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 ("Inception") 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.
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 model 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 5 years, subject
to a right to renew for an additional 5 year term. 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 all amounts due under the Agreement.
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.
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We are in the process of using the underlying Technology to create a smartphone
video mix app and social video sharing platform. We are developing this new apps
for use with iOS and Android smartphones and we expect to launch the app
sometime in the beginning of next year. We expect that this new app will
transform the way users create and share art talent and fun. The app is expected
to take advantage of the core design philosophy of "My film anyone, anywhere,
anytime be together." 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.
Today, the word "Meitu" is used as a verb for "enhancing images", amd TikTok is
a short video sharing platform. Our Videomix app, yet to be released, is
expected to be used as a verb for "enhancing videos synthesis production," but
also as a brand that represents talent, trendiness, youthfulness and funniness.
To better meet our users' demands for higher quality selfies, we are also
planning to launch the Patent (Mobile communication equipment video synthesis
production and distribution system) License Program. The program markets our
Technology to big brand smartphones makers to highlight our patent apps
integrate proprietary video synthesis production and distribution system
processing algorithms and specialized video processors, which generate
high-quality selfies duet video synthesis. We have been in discussion with these
smartphone makers about our initiatives and selling points in an effort to
increase sales. Revenue from this program will be generated by license fees for
each smartphone with this video synthesis production and distribution system
function.
Fundamentally, we view ourselves as a mobile Internet company with our core
asset being our massive, active and fast-growing user base through registered
patent--Mobile communication equipment video synthesis production and
distribution system.
We believe that the VideoMix app will become an important part of users' social
lives online. We believe the provision of relevant products, content and
services will help us monetize our user base and enable us to create value for
our users at the same time. We intend to continue to drive our near-term revenue
growth through patent--Mobile communication equipment video synthesis production
and distribution system license fees from smartphone makers, since China's large
smartphone market continues to present significant opportunities. Our goal is
that at least 10% of smartphones in China will eventually contain this
integrated patent function. If we meet this goal, which would equate to around
40 million smartphones, which in turn result in about 200 million RMB in revenue
generated from patent license fees. As we have not yet commercialized the app
for sale, we do not expect to achieve any revenues until we launch the app and
make it available under our program, and we can provide no assurances that we
will be able to achieve commercialization or our revenue goals for the app.
According to preliminary data of the IDC Quarterly Mobile Phone Tracker, the
Chinese smartphone market shipped 105 million units during the second quarter of
2018. Following our successful monetization through smartphones, we have also
identified three other major opportunities for monetization, including content
use fees, advertising fees, KOL agency fees.
On March 10, 2018, we acquired intellectual property from Aura Blocks Ltd. for
$200,000. 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 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
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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.
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 with Aura Blocks
Limited to acquire a movie copy right for $768,000 and paid $153,600 of the
total balance. In December of 2018, another payment of $153,662 was made. The
remaining balance to Aura Blocks Limited is $460,738. 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 the end of
December 2019. This movie will also be included in the video library for the
Company's VideoMix app.
On September 5, 2018, the Company entered into an agreement with Aura Blocks
Limited to acquire a movie copyright for $768,000. 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 the end of
December 2019. This movie will also be included in the video library for the
Company's VideoMix app.
In December of 2018, we started 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.
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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.
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. The
Company expects to have similar short term note receivables for the next few
years.
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. The Company expects to have similar short term note
receivables for the next few years.
Results of Operations
Revenues
Our total revenue reported for the three months ended November 30, 2019 was
$156,405, compared with $74,240 for the three months ended November 30, 2018.
The increase in revenue for the three months ended November 30, 2019 over the
same periods ended 2018 is attributable to increased revenue from sublicensing
the VideoMix patent to Anyone Pictures Limited and the new revenue stream of
performance matching service fees generated from the Fan Dou He Pai Wechat
Official account.
