NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
For the years ended August 31, 2020 and August
31, 2019
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 and originally intended
to purchase used cars in the United States and sell them in Krygyzstan. The Company's fiscal year end is August 31.
We are
an intellectual property (IP) and movie investment and licensing firm, focused on acquisitions and development of various intellectual
property. We are engaged to acquisition and distribution of movies. We have a patent license to a video synthesis and release system
for mobile communications equipment, in which the technology is the subject of a utility model patent in the People's Republic
of China. We had launched a business application (Ai Bian Quan Qiu) through smartphones and official social media accounts based
on WeChat platform in February 2019, utilizing Artificial Intelligence, it is a matching platform for performers, advertiser merchants,
and owners for more efficient services. We generate revenues through an agency service fee from each matched performance
On January 22, 2016, our former sole officer,
who owned 83% of our outstanding common shares, sold all of his common shares to unrelated investor Jianli Deng. After the stock
sale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designed for movie trailer
promotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphone makers,
online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins to movie
distributors or other video advertisers in China. We created the app “Amoney” for the Android smartphone platform to
develop a WeChat micro-shop that was designed to display and deliver a variety of information and links for download or online
watch prices in the China market.
On June 1, 2017, we entered into a Patent License
Agreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television Company Limited, a company
incorporated in China (“Licensor”), granted to us a worldwide license to a video synthesis and release system for mobile
communications equipment (the “Technology”). The Technology is the subject of a utility patent in the People’s
Republic of China. Under the Agreement, we are able to utilize, improve upon, and sub-license the technology for an initial period
of one year from October 1, 2017 to September 30, 2018, subject to a right to renew. We were obligated to pay the Licensor $500,000
within 30 days of the date of the Agreement and a royalty fee in the amount of 20% of any proceeds resulting from our utilization
of the Technology, whether in the form of sub-licensing fees or sales of licensed products. Our Chief Executive Officer, Chiyuan
Deng and former Chief Executive Officer, Jianli Deng, jointly own and control Licensor. On October 10, 2017, we completed the payment
of $500,000 initial payment amount due under the Agreement. In October of 2019, the term of this sublicensing agreement was renewed
and extended until October 31, 2020.
Our License to the Technology generates revenue
through sub-license monthly fees from a smartphone app on Android devices. This app was already existing and licensed at the time
we acquired the Technology.
On March 10, 2018, we acquired intellectual
property for $200,000 from All In One Media Ltd, previously named as Aura Blocks Ltd. On March 19, 2018, we entered into consulting
agreements (the “Consulting Agreements”) with four consultants (the “Consultants”). The Consulting Agreements
have terms or either two or three years. Under the Consulting Agreements the Consultants will provide services to us in Hong Kong
and China related to blockchain technology and krypto kiosks. In consideration for the services provided by the Consultants, we
have issued the Consultants a total of 1,100,000 shares of our common stock. On November 10, 2018, the Company sold this intellectual
property to China IPTV Industry Park Holdings Ltd. for $80,000.
On March 21, 2018, we acquired the intellectual
assets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operation
of cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plans
to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposes
to bring a physical aspect to something that is otherwise very abstract to people. We also issued to JPC Fintech Limited 2,400,000
common shares with a market value of $72,000 exchange of KryptoKiosk Limited’s assets consist mostly of intellectual property,
including, but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rights
and personal property.
We planned
to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing, we proposed
to bring a physical aspect to something that is otherwise very abstract to people. We planned to invest in machines and sell
sub-licenses in the Asia Pacific region with future world-wide expansion. We had promoted and marketed the ATM business for 6
months or until around August 2018, because the BTC and cryptocurrencies price went down. The IP, however, was never
transferred to us. We have repeatedly requested from Messrs. Grounds, Vickery and Shakespare access to the domains and
websites and other information concerning the IP assets. As of the date of this annual report, no such information has been
provided. In addition, the IP including domain names were transferred to others while Messrs. Vickery and Shakespare were
officers of our company. As a result, we ceased promotions and marketing on the ATM business and relations cryptocurrencies
business in September 2018. On November 21, 2018, we had sent the final notice that JPC Fintech has materially breached the
agreement. We requested that JPC Fintech Ltd. return its stock certificate received in the transaction to our transfer agent
for immediate cancellation. We have not yet received the certificate for termination. In February of 2020, 100% of the
intellectual assets of KryptoKiosk Limited‘s carrying value $48,000 net of amortization is written off since the IP was
never transferred to us and no revenue was
generated from this intellectual asset.
On May 9, 2018, we entered into an investor
agreement with iCrowdU Inc. We agreed to purchase 228,013 shares of iCrowdU Inc. at a share price of $1.228 for total consideration
of $280,000. iCrowdU Inc. offers an online platform and mobile app for crowd funding services targeting the global crowd funding
market.
Furthermore, it was agreed to exchange 2,000,000
shares of our common stock for 2,000,000 shares of common stock in iCrowdU Inc. This share exchange was made as collateral in advance
of an investment of $1,935,000 by us into iCrowdU Inc., which never occurred.
On or about May 9, 2018, we entered into consultancy
agreements with Alexander Holtermann, Ian Wright and Luis Hadic. Each of Messrs. Holtermann, Wright and Hadic received 200,000
shares of our common stock under the consultancy agreements.
On or about July 26, 2018, we entered into
an investment agreement with iCrowdU Inc. for the purchase of 40% of iCrowdU in exchange for 8,000,000 shares of our common stock
that would be split between Messrs. Holtermann and Wright at 70% and 30%, respectively, and an investment of $10,000,000. The 8,000,000
shares were cut but not delivered to Messrs. Holtermann and Wright and no part of the $10,000,000 was invested by us into iCrowdU
Inc.
On or about July 31, 2018, we entered into
employment agreements with Messrs. Holtermann and Wright for the consideration provided for under the agreements.
On October 25, 2018, the above parties entered
into an Agreement for Termination and Release that terminated all outstanding agreements among the parties and released each party
from the other. We agreed to settle outstanding expenses and costs incurred by iCrowdU Inc., in the sum of $6,444.90. In addition,
all parties agreed to return any shares received from the above agreements, save we shall be permitted to retain the 228,013 shares
purchased in iCrowdU Inc. Finally, we agreed to amend our Current Report on Form 8-K concerning certain disclosures made therein.
We amended the report as per the agreement.
On September 5, 2018, the Company entered into
an agreement to acquire a movie copyright for $768,000 from All In One Media Ltd, which holds 200,000 common shares of the Company
as of August 31, 2019 and is previously named as Aura Blocks Limited. The remaining balance to Aura Blocks Limited is $153,600
as of August 31, 2019. The Company has obtained the exclusive permanent broadcasting right outside the mainland China and is expected
to generate revenues from showing the movie online, in theaters, and on TV outside the mainland China once this movie is completed
in June, 2019. In August of 2019, the Company sold this movie copyright to China IPTV Industry Park Holding Ltd for $857,600 with
a gain of $89,538.
In December of 2018, we engaged StarEastnet,
a software developer that holds 171,000 common shares of the Company as of August 31, 2019, to start developing a performance matching
platform (Ai Bian Quan Qiu) and a WeChat official account to advertise the platform. The matching platform is to arrange performance
events for celebrities and performers. Performers can
set their schedules and quotes on the platform. The platform will maximize
their profits from performance events by optimizing their schedules based upon quotes and event locations and save time from commuting
among different events. “Ai Bian Quan Qiu” utilizes the artificial intelligence (AI) matching technology to instantly
and accurately match performers and advertisers or merchants. The company charges agency service fees for each successful event
matched through the platform. Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generated
from the performance matching platform (Ai Bian Quan Qiu) since the end of January, 2020. The Company decided that 100% of the
carrying amount of Ai Bian Quan Qiu platform and its Wechat official account should be impaired.
In June, 2019, the Company completed the development
of a video mix APP for social video sharing via iOS and Android smartphones. This app was originally planned to take advantage
of the core design philosophy of “My film anyone, anywhere, anytime be together” as similar and competitive innovative
video and community apps have been activated on over 2 million unique devices in China as of December 31, 2017 and precipitated
the duet video synthesis phenomenon in China. However, the Company decided to focus on the “Ai Bian Quan Qiu” platform
as its main business and thus sold the video mix APP to Anyone Pictures Limited, which holds 242,980 common shares of the Company,
for $422,400 with a gain of $59,792 in August of 2019. Due to the quarantine and continuous
control imposed by the state and local governments in areas affected by COVID-19, merchant advertising events were suspended. The
Company decided to shut down the Ai Bian Quan Qiu platform, which has created an adverse impact on the business and financial condition
and hampered its ability to generate revenue and access sources of liquidity on reasonable terms.
In August of 2019, the Company entered into
a one-year loan agreement to lend $1,047,040 at an annual interest rate of 10% to All In One Media Ltd, previously named as Aura
Blocks Limited, for producing films and digital videos in Hong Kong. The term of note receivable is from August 1, 2019 to July
31, 2020. This loan principal balance was paid off in full in July, 2020.
On September 4, 2019, the Company
entered into another loan agreement to lend $1,049,600 at an annual interest rate of 10% to All In One Media Ltd, previously named
as Aura Blocks Limited. The term of note receivable is from September 4, 2019 to March 3, 2020. This loan balance was paid off
in full on May 4th, 2020 with two months’
extension.
On April 22, 2020, the Company has
announced the first phase development of it’s a video streaming service, the Company expects a full launch by December,
2020. The online service will be marketed and distributed in the world under the brand name ABQQ.tv. ABQQ.tv is expected to generate
a new and profitable revenue stream immediately following its launch derived from its hybrid subscription and advertising business
model. The Company is currently designing and creating the website, the Company's professional team are sourcing such dramas and
films to prepare the ABQQ.tv official launch in December,
2020.
As of August 31, 2020, the Company acquired broadcast rights for a TV series of “If time could stop at the moment when we
first met” and a movie of “Huafeng” at a price of $640,000 and $422,420, respectively.
NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The financial statements of the Company have
been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in
US dollars. The Company’s year-end is August 31. The financial statements have been prepared on a consolidated basis, with
their fully owned subsidiary App Board Limited.
Basis of Consolidation
The financial statements have been prepared
on a consolidated basis, with the Company’s fully owned subsidiary App Board Limited registered and located in Hong Kong.
For the year ended August 31, 2020, there were intercompany receivable and payables balance of $9,060, which is offset to zero
in the consolidated financial statements. No intercompany balances or transactions existed during the year ended August 31, 2019.
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
For purposes of the statement of cash flows,
the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Foreign Currency Transactions
The Company’s planned operations are
outside of the United States, which results in exposure to market risks from changes in foreign currency rates. The financial risk
arises from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company does
not use derivative instruments to reduce its exposure to foreign currency risk. Non-monetary assets and liabilities are translated
at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues
and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements
into U.S. dollars are included in current results of operations.
Accounts Receivable
Accounts receivable consist of amounts due
from Anyone Pictures Limited for the sub-licensing fee revenue. Amounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses
in its existing accounts receivable. No amount for bad debt expense has been recorded by the Company during the years ended August
31, 2020 and August 31, 2019, and no write-off for bad debt were recorded for the years ended August 31, 2020 and August 31, 2019.
Prepaid Expenses
Prepaid expenses primarily consist of consulting
fees that have been paid in advance and prepayments of OTC market annual fee, website domain fee, TV promotion fee, and investor
relation fee.
The prepaid balances are amortized when the
related expense is incurred.
Note Receivable
Note receivable is a one-year note bearing
annual interest of 10% with the principal payable annually at the end of the term. Interest is due and payable, at the election
of the Company, in cash on the Maturity Date, as applicable, or if the note receivable is prepaid earlier, on such prepayment date.
Therefore, interest income is recorded along with interest receivable throughout the note outstanding periods.
Fixed Asset
Fixed asset consists of furniture and appliances
acquired for the office. The balance is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line
method over estimated useful lives listed below:
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Estimated
Useful Life
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Furniture
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7
years
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Appliances
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5 years
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Leasehold Improvement
Leasehold improvement is related to the enhancements
paid by the Company to leased office and store. 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. Leasehold improvement is amortized over the lease term of 3 years.
Intangible Assets
Intangible assets are stated at cost and depreciated
as follows:
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Mobile application product: straight-line method over the estimated life of the asset, which has been determined by management to be 3 years
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Movie copyrights: income forecast method for a period not to exceed 10 years
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Patent: straight-line method over the term of 5 years based on the patent license agreement
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Amortized costs of the intangible asset are
recorded as cost of sales, as the intangible asset is directly related to generation of revenues in the Company.
Lease property under operating lease
In February 2016, the Financial Accounting
Standards Board (“FASB”) issued updated guidance to improve financial reporting about leasing transactions. This guidance
required organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations
created by those leases. The original guidance required application on a modified retrospective basis with the earliest
period presented. In August 2018, the FASB issued new guidance which included an option to not restate comparative periods in transition. Under
this new guidance, a company applies the standard to leases in place as of the date of initial application, records a cumulative-effect
adjustment to retained earnings as of the first day of the adoption year, and follows the new rules for all leases entered or modified
going forward. The Company adopted this new standard on June 1, 2020 with no retrospective adjustments to prior
comparative periods. In accordance with ASC 250-10-45-14, a change in accounting principle made in an interim period shall be reflected
as if the entity had adopted the new principle on the first day of the adoption year, which is September 1, 2019 for the Company.
As such, the adoption of ASC 842 lease accounting standard has resulted in $196,813 lease liabilities with corresponding $201,025
ROU assets net of amortization as of September 1, 2019 based on the present value of the remaining rental payments under
current leasing standards for existing leases. The remaining balance of lease liabilities are presented within the current
portion of lease liabilities and the non-current portion of lease liabilities on the Consolidated Balance Sheet.
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 G&A expense. For the year ended August 31, 2020, the impairment loss of intangible assets was $125,062, including
$48,000 for the intellectual assets acquired from KryptoKiosk Limited and $77,062 for the performance matching platform “Ai
Bian Quan Qiu” and its WeChat official account.
Revenue Recognition
The Company adopted ASC Topic 606, “Revenue
from Contracts with Customers”, applying the modified retrospective method.
In accordance with ASC Topic 606, revenues
are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration
that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order
to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
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the contract with a customer;
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identify the performance obligations in the contract;
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determine the transaction price;
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allocate the transaction price to performance obligations in the contract; and
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recognize revenue as the performance obligation is satisfied.
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The Company does not believe that significant
management judgements are involved in revenue recognition, but the amount and timing of the Company’s revenues could be different
for any period if management made different judgments or utilized different estimates. Generally, the Company recognizes revenue
under ASC Topic 606 for its performance obligation.
The Company generates revenue from sub-licensing
a patent and charging a service fee from the “Ai Bian Quan Qiu” platform for actors and commercial events matching.
The sub-licensing revenue is recognized monthly
based upon the number of users who download the APP that utilizes the Company’s patent. The monthly royalty the Company charges
Anyone Pictures Limited is $12.8 per 1000 APP users. Both parties agreed to charge the sublicensing fee based upon a fixed number
2,000,000 users.
The “Ai Bian Quan Qiu” platform
service revenue is derived principally from providing matching service to merchants who are looking for actors to perform at their
advertising events. The Company recognizes revenue upon a matching event is accepted by actors with a service fee of 10% of the
actors’ quote for performing at the events. For the service fee revenue from the “Ai Bian Quan Qiu” platform,
the Company does not control the specified goods or services before that is transferred to the customers and thus the Company is
an agent. Therefore, this service revenue is recognized at a net basis.
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. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level
1" inputs, which consist of quoted prices in active markets for identical assets. 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 as below:
Proceeds from the
sale of a debt instrument with stock purchase warrants (detachable call options) shall be allocated to the two elements based on
the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion
of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be
allocated to the debt instrument portion of the transaction. This usually results in a discount (or, occasionally, a reduced premium),
which shall be accounted for as interest expense under Topic 835 Interest.
Income Taxes
The Company accounts for income taxes pursuant
to FASB ASC 740 “Income Taxes”. Under ASC 740 deferred income taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes
represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 also provides criteria for the recognition,
measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on
the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the
relevant taxing authority. At August 31, 2020, there was unrecognized tax benefits. Please see Notes 14 for details.
Value-Added Taxes
The Company generates revenue in People's Republic
of China (PRC) via the “Ai Bian Quan Qiu” platform and is subject to a value-added tax at an effective rate of 6%.
In accordance with PRC law, the Company is also subject to surcharges, which includes urban maintenance and construction taxes
and additional education fees on VAT payable.
For the year ended August 31, 2020, the Company’s
revenue generated from the “Ai Bian Quan Qiu” platform is subject to VAT at a rate of 6% and subject to surcharges
at a rate of 12% of the VAT payable.
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share
in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings
per share on the face of the statement of operations. The earnings per share after the reverse stock split is presented retrospectively
as if the reverse split had occurred at the very beginning of the business. Basic loss per share is computed by dividing net income
(loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted
loss per share is computed using the weighted average number of common shares and potential common shares outstanding during the
period for warrants, options and restricted shares under treasury stock method, and for convertible debts under if-convertible
method, if dilutive. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the
period and excludes all potential common shares if their effects are anti-dilutive.
In accordance with the Company’s convertible
note agreements, the Note Holders have the option to convert all or any lesser portion of the outstanding principal amount and
accrued but unpaid interest into common stock at a conversion price equal to a price which is 55% or 60% of the lowest trading
price during the 10 or 20 days prior to the day that the Holder requests conversion. 55% is applicable to EMA Financial whereas
60% applies for the other counterparties. The lowest trading price during 10 days prior to conversion is applicable to East Capital and
East Capital, whereas the other counterparties utilize the lowest trading price during the preceding 20 days. The number of diluted
shares from convertible notes is calculated with the assumption of converting all the outstanding principal balance and unpaid
interest expense to common shares at the beginning of the period or at the time of issuance, if later.
