AERA 10-Q
AI Era Corp. (AERA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended
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Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from __________ to__________
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(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.) |
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(Address of principal executive offices)
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| (Former name, former address and former fiscal year, if changed since last report) | |
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X]
State the number of shares outstanding for each of the issuer’s classes of common stock, as of the latest practicable date: common shares as of July 15, 2026.
| 1 |
| TABLE OF CONTENTS | ||
| Page | ||
PART I – FINANCIAL INFORMATION
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| Item 1: | Financial Statements (Unaudited) | 3 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 9 |
| Item 4: | Controls and Procedures | 9 |
PART II – OTHER INFORMATION
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| Item 1: | Legal Proceedings | 11 |
| Item 1A: | Risk Factors | 11 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 11 |
| Item 3: | Defaults Upon Senior Securities | 12 |
| Item 4: | Mine Safety Disclosures | 12 |
| Item 5: | Other Information | 12 |
| Item 6: | Exhibits | 12 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our unaudited consolidated financial statements included in this Form 10-Q are as follows:
| F-1 | Consolidated Balance Sheets as of May 31, 2026 and August 31, 2025 (unaudited); |
| F-2 | Consolidated Statements of Operations for the three and nine months ended May 31, 2026 and 2025 (unaudited); |
| F-3 | Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended May 31, 2026 and 2025 (unaudited); |
| F-4 | Consolidated Statements of Cash Flows for the nine months ended May 31, 2026 and 2025 (unaudited); and |
| F-5 | Notes to Consolidated Financial Statements (unaudited) |
| 3 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
Consolidated Balance Sheets
(Unaudited)
| May 31, | August 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Prepaid expenses – related party | ||||||||
| Accounts receivable | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use operating lease assets | ||||||||
| Intangible assets, net | ||||||||
| Purchase deposits for intangible assets | ||||||||
| Security deposit | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Loan from related parties | ||||||||
| Current portion of obligations under operating leases | ||||||||
| Warrants liability | ||||||||
| Convertible note, net of discount | ||||||||
| Derivative liability | ||||||||
| Deferred revenue | ||||||||
| Total Current Liabilities | ||||||||
| Obligations under operating leases, non-current | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, par value, preferred shares authorized; | ||||||||
| Series A preferred stock, and shares issued and outstanding, as of May 31, 2026 and August 31, 2025, respectively | 100 | 100 | ||||||
| Common stock, par value, shares authorized; and shares issued and outstanding, as of May 31, 2026 and August 31, 2025, respectively* | ||||||||
| Additional paid-in capital* | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
| *Retroactively restated for the effect of reverse stock split (see Note 10). |
The accompanying notes are an integral part of these financial statements.
| F-1 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
Consolidated Statements of Operations
(Unaudited)
| Nine months Ended | Three Months Ended | |||||||||||||||
| May 31, | May 31, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| REVENUE | ||||||||||||||||
| Service revenue | $ | $ | $ | $ | ||||||||||||
| Service revenue – related party | ||||||||||||||||
| Copyrights sales | ||||||||||||||||
| Copyrights sales – related party | ||||||||||||||||
| Theater revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| OPERATING COSTS AND EXPENSES | ||||||||||||||||
| Amortization expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cost of copyrights sold | ( | ) | ( | ) | ||||||||||||
| Theatre operating costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Related party salary and wages | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Operating Costs And Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (Loss) From Operations | ( | ) | ( | ) | ||||||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
| Loss on change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||
| Gain on change in fair value of derivative liability | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Total Other Income (expenses) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) Income Before Income Tax Provision | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax provision | ||||||||||||||||
| NET (LOSS) INCOME | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| NET (LOSS) INCOME PER SHARE: BASIC | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| NET (LOSS) INCOME PER SHARE: DILUTED | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC* | ||||||||||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED* | ||||||||||||||||
*Retroactively restated for the effect of reverse stock split (see Note 10).
The accompanying notes are an integral part of these financial statements.
| F-2 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
| Common Stock | Preferred Stock | |||||||||||||||||||||||||||
| Number of Shares* | Amount* | Number of Shares | Amount | Additional Paid-in Capital* | Accumulated Deficit | Total Equity | ||||||||||||||||||||||
| Balance – February 28, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Common shares for cash | ||||||||||||||||||||||||||||
| Issuance of Common shares for officer bonus | ||||||||||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at May 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance –August 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Common shares for cash | ||||||||||||||||||||||||||||
| Issuance of Common shares for officer bonus | ||||||||||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Balance at May 31, 2025 | $ | $ | $ | $ | ( | ) | ||||||||||||||||||||||
| Balance – February 28, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Common shares for private placement | ||||||||||||||||||||||||||||
| Issuance of Common shares for officer bonus and salary | ||||||||||||||||||||||||||||
| Issuance of Common shares for consulting and financing services | ||||||||||||||||||||||||||||
| Share-Based Compensation | ||||||||||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance – May 31, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance – August 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Common shares for consulting and financing services | ||||||||||||||||||||||||||||
| Issuance of Common shares for officer bonus and salary | ||||||||||||||||||||||||||||
| Issuance of Common shares for private placement | ||||||||||||||||||||||||||||
| Share-Based Compensation | ||||||||||||||||||||||||||||
| Repurchase of Common shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Imputed Interest | ||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance – May 31, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
*Retroactively restated for the effect of reverse stock split (see Note 10).
The accompanying notes are an integral part of these financial statements.
| F-3 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
Consolidated Statements of Cash Flows
(Unaudited)
| Nine months Ended | ||||||||
| May 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Consulting fees paid in stock | ||||||||
| Stock issued for officer compensation | ||||||||
| Share-based compensation - officer | ||||||||
| Depreciation of fixed asset | ||||||||
| Amortization of intangible asset | ||||||||
| Gain on change in fair value of derivative liability | ( | ) | ||||||
| Amortization of discount | ||||||||
| Accrued interest expense | ||||||||
| Loss on change in fair value of warrant liabilities | ||||||||
| Costs of copyrights sold | ||||||||
| Imputed interest on loan from related parties | ||||||||
| Non-cash lease expense | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| (Repayment to) proceeds from related party loan | ( | ) | ||||||
| Proceeds from common stock issuances | ||||||||
| Proceeds from convertible note | ||||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents – beginning of period | ||||||||
| Cash and cash equivalents – end of period | $ | $ | ||||||
| Supplemental Cash Flow Disclosures | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-Cash Investing and Financing Activities: | ||||||||
| Proceeds receivable from a private placement offset against purchase obligation of intangible assets | $ | $ | ||||||
| Repurchase of common shares through non-cash settlement by increasing amounts due to a related party | $ | $ | ||||||
| Non-cash settlement of prepaid expenses through due to shareholders | $ | $ | ||||||
| Acquisition of intangible assets financed through accounts payable | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 –BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of AI Era Corp. (Formerly known as AB International Group Corp.) (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet as of August 31, 2025 derived from the audited consolidated financial statements at that date, but does not include all the information and footnotes required by GAAP. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2025.
The unaudited consolidated financial statements as of and for the three and nine months ended May 31, 2026 and 2025, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition, results of operations and cash flows. The results of operations for the three and nine months ended May 31, 2026 and 2025 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements have been prepared on a consolidated basis, with the Company’s wholly owned subsidiaries, App Board Limited, AB Cinemas NY, Inc and AI+ Hubs Corp. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts receivable
Accounts receivable is presented at invoiced amount
net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses. The Company
reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability
of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including
the age of the balance, customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written
off after efforts at collection prove unsuccessful.
| F-5 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Transactions
The financial risk arises from the fluctuations in foreign exchange rates and the degrees of volatility in these rates. Currently the Company does not use derivative instruments to reduce its exposure to foreign currency risk. Gains and losses from translation of foreign currency into U.S. dollars are included in current results of operations.
