief Marketing Officer and Mr. Ye resigned as Chief Operating Officer.Mr. Deng will remain on as a member of our board 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,Ms. Yu will receive $110,000and Mr. Ye will receive $120,000.We received a release of all claims from these prior officers. In addition, Mr. Deng, Ms. Yu, and Mr. Ye agreed to return to the Companytheir unvested restricted shares of 130,556,147,222,and 147,222,respectively.

 

On September 11, 2020,we entered into an amended employment agreement with Chiyuan Deng, our Chief Executive Officer. Pursuant the amended agreement, we amendedthe compensation to Mr. Deng to include a salary of $180,000annually, a reduction in common stock received under his initial employment agreement, apotential for a bonus in cash or shares, and the issuance of 100,000shares of our newly created Series A Preferred Stock at par value $0.001.

 

During the year endedAugust 31, 2021, the Company paid the Chief Executive Officer $180,000salary, $50,000bonus in cash, and $30,100stock-based compensation. $25,000salary was paid in cash to Chief Financial Officer. In addition, the Company hired ChiefInvestment Officer on February 22, 2021. $55,685cash salary and $7,527stock-based compensation were paid to Chief Investment Officer for the year ended August31, 2021. During the year ended August 31, 2020, $169,768was paid to five executives in the form of stock-based compensation and $15,000cash salary was paid to the Chief Financial Officer. 

 

NOTE13 – STOCKHOLDERS’ EQUITY

 

The Company has 226,589,735and 46,661,417common shares issued and outstanding as of August 31, 2021 and August 31, 2020, respectively. These commonshares were held by approximately 559and 520shareholders of record at August 31, 2021 and August 31, 2020, respectively. The Company has 100,000and 0series A preferred shares issued and outstanding as of August 31, 2021 and August 31, 2020,respectively. The Company has 20,000and 0series B preferred shares issued and outstanding as of August 31, 2021 and August 31, 2020,respectively

 

The Company has thefollowing equity activities during the year ended August 31, 2021:

 

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Common shares

 

•

The Company issued 19,000,000 shares of common stock for cash at $0.0140 per share and 4,000,000 shares of common stock for cash at $0.0715 per share.

 

•

The Company issued 25,406,238 shares of common stock from note conversion. Refer to Note 9 for further details.

 

•

The Company issued 56,407,922 shares of common stock from warrant exercises. Refer to Note 10 for further details.

 

•

261,111 shares of common stock returned to the Company due to officer resignations.

 

	•	The Company issued 31,646,633 shares of put shares for cash at $0.015312, $0.014256, $0.01452, $0.077528, $0.09856, $0.11, $0.0715, $0.0563, $0.0528, $0.04875, $0.05764, and $0.0344 per share.
	•	As stock-based compensation the Company issued 500,000 shares to the Chief Investment Offer and 1,000,000 shares to the Chief Executive Officer.
	•	The Company issued 24,528,637 of common shares from preferred shares series C & D conversion.
	•	The Company issued 17,700,000 shares of stock for consulting services.

 

Preferred shares

 

The Company authorized10,000,000 sharesof preferred shares with a par value $0.001.During the year ended August 31, 2021, the Company issued 100,000shares of Series A Preferred shares at par value $0.001,and 20,000shares of Series B Preferred shares at $16per share, 280,025shares of Series C Preferred shares and its dividend shares were converted to 7,140,360common shares in August, 2021, and 798shares of Series D Preferred shares were converted to 17,388,277common shares in August, 2021.

 

Based upon the SeriesC Preferred Share purchase agreement, each share of Series C Preferred Stock carries an annual dividend in the amount of 12.0% of theStated Value (the “Dividend Rate”). Which shall be cumulative, payable solely upon redemption, liquidation or conversion.Upon the occurrence of an Event of Default, the Dividend Rate shall automatically increase to 22.0%. As of August 31, 2021, the Companyhas dividend expense of $16,801and dividend payable of $0on Series C Preferred Shares.

 

Based upon the SeriesD Preferred Share purchase agreement, each share of Series D Preferred Stock shall be entitled to receive, and the Corporation shallpay, cumulative dividends of 8.0% per annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that suchshare of Preferred Share has been converted or redeemed (the “Dividend End Date”). As of August 31, 2021, the Company hasdividend expense of $9,034and dividend payable of $1,834on Series D Preferred Shares and included in the accrued liabilities in the balance sheet.

