07/15/2025 | Press release | Distributed by Public on 07/15/2025 14:51
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." 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. 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.
Other factors, which could have a material adverse effect on our operations and future prospects on a consolidated basis, include but are not limited to:
§ risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
§ the uncertainty of profitability based upon our history of losses;
§ legislative or regulatory changes;
§ risks related to our operations and uncertainties related to our business plan and business strategy;
§ changes in economic conditions;
§ uncertainty with respect to intellectual property rights, protecting those rights and claims of infringement of other's intellectual property;
§ competition; and
§ cybersecurity concerns.
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, including the risks and uncertainties identified under the heading "Risk Factors" in the Company's most recent Annual Report on Form 10-K.
Overview
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 and TV shows.
In addition to licensing and selling rights to movies and TV shows, we are also engaged in licensing our NFT MMM platform and providing technical service; running our physical movie theater in New York; and providing marketing and consulting services in the media industry.
On April 22, 2020, we announced the first phase development of our video streaming service. The online service will be marketed and distributed internationally under the brand name ABQQ.tv. Our team sources dramas and films to provide video streaming service on ABQQ.tv. Our video streaming website (www.ABQQ.tv) was officially launched on December 29, 2020, and management has been sourcing dramas and films to provide video streaming service on ABQQ.tv. On January 27, 2025, the ABQQ.tv was sold to a third party. Subsequently, the Company transitioned to utilizing a third-party platform for broadcasting its films and TV dramas starting from March 2025.
As of May 31, 2025, we have acquired 19 movie copyrights and broadcast rights, a 75-episode TV drama and sitcom, a 20-episode, a 10-episode and 1,531 series of network TV drama. The purchase and sale of films and TV dramas copyrights continue to be one of the revenue streams for the Company.
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 plus a free rent period. The total monthly rent was $14,366 for the first two years, and $20,648 for the third year including real estate related taxes and landlord's insurance. 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 Millsin "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.
On May 5, 2022, we incorporated AB Cinemas NY, Inc. in New York, NY, for the purpose of operating the Mt. Kisco Theatre. The theatre started operations in October 2022. We still intend to follow the strategy of having the physical locations for movies and other media. We expect to generate increased revenue from our movie theater business line in the coming years.
On April 27, 2022, we purchased a unique Non-Fungible Token ("NFT") movie and music marketplace, named the NFT MMM from Stareastnet Portal Limited, an unrelated party, which included an APP "NFTMMM" on Google Play, and full right to the website: stareastnet.io.
NFTs are digital assets with a unique identifier that is stored on a blockchain, and NFTs are tradable rights of digital assets (pictures, music, films, and virtual creations) where ownership is recorded in blockchain smart contracts. On August 6, 2022, the Company licensed NFT MMM platform to a third party to allow access of NFTMM platform and platform data on both our app and website for one year starting from August 20, 2022 to August 19, 2023 for a monthly license fee of $60,000. Pursuant to the agreement, we also charged a one time implementation service and consulting fee of $100,000. Subsequent to the license renewal on November 1, 2023, we continued licensing the NFT MM platform to the same third party from November 1, 2023 until October 31, 2025 for a monthly license fee of $57,000. The agreement was terminated on January 31, 2025. The Company retained the ownership and copyright of the NFT MMM platform, including the APP "NFT MMM", and the website: stareastnet.io.
On May 5, 2025 (the "Effective Date"), we entered into a Contribution Agreement (the "Contribution Agreement") with AI+ Hubs Corp, a Delaware corporation ("AI+ Hubs") and newly formed wholly owned subsidiary. Pursuant to the terms of the Contribution Agreement, the Company contributed to AI+ Hubs the assets and liabilities associated with the following:
1) Intellectual property (IP) of ufilm AI Generated Creation, Productions Synthesis and Release System of Movie, TV series and Short series;
2) copyrights of short series; and
3) 100% interest of the subsidiary, AB Cinemas NY, Inc.