Purchase Deposits
Purchase deposits primarily consist of payments made to acquire the copyrights and distribution rights of movies, Television series, short-form drama series and intellectual property of ufilm, etc. Purchase deposits are classified as either current or non-current based on the nature and the terms of the respective agreements. These purchase deposits are unsecured and are reviewed periodically to determine whether their carrying value has become impaired. The allowance is also based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized may differ from management’s estimate of credit worthiness and the economic environment. Purchase deposits are written off against the allowances only after exhaustive collection efforts. No allowance was recorded for the three and nine months ended May 31, 2026 and 2025.
Property and Equipment, net
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Leasehold improvement is related to the enhancements paid by the Company to leased offices. Leasehold improvement represents capital expenditures for direct costs of renovation or acquisition and design fees incurred. The amortization of leasehold improvements commences once the renovation is completed and ready for the Company’s intended use.
The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:
| Estimated Useful Life | ||
| Furniture | 7 years | |
| Appliances | 5 years | |
| Leasehold improvement | Lesser of useful life and lease term |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments that substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations in other income or expenses.
| F-6 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible Assets
Intangible assets are recorded at the lower of cost or estimated fair value and amortized as follows:
| • | Movie copyrights and broadcast rights: | |
| • | NFT MMM platform: | |
| • | Intellectual property of ufilm: |
Amortized costs of the intangible asset are recorded as amortization expenses in the consolidated statements of operations.
Lease property under operating lease
The Company adopted ASU No. 2016-02—Leases (Topic 842) since June 1, 2019, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities on the consolidated balance sheets. The standard did not materially impact the Company’s consolidated net earnings and cash flows.
Impairment of Long-lived asset
The Company evaluates its long-lived assets or asset
group, including intangible assets with indefinite and finite lives, for impairment. Intangible assets with indefinite lives that are
not subject to amortization are tested for impairment at least annually or more frequently if events or changes in circumstances indicate
that the assets might be impaired in accordance with ASC 350. Such impairment test compares the fair values of assets with their carrying
values with an impairment loss recognized when the carrying values exceed fair values. For long-lived assets and intangible assets with
finite lives that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances (such
as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount
of an asset or a group of long-lived assets may not be recoverable. When these events occur, the Company evaluates impairment by comparing
the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual
disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company would recognize
an impairment loss based on the excess of the carrying amount of the asset group over its fair value. Impairment losses are included in
the general and administrative expense. There was
Revenue Recognition
The Company adopted ASC Topic 606, “Revenue from Contracts with Customers”, using the modified retrospective approach. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
| F-7 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company derives its revenues primarily from the following sources:
Revenue from selling copyrights of movies or television series:
Revenue from the sale of copyrights for movies or television series is recognized at a point in time when control of the intellectual property transfers to the customer. Control is considered transferred upon delivery of the master copy and completion of all requisite authorization procedures, as this is the point at which the customer has the legal right to direct the use of, and obtain substantially all of the remaining benefits from the copyright. Contracts are generally fixed-price arrangements without cancellation or refund provisions.
Revenue from licensing NFT MMM platform:
Revenue from NFT MMM platform licensing is recognized over time on a straight-line basis over the contractual license term, typically one or two years. The Company determined that the license provides customers the access to the platform and its data through both mobile and web interfaces for the license period, as the customer simultaneously receives and consumes the benefits provided by the Company's performance. The arrangements are non-cancelable and non-refundable with fixed consideration.
Revenue from movie theater admissions and food and beverage sales:
Revenue from movie theater admissions is recognized at a point in time when the movie is exhibited to customers, as this is when the performance obligation is satisfied. Food and beverage revenue is recognized at a point in time when customers take possession of the items. Revenue from gift cards and exchange ticket sales is deferred until redemption occurs or upon estimation of breakage income for gift cards with a remote likelihood of redemption.
Revenue from embedded marketing service:
The Company earns revenue from embedded marketing services by incorporating advertisements into movies, television series or short-form drama series. Revenue is recognized at a point in time when the advertisement has been integrated into the media content and customer approval, as the customer can then direct the use of and obtain substantially all future economic benefits from the customized media content.
Revenue from consulting services:
The Company derives revenue from providing consulting services related to software development, corporate restructuring and strategic advisory. The Company also provides AI-based solutions and project oversight services that enhance content market accuracy, personalization, and advertising monetization for short drama platforms. Revenue from consulting services is recognized over time as the related services are performed, consistent with the continuous transfer of benefits to the customer.
| F-8 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Revenue from advertising services in theaters
The Company generates advertising revenue from displaying commercials on theater screens prior to movie exhibitions. Revenue is recognized at a point in time when the advertisement is exhibited on screen to the audience.
Revenue from broadcast and download licensing
The Company grants non-exclusive, time-based licenses that allow customers to broadcast or provide download service of its films and television series, primarily short-form drama series, on their web or cloud-based platforms. License fees are charged per movie or per drama series based on the authorized period, typically on a monthly basis, and are not linked to user activity or download volume. The customer obtains a right to access the content during the license term. The Company satisfies its performance obligation by making the licensed content available to the customer and maintaining that accessibility throughout the license term. Accordingly, revenue is recognized over time on a straight-line basis throughout the license period.
Revenue from license of short-form drama for AI training pilot
The Company generates revenue from licensing its short-form drama content library for artificial intelligence training purposes. Under these arrangements, the Company grants customers a non-exclusive, non-transferable license to access and use its content for machine learning, testing, and model optimization. Revenue related to the initial license is generally recognized over time as the services are provided. To the extent contracts include ongoing content updates or support services, such components are accounted for as separate performance obligations and recognized over time as the services are provided. Fees for optional data processing or technical support services are recognized as the services are performed.
Revenue from licensing uFilm platform
The Company generates revenue from providing access to its AI-powered SaaS uFilm platform, installation services, and data licensing. The Company’s arrangements include access to AI models, user interfaces, APIs, and ongoing maintenance and support. These services are combined into a single performance obligation and revenue is recognized ratably over the contract term as customers simultaneously receive and consume the benefits.
The Company also provides installation services at contract inception, which are distinct from the SaaS services. Revenue from installation services is recognized at a point in time when the installation is completed and control is transferred to the customer.
In addition to subscription fees, the Company is entitled to fixed guaranteed payments that are contractually agreed upon and not contingent on customer usage or revenue. These amounts are recognized over time as part of the performance obligation.
The Company provides licensed data for AI training purposes, which is a separate performance obligation. Revenue from data usage is recognized over time as the services are provided.
| F-9 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contract Assets and Liabilities
Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. Contract assets are recognized for in related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery occurs.
As of May 31, 2026 and August 31, 2025, the Company
had contract liabilities of $
Disaggregation of revenue
The Company disaggregates its revenue from contracts by revenue streams, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors.
