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NOTE 9 – CONVERTIBLE NOTES

12 Months Ended

Aug. 31, 2022

NOTE 9 – CONVERTIBLE NOTES

On November 18, 2019, the Company closed a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible note (the “Note”). In connection with the issuance of the Note, the Company granted EMA Financial a five year cashless warrant (the “Warrant”) to purchase 30,000 shares of common stock at an exercise price of $12.5 per share. As of November 30, 2020, EMA Financial exercised 100% of the total warrant shares to acquire 45,851,221 common shares through cashless exercises.

On December 13, 2019, the Company entered into a Securities Purchase Agreement with Peak One Opportunity Fund, L.P., a Delaware limited partnership (“Peak One” or the “Holder”), pursuant to which we issued and sold to the Peak One a convertible promissory note. The Note has an original principal amount of $235,000, and upon issuance, the Company is expected to receive net proceeds of $211,500 after subtracting an original issue discount of $23,500 per the Note agreement. This Note carries a prorated original issue discount of up to $23,500 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note. Peak One has converted all the convertible notes into 1,096,846 common shares by July 16, 2020. In connection with the issuance of the Note, the Company granted Peak One a five year cashless warrant (the “Warrant”) to purchase 10,000 shares of common stock at an exercise price of $10 per share. As of November 30, 2020, Peak One exercised 100% of the total warrant shares to acquire 3,720,326 common shares through cashless exercises.

On January 8, 2020, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC, a New York limited company (“Crown Bridge”), pursuant to which the Company issued and sold to Crown a convertible promissory note, dated January 8, 2020, in the principal amount of $121,500. Upon issuance, the Company is expected to receive net proceeds of $109,500 after subtracting an original issue discount of $12,000 per the Note agreement. This Note carries a prorated original issue discount of up to $12,000 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note. In connection with the issuance of each tranche of the Note, the Company granted Crown Bridge a five year cashless warrant (the “Warrant”) to purchase 4,680 shares of common stock at an exercise price of $12.5 per share.

On December 31, 2019, the Company closed a private financing with Auctus Capital Partners, LLC, (“Auctus” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $75,000 with no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $75,000 and the Holder shall pay $75,000 of the consideration (the “First Tranche”). Out of $75,000 consideration, the Company has received $59,342 cash from Auctus with the remaining $15,658 spent as legal expense for note issuance and due diligence fees. The term of this convertible note is 9 months with the maturity date on September 30, 2020.

On February 13, 2020, the Company closed a private financing with East Capital Investment Corporation (“East Capital” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000 with no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $50,000 and the Holder shall pay $50,000 of the consideration (the “First Tranche”). Out of $50,000 consideration, the Company has received $43,492 cash from East Capital with the remaining $6,508 spent as legal expense for note issuance and due diligence fees. The term of this convertible note is 1 year with the maturity date on February 13, 2021.

On February 19, 2020, the Company closed a private financing with Fidelis Capital, LLC, (“Fidelis” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000 with no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $50,000 and the Holder shall pay $50,000 of the consideration (the “First Tranche”). Out of $50,000 consideration, the Company has received $43,487 cash from Fidelis with the remaining $6,513 spent as legal expense for note issuance and due diligence fees. The term of this convertible note is 1 year with the maturity date on February 19, 2021.

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTES (Continued)

On March 12, 2020, the Company closed a private financing with Armada Capital Partners, LLC, (“Armada” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $38,500 and an original issue discount of $3,500 per the Note agreement. As part of initial closing the outstanding principal amount shall be $38,500 and the Holder shall pay $35,000 of the consideration (the “First Tranche”). Out of $35,000 consideration, the Company has received $32,992 cash from Armada with the remaining $2,008 spent as legal expense for note issuance and due diligence fees. The term of this convertible note is one year with the maturity date on March 12, 2021. In connection with the issuance of the Armada Note, the Company granted Armada a five year cashless warrant (the “Warrant”) to purchase 4,200 shares of the Company’s common stock at an exercise price of $12.50 per share.

On July 17, 2020, the Company closed a private financing with EMA Financial, LLC (“EMA Financial” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $50,000, and upon issuance, carries a prorated original issue discount of up to $2,500 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note. As part of initial closing the outstanding principal amount shall be $50,000 and the Holder shall pay $47,500 of the consideration. Out of $47,500 consideration, the Company has received $42,987 cash from EMA Financial with the remaining $4,513 spent as legal expense for note issuance and due diligence fees. The term of the convertible note is one year with the maturity date on July 17, 2021.

On July 24, 2020, the Company closed a private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $130,000 with no original discount upon issuance. As part of initial closing the outstanding principal amount shall be $130,000 and the Holder shall pay $130,000 of the consideration (the “First Tranche”). Out of $130,000 consideration, the Company has received $116,079 cash from Power up with the remaining $13,921 spent as legal expense for note issuance and due diligence fees. The term of this convertible note is one year with the maturity date on July 24, 2021.