AI+ Hubs accepted the assets and assumed the liabilities, as of the Effective Date. In exchange for the contribution, AI+ Hubs issued to the Company 6,680,500 shares common stock of AI+ Hubs. After the above contribution, AI+ Hubs shall engage in fundraising efforts to obtain approximately $1m in financing from outside sources. As of 31 May, 2025, the company and its subsidiary AI+ Hubs Corp decided not to exercise contribution agreement.
Also on May 5, 2025, the Company entered into an agreement to acquire a license to intellectual property (IP) of ufilm from AIHUB Releasing, Inc. for total consideration of $2,000,000. The original settlement terms required: $500,000 to be paid in cash within 10 days of the agreement date, and the remaining $1,500,000 to be settled within 10 days following the successful completion of related SaaS system testing.
On June 2, 2025, the parties mutually agreed to amend the terms of the agreement. Under the revised terms, the company fully settled the purchase consideration by transferring its NFT MMM intellectual property, to the AIHUB Releasing, Inc.
On July 12, 2025, the parties mutually further agreed to modify the terms of the agreement. Under the amended terms, the Company agreed to acquire all rights to the ufilm AI IP from AIHUB Releasing, Inc. for a cash consideration of $300,000, replacing the originally agreed transfer of the Company's NFT MMM IP.
On June 5, 2025, the Board of Directors of the Company approved the granting of discretionary authority to the Board of Directors of the Company, at any time or times for a period of 12 months after the date of the written consent, to adopt an amendment to our articles of incorporation to effect a reverse split of our issued and outstanding common stock, par value $0.001 per share, in a range of not less than 1-for-2,000 and not more than 1-for-20,000.
On June 5, 2025, the Board of Directors of the Company approved to authorize a change in the name of the Company from "AB International Group Corp." to "AI Era Corp." The reverse split and name change are subject to review by FINRA and receipt of a market effective date.
The information on or accessible through our websites is not part of and is not incorporated by reference into this Quarterly Report on Form 10-Q, and the inclusion of our website addresses in this Quarterly Report on Form 10-Q is only for reference. We were incorporated under the laws of the State of Nevada on July 29, 2013. Our fiscal year end is August 31.
Results of Operations
Revenues
Our total revenue reported for the three and nine months ended May 31, 2025 was $1,845,189 and $3,530,082, respectively. Our total revenue reported for the three and nine months ended May 31, 2024 was $698,311 and $1,885,311, respectively.
The revenue for the three and nine months ended May 31, 2025, was mainly attributable to the license fee received in connection with the licensing of our NFT MMM platform, movie copyrights sales to the related and third parties, fees charged for embedded marketing service, advertising services as well as the revenue generated from movie tickets and food and beverage sales from our operated movie theatre and broadcasting revenue. On the other hand, for the three and nine months ended May 31, 2024, was mainly attributable to the license fee received in connection with the licensing of our NFT MMM platform, movie copyrights sales to two third parties, fees charged for embedded marketing service, consulting service fees in connection with the sales of the software-in-progress and restructuring of a company as well as the revenue generated from movie tickets and food and beverage sales from our operated movie theatre. The increase in revenue was mainly due to the increase in sales of copyrights and broadcast rights and broadcasting revenue during the three and nine months ended May 31, 2025 as compared to the three and nine months ended May 31, 2024.
Operation of our movie theatre started in October of 2022. For the nine months ended May 31, 2025, we generated total revenue of $221,954, including $136,347 from ticket sales, and $63,026 from food and beverage sales and $22,581 from advertisement. For the nine months ended May 31, 2024, we generated total revenue of $267,856, including $182,353 from ticket sales, and $85,503 from food and beverage sales. The decrease in revenue was mainly due to less renowned and popular movies on screen compared to the corresponding period in 2024.
For the three months ended May 31, 2025, we generated total revenue of $59,089, including $30,743 from ticket sales, and $16,389 from food and beverage sales and $11,957 from advertisement. For the three months ended May 31, 2024, we generated total revenue of $68,492, including $47,011 from ticket sales, and $21,481 from food and beverage sales. The decrease in revenue was mainly due to less renowned and popular movies on screen compared to the corresponding period in 2024.