The following table presents sales by revenue streams for the three and nine months ended May 31, 2026 and 2025, respectively:
| Three months ended | ||||||||
| May 31, 2026 | May 31, 2025 | |||||||
| Theater admissions | $ | $ | ||||||
| Food and beverage sales | ||||||||
| Theater advertisement | ||||||||
| Theater revenue | ||||||||
| Licensing for broadcast and download | ||||||||
| Licensing for NFT platform | ||||||||
| Embedded marketing service | ||||||||
| License of short-form drama for AI training pilot | ||||||||
| Licensing for uFilm platform | ||||||||
| Service revenue | ||||||||
| Copyrights sales | ||||||||
| Total revenue | $ | $ | ||||||
| Nine months ended | ||||||||
| May 31, 2026 | May 31, 2025 | |||||||
| Theater admissions | $ | $ | ||||||
| Food and beverage sales | ||||||||
| Theater advertisement | ||||||||
| Theater revenue | ||||||||
| Licensing for broadcast and download | ||||||||
| Licensing for NFT platform | ||||||||
| Embedded marketing service | ||||||||
| Consulting services | ||||||||
| License of short-form drama for AI training pilot | ||||||||
| Licensing for uFilm platform | ||||||||
| Service revenue | ||||||||
| Copyrights sales | ||||||||
| Total revenue | $ | $ | ||||||
| F-10 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
ASC 820, “Fair Value Measurements” (ASC 820) and ASC 825, “Financial Instruments” (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 – Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 – Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 – Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
The carrying values of cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short-term nature.
Warrant liability and derivative liability were measured at fair value on a recurring basis as of May 31, 2026 and August 31, 2025, respectively.
| May 31, 2026 | August 31, 2025 | |||||||
| Level 3 | Level 3 | |||||||
| Warrants Liability | $ | 4,432,209 | $ | 1,338,389 | ||||
| Derivative liability | 538,415 | — | ||||||
| Total | $ | 4,970,624 | $ | 1,338,389 | ||||
Accounting for Derivative Instruments
The Company accounts for convertible promissory notes in accordance with ASC 470, Debt, and evaluates embedded features in accordance with ASC 815, Derivatives and Hedging.
Embedded features are assessed to determine whether they are clearly and closely related to the host contract and whether they are indexed to the Company’s own stock in accordance with ASC 815-40. Features that do not meet the scope exception for equity classification are bifurcated and accounted for separately as derivative liabilities.
Derivative liabilities are initially recognized at fair value on the issuance date and are subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations. The Company classifies derivative liabilities as Level 3 within the fair value hierarchy under ASC 820 because their valuation involves significant unobservable inputs.
| F-11 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At issuance, the Company allocates the proceeds received between the host debt and the embedded derivative liability in accordance with ASC 815-15-30-2. The initial carrying amount of the host debt is determined as the difference between the proceeds received and the fair value of the embedded derivative. If the fair value of the embedded derivative exceeds the proceeds received, the excess is recognized as a loss on issuance in the consolidated statements of operations.
Debt issuance costs and original issue discounts are accounted for in accordance with ASC 835-30. To the extent a host debt component is recognized, such amounts are recorded as a reduction of the carrying amount of the debt and amortized to interest expense over the term of the instrument using the effective interest method. If no amount is allocated to the host debt, debt issuance costs are recognized in earnings as incurred. Interest expense on convertible promissory notes includes both contractual coupon interest and the amortization of any debt discount recognized at issuance.
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. No warrants were included in the diluted income per share as they would be anti-dilutive. During the nine months ended May 31, 2025, preferred stocks were included in the diluted earnings per share as they would be dilutive.
| Three Months Ended | ||||||||
| May 31, 2026 | May 31, 2025 | |||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Shares Outstanding: Basic * | ||||||||
| Basic EPS* | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjusted net loss | ( | ) | ( | ) | ||||
| Weighted Average Number of Shares Outstanding: Basic * | ||||||||
| Add: Preferred shares A | ||||||||
| Weighted Average Number of Shares Outstanding: Diluted* | ||||||||
| Diluted EPS* | ( | ) | ( | ) | ||||
| Nine months Ended | ||||||||
| May 31, 2026 | May 31, 2025 | |||||||
| Net (Loss) Income | $ | ( | ) | $ | ||||
| Weighted Average Number of Shares Outstanding: Basic * | ||||||||
| Basic EPS* | ( | ) | ||||||
| Net (Loss) Income | $ | ( | ) | $ | ||||
| Adjusted net (loss) income | ( | ) | ||||||
| Weighted Average Number of Shares Outstanding: Basic * | ||||||||
| Add: Preferred shares A | ||||||||
| Weighted Average Number of Shares Outstanding: Diluted* | ||||||||
| Diluted EPS* | ( | ) | ||||||
*Retroactively restated for the effect of reverse stock split (see Note 10).
| F-12 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassification
Certain prior period amounts of revenue in consolidated statements of operations and purchase of intangible assets in consolidated statements of cash flows have been reclassified to conform to the current period presentation.
Warrants
The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Warrants are evaluated at issuance to determine whether they meet the criteria for equity classification under ASC 815-40, Contracts in Entity’s Own Equity. Warrants that do not meet the equity classification criteria are classified as warrant liabilities. Equity-classified warrants are recorded in additional paid-in capital and are not subsequently remeasured.
Warrant liabilities are initially recognized at fair value on the issuance date and are subsequently remeasured at fair value at each reporting date until exercised, expired, or otherwise settled. Changes in fair value are recognized in earnings within the consolidated statements of operations.
The fair value of warrant liabilities is determined in accordance with ASC 820, Fair Value Measurement, using valuation techniques such as option-pricing models that incorporate assumptions including expected volatility, risk-free interest rate, expected term, and the Company’s stock price.
Income Taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Income taxes are accounted for using the asset and liability approach. Under this approach, income tax expense is recognized for the amount of taxes payable or refundable for the current year. Deferred income taxes assets and liabilities are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Share-Based Compensation
The Company follows the provisions of ASC 718, “Compensation - Stock Compensation,” which establishes the accounting for employee share-based awards. For employee share-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award.
Segment reporting
The Company follows ASU No. 2023-07, “Segment Reporting (Topic 280)”, which improves the disclosures about a public entity’s reportable segments and address requests from investors for more detailed information about a reportable segment’s expenses.
| F-13 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, “Income Statement — Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as: employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. In January 2025, the FASB issued ASU 2025-01, which revises the effective date of ASU 2024-03 (on disclosures about disaggregation of income statement expenses) “to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.” Entities within the ASU’s scope are permitted to early adopt the ASU. The Company is currently evaluating the impact of this standard on its financial statement disclosures.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 clarifies the guidance to determine the accounting acquirer in a business combination that is effected primarily by exchanging equity interests, when the legal acquiree is a variable interest entity (“VIE”) that meets the definition of a business. ASU 2025-03 requires entities to consider the same factors in ASC 805, Business Combinations, required for determining which entity is the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-03 is required to be applied on a prospective basis to any acquisition transaction that occurs after the initial application date. The Company does not expect a material effect on its consolidated financial statements upon adoption.
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). ASU 2025-04 revises the definition of the term performance condition for share-based consideration payable to a customer to incorporate conditions that are based on the volume or monetary amount of a customer’s purchases or potential purchases. ASU 2025-04 also eliminates the policy election to account for forfeitures as they occur for awards with service conditions. ASU 2025-04 also clarifies that ASC 606 variable consideration guidance does not apply to share-based payments to customers; instead, vesting probability should be assessed solely under ASC 718, Compensation—Stock Compensation. ASU 2025-04 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-04 may be applied on either a modified retrospective basis or on a retrospective basis. The Company is currently assessing the impact this standard will have on the Company’s Consolidated Financial Statements.