On August 18, 2020, the Company closed another private financing with Power Up Lending Group Ltd., (“Power up” or the “Holder”) by issuing a convertible note (the “Note”). The Note has an original principal amount of $63,000 with no original discount upon issuance. As part of closing the outstanding principal amount shall be $63,000 and the Holder shall pay $63,000 of the consideration (the “Second Tranche”). Out of $63,000 consideration, the Company has received $54,939 cash from Power up with the remaining $8,061 spent as legal expense for note issuance and due diligence fees. The term of this convertible note is one year with the maturity date on August 18, 2021.

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

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTES (Continued)

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

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

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

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

The term of this convertible note is 9 months with the maturity date on June 1, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 24.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

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

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

The term of this convertible note is 1 year with the maturity date on October 8, 2021. The interest rate of 10.0% per annum. Upon an event of default, the interest rate will be equal to the 22.0% per annum from the due date thereof until the same is paid. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

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

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

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTES (Continued)

The term of this convertible note is 1 year with the maturity date on October 9, 2021. The interest rate of 10.0% per annum. The convertible note has prepayment and conversion features. The conversion price shall equal the lower of: (i) the lowest closing price during the preceding 20 trading day period ending on the latest complete trading day prior to the Issue Date of this Note (the “Closing Price”) or (ii) 60.0% of the lowest traded price for the common stock on the principal market during the 20 consecutive trading immediately preceding the Conversion Date.

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

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

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


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

The Company valued its derivatives liability using Monte Carlo simulation. Assumptions used as of August 31, 2021 include (1) risk-free interest rates of 0.06%, (2) expected equity volatility of 66.25% - 66.3%, (3) zero dividends, (4) discount for lack of marketability of 30% (5) remaining terms and conversion prices as set forth in the convertible note agreement, and (6) the common stock price of the underlying share on the valuation date of August 31, 2021.

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

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTES (Continued)

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

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

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

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

EMA Financial:

Conversion date

Beginning principal balance

Principal Amount Converted

Interest Amount Converted

MFN Principal

Total converted principals and unpaid interest

Closing
Fee

Ending principal balance

Conversion Price

Converted
Shares

September 1, 2020

5,285

5,154

—

10,439

1,000

—

0.00812

1,408,800

Total

5,285

5,154

—

10,439

1,000

1,408,800

Auctus Capital Partners:

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

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

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTES (Continued)

East Capital:

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

Fidelis Capital:

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

Armada Partners:

Conversion date Beginning principal balance Principal Amount Converted Interest Amount Converted MFN Principal Total converted principals and unpaid interest Closing
Fee Ending principal balance Conversion Price Converted
Shares

September 25, 2020 25,500 13,000 213 —   13,213 500 12,500 $ 0.01020 1,344,363

October 6, 2020 12,500 12,500 38 —   12,538 500 —   $ 0.00960 1,358,145

Total 25,500 251 —   25,751 1,000 2,702,508

Crown Bridge (Tranche I):

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

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTES (Continued)

In summary, the Company has either converted or prepaid all the outstanding convertible notes as of August 31, 2021. The below table lists conversions and prepayments during each quarter in fiscal 2021.

Sr. No. Note Total convertible note issued Total principal converted as of 08/31/2020 Total principal converted as of 11/30/2020 Total principal paid off as of 2/28/2021 Total principal paid off as of 8/31/2021 Principal balance Outstanding as of 8/31/2021

1 EMA Financial 90,000     (84,716)     (5,285)            -               -               -

2 Peak One Opportunity           85,000     (85,000)            -                     -               -                     -

3 Auctus Fund Note 90,000     (41,705)   (48,295)                  -                     -                     -

4 Crown Bridge (Tranche I)           40,500     (19,633)   (19,785)        (1,082)            -               -

5 East Capital          50,000     (23,400)   (26,600)            -               -               -

6 Fidelis Capital 50,000       (9,000)               (41,000)            -               -               -

7 Armada Partners           38,500     (13,000)   (25,500)            -               -               -

8 Crown Bridge (Tranche II) 40,500            -    -    (40,500)            -               -

9 EMA Financial (Issue Date: 7.17.2020)                      50,000 -    -                                (50,000)            -               -

10 Power Up Lending (Issue Date: 07.24.2020)          130,000            -               -                              (130,000)            -               -

11 Power Up Lending (Issue Date: 08.18.2020)                      63,000            -               -                                (63,000)            -               -

12 East Capital (Issue Date: 10.09.2020)                      62,700            -               -               -            (62,700)            -

13 Power Up Lending (Issue Date: 10.08.2020)                      55,000            -               -               -             (55,000)            -

14 Jefferson Street (Issue Date: 09.01.2020)                      82,500            -               -               -             (82,500)            -

15 FirstFire Global (Issue Date: 09.01.2020)                      75,000            -               -               -             (75,000)            -

Total       1,002,700 (276,454)             (166,464)   (284,582) (275,200)            -

As of August 31, 2021, all convertible notes were either converted or paid. No convertible notes were issued in the year ended August 31, 2022.

AB INTERNATIONAL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS