NOTE 14 – INCOME TAXES

3 Months Ended

Nov. 30, 2021

Income Tax Disclosure [Abstract]

NOTE 14 – INCOME TAXES

NOTE 14 – INCOME TAXES

Components of net deferred tax assets, including a valuation allowance, are as follows as of November 30, 2021 and August 31, 2021

	November 30, 2021			August 31, 2021
Deferred tax asset attributable to:
Net operating loss carry over	$	945,638		$	871,681
Less: valuation allowance		(945,638	)		(871,681	)
Net deferred tax asset	$	—		$	—

The valuation allowance for deferred tax assets was $945,638 as of November 30, 2021 and $871,681 as of August 31, 2021. 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 November 30, 2021 and August 31, 2021

Reconciliation between the statutory rate and the effective tax rate is as follows for the three months ended November 30, 2021 and November 30, 2020:

	Three months ended
	November 30, 2021,
	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 is 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 three months ended November, 2021 and November 30, 2020, the Company and its subsidiary have incurred a consolidated loss of $(1,052,045) and $(525,454), respectively. As a result, the Company and its subsidiary did not incur any income tax during the three months ended November 30, 2021 and November 30, 2020.

NOTE 15 – CONCENTRATION RISK

100% of revenue was generated from one customer during the three months ended November 30, 2020.

NOTE 16 – COMMITMENTS AND CONTINGENCIES

Operating lease 

As of November 30, 2021, the Company leases office premises in Hong Kong, an office in New York city, and an office in Singapore under non-cancelable operating lease agreements with an option to renew these leases. On November 22, 2020, the Company closed down a display store and terminated its lease, which has an original term from February 23, 2019 to February 22, 2022, as a result of the COVID-19 impact and uncertainties of the economy in Hong Kong. The cash lease expense for the years ended November 30, 2021 and November 30, 2020 was $23,808 and $26,681, respectively. All leases are on a fixed payment basis. None of the leases include contingent rentals. The Company had lease commitment of $1,111,363 as of November 30, 2021.

In accordance with ASC 250-10-45-14, the adoption of ASC 842 lease accounting standard has resulted in $1,111,361 lease expenses for the year ended November 30, 2021, including both cash and non-cash lease expenses.

		As of November 30, 2021	As of August 31, 2021
Total Lease Payments	$	1,132,824		$	48,822
Less: imputed interest	$	(21,463)		$	(596)
Present value of lease liabilities	$	1,111,361		$	48,226
Current portion of obligations under operating leases	$	166,834		$	48,226
Obligations under operating leases, non-current	$	944,527		$	0

NOTE 17 – SUBSEQUENT EVENTS  

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to November 30, 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.

Issuance of Common Stock:

On December 14, 2021, the Company received $21,840 for the issuance of 1,800,000 shares. On January 18, 2022, the Company received $41,558 for the issuance of 3,000,000 shares. Also on January 18, 2022, the Company issued 5,521,473 shares for the conversion of Series D preferred stock.

NFT Movie and Music Market (NFT MMM) Development and Maintenance Contract:

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

Officer Resignation:

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

Cancellation of Acquiring a Movie Copyright:

The Company acquired a movie copyright of “Too Simple” from Guang Dong Honor Pictures Ltd in July 2021 at a price of $1,271,680, which was to be paid in installments. As of November 30, 2021 and August 31, 2021, $1,184,385 and $644,785 was paid and recorded in long-term prepayment. On December 31, 2021, the Company entered into a termination contract with Guang Dong Honor Pictures Ltd to cancel the purchase of this movie copyright and will receive a full refund before May 31, 2022. Therefore, the Company has reclassified these amounts from long-term prepayment to other receivable on the balance sheet.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview 

AB International Group Corp. (the "Company", "we" or "us") was incorporated under the laws of the State of Nevada on July 29, 2013 and originally 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, including the 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.  Due to the quarantine and continuous control imposed by the state and local governments in areas affected by COVID-19, merchant advertising events have been suspended for 7 months. The Company decided to suspend the Ai Bian Quan Qiu platform, which, at the time, 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. Starting in January 2021, however, the Company started generating movie box-office revenue from the movie “Ai Bian Quan Qiu” as a result in the easing of COVID-19 restrictions.

On April 22, 2020, the Company announced the first phase development of its video streaming service. The online service will be marketed and distributed in the world under the brand name ABQQ.tv. The Company's professional team are sourcing such dramas and films to provide video streaming service on the ABQQ.tv. The video streaming website www.ABQQ.tv was officially launched on December 29, 2020. As of November 30, 2021, the Company acquired 59 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.

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

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

Covid-19

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

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

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

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

Results of Operations

Revenues 

Our total revenue reported for the three months ended November 30, 2021 was $0, compared with $76,800 for the three months ended November 30, 2020.