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 amends ASC 326, Financial Instruments—Credit Losses, and introduces a practical expedient available for all entities and an accounting policy election available for all entities, other than public business entities, that elect the practical expedient. These changes apply to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue Recognition. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This simplifies the estimation process for short-term financial assets. ASU 2025-05 is effective for the Company’s annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-05 should be applied on a prospective basis. The Company does not expect a material effect on its consolidated financial statements upon adoption.
| F-14 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In August 2025, the Financial Accounting Standards Board (“FASB”) issued ASU 2025-06, Intangibles - Goodwill and Other (Topic 350) — Internal-Use Software (Subtopic 350-40): Targeted Improvements. This update provides clarifications and targeted improvements to the accounting for internal-use software, including enhanced guidance on the identification of software development activities, capitalization of implementation costs, and accounting for subsequent upgrades and maintenance. ASU 2025-06 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The Company does not expect a material effect on its consolidated financial statements upon adoption.
Except for the above-mentioned pronouncements, there are no new recently issued accounting standards that will have a material impact on the balance sheets, statements of operations and comprehensive income and cash flows.
NOTE 3 – GOING CONCERN
The accompanying 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, 2026, the Company had limited
cash, loss from operation of approximately $1.3 million, an accumulated deficit of approximately $
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 continued financial support from its stockholders or external financing. Management’s plans include (i) continued utilization of the $30 million equity purchase agreement entered into with Monroe Street Capital Partners, LP on February 21, 2026, (ii) expected cash flows from expanded licensing of short-form drama content for AI training and uFilm SaaS platform, (iii) additional private placements and convertible note financings, (iv) ongoing financial support from the President, (v) pursuit of a direct listing on NYSE American supported by the Craft Capital advisory engagement entered into on April 18, 2026, and (vi) strategic advisory services from the newly appointed Vice Chairman effective June 12, 2026. These actions are expected to provide sufficient liquidity to fund operations for at least the next twelve months. However, there can be no assurance that these plans will be successful, 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 provide the opportunity for the Company to continue as a going concern.
NOTE 4 – PROPERTY AND EQUIPMENT
The Company capitalized the renovation cost as leasehold improvement and the cost of furniture and appliances as fixed asset. Leasehold improvement relates to renovation and upgrade of the leased office.
Depreciation expense was $
As of May 31, 2026 and August 31, 2025, the balance of property and equipment was as follows:
| May 31, 2026 | August 31, 2025 | |||||||
| Leasehold improvement | $ | $ | ||||||
| Appliances and furniture | ||||||||
| Total cost | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
| F-15 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 – INTANGIBLE ASSETS
As of May 31, 2026 and August 31, 2025, the balance of intangible assets was as follows:
| May 31, 2026 | August 31, 2025 | |||||||
| Movie copyrights and broadcast right | $ | $ | ||||||
| Television series | ||||||||
| Short form drama series | ||||||||
| Intellectual property of ufilm | ||||||||
| NFT MMM platform | ||||||||
| Total cost | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
The amortization expense for the three and nine months ended May 31, 2026 was $1,445,409 and $3,467,411, respectively. The amortization expense for the three and nine months ended May 31, 2025 was $594,802 and $849,568, respectively. Estimated future amortization expense is as follows:
| Twelve months ending May 31, | Amortization expense | ||||
| 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Total | $ | ||||
On August 6, 2022, the Company licensed its NFT MMM
platform to a third party, Anyone Pictures Limited, granting access to the platform and related data through both the mobile application
and website for one year beginning August 20, 2022, at a monthly license fee of $
During the three months ended November 30, 2024, on
September 30, 2024, the Company entered into an agreement with Capitalive Holdings Limited to sell the offline broadcast rights of two
movies for $
| F-16 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 – INTANGIBLE ASSETS (continued)
During the three months ended November 30, 2024, on
September 30, 2024, the Company entered into an agreement with All In One Media Ltd. to acquire the copyrights and broadcast rights for
one movie for a total purchase price of $
During the three months ended February 28, 2025,
on December 12, 2024, the Company entered into an agreement with All In One Media Ltd to acquire the copyright and broadcast rights for
1 movie for a price of $
During the three months ended February 28, 2025, on
January 27, 2025, the Company entered into an agreement with Capitalive Holdings Limited to sell the ABQQ.TV website and the copyrights
of 59 movies for $
During the three months ended February 28, 2025, on
February 12, 2025, the Company entered into an agreement with Anyone Pictures Limited to sell the broadcast rights of 2 movies for $
During
the three months ended May 31, 2025, the Company received the copyright and broadcast right of 1 movie and 1,151 series of TV drama from
All In One Media Ltd for a price of $
During the three months
ended May 31, 2025, the Company received the copyright and broadcast right of 20 series of TV drama and 360 series of TV drama from Guangdong
Honor Film Co., Ltd. for a price of $
During the three months
ended May 31, 2025, the Company entered into an agreement with Capitalive Holdings Limited to sell the offline broadcast rights of 5
movies for $
During the three months
ended May 31, 2025, the Company entered into an agreement with Anyone Pictures Limited to sell the broadcast rights of one movie for
$
During the nine months ended May 31, 2025, the total
sale amount of intangible assets was $
On March 27, 2025, the Company entered into an agreement
with All-in-One Media Ltd. to acquire the copyrights and broadcast rights of 1,500 episodes of short form drama series. On September 28,
2025, the Company entered into another agreement to acquire the copyrights and broadcast rights of 500 episodes of short form drama series.
During the three months ended November 30, 2025, the Company received the copyrights from All-in-One Media Ltd. of 1,500 series and
500 series of TV drama for a price of $
| F-17 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On December 1, 2025, the Company entered into an
agreement with All-in-One Media Ltd. to acquire the copyrights and broadcast rights of 1,000 episodes of short form drama series. On
December 16, 2025, the Company entered into another agreement to acquire the copyrights and broadcast rights of 2,000 episodes of short
form drama series. On January 21, 2026, the Company entered into another agreement to acquire the copyrights and broadcast rights of
5,000 episodes of short form drama series. During the three months ended February 28, 2026, the Company received the copyrights
from All-in-One Media Ltd. of 1,000 series, 2,000 series and 3,000 series of TV drama for a price of $
On December 1, 2025, the Company entered into an
agreement with Guangdong Honor Film Co., Ltd. to acquire the copyrights and broadcast rights of 1,323
episodes of short form drama series. On April 1, 2026, the Company entered into another agreement to acquire the copyrights and broadcast
rights of 166 episodes of short form drama series. During the three months ended May 31, 2026, the Company received the copyrights
from Guangdong Honor Film Co., Ltd. of 1,323 series and 166 series of TV drama for a price of $
The Company entered into an agreement to acquire
a license to the intellectual property (“IP”) of ufilm from AIHUB Releasing, Inc., on July 12, 2025, the parties further
amended the agreement. Under the revised terms, the Company agreed to acquire all rights to the ufilm AI IP from AIHUB Releasing, Inc.
