The accompanying notes are an integral
part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
1 – ORGANIZATION AND BUSINESS OPERATIONS
AB International Group Corp. (the
“Company”, “we” or “us”) was incorporated under the laws of the State of Nevada on July
29, 2013. The Company is an Intellectual Property (IP) investment and licensing company. The Company is primarily
engaged in the acquisition and distribution of movies, TV shows and music. On December 15, 2014, the Company incorporated APP Board Limited
in Hong Kong, with its operation focusing primarily on acquisition and distribution movies and TV Shows.
On April 22, 2020, the Company announced
the first phase development of its video streaming service. The online service will be marketed and distributed in the world under the
brand name ABQQ.tv. The Company's professional team are sourcing such dramas and films to provide video streaming service on the ABQQ.tv.
The video streaming website www.ABQQ.tv was officially launched on December 29, 2020. The Company will continue marketing and promoting
the ABQQ.tv website through GoogleAds and acquire additional broadcast rights for movies and TV series, and plan to charge subscription
fees once the Company has obtained at least 200 broadcast rights of movie and TV series.
On April 27, 2022, the Company
purchased a unique Non-Fungible Token (“NFT”) movie and music marketplace, named as the NFT MMM from Stareastnet Portal Limited,
an unrelated party, which including an APP “NFTMMM” on Google Play, and full right to the website: stareastnet.io. NFTs are
digital assets 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. The Company has licensed NFT MMM platform to
a third party for the operation and obtained license fee starting for the fourth quarter of fiscal 2022.
On May 5, 2022, the Company
incorporated AB Cinemas NY, Inc. in New York, NY, for the purpose of operating Mt. Kisco Theatre located at 144 Main Street, Mount Kisco,
NY. The Company intends to use this theatre with a total of 5 screens and 466 seats for screening films. This is the Company’s
first cinema in the United States and movie theater will become a new business line of the Company. The theatre has started the operation
since October 2022. After a rough two years for movie theatres due to the pandemic, movie theaters are starting to show signs of life
again. The Company is intending to shift the business strategy from online only to the combination of online and offline business. The
Company expects to generate considerable revenue from its movie theater business line in the following years.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The accompanying consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) and have been consistently applied.
Principles
of Consolidation
The financial statements have been
prepared on a consolidated basis, with the Company’s fully owned subsidiary App Board Limited and AB Cinemas NY, Inc. All intercompany
balances and transactions have been eliminated in consolidation.
Use
of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial
statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The Company considers all highly
liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Foreign
Currency Transactions
The financial risk arises from the
fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company does not use derivative instruments
to reduce its exposure to foreign currency risk. Gains and losses from transactions of foreign currency into U.S. dollars are included
in current results of operations.
Prepayments
Prepayments
primarily consist of OTC market annual fee and
payments made to acquire the copyrights and distribution rights of movies, TV shows and music, etc.
Prepayments are classified as either current or non-current based
on the nature and the terms of the respective agreements. These prepayments are unsecured and are reviewed periodically to determine
whether their carrying value has become impaired. The allowance is also based on management’s best estimate of specific losses
on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized
may differ from management’s estimate of credit worthiness and the economic environment. Prepayments are written off against the
allowances only after exhaustive collection efforts. No
allowance was recorded for
the years ended August 31, 2022 and 2021.
Property
and Equipment, net
Property, plant and equipment are stated at cost
less accumulated depreciation and amortization. Leasehold improvement is related to the enhancements paid by the Company to leased offices.
Leasehold improvement represents capital expenditures for direct costs of renovation or acquisition and design fees incurred. The amortization
of leasehold improvements commences once the renovation is completed and ready for the Company’s intended use.
The straight-line depreciation method is used to
compute depreciation over the estimated useful lives of the assets, as follows:
| |
Estimated
Useful Life |
Furniture | |
7 years |
Appliances | |
5 years |
Leasehold improvement | |
Lesser of useful life and lease term |
Expenditures for maintenance and repairs, which do
not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments
that substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired
or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations in
other income or expenses.
Intangible
Assets
Intangible assets are recorded at
the lower of cost or 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 |
|
• |
NFT MMM
platform: straight-line
method over the estimated life
of the asset, which has been determined by management to be 2
years |
Amortized costs of the intangible
asset are recorded as cost of sales, as the intangible assets are directly related to generation of revenues in the Company.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Lease
property under operating lease
The Company adopted ASU No. 2016-02—Leases
(Topic 842) since June 1, 2019, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach
provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be
adjusted. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new
standard, which among other things, allowed us to carry forward the historical lease classification. Adoption of the new standard resulted
in the recording of additional lease assets and lease liabilities on the consolidated balance sheets. The standard did not materially
impact the Company’s consolidated net earnings and cash flows.
Impairment
of Long-lived asset
The Company
evaluates its long-lived assets or asset group, including intangible assets with indefinite and finite lives, for impairment. Intangible
assets with indefinite lives that are not subject to amortization are tested for impairment at least annually or more frequently if events
or changes in circumstances indicate that the assets might be impaired in accordance with ASC 350. Such impairment test compares the
fair values of assets with their carrying values with an impairment loss recognized when the carrying values exceed fair values. For
long-lived assets and intangible assets with finite lives that are subject to depreciation and amortization are tested for impairment
whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use
of the assets) indicate that the carrying amount of an asset or a group of long-lived assets may not be recoverable. When these events
occur, the Company evaluates impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected
to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than
the carrying amount of the assets, the Company would recognize an impairment loss based on the excess of the carrying amount of the asset
group over its fair value. Impairment losses are included in the general and administrative expense. There was no
impairment loss during the year ended August 31, 2022 and 2021.
Revenue
Recognition
The Company adopted
ASC Topic 606, “Revenue from Contracts with Customers”, using the modified retrospective approach. ASC 606 establishes
principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s
contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer
of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange
for those goods or services recognized as performance obligations are satisfied.
To determine revenue recognition for contracts with
customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable
that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations
in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The
Company derives its revenues primarily from three sources: (1) sub-licensing
a patent; (2) selling copyrights of movies or TV shows; (3) licensing
NFT MMM platform and providing technical service.
Revenue from sub-licensing a patent:
The sub-licensing revenue is recognized
monthly based upon the number of users who download the APP that utilizes the Company’s patent. In January, 2021, the sublicensing
agreement with Anyone Picture was terminated. As such, there has been no revenues generated from sub-licensing since the end of December,
2020. Once the Company finds another company to sublicense the patent, it will generate royalty revenue again.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Revenue
Recognition (continued)
Revenue
from selling copyrights of movies or TV shows:
The Company recognizes revenue when master copy of
movie or TV show is delivered, the IP is authorized and transferred to customers. The Company’s contracts with customer are primarily
on a fixed-price basis and do not contain cancelable and refund-type provisions.
Revenue from licensing NFT MMM
platform and providing technical service fee:
The Company derives revenue from
NFTMM platform license fees, which includes accessing the NFTMM platform and platform data on both app and website. The Company's contract
has one year term, and is non-cancelable and non-refundable. In accordance with ASC 606, a 'right to access' license is recognized over
the license period. Initial technical service fee comprises of installation, implementation and necessary training required by the customer.
These services fees are recognized as the services are delivered at a point in time.
Contract Assets and Liabilities
Payment terms are established on the Company’s
pre-established credit requirements based upon an evaluation of customers’ credit quality. Contact assets are recognized for in
related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery.
The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery
occurs.
As of August 31, 2022 and 2021, other than deferred
revenue, the Company had no material contract assets, contract liabilities or deferred contract costs recorded on its consolidated balance
sheets.
Disaggregation of Revenues
The Company disaggregates its revenue from contracts
by product and service types, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and
cash flows are affected by economic factors. The Company’s disaggregation of revenues for the years ended August 31, 2022 and 2021
are as follows:
| |
For
the year ended August 31, 2022 | |
For
the year ended August 31, 2021 |
Sub-licensing a patent | |
$ | — | | |
$ | 115,091 | |
Selling of copyrights of movies and TV shows | |
| 2,806,000 | | |
| — | |
licensing NFT MMM platform | |
| 122,000 | | |
| — | |
Total revenue | |
$ | 2,928,000 | | |
$ | 115,091 | |
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Fair
Value of Financial Instruments
ASC 820, “Fair Value Measurements”
(ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value
hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three
levels that may be used to measure fair value:
Level 1 – Level 1 applies to
assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 – Level 2 applies to
assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.
Level 3 – Level 3 applies to
assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of
the fair value of the assets or liabilities.
The carrying values of cash, accounts
payable, and accrued liabilities approximate fair value due to their short-term nature. The fair values of warrant liabilities and derivative
liabilities embedded in convertible notes are determined by level 3 inputs.
Accounting
for Derivative Instruments
The Company
accounts for derivative instruments in accordance with ASC Topic 815, “Derivatives and Hedging” (ASC 815) and all derivative
instruments are reflected as either assets or liabilities at fair value in the balance sheet.
The Company
uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability
in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fair values is
to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not
available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds,
default rates and credit spreads (including for the Company's liabilities), relying first on observable 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 output to market
transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different
fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its
fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency
utilized in measuring financial instruments at fair value as discussed above. Changes in fair value are recognized in the period incurred
as either gains or losses.
Warrants
Warrants
are classified as equity and the proceeds from issuing warrants in conjunction with convertible notes are allocated based on the relative
fair values of the base instrument of convertible notes and the warrants by following the guidance of ASC 470-20-25-2.
Proceeds
from the sale of a debt instrument with stock purchase warrants (detachable call options) shall be allocated to the two elements based
on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion
of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be allocated
to the debt instrument portion of the transaction. This usually results in a discount (or, occasionally, a reduced premium), which shall
be accounted for as interest expense under Topic 835 Interest.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Income
Taxes
The Company accounts for current income taxes in
accordance with the laws of the relevant tax authorities. Income taxes are accounted for using the asset and liability approach. Under
this approach, income tax expense is recognized for the amount of taxes payable or refundable for the current year. Deferred income taxes
assets and liabilities are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported
amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company records uncertain tax positions in accordance
with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions
will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not
recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon
ultimate settlement with the related tax authority.
Basic
and Diluted Earning (Loss) Per Share
The Company computes earnings per share (“EPS”)
in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital
structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common shares
outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares (e.g., convertible
securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later.
Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are
excluded from the calculation of diluted EPS.
Share-Based
Compensation
The Company follows the provisions of ASC 718, “Compensation
- Stock Compensation,” which establishes the accounting for employee share-based awards. For employee share-based awards, share-based
compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting
on a straight-line basis over the requisite service period for the entire award.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent
Accounting Pronouncements
In October 2021, the FASB issued ASU No. 2021-08,
“‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”
(“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities
in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and
measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not
acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively
to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 to have a material
effect on the consolidated financial statements.
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on the Company’s consolidated balance sheets, statements of operations and statements of cash flows.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
3 – GOING CONCERN
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets
and the discharge of liabilities in the normal course of business for the foreseeable future.
As of August 31, 2022, the Company
had an accumulated deficit of approximately $8.8
million and a working capital deficit of $856,866.
For the year ended August 31, 2022, the Company incurred a net loss of approximately $2.2
million and the net cash used in operations was approximately $1.5
million. Losses have principally occurred as a result of the substantial resources required for general and administrative expenses
associated with our operations. The continuation of the Company as a going concern is dependent upon the continued financial support
from its stockholders or external financing. Management believes the existing stockholders will provide the additional cash to meet the
Company’s obligations as they become due. However, there is no assurance that the Company will be successful in securing sufficient
funds to sustain the operations.
These factors, among others, raise
the substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include
any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to
obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
NOTE
4 – SUBSCRIPTION RECEIVABLE
Subscription receivable is cash not
yet collected from the stockholders for issuance of common stock. As of August 31, 2022, the subscription receivable balance was $nil.
As of August 31, 2021, the subscription receivable of $87,239 represented
the receivable balance from the issuance of 3 million
Put shares to Peak One Opportunity Fund LP. The amount was subsequently received on September 4, 2021.
NOTE
5 – PROPERTY AND EQUIPMENT
The Company capitalized the renovation
cost as leasehold improvement and the cost of furniture and appliances as fixed asset. Leasehold improvement relates to renovation and
upgrade of the leased office.
The depreciation expense was $41,010 and $53,048 for
the years ended August 31, 2022 and 2021, respectively.
| |
August
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 | |
| (159,583 | ) | |
| (118,573 | ) |
Property and equipment,
net | |
$ | 12,695 | | |
$ | 53,705 | |
AB
INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
6 – INTANGIBLE ASSETS
As of August 31, 2022 and 2021, the
balance of intangible assets are as follows:
| |
August
31, 2022 | |
August
31, 2021 |
Patent license right | |
$ | — | | |
$ | 500,000 | |
Movie copyrights - Love over the world | |
| 853,333 | | |
| 853,333 | |
Sitcom copyrights - Chujian | |
| 640,000 | | |
| 640,000 | |
Movie copyrights - A story as a picture | |
| 422,400 | | |
| 422,400 | |
Movie copyrights - Our treasures | |
| 936,960 | | |
| 936,960 | |
Movie broadcast right- On the way | |
| 256,000 | | |
| — | |
Movie copyrights - Too simple | |
| 1,271,265 | | |
| — | |
Movie copyrights - Confusion | |
| 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 | |
| 8,313,798 | | |
| 5,792,533 | |
Accumulated amortization | |
| (4,515,516 | ) | |
| (1,793,728 | ) |
Intangible assets,
net | |
$ | 3,798,282 | | |
$ | 3,998,805 | |
Intangible assets include: 1) a patent
license right (expired on 6/1/2022) obtained from Guangzhou Shengshituhua Film and Television Company Limited as a worldwide license
to a video synthesis and release system for mobile communications equipment; 2) copyrights for the movies and TV drama series; 3) broadcast
rights for fifty-nine movie and TV series; and 4) On April 27, 2022, the Company purchased a unique Non-Fungible Token movie and music
marketplace, named as the NFT MMM, from Stareastnet Portal Limited, an unrelated party, which including an APP“NFT MMM” on
Google Play, and full right to the website: starestnet.io.
In July 2021, the Company
acquired a movie copyright of “Too Simple” from Guang Dong Honor Pictures Ltd at a price of $1,271,265.
As of August 31, 2021, $644,785
was paid and recorded as purchase deposit for intangible asset.
On December 31, 2021, both parties entered into a termination contract to cancel the agreement for a full refund before May 31, 2022.
Per further negotiation, on June 23, 2022, both parties agreed to resume the purchase transaction. The Company paid the remaining balance
in fiscal 2022 and transferred the balance to intangible asset when it obtained the copyright of the movie. movie.
The estimated amortization
expense for the years ended August 31, 2022 and 2021 was $3,221,789
and $1,468,728,
respectively. Estimated future amortization expense is as follows:
Twelve months ending August 31, | |
Amortization expense |
2023 | | |
$ | 2,788,171 | |
2024 | | |
| 1,010,111 | |
Total | | |
$ | 3,798,282 | |
On January 24, 2022, the Company sold the mainland
China copyrights and broadcast rights of the movie “Love over the world”, “Our treasures” and “Confusion”
to a third party for a price of $1,800,000.
On May 2, 2022, the
Company sold the mainland China copyright and broadcast right of the movie “A story as a picture”
to a third party for 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
broadcast right of the movie “On the Way” to a third party for a price of $128,000.
The Company remains to have all copyright of outside of mainland China.
On June 23, 2022, the Company sold the mainland China
copyright and broadcast right of the movie “Too Simple” to Zestv Studios Limited, a Hong Kong entity 100% owned by the Chief
Executive Officer Chiyuan Deng, for a price of $750,000.
The Company remains to have all copyright of outside of mainland China.
On August 6, 2022, the Company licensed NFT MMM platform
to a third party to allow the access of NFTMM platform and platform data on both app and website for one year starting from August 20,
2022 for a monthly license fee of $60,000.
Pursuant to the agreement, the Company also charged one time implementation service and consulting fee of $100,000.
The Company remains the ownership and copyright of the NFT MMM platform, including the APP “NFT MMM” on Google Play, and
the website: starestnet.io.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
7 – LEASES
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 leased certain office space in Hong Kong
from Zestv Studios Limited, a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng, under operating lease for three
years from May 1, 2019 to April 30, 2022 with annual rental of $66,048
(HKD 516,000). On May 1, 2022, the Company signed a new operating lease agreement with Zestv Studios Limited to lease its Hong
Kong office premise for two
years from May 1, 2022 to April 2024 with annual rental of $66,048
(HKD 516,000).
The Company also leased an office space in Singapore
under operating lease from April 13, 2021 to March 31, 2022 with monthly rental of $716
(SGD 974), and an office space at 48 Wall Street, New York, under operating lease for one
year 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 five
years plus the free rent period which commences four months from the lease commencement date. The theatre consists
of approximately 8,375 square feet, and the total monthly rent is $14,366
for the first year, including real estate related taxes and landlord’s insurance.
Total lease expense for the years ended August 31,
2022 and 2021 was $289,411
and $94,570,
respectively. All leases are on a fixed payment basis. The Company’s lease agreements do not contain any material residual value
guarantees or material restrictive covenants. Supplemental balance sheet information related to operating leases was as follows:
| |
August
31, 2022 | |
August
31, 2021 |
| |
| |
|
Right-of-use assets, net | |
$ | 1,004,018 | | |
$ | 47,827 | |
| |
| | | |
| | |
Operating lease liabilities - current | |
$ | 229,813 | | |
$ | 48,226 | |
Operating lease liabilities - non-current | |
| 863,145 | | |
| — | |
Total operating lease liabilities | |
$ | 1,092,958 | | |
$ | 48,226 | |
The weighted average remaining lease terms was 4.37
years as of August 31, 2022.