 

Warrant shares

 

•

The Company canceled 9,720 warrant shares with Crown Bridge and 4,200 warrant shares with Armanda Partners in November, 2020.

 

•

Peak One Opportunities exercised the remaining 10% of the 10,000 warrant shares issued on December 9, 2019 and 100% 750,000 warrant shares issued on July 30, 2020.

 

•

EMA Financial exercised all 30,000 warrant shares issued on January 17, 2020.

 

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NOTE 14– INCOME TAXES

 

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

 

Components of net deferredtax assets, including a valuation allowance, are as follows as of August 31, 2021 and August 31, 2020:

 

		August 31, 2021				August 31, 2020
Deferred tax asset attributable to:
Net operating loss carry over		$	871,681			$	447,765
Less: valuation allowance			(871,681	)			(447,765)
Net deferred tax asset		$	—			$	—

 

The valuation allowancefor deferred tax assets was $871,681as of August 31, 2021 and $447,765as of August 31, 2020. In assessing the recovery of the deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differencesbecome deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and taxplanning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assetswould not be realized as of August 31, 2021 and August 31, 2020.

 

Reconciliation between the statutoryrate and the effective tax rate is as follows for the years ended August 31, 2021 and August 31, 2020:

		Years ended
		August 31,
		2021				2020
Federal statutory tax rate			21	%			21	%
Change in valuation allowance			(21	%)			(21	%)
Effective tax rate			0	%			0	%

 

The Company’sfully owned subsidiary App Board Limited registered and located in Hong Kong. It is governed by the income tax law of the Hong Kong andis subject to a tax rate of 16.5%.

 

During the years endedAugust 31, 2021 and August 31, 2020, the Company and its subsidiary have incurred a consolidated loss of $(3,608,097)and $(1,523,071),respectively. As a result, the Company and its subsidiary did not incur any income tax during the years ended August 31, 2021 and August31, 2020.

 

NOTE 15– CONCENTRATION RISK

 

89%and 69%of revenue was generated from one customer during the years ended August 31, 2021 and August31, 2020, respectively.

 

100%of the account receivable balance was due from one customer as of August 31, 2021 and August 31,2020.

 

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NOTE 16– COMMITMENTS AND CONTINGENCIES

 

Operating lease 

 

As of August 31, 2021,the Company leases office premises in Hong Kong, an office in New York city, and an office in Singapore under non-cancelable operatinglease agreements with an option to renew these leases. On November 22, 2020, the Company closed down a display store and terminated itslease, which has an original term from February 23, 2019 to February 22, 2022, as a result of the COVID-19 impact and uncertainties ofthe economy in Hong Kong. The cash lease expense for the years ended August 31, 2021 and August 31, 2020 was $92,981and $79,488,respectively. All leases are on a fixed payment basis. None of the leases include contingent rentals. The Company had lease commitmentof $48,822 asof August 31, 2021, of which $48,822is within one year.

 

In accordance withASC 250-10-45-14, the adoption of ASC 842 lease accounting standard has resulted in $94,570lease expenses for the year ended August 31, 2021, including both cash and non-cash leaseexpenses.

 

As of August 31,		Commitments
2021		$	48,822
Total Lease Payments		$	48,822
Less: imputed interest		$	(596)
Present value of lease liabilities		$	48,226
Current portion of obligations under operating leases		$	48,226
Obligations under operating leases, non-current		$	0

 

NOTE17 – SUBSEQUENT EVENTS  

 

In accordance withASC 855-10, the Company has analyzed its operations subsequent to August 31, 2021 to the date these financial statements were issued.

 

Covid-19 impact:

 

In December 2019, anovel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significantvolatility in the U.S. and international markets. The ultimate disruption which may be caused by the outbreak is uncertain; however,it may result in 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, but arenot limited to, disruption to the Company’s customers and revenue, labor workforce, unavailability of supplies used in operations,etc. Accordingly, Management is evaluating the Company’s liquidity position, reduction in revenues, and reviewing the analysisof the Company’s financial performance as the Company seeks to withstand the uncertainty related to the coronavirus. As no large-crowdgathering has been allowed since the outbreak of COVID-19, the Company has not generated any revenue from the Ai Bian Quan Qiu performancematching platform. Consequently, the Company has decided to impair all of the intangible asset carrying value related to the Ai BianQuan Qiu performance matching platform and its Wechat official account, given that it is uncertain whether this platform will continuegenerating any revenue.