We expect to continue to achieve steadily increasing revenues within the coming
months. However, as we are a start-up, we have limited operating history to rely
upon and we cannot guarantee that our business plan will be successful.
Our cost of revenues was $52,046 for the three months ended November 30, 2019,
as compared with $43,448 for the same period ended November 30, 2018.
As a result, we had gross profit of $104,358 for the three months ended November
30, 2019, as compared with gross profit of $30,792 for the same period ended
November 30, 2018.
We had a gross profit margin of 67% for the three months ended November 30,
2019, an increase from 41% over the same period ended 2018. The reason for the
increase in our gross profit margin in 2019 over 2018 is attributable to revenue
from the Wechat Official account for the Fan Dou He Pai performance matching
platform that started generating revenue in February, 2019 .
Operating Expenses
Operating expenses increased to $202,117 for the three months ended November 30,
2019 from $139,346 for the three months ended November 30, 2018.
Our operating expenses for the three months ended November 30, 2019 consisted of
general and administrative expenses of $155,743 and related party salary and
wages of $46,373. In contrast, our operating expenses for the same period ended
November 30, 2018 consisted of general and administrative expenses of $72,862
and related party salary and wages of $66,484. The detail by major category is
reflected in the table below.
Three Months Ended
November 30,
2019 2018
General and Administrative Expenses 155,743 101,846
Related Party Salary and Wages 46,373 37,500
Total Operating Expense $ 202,117 $ 139,346
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The main reason for the increase in operating expenses is attributable to
increased professional service fee, stock based compensation expense, salary,
rent, and depreciation of leasehold improvement and fixed asset .
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 compliance as our business grows more complex and more
expensive to maintain.
Other Income (Expenses)
We had other income of $34,404 for the three months ended November 30, 2019, as
compared with other expenses of $120,000 for the same period ended 2018. Our
other income for 2019 is the result of interest income of $52,488 in connection
with our loans to All In One Media, previously named as Aura Blocks Limited, in
August and September of 2019, respectively, offset by $18,084 loss on change in
fair value of derivative liability. The note receivable entered in August, 2019
is a one-year loan of $1,280,000 the Company lent to All In One Media Ltd at an
annual interest rate of 10%. The note receivable entered in September, 2019 is a
loan of $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. Our other expense for the
three months ended November 30, 2018 is the result of the sale of intellectual
property. On November 10, 2018, the Company sold the $200,000 intellectual
property from All In One Media, previously named as Aura Blocks Limited for
$80,000 with a realized loss of $120,000. We recorded this realized loss as
other expenses in the amount of $120,000 for the three months ended November 30,
2018.
Net (Loss) Income
We incurred a net loss in the amount of $63,354 for the three months ended
November 30, 2019, as compared with a net loss of $228,554 for the same period
ended November 30, 2018.
Liquidity and Capital Resources
As of November 30, 2019, we had $3,512,216 in current assets consisting of cash,
prepaid expenses, accounts receivable, related party receivable, note receivable
and interest receivable. Our total current liabilities as of November 30, 2019
were $264,033. As a result, we have working capital of $3,248,183 as of November
30, 2019.
Operating activities provided $769,671 in cash for the three months ended
November 30, 2019, as compared with $199,500 used in cash provided for the same
period ended November 30, 2018. Our positive operating cash flow in 2019 was
mainly the result of our receivable of $1,280,000 on asset disposal in
connection with our loan to All In One Media. Our negative operating cash flow
in 2018 was mainly the result of our net loss of $228,554 and change in our
prepaid expenses of $151,100.
Investing activities used $1,049,600 in cash for the three months ended November
30, 2019, as compared with $80,000 provided for the same period ended November
30, 2018. Our negative investing cash flow for November 30, 2019 was the result
of a $1,049,000 note receivable. Our positive investing cash flow for November
30, 2018 was the result of $80,000 in the sale of intangible assets.
We did not have any financing activities during the quarters ended November 30,
2019 and 2018.
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, 2019, 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.
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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.
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