The number of diluted shares from warrants
is the upper limit to which warrants can be converted into common shares and adjusted for anti-dilution clauses.
As of August 31, 2020, 6,614,769 potentially
diluted shares were from convertible notes and 68,163,661 potentially diluted shares were from warrants. 68,163,661 diluted shares
are the maximum number of common shares these warrants can be converted into. No potentially dilutive debt or equity instruments
were issued or outstanding as of August 31, 2019.
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Years Ended
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August 31,
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Diluted shares not included in basic loss per share computation
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2020
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2019
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Warrants
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68,163,661
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Convertible notes
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6,614,769
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Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases.
The standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize
in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to
use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting
policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors
are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018.
In September 2017, the FASB has issued ASU
No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases
(Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of
Prior SEC Staff Announcements and Observer
Comments.” The amendments in ASU No. 2017-13 amends the early adoption date option
for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may still adopt
using the public company adoption guidance in the related ASUs, as amended. The effective date is the same as the effective date
and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.
In February 2018, the FASB issued guidance
to address the income tax accounting treatment of the tax effects within other comprehensive income due to the enactment of the
Tax Cuts and Jobs Act (the “Act”). This guidance allows entities to elect to reclassify the tax effects of the change
in the income tax rates from other comprehensive income to retained earnings. The guidance is effective for periods beginning after
December 15, 2018 although early adoption is permitted. The Company has evaluated and concluded that there was no impact on its
consolidated financial position and results of operations.
In March 2018, the FASB issued ASU 2018-05:
“Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. The amendments
in this ASU add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118, which expresses the view
of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 –
the date on which the Tax Cuts and Jobs Act was signed into law. The Company has evaluated and concluded that there was no impact
on its consolidated financial position and results of operations.
In June 2018, the FASB issued ASU 2018-07:
“Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting”.
This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments
to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based
payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity—Equity-Based
Payments to Nonemployees. The amendments in this ASU are effective for public companies for fiscal years beginning after December
15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years
beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is
permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company
does not currently expect the adoption of the amendment to have a material impact on its consolidated financial position and results
of operations.
In July 2018, the FSAB issued ASU 2018-10 ASC
Topic 842: “Codification Improvements to Leases” The amendments are to address stakeholders’ questions about
how to apply certain aspects of the new guidance in Accounting Standards Codification (ASC) 842, Leases. The clarifications address
the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor
reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments.
The amendments in ASC Topic 842 are effective for EGC for fiscal years beginning after December 15, 2019, and interim periods within
fiscal years beginning after December 15, 2020. While early application is permitted, including adoption in an interim period,
the Company has not elected to early adopt. The Company is currently evaluating the impact of this accounting standard update on
its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-11,
Leases (Topic 842). This update provides entities with an additional (and optional) transition method to adopt the new leases standard.
Under this method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period’s
financials will remain the same as those previously presented. Entities that elect this optional transition method must provide
the disclosures that were previously required. The Company is evaluating the effect this new guidance will have on our consolidated
financial statements and related disclosures.
In August 2018,
the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure
Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements
related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and
Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3
fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs
used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2019 .
In December 2019, the FASB issued ASU
2019-12, “Simplifying the Accounting for Income Taxes” to remove specific exceptions to the general principles in Topic
740 and to simplify accounting for income taxes. The standard is effective for public companies for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating
the impact of this accounting standard update on its consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01,
“Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives
and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,” which clarifies the interaction
of the accounting for equity investments under Topic 321 and investments accounted for under the equity method of accounting in
Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The standard is
effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2020. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated
financial statements.
NOTE 3 –PREPAID EXPENSES
Prepaid expense was $11,024 and $21,970 as
of August 31, 2020 and August 31, 2019, respectively. Prepaid expense at August 31, 2020 primarily included $11,000 prepayment
of OTC market annual fee.
NOTE 4 –
NOTE RECEIVABLE
Note receivable relates to two loan agreements
entered with All In One Media, previously named as Aura Blocks Limited, in August and September of 2019, respectively. The note
receivable entered in August, 2019 is a one-year loan of $1,047,040 the Company lends to All In One Media Ltd at an annual interest
rate of 10%. The loan principal is due on July 31, 2020. The note receivable entered in September, 2019 is to lend $1,049,600 at
an annual interest rate of 10% to All In One Media Ltd with a term from September 4, 2019 to March 3, 2020.
On May 4th, 2020, All In One Media paid off
the loan principal of $1,049,600 with 5 months’ interest of $43,717. The Company has received 2 months’ extra interest
income due to the delay in payment from All In One Media Ltd. On July 31, 2020, All In One Media paid off the loan principal of
$1,047,040. As of August 31, 2020, and August 31, 2019, the Note receivable balance was $0 and $1,047,040, respectively and the
interest receivable balance was $26,240 and $8,725, respectively. For the year ended August 31, 2020, the Company has generated
an interest income of $166,000 from these two note receivables.
On July 31,
2020, All In One Media paid off the loan principal of $1,047,040 with 3 months interest of $26,240 as interest receivable outstanding
as of August 31, 2020. Refer to subsequent event
disclosures in Note 17.
NOTE 5 – FIXED ASSETS AND LEASEHOLD
IMPROVEMENT
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 an office and an offline display store. The leasehold improvement is depreciated over 3 years which equal the terms
of the operating lease for renting an office. The furniture and appliances are depreciated over 7 and 5 years, respectively.
The total original cost was $167,278, including
$146,304 for renovation of the office and the store and $20,974 office furniture and appliances. The accumulated depreciation was
$65,525 and $12,631 at August 31, 2020 and August 31, 2019, respectively.
|
|
August 31,
|
|
August 31,
|
|
|
2020
|
|
2019
|
Appliances and furniture
|
|
$
|
20,974
|
|
|
$
|
20,974
|
Leasehold improvement
|
|
|
146,304
|
|
|
|
146,304
|
Total cost
|
|
|
167,278
|
|
|
|
167,278
|
Accumulated depreciation
|
|
|
(65,525
|
)
|
|
|
(12,631)
|
Property and equipment, net
|
|
$
|
101,753
|
|
|
$
|
154,647
|
NOTE 6 – INTANGIBLE ASSETS
As of August 31, 2020 and August 31, 2019,
the balance of intangible assets are as follows;
|
|
August 31,
|
|
August 31,
|
|
|
2020
|
|
2019
|
Patent
|
|
$
|
500,000
|
|
|
$
|
500,000
|
Intellectual property: Kryptokiosk
|
|
|
—
|
|
|
|
72,000
|
Ai Bian Quan Qiu platform
|
|
|
—
|
|
|
|
99,584
|
Total cost
|
|
|
500,00
|
|
|
|
671,584
|
Accumulated amortization
|
|
|
(325,000
|
)
|
|
|
(257,791)
|
Intangible asset,net
|
|
$
|
175,000
|
|
|
$
|
413,793
|
The two intangible
assets of Krypotokiosk and Ai Bian Quan Qiu platform are both impaired to zero values because they cease in operations and do
not generate revenues for the Company any more. Amortization expenses for years ended August 31, 2020 and 2019 was $113,731 and
$126,791, respectively.
NOTE 7 –
RIGHTS-TO-USE LEASE ASSETS, NET
Rights-to-use lease assets,
net consisted of the following:
|
|
August 31,
|
|
August 31,
|
|
|
2020
|
|
2019
|
Leased properties under operating leases
|
|
$
|
228,510
|
|
|
$
|
—
|
Less: accumulated amortization
|
|
|
(102,156
|
)
|
|
|
—
|
Right-to-use asset, net
|
|
$
|
126,354
|
|
|
$
|
—
|
The
estimated amortization expenses for each of the two succeeding years is as follows:
Year ending August 31,
|
|
Amortization
expense
|
|
2021
|
|
|
$
|
77,082
|
|
2022
|
|
|
$
|
49,273
|
|
Total
|
|
|
$
|
126,355
|
NOTE 8 - LONG-TERM
PREPAYMENT
In September 2019,
the Company entered into an agreement with Guangzhou Yuezhi Computer Ltd. for upgrading software of the “Ai Bian
Quan Qiu” platform at a cost of $128,000. $108,800 was paid upon signing the agreement and recorded as long-term prepayment
in Q1, FY2020. As COVID-19 restricted crowd-gathering, “Ai Bian Quan Qiu” platform has not generated any revenue since
mid-January, 2020, the Company impaired 80% of the “Ai Bian Quan Qiu” platform intangible asset value in Q2 FY2020
and the remaining 20% intangible asset in Q4 FY2020. As such, $108,800 prepayment was expensed as research and development expense
from the previously recognized long-term prepayment asset.
As of August 31, 2020,
the long-term prepayment balance of $1,742,080 relates to three movie copyrights and two broadcast rights for a movie and a TV
series as below:
|
·
|
In November 2019, the Company acquired two movie copyrights at a price of $256,000 for “Lushang” (English name: “On The Way”) and $115,200 for “Qi Qing Kuai Che” (English name: “Confusion”). Both of them have been fully paid and recorded as long-term prepayment.
|
|
·
|
In
January 2020, the Company acquired a movie copyright “Ai Bian Quan Qiu” (English name: “Love Over The World”)
at a price of $870,978. As of May 31, 2020, $640,000 has been paid and recorded as long-term prepayment for this movie copyright.
|
|
·
|
In
June 2020, the Company acquired broadcast rights for a TV series of “If time could stop at the moment when we first
met” and a movie of “Huafeng” at a price of $640,000 and $422,420, respectively. As of August 31, 2020,
$435,200 and $295,680 has been paid and recorded as long-term prepayment for “If time could stop at the moment when we
first met” and “Huafeng”, respectively .
“If time could stop at the moment when we first met” and “Huafeng” can be both exclusively
broadcasted on the video streaming website of abqq.tv after the website is officially launched.
|
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”). The Note has an original principal amount of $250,000, and upon issuance, the Company is expected to
receive net proceeds of $228,333 after subtracting an original issue discount of $21,667 per the Note agreement. This Note carries
a prorated original issue discount of up to $21,667 (the “OID”), to cover the Holder’s monitoring costs associated
with 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 $75,000 and the Holder shall pay $68,500 of the consideration (the “First
Tranche”). Out of $68,500 consideration, the
Company has received $64,737 cash from EMA Financial with the remaining $3,763 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 August 18, 2020. The
interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 24.0% per annum from the due
date thereof until the same is paid. 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) 55.0% of the lowest traded price for the common
stock on the principal market during the 20 consecutive trading Days on which at least 100 shares of common stock were traded including
and immediately preceding the Conversion Date.
In connection with the issuance of the Note,
the Company granted EMA Financial a five-year cashless warrant (the “Warrant”) to purchase 30,000 shares of common
stock at an exercise price of $12.5 per share.
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.
As part of initial
closing the outstanding principal amount shall be $85,000 and the Holder shall pay $76,500 of the consideration (the “First
Tranche ”). Out of $76,500 consideration, the
Company has received $65,312 cash from Peak One with the remaining $11,188 spent as legal expense for note issuance and due diligence
fees. Peak One has converted all the convertible notes into 1,096,846 common shares by July 16th, 2020.
The term of this convertible note is 1 year
with the maturity date on December 09, 2020. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to the lesser of (a) $10.00 or (b) Sixty percent (60%) of the lowest closing bid price
(as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of
conversion of the Debentures (provided, further, that if either the Company is not DWAC Operational at the time of conversion or
the Conversion Price is less than $0.01 per share, then Sixty percent (60%) shall automatically adjust to Fifty percent (50%) of
the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding
the date of conversion of the Debenture), subject in each case to equitable adjustments resulting from any stock splits, stock
dividends, recapitalizations or similar events.
In connection with the issuance of the Note,
the Company granted Peak One a five-year cashless warrant (the “Warrant”) to purchase 10,000 shares of common stock
at an exercise price of $10 per share. As of August 31, 2020, Peak One exercised 87% of the total warrant shares to acquire 3,250,000
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.
As part of initial first tranche closing on
January 8th, 2020 the outstanding principal amount shall be $40,500 and the Holder shall pay $36,500 of the consideration (the
“First Tranche”). Out of $36,500 consideration, the Company has received $34,992 cash from Crown Bridge with the remaining
$1,508 spent as legal expense for note issuance and due diligence fees.
As part of the second tranche closing on July
23rd, 2020 the outstanding principal amount shall be $50,000 and the Holder shall pay $47,500 of the consideration (the “Second
Tranche”). Out of $47,500 consideration, the Company has received $42,987 cash from Crown Bridge with the remaining $ 4,513
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 January 8, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will
be equal lesser (i) fifteen percent (15%) per annum or (ii) the maximum amount permitted by law from the due date thereof until
the same is paid. The convertible note has prepayment and conversion features. The Conversion Price shall be the lesser of (i)
the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest complete Trading
Day prior to the date of this Note or (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities
of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events)
(also subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 60% multiplied by
the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest one (1)
Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading
Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of the (i) lowest
traded price and (ii) lowest closing bid price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the
“Principal Market”) as reported by a reliable reporting service (“Reporting Service”) designated by the
Holder (i.e. Bloomberg) or, if the Principal Market is not the principal trading market for such security, on the principal securities
exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is
not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted
on the OTC Markets.
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. The interest rate of 10.0% per annum. Upon an event of default, the interest rate
will be equal the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted under law from the due
date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price is the lesser
of: (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest complete
Trading Day prior to the date of this Note, and (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities
of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).
The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount
rate of 40%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty
(20) Trading Days on which at least 100 shares of Common Stock were traded including and immediately preceding the Conversion Date.
“Trading Price” means, for any security as of any date, the lowest trade price on the OTC Pink, OTCQB or applicable
trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the
OTC Pink is not the principal trading market for such security, the trading price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no trading price of such security is available in any
of the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the “pink
sheets” by the National Quotation Bureau, Inc.
On February 13, 2020, the Company closed a
private financing with East Capital Investment Corporation (“East Capital” or the “Holder”) by issuing
a convertible note (the “Note”). The Note has an original principal amount of $50,000 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 EMA Financial 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. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days
prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.
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. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days
prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.
On March 12, 2020, the Company closed a private
financing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) 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 Fidelis with the remaining $2,008 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 March 12, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days
prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties. In connection
with the issuance of the Armada Note, the Company granted Armada a five-year cashless warrant (the “Warrant”) to purchase
4,200 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 1 year
with the maturity date on July 17, 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 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 EMA Financial with the remaining $13,921 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 July 24, 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 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 EMA Financial 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. 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 .
The below
table summarizes all the convertible notes issued during the year ended August 31, 2020.
Counterparties
|
|
Issuance
date
|
|
Maturity date
|
|
Principal Amount
|
|
Purchase Price
|
|
Discount on Note issuance
|
|
Note issuance costs
|
|
Proceeds Received (USD)
|
EMA Financial
|
|
November
18, 2019
|
|
August
18, 2020
|
|
$
|
75,000
|
|
|
$
|
68,500
|
|
|
$
|
6,500
|
|
|
$
|
18,763
|
|
|
$
|
64,737
|
Peak One Opportunity
|
|
December
9, 2019
|
|
December
9, 2022
|
|
$
|
85,000
|
|
|
$
|
76,500
|
|
|
$
|
8,500
|
|
|
$
|
11,188
|
|
|
$
|
65,312
|
Crown Bridge (Tranche I)
|
|
January
8, 2020
|
|
January
8, 2021
|
|
$
|
40,500
|
|
|
$
|
36,500
|
|
|
$
|
4,000
|
|
|
$
|
1,508
|
|
|
$
|
34,992
|
Auctus Fund Note
|
|
December
31, 2019
|
|
September
30, 2020
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
|
$
|
—
|
|
|
$
|
15,658
|
|
|
$
|
59,342
|
East Capital
|
|
February
13, 2020
|
|
February
13, 2021
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
—
|
|
|
$
|
6,508
|
|
|
$
|
43,492
|
Fidelis Capital
|
|
February
19, 2020
|
|
February
19, 2021
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
—
|
|
|
$
|
6,513
|
|
|
$
|
43,487
|
Armada Partners
|
|
March
12, 2020
|
|
March
12, 2021
|
|
$
|
38,500
|
|
|
$
|
35,000
|
|
|
$
|
3,500
|
|
|
$
|
2,008
|
|
|
$
|
32,992
|
EMA Financial
|
|
July
17, 2020
|
|
July
17, 2021
|
|
$
|
50,000
|
|
|
$
|
47,500
|
|
|
$
|
2,500
|
|
|
$
|
4,513
|
|
|
$
|
42,987
|
Crown Bridge (Tranche II)
|
|
July
23, 2020
|
|
July
23, 2021
|
|
$
|
40,500
|
|
|
$
|
36,500
|
|
|
$
|
4,000
|
|
|
$
|
2,208
|
|
|
$
|
34,292
|
Power Up Lending (Tranche I)
|
|
July
24, 2020
|
|
July
24, 2021
|
|
$
|
130,000
|
|
|
$
|
130,000
|
|
|
$
|
—
|
|
|
$
|
13,921
|
|
|
$
|
116,079
|
Power Up Lending (Tranche II)
|
|
August
18, 2020
|
|
August
18, 2021
|
|
$
|
63,000
|
|
|
$
|
63,000
|
|
|
$
|
—
|
|
|
$
|
8,061
|
|
|
$
|
54,939
|
|
|
|
|
|
|
$
|
697,500
|
|
|
$
|
668,500
|
|
|
$
|
29,000
|
|
|
$
|
90,853
|
|
|
$
|
592,647
|
The following table summarizes the convertible
note and derivative liability in the balance sheet at August 31, 2020:
Balance, August 31, 2019
|
|
$
|
—
|
Principal
|
|
$
|
436,046
|
Discount on Note issuance
|
|
$
|
(75,074)
|
Accrued interest expense
|
|
$
|
13,365
|
Derivative liability
|
|
$
|
64,584
|
Balance, August 31, 2020
|
|
$
|
438,921
|
The Company valued its derivatives liability
using Monte Carlo simulation. Assumptions used as of August 31, 2020 include (1) risk-free interest rates of 0.12% - 0.17%, (2)
expected equity volatility of 64.4% - 82.9%, (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, 2020.
The Company recognizes loss due to convertible
feature of $ 64,584 in the income statement for the year ended August 31, 2020.
The Holders converted convertible notes to
common shares throughout Q4 of FY2020 as below:
EMA Financial:
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
June 2,
2020
|
|
|
4,775
|
|
|
|
—
|
|
|
|
4,775
|
|
|
|
1,000
|
|
|
|
70,225
|
|
|
$
|
3.85000
|
|
|
|
1,500
|
June 22, 2020
|
|
|
3,040
|
|
|
|
—
|
|
|
|
3,040
|
|
|
|
1,000
|
|
|
|
67,185
|
|
|
$
|
0.80800
|
|
|
|
5,000
|
June 25, 2020
|
|
|
3,433
|
|
|
|
—
|
|
|
|
3,433
|
|
|
|
1,000
|
|
|
|
63,753
|
|
|
$
|
0.17730
|
|
|
|
25,000
|
July 1, 2020
|
|
|
5,000
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
1,000
|
|
|
|
58,753
|
|
|
$
|
0.12000
|
|
|
|
50,000
|
*July 7, 2020
|
|
|
8,660
|
|
|
|
—
|
|
|
|
8,660
|
|
|
|
1,000
|
|
|
|
65,093
|
|
|
$
|
0.06440
|
|
|
|
150,000
|
July 9, 2020
|
|
|
7,050
|
|
|
|
—
|
|
|
|
7,050
|
|
|
|
1,000
|
|
|
|
58,043
|
|
|
$
|
0.03220
|
|
|
|
250,000
|
July 14, 2020
|
|
|
5,000
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
1,000
|
|
|
|
53,043
|
|
|
$
|
0.02000
|
|
|
|
300,000
|
July 16, 2020
|
|
|
5,900
|
|
|
|
—
|
|
|
|
5,900
|
|
|
|
1,000
|
|
|
|
47,143
|
|
|
$
|
0.02000
|
|
|
|
345,000
|
July 20, 2020
|
|
|
6,200
|
|
|
|
—
|
|
|
|
6,200
|
|
|
|
1,000
|
|
|
|
40,943
|
|
|
$
|
0.02000
|
|
|
|
360,000
|
July 21, 2020
|
|
|
7,440
|
|
|
|
—
|
|
|
|
7,440
|
|
|
|
1,000
|
|
|
|
33,503
|
|
|
$
|
0.02000
|
|
|
|
422,000
|
July 24, 2020
|
|
|
7,298
|
|
|
|
—
|
|
|
|
7,298
|
|
|
|
1,000
|
|
|
|
26,205
|
|
|
$
|
0.01844
|
|
|
|
450,000
|
August 3, 2020
|
|
|
5,864
|
|
|
|
—
|
|
|
|
5,864
|
|
|
|
1,000
|
|
|
|
20,341
|
|
|
$
|
0.01320
|
|
|
|
520,000
|
August 10, 2020
|
|
|
9,560
|
|
|
|
—
|
|
|
|
9,560
|
|
|
|
1,000
|
|
|
|
10,781
|
|
|
$
|
0.01320
|
|
|
|
800,000
|
August
21, 2020
|
|
|
5,496
|
|
|
|
—
|
|
|
|
5,496
|
|
|
|
1,000
|
|
|
|
5,285
|
|
|
$
|
0.00812
|
|
|
|
800,000
|
Total
|
|
|
84,716
|
|
|
|
—
|
|
|
|
84,716
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
4,478,500
|
*On July 7,2020, $8,660 of the EMA Financial
convertible note was converted to 150,000 shares of common stock at a conversion price $ 0.0644, 55% 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. Therefore, the remaining EMA Financial convertible note principle balance was $65,093, including
$15,000 MFN principal.
Peak
One:
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
June 22,
2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
75,000
|
|
|
$
|
1.21200
|
|
|
|
8,250
|
June 25, 2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
65,000
|
|
|
$
|
0.31800
|
|
|
|
31,446
|
June 29, 2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
55,000
|
|
|
$
|
0.21660
|
|
|
|
46,168
|
July 1, 2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
45,000
|
|
|
$
|
0.18000
|
|
|
|
55,555
|
July 7, 2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
35,000
|
|
|
$
|
0.12000
|
|
|
|
83,333
|
July 9, 2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
25,000
|
|
|
$
|
0.06012
|
|
|
|
166,333
|
July 13, 2020
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
15,000
|
|
|
$
|
0.04860
|
|
|
|
205,761
|
July 15, 2020
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
|
$
|
0.03000
|
|
|
|
250,000
|
July
16, 2020
|
|
|
7,500
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.03000
|
|
|
|
250,000
|
Total
|
|
|
85,000
|
|
|
|
—
|
|
|
|
85,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
1,096,846
|
Auctus
Capital Partners:
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
July 9,
2020
|
|
|
3,180
|
|
|
|
3,760
|
|
|
|
6,941
|
|
|
|
750
|
|
|
|
71,820
|
|
|
$
|
0.03006
|
|
|
|
255,841
|
July 15, 2020
|
|
|
3,738
|
|
|
|
118
|
|
|
|
3,857
|
|
|
|
750
|
|
|
|
68,081
|
|
|
$
|
0.01500
|
|
|
|
307,100
|
July 17, 2020
|
|
|
4,649
|
|
|
|
37
|
|
|
|
4,686
|
|
|
|
750
|
|
|
|
63,433
|
|
|
$
|
0.01500
|
|
|
|
362,400
|
August 3, 2020
|
|
|
4,117
|
|
|
|
295
|
|
|
|
4,413
|
|
|
|
750
|
|
|
|
59,315
|
|
|
$
|
0.00990
|
|
|
|
521,500
|
August 25, 2020
|
|
|
6,130
|
|
|
|
358
|
|
|
|
6,488
|
|
|
|
750
|
|
|
|
53,185
|
|
|
$
|
0.00609
|
|
|
|
1,188,499
|
August 27, 2020
|
|
|
7,855
|
|
|
|
29
|
|
|
|
7,884
|
|
|
|
750
|
|
|
|
45,330
|
|
|
$
|
0.00609
|
|
|
|
1,417,693
|
August
31, 2020
|
|
|
12,036
|
|
|
|
50
|
|
|
|
12,085
|
|
|
|
750
|
|
|
|
33,295
|
|
|
$
|
0.00609
|
|
|
|
2,107,596
|
Total
|
|
|
41,705
|
|
|
|
4,648
|
|
|
|
46,353
|
|
|
|
5,250
|
|
|
|
|
|
|
|
|
|
|
|
6,160,629
|
Crown
Bridge (Tranche I):
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
July 17,
2020
|
|
|
4,375
|
|
|
|
—
|
|
|
|
4,375
|
|
|
|
1,250
|
|
|
|
36,125
|
|
|
$
|
0.02250
|
|
|
|
250,000
|
August 3, 2020
|
|
|
2,834
|
|
|
|
—
|
|
|
|
2,834
|
|
|
|
1,250
|
|
|
|
33,291
|
|
|
$
|
0.01485
|
|
|
|
275,000
|
August 24, 2020
|
|
|
6,438
|
|
|
|
—
|
|
|
|
6,438
|
|
|
|
1,250
|
|
|
|
26,853
|
|
|
$
|
0.00905
|
|
|
|
850,000
|
August
26, 2020
|
|
|
5,986
|
|
|
|
—
|
|
|
|
5,986
|
|
|
|
1,250
|
|
|
|
20,867
|
|
|
$
|
0.00905
|
|
|
|
800,000
|
Total
|
|
|
19,633
|
|
|
|
—
|
|
|
|
19,633
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
2,175,000
|
East
Capital:
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
August
27, 2020
|
|
|
5,300
|
|
|
|
2,100
|
|
|
|
7,400
|
|
|
|
—
|
|
|
|
44,700
|
|
|
$
|
0.01218
|
|
|
|
607,553
|
August
28, 2020
|
|
|
18,100
|
|
|
|
200
|
|
|
|
18,300
|
|
|
|
—
|
|
|
|
26,600
|
|
|
$
|
0.01218
|
|
|
|
1,502,463
|
Total
|
|
|
23,400
|
|
|
|
2,300
|
|
|
|
25,700
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
2,110,016
|
Fidelis
Capital:
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
August
25, 2020
|
|
|
9,000
|
|
|
|
—
|
|
|
|
9,000
|
|
|
|
—
|
|
|
|
41,000
|
|
|
$
|
0.01218
|
|
|
|
738,916
|
Total
|
|
|
9,000
|
|
|
|
|
|
|
|
9,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
738,916
|
Armada
Partners:
Conversion
date
|
|
Principal
Amount Converted
|
|
Interest
Amount Converted
|
|
Conversion
value
|
|
Closing
Fee
|
|
Ending
principal balance
|
|
Conversion
Price
|
|
Converted
Shares
|
August
26, 2020
|
|
|
13,000
|
|
|
|
1,743
|
|
|
|
14,743
|
|
|
|
500
|
|
|
|
25,500
|
|
|
$
|
0.01215
|
|
|
|
1,254,494
|
Total
|
|
|
13,000
|
|
|
|
|
|
|
|
14,743
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
1,254,494
|
NOTE 10 - WARRANTS
On December 9, 2019, January 8, 2020, January
17, 2020, March 12, 2020, July 23, 2020 and July 30, 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.
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 zero,
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 zero,
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 zero, remaining contractual life of 4.86, 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 zero,
remaining contractual life of 4.78, 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 zero, remaining contractual life of 4.90, 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 zero, remaining contractual life of 4.92, and an average expected volatility of 55.29%.
Peak One exercised warrant shares to acquire
common shares via cashless exercises throughout Q4 of FY2020 as below:
On July 20, 2020, 250,358 anti-dilution adjusted
warrant shares were exercised to acquire 250,000 shares of common stock at $0.03 per share through a cashless exercise.
On July 21, 2020, 250,358 anti-dilution adjusted
warrant shares were exercised to acquire 250,000 shares of common stock at $0.03 per share through a cashless exercise.
On July 23, 2020, 250,358 anti-dilution adjusted
warrant shares were exercised to acquire 250,000 shares of common stock at $0.03 per share through a cashless exercise.
On July 29, 2020, 250,358 anti-dilution adjusted
warrant shares were exercised to acquire 250,000 shares of common stock at $0.03 per share through a cashless exercise.
On August 04, 2020, 250,358 anti-dilution adjusted
warrant shares were exercised to acquire 250,000 shares of common stock at $0.03 per share through a cashless exercise.
On August 11, 2020, 500,715 anti-dilution adjusted
warrant shares were exercised to acquire 500,000 shares of common stock at $0.03 per share through a cashless exercise.
On August 21, 2020, 500,715 anti-dilution adjusted
warrant shares were exercised to acquire 500,000 shares of common stock at $0.03 per share through a cashless exercise.
On August 25, 2020, 500,489 anti-dilution adjusted
warrant shares were exercised to acquire 500,000 shares of common stock at $0.0205 per share through a cashless exercise.
On August 31, 2020, 500,489 anti-dilution adjusted
warrant shares were exercised to acquire 500,000 shares of common stock at $0.0205 per share through a cashless exercise.
If the Market Price of one share of Common
Stock is greater than the Exercise Price, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu
of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining
unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of
Common Stock computed using the formula of X = Y (A-B)/A, where X, Y, A, B are as below.
X = the number of Warrant Shares to be issued to Holder.
Y = the number of Warrant Shares that the Holder elects
to purchase under this
Warrant (at the date of such calculation).
A = the Market Price (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
The exercise prices for all the warrants are
subject to anti-dilution adjustments. If the Company issues common stocks under a purchase agreement, issue options, or convert
notes to common stocks at a lower price than the warrant exercise prices while the warrants are still outstanding, such lower price
is the base price that the warrant exercise price can be reduced to. As such, the Holder will receive additional warrant shares
to keep the same warrant value as the original issuance before the exercise price is adjusted down.
A summary of the status of the Company’s
warrants as of August 31, 2020 is presented below. The number of shares is adjusted in accordance with the anti-dilution adjustment
and equals the original number of warrant shares times the original exercise prices divided by based prices. Base price is either
the note conversion price or the share issuance price used by the Company while the warrants are outstanding.
|
|
Number of warrants
|
|
|
Original shares issued
|
|
Anti-dilution Adjusted
|
Warrants as at August 31,2019
|
|
—
|
|
—
|
Warrants granted
|
|
|
803,920
|
|
|
|
88,649,948
|
Exercised, forfeited or expired
|
|
|
(10,000
|
)
|
|
|
(20,486,287)
|
Outstanding at August 31,2020
|
|
|
793,920
|
|
|
|
68,163,661
|
Exercisable at August 31, 2020
|
|
|
793,920
|
|
|
|
68,163,661
|
The following table summarizes information
about the Company’s warrants as of August 31, 2020:
Warrants outstanding
|
|
|
|
Warrants exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price(1)
|
|
|
|
Anti-dilution Adjusted Number outstanding(2)
|
|
|
|
Weighted average remaining contractual life (in years)
|
|
|
|
Weighted average exercise price
|
|
|
|
Number exercisable
|
|
|
|
Weighted average exercise price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMA Financial
|
|
$
|
0.01
|
|
|
|
46,182,266
|
|
|
|
2.97
|
|
|
$
|
0.00550
|
|
|
|
46,182,266
|
|
|
$
|
0.00550
|
Peak One
|
|
$
|
0.02
|
|
|
|
579,678
|
|
|
|
0.04
|
|
|
$
|
0.00017
|
|
|
|
579,678
|
|
|
$
|
0.00017
|
Crown Bridge
(Tranche I)
|
|
$
|
0.01
|
|
|
|
6,716,418
|
|
|
|
0.43
|
|
|
$
|
0.00089
|
|
|
|
6,716,418
|
|
|
$
|
0.00089
|
Armada Partners
|
|
$
|
0.01
|
|
|
|
4,310,345
|
|
|
|
0.29
|
|
|
$
|
0.00077
|
|
|
|
4,310,345
|
|
|
$
|
0.00077
|
Crown Bridge
(Tranches II)
|
|
$
|
0.01
|
|
|
|
6,716,418
|
|
|
|
0.48
|
|
|
$
|
0.00089
|
|
|
|
6,716,418
|
|
|
$
|
0.00089
|
Peak One Opportunity
|
|
$
|
0.02
|
|
|
|
3,658,537
|
|
|
|
0.26
|
|
|
$
|
0.00110
|
|
|
|
3,658,537
|
|
|
$
|
0.00110
|
Total
|
|
|
|
|
|
|
68,163,661
|
|
|
|
4.47
|
|
|
$
|
0.00933
|
|
|
|
68,163,661
|
|
|
$
|
0.00933
|
(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.
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.
Derivative liabilities of conversion features
in convertible notes are classified within Level 3. We estimate the fair values of these liabilities at August 31, 2020 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, 2020 are summarized below:
|
|
|
Fair value measurement using:
|
|
|
|
|
|
|
|
Quoted prices in active markets for identical assets (Level 1)
|
|
|
|
Significant other observable inputs
( Level 2)
|
|
|
|
Unobservable inputs
( Level 3)
|
|
|
|
Fair value at August 31, 2020
|
Derivative liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
64,584
|
|
|
$
|
64,584
|
|
|
Derivative liabilities embedded in convertible notes
|
|
|
|
Fair value at September 1, 2019
|
|
$
|
—
|
Increase in liability
|
|
|
18,084
|
Fair value at November 30, 2019
|
|
|
18,084
|
Increase in liability
|
|
|
34,683
|
Changes in the fair value
|
|
|
(2,441)
|
Fair value at February 29, 2020
|
|
$
|
50,326
|
Increase in liability
|
|
|
4,650
|
Changes in the fair value
|
|
|
(660)
|
Fair value at May 31, 2020
|
|
|
54,316
|
Increase in liability
|
|
|
18,558
|
Changes in the fair value
|
|
|
(8,290)
|
Fair value at August 31, 2020
|
|
$
|
64,584
|
NOTE 12– RELATED
PARTY TRANSACTIONS
In support of the Company’s efforts and
cash requirements, it may rely on advances from related parties 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 shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are
considered temporary in nature and have not been formalized by a promissory note. During the years ended August 31, 2020 and 2019,
there are no such related party transactions.
The Company has entered into a patent license
agreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”). The agreement
is for a term of 5 years commencing on the effective date on June 1, 2017. The Company has already paid the licensor a non-refundable,
up-from payment of $500,000 and shall pay a royalty of 20% of the gross revenue realized from the sale of licensed products and
sub-licensing of this patent every year. The royalty expenses during the years ended August 31, 2020 and 2019 are $61,440 and $60,928,
respectively.
Youall Perform Services Ltd, owned by the Company’s
Board of Director Jianli Deng, has been collecting revenue on behalf of the Company from the performance matching platform “Ai
Bian Quan Qiu”. As of August 31, 2020, the Company has $87,581 related party receivable from Youall Perform Services Ltd
for the revenue collected from “Ai Bian Quan Qiu” on behalf of the Company.