The following is a schedule of maturities of lease liabilities are as
follows:
Twelve months ending August 31, | |
|
2023 | | |
$ | 238,443 | |
2024 | | |
| 260,396 | |
2025 | | |
| 250,555 | |
2026 | | |
| 255,412 | |
2027 | | |
| 107,275 | |
Total
future minimum lease payments | | |
| 1,112,081 | |
Less:
imputed interest | | |
| (19,123 | ) |
Total | | |
$ | 1,092,958 | |
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
8 – PURCHASE DEPOSITS FOR INTANGIBLE ASSETS
The balance of purchase
deposits for intangible assets which relates to the acquisition of copyrights and broadcast rights for movies and TV drama was as follows:
| |
August
31, 2022 | |
August
31, 2021 |
| |
| |
|
Purchase deposit for movie – On the way | |
$ | — | | |
$ | 256,000 | |
Purchase deposit for movie – Confusion | |
| — | | |
| 505,600 | |
Purchase deposit for 25-episode TV drama | |
| 525,000 | | |
| — | |
Purchase deposit for five movies | |
| 356,724 | | |
| — | |
Total purchase deposits for intangible
assets | |
$ | 881,724 | | |
$ | 761,600 | |
|
• |
In November 2019, the Company
acquired the broadcast right of “On the Way” from All In One Media Ltd for online streaming at a price of $256,000. The
Company recognized the balance as intangible asset in March 2022 when the movie is available for online broadcasting. 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 the broadcast right of “Confusion” from All In One Media Ltd for online streaming at a price
of $115,200.
This broadcast right only allows online streaming outside mainland China. In July 2021, the Company acquired the full movie copyright
for both mainland China and overseas with additional cost of $908,800
and the total price is $1,024,000.
As of August 31, 2021, $505,600 was
paid by the Company. The Company paid the remaining balance and recognized copyright as intangible asset in March 2022 when the movie
is available for online broadcasting. |
|
• |
In March
2022, the Company signed a purchase agreement with Anyone Pictures Limited to acquire the copyright to broadcast a 25-episode TV
drama series outside of mainland China at a price of $5253,000.
The fill episode is expected to deliver to the Company by the end of December 2022. |
|
• |
In March
2022, the Company signed a purchase agreement with All In One Media Ltd to acquire the copyrights and broadcast right for five movies
at a price of $1,500,000.
These copyrights and broadcast rights allow the Company to broadcast these movies outside the mainland China. As of August 31, 2022,
the Company made total payments of $356,724. |
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES
On November 18, 2019, the Company
closed a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible
note (the “Note”). In connection with the issuance of the Note, the Company granted EMA Financial a five
year cashless warrant (the “Warrant”) to purchase 30,000 shares
of common stock at an exercise price of $12.5 per
share. As of November 30, 2020, EMA Financial exercised 100% of
the total warrant shares to acquire 45,851,221 common
shares through cashless exercises.
On December 13, 2019, the Company
entered into a Securities Purchase Agreement with Peak One Opportunity Fund, L.P., a Delaware limited partnership (“Peak One”
or the “Holder”), pursuant to which we issued and sold to the Peak One a convertible promissory note. The Note has an original
principal amount of $235,000,
and upon issuance, the Company is expected to receive net proceeds of $211,500 after
subtracting an original issue discount of $23,500 per
the 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 the purchase and sale of the Note, which is included
in the principal balance of this Note. Peak One has converted all the convertible notes into 1,096,846 common
shares by July 16, 2020. In connection with the issuance of the Note, the Company granted Peak One a five
year cashless warrant (the “Warrant”) to purchase 10,000 shares
of common stock at an exercise price of $10 per
share. As of November 30, 2020, Peak One exercised 100% of
the total warrant shares to acquire 3,720,326 common
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 amount of $121,500.
Upon issuance, the Company is expected to receive net proceeds of $109,500 after
subtracting an original issue discount of $12,000 per
the Note agreement. This Note carries a prorated original issue discount of up to $12,000 (the
“OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included
in the principal balance of this Note. In connection with the issuance of each tranche of the Note, the Company granted Crown Bridge
a five
year cashless warrant (the “Warrant”) to purchase 4,680 shares
of common stock at an exercise price of $12.5 per
share.
On
December 31, 2019, the Company closed a private financing with Auctus Capital Partners, LLC, (“Auctus” or the “Holder”)
by issuing a convertible note (the “Note”). The Note has an original principal amount of $75,000 with
no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $75,000 and
the Holder shall pay $75,000 of
the consideration (the “First Tranche”). Out of $75,000 consideration,
the Company has received $59,342 cash
from Auctus with the remaining $15,658 spent
as legal expense for note issuance and due diligence fees. The term of this convertible note is 9
months with the maturity date on September
30, 2020.
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 $50,000 with
no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $50,000 and
the Holder shall pay $50,000 of
the consideration (the “First Tranche”). Out of $50,000 consideration,
the Company has received $43,492 cash
from East Capital with the remaining $6,508 spent
as legal expense for note issuance and due diligence fees. The term of this convertible note is 1
year with the maturity date on February
13, 2021.
On February 19, 2020,
the Company closed a private financing with Fidelis Capital, LLC, (“Fidelis” or the “Holder”) by issuing a convertible
note (the “Note”). The Note has an original principal amount of $50,000 with
no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $50,000 and
the Holder shall pay $50,000 of
the consideration (the “First Tranche”). Out of $50,000 consideration,
the Company has received $43,487 cash
from Fidelis with the remaining $6,513 spent
as legal expense for note issuance and due diligence fees. The term of this convertible note is 1
year with the maturity date on February
19, 2021.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES (Continued)
On March 12, 2020, the Company closed
a private financing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) by issuing a convertible note
(the “Note”). The Note has an original principal amount of $38,500 and
an original issue discount of $3,500 per
the Note agreement. As part of initial closing the outstanding principal amount shall be $38,500 and
the Holder shall pay $35,000 of
the consideration (the “First Tranche”). Out of $35,000 consideration,
the Company has received $32,992 cash
from Armada with the remaining $2,008 spent
as legal expense for note issuance and due diligence fees. The term of this convertible note is one
year with the maturity date on March
12, 2021. In connection with the issuance of the Armada Note, the Company granted Armada a five
year cashless warrant (the “Warrant”) to purchase 4,200 shares
of the Company’s common stock at an exercise price of $12.50 per
share.
