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 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. 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 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.

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.





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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.

On April 22, 2020, the Company has announced the first phase development of a video streaming service. 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 derived from its hybrid subscription and advertising business model. We launched the video streaming service at the end of 2020 and the service now feature Chinese movies, television shows and drama series with unique content and exclusive to the company. We launched the video streaming website of www.ABQQ.tv on December 29, 2020. As of February 28, 2021, the Company acquired 1 movie copyrights and 45 movie broadcast rights. We will continue marketing and promoting the ABQQ.tv website through GoogleAds and acquire additional broadcast rights for movies and TV series. The Company plans to charge subscription fees to generate revenue once ABQQ.tv has at least 200 broadcast rights for movies and TV series.





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.





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Results of Operations



Revenues

Our total revenue reported for the six months ended February 28, 2021 was $153,600, compared with $294,743 for the six months ended February 29, 2020.

100% and 52% of revenue was generated from one customer during the six months ended February 28, 2021 and February 29, 2020, respectively.

The decrease in revenue for the six months ended February 28, 2021 over the six months ended February 29, 2020 is attributable to the shutdown of the performance matching platform (Ai Bian Quan Qiu). 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.

Our cost of revenues was $454,927 for the six months ended February 28, 2021, as compared with $95,025 for the six months ended February 29, 2020.

As a result, we had gross loss of $301,327 for the six months ended February 28, 2021, as compared with gross profit of $199,718 for the six months ended February 29, 2020. The decrease in gross profit margin is largely due to the high cost of amortizing movie broadcast rights.





Operating Expenses

Operating expenses increased to $949,134 for the six months ended February 28, 2021 from $522,096 for the six months ended February 29, 2020.

Our operating expenses for six months ended February 28, 2021 consisted of general and administrative expenses of $764,796 and related party salary and wages of $184,337. In contrast, our operating expenses for the six months ended February 29, 2020 consisted of general and administrative expenses of $433,244 and related party salary and wages of $88,852.

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 experienced an increase in related party salary and wages as the Chief Executive Officer started receiving cash salary in the fiscal year of 2021 and received both cash bonus and stock-based compensation in February, 2021. During the six months ended February 28, 2021, the Company paid the Chief Executive Officer $90,000 salary, $50,000 bonus in cash, and $30,100 stock-based compensation. In addition, the Company hired Chief Investment Officer on February 22, 2021 and $1,710 cash salary and $27 stock-based compensation were paid to Chief Investment Officer for the six months ended Feb 28, 2021.

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 our online operations will increase, as we use online working systems to monitor and communicate with employees, consultants and suppliers. These and other costs for COVID expenditures will increase our operational costs in fiscal 2022 at various levels of operation.





Other Expenses

We had other expenses of $326,549 for the six months ended February 28, 2021, as compared with other expenses of $92,953 for the six months ended February 29, 2020. Our other expenses in 2021 were mainly the result of interest expense and the loss from prepaid convertible notes and warrant exercises. Our other expenses for 2020 was the result of interest expenses and a loss from a change in fair value.





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Net Loss

We incurred a net loss in the amount of $1,521,663 for the six months ended February 28, 2021, as compared with a net loss of 415,331 for the six months ended February 29, 2020.

Liquidity and Capital Resources

As of February 28, 2021, we had $491,981 in current assets consisting of cash, prepaid expenses, accounts receivable, related party receivables and other receivables. Our total current liabilities as of February 28, 2021 were $501,076. As a result, we had a working capital deficit of $9,905 as of February 28, 2021.

Operating activities used $3,291,897 in cash for the six months ended February 28, 2021, as compared with $46,718 provided in cash for the same period ended February 29, 2020. Our negative operating cash flow in 2021 was mainly the result of our net loss for the year combined with changes in movie and TV series broadcast rights and copyright. Our positive operating cash flow in 2020 was mainly the result of our net loss for the year combined with changes in long term prepayments.

Investing activities used $5,000 in cash for the six months ended February 28, 2021, as compared with $1,049,600 used for the six months ended February 29, 2020. Our negative investing cash flow for February 28, 2021 was mainly the result of the purchase of furniture and equipment. Our negative investing cash flow for February 29, 2020 was the result of proceeds from a note receivable collection.

Financing activities provided $1,066,639 for the six months ended February 28, 2021, as compared with $311,360 provided in financing activities for the six months ended February 29, 2020. Our positive financing cash flow for February 28, 2021 was the result of proceeds from convertible notes and sales of our common stock and preferred stock. Our positive financing cash flow for February 28, 2020 was the result of proceeds from convertible notes.

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 February 28, 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.





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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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