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 “Ai Bian Quan Qiu” due to COVID-19 since mid-January,
2020, $108,800 long-term prepayment is expensed as research and development expense. In July 2020, the Company changed the service
scope of this agreement and turned it into a website maintenance contract over the next two years. The major website of this Company
is ABQQ.tv for video streaming. The contract amount remains to be $128,000, out of which $108,800 was previously paid
and $19,200 will be due on the twenty first month after the contract related signing date of July 31, 2020.
The Company rented an office from Zestv Studios
Ltd., owned by the Chief Executive Officer Chiyuan Deng, and incurred a total related party payable of $5,504 as there is a one-month
lag in payment of the office rent.
During the years
ended August 31, 2020, $169,768 was paid to five executives in the form of stock-based compensation and $15,000 cash salary was
paid to the Chief Financial Officer.
On August 29, 2020, the Company entered into a Separation Agreement
and Release with each of Jianli Deng, Lijun Yu and Linqing Ye. Pursuant to the agreements, Mr. Deng resigned as Secretary and Treasurer,
Ms. Yu resigned as Chief Marketing Officer and Mr. Ye resigned as Chief Operating Officer. Mr. Deng will remain on as a member
of our board of directors. The Separation and Release Agreement cancelled the employment agreements for each of Messrs. Deng, Yu
and Ye, and provided them each an indebtedness payment within five (5) business days of the agreements. Mr. Deng will receive $110,000
USD, Ms. Yu will receive $110,000 USD and Mr. Ye will receive $120,000 USD. We received a release of all claims from these prior
officers. In addition, Mr. Deng, Ms. Yu, and Mr. Deng agreed to return to the Company their unvested restricted shares of 130,556,
147,222, and 147,222, respectively.
NOTE 13– EQUITY
Effective as of June 6, 2018, AB International
Group Corporation amended its Articles of Incorporation to increase its authorized common stock to One Billion (1,000,000,000)
shares, par value $0.001 per share.
During the year ended August 31, 2019, the
following 40,600,000 common shares were returned to the Company due to the termination of the Investor Agreement to acquire 51%
ownership of iCrowdU Inc:
|
●
|
2,000,000 shares for acquisition of shares of iCrowdU as collateral and 8,000,000 shares as consideration.
|
|
●
|
20,200,000 issued to Alexander Holtermann for employment as Chief Executive Officer, 10,200,000 to Ian Wright for employment as Chief Operational Officer, and 200,000 to Eichbaum Financial Reporting Services Inc. for consulting fees.
|
In June, 2019, the Company incurred a 50:1
common reverse stock split. Prior to approval of the reverse split the Company had a total of 177,100,000 issued and outstanding
shares of common stock, par value $0.001. On the effective date of the reverse split, the Company has a total of 3,602,016 issued
and outstanding shares of common stock, par value $0.001.
Upon the Reverse Split becoming effective,
the par value per share of common stock will remain unchanged at $0.001 per share. As a result, on the effective date of the Reverse
Split, the stated capital on the Company’s balance sheet attributable to our common stock will be reduced proportionally,
based on the exchange ratio of the Reverse Split, from its present amount, and the additional paid-in capital account will be credited
with the amount by which the stated capital is reduced. The net income or loss and net book value per share of common stock will
be increased, because there will be fewer shares of common stock outstanding.
The Company issued the following common shares
during year ended August 31, 2019:
|
●
|
1,975,000 shares issued for consulting services of $59,250 to two third-party consultants during Q1, FY2019 and 3,300,000 common shares for consulting services of $99,000 to nine third-party consultants during Q3, FY2019
|
|
●
|
20,100,000 shares for services of the Chief Operational Officer, the Chief Marketing Officer, and the Chief Financial Officer.
|
|
●
|
18,000,000 common shares issued at $0.02 per share to five unrelated parties for proceeds of $360,000 during Q2, FY2019. The five unrelated parties include Anyone Pictures Limited, Kangdi Liu, Lijun Yu, Zestv Features Limited, and All In One Media Limited.
|
|
●
|
13,000,000 common shares issued at $0.02 per share to three unrelated parties, including 3,000,000 to Kangdi Liu and 10,000,000 Bonus Media Investment Limited during Q3, 2019 for total proceeds of $260,000 during Q3, FY2019.
|
|
●
|
3,000,000 common shares issued at $0.02 per share to an unrelated third party Zestv Features Limited in Q4, FY2019 before the 50:1 reverse stock split for a total proceed of $60,000.
|
|
●
|
20,000,000 common shares to the Chief Executive Officer Chiyuan Deng with 14,000,000 issued at $0.02 per share in Q3, FY2019 and 600,000 shares issued at $2 per share in Q4, FY2019 after the 50:1 reverse stock split for total cash proceeds of $1,480,000.
|
|
●
|
620,000 common shares issued at $2
per share after the reverse stock split to five unrelated party, including 100,000 to All In One Media Limited, 60,000 to KangDi
Liu, 130,000 to Anyone Pictures Limited, 165,000 to StarEastNet, and 165,000 to Baoyu Chen, for total proceeds of $1,240,000
|
The Company issued and cancelled
the following common shares during the year ended August 31, 2020:
|
·
|
10,000,000 common shares issued at $0.035 per share to five unrelated
parties for proceeds of $350,000 during Q4, FY2020. The five unrelated parties include All In One Media Limited, Capitalive Holdings
Limited,KangDi Liu, Yilin Liu, and Zestv Features Limited.
|
|
·
|
11,000,000 common shares issued at $0.0205 per share to five unrelated
parties for proceeds of $225,500 during Q4, FY2020. The five unrelated parties include All In One Media Limited, KangDi Liu, Mingpeng
Ou , Weishan Jian , Xinyang Liu.
|
|
·
|
18,014,401 common shares issued from note conversions for total proceeds
of $309,894. Please refer to Note 9 for detailed conversion price.
|
|
·
|
3,250,000 common shares issued from warrant exercise at $0.03 and
$0.0205 per share for total proceeds of $43,247 during Q4, FY 2020.
|
|
·
|
425,000 restricted common shares cancelled due to
the resignations of Secretary and Treasurer, Chief Marketing Officer, and Chief Operating Officer, who received these shares from
the upfront issuances of restricted shares as stock-based compensation upon inauguration.
|
The Company issued the following warrant shares
during the year ended August 31, 2020:
|
·
|
During FY2020 the Company issued six five-year warrants to purchase up to 803,920 shares of common
stock at an exercise price of $10.00 per share, $12.50 per share, or $0.1 per share. The exercise prices for all the warrants are
subject to anti-dilution adjustments. Refer to Note 10 for further details.
|
The Company has 46,661,417 and 4,822,016 shares
issued and outstanding, as of August 31, 2020 and August 31, 2019, respectively. These common shares were held by approximately
520 and 513 shareholders of record at August 31, 2020 and August 31, 2019, respectively.
On July 30, 2020,
the Company entered into an Equity Purchase Agreement (the “Financing Agreement”) with Peak One. Although we are not
mandated to sell shares under the Financing Agreement, the Financing Agreement gives us the option to sell to Peak One, up to $10,000,000
worth of our common stock over the period ending twenty-four (24) months after the date the Registration Statement of which this
prospectus forms a part is deemed effective. In consideration for Peak One’s execution and performance under the Financing
Agreement, the Company issued a warrant to purchase 750,000 shares of Common Stock, as Warrant Shares (as defined in the Financing
Agreement), to Peak One in July 2020. As of August 31, 2020, there were no put shares issued to Peak One.
On
July 30, 2020, the Company also entered into a registration rights agreement with Peak One (the “Registration Rights
Agreement”) whereby we are obligated to file a registration statement to register the resale of the purchase shares. The Registration
Statement of which this prospectus forms a part is being filed to comply with the Registration Rights Agreement. We must our
reasonable efforts to keep the registration statement continuously effective under the Securities Act until all of the Warrant
Shares and purchase shares have been sold there under or pursuant to Rule 144 .
The Company will not
receive any proceeds from the sale of the shares of our common stock by Peak One. However, we will receive proceeds from our initial
sale of shares to Peak One pursuant to the Financing Agreement. We will sell shares to Peak One at a price equal to 88% of the
Market price. The Market price is the lesser of the lowest closing bid price immediately preceding the put date, or the lowest
closing bid price of our common stock during the ten (10) consecutive trading day period beginning on the date on which we deliver
a put notice to Peak One.
NOTE 14– INCOME TAXES
On December 22, 2017, the United States enacted
the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completed
the accounting for the effects of the Act. The Company’s financial statements for the year ended August 31, 2019 reflect
certain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes.
Components of net deferred tax assets, including
a valuation allowance, are as follows as of August 31, 2020 and August 31, 2019:
|
|
August 31,
|
|
August 31,
|
|
|
2020
|
|
2019
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
Net operating loss carry over
|
|
$
|
447,765
|
|
|
$
|
201,056
|
Less: valuation allowance
|
|
|
(447,765
|
)
|
|
|
(201,056)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
The valuation allowance for deferred tax assets
was $447,765 as of August 31, 2020 and $201,056 as of August 31, 2019. 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, 2020 and August 31, 2019.
Reconciliation between the statutory rate and
the effective tax rate is as follows for the years ended August 31, 2020 and August 31, 2019:
|
|
Years ended
|
|
|
August 31,
|
|
|
2020
|
|
2019
|
Federal statutory tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Change in valuation allowance
|
|
|
(21
|
%)
|
|
|
(21
|
%)
|
Effective tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The Company’s fully owned 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, 2020 and
August 31, 2019, the Company and its subsidiary have incurred a loss of (1,523,071) and ($404,635), respectively. As a result,
the Company and its subsidiary did not incur any income tax during the years ended August 31, 2020 and August 31, 2019.
NOTE 15 – CONCENTRATION
RISK
69% and 70% of revenue was generated from one
customer during the years ended August 31, 2020 and August 31, 2019, respectively.
100% of the account receivable balance was
due from one customer as of August 31, 2020 and August 31, 2019.
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Operating
lease
The Company leases office premises and a display
store under non-cancelable operating lease agreements with an option to renew the lease. On February 21, 2020, the display store
lease for a monthly rent of $1,766 was updated with a lower monthly rent of $768 per month from February 23, 2020 to February 22,
2021 and $968 from February 23, 2021 to February 22, 2022. The cash lease expense for the years ended August 31, 2020 and 2019
was $79,488 and $34,381, respectively. All leases are on a fixed payment basis. None of the leases include contingent rentals.
The Company had lease commitment of $125,440 as of August 31, 2020, of which $76,608 was within one year.
In accordance with ASC 250-10-45-14, the adoption
of ASC 842 lease accounting standard has resulted in $79,258 lease expenses for the year ended August 31, 2020
As of August 31,
|
|
Commitments
|
|
2021
|
|
$
|
76,608
|
|
2022
|
|
$
|
48,832
|
|
Total Lease Payments
|
|
$
|
125,440
|
|
Less: imputed interest
|
|
$
|
(3,527
|
)
|
Present value of lease liabilities
|
|
$
|
121,913
|
|
Current portion of obligations under operating leases
|
|
$
|
73,664
|
|
Obligations under operating leases, non-current
|
|
$
|
48,249
|
|
NOTE 17 –
SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to August 31, 2020 to the date these financial statements were issued.
Covid-19 impact:
In December 2019, a novel strain of coronavirus
(COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in
the U.S. and international markets. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result
in a material adverse impact on the Company’s financial position, operations and cash flows. It is too early to quantify
the impact this situation will have on company revenue and profits at this time. Possible areas that may be affected include, but
are not limited to, disruption to the Company’s customers and revenue, labor workforce, unavailability of supplies used in
operations, etc. Accordingly, Management is evaluating the Company’s liquidity position, reduction in revenues, and reviewing
the analysis of the Company’s financial performance as the Company seeks to withstand the uncertainty related to the coronavirus.
As no large-crowd gathering has been allowed since the outbreak of COVID-19, the Company has not generated any revenue from the
Ai Bian Quan Qiu performance matching platform. Consequently, the Company has decided to impair all of the intangible asset carrying
value related to the Ai Bian Quan Qiu performance matching platform and its Wechat official account, given that it is uncertain
whether this platform will continue generating any revenue.
Subsequent cash receipt for investments:
On September 1, 2020, the Company received
the outstanding cash investment from Mingpeng Ou for issuing 3,000,000 shares of common stocks at a price of $0.0205 per share.
Therefore, $61,500 due from shareholder at August 31, 2020 was reduced to zero.
Issuance of convertible notes:
On
September 1, 2020, we entered into a Securities Purchase Agreement (“JSC SPA”) with Jefferson Street Capital LLC,
a New Jersey limited liability company (“Jefferson Street”), pursuant to which we issued and sold to Jefferson Street
a convertible promissory note, dated September 1, 2020, in the principal amount of $82,500 (the “Jefferson Street Note”).
We received $75,000 after paying fees and expenses.
On
September 1, 2020, we entered into a Securities Purchase Agreement (“Firstfire SPA”) with Firstfire Global Opportunities
Fund, LLC., a Delaware limited company (“Firstfire”), pursuant to which we issued and sold to the Firstfire a convertible
promissory note, dated September 1, 2020 in the principal amount of $75,000(the “Firstfire Note”). We received $71,250
after fees and expenses.
On October 10, 2020, we entered into and closed a Securities Purchase
Agreement (“SPA”), dated October 8, 2020, with Power Up Lending Group Ltd., a Virginia corporation (“Purchaser”),
pursuant to which we issued and sold to the Purchaser a convertible promissory note, dated October 8, 2020 in the principal amount
of $55,000 (the “Note”). We received $47,600 from the investment after the payment of expenses.
On October 20, 2020, we entered into a Securities Purchase Agreement
(“EC SPA”), dated October 9, 2020, with East Capital Investment Corp., a New Jersey corporation (“East Capital”),
pursuant to which we issued and sold to the East Capital a convertible promissory note, dated October 9, 2020, in the principal
amount of $62,700 (the “East Capital Note”). We received $55,000 after paying fees and expenses.
Change in board of directors, authorized common shares, and preferred
shares:
On
September 11, 2020, we issued a total of 100,000 shares of our newly designated Series A Preferred Stock to Chiyuan Deng in connection
with Mr. Deng’s amended employment agreement.
On September 29, 2020, our board of directors
approved a change in director compensation from shares to cash compensation. For the fiscal year of 2020, the Board of Directors
hereby approves of the payment of US$9,000 as the fee for each Director. For the fiscal year of 2021, the Board of Directors hereby
approves of the payment of US$9,000 as the fee for each Director.
On November 3, 2020, Jianli Deng resigned as
a member of our Board of Directors. There was no known disagreement with Mr. Deng on any matter relating to our operations, policies
or practices.
On November 10, 2020, the Company approved an amendment to the Company’s Articles of Incorporation (the “Amendment”) to increase the total number of authorized shares of our Common Stock from one billion (1,000,000,000) shares to five billion (5,000,000,000) shares.
Equity purchase agreement and put share
issuances:
In connection with the Equity Purchase Agreement
(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 Company issued two put
notices to Peak One for selling 2,735,000 Put Shares at a revised purchase price of $0.015312 per share on September 17, 2020 and
another 2,735,000 Put Shares at a revised purchase price of $0.014256 per share on October 7, 2020. On October 8 and October 24,
2020, the Company received $36,175 and $33,503 proceeds for selling these Put shares after deducting clearing and trading costs
as well as banker commissions of $5,703 and $5,487, respectively.
Peak
One may offer up to 21,444,261 shares of common stock to be used for drawdowns and warrant exercises in connection with the July
30, 2020 Equity Purchase Agreement (the “Financing Agreement”). As of October 12, 2020, the 21,444,261 shares of Common
Stock registered for resale herein would represent approximately 25.8% of the Company’s public float.
Purchases of movie broadcast rights:
In October 2020, the company entered into agreements
with All In One Media Limited in purchasing broadcast rights for 25 movies and paid $1,408,000 in cash. We obtained
the transferable exclusive copyright for these 25 films. The copyright period is permanent. The exclusive rights to grant any kind
of media to broadcast and sublicense to broadcast in other regions of the globe (excluding mainland China). The Company had been
provided with the following agreed materials and materials after signing the agreements: 1) all films’ digital hard drive
sets (all films are final version completed film, technical standards according to our technical review requirements); 2) all films’
instruction manuals, synopsis of the stories, the textbooks, the line-ups, the main creative staff, posters, and the films’
related materials.
Subsequent collection of interest receivable:
On November 13, 2020, the last payment of $26,240
interest receivable from the $1,047,040 loan to All In One Media Ltd, previously named as Aura Blocks Limited, was deposited into
the Company’s bank account. Interest receivable at August 31, 2020 was reduced to zero.
Termination of issued warrants:
On November 23, 2020, the Company entered into
a Termination and Release Agreement with Armada Capital Partners LLC (“Armada”). Pursuant to the agreement, the parties
agreed to terminate the warrant issued in favor of Armada to purchase 4,200 shares of our common stock for a payment of $20,000.
AB International agrees to pay to Armada the sum of $20,000 within five business days from the date of execution of the agreement.
The parties also entered into a mutual release of claims.
On November 30, 2020, the Company entered into
a Termination and Release Agreement with Crown Bridge Partners LLC (“Crown Bridge”). Pursuant to the agreement, the
parties agreed to terminate the warrant issued in favor of Crown Bridge to purchase 9,720 shares of our common stock for a payment
of $75,000. AB International agrees to pay to Crown Bridge the sum of $75,000 on or before December 2, 2020. The parties also entered
into a mutual release of claims.