for a cash consideration of $
On March 1, 2026, the Company entered into an irrevocable
tripartite term sheet with Honrado Filmes AI Limitada Inc. ("Seller") and Aixdance LLC ("Verifier") regarding the
proposed acquisition of an advanced multi-agent content engine and monetization infrastructure, including related source code, AI models,
datasets, prompts, marketplace infrastructure, intellectual property, and other associated assets. Under the term sheet, the transaction
was subject to a testing and verification process to be independently validated by the Verifier. Following completion of the testing
process and receipt of a verification report confirming that the assets met the agreed performance requirements, the Company entered
into an Asset Purchase Agreement with the Seller on May 10, 2026. Pursuant to the Asset Purchase Agreement, the Company agreed to acquire
all rights, title, and interest in the acquired assets for total consideration of $
During the year ended August 31, 2025, the Company
entered into an agreement with Capitalive Holdings Limited to grant non-exclusive, time-based licenses allowing the customer to broadcast
the Company’s films and television series, primarily short-form drama series. License fees are charged per movie or per drama series
per month. The Company received total broadcast licensing fees of $
During the year ended August 31, 2025, the
Company also licensed the download rights to Guangdong Dangliang Film Co., Ltd. to download the Company’s film through the
cloud-based platforms. The licensed rights exclude Mainland China. License fees are charged per movie based on the authorized
period, typically monthly or annually, and are not linked to user activity or download volume. The Company received total download
licensing fees of $
| F-18 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On December 8, 2025 and February 1, 2026, the Company
entered into two agreements with Anyone Pictures Ltd to grant a non-exclusive, non-transferable license to access and use its content
for machine learning, testing, and model optimization. License fees are charged per movie or per drama series per month. The Company received
total short-form drama for AI training pilot licensing fees of $
On January 31, 2026, the Company entered into an agreement
with Uflix.ai LLC to provide access to its AI-powered SaaS uFilm platform, installation services, and data licensing. The Company’s
arrangements include access to AI models, user interfaces, APIs, and ongoing maintenance and support. The Company received total uFilm
platform licensing fees of $
On May 1, 2026, the Company entered into an agreement
with AIXdance LLC to provide access to its AI-powered SaaS uFilm platform, installation services, and data licensing. The Company’s
arrangements include access to AI models, user interfaces, APIs, and ongoing maintenance and support. The Company received total uFilm
platform licensing fees of $
During the nine months ended May 31, 2026, the
total sale amount of intangible assets was $
NOTE 6 – LEASES
On October 21, 2021, the Company signed a lease
agreement to lease “the Mt. Kisco Theatre”, a movie theater, for
On January 31, 2024, the end of the initial two-year
rental period, the landlord agreed to continue to receive $
Total lease expense for the nine months ended May
31, 2026 and 2025 was $
The following is a schedule of maturities of lease liabilities:
| Twelve months ending May 31, | ||||
| 2027 | $ | |||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( |
) | ||
| Total | $ | |||
| F-19 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 – PURCHASE DEPOSITS FOR INTANGIBLE ASSETS
The balance of purchase deposits for intangible assets, which relates to the acquisitions of copyrights and broadcast rights for movies, TV dramas, and software was as follows:
| May 31, 2026 | August 31, 2025 | |||||||
| Purchase deposit for copyright and broadcast right for short form drama series | $ | $ | ||||||
| Purchase deposit for intellectual property of ufilm | ||||||||
| Total purchase deposits for intangible assets | $ | $ | ||||||
On March 27, 2025, the Company entered into an agreement
to acquire the copyrights and broadcast rights of 1,500 episodes of short form drama series. The granted broadcasting rights are exclusive
to Mainland China. As of August 31, 2025, the Company had paid purchase deposits of $
In May 2025, the Company entered into an agreement
to acquire a license to the intellectual property (“IP”) of ufilm from AIHUB Releasing, Inc. for total consideration of $
NOTE 8 – CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES
During the period from January 8, 2026 through February
26, 2026, the Company issued a series of convertible promissory notes (the “Notes”) to six investors, with an aggregate principal
amount of approximately $
The Notes generally bear interest at a rate of
| F-20 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 – CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES (Continued)
The Company accounts for its convertible promissory notes in accordance with ASC 470 and evaluates embedded features in accordance with ASC 815. The Company determined that the embedded conversion features are not indexed to its own stock within the meaning of ASC 815-40 because the conversion price is based on a variable discount to the Company’s market price, resulting in a variable number of shares to be issued upon conversion. Accordingly, the embedded conversion features are bifurcated from the host instruments and accounted for as derivative liabilities, with the remaining host instruments accounted for as debt. Derivative liabilities are initially recognized at fair value on the issuance date and are subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.
The fair value of the embedded derivatives is estimated using a Monte Carlo simulation model due to the path-dependent nature of the conversion features, including look-back pricing provisions and assumptions regarding the timing of conversion by the holders. Key inputs used in the valuation include:
- The Company’s stock price at the valuation date
- Expected volatility (approximately to )
- Risk-free interest rates (approximately to )
- Expected term based on contractual maturity and estimated conversion behavior
- Zero expected dividend yield
Due to the use of significant unobservable inputs, including assumptions regarding expected volatility and holder behavior, the derivative liabilities are classified as Level 3 within the fair value hierarchy in accordance with ASC 820.
In accordance with ASC 815-15-30-2, the Company allocates the proceeds received from the issuance of convertible promissory notes between the derivative liability and the host debt. The derivative liability is initially measured at its fair value, and the carrying amount of the host debt is determined as the difference between the proceeds received and the fair value of the derivative liability. To the extent that the fair value of the derivative liability exceeds the proceeds received, the excess is recognized immediately in earnings as a loss on issuance, resulting in no initial carrying amount for the host debt.
Interest expense recognized over the term of the Notes includes contractual coupon interest and, where applicable, amortization of any debt discount. Debt issuance costs related to the Notes are capitalized and amortized to interest expense over the term of the Notes using the effective interest method.
For the three and nine months ended May 31, 2026,
the Company recognized (i) interest expense of $
As of May 31, 2026, the Company had outstanding convertible
notes with an aggregate principal amount of approximately $
The following table summarizes the Company’s convertible promissory notes and derivative liabilities as of May 31, 2026:
| Convertible Notes Payable | ||||
| Balance, August 31, 2025 | $ | |||
| Issuance of convertible notes (face value) | ||||
| Less: discount on Note issuance, net of amortization | ( | ) | ||
| Repayments / conversions | ||||
| Balance, May 31, 2026 | $ | |||
| Derivative Liabilities | ||||
| Balance, August 31, 2025 | $ | |||
| Initial recognition | ||||
| Change in fair value of derivative liability | ( | ) | ||
| Settlement / conversions | ||||
| Balance, May 31, 2026 | $ | |||
| F-21 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 – RELATED PARTY TRANSACTIONS
Related party loans and line of credit agreements
In support of the Company’s operations and cash requirements, the Company may rely on advances from stockholders until such time that it can sustain its operations or obtain adequate financing through equity sales or traditional debt financing.
Mr. Chiyuan Deng, the Chief Executive Officer
On June 1, 2023, Mr. Chiyuan Deng, the Company’s Chief Executive Officer and a stockholder, entered into a line of credit agreement with the Company. Under the agreement, Mr. Deng agreed to provide a line of credit of up to , which included the existing shareholder loan balance of . .
For the nine months ended May 31, 2026, Mr. Deng provided additional loans totaling to meet the Company’s working capital needs. In addition, Mr. Deng and Anyone Pictures Limited had signed an agreement to agree to transfer Anyone’s balance to Mr. Deng’s account. As of May 31, 2026, the Company had repaid .
For the nine months ended May 31, 2025, Chiyuan Deng
has loaned a total of for its working capital needs. As of May 31, 2025, the Company has repaid .
The loans are non-interest bearing and due on demand. The Company recognized imputed interest at
During the nine and three months ended May 31,
2026, the Company incurred related party loan interest expense of $
Anyone Pictures Limited
On March 1, 2025, the Company entered into a line
of credit agreement with Anyone Pictures Limited, the Company’s major stockholder, for up to $
During the nine and three months ended May 31,
2026, the Company incurred related party loan interest expense of $
Maintenance & consulting agreement - related party - Zestv
During the three months ended May 31, 2026, the Company
entered into an operations and maintenance service agreement with Zestv Studios Limited, a company owned by the Company's director, Mr.