On July 17, 2020, the Company closed
a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible note (the
“Note”). The Note has an original principal amount of $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 the purchase and sale of the Note, which is included
in the principal balance of this Note. As part of initial closing the outstanding principal amount shall be $50,000 and
the Holder shall pay $47,500 of
the consideration. Out of $47,500 consideration,
the Company has received $42,987 cash
from EMA Financial with the remaining $4,513 spent
as legal expense for note issuance and due diligence fees. The term of the convertible note is one
year with the maturity date on July
17, 2021.
On July 24, 2020, the Company closed
a private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible note
(the “Note”). The Note has an original principal amount of $130,000 with
no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $130,000 and
the Holder shall pay $130,000 of
the consideration (the “First Tranche”). Out of $130,000 consideration,
the Company has received $116,079 cash
from Power up with the remaining $13,921 spent
as legal expense for note issuance and due diligence fees. The term of this convertible note is one
year with the maturity date on July
24, 2021.
On August 18, 2020, the Company closed
another private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible
note (the “Note”). The Note has an original principal amount of $63,000 with
no original discount upon issuance. As part of closing the outstanding principal amount shall be $63,000 and
the Holder shall pay $63,000 of
the consideration (the “Second Tranche”). Out of $63,000 consideration,
the Company has received $54,939 cash
from Power up with the remaining $8,061 spent
as legal expense for note issuance and due diligence fees. The term of this convertible note is one
year with the maturity date on August
18, 2021.
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 $82,500 with $7,500 discount
upon issuance.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES (Continued)
As part of closing the outstanding
principal amount shall be $82,500 and
the Holder shall pay $75,000 of
the consideration. Out of $75,000 consideration,
the Company has received $68,949 cash
from Jefferson Street Capital with the remaining $6,051 spent
as legal expense for note issuance and due diligence fees.
The term of this convertible note
is 1
year with the maturity date on September
1, 2021. The interest rate of 10.0% per
annum. Upon
an 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. The
conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest
complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price
for 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 $75,000 with $3,750 discount
upon issuance.
As part of closing the outstanding
principal amount shall be $75,000 and
the Holder shall pay $71,250 of
the consideration. Out of $71,250 consideration,
the Company has received $61,498 cash
from FirstFire Global with the remaining $9,752 spent
as legal expense for note issuance and due diligence fees.
The term of this convertible note
is 9
months with the maturity date on June
1, 2021. 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. The
convertible note has prepayment and conversion features. The
conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest
complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price
for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.
On October 8, 2020, the Company closed
another private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible
note (the “Note”). The Note has an original principal amount of $55,000 with
no original discount upon issuance.
As part of closing the outstanding
principal amount shall be $55,000 and
the Holder shall pay $55,000 of
the consideration. Out of $55,000 consideration,
the Company has received $47,579 cash
from Power up with the remaining $7,421 spent
as legal expense for note issuance and due diligence fees.
The term of this convertible note
is 1
year with the maturity date on October
8, 2021. The interest rate of 10.0% per
annum. Upon
an 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. The
conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest
complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price
for 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 $62,700 with
no original discount upon issuance.
As part of closing the outstanding
principal amount shall be $62,700 and
the Holder shall pay $62,700 of
the consideration. Out of $62,700 consideration,
the Company has received $54,992 cash
from Power up with the remaining $7,708 spent
as legal expense for note issuance and due diligence fees.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES (Continued)
The term of this convertible note
is 1
year with the maturity date on October
9, 2021. The interest rate of 10.0% per
annum. The convertible note has prepayment and conversion features. The
conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest
complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price
for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.
The below table summarizes all 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 table summarizes 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 valued its derivatives liability using
Monte Carlo simulation. Assumptions used as of August 31, 2021 include (1) risk-free interest rates of 0.06%,
(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 recognizes gain due to convertible feature
of $64,584
in the income statement for the year ended August 31, 2021.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES (Continued)
The Company prepaid nine 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
The Holders converted convertible
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, $6,007 of
the Auctus Capital convertible note was converted to 17,107 shares
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 $15,000 was
triggered when the conversion price is lower than $0.1.
The remaining Auctus Capital convertible note principal balance was $0,
including $15,000 MFN
principal
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES (Continued)
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 |
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 (Tranche I):
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 |
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
9 – CONVERTIBLE NOTES (Continued)
In summary, the Company has either converted or
prepaid all the outstanding convertible notes as of August 31, 2021. The below table lists conversions and prepayments during each quarter
in fiscal 2021.
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) |
- |
As of August 31, 2021, all convertible
notes were either converted or paid. No
convertible notes were issued in the year ended August 31, 2022.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
10 – 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 warrants issued
in a bundled transaction with convertible notes are accounted for separately as additional paid-in capital for the portion of the proceeds
allocated to them. The allocation of the sales proceeds between the base instrument of convertible notes and the warrants are allocated
based on the relative fair values of the base instrument of convertible notes and the warrants following the guidance in ASC 470-20-25-2.
On July 30, 2020, the Company issued $750,000 warrant
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’s common stock over the period ending twenty-four (24)
months after the date the Registration Statement.
The fair value of the stock warrants
granted to EMA Financial was estimated at $106,540 on
the date granted using the Black-Scholes pricing model, with the following assumption used for the valuation: exercise price of $12 per
share, average risk-free interest rate of 0.89%,
expected dividend yield of 0,
remaining contractual life of 4.89 years,
and an average expected volatility of 58.11%.
The fair value of the stock warrants
granted to Peak One was estimated at $39,515 on
the date granted using the Black-Scholes pricing model, with the following assumption used for the valuation: exercise price of $10 per
share, average risk-free interest rate of 0.89%,
expected dividend yield of 0,
remaining contractual life of 4.78 years,
and an average expected volatility of 57.51%. The
fair value of the stock warrants granted to Crown Bridge (Tranche I) was estimated at $17,443 on
the date granted using the Black-Scholes pricing model, with the following assumption used for the valuation: exercise price of $12.5 per
share, average risk-free interest rate of 0.89%,
expected dividend yield of 0,
remaining contractual life of 4.86 years,
and an average expected volatility of 57.97%.