Warrant exercises:
As of November 30, 2020, EMA Financial exercised
all of its warrant shares. 46,182,266 anti-dilution adjusted warrant shares were exercised to acquire 45,850,861 shares of common
stock at $0.00812 per share through cashless exercises.
Ceased operation of the display store:
The Company closed down the display store due
to the COVID-19 impact and uncertainties of the economy in Hong Kong. The lease agreement for the display store, which has the
original term of February 23, 2019 to February 22, 2022, was terminated on November 22, 2020.
NOTE
18 – GOING CONCERN UNCERTAINTIES
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, 2020, the Company had an accumulated
deficit of $2,970,881. For the year ended August 31, 2020, the Company incurred a net loss of $1,523,071 and the net cash used
in operations was $1,263,370. 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 through August 31, 2020
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 with 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 conditions raise substantial doubt about
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.
AB INTERNATIONAL
GROUP
Condensed
Consolidated Balance Sheets
|
|
February 28,
|
|
August 31,
|
|
|
2021
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
ASSETS
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
224,804
|
|
|
$
|
2,455,061
|
Prepaid expenses
|
|
|
5,000
|
|
|
|
11,024
|
Accounts receivable
|
|
|
51,338
|
|
|
|
137,700
|
Related party receivable
|
|
|
699,149
|
|
|
|
87,581
|
Due from shareholders
|
|
|
—
|
|
|
|
61,500
|
Interest receivable
|
|
|
—
|
|
|
|
26,240
|
Other receivable
|
|
|
209,400
|
|
|
|
—
|
Total Current Assets
|
|
|
1,189,690
|
|
|
|
2,779,106
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
19,344
|
|
|
|
16,408
|
Leasehold improvement, net
|
|
|
60,961
|
|
|
|
85,345
|
Right of use lease assets, net
|
|
|
85,581
|
|
|
|
126,354
|
Intangible assets, net
|
|
|
2,626,526
|
|
|
|
175,000
|
Long-term prepayment
|
|
|
1,705,395
|
|
|
|
1,742,080
|
Other assets
|
|
|
14,536
|
|
|
|
18,427
|
TOTAL ASSETS
|
|
$
|
5,702,034
|
|
|
$
|
4,942,721
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
114,330
|
|
|
$
|
364,979
|
Current portion of obligations under operating leases
|
|
|
74,618
|
|
|
|
73,664
|
Convertible note and derivative liability
|
|
|
306,212
|
|
|
|
438,921
|
Due to shareholder
|
|
|
2,089
|
|
|
|
476
|
Tax payable
|
|
|
—
|
|
|
|
56,750
|
Other payable
|
|
|
3,827
|
|
|
|
3,584
|
Total Current Liabilities
|
|
|
501,076
|
|
|
|
938,374
|
|
|
|
|
|
|
|
|
Obligations under operating leases, non-current
|
|
|
10,963
|
|
|
|
48,249
|
Total Liabilities
|
|
|
512,039
|
|
|
|
986,623
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 1,000,000,000 shares authorized: 173,434,446 and 46,661,417 shares issued and outstanding,
as of
February 28, 2021 and August 31, 2020, respectively
|
|
|
173,434
|
|
|
|
46,661
|
Preferred stock, $0.001 par value, 10,000,000 preferred shares authorized:
|
|
|
|
|
|
|
|
Series A preferred stock, 100,000 and 0 shares issued and outstanding, as of February 28, 2021 and August 31, 2020, respectively
|
|
|
100
|
|
|
|
—
|
Series B preferred stock, 20,000 and 0 shares issued and outstanding, as of February 28, 2021 and August 31, 2020, respectively
|
|
|
20
|
|
|
|
—
|
Series C convertible preferred stock, 280,025 and 0 shares issued and outstanding, as of February 28, 2021 and August 31, 2020, respectively
|
|
|
280
|
|
|
|
—
|
Additional paid-in capital
|
|
|
8,825,968
|
|
|
|
7,271,983
|
Accumulated deficit
|
|
|
(3,794,835
|
)
|
|
|
(2,970,881)
|
Unearned shareholders' compensation
|
|
|
(14,973
|
)
|
|
|
(391,666)
|
Total Stockholders’ Equity
|
|
|
5,189,995
|
|
|
|
3,956,097
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
5,702,034
|
|
|
$
|
4,942,721
|
The accompanying notes are an
integral part of these financial statements.
AB
INTERNATIONAL GROUP
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
Six
Months Ended
|
|
Three
Months Ended
|
|
|
February
28,
|
|
February
28,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
851,309
|
|
|
$
|
294,743
|
|
|
$
|
774,509
|
|
|
$
|
138,338
|
Cost
of revenue
|
|
|
(454,927
|
)
|
|
|
(95,025
|
)
|
|
|
(298,841
|
)
|
|
|
(42,979)
|
Gross
Profit
|
|
|
396,382
|
|
|
|
199,718
|
|
|
|
475,668
|
|
|
|
95,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
(764,796
|
)
|
|
|
(433,244
|
)
|
|
|
(578,651
|
)
|
|
|
(277,501)
|
Related
party salary and wages
|
|
|
(184,337
|
)
|
|
|
(88,852
|
)
|
|
|
(132,987
|
)
|
|
|
(42,479)
|
Total
Operating Expenses
|
|
|
(949,134
|
)
|
|
|
(522,096
|
)
|
|
|
(711,638
|
)
|
|
|
(319,980)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent
income
|
|
|
1,920
|
|
|
|
—
|
|
|
|
1,920
|
|
|
|
—
|
Interest
expense
|
|
|
(128,661
|
)
|
|
|
(42,627
|
)
|
|
|
(46,905
|
)
|
|
|
(95,115)
|
Interest
income
|
|
|
8
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
Gain
/(Loss) from change in fair value
|
|
|
19,094
|
|
|
|
(50,326
|
)
|
|
|
117,881
|
|
|
|
(32,242)
|
Gain/(Loss)
from lease termination
|
|
|
(3,251
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Gain/(Loss)
from prepaid convertible note
|
|
|
(128,316
|
)
|
|
|
—
|
|
|
|
(128,316
|
)
|
|
|
—
|
Gain/(Loss)
from warrant termination
|
|
|
(12,343
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Gain/(Loss)
from warrant exercise
|
|
|
(75,000
|
)
|
|
|
—
|
|
|
|
(62,460
|
)
|
|
|
—
|
Total
other income (expenses)
|
|
|
(326,549
|
)
|
|
|
(92,953
|
)
|
|
|
(117,877
|
)
|
|
|
(127,357)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Net
loss from operations
|
|
|
(879,301
|
)
|
|
|
(415,331
|
)
|
|
|
(353,847
|
)
|
|
|
(351,978)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
(879,301
|
)
|
|
$
|
(415,331
|
)
|
|
$
|
(353,847
|
)
|
|
$
|
(351,978)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER SHARE: BASIC
|
|
$
|
(0.01
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.07)
|
NET
INCOME (LOSS) PER SHARE: DILUTED
|
|
$
|
(0.01
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.07)
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC
|
|
|
137,158,120
|
|
|
|
4,822,000
|
|
|
|
137,158,120
|
|
|
|
4,822,000
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED
|
|
|
149,594,775
|
|
|
|
4,933,487
|
|
|
|
137,735,830
|
|
|
|
4,933,487
|
The
accompanying notes are an integral part of these financial statements.
AB
INTERNATIONAL GROUP
Condensed
Consolidated Statements Stockholders’ Equity (Deficit)
(Unaudited)
|
|
Common
Stock
|
|
|
|
Preferred
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
|
Amount
|
|
|
|
Number
of Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Unearned
Shareholders' Compensation
|
|
|
|
Total
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - August 31, 2019
|
|
|
4,822,016
|
|
|
$
|
4,822
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
6,520,980
|
|
|
$
|
(1,452,020
|
)
|
|
$
|
(842,657
|
)
|
|
$
|
4,231,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued to officers for services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
85,102
|
|
|
|
85,102
|
Common shares issued for third party services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Warrant shares issued in conjunction with convertible notes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
133,023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
133,023
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(415,331
|
)
|
|
|
—
|
|
|
|
(415,331)
|
Balance - February 29, 2020
|
|
|
4,822,016
|
|
|
$
|
4,822
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
6,654,003
|
|
|
$
|
(1,867,351
|
)
|
|
$
|
(757,556
|
)
|
|
$
|
4,033,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - August 31, 2020
|
|
|
46,661,417
|
|
|
$
|
46,661
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
7,271,983
|
|
|
$
|
(2,970,881
|
)
|
|
$
|
(391,667
|
)
|
|
$
|
3,956,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for cash at $0.0140 per share
|
|
|
19,000,000
|
|
|
|
19,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
247,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
266,000
|
Common shares issued from note conversions
|
|
|
25,406,238
|
|
|
|
25,406
|
|
|
|
—
|
|
|
|
—
|
|
|
|
158,347
|
|
|
|
—
|
|
|
|
—
|
|
|
|
183,753
|
Common shares issued from warrant exercises
|
|
|
56,407,922
|
|
|
|
56,408
|
|
|
|
—
|
|
|
|
—
|
|
|
|
81,358
|
|
|
|
—
|
|
|
|
—
|
|
|
|
137,766
|
Common shares returned due to officer resignations
|
|
|
(261,111
|
)
|
|
|
(261
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(391,405
|
)
|
|
|
—
|
|
|
|
560,833
|
|
|
|
169,167
|
Put Shares issued for cash
|
|
|
15,220,000
|
|
|
|
15,220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
721,908
|
|
|
|
—
|
|
|
|
—
|
|
|
|
737,128
|
Common shares issued to officers for services
|
|
|
1,500,000
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
43,500
|
|
|
|
—
|
|
|
|
(14,973
|
)
|
|
|
30,027
|
Common shares issued for consulting services
|
|
|
9,500,000
|
|
|
|
9,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
275,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
285,000
|
Series A Preferred Shares issued
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100
|
Series B Preferred Shares issued
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
20
|
|
|
|
319,980
|
|
|
|
—
|
|
|
|
—
|
|
|
|
320,000
|
Series C Preferred Shares issued
|
|
|
—
|
|
|
|
—
|
|
|
|
280,025
|
|
|
|
280
|
|
|
|
243,220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
243,500
|
Warrants termination and Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(145,423
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(145,423)
|
Adjustment to retained earning
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,347
|
|
|
|
—
|
|
|
|
55,347
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(879,301
|
)
|
|
|
—
|
|
|
|
(879,301)
|
Balance - February 28, 2021
|
|
|
173,434,466
|
|
|
$
|
173,434
|
|
|
|
400,025
|
|
|
$
|
400
|
|
|
$
|
8,825,968
|
|
|
$
|
(3,794,835
|
)
|
|
$
|
(14,973
|
)
|
|
$
|
5,189,995
|
The
accompanying notes are an integral part of these consolidated financial statements.
AB
INTERNATIONAL GROUP
Condensed
Consolidated Statements Cash Flows
(Unaudited)
|
|
Six Months Ended
|
|
|
February 28,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net loss from operations
|
|
$
|
(879,301
|
)
|
|
$
|
(415,331)
|
Adjustments to reconcile net income (loss) to net cash from operating activities:
|
|
|
|
|
|
|
|
Executive salaries and consulting fees paid in stock
|
|
|
315,127
|
|
|
|
85,102
|
Depreciation of fixed asset
|
|
|
26,448
|
|
|
|
26,204
|
Amortization of intangible asset
|
|
|
424,207
|
|
|
|
61,899
|
Impairment of intangible asset
|
|
|
—
|
|
|
|
111,115
|
Loss/(gain) on sales of intangible assets
|
|
|
—
|
|
|
|
—
|
Loss/(gain) from change in fair value of derivatives
|
|
|
(19,094
|
)
|
|
|
50,326
|
Loss/(gain) from lease termination
|
|
|
3,251
|
|
|
|
—
|
Loss/(gain) from warrant termination
|
|
|
12,343
|
|
|
|
—
|
Loss/(gain) from warrant exercise
|
|
|
75,000
|
|
|
|
—
|
Loss/(gain) prepaid convertible note
|
|
|
128,316
|
|
|
|
—
|
Interest expense
|
|
|
128,661
|
|
|
|
147,799
|
Non-cash note conversion fees
|
|
|
8,750
|
|
|
|
—
|
Non-cash lease expense
|
|
|
1,190
|
|
|
|
—
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
86,362
|
|
|
|
(76,800)
|
Receivable on asset disposal
|
|
|
—
|
|
|
|
1,280,000
|
Interest receivable
|
|
|
26,240
|
|
|
|
(52,416)
|
Related party receivable
|
|
|
(611,567
|
)
|
|
|
(52,588)
|
Prepaid expenses
|
|
|
6,024
|
|
|
|
(30,776)
|
Rent security & electricity deposit
|
|
|
3,891
|
|
|
|
—
|
Long-term prepayment
|
|
|
36,685
|
|
|
|
(992,000)
|
Accounts payable and accrued liabilities
|
|
|
(250,649
|
)
|
|
|
(23,614)
|
Due to / from shareholders
|
|
|
63,113
|
|
|
|
—
|
Tax payable
|
|
|
(1,403
|
)
|
|
|
(7,814)
|
Other payable
|
|
|
243
|
|
|
|
(157,824)
|
Net cash used in operating activities
|
|
|
(416,164
|
)
|
|
|
(46,718)
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Purchase of movie and TV series broadcast right and copyright
|
|
|
(2,875,733
|
)
|
|
|
—
|
Proceeds from note receivable collection
|
|
|
—
|
|
|
|
(1,049,600)
|
Purchase of furniture and equipment
|
|
|
(5,000
|
)
|
|
|
—
|
Net cash used in / (provided by) investing activities
|
|
|
(2,880,733
|
)
|
|
|
(1,049,600)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes
|
|
|
233,017
|
|
|
|
311,360
|
Proceeds from common stock issuances
|
|
|
793,729
|
|
|
|
—
|
Proceeds from preferred share issuances
|
|
|
563,500
|
|
|
|
—
|
Payments for warrant termination
|
|
|
(95,000
|
)
|
|
|
—
|
Prepayments of convertible notes
|
|
|
(428,606
|
)
|
|
|
—
|
Net cash provided by financing activities
|
|
|
1,066,639
|
|
|
|
311,360
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(2,230,258
|
)
|
|
|
(784,958)
|
Cash and cash equivalents - beginning of the quarter
|
|
|
2,455,061
|
|
|
|
1,564,750
|
Cash and cash equivalents - end of the quarter
|
|
|
224,804
|
|
|
|
779,792
|
Supplemental Cash Flow Disclosures
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
—
|
|
|
|
—
|
Cash paid for income taxes
|
|
|
—
|
|
|
|
—
|
Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
Cashless warrant exercises
|
|
|
137,766
|
|
|
|
133,023
|
Convertible notes converted to common shares
|
|
|
(183,752
|
)
|
|
|
—
|
Additions to ROU assets from operating lease liabilities
|
|
|
20,038
|
|
|
|
—
|
Common shares returned due to officer resignations
|
|
$
|
(391,666
|
)
|
|
$
|
—
|
The
accompanying notes are an integral part of these consolidated financial statements.
AB INTERNATIONAL GROUP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the six months ended February 28, 2021 and
February 29, 2020
(Unaudited)
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 and originally intended
to purchase used cars in the United States and sell them in Krygyzstan. The Company's fiscal year end is August 31.
We are
an intellectual property (IP) and movie investment and licensing firm, focused on acquisitions and development of various intellectual
property. We are engaged to acquisition and distribution of movies. We have a patent license to a video synthesis and release system
for mobile communications equipment, in which the technology is the subject of a utility model patent in the People's Republic
of China. We had launched a business application (Ai Bian Quan Qiu) through smartphones and official social media accounts based
on WeChat platform in February 2019, utilizing Artificial Intelligence, it is a matching platform for performers, advertiser merchants,
and owners for more efficient services. We generate revenues through an agency service fee from each matched performance.
On January 22, 2016, our former sole officer,
who owned 83% of our outstanding common shares, sold all of his common shares to unrelated investor Jianli Deng. After the stock
sale, we modified our business to focus on the creation of a mobile app marketing engine. The app was designed for movie trailer
promotions and we planned to generate a subscriber base of smartphone users primarily through pre-installed app smartphone makers,
online app stores, WeChat official accounts, Weibo and other social network media outlets and sell prepaid cards or coins to movie
distributors or other video advertisers in China. We created the app “Amoney” for the Android smartphone platform to
develop a WeChat micro-shop that was designed to display and deliver a variety of information and links for download or online
watch prices in the China market.
On June 1, 2017, we entered into a Patent License
Agreement (the “Agreement”) pursuant to which Guangzhou Shengshituhua Film and Television Company Limited, a company
incorporated in China (“Licensor”), granted to us a worldwide license to a video synthesis and release system for mobile
communications equipment (the “Technology”). The Technology is the subject of a utility patent in the People’s
Republic of China. Under the Agreement, we are able to utilize, improve upon, and sub-license the technology for an initial period
of one year from October 1, 2017 to September 30, 2018, subject to a right to renew for another five years. We were obligated to
pay the Licensor $500,000 within 30 days of the date of the Agreement and a royalty fee in the amount of 20% of any proceeds resulting
from our utilization of the Technology, whether in the form of sub-licensing fees or sales of licensed products. Our Chief Executive
Officer, Chiyuan Deng and former Chief Executive Officer, Jianli Deng, jointly own and control Licensor. On October 10, 2017, we
completed the payment of $500,000 initial payment amount due under the Agreement. In October of 2019, the term of this sublicensing
agreement was renewed and extended for another five years.