Chiyuan Deng, and therefore a related party, for the provision of technical support, software maintenance, system optimization, security
updates, service level support and consulting services for the Company's Ufilm AI platform. Pursuant to the agreement, the Company incurred
maintenance service fees of $
In addition, the Company engaged Zestv Studios Limited
to perform additional development and enhancement work on the Ufilm AI platform, including further development of AI functionalities
and the integration of the acquired multi-agent technology into the Ufilm v2.0 platform. During the three months ended May 31, 2026,
the Company incurred $
As of May 31, 2026, the Company had prepaid maintenance
service fees of $
| F-22 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 – RELATED PARTY TRANSACTIONS (continued)
Revenue and accounts receivable - related party - Anyone Pictures Limited
For the three months ended November 30, 2025, the
Company recognized a license revenue of $
As of May 31, 2026 and August 31, 2025, the Company
had
Executives’ salaries
Mr. Chiyuan Deng, the President
On September 11, 2020 and May 24, 2022, the Company entered into two amended employment agreements with Chiyuan Deng, the Chief Executive Officer. Pursuant the amended agreements, the Company amended the compensation to Mr. Deng to include a salary of $180,000 annually, a reduction in common stock received under his initial employment agreement, a potential for a bonus in cash or shares, and the issuance of shares of Series A Preferred Stock at par value . Mr. Deng returned shares common stock to the Company received under his initial employment agreement. The Chief Executive Officer opted to forgo his salaries effective from October 2023. On February 14, 2025, the Company approved compensation of $99,000 to the Chief Executive Officer for the three months ended February 28, 2025.
On February 14, 2025,
the Company approved compensation of $
On December 24, 2025, the sole director approved
a stock-based bonus to the Company’s Chief Executive Officer consisting of fully vested shares of common stock. The Company
recognized compensation expense of $
On March 1, 2026, the Company entered into an Employment
Agreement with Chiyuan Deng to serve as the Company's President. The agreement has an initial three-year term with automatic one-year
renewals unless either party provides 90 days’ prior written notice of non-renewal. Pursuant to the agreement, Mr. Deng is entitled
to a sign-on bonus of $
In addition, on March 1, 2026, the Company entered
into an Employment Agreement with Chiyuan Deng with an annual base salary of $
During the nine months ended May 31, 2026 and 2025,
the Company incurred total compensation of $
| F-23 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 – RELATED PARTY TRANSACTIONS (continued)
Mr. Ahmad Moradi, the Chief Executive Officer (March 1, 2026 to May 7, 2026)
On March 1, 2026, the Company entered into an Employment
Agreement with Ahmad Moradi to serve as the Company's Chief Executive Officer. The agreement has an initial three-year term with automatic
one-year renewals unless either party provides 90 days’ prior written notice of non-renewal. Pursuant to the agreement, Mr. Moradi
is entitled to a sign-on bonus of $
Under the Employment Agreement, Mr. Moradi is also
entitled to an annual base salary of $
During the nine months ended May 31, 2026 and 2025,
the Company incurred total compensation of $
Mr. Dzmitry Kastahorau, the CFO (April 7, 2026 to June 3, 2026)
On April 7, 2026, the Company entered into an Employment
Agreement with Dzmitry Kastahorau to serve as the Company's CFO. The agreement has an initial three-year term with automatic one-year
renewals unless either party provides 90 days’ prior written notice of non-renewal. Pursuant to the agreement, Mr. Kastahorau is
entitled to a sign-on bonus of $
Under the Employment Agreement, Mr. Kastahorau is
also entitled to an annual base salary of $
During the nine months ended May 31, 2026 and 2025,
the Company incurred total compensation of $
Executives’ share-based compensation
During the nine months ended May 31, 2026 and 2025,
the Company incurred total share-based compensation of $
NOTE 10 – STOCKHOLDERS’ EQUITY
Common shares
The Company had the following activities for the nine months ended May 31, 2026:
Repurchase of shares
On December 8, 2025, the Company entered into
a Repurchase Agreement (the “Repurchase Agreement”) with Anyone Pictures Limited (the “Stockholder”), pursuant
to which the Company agreed to repurchase from the Stockholder (split-adjusted 1,875,000) shares of the Company’s
common stock, par value per share (the “Shares”), for an aggregate purchase price of $
| F-24 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – STOCKHOLDERS’ EQUITY (Continued)
The repurchase represents approximately
The transaction closed simultaneously with the execution of the Repurchase Agreement on December 8, 2025. The Purchase Price was satisfied through a non-cash settlement by offsetting against a related party loan. The Shares have been surrendered and canceled on the books of the Company.
Reverse Stock split
Issuance of common shares for consulting and financing services
On October 1, 2025, the Company entered into three consulting agreements with independent third-party consultants to provide business development services. Under the terms of the agreements, each of the consultants are entitled to receive an aggregate of (split-adjusted 80,000) shares of the Company’s restricted common stock as compensation for services.
Upon execution of the agreements, the Company issued (split-adjusted 15,000) restricted common shares to each of the consultants, totaling (split-adjusted 45,000), which were delivered to the Company’s transfer agent in the consultants’ names and accounts. Under the terms of the agreement, the Company issued (split-adjusted 45,000), shares of its common stock at a value of (split-adjusted $0.4) per share, for total consulting expenses of for the three months ended November 30, 2025.
Beginning in the fourth month following the agreement
date, and continuing through the sixteenth month, for each of the consultant, the Company is required to issue
(split-adjusted 5,000) restricted common shares per month, to be delivered to the transfer agent in the Company’s name and account
for subsequent release pursuant to the service schedule under the agreements. During the three months ended February 28, 2026, the Company
issued
and
shares of its common stock at a grant-date fair value of
and
per share, for total consulting expenses of $
On December 15, 2025, the Company entered into
advisory agreements with an independent third party to provide financing and non-financing advisory services. Under the agreements,
the advisor is entitled to an equity fee equal to 7% of the gross proceeds received from financing transactions. The equity fee is
settled in restricted common stock, valued at the Company’s closing market price on the respective transaction dates. During
the nine months ended May 31, 2026, the Company issued restricted common shares and recognized financing services expenses of
$
On May 1, 2026, the Company entered into advisory
agreement with an independent third party to provide strategic capital markets consulting services. Under the agreements, the initial
term will commence on May 1, 2026 and will continue for a period of four months and a monthly fee of $
| F-25 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – STOCKHOLDERS’ EQUITY (Continued)
Issuance of Common shares for officer bonus and salary
On December 24, 2025, the sole director, Chiyuan Deng,
approved his bonus compensation for serving as the Company’s Chief Executive Officer for bonus of shares of common stock.
The Company issued shares of the Company’s common stock valued at market price of per share for a total amount of
$
On March 1, 2026, the Company entered into an Employment
Agreement with Ahmad Moradi to serve as the Company's Chief Executive Officer. The agreement has an initial three-year term with automatic
one-year renewals unless either party provides 90 days’ prior written notice of non-renewal. Pursuant to the agreement, Mr. Moradi
is entitled to a sign-on bonus of $
Under the Employment Agreement, Mr. Moradi is also
entitled to an annual base salary of $
On March 1, 2026, the Company entered into an Employment
Agreement with Chiyuan Deng to serve as the Company's President. The agreement has an initial three-year term with automatic one-year
renewals unless either party provides 90 days’ prior written notice of non-renewal. Pursuant to the agreement, Mr. Deng is entitled
to a sign-on bonus of $
On April 7, 2026, the Company entered into an Employment
Agreement with Dzmitry Kastahorau to serve as the Company's CFO. The agreement has an initial three-year term with automatic one-year
renewals unless either party provides 90 days’ prior written notice of non-renewal. Pursuant to the agreement, Mr. Kastahorau is
entitled to a sign-on bonus of $
Issuance of common shares for private placement
On January 14, 2026, the Company entered into a Stock Purchase Agreement with Chief Executive Officer, Mr. Deng for the sales of 130,000 shares and with four unrelated investors for the sales of 138,000, 160,000, 150,000, and 80,000 shares, respectively, at a purchase price of $0.86 per share. The issuances resulted in total cash proceeds of $565,880.