We anticipate an increase in revenue in the future by selling movie and TV drama copyrights and broadcast rights, providing embedded marketing services, broadcasting movies and TV dramas through third-party online platforms and generating movie tickets and related revenues from our Mt. Kisco movie theatre in New York.
Operating Costs and Expenses
Operating costs and expenses were $3,457,876 for the nine months ended May 31, 2025, as compared to $2,266,117 for the nine months ended May 31, 2024. Our operating costs and expenses for the nine months ended May 31, 2025 consisted of theatre operating costs of $118,598, amortization expenses of $849,568, costs of copyrights sold of $1,510,921, general and administrative expenses of $479,789 and related party salary and wages of $499,000. In contrast, our operating costs and expenses for the nine months ended May 31, 2024 consisted of theatre operating costs of $136,397, amortization expenses of $1,441,489, general and administrative expenses of $673,182 and related party salary and wages of $15,049.
Operating expenses increased to $1,933,965 for the three months ended May 31, 2025 from $562,888 for the three months ended May 31, 2024. Our operating expenses for three months ended May 31, 2025 consisted of theatre operating costs of $25,995, amortization expenses of $594,802, costs of copyrights sold of $780,871, general and administrative expenses of $132,297 and related party salary and wages of $400,000. In contrast, our operating expenses for the three months ended May 31, 2024 consisted of theatre operating costs of $32,316, amortization expenses of $369,006 and general and administrative expenses of $161,566.
We experienced a decrease in theatre operating costs for the nine months ended May 31, 2025 as compared to the nine months ended May 31, 2024. The decrease was mainly due to the decrease in admission revenues and the decrease in movie exhibition costs as a percentage of admission revenue.
We experienced a decrease in theatre operating costs for the three months ended May 31, 2025 as compared to the nine months ended May 31, 2024. The decrease was mainly due to the decrease in admission revenues and the decrease in movie exhibition costs as a percentage of admission revenue.
We experienced a decrease in amortization expenses for the nine months ended May 31, 2025 as compared to the corresponding period in 2024, mainly due to having more fully amortized intangible assets for the nine months ended May 31, 2025.
We experienced an increase in amortization expenses for the three months ended May 31, 2025 as compared to the corresponding period in 2024, mainly due to newly acquired copyrights in the three months ended May 31, 2025.
The costs of copyrights sold for the nine months ended May 31, 2025 represented the remaining costs of the 10 globally exclusive offline copyrights, with the exception of mainland China and 7 Mainland China exclusive broadcast rights when they were sold.
The costs of copyrights sold for the three months ended May 31, 2025 represented the remaining costs of the 8 globally exclusive offline copyrights, with the exception of mainland China and 2 Mainland China exclusive broadcast rights when they were sold.
We experienced a decrease in general and administrative expenses for the nine months ended May 31, 2025 as compared to the corresponding period in 2024, mainly as a result of decreased professional fees, travel expenses, lease expenses, and cleaning expenses for the nine months ended May 31, 2025 in contrast to the corresponding period in 2024.
We experienced a decrease in general and administrative expenses for the three months ended May 31, 2025 as compared to the corresponding period in 2024, mainly as a result of decreased non-related party salaries, lease expenses, and travel expenses for the three months ended May 31, 2025 in contrast to the corresponding period in 2024.
We experienced an increase in related party salary and wages for the nine months ended May 31, 2025 as compared to corresponding period in 2024, mainly due to the one-off compensation of $99,000 and bonus compensation of $400,000 paid by shares to the Chief Executive Officer. During the nine months ended May 31, 2024, the Company incurred total compensation of $15,049 for the Chief Executive Officer.
We experienced an increase in related party salary and wages for the three months ended May 31, 2025 as compared to corresponding period in 2024, mainly due to the bonus compensation of $400,000 paid by shares to the Chief Executive Officer. During the three months ended May 31, 2024, the Company incurred total compensation of $nil for the Chief Executive Officer. This is mainly due to the opt out of salary by the Chief Executive Officer since October 2023.