The fair value of the stock warrants
granted to Armada was estimated at $12,341 on
the date granted using the Black-Scholes pricing model, with the following assumption used for the valuation: exercise price of $12.5 per
share, average risk-free interest rate of 0.29%,
expected dividend yield of 0,
remaining contractual life of 4.78 years,
and an average expected volatility of 61.54%.
The fair value of the stock warrants
granted to Crown Bridge (Tranche II), issued on July 23, 2020 was estimated at $126,112 on
August 31, 2020 using the Black-Scholes pricing model, with the following assumption used for the valuation: exercise price of $0.00905 per
share, average risk-free interest rate of 0.28%,
expected dividend yield of 0,
remaining contractual life of 4.90 years,
and an average expected volatility of 55.33%.
The fair value of the stock warrants
granted to Peak One, a standalone warrant issued on July 30, 2020 was estimated at $45,722 on
August 31, 2020 using the Black-Scholes pricing model, with the following assumption used for the valuation: exercise price of $0.1 per
share, average risk-free interest rate of 0.27%,
expected dividend yield of 0,
remaining contractual life of 4.92 years,
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:
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 10 – WARRANTS (Continued)
Peak
One warrant issued 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 |
Peak
One warrant issued 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 warrant issued 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 |
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 10 – WARRANTS (Continued)
On August 2, 2022, in connection with this Common
stock purchase (See Note 13), Alumni Capital LP is also entitled to purchase up to 50,000,000
shares of Company’s common stock (the “Warrant Shares”). The exercise price is $0.02
per shares with an exercise period commencing on August 2, 2022, and ending on the 5
years anniversary of the issuance date. (See Note 13). The aggregated fair value of the warrants is $234,000.
The fair value has been estimated using the Black-Scholes pricing model with the following assumptions: market value of underlying common
shares of $0.0048;
risk free rate of 2.85%;
expected term of 5
years; exercise price of $0.02;
volatility of 221.4%;
and expected future dividends of $Nil.
A summary of the status of the Company’s
warrants as of August 31, 2022 is presented below.
| |
Number
of warrants |
| |
Original
shares issued | |
Anti-dilution
Adjusted |
Warrants
as of August 31, 2020 (1) (2) | |
| 793,920 | | |
| 68,163,661 | |
Warrants
granted during the year | |
| — | | |
| — | |
Exercised,
forfeited or expired (3) | |
| (793,920 | ) | |
| (68,163,661 | ) |
Outstanding
as of August 31, 2021 | |
| — | | |
| — | |
Warrants
granted during the year | |
| 50,000,000 | | |
| — | |
Exercisable
as of August 31, 2022 | |
| 50,000,000 | | |
| — | |
(1) Exercise price is reduced to
the latest base price. Base price is either the note conversion price or the share issuance price, which the Company used while the warrants
were outstanding.
(2) The number of shares is adjusted
in accordance with the anti-dilution clause per the warrant agreement and equals the original number of warrant shares times the original
exercise prices divided by base price.
(3) |
• |
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 100% of
750,000 warrant
shares issued on July 30, 2020. |
|
• |
EMA Financial exercised
all 30,000 warrant
shares issued on January 17, 2020. |
NOTE
11 – FAIR VALUE MEASUREMENTS
The Company applies ASC 820, Fair
Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.
ASC 820 establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 — Observable inputs
that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Include other 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 three main approaches
to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach
uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on
the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently
be required to replace an asset.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Derivative liabilities of conversion
features in convertible notes are classified within Level 3. The Company estimated the fair values of these liabilities at August 31,
2021 by using Monte Carlo simulation based on the remaining contractual terms, risk-free interest rates, and expected volatility of 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 measured at 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, 2022 and 2021 |
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 | |
| (136,321 | ) |
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 | |
| — | |
No
liabilities measured at fair value on a recurring basis as of and for the year ended August 31, 2022.
NOTE
12 – RELATED PARTY TRANSACTIONS
In support of the Company’s
efforts and cash requirements, it may rely on advances from stockholders until such time that the Company can support its operations
or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued
support by stockholders. Amounts due to stockholders 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 August 31, 2022, Chiyuan Deng, the Chief
Executive Offer, and Jianli Deng, the Chief Financial Officer, as the Company’s stockholders, loaned $144,516
and $232,882,
respectively, to the Company for working capital purpose. These loans are non-interest bearing and due on demand. As of August
31, 2022 and 2021, the Company had due to stockholders balance of $377,398
and $2,347,
respectively.
Youall Perform Services Ltd, owned
by Jianli Deng, the son of the Company’s Chief Executive Offer and the Company’s Chief Financial Officer, collects revenue
from the performance matching platform “Ai Bian Quan Qiu” via a Wechat official account on behalf 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, 2022 and 2021, the Company had no revenue from this performance matching platform, respectively. The balance of related party
receivable from Youall Perform Services Ltd was $0
and $1,439 as
of August 31, 2022 and 2021, respectively.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 12 – RELATED PARTY
TRANSACTIONS (Continued)
In September 2019, the Company entered
into an agreement with Youall Perform Services Ltd for two transactions. 1) The Company pays Youall Perform Services Ltd. 10% of
the revenue generated from the “Ai Bian Quan Qiu” platform every month to reimburse the valued-added tax, tax surcharges,
and foreign transaction fee Youall Perform Services Ltd. has been paying on behalf of the Company. 2) Youall Perform Services Ltd. will
provide IT consulting service for “Ai Bian Quan Qiu” platform upgrade and maintenance at a total cost of $128,000,
out of which $108,800
has been paid. As there has been no revenue from the “Ai Bian Quan Qiu” platform due to COVID-19 since mid-January,
2020, $108,800 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 two-year website maintenance contract to maintain the website ABQQ.TV which was launched on December 29, 2020. The
website maintenance service began on January 1, 2021 and will end on December 31, 2022.The contract amount remains to be $128,000,
out of which $108,800 was
previously paid and $19,200 was
scheduled to be due on the twenty first month of service term. The Company will pay Youall Perform Services Ltd the remaining
balance of $19,200 in
December 2022.