The decrease in revenue for the three months ended November 30, 2021 over the three months ended November 30, 2020 is mainly attributable to lack of any movie box-office revenue for the current period, where in 2020, we achieved revenue of $76,800 from the movie “Ai Bian Quan Qiu.”

100% of revenue was generated from one customer during the three months ended November 30, 2020.

Our cost of revenues was $686,567 for the three months ended November 30, 2021, as compared with $156,086 for the three months ended November 30, 2020. Most of the increase in cost of revenues for the three months ended November 30, 2021 was the result of amortizing movie broadcast rights, not present in the same period 2020.

As a result, we had a gross loss of $686,567 for the three months ended November 30, 2021, as compared with a gross loss of $79,286 for the three months ended November 30, 2020. The decrease in gross profit margin for the three months ended November 30, 2021 is largely to the high cost of amortizing movie broadcast rights combined with a lack of revenue.

We hope to generate increased revenues for the balance of the fiscal year with continued box office revenue of Our Treasures, as well as achieving enough customers to start subscriptions for ABQQ.tv

Operating Expenses 

Operating expenses increased to $363,967 for the three months ended November 30, 2021 from $237,496 for the three months ended November 30, 2020.

Our operating expenses for three months ended November 30, 2021 consisted of general and administrative expenses of $308,966 and related party salary and wages of $55,000. In contrast, our operating expenses for the three months ended November 30, 2020 consisted of general and administrative expenses of $231,146 and related party salary and wages of $6,350.

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

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

Other Expenses

We had other expenses of $1,511 for the three months ended November 30, 2021, as compared with other expenses of $208,672 for the three months ended November 30, 2020. Our other expenses in 2021 were mainly the result of preferred share dividend expense. Our other expenses in 2020 were mainly the result of interest expense and loss from the change in fair value.

 Net Loss

We incurred a net loss in the amount of $1,052,045 for the three months ended November 30, 2021, as compared with a net loss of $525,453 for the three months ended November 30, 2020. 

Liquidity and Capital Resources

As of November 30, 2021, we had $1,380,971 in current assets consisting of cash, prepaid expenses, related party receivables and amounts due from shareholders. Our total current liabilities as of November 30, 2021 were $1,611,998. As a result, we have a working capital deficit of $231,027 as of November 30, 2021 as compared with $228,669 as of August 31, 2021.

Operating activities used $629,550 in cash for the three months ended November 30, 2021, as compared with $1,744,973 used in cash for the same period ended November 30, 2020. Our negative operating cash flow in 2021 was mainly the result of our net loss for the quarter combined with operating changes in receivables. Our negative operating cash flow in 2020 was mainly the result of our net loss for the quarter combined with operating changes in accounts payable and accrued liabilities, and from related party payables.

Investing activities used $0 in cash for the three months ended November 30, 2021, as compared with $5,000 used for the three months ended November 30, 2020. We have zero investing cash flow for November 30, 2021. Our negative investing cash flow for November 30, 2020 was mainly the result of the purchase of movie and TV series rights.

Financing activities provided $667,965 for the three months ended November 30, 2021, as compared with $313,885 provided in financing activities for the three months ended November 30, 2020. Our positive financing cash flow for November 30, 2021 was the result of proceeds from sales of our common stock and preferred stock. Our positive financing cash flow for November 30, 2020 was the result of proceeds from convertible notes and sales of our common stock.

The company has discussed selling the mainland China broadcast right of 3 movies (“Love over the world”, “Our treasures”, “Confusion”) (the Company is anticipating to sign a contract by the end of February 2022). The Company is also contemplating selling all other mainland China broadcast rights of all films owned by the Company due to restrictions on the Company in accessing the royalties earned on mainland China. The company plans to continue to own all other copyrights & broadcast rights.

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

Off Balance Sheet Arrangements

As of November 30, 2021, there were no off-balance sheet arrangements.

Critical Accounting Policies

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

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

 Recently Issued Accounting Pronouncements

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 31, 2018. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of November 30, 2021, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of November 30, 2021, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending August 31, 2022: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended November 30, 2021 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error.   Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

See Risk Factors contained in our Form 10-K filed with the SEC on January 12, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company has the following equity activities during the three months ended November 30, 2021:

Common shares

The Company issued 5,500,000 shares of put shares for cash at $0.02288 and $0.02719 per share 

The Company issued 3,146,854 of common shares from preferred shares series D conversions

Preferred shares

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

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

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

None

Item 6. Exhibits
Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2021 formatted in Extensible Business Reporting Language (XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on the dates below on its behalf by the undersigned thereunto duly authorized.

AB INTERNATIONAL GROUP CORP.

By:	/s/ Chiyuan Deng
	Chief Executive Officer, Principal Executive Officer, and Director
	January 20, 2022

By:	/s/ Vella Deng
	Chief Financial Officer
	January 20, 2022