 

Subsequent cashreceipt for Put share issuance:

 

On September 4, 2021,the Company received the subscription receivable from Peak One Opportunity Fund LP for issuing 3,000,000 Put shares at $0.0344 per shareon August 16, 2021.

 

Issue of SeriesC Preferred Stock:

 

On September 3, theCompany entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor Geneva Roth RemarkHoldings, Inc. (the “Investor”), whereby Investor purchased from the Company 234,300 shares of Series C Convertible PreferredStock of the Company (the “Series C Preferred Stock”) for a purchase price of $203,500 (the “Purchase Price”).The closing occurred on September 3, 2021. After the payment of transaction-related expenses, net proceeds to the Company from the issuanceof the Series C Preferred Stock totaled $184,000. The Company intends to use the proceeds from the Preferred Stock for general workingcapital purposes.

 

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On October 21, underanother Purchase Agreement with the Investor, whereby Investor purchased from the Company 98,325 shares of Series C Convertible PreferredStock of the Company (the “Series C Preferred Stock”) for a purchase price of $85,450 (the “Purchase Price”).The closing occurred on October 22, 2021. After the payment of transaction-related expenses, net proceeds to the Company from the issuanceof the Series C Preferred Stock totaled $75,390. The Company intends to use the proceeds from the Preferred Stock for general workingcapital purposes.

 

Issue of SeriesD Preferred Stock:

 

For the SecuritiesPurchase Agreement dated March 10, 2021 entered between the Company and the accredited investor GHS Investments, LLC (the “Investor”),the Company will issue up to 5,075 shares of Series D Convertible Preferred Stock of the Company (the “Series D Preferred Stock”)to GHS Investments, LLC with a purchase price of $1,000 per share. On September 6, 2021 and October 5, 2021, the Company issued 73 and37 shares of series D preferred stock to the investor, respectively. After the payment of transaction-related expenses, net proceedsto the Company from the issuance of the Series D Preferred Stock was $67,160 and $34,040, respectively. The Company intends to use theproceeds from the Preferred Stock for general working capital purposes.

 

Open a Movie Theaterin New York City:

 

In October 2021, theCompany entered into a five- year lease with Martabano Realty Corp (hereinafter referred to as "Landlord") for the "The Mt.Kisco Theatre” located at 144 Main Street, Mount Kisco, New York. The property under the lease consists of approximately 8,375squares to be used and occupied by the Company as a movie theater. The fixed minimum annual base rent for each year of the five-yearlease term is $83,750, $83,750, $159,125, $163,899, and $168,816.

 

NFT Film and MusicMarket (NFT MMM) Development and Maintenance Contract:

 

The Company has enteredinto a contract with STAREASTnet to develop a decentralized application based on the NFT (Non-Fungible Token) for a movie and music marketplacewith the option to buy physical, digital download or both, in one place. The digital copyrights of movies and music are generalized throughNFTs, whose smart contracts facilitate the verifications of digital copyrights saved on the blockchain. The Company will hold 100%stake of STAREASTnet NFT Movies and Music Marketplace (NFT MMM).

 

Officer Resignation:

 

Brandy Gao resignedas Chief Financial Officer of the Company since the term of her contract with the Company ended on December 31, 2021.

 

Cancellation ofAcquiring a Movie Copyright:

 

The Company acquireda movie copyright of “Too Simple” from Guang Dong Honor Pictures Ltd in July 2021 at a price of $1,271,680, which was tobe paid in installments. As of August 31, 2021, $644,785 was paid and recorded in long-term prepayment. On December 31, 2021, the Companyentered into a termination contract with Guang Dong Honor Pictures Ltd to cancel the purchase of this movie copyright and will receivea full refund before May 31, 2022. Therefore, the Company has reclassified $644,785 from long-term prepayment to other receivable onthe balance sheet.

 

Change in OutstandingCommon Shares:

 

As of December 31, 2021, the Company had237,297,700 shares of common stock outstanding. The approximate 10.7 million increase from 226,589,735shares outstanding at August 31, 2021 is primarily attributed to 7.3 million Put shares issued to Peak One Opportunity Fund LP and 3.2million common shares converted from preferred shares series D.

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AB INTERNATIONAL GROUPCORP.

 

250,000,000 Sharesof Common Stock

 

---

 

PROSPECTUS

 

---

 

August 3, 2022

 

 

 

 

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PART II

INFORMATION NOT REQUIREDIN PROSPECTUS

 

Item 13. Other Expenses of Issuance andDistribution

 

The following tablesets forth an itemization of the various expenses, all of which we will pay, in connection with the issuance and distribution of thesecurities being registered. All of the amounts shown are estimated except the SEC Registration Fee.