On February 3, 2026, the Company entered into a Stock
Purchase Agreement with an investor for the sale of shares of its common stock at a purchase price of per share. The Company
received total cash proceeds of $
On February 5, 2026, the Company entered into a Stock Purchase Agreement with an investor for the sale of 160,000 shares of its common stock at a purchase price of $0.61 per share. The $97,600 was applied as a non-cash deposit toward a short-form drama series purchase agreement.
| F-26 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – STOCKHOLDERS’ EQUITY (Continued)
On April 8, 2026, the Company entered into a Stock
Purchase Agreement with three investors for the sales of , , and shares, respectively, at a purchase price of
per share. The issuances resulted in total cash proceeds of $
On April 28, 2026, the Company entered into a Stock
Purchase Agreement with President, Mr. Deng for the sales of share, at a purchase price of per share. The issuances resulted
in total cash proceeds of $
The Company had the following activities for the nine months ended May 31, 2025:
Issuance of common shares
On February 21, 2025, the Company entered into a stock purchase agreement with Anyone Pictures Limited. Under the terms of this agreement, the Company issued (split-adjusted 1,000,000) shares of the Company’s common stock with a value of $0.00015 (split-adjusted $0.3) per share for a gross proceed of $300,000 (See Note 9). These shares were repurchased by the company at the same price on December 8, 2025.
On March 14, 2025, the
Company issued (split-adjusted 1,000,000) shares of the Company’s common
stock valued at market price of (split-adjusted $0.4) per share for a total amount of
$
On May 15, 2025, the
Company entered into another stock purchase agreement with Anyone Pictures Limited. Under the terms of this agreement, the Company issued
(split-adjusted 875,000) shares of the Company’s common stock with a value
of (split-adjusted $0.4) per share for a gross proceed of $
As of May 31, 2026 and August 31, 2025, the Company had and 8,031,266,321 (split-adjusted ) shares of common stock issued and outstanding, respectively.
Preferred shares
The Company had no preferred share activities for the nine months ended May 31, 2026 and 2025.
As of May 31, 2026 and August 31, 2025, the Company had and shares of Series A preferred stock issued and outstanding, respectively.
Warrants
2022 warrants
As a consideration of Common Stock Purchase Agreement
signed with Alumni Capital on August 2, 2022, which resulted in Alumni Capital subscribing to a total of (split-adjusted 100,000)
shares of common stock for total proceeds of as of August 31, 2023, Alumni Capital was granted the right to purchase up to
(split-adjusted 25,000) shares of the Company’s common stock (the “Warrant Shares”). The warrants have an exercise price
of $
| F-27 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – STOCKHOLDERS’ EQUITY (continued)
2024 warrants
In connection with the Common Stock Purchase Agreement
signed with Alumni Capital on June 13, 2024, the Company issued to Alumni a Common Stock Purchase Warrant dated the same day to purchase
up to
The warrant liability is remeasured at fair value
at each reporting date, with changes in fair value recognized in earnings in accordance with ASC 815-40. As of May 31, 2026, the aggregate
fair value of the warrants was estimated at $
As of August 31, 2025, the aggregate fair value of
the warrants was estimated at $
As of May 31, 2026,
A summary of the status of the Company’s warrants as of May 31, 2026 and August 31, 2025 is presented below:
| Number of warrants | |||||||||||||
| Original shares issued | Original shares issued (split-adjusted) | Anti-dilution Adjusted | |||||||||||
| Warrants as of August 31, 2024 | |||||||||||||
| Adjustment | |||||||||||||
| Exercisable as of August 31, 2025 | |||||||||||||
| Adjustment | |||||||||||||
| Exercisable as of May 31, 2026 | |||||||||||||
Equity Purchase Agreement
On February 21, 2026, the Company entered into
an equity purchase agreement with Monroe Street Capital Partners, LP (the “Investor”), pursuant to which the Company has
the right, but not the obligation, to sell up to an aggregate of $
Under the agreement, the Company may, from time to time, direct the Investor to purchase shares of its common stock at prices based on prevailing market prices, subject to certain limitations and conditions, including regulatory requirements and the effectiveness of a registration statement covering the resale of such shares.
The Company is generally required to register the resale of shares issuable under the agreement, and the arrangement may result in significant dilution to existing stockholders depending on the timing and pricing of share issuances.
| F-28 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On March 1, 2026, the Board adopted the AI Era Corp. 2026 Equity Incentive Plan (the “2026 Plan”), which reserves a maximum of 10,000,000 shares of Common Stock for issuance thereunder. The 2026 Plan provides for the grant of stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights, and other equity-based awards to eligible employees, officers, directors, consultants, and other service providers of the Company and its subsidiaries. The grants to Messrs. Moradi, Deng and Kastahorau described above were made under the 2026 Plan.
On March 1, 2026, the Company granted 1,500,000 stock options to Chiyuan Deng, the Company's President, and 2,000,000 stock options to Ahmad Moradi, the Company's Chief Executive Officer, under the Company's 2026 Equity Incentive Plan. On April 7, 2026, the Company granted 1,500,000 stock options to Dzmitry Kastahorau, the Company's Chief Financial Officer, under the same plan.
The stock options vest over three years, with 25% vesting after the first year, 35% after the second year, and the remaining 40% after the third year, subject to the recipients' continued service and the achievement of applicable performance milestones. The awards provide for accelerated vesting upon a change in control or termination without cause, as specified in the applicable award agreements.
Mr. Moradi resigned on May 7, 2026, and Mr. Kastahorau resigned on June 3, 2026. Accordingly, all of their unvested stock options were forfeited and cancelled.
The following table summarizes the Company’s share option activity for the nine months ended May 31, 2026:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | |||||||||||
| Opening balance, August 31, 2025 | — | ||||||||||||
| Granted | — | ||||||||||||
| Cancelled | ( | ) | — | ||||||||||
| Exercised | — | ||||||||||||
| Ending balance, May 31, 2026 | |||||||||||||
| Exercisable, May 31, 2026 | — | ||||||||||||
The Black-Scholes pricing model was applied in determining the estimated fair value of the options granted. The model requires the input of subjective assumptions. The following table presents the assumptions used to estimate the fair values of the share options granted for the nine months ended May 31, 2026:
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Estimated forfeiture rate | % | |||
| Dividend yield | ||||
| Fair value of the underlying common stocks of the Company | $ | |||
| Fair value of the stock option | $ |
The expected term was estimated using the simplified method. The expected volatility was estimated based on the historical volatility of the companies with a time horizon close to the contract life of the Company’s options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock-based award. Expected dividend yield is zero as the Company has never declared or paid any cash dividends on its shares, and the Company does not anticipate any dividend payments in the foreseeable future. For the nine months ended May 31, 2026 and 2025, the total share-based compensation expenses were and , respectively. The Company did not grant any share options during the nine months ended May 31, 2025.
| F-29 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 12 – INCOME TAXES
The Company and its fully owned subsidiaries, AB
Cinemas NY, Inc and AI+ Hubs Corp, were incorporated in the United States and are subject to a statutory income tax rate at
As of May 31, 2026 and August 31, 2025, the components of net deferred tax assets, including a valuation allowance, were as follows:
May 31, 2026 | August 31, 2025 | |||||||
| Deferred tax asset attributable to: | ||||||||
| Net operating loss carry over | $ | $ | ||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
For the nine months ended May 31, 2026 and 2025, the Company and its subsidiaries generated net loss and net income respectively. However, despite the current profitability, management believes that the Company’s earnings are not yet stable or sustainable. The Company also continues to experience negative working capital and has an accumulated deficit.