We anticipate our operating expenses will increase as we undertake our plan of operations, including the streamline of costs associated with marketing, personnel, and other general and administrative expenses, along with increased professional fees associated with SEC. These costs may increase our operational costs in fiscal 2025 at various levels of operation.
Other Expense/ Other Income
We had other expense of $32,555 for the nine months ended May 31, 2025, as compared with other income of $62,521 for the corresponding period in 2024. Our other expense for the nine months ended May 31, 2025 was the net amount of the other income and the interest expense - related parties. Our other income for the corresponding period in 2024 was the net amount of the other income generated from the sales of software in progress, bank interest income, and the interest expense - related party.
We had other expense of $36,468 for the three months ended May 31, 2025, as compared with other expense of $2,389 for the corresponding period in 2024. Our other expense for the three months ended May 31, 2025 was the interest expense - related parties. Our other expense for the corresponding period in 2024 was the net amount of the bank interest income, and the interest expense - related party.
Net Loss/ Net Income
We generated net income in the amount of $39,651 for the nine months ended May 31, 2025, as compared with a net loss of $318,285 for corresponding period in 2024.
We incurred net loss in the amount of $125,244 for the three months ended May 31, 2025, as compared with net income of $133,034 for corresponding period in 2024.
Liquidity and Capital Resources
As of May 31, 2025, we had $216,619 in current assets consisting of cash, prepaid expenses and accounts receivable. Our total current liabilities as of May 31, 2025 were $3,716,924. As a result, we have a working capital deficit of $3,500,305 as of May 31, 2025 as compared with working capital deficit of $160,617 as of August 31, 2024.
Operating activities used $3,876,764 in cash for the nine months ended May 31, 2025, as compared with $124,938 provided in cash for the nine months ended May 31, 2024.
Our negative operating cash flow for the nine months ended May 31, 2025 was mainly the result of the cash used in the purchase of movie and TV series broadcast right and copyright and purchase deposit and the decrease in deferred revenue, offset by net income combined with the amortization of intangible assets, sales of copyrights and decrease in accounts receivable.
Our positive operating cash flow for the nine months ended May 31, 2024 was mainly the result of net loss combined with cash used in the purchase of movie and TV series broadcast right and copyright and the increase in accounts receivable, offset by the amortization of intangible assets, and the increase in deferred revenue and accounts payable and accrued liabilities.
Investing activities was $Nil for the nine months ended May 31, 2025 and May 31, 2024.
Financing activities provided $3,907,850 for the nine months ended May 31, 2025, as compared with $76,606 used in financing activities for the nine months ended May 31, 2024. Our positive financing cash flow for the nine months ended May 31, 2025 was due to the proceeds from share issuance and the net proceeds from related party loans. Our negative financing cash flow for the nine months ended May 31, 2024 was due to the settlement of loans due to a related party.
Going Concern
Our consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. As of May 31, 2025, the Company had an accumulated deficit of approximately $11.8 million and a working capital deficit of approximately $3.9 million. For the nine months ended May 31, 2025, the Company had the net cash used in operating activities was approximately $3.8 million. These factors, among others, raise the substantial doubt regarding the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.
The future operations of the Company depend on its ability to realize forecasted revenues, achieve profitable operations, and depend on whether or not the Company could obtain the continued financial support from its stockholders or external financing. Management believes the existing stockholders will continue to provide the additional cash to meet the Company's obligations as they become due. The Company also intends to fund operations through cash flow generated from the operations, including the expected ticket sales from Mt. Kisco movie theatre, equity financing, debt borrowings, and additional equity financing from outside investors, to ensure sufficient working capital. However, no assurance can be given that additional financing, if required, would be available on favorable terms or at all. If we are not able to secure additional funding, the implementation of our business plan will be impaired.
Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.
Off Balance Sheet Arrangements
As of May 31, 2025, 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.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management's difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. For a full description of our critical accounting policies, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2024 Form 10-K. While there have been no material changes to our critical accounting policies, or the methodologies or assumptions we apply under them, we continue to monitor such methodologies and assumptions.
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.