 

SEC Registration Fee		$	125.15
Legal Fees and Expenses		$	10,000
Accounting Fees and Expenses		$	10,000
Miscellaneous		$	0
Total		$	20,125.15

 

Item 14. Indemnification of Directorsand Officers

 

TheNevada Revised Statutes limits or eliminates the personal liability of directors to corporations and their stockholders for monetarydamages for breaches of directors’ fiduciary duties as directors. Our bylaws include provisions that require the company to indemnifyour directors or officers against monetary damages for actions taken as a director or officer of our Company. We are also expressly authorizedto carry directors’ and officers’ insurance to protect our directors, officers, employees and agents for certain liabilities.Our articles of incorporation do not contain any limiting language regarding director immunity from liability.

 

Thelimitation of liability and indemnification provisions under the Nevada Revise Statutes and our bylaws may discourage stockholders frombringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing thelikelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefitus and 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 provisions donot alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to theextent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuantto these indemnification provisions.

   

Item 15. Recent Sales of UnregisteredSecurities

 

 Thesales and issuances of the securities described below were made pursuant to the exemptions from registration contained in to Section4(a)(2) of the Securities Act and Regulation D under the Securities Act. Each purchaser represented that such purchaser’s intentionto acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriatelegends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser wasgiven adequate access to sufficient information about us to make an informed investment decision. Except as described in this prospectus,none of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.

 

Commonshares

 

•

The Company issued 19,000,000 shares of common stock for cash at $0.0140 per share and 4,000,000 shares of common stock for cash at $0.0715 per share.

•

The Company issued 25,406,238 shares of common stock from note conversion. Refer to Note 9 of the consolidated financial statements for the year ended August 31, 2021 for further details.

•

The Company issued 56,407,922 shares of common stock from warrant exercises. Refer to Note 10 of the consolidated financial statements for the year ended August 31, 2021 for further details.

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•

261,111 shares of common stock returned to the Company due to officer resignations.

 

	•	The Company issued 31,646,633 shares of put shares for cash at $0.015312, $0.014256, $ 0.01452, $0.077528, $0.09856, $0.11, $0.0715, $0.0563, $0.0528, $0.04875, $0.05764, and $0.0344 per share.
	•	As stock-based compensation the Company issued 500,000 shares to the Chief Investment Offer and 1,000,000 shares to the Chief Executive Officer.
	•	The Company issued 24,528,637 of common shares from preferred shares series C & D conversion.
	•	The Company issued 17,700,000 shares of stock for consulting services.
	•	The Company issued 5,500,000 shares of put shares for cash at $0.02288 and $0.02719 per share
	•	The Company issued 3,146,854 of common shares from preferred shares series D conversions
	•	The Company issued 1,800,000 shares of common stock for cash at $0.01548 per share and 3,000,000 shares of common stock for cash at $0.01716 per share and 2,300,000 shares of common stock for cash at $0.01729 per share and 2,300,000 shares of common stock for cash at $0.01100 per share.
	•	As stock-based compensation the Company issued 5,000,000 shares to the Chief Investment Offer and 10,000,000 shares to the Chief Executive Officer.
	•	The Company issued 5,521,473 of common shares from preferred shares series D conversions
	•	The Company issued 30,000,000 shares of stock for consulting services.
	•	On April 7, 2022, the Company issued 2,841,389 shares of common stock to Geneva Roth Remark Holding Inc. for the conversion of Series C preferred stock.
	•	From June 13, 2022 to July 7, 2022, the Company issued 33,986,292 common shares for the conversion of Series C preferred stock.

 

Preferredshares

        TheCompany authorized 10,000,000 shares of preferred shares with a par value $0.001. During the year ended August 31, 2021, the Companyissued 100,000 shares of Series A Preferred shares at par value $0.001, and 20,000 shares of Series B Preferred shares at $16 per share,280,025 shares of Series C Preferred shares and its dividend shares were converted to 7,140,360 common shares in August, 2021, and 798shares of Series D Preferred shares were converted to 17,388,277 common shares in August, 2021.

 

Basedupon the Series C Preferred Share purchase agreement, each share of Series C Preferred Stock carries an annual dividend in the amountof 12.0% of the Stated Value (the “Dividend Rate”). Which shall be cumulative, payable solely upon redemption, liquidationor conversion. Upon the occurrence of an Event of Default, the Dividend Rate shall automatically increase to 22.0%. As of August 31,2021, the Company has dividend expense of $16,801 and dividend payable of $0 on Series C Preferred Shares.