Our License to the Technology generates revenue
through sub-license monthly fees from a smartphone app on Android devices. This smartphone app was already existing and licensed
at the time we acquired the Technology of video synthesis. In January, 2021, our sublicensing agreement with Anyone Picture to
generate revenues was terminated.
Our License to the Technology generates revenue
through sub-license monthly fees from a smartphone app on Android devices. This app was already existing and licensed at the time
we acquired the Technology.
On March 10, 2018, we acquired intellectual
property for $200,000 from All In One Media Ltd, previously named as Aura Blocks Ltd. On March 19, 2018, we entered into consulting
agreements (the “Consulting Agreements”) with four consultants (the “Consultants”). The Consulting Agreements
have terms or either two or three years. Under the Consulting Agreements the Consultants will provide services to us in Hong Kong
and China related to blockchain technology and krypto kiosks. In consideration for the services provided by the Consultants, we
have issued the Consultants a total of 1,100,000 shares of our common stock. On November 10, 2018, the Company sold this intellectual
property to China IPTV Industry Park Holdings Ltd. for $80,000.
On March 21, 2018, we acquired the intellectual
assets of KryptoKiosk Limited, a crypto currencies kiosk company which has licenses and patent in Australia, which enable the operation
of cryptocurrency ATMs that allow buying and selling of Bitcoin, Litecoin, and Ethererum all in one terminal. The Company plans
to generate revenue through sub-licensing fees for the operation of cryptocurrency ATMs. Through the foregoing the Company proposes
to bring a physical aspect to something that is otherwise very abstract to people. We also issued to JPC Fintech Limited 2,400,000
common shares with a market value of $72,000 exchange of KryptoKiosk Limited’s assets consist mostly of intellectual property,
including, but not limited to, certain domain names, copyrights, trademarks, and patents pending, but also include contract rights
and personal property.
We planned to generate revenue through sub-licensing
fees for the operation of cryptocurrency ATMs. Through the foregoing, we proposed to bring a physical aspect to something that
is otherwise very abstract to people. We planned to invest in machines and sell sub-licenses in the Asia Pacific region with future
world-wide expansion. We had promoted and marketed the ATM business for 6 months or
until around August 2018, because the BTC and cryptocurrencies price went down. The IP, however, was never transferred to us. We
have repeatedly requested from Messrs. Grounds, Vickery and Shakespare access to the domains and websites and other information
concerning the IP assets. As of the date of this annual report, no such information has been provided. In addition, the IP including
domain names were transferred to others while Messrs. Vickery and Shakespare were officers of our company. As a result, we ceased
promotions and marketing on the ATM business and relations cryptocurrencies business in September 2018. On November 21, 2018, we
had sent the final notice that JPC Fintech has materially breached the agreement. We requested that JPC Fintech Ltd. return its
stock certificate received in the transaction to our transfer agent for immediate cancellation. We have not yet received the certificate
for termination. In February of 2020, 100% of the intellectual assets of KryptoKiosk Limited‘s carrying value $48,000 net
of amortization is written off since the IP was never transferred to us and no revenue was generated from this intellectual
asset.
On May 9, 2018, we entered into an investor
agreement with iCrowdU Inc. We agreed to purchase 228,013 shares of iCrowdU Inc. at a share price of $1.228 for total consideration
of $280,000. iCrowdU Inc. offers an online platform and mobile app for crowd funding services targeting the global crowd funding
market.
Furthermore, it was agreed to exchange 2,000,000
shares of our common stock for 2,000,000 shares of common stock in iCrowdU Inc. This share exchange was made as collateral in advance
of an investment of $1,935,000 by us into iCrowdU Inc., which never occurred.
On or about May 9, 2018, we entered into consultancy
agreements with Alexander Holtermann, Ian Wright and Luis Hadic. Each of Messrs. Holtermann, Wright and Hadic received 200,000
shares of our common stock under the consultancy agreements.
On or about July 26, 2018, we entered into
an investment agreement with iCrowdU Inc. for the purchase of 40% of iCrowdU in exchange for 8,000,000 shares of our common stock
that would be split between Messrs. Holtermann and Wright at 70% and 30%, respectively, and an investment of $10,000,000. The 8,000,000
shares were cut but not delivered to Messrs. Holtermann and Wright and no part of the $10,000,000 was invested by us into iCrowdU
Inc.
On or about July 31, 2018, we entered into
employment agreements with Messrs. Holtermann and Wright for the consideration provided for under the agreements.
On October 25, 2018, the above parties entered
into an Agreement for Termination and Release that terminated all outstanding agreements among the parties and released each party
from the other. We agreed to settle outstanding expenses and costs incurred by iCrowdU Inc., in the sum of $6,444.90. In addition,
all parties agreed to return any shares received from the above agreements, save we shall be permitted to retain the 228,013 shares
purchased in iCrowdU Inc. Finally, we agreed to amend our Current Report on Form 8-K concerning certain disclosures made therein.
We amended the report as per the agreement.
On September 5, 2018, the Company entered into
an agreement to acquire a movie copyright for $768,000 from All In One Media Ltd, which holds 200,000 common shares of the Company
as of August 31, 2019 and is previously named as Aura Blocks Limited. The remaining balance to Aura Blocks Limited is $153,600
as of August 31, 2019. The Company has obtained the exclusive permanent broadcasting right outside the mainland China and is expected
to generate revenues from showing the movie online, in theaters, and on TV outside the mainland China once this movie is completed
in June, 2019. In August of 2019, the Company sold this movie copyright to China IPTV Industry Park Holding Ltd for $857,600 with
a gain of $89,538.
In December of 2018, we engaged StarEastnet,
a software developer that holds 171,000 common shares of the Company as of August 31, 2019, to start developing a performance matching
platform (Ai Bian Quan Qiu) and a WeChat official account to advertise the platform. The matching platform is to arrange performance
events for celebrities and performers. Performers can set their schedules and quotes on the platform. The platform will maximize
their profits from performance events by optimizing their schedules based upon quotes and event locations and save time from commuting
among different events. “Ai Bian Quan Qiu” utilizes the artificial intelligence (AI) matching technology to instantly
and accurately match performers and advertisers or merchants. The company charges agency service fees for each successful event
matched through the platform. Since no large social gathering is allowed as a result of COVID-19, there has been no revenue generated
from the performance matching platform (Ai Bian Quan Qiu) since the end of January, 2020. The Company decided that 100% of the
carrying amount of Ai Bian Quan Qiu platform and its Wechat official account should be impaired.
In June, 2019, the Company completed the development
of a video mix APP for social video sharing via iOS and Android smartphones. This app was originally planned to take advantage
of the core design philosophy of “My film anyone, anywhere, anytime be together” as similar and competitive innovative
video and community apps have been activated on over 2 million unique devices in China as of December 31, 2017 and precipitated
the duet video synthesis phenomenon in China. However, the Company decided to focus on the “Ai Bian Quan Qiu” platform
as its main business and thus sold the video mix APP to Anyone Pictures Limited, which holds 242,980 common shares of the Company,
for $422,400 with a gain of $59,792 in August of 2019. Due to the quarantine and continuous
control imposed by the state and local governments in areas affected by COVID-19, merchant advertising events were suspended. The
Company decided to shut down the Ai Bian Quan Qiu platform, which has created an adverse impact on the business and financial condition
and hampered its ability to generate revenue and access sources of liquidity on reasonable terms.
In August of 2019, the Company entered into
a one-year loan agreement to lend $1,047,040 at an annual interest rate of 10% to All In One Media Ltd, previously named as Aura
Blocks Limited, for producing films and digital videos in Hong Kong. The term of note receivable is from August 1, 2019 to July
31, 2020. This loan principal balance was paid off in full in July, 2020.
On September 4, 2019, the Company entered into another loan agreement
to lend $1,049,600 at an annual interest rate of 10% to All In One Media Ltd, previously named as Aura Blocks Limited. The term
of note receivable is from September 4, 2019 to March 3, 2020. This loan balance was paid off in full on May 4th, 2020 with
two months’ extension.
On April 22, 2020, the Company has 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. As of February 28, 2021, the
Company acquired 45 movie broadcast rights. 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.
Starting in January 2021, the Company started
generating movie box-office revenue from the movie “Ai Bian Quan Qiu”.
NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The financial statements of the Company have
been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in
US dollars. The Company’s year-end is August 31. The financial statements have been prepared on a consolidated basis, with
their fully owned subsidiary App Board Limited.
Basis of Consolidation
The financial statements have been prepared
on a consolidated basis, with the Company’s fully owned subsidiary App Board Limited registered and located in Hong Kong.
As of February 28, 2021 and August 31, 2020, there were net intercompany receivable balance of $1,681,380 and $9,060, respectively.
The intercompany receivable and payable balances are offset to zero in the consolidated financial statements.
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
For purposes of the statement of cash flows,
the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Foreign Currency Transactions
The Company’s planned operations are
outside of the United States, which results in exposure to market risks from changes in foreign currency rates. The financial risk
arises from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company does
not use derivative instruments to reduce its exposure to foreign currency risk. Non-monetary assets and liabilities are translated
at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Revenues
and expenses are translated at average rates for the year. Gains and losses from translation of foreign currency financial statements
into U.S. dollars are included in current results of operations.
Accounts Receivable
Accounts receivable consist of amounts due
from Anyone Pictures Limited for the sub-licensing fee revenue. Amounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses
in its existing accounts receivable. No amount for bad debt expense has been recorded by the Company during the six months ended
February 28, 2021 and February 29, 2020, and no write-offs for bad debt were recorded for the six months ended February 28, 2021
and February 29, 2020.
Prepaid Expenses
Prepaid expenses primarily consist of consulting
fees that have been paid in advance and prepayments of OTC market annual fee, website domain fee, TV promotion fee, and investor
relation fee.
The prepaid balances are amortized when the
related expense is incurred.
Note Receivable
Note receivable is a one-year note bearing
annual interest of 10% with the principal payable annually at the end of the term. Interest is due and payable, at the election
of the Company, in cash on the Maturity Date, as applicable, or if the note receivable is prepaid earlier, on such prepayment date.
Therefore, interest income is recorded along with interest receivable throughout the note outstanding periods.
Fixed Asset
Fixed asset consists of furniture and appliances
acquired for the office. The balance is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line
method over estimated useful lives listed below:
|
|
|
|
Estimated Useful Life
|
|
Furniture
|
|
|
7 years
|
|
Appliances
|
|
|
5 years
|
Leasehold Improvement
Leasehold improvement is related to the enhancements
paid by the Company to leased office and store. 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. Leasehold improvement is amortized over the lease term of 3 years.
Intangible Assets
Intangible assets are stated at cost and depreciated
as follows:
|
●
|
Mobile application product: straight-line method over the estimated life of the asset, which has been determined by management to be 3 years
|
|
●
|
Movie copyrights and broadcast rights: straight-line method over the estimated life of the asset, which has been determined by management to be 2 years
|
|
●
|
Patent: straight-line method over the term of 5 years based on the patent license agreement
|
Amortized costs of the intangible asset are
recorded as cost of sales, as the intangible asset is directly related to generation of revenues in the Company.
Lease property under operating lease
In February 2016, the Financial Accounting
Standards Board (“FASB”) issued updated guidance to improve financial reporting about leasing transactions. This guidance
required organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations
created by those leases. The original guidance required application on a modified retrospective basis with the earliest
period presented. In August 2018, the FASB issued new guidance which included an option to not restate comparative periods in transition. Under
this new guidance, a company applies the standard to leases in place as of the date of initial application, records a cumulative-effect
adjustment to retained earnings as of the first day of the adoption year, and follows the new rules for all leases entered or modified
going forward. The Company adopted this new standard on June 1, 2020 with no retrospective adjustments to prior
comparative periods. In accordance with ASC 250-10-45-14, a change in accounting principle made in an interim period shall be reflected
as if the entity had adopted the new principle on the first day of the adoption year, which is September 1, 2019 for the Company.
As such, the adoption of ASC 842 lease accounting standard has resulted in $196,813 lease liabilities with corresponding $201,025
ROU assets net of amortization as of September 1, 2019 based on the present value of the remaining rental payments under
current leasing standards for existing leases. The remaining balance of lease liabilities are presented within the current
portion of lease liabilities and the non-current portion of lease liabilities on the Consolidated Balance Sheet.
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 G&A expense. There was no impairment loss during the six months ended February 28, 2021. For the six months
ended February 29, 2020, the impairment loss of intangible assets was $111,115, including $48,000 for the intellectual assets acquired
from KryptoKiosk Limited and $63,115 for the performance matching platform “Ai Bian Quan Qiu” and its WeChat official
account.
Revenue Recognition
The Company adopted ASC Topic 606, “Revenue
from Contracts with Customers”, applying the modified retrospective method.
In accordance with ASC Topic 606, revenues
are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration
that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order
to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
●
|
the contract with a customer;
|
|
●
|
identify the performance obligations in the contract;
|
|
●
|
determine the transaction price;
|
|
●
|
allocate the transaction price to performance obligations in the contract; and
|
|
●
|
recognize revenue as the performance obligation is satisfied.
|
The Company does not believe that significant
management judgements are involved in revenue recognition, but the amount and timing of the Company’s revenues could be different
for any period if management made different judgments or utilized different estimates. Generally, the Company recognizes revenue
under ASC Topic 606 for its performance obligation.
The Company generates revenue from sub-licensing
a patent and charging a service fee from the “Ai Bian Quan Qiu” platform for actors and commercial events matching.
The sub-licensing revenue is recognized monthly
based upon the number of users who download the APP that utilizes the Company’s patent. The monthly royalty the Company charges
Anyone Pictures Limited is $12.8 per 1000 APP users. Both parties agreed to charge the sublicensing fee based upon a fixed number
2,000,000 users.
The “Ai Bian Quan Qiu” platform
service revenue is derived principally from providing matching service to merchants who are looking for actors to perform at their
advertising events. The Company recognizes revenue upon a matching event is accepted by actors with a service fee of 10% of the
actors’ quote for performing at the events. For the service fee revenue from the “Ai Bian Quan Qiu” platform,
the Company does not control the specified goods or services before that is transferred to the customers and thus the Company is
an agent. Therefore, this service revenue is recognized at a net basis.
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. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level
1" inputs, which consist of quoted prices in active markets for identical assets. 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 as below:
Proceeds from the
sale of a debt instrument with stock purchase warrants (detachable call options) shall be allocated to the two elements based on
the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion
of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be
allocated to the debt instrument portion of the transaction. This usually results in a discount (or, occasionally, a reduced premium),
which shall be accounted for as interest expense under Topic 835 Interest.
Income Taxes
The Company accounts for income taxes pursuant
to FASB ASC 740 “Income Taxes”. Under ASC 740 deferred income taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes
represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
ASC 740 also provides criteria for the recognition,
measurement, presentation and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on
the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the
relevant taxing authority. At February 28, 2021, there was unrecognized tax benefits. Please see Note 13 for details.
Value-Added Taxes
The Company generates revenue in People's Republic
of China (PRC) via the “Ai Bian Quan Qiu” platform and is subject to a value-added tax at an effective rate of 6%.
In accordance with PRC law, the Company is also subject to surcharges, which includes urban maintenance and construction taxes
and additional education fees on VAT payable.
The Company’s revenue generated from
the “Ai Bian Quan Qiu” platform is subject to VAT at a rate of 6% and subject to surcharges at a rate of 12% of the
VAT payable.
Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share
in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings
per share on the face of the statement of operations. The earnings per share after the reverse stock split is presented retrospectively
as if the reverse split had occurred at the very beginning of the business. Basic loss per share is computed by dividing net income
(loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted
loss per share is computed using the weighted average number of common shares and potential common shares outstanding during the
period for warrants, options and restricted shares under treasury stock method, and for convertible debts under if-convertible
method, if dilutive. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the
period and excludes all potential common shares if their effects are anti-dilutive.
In accordance with the Company’s convertible
note agreements, the Note Holders have the option to convert all or any lesser portion of the outstanding principal amount and
accrued but unpaid interest into common stock at a conversion price equal to a price which is 55% or 60% of the lowest trading
price during the 10 or 20 days prior to the day that the Holder requests conversion. 55% is applicable to EMA Financial whereas
60% applies for the other counterparties. The lowest trading price during 10 days prior to conversion is applicable to East Capital
and Fidelis Capital, whereas the other counterparties utilize the lowest trading price during the preceding 20 days. The number
of diluted shares from convertible notes is calculated with the assumption of converting all the outstanding principal balance
and unpaid interest expense to common shares at the beginning of the period or at the time of issuance, if later.
The number of diluted shares from warrants
is the upper limit to which warrants can be converted into common shares and adjusted for anti-dilution clauses.
As of February 28, 2021, 12,436,655 potentially
diluted shares were from convertible notes. As of February 29, 2020, 66,791
potentially diluted shares were from convertible notes and 44,680 potentially diluted shares were from warrants.
|
|
As of February, 28,
|
Diluted shares not included in basic loss per share computation
|
|
2021
|
|
2020
|
Warrants
|
|
|
—
|
|
|
|
44,680
|
Convertible notes
|
|
|
12,436,655
|
|
|
|
66,791
|
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases.
The standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize
in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to
use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting
policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors
are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018.
In September 2017, the FASB has issued ASU
No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases
(Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of
Prior SEC Staff Announcements and Observer
Comments.” The amendments in ASU No.
2017-13 amends the early adoption date option for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02.
Both of the below entities may still adopt using the public company adoption guidance in the related ASUs, as amended. The effective
date is the same as the effective date and transition requirements for the amendments for ASU 2014-09 and ASU 2016-02.