In assessing the realizability of deferred tax assets, management evaluates 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 depends on the generation of future taxable income during the periods in which the related temporary differences become deductible. In making this assessment, management considers the scheduled reversal of deferred tax items, projected future taxable income, and feasible tax planning strategies.
As a result, management determined that it is more
likely than not that the Company’s deferred tax assets will not be realized, after considering the potential utilization of existing
net operating loss (“NOL”) carryforwards. As of May 31, 2026 and August 31, 2025, the valuation allowance for deferred tax
assets was $
Reconciliation between the statutory rate and the effective tax rate is as follows for the nine months ended May 31, 2026 and 2025:
| Nine months ended | ||||||||
| May 31, | May 31, | |||||||
| 2026 | 2025 | |||||||
| Federal statutory tax rate | % | % | ||||||
| Effect of permanent difference | ( | )% | % | |||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Effective tax rate | % | % | ||||||
During the nine months ended May 31, 2026, the Company and its subsidiaries generated net losses. As a result, the Company and its subsidiaries did not incur any income tax for the nine months ended May 31, 2026.
During the nine months ended May 31, 2025, the Company and its subsidiaries generated net income. However, due to the fact that the Company had net operating loss carried forward, the Company and its subsidiaries did not incur any income tax for the nine months ended May 31, 2025.
| F-30 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 13 – CONCENTRATION RISK
Concentration
For the nine months ended May 31, 2026,
As of May 31, 2026,
For nine months ended May 31, 2026,
Credit risk
Financial instruments that potentially subject the
Company to concentrations of credit risk consist primarily of cash deposits. In the United States, deposits at each financial institution
are insured by the Federal Deposit Insurance Corporation (FDIC) up to $
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. There is no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of its operations and there are no proceedings in which any of the Company’s directors, officers, or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to the Company’s interest.
Operating leases
The Company has a lease agreement to rent movie theatre with a third-party vendor as of May 31, 2026 date and the expiration date is 1 February, 2027. (See Note 6)
| F-31 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STTEMENTS
(Unaudited)
NOTE 15 – SEGMENT INFORMATION
The Company follows FASB ASC Topic 280, Segment Reporting, as amended by ASU 2023-07. The Company’s Chief Operating Decision Maker (“CODM”), Mr. Deng, the Chief Executive Officer, is responsible for evaluating operating results and allocating resources among the Company’s operating segments. As a result of strategic business realignment, the Company has identified two reportable segments: the Copyrights and Licensing (“IP”) segment and the Cinema segment.
The following table presents summarized financial information by reportable segment for the nine months ended May 31, 2026 and 2025, respectively.
| IP Segment | Cinema Segment | Total | ||||||||||||||||||||||
| Nine months ended | Nine months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2026 | May 31, 2025 | May 31, 2026 | May 31, 2025 | May 31, 2026 | May 31, 2025 | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Costs of copyrights sold | ||||||||||||||||||||||||
| Theatre operating costs | ||||||||||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Segment assets | ||||||||||||||||||||||||
| Segment (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
The following table presents summarized financial information by reportable segment for the three months ended May 31, 2026 and 2025, respectively.
| IP Segment | Cinema Segment | Total | ||||||||||||||||||||||
| Three months ended | Three months ended | Three months ended | ||||||||||||||||||||||
| May 31, 2026 | May 31, 2025 | May 31, 2026 | May 31, 2025 | May 31, 2026 | May 31, 2025 | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Costs of copyrights sold | ||||||||||||||||||||||||
| Theatre operating costs | ||||||||||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Segment assets | ||||||||||||||||||||||||
| Segment (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| F-32 |
AI ERA CORP. (FORMERLY KNOWN AS AB INTERNATIONAL GROUP CORP.)
NOTES TO CONSOLIDATED FINANCIAL STTEMENTS
(Unaudited)
NOTE 16 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to the date these financial statements were issued.
Management Changes
On June 3, 2026, Dzmitry Kastahorau notified AI Era Corp. (the “Company”) of his resignation as Chief Financial Officer of the Company, effective immediately on June 3, 2026. The Company has accepted Mr. Kastahorau’s resignation. Mr. Kastahorau’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
Issuance of common shares for private placement
On June 24, 2026, the Company entered into a Stock Purchase Agreement with two investors for the sale of 54,000 and 82,000 shares of its common stock at a purchase price of $0.76 per share. The Company received total cash proceeds of $41,040 and $62,320.
| F-33 |
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.” 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;
§ significant management turnover and our ability to attract and retain qualified executive officers and key personnel;
§ substantial dilution to existing stockholders from the issuance of convertible notes, equity financings, and the $30 million equity purchase agreement;
§ legislative or regulatory changes;
§ risks related to our operations and uncertainties related to our business plan and business strategy, including our ability to successfully commercialize our AI-powered uFilm platform and short-form drama content for AI training;
§ 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 and any updates thereto in this Quarterly Report on Form 10-Q.
Overview
AI Era Corp. (formerly AB International Group Corp.) is an intellectual property (“IP”) investment, acquisition, and licensing company focused primarily on the entertainment media sector. We acquire copyrights and broadcast rights for movies, television series, and short-form drama series, which we monetize through licensing (broadcast and download), embedded marketing services, AI-enhanced consulting, and direct copyright sales. In addition, we operate the Mt. Kisco Theatre in Mount Kisco, New York, generating revenue from ticket admissions, concessions, and on-screen advertising.
Our business is organized into two reportable segments: the Copyrights and Licensing (“IP”) segment and the Cinema segment. The IP segment, which includes our growing short-form drama library and AI initiatives (including the ufilm AI platform and short-drama AI training licensing), continues to be the primary driver of revenue and growth. The Cinema segment provides stable, recurring cash flow from physical theater operations.
| 4 |
For the nine months ended May 31, 2026, we reported total revenue of $7,168,497, an increase of 103% from $3,530,082 in the prior-year period. The IP segment generated $6,991,673 in revenue, while the Cinema segment contributed $176,824, primarily reflecting higher licensing revenue from broadcast/download rights, embedded marketing services, and new AI-related streams (including $955,270 from short-form drama AI training pilots and $1,322,300 from the uFilm platform). Amortization expense increased to $3,467,411 as a result of continued investment in our content library.
During the nine months ended May 31, 2026, we continued to execute on our strategic transition toward AI-enhanced media solutions. In January 2026 we received delivery of the ufilm AI intellectual property, which launched on the Uflix.ai platform in February 2026 and contributed initial licensing revenue. We also issued convertible promissory notes for net proceeds of approximately $847,500 and entered into a $30 million equity purchase agreement to support further library expansion and AI commercialization. In December 2025 we completed a related-party share repurchase of 1,875,000 shares (post-split) and implemented a 1-for-2,000 reverse stock split effective December 18, 2025, followed by our name change to AI Era Corp.
During the three months ended May 31, 2026, we experienced changes in executive leadership. Dr. Ahmad Moradi resigned as Chief Executive Officer on May 7, 2026, and subsequent to the end of the quarter, Mr. Dzmitry Kastahorau resigned as Chief Financial Officer on June 3, 2026. We also entered into a financial advisory agreement with Craft Capital in April 2026 to support a potential direct listing and appointed a Vice Chairman in June 2026 to provide strategic advisory services.
We continue to face the challenges typical of our industry, including content acquisition costs, customer concentration, and the evolving regulatory and competitive