The Company 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 has a term of five
years commencing on June
1, 2017 and was expired on June
1, 2022. The Company paid the licensor a non-refundable, up-from payment of $500,000 and
shall pay a royalty of 20% of
the gross revenue realized from the sale of licensed products and sub-licensing of this patent every year. The royalty expenses during
the years ended August 31, 2022 and 2021 were $0
and $25,600,
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 generated
from the patent.
The Company rented an office from Zestv Studios Limited,
a Hong Kong entity 100% owned by the Chief Executive Officer Chiyuan Deng (See Note 7). For the years ended August 31, 2022 and 2021,
the Company incurred related party office rent expense of $66,048
and $66,048,
respectively. As of August 31, 2022 and 2021, the Company had accrued rent of $0
and $16,512,
respectively, included in related party payable on the consolidated balance sheets.
On December 1, 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 stipulated to equal 43%
of the after-tax movie box office revenue deducting movie issuance costs. The movie box office revenue is tracked by a movie distributor
Huaxia Film Distribution Co. Ltd (hereafter “Hua Xia”) in China as it connects with all movie theaters in China and can track
the total movie box office revenue online in real time. Although Zestv Studios Limited has paid royalty revenue to the Company, Zestv
Studios Limited failed to collect cash from Hua Xia. As of August 31, 2021, the Company had refund payable of $916,922
for the movie royalty revenue net of the movie distribution commission fee to Zestv Studios Limited.
On June 23, 2022, the Company sold the mainland China
copyright and broadcast right of the movie “Too Simple” to Zestv Studios Limited for a price of $750,000.
The Company remains to have all copyright of outside of mainland China. (See Note 6). The Company used this proceed to off-set the refund
payable balance to Zestv Studios Limited with additional payment of $151,795 during the year ended August 31, 2022.
During the year ended August 31, 2022, Zestv Studios
Limited also loaned total of $273,913
in May 2022 to the Company as the working capital. The loan is non-interest bearing and due on demand. The Company repaid the
loan in June 2022.
As of August 31, 2022 and 2021, the Company had related
party balance of $15,127
and $933,434
payable to Zestv Studios Limited, respectively.
On September 11, 2020
and May 24, 2022, the Company entered into two amended employment agreements with Chiyuan Deng, the Chief Executive Officer. Pursuant
the amended agreements, the Company amended the compensation to Mr. Deng to include a salary of $180,000 annually,
a reduction in common stock received under his initial employment agreement, a potential for a bonus in cash or shares, and the issuance
of 100,000 shares
of the newly created Series A Preferred Stock at par value $0.001.
Mr. Deng returned 266,667
shares common stock to the Company received under his initial employment agreement.
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 which were valuated at market price $0.0138
per share in Q2 2022. During the years ended August 31, 2022 and 2021, the Company paid the Chief Executive Offer and Chief Financial
Officer total compensation of $393,165
and $270,125,
respectively. The Company also paid Chief Investment Officer total compensation of $154,473
and $63,212,
respectively, for the years ended August 31, 2022 and 2021.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE
13 – STOCKHOLDERS’ EQUITY
The Company had the following equity
activities during the year ended August 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 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 which were valuated at market price $0.0138
per share in 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. |
|
• |
The Company
issued total 85,715,176
of common shares from preferred shares series
C conversion during the year. |
|
• |
The Company issued total
12,307,672
of common shares from preferred shares series
D conversion during the year. |
Common stock
purchase agreement
On August 2, 2022, the Company entered into a common
stock purchase agreement with Alumni Capital LP, a Delaware limited partnership. Pursuant to the agreement, Alumni Capital LP shall purchase
$1.0
million of common stocks as per the Company’s discretions after a Registration Statement is declared effective by the Securities
and Exchange Commission. The
purchase price is number of common stocks in a Purchase Notice issued by the Company multiplied by 75% of the lowest traded price of
the Common Stock five Business Days prior to the Closing, which is no later than five business days after the Purchase Notice Date.
The Company will use the proceeds from the sale of
the common stocks for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other
purposes that the Board of Directors, in good faith deem to be in the best interest of the Company. The registration of these securities
was effective on September 13, 2022.
Preferred
shares
On September 3, 2021, the Company entered into a
securities purchase agreement with an accredited investor, whereby the investor purchased from the Company 234,300
shares of Series C Convertible Preferred Stock of the Company for a purchase price of $203,500.
The closing occurred on September 3, 2021. After payment of transaction-related expenses, net proceeds to the Company from the sale and
issuance of the Series C Preferred Stock totaled $184,000.
On October 21, 2021, the Company entered into a securities
purchase agreement with an accredited investor, whereby investor purchased from the Company 98,325
shares of Series C Convertible Preferred Stock of the Company for a purchase price of $85,450. The
closing occurred on October 21, 2021. After payment of transaction-related expenses, net proceeds to the Company from the sale and issuance
of the Series C Preferred Stock totaled $75,390.
During the quarter ended November 30, 2021, the Company
issued 153
shares of series D preferred stock to an 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 9, 2021, the Company issued 34
shares of series D preferred stock to an 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
$31,280.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 13 – STOCKHOLDERS’
EQUITY (Continued)
On January 21, 2022, the Company entered into a securities
purchase agreement with an accredited investor, whereby investor purchased from the Company 89,490
shares of Series C Convertible Preferred Stock of the Company for a purchase price of $78,035. The
closing occurred on January 21, 2022. After payment of transaction-related expenses, net proceeds to the Company from the sale and issuance
of the Series C Preferred Stock totaled $68,535.
On March 16, 2022, the Company entered into a securities
purchase agreement with an accredited investor, whereby investor purchased from the Company 96,075
shares 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 issuance of the Series C Preferred Stock
totaled $73,600.
On June 1, 2022, the Company entered into a securities
purchase agreement with an accredited investor, whereby investor purchased from the Company 147,775
shares of Series C Convertible Preferred Stock of the Company for a purchase price of $128,500.
After payment of transaction-related expenses, net proceeds to the Company from the sale and issuance of the Series C Preferred Stock
totaled $115,000.
On July 19, 2022, the Company entered into a securities
purchase agreement with an accredited investor, whereby investor purchased from the Company 92,000
shares of Series C Convertible Preferred Stock of the Company for a purchase price of $80,000.
After payment of transaction-related expenses, net proceeds to the Company from the sale and issuance of the Series C Preferred Stock
totaled $70,380.