In February 2018, the FASB issued guidance
to address the income tax accounting treatment of the tax effects within other comprehensive income due to the enactment of the
Tax Cuts and Jobs Act (the “Act”). This guidance allows entities to elect to reclassify the tax effects of the change
in the income tax rates from other comprehensive income to retained earnings. The guidance is effective for periods beginning after
December 15, 2018 although early adoption is permitted. The Company has evaluated and concluded that there was no impact on its
consolidated financial position and results of operations.
In March 2018, the FASB issued ASU 2018-05:
“Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. The amendments
in this ASU add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118, which expresses the view
of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 –
the date on which the Tax Cuts and Jobs Act was signed into law. The Company has evaluated and concluded that there was no impact
on its consolidated financial position and results of operations.
In June 2018, the FASB issued ASU 2018-07:
“Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting”.
This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments
to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based
payments to nonemployees and employees will be substantially aligned. This ASU supersedes Subtopic 505-50, Equity—Equity-Based
Payments to Nonemployees. The amendments in this ASU are effective for public companies for fiscal years beginning after December
15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years
beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is
permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company
does not currently expect the adoption of the amendment to have a material impact on its consolidated financial position and results
of operations.
In July 2018, the FSAB issued ASU 2018-10 ASC
Topic 842: “Codification Improvements to Leases” The amendments are to address stakeholders’ questions about
how to apply certain aspects of the new guidance in Accounting Standards Codification (ASC) 842, Leases. The clarifications address
the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor
reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments.
The amendments in ASC Topic 842 are effective for EGC for fiscal years beginning after December 15, 2019, and interim periods within
fiscal years beginning after December 15, 2020. While early application is permitted, including adoption in an interim period,
the Company has not elected to early adopt. The Company is currently evaluating the impact of this accounting standard update on
its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-11,
Leases (Topic 842). This update provides entities with an additional (and optional) transition method to adopt the new leases standard.
Under this method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the prior comparative period’s
financials will remain the same as those previously presented. Entities that elect this optional transition method must provide
the disclosures that were previously required. The Company is evaluating the effect this new guidance will have on our consolidated
financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13,
“Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,”
to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value
measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy
for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The new standard requires
disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.
The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019.
In December 2019, the FASB issued ASU
2019-12, “Simplifying the Accounting for Income Taxes” to remove specific exceptions to the general principles in Topic
740 and to simplify accounting for income taxes. The standard is effective for public companies for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating
the impact of this accounting standard update on its consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01,
“Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives
and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,” which clarifies the interaction
of the accounting for equity investments under Topic 321 and investments accounted for under the equity method of accounting in
Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The standard is
effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2020. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated
financial statements.
NOTE 3 –PREPAID EXPENSES
Prepaid expense was $5,000 and $11,024 as of
February 28, 2021 and August 31, 2020, respectively. Prepaid expense as of February 28, 2021 primarily includes $5,000 prepayment
of OTC market annual fee.
NOTE 4 – FIXED ASSETS AND LEASEHOLD
IMPROVEMENT
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 an office and an offline display store. The leasehold improvement is depreciated over 3 years which equal the terms
of the operating lease for renting an office. The furniture and appliances are depreciated over 7 and 5 years, respectively.
The total original cost was $172,278, including
$146,304 for renovation of the office and the store and $25,974 office furniture and appliances. The accumulated depreciation was
$91,973 and $65,525 as of February 28, 2021 and August 31, 2020, respectively.
|
|
February 28, 2021
|
|
August 31, 2020
|
Appliances and furniture
|
|
$
|
25,974
|
|
|
$
|
20,974
|
Leasehold improvement
|
|
|
146,304
|
|
|
|
146,304
|
Total cost
|
|
|
172,278
|
|
|
|
167,278
|
Accumulated depreciation
|
|
|
(91,973
|
)
|
|
|
(65,525)
|
Property and equipment, net
|
|
$
|
80,305
|
|
|
$
|
101,753
|
NOTE 5 – INTANGIBLE ASSETS
As of February 28, 2021 and August 31, 2020,
the balance of intangible assets are as follows;
|
|
February 28,
2021
|
|
August 31, 2020
|
Patent
|
|
$
|
500,000
|
|
|
$
|
500,000
|
Movie copyrights
|
|
|
853,333
|
|
|
|
—
|
Movie and TV series broadcast rights
|
|
|
2,022,400
|
|
|
|
—
|
Total cost
|
|
|
3,375,733
|
|
|
|
500,000
|
Accumulated amortization
|
|
|
(749,207
|
)
|
|
|
(325,000)
|
Intangible assets, net
|
|
$
|
2,626,526
|
|
|
$
|
175,000
|
Intangible assets include 1) a patent 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) a movie copyright for the movie “Ai Bian Quan Qiu”, and 3) broadcast rights
for fourty-five movie and TV series. The amortization expense for six months ended February 28, 2021 and February 29, 2020 was
$424,207 and $61,899, respectively.
NOTE 6 – RIGHTS-TO-USE LEASE ASSETS,
NET
Rights-to-use lease assets,
net consisted of the following:
|
|
February
28, 2021
|
|
August
31, 2020
|
Right-to-use
gross asset
|
|
$
|
215,853
|
|
|
$
|
228,510
|
Less:
accumulated amortization
|
|
|
(130,272
|
)
|
|
|
(102,156)
|
Right-to-use
asset, net
|
|
$
|
85,581
|
|
|
$
|
126,354
|
The estimated
amortization expenses for each of the two succeeding years is as follows:
Year
ending February 28,
|
|
Amortization
expense
|
|
2021
|
|
|
$
|
74,619
|
|
2022
|
|
|
$
|
10,962
|
|
Total
|
|
|
$
|
85,582
|
NOTE 7 - LONG-TERM
PREPAYMENT
In September 2019,
the Company entered into an agreement with Guangzhou Yuezhi Computer Ltd. for upgrading software of the “Ai Bian Quan
Qiu” platform at a cost of $128,000. $108,800 was paid upon signing the agreement and recorded as long-term prepayment in
Q1, FY2020. As COVID-19 restricted crowd-gathering, “Ai Bian Quan Qiu” platform has not generated any revenue since
mid-January,2020, the Company impaired 80% of the “Ai Bian Quan Qiu” platform intangible asset value in Q2 FY2020 and
the remaining 20% intangible asset in Q4 FY2020. As such, $108,800 prepayment was expensed as research and development expense
from the previously recognized long-term prepayment asset.
As of February 28,
2021, the long-term prepayment balance of $1,705,395 relates to six copyrights for movies and TV series as below:
|
•
|
In November 2019, the Company acquired two broadcast rights for online streaming at a price of $256,000 for “Lushang” (English name: “On The Way”) and $115,200 for “Qi Qing Kuai Che” (English name: “Confusion”). “Lushang” broadcast right permits online streaming globally, whereas “Qi Qing kuai Che” only allows online streaming outside China. Both of them have been fully paid. As these two movies have not yet been approved for screening by the Chinese government, the balances were recorded as long-term prepayment.
|
|
•
|
In June 2020, the Company acquired broadcast
rights for a TV series of “If time could stop at the moment when we first met” and a movie of “Huafeng”
at a price of $640,000 and $422,420, respectively. These broadcast rights are both for online streaming globally. As of February
28, 2021, $435,200 and $295,680 has been paid and recorded as long-term prepayment for “If time could stop at the moment
when we first met” and “Huafeng”, respectively.
|
|
•
|
In January 2021, the Company acquired a movie
copyright” Kai Shi Er Yi” at a price of $936,960. As of February 28, 2021, $603,315 has been paid and recorded as long-term
prepayment for “Kai Shi Er Yi”.
|
NOTE 8 - 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”). The Note has an original principal amount of $250,000, and upon issuance, the Company is expected to
receive net proceeds of $228,333 after subtracting an original issue discount of $21,667 per the Note agreement. This Note carries
a prorated original issue discount of up to $21,667 (the “OID”), to cover the Holder’s monitoring costs associated
with 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 $75,000 and the Holder shall pay $68,500 of the consideration (the “First Tranche”). Out
of $68,500 consideration, the Company has received $64,737 cash from EMA Financial with the remaining $3,763 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 August 18, 2020. The interest rate of 10.0% per annum. Upon an event of default, the interest rate
will be equal to the 24.0% per annum from the due date thereof until the same is paid. 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) 55.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading Days on which
at least 100 shares of common stock were traded including and immediately preceding the Conversion Date.
In connection with the issuance of the Note,
the Company granted EMA Financial a five-year cashless warrant (the “Warrant”) to purchase 30,000 shares of 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.
As part of initial closing the outstanding
principal amount shall be $85,000 and the Holder shall pay $76,500 of the consideration (the “First Tranche”). Out
of $76,500 consideration, the Company has received $65,312 cash from Peak One with the remaining $11,188 spent as legal expense
for note issuance and due diligence fees. Peak One has converted all the convertible notes into 1,096,846 common shares by July
16th, 2020.
The term of this convertible note is 1 year
with the maturity date on December 09, 2020. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to the lesser of (a) $10.00 or (b) Sixty percent (60%) of the lowest closing bid price
(as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of the date of
conversion of the Debentures (provided, further, that if either the Company is not DWAC Operational at the time of conversion or
the Conversion Price is less than $0.01 per share, then Sixty percent (60%) shall automatically adjust to Fifty percent (50%) of
the lowest closing bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding
the date of conversion of the Debenture), subject in each case to equitable adjustments resulting from any stock splits, stock
dividends, recapitalizations or similar events.
In connection with the issuance of the Note,
the Company granted Peak One a five-year cashless warrant (the “Warrant”) to purchase 10,000 shares of common 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.
As part of initial first tranche closing on January 8th,
2020 the outstanding principal amount shall be $40,500 and the Holder shall pay $36,500 of the consideration (the “First
Tranche”). Out of $36,500 consideration, the Company has received $34,992 cash from Crown Bridge with the remaining $1,508
spent as legal expense for note issuance and due diligence fees.
As part of the second tranche closing on July
23rd, 2020 the outstanding principal amount shall be $50,000 and the Holder shall pay $47,500 of the consideration (the “Second
Tranche”). Out of $47,500 consideration, the Company has received $42,987 cash from Crown Bridge with the remaining $ 4,513
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 January 8, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will
be equal lesser (i) fifteen percent (15%) per annum or (ii) the maximum amount permitted by law from the due date thereof until
the same is paid. The convertible note has prepayment and conversion features. The Conversion Price shall be the lesser of (i)
the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest complete Trading
Day prior to the date of this Note or (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities
of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events)
(also subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 60% multiplied by
the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest one (1)
Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading
Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of the (i) lowest
traded price and (ii) lowest closing bid price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the
“Principal Market”) as reported by a reliable reporting service (“Reporting Service”) designated by the
Holder (i.e. Bloomberg) or, if the Principal Market is not the principal trading market for such security, on the principal securities
exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is
not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted
on the OTC Markets.
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. The interest rate of 10.0% per annum. Upon an event of default, the interest rate
will be equal the lesser of (i) twenty-four percent (24%) per annum and (ii) the maximum amount permitted under law from the due
date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price is the lesser
of: (i) the lowest closing price of the Common Stock during the previous twenty (20) Trading Day period ending on the latest complete
Trading Day prior to the date of this Note, and (ii) the Variable Conversion Price (as defined herein) (subject to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities
of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).
The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount
rate of 40%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty
(20) Trading Days on which at least 100 shares of Common Stock were traded including and immediately preceding the Conversion Date.
“Trading Price” means, for any security as of any date, the lowest trade price on the OTC Pink, OTCQB or applicable
trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the
OTC Pink is not the principal trading market for such security, the trading price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no trading price of such security is available in any
of the foregoing manners, the average of the trading prices of any market makers for such security that are listed in the “pink
sheets” by the National Quotation Bureau, Inc.
On February 13, 2020, the Company closed a
private financing with East Capital Investment Corporation (“East Capital” or the “Holder”) by issuing
a convertible note (the “Note”). The Note has an original principal amount of $50,000 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 EMA Financial 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. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days
prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.
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. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days
prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties.
On March 12, 2020, the Company closed a private
financing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) 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 Fidelis with the remaining $2,008 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 March 12, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion
features. The conversion price shall equal to a price which is a 40% discount to the lowest trading price in the ten (10) days
prior to the day that the Holder requests conversion, unless otherwise modified by mutual agreement between the Parties. In connection
with the issuance of the Armada Note, the Company granted Armada a five-year cashless warrant (the “Warrant”) to purchase
4,200 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 1 year
with the maturity date on July 17, 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 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 EMA Financial with the remaining $13,921 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 July 24, 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 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 EMA Financial 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. 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 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.
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 one 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 nine 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 one 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.
The term of this convertible note is one 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, 2020.
Counterparties
|
|
Issuance date
|
|
Maturity date
|
|
Principal Amount
|
|
Purchase Price
|
|
Discount on Note issuance
|
|
Note issuance costs
|
|
Proceeds Received (USD)
|
EMA Financial
|
|
November 18, 2019
|
|
August 18, 2020
|
|
$
|
75,000
|
|
|
$
|
68,500
|
|
|
$
|
6,500
|
|
|
$
|
18,763
|
|
|
$
|
64,737
|
Peak One Opportunity
|
|
December 9, 2019
|
|
December 9, 2022
|
|
$
|
85,000
|
|
|
$
|
76,500
|
|
|
$
|
8,500
|
|
|
$
|
11,188
|
|
|
$
|
65,312
|
Crown Bridge (Tranche I)
|
|
January 8, 2020
|
|
January 8, 2021
|
|
$
|
40,500
|
|
|
$
|
36,500
|
|
|
$
|
4,000
|
|
|
$
|
1,508
|
|
|
$
|
34,992
|
Auctus Fund Note
|
|
December 31, 2019
|
|
September 30, 2020
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
15,658
|
|
|
$
|
59,342
|
East Capital
|
|
February 13, 2020
|
|
February 13, 2021
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
$
|
6,508
|
|
|
$
|
43,492
|
Fidelis Capital
|
|
February 19, 2020
|
|
February 19, 2021
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
$
|
6,513
|
|
|
$
|
43,487
|
Armada Partners
|
|
March 12, 2020
|
|
March 12, 2021
|
|
$
|
38,500
|
|
|
$
|
35,000
|
|
|
$
|
3,500
|
|
|
$
|
2,008
|
|
|
$
|
32,992
|
EMA Financial
|
|
July 17, 2020
|
|
July 17, 2021
|
|
$
|
50,000
|
|
|
$
|
47,500
|
|
|
$
|
2,500
|
|
|
$
|
4,513
|
|
|
$
|
42,987
|
Crown Bridge (Tranche II)
|
|
July 23, 2020
|
|
July 23, 2021
|
|
$
|
40,500
|
|
|
$
|
36,500
|
|
|
$
|
4,000
|
|
|
$
|
2,208
|
|
|
$
|
34,292
|
Power Up Lending (Tranche I)
|
|
July 24, 2020
|
|
July 24, 2021
|
|
$
|
130,000
|
|
|
$
|
130,000
|
|
|
$
|
-
|
|
|
$
|
13,921
|
|
|
$
|
116,079
|
Power Up Lending (Tranche II)
|
|
August 18, 2020
|
|
August 18, 2021
|
|
$
|
63,000
|
|
|
$
|
63,000
|
|
|
$
|
-
|
|
|
$
|
8,061
|
|
|
$
|
54,939
|
|
|
|
|
|
|
$
|
697,500
|
|
|
$
|
668,500
|
|
|
$
|
29,000
|
|
|
$
|
90,853
|
|
|
$
|
592,647
|
The below table summarizes all the convertible
notes issued during the six months ended February 28, 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
|
|
June1, 2021
|
|
|
75,000
|
|
|
|
71,250
|
|
|
|
3,750
|
|
|
|
9,752
|
|
|
|
61,498
|
Power Up Lending
|
|
October8, 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
|
|
|
$
|
30,933
|
|
|
$
|
233,017
|
The following table summarizes the convertible
note and derivative liability in the balance sheet at February 28, 2021:
Balance, August 31, 2020
|
|
$
|
438,921
|
Principal
|
|
$
|
(160,846)
|
Discount on Note issuance
|
|
$
|
48,139
|
Accrued interest expense
|
|
$
|
(909)
|
Derivative liability
|
|
$
|
(19,094)
|
Balance, February 28, 2021
|
|
$
|
306,212
|
The Company valued its derivatives liability
using Monte Carlo simulation. Assumptions used as of February 28, 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 February 28, 2021.
The Company recognizes gain due to convertible
feature of $19,094 in the income statement for the six months ended February 28, 2021.