 

Basedupon the Series D Preferred Share purchase agreement, each share of Series D Preferred Stock shall be entitled to receive, and the Corporationshall pay, cumulative dividends of 8.0% per annum, payable quarterly, beginning on the Original Issuance Date and ending on the datethat such share of Preferred Share has been converted or redeemed (the “Dividend End Date”). As of August 31, 2021, the Companyhas dividend expense of $9,034 and dividend payable of $1,834 on Series D Preferred Shares and included in the accrued liabilities inthe balance sheet.

 

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OnSeptember 3, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby the investor purchasedfrom the Company 234,300 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $203,500.

OnOctober 21, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased fromthe Company 98,325 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $85,450. 

 

OnDecember 9, 2021, the Company entered into a securities purchase agreement with an accredited investor, whereby the investor purchasedfrom the Company 34 shares of Series D Convertible Preferred Stock of the Company for a purchase price of $34,000.

OnJanuary 27, 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased fromthe Company 89,490 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $78,050.

 

OnJune 1, 2022, the Company entered into a securities purchase agreement with an accredited investor, whereby investor purchased from theCompany 147,775 shares of Series C Convertible Preferred Stock of the Company for a purchase price of $128,500. The closing occurredon June 16, 2022.

 

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Item 16. Exhibits and Financial StatementSchedules

  

Incorporated by Reference

Filed or Furnished

Exhibit Number

Exhibit Description

Form

Exhibit

Filing Date

Herewith

3.1

Articles of Incorporation

S-1

3.1

10/10/14

3.2

Bylaws

S-1

3.2

10/10/14

3.3

Certificate of Amendment

8-K

3.1

6/7/18

3.4

Certificate of Change

8-K

3.1

6/18/19

4.1

Convertible Promissory Note

8-K

4.1

11/21/19

4.2

Convertible Debenture

8-K

4.1

12/18/19

.

4.3

Common Stock Purchase Warrant

8-K

4.2

12/18/19

4.4

Convertible Promissory Note

8-K

4.1

1/10/20

4.5

Convertible Promissory Note

8-K

4.2

1/10/20

4.6

10% Convertible Note

8-K

4.1

2/21/20

4.7

10% Convertible Note

8-K

4.2

2/21/20

4.8

Convertible Promissory Note

8-K

4.1

3/18/20

4.9

Common Stock Purchase Warrant

8-K

10.1

3/18/20

4.10

10% Convertible Note

8-K

4.1

7/23/20

4.11

Convertible Promissory Note

8-K

4.1

7/28/20

4.12

Common Stock Purchase Warrant

8-K

4.1

8.3.20

4.13

Convertible Promissory Note

8-K

4.1

8/24/2020

4.14

Convertible Promissory Note

8-K

4.1

9/4/20

4.15

Convertible Promissory Note

8-K

4.2

9/4/20

4.16

Convertible Promissory Note

8-K

4.1

10/15/20

4.17

Common Stock Purchase Warrant

8-K

4.1

8/2/22

5.1

The Doney Law Firm Legal Opinion

X

10.1

Patent License Agreement

8-K

10.1

6/6/17

10.2

Agreement for Termination and Release

8-K

10.1

11/1/18

10.3

Chief Marketing Officer Employment Agreement

8-K

10.1

2/11/19

10.4

Chief Operating Officer Employment Agreement

8-K

10.1

2/11/19

10.5

Securities Purchase Agreement

8-K

10.1

11/21/19

10.6

Securities Purchase Agreement

8-K

10.1

12/18/19

10.7

Securities Purchase Agreement

8-K

10.1

1/10/20

10.8

Securities Purchase Agreement

8-K

10.2

1/10/20

10.9

Securities Purchase Agreement

8-K

10.1

2/21/20

10.10

Securities Purchase Agreement

8-K

10.2

2/21/20

10.11

Securities Purchase Agreement

8-K

4.2

3/18/20

10.12

Securities Purchase Agreement

8-K

10.1

7/23/20

10.13

Securities Purchase Agreement

8-K

10.1

7/28/20

10.14

Equity Purchase Agreement

8-K

10.1

8/3/20

10.15

Registration Rights Agreement

8-K

10.2

8/3/20

10.16

Securities Purchase Agreement

8-K

10.1

8/24/20

10.17

Separation Agreement and Release with Jianli Deng, dated August 29, 2020

8-K

10.1

9/1/20

10.18

Separation Agreement and Release with Lijun Yu, dated August 29, 2020

8-K

10.2

9/1/20

10.19

Separation Agreement and Release with Linqing Ye, dated August 29, 2020

8-K

10.3

9/1/20

10.20

Securities Purchase Agreement

8-K

10.1

9/4/20

10.21

Securities Purchase Agreement

8-K

10.2

9/4/20

10.22

Securities Purchase Agreement

8-K

10.1

10/15/20

10.23

Securities Purchase Agreement

8-K

10.1

10/20/20

10.24

Termination and Release Agreement

8-K

10.1

11/25/20

10.25

Termination and Release Agreement

8-K

10.1

12/1/20

10.26

Series C Preferred Stock Purchase Agreement

8-K

10.1

1/29/21

10.27

Employment Agreement

8-K

10.1

2/24/21

10.28

Series C Preferred Stock Purchase Agreement

8-K

10.1

3/2/21

10.29

Series C Preferred Stock Purchase Agreement

8-K

10.1

11/3/21

10.30

Lease Agreement

8-K

10.1

11/2/21

10.31

Series C Preferred Stock Purchase Agreement

8-K

10.1

9/13/21

10.32

Series C Preferred Stock Purchase Agreement

8-K

10.1

1/28/22

10.33

Series C Preferred Stock Purchase Agreement

8-K

10.1

3/21/22

10.34

Amendment to Employment Agreement

8-K

10.1

5/24/22

10.35

Series C Preferred Stock Purchase Agreement

8-K

10.1

6/17/22

10.36

Series C Preferred Stock Purchase Agreement

8-K

10.1

8/1/22

10.36

Common Stock Purchase Agreement

8-K

10.1

8/2/22

23.1

Consent of Auditor

X

23.2

Consent of Auditor

X

 

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 Item 17. Undertakings

 

(a)           The undersigned registrant hereby undertakes:

 

(1)    To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i)     To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

 

(ii)    To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effectiveamendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registrationstatement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securitiesoffered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering rangemay be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes involume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the ‘‘Calculationof Registration Fee’’ table in the effective registration statement; and

 

(iii)   To include any material information with respect to the plan of distribution not previously disclosed in the registration statement orany material change to such information in the registration statement;

 

provided, however, that paragraphs(a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the information required to be included in a post-effective amendmentby those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section 15(d) ofthe Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectusfiled pursuant to Rule 424(b) that is part of the registration statement.

 

(2)      That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemedto be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shallbe deemed to be the initial bona fide offering thereof.

 

(3)      To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at thetermination of the offering.

 

(4)      That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) aspart of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other thanprospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of thedate it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectusthat is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registrationstatement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to suchfirst use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registrationstatement or made in any such document immediately prior to such date of first use; and

 

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(5)      That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distributionof the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuantto this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securitiesare offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller tothe purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i)     Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

(ii)    Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to bythe undersigned registrant;

 

(iii)   The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrantor its securities provided by or on behalf of the undersigned registrant; and

 

(iv)   Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

(6)      The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filingof the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities ExchangeAct of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relatingto the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offeringthereof.

 

(7)      Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controllingpersons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion ofthe Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is,therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrantof expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, theregistrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriatejurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 andwill be governed by the final adjudication of such issue.

 

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SIGNATURES

 

Pursuantto the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalfby the undersigned, thereunto duly authorized on August 2, 2022.

 

DATE		SIGNATURE		TITLE
August 3, 2022		/s/ Chiyuan Deng		Chief Executive Officer
		Chiyuan Deng		(Principal Executive Officer)

 

DATE		SIGNATURE		TITLE
August 3, 2022		/s/ Jianli Deng		Chief Financial Officer and Director
		Jianli Deng		(Principal Financial Officer and Principal Accounting Officer)

 

 

Inaccordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in thecapacities and on the dates stated:

 

 

DATE		SIGNATURE		TITLE
August 3, 2022		/s/ Chiyuan Deng		Chief Executive Officer
		Chiyuan Deng		(Principal Executive Officer)

 

DATE		SIGNATURE		TITLE
August 3, 2022		/s/ Jianli Deng		Chief Financial Officer and Director
		Jianli Deng		(Principal Financial Officer and Principal Accounting Officer)

 

 

DATE		SIGNATURE		TITLE
August 3, 2022		/s/ Ho Fai Lam		Director
		Ho Fai Lam

 

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