The Company recorded dividend expenses of $36,952
and $25,835
in connection with its preferred stocks for the years ended August 31 2022 and 2021, respectively. The Company also recorded a
penalty expense of $141,945
which was in connection with the conversion of 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.
The Company had the following equity
activities during the year ended August 31, 2021:
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. |
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 13 – STOCKHOLDERS’
EQUITY (Continued)
Preferred
shares
The Company authorized 10,000,000 shares
of preferred shares with a par value $0.001.
During the year ended August 31, 2021, the Company issued 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 19,322
dividend shares were converted to 7,140,360 common
shares in August, 2021, and 798 shares
of Series D Preferred shares and 6
dividend shares were converted to 17,388,277 common
shares in August, 2021.
Based upon the Series C Preferred
Share purchase agreement, each share of Series C Preferred Stock carries an annual dividend in the amount of 12.0%
of the Stated 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 Company has dividend expense of $16,801 and
dividend payable of $0 on
Series C Preferred Shares.
Based upon the Series D Preferred
Share purchase agreement, each share of Series D Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative
dividends of 8.0%
per annum, payable quarterly, beginning on the Original Issuance Date and ending on the date that such share of Preferred Share
has been converted or redeemed (the “Dividend End Date”). As of August 31, 2021, the Company has dividend expense of $9,034 and
dividend payable of $1,834 on
Series D Preferred Shares and included in the accrued liabilities in the balance sheet.
NOTE 14
– INCOME TAXES
The Company has operations in the
United States and Hong Kong, which is subject to a statutory income tax rate at 21% and 16.5%, respectively. Components of net deferred
tax assets, including a valuation allowance, are as follows as of August 31, 2022 and 2021:
| |
August
31, 2022 | |
August
31, 2021 |
Deferred tax asset attributable to: | |
| | | |
| | |
Net operating loss carry over | |
$ | 1,328,204 | | |
$ | 871,681 | |
Less: valuation allowance | |
| (1,328,204 | ) | |
| (871,681 | ) |
Net deferred tax asset | |
$ | — | | |
$ | — | |
The valuation allowance for deferred
tax assets was $1,328,204 and
$871,681
as of August 31, 2022 and 2021, respectively. In assessing the recovery of the deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences
become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax
planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets
would not be realized as of August 31, 2022 and 2021.
Reconciliation between the
statutory rate and the effective tax rate is as follows for the years ended August 31, 2022 and 2021:
| |
| |
|
| |
Years ended |
| |
August
31, |
| |
2022 | |
2021 |
Federal statutory tax rate | |
| 21 | % | |
| 21 | % |
Change in valuation
allowance | |
| (21 | %) | |
| (21 | %) |
Effective tax rate | |
| 0 | % | |
| 0 | % |
The Company’s fully owned subsidiary
App Board Limited registered and located in Hong Kong. It is governed by the income tax law of the Hong Kong and is subject to a tax
rate of 16.5%.
During the years ended August 31,
2022 and 2021, both the Company and its subsidiary incurred net loss. As a result, the Company and its subsidiary did not incur any income
tax during the years ended August 31, 2022 and 2021.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 15
– CONCENTRATION RISK
Sales concentration
70% and
26%
of the total revenue were generated from two customers, including a related party (see Note 12) during the year ended August 31,
2022. 89% of
the total revenue was generated from one customer during the year ended August 31, 2021. There were no
accounts receivable balances as of August 31, 2022 and 2021.
Credit risk
Financial instruments that potentially subject the
Company to significant concentrations of credit risk consist primarily of cash. The Hong Kong Deposit Protection Board pays compensation
up to a limit of HKD 500,000 (approximately $64,000)
if the bank with which an individual/a company hold its eligible deposit fails. As of August 31, 2022 and 2021, cash balance of $70,602
and $131,796,
respectively, were maintained at financial institutions in Hong Kong, and were subject to credit risk. In the US, the insurance coverage
of each bank is $250,000.
As of August 31, 2022 and 2021, cash balance of $13,621
and $0
respectively, were maintained at financial institutions in the US, and were subject to credit risk. While management believes
that these financial institutions are of high credit quality, it also continually monitors their creditworthiness.
NOTE 16
– COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company may be involved in
litigation relating to claims arising out of its operations in the normal course of business. There is no pending or threatened lawsuits
that could reasonably be expected to have a material effect on the results of its operations and there are no proceedings in which any
of the Company’s directors, officers, or affiliates, or any registered or beneficial stockholder, is an adverse party or has a
material interest adverse to the Company’s interest.
Operating leases
The Company has several lease agreements
to rent office spaces and movie theatre with its related party and third-party vendors. (See Note 7)
NOTE
17 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed
its operations subsequent to November 30, 2022 to the date these financial statements were issued.
Increasing
authorized number of common shares
On October 11, 2022, the Company filed amendment
to Articles of Incorporation to increase the authorized number of common shares from 1,000,000,000 shares to 10,000,000,000 shares. This
increasing of authorized number of common shares has been retroactively reflected in the consolidated financial statements and notes
thereto.
Common stock
purchase
Pursuant to the common stock purchase agreement sighed
with Alumni Capital LP on August 2, 2022 (See Note 10), Alumni Capital LP paid $24,225 on September 28, 2022 as the proceeds to subscribe
17,000,000 common shares. On October 27, 2022, Alumni Capital LP paid additional $26,250 as the proceeds to subscribe 35,000,000 common
shares. On November 2 and November 17, 2022, Alumni Capital LP further subscribed 50,000,000 and 48,000,000 common shares, and paid $37,500
and $36,000 as the proceeds, respectively.
Issuance
of Series C preferred stock
On September 6, 2022, the Company entered into a
securities purchase agreement with an accredited investor, whereby investor purchased from the Company 90,275 shares of Series C Convertible
Preferred Stock of the Company for a gross proceed of $78,500. The Company intends to use the proceeds from the Preferred Stock
for general working capital purposes.
Conversion
of Series C preferred stock to common stock
Subsequent to the year ended August 31, 2022, the
Company issued total 75,037,786 common shares for the conversion of total 96,075 Series C preferred stock.