The
Company prepaid nine convertible notes during the six months ended February 28, 2021 as below:
Convertible
Notes
|
Beginning
Principle after Note Conversion
|
Total
Interest Accrued
|
Paid
Date
|
Paid
Principle
|
Paid
Interest
|
Principal
balance Outstanding
|
Payment
amount
|
Loss
from prepaid convertible note
|
Crown
Bridge (Tranche I)
|
1,082
|
2,641
|
12/9/2020
|
(1,082)
|
(2,641)
|
-
|
72,500
|
(26,732)
|
Crown Bridge (Tranche
II)
|
40,500
|
1,545
|
12/9/2020
|
(40,500)
|
(1,545)
|
-
|
EMA Financial
|
50,000
|
1,990
|
12/9/2020
|
(50,000)
|
(1,990)
|
-
|
72,800
|
(20,810)
|
Power Up Lending
|
130,000
|
6,491
|
1/22/2021
|
(130,000)
|
(6,491)
|
-
|
190,925
|
(54,434)
|
Power Up Lending
|
63,000
|
3,042
|
2/10/2021
|
(63,000)
|
(3,042)
|
-
|
92,380
|
(26,338)
|
East Capital
|
40,500
|
2,461
|
-
|
-
|
-
|
62,700
|
-
|
|
Power Up Lending
|
50,000
|
3,042
|
-
|
-
|
-
|
55,000
|
-
|
|
Jefferson Street
|
50,000
|
4,097
|
-
|
-
|
-
|
82,500
|
-
|
|
FirstFire Global
|
38,500
|
6,586
|
-
|
-
|
-
|
75,000
|
-
|
|
Total
|
463,582
|
31,895
|
-
|
(284,582)
|
(15,709)
|
275,200
|
-
|
(128,315)
|
The Holders converted convertible notes to
common shares during the six months ended February 28, 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
|
|
|
|
5,284.50
|
|
|
|
5,154
|
|
|
|
—
|
|
|
|
10,439
|
|
|
|
1,000
|
|
|
|
—
|
|
|
$
|
0.00812
|
|
|
|
1,408,800
|
Total
|
|
|
|
|
|
|
5,284.50
|
|
|
|
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
|
|
|
|
|
|
|
33,294.51
|
|
|
|
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.
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
|
|
|
|
13,300.00
|
|
|
|
250
|
|
|
|
—
|
|
|
|
13,550
|
|
|
|
—
|
|
|
|
13,300
|
|
|
$
|
0.01020
|
|
|
|
1,328,431
|
September 25, 2020
|
|
|
13,300
|
|
|
|
13,300.00
|
|
|
|
129
|
|
|
|
—
|
|
|
|
13,429
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.00960
|
|
|
|
1,398,854
|
Total
|
|
|
|
|
|
|
26,600.00
|
|
|
|
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
|
|
|
|
25,671.15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,671
|
|
|
|
—
|
|
|
|
15,329
|
|
|
$
|
0.01218
|
|
|
|
2,107,648
|
September 9, 2020
|
|
|
15,329
|
|
|
|
15,328.85
|
|
|
|
2,605
|
|
|
|
—
|
|
|
|
17,934
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.01020
|
|
|
|
1,758,257
|
Total
|
|
|
|
|
|
|
41,000.00
|
|
|
|
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
|
|
|
|
13,000.00
|
|
|
|
213
|
|
|
|
—
|
|
|
|
13,213
|
|
|
|
500
|
|
|
|
12,500
|
|
|
$
|
0.01020
|
|
|
|
1,344,363
|
October 6, 2020
|
|
|
12,500
|
|
|
|
12,500.00
|
|
|
|
38
|
|
|
|
—
|
|
|
|
12,538
|
|
|
|
500
|
|
|
|
—
|
|
|
$
|
0.00960
|
|
|
|
1,358,145
|
Total
|
|
|
|
|
|
|
25,500.00
|
|
|
|
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
|
|
|
|
6,400.00
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,400
|
|
|
|
1,250
|
|
|
|
14,467
|
|
|
$
|
0.00765
|
|
|
|
1,000,000
|
September 22, 2020
|
|
|
14,467
|
|
|
|
5,635.00
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,635
|
|
|
|
1,250
|
|
|
|
8,832
|
|
|
$
|
0.00765
|
|
|
|
900,000
|
October 1, 2020
|
|
|
8,832
|
|
|
|
7,750.00
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,750
|
|
|
|
1,250
|
|
|
|
1,082
|
|
|
$
|
0.00720
|
|
|
|
1,250,000
|
Total
|
|
|
|
|
|
|
19,785.00
|
|
|
|
|
|
|
|
—
|
|
|
|
19,785
|
|
|
|
3,750
|
|
|
|
|
|
|
|
|
|
|
|
3,150,000
|
NOTE 9 - 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 8). 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 zero,
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 zero,
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 zero, remaining contractual life of 4.86, 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 zero,
remaining contractual life of 4.78, 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 zero, remaining contractual life of 4.90, 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 zero, remaining contractual life of 4.92, and an average expected volatility of 55.29%.
As of February 28, 2021, the Company exercised
the following warrant shares to acquire common shares via cashless exercises as below:
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
|
|
|
|
3,724,982
|
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
|
45,851,221
|
$375,000
|
If the Market Price of one share of Common
Stock is greater than the Exercise Price, the Holder may elect to receive Warrant Shares pursuant to a cashless exercise, in lieu
of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining
unexercised) by surrender of this Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of
Common Stock computed using the formula of X = Y (A-B)/A, where X, Y, A, B are as below.
X = the number of Warrant Shares to be issued to Holder.
Y = the number of Warrant Shares that the Holder elects
to purchase under this
Warrant (at the date of such calculation).
A = the Market Price (at the date of such calculation).
B = Exercise Price (as adjusted to the date of such calculation).
The exercise prices for all the warrants are
subject to anti-dilution adjustments. If the Company issues common stocks under a purchase agreement, issue options, or convert
notes to common stocks at a lower price than the warrant exercise prices while the warrants are still outstanding, such lower price
is the base price that the warrant exercise price can be reduced to. As such, the Holder will receive additional warrant shares
to keep the same warrant value as the original issuance before the exercise price is adjusted down.
A summary of the status of the Company’s
warrants as of February 28, 2021 is presented below. The number of shares is adjusted in accordance with the anti-dilution adjustment
and equals the original number of warrant shares times the original exercise prices divided by based prices. Base price is either
the note conversion price or the share issuance price used by the Company while the warrants are outstanding.
|
|
Number of warrants
|
|
|
Original shares issued
|
|
Anti-dilution Adjusted
|
Warrants as of August 31, 2020
|
|
|
793,920
|
|
|
|
68,163,661
|
Warrants granted
|
|
|
—
|
|
|
|
—
|
Exercised, forfeited or expired
|
|
|
(793,920
|
)
|
|
|
(68,163,661)
|
Outstanding as of February 28, 2021
|
|
|
—
|
|
|
|
—
|
Exercisable as of February 28, 2021
|
|
|
—
|
|
|
|
—
|
(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.
NOTE 10 - 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.
Derivative liabilities of conversion features
in convertible notes are classified within Level 3. We estimate the fair values of these liabilities at February 28, 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 February 28, 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 February 28, 2021
|
Derivative liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,490
|
|
|
$
|
45,490
|
|
|
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
|
|
$
|
163,372
|
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
|
NOTE 11– RELATED
PARTY TRANSACTIONS
In support of the Company’s efforts and
cash requirements, it may rely on advances from related parties 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 shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are
considered temporary in nature and have not been formalized by a promissory note. As of February 28, 2021 and August 31, 2020,
there are no such related party transactions.
The Company has entered into a patent license
agreement with a related party Guangzhou Shengshituhua Film and Television Company Limited (“Licensor”). The agreement
is for a term of 5 years commencing on the effective date on June 1, 2017. The Company has already paid the licensor a non-refundable,
up-from payment of $500,000 and shall pay a royalty of 20% of the gross revenue realized from the sale of licensed products and
sub-licensing of this patent every year. The royalty expenses during the six months ended February 28, 2021 and February 29, 2020
are $30,720 and $30,720, respectively.
Youall Perform Services Ltd, owned by the Company’s
Board of Director Jianli Deng, has been collecting revenue on behalf of the Company from the performance matching platform “Ai
Bian Quan Qiu”. As of February 28, 2021, the Company has $1,439 related party receivable from Youall Perform Services Ltd
for the revenue collected from “Ai Bian Quan Qiu” on behalf of the Company.
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 “Ai Bian Quan Qiu” 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 website maintenance contract over the next two years. The major website
of this Company is ABQQ.tv for video streaming. The contract amount remains to be $128,000, out of which $108,800 was
previously paid and $19,200 will be due on the twenty first month after the contract related signing date of July 31,
2020.
The Company rented an office from Zestv Studios
Ltd., owned by the Chief Executive Officer Chiyuan Deng, and incurred a total related party payable of $5,504 as there is a one-month
lag in payment of the office rent.
On August 29, 2020, the Company entered into a Separation Agreement
and Release with each of Jianli Deng, Lijun Yu and Linqing Ye. Pursuant to the agreements, Mr. Deng resigned as Secretary and Treasurer,
Ms. Yu resigned as Chief Marketing Officer and Mr. Ye resigned as Chief Operating Officer. Mr. Deng will remain on as a member
of our board of directors. The Separation and Release Agreement cancelled the employment agreements for each of Messrs. Deng, Yu
and Ye, and provided them each an indebtedness payment within five (5) business days of the agreements. Mr. Deng will receive $110,000
USD, Ms. Yu will receive $110,000 USD and Mr. Ye will receive $120,000 USD. We received a release of all claims from these prior
officers. In addition, Mr. Deng, Ms. Yu, and Mr. Deng agreed to return to the Company their unvested restricted shares of 130,556,
147,222, and 147,222, respectively.
On September 11, 2020, we entered into an amended employment agreement
with Chiyuan Deng, our Chief Executive Officer. Pursuant the amended agreement, we 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 our newly created Series A Preferred Stock at par value $0.001.
During the six months ended February 28, 2021,
$90,000 salary and $50,000 bonus were paid in cash to Chief Executive Officer. $12,500 salary was paid in cash to Chief Financial
Officer. $1,710 salary was paid in cash to Chief Investment Officer. $27 and $30,100 in the form of stock-based compensation were
paid to Chief Investment Officer and Chief Executive Officer, respectively. During the six months ended February 29, 2020, $85,102
was paid to five executives in the form of stock-based compensation and $7,500 cash salary was paid to the Chief Financial Officer.
NOTE 12– EQUITY
The Company has 173,434,446 and 46,661,417
common shares issued and outstanding as of February 28, 2021 and August 31, 2020, respectively. These common shares were held by
approximately 531 and 520 shareholders of record at February 28, 2021 and August 31, 2020, respectively. The Company has 100,000
and 0 series A preferred shares issued and outstanding as of February 28, 2021 and August 31, 2020, respectively. The Company has
20,000 and 0 series B preferred shares issued and outstanding as of February 28, 2021 and August 31, 2020, respectively. The Company
has 280,025 and 0 series C preferred shares issued and outstanding as of February 28, 2021 and August 31, 2020, respectively.
The Company has the following equity activities
during the six months ended February 28, 2021:
Common shares
|
•
|
The Company issued 19,000,000 shares of common stock for cash at $0.0140 per share.
|
|
|
|
|
•
|
The Company issued 25,406,238 shares of common stock from note conversion. Refer to Note 8 for further details.
|
|
|
|
|
•
|
The Company issued
56,407,922 shares of common stock from warrant exercises. Refer to Note 9 for further details.
|
|
|
|
|
•
|
261,111 shares of
common stock returned to the Company due to officer resignations.
|
|
|
|
|
•
|
The Company issued 15,220,000 shares of put
shares for cash at $0.015312, $0.014256, $ 0.01452, 0.077528, or 0.09856 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 9,500,000 shares of stock
for consulting services.
|
Preferred shares
The Company authorized 10,000,000 shares of
preferred shares with a par value $0.001. During the six months ended February 28, 2021, the Company issued 100,000 shares of Series
A Preferred shares at par value $0.001, 20,000 shares of Series B Preferred shares at $16 per share, and 280,025 shares of Series
C Preferred shares at $0.8696 per share
Warrant shares
|
•
|
The Company canceled 13,920 warrant shares with Crown Bridge and Armanda Partners.
|
|
•
|
Peak One Opportunities exercised the remaining 10% of the 10,000 warrant shares issued on December 9, 2019 and 100% 750,000 warrant shares issued on July 30, 2020.
|
|
•
|
EMA Financial exercised all 30,000 warrant shares issued on January 17, 2020.
|
NOTE 13– INCOME TAXES
On December 22, 2017, the United States enacted
the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completed
the accounting for the effects of the Act. The Company’s financial statements for the year ended August 31, 2019 reflect
certain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes.
Components of net deferred tax assets, including
a valuation allowance, are as follows as of February 28, 2021 and August 31, 2020:
|
|
February
28,
2021
|
|
August
31, 2020
|
Deferred
tax asset attributable to:
|
|
|
|
|
|
|
|
Net
operating loss carry over
|
|
$
|
534,090
|
|
|
$
|
447,765
|
Less:
valuation allowance
|
|
|
(534,090
|
)
|
|
|
(447,765)
|
Net
deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
The valuation allowance for deferred tax assets
was $534,090 as of February 28, 2021 and $447,765 as of August 31, 2020. 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 February 28, 2021 and August 31, 2020.
Reconciliation between the statutory rate and the effective
tax rate is as follows for the six months ended February 28, 2021 and February 29, 2020:
|
|
Six months ended
|
|
|
February 28,
|
|
|
2021
|
|
2020
|
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 six months ended February 28, 2021
and February 29, 2020, the Company and its subsidiary have incurred a loss of (879,301) and ($415,331), respectively. As a result,
the Company and its subsidiary did not incur any income tax during the six months ended February 28, 2021 and February 29, 2020.
NOTE 14 – CONCENTRATION RISK
18% and 52% of revenue was generated from one
customer during the six months ended February 28, 2021 and February 29, 2020, respectively.
100% of the account receivable balance was
due from one customer as of February 28, 2021 and August 31, 2020.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Operating lease
The Company leases office premises in Hong
Kong, a display store in Hong Kong and another office in New York city under non-cancelable operating lease agreements with an
option to renew the lease. The Company closed down the display store due to the COVID-19 impact and uncertainties of the economy
in Hong Kong. The lease agreement for the display store, which has the original term of February 23, 2019 to February 22, 2022,
was terminated on November 22, 2020. The cash lease expense for the six months ended February 28, 2021 and February 29, 2020 was
$48,293 and $36,557, respectively. All leases are on a fixed payment basis. None of the leases include contingent rentals. The
Company had lease commitment of $87,256 as of February 28, 2021, of which $76,248 is within one year.
In accordance with ASC 250-10-45-14, the adoption
of ASC 842 lease accounting standard has resulted in $49,483 lease expenses for the six months ended February 28, 2021.
As of February 28,
|
|
Commitments
|
2021
|
|
$
|
76,248
|
2022
|
|
$
|
11,008
|
Total Lease Payments
|
|
$
|
87,256
|
Less: imputed interest
|
|
$
|
(1,674)
|
Present value of lease liabilities
|
|
$
|
85,582
|
Current portion of obligations under operating leases
|
|
$
|
74,619
|
Obligations under operating leases, non-current
|
|
$
|
10,962
|
NOTE 16 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to February 28, 2021 to the date these financial statements were issued.
Covid-19 impact:
In December 2019, a novel strain of coronavirus
(COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter of 2020 has caused significant volatility in
the U.S. and international markets. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result
in a material adverse impact on the Company’s financial position, operations and cash flows. It is too early to quantify
the impact this situation will have on company revenue and profits at this time. Possible areas that may be affected include, but
are not limited to, disruption to the Company’s customers and revenue, labor workforce, unavailability of supplies used in
operations, etc. Accordingly, Management is evaluating the Company’s liquidity position, reduction in revenues, and reviewing
the analysis of the Company’s financial performance as the Company seeks to withstand the uncertainty related to the coronavirus.
As no large-crowd gathering has been allowed since the outbreak of COVID-19, the Company has not generated any revenue from the
Ai Bian Quan Qiu performance matching platform. Consequently, the Company has decided to impair all of the intangible asset carrying
value related to the Ai Bian Quan Qiu performance matching platform and its Wechat official account, given that it is uncertain
whether this platform will continue generating any revenue.
Prepayments
for convertible notes:
On March 1,
2021, the Company prepaid a convertible promissory note dated September 1, 2020 (the “Note”) held by FirstFire Global
Opportunities Fund, LLC with the principal amount of $75,000. The Company prepaid $108,125.00 on the Note, which accounts for
all the principal and accrued but unpaid interest.
On March 1,
2021, we prepaid a convertible promissory note dated September 1, 2020 (the “Note”) held by Jefferson Street Capital
LLC with the principal amount of $82,500. We prepaid $116,974.69 on the Note, which accounts for all the principal and accrued
but unpaid interest.
On April 7,
2021, the Company prepaid a convertible promissory note dated October 9, 2020 (the “Note”) held by East Capital Investment
Corporation in the principal amount of $62,700. The Company prepaid $87,467 on the Note, which accounts for all the principal
and accrued but unpaid interest.
On April 7,
2021, the Company prepaid a convertible promissory note dated October 8, 2020 (the “Note”) held by Power Up Lending
Group Ltd. in the principal amount of $55,000. The Company prepaid $ 80,797 on the Note, which accounts for all the principal
and accrued but unpaid interest.
Issue of Series
D Preferred Stock:
On
March 10, 2021, the Company entered a Securities Purchase Agreement (the “Securities Purchase Agreement”) with GHS
Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to $5,000,000 of the Company’s Series
D Preferred Stock in exchange for 5,000 shares of Series D Preferred Stock. The first tranche, promptly upon execution of the
Securities Purchase Agreement, was for the purchase of 250 shares of Series D Preferred Stock for $250,000. The remaining tranches
(each consisting of the sale of 500 shares of Series D Preferred Stock for $500,000 shall occur so long as the Equity Conditions
are met as defined in the Securities Purchase Agreement. The Company issued to GHS commitment shares of 75 shares of Series D
Preferred Stock.
New office in
Singapore:
On April 13, 2021,
the Company announced operation in Singapore. The office is located at 24 Raffles Place, Level 28, Clifford Centre, Singapore
048621. The Singapore office will be utilized to promote the video streaming of www.ABQQ.tv in the international market.
AB INTERNATIONAL GROUP CORP.
69,861,682 Shares of Common Stock
PROSPECTUS
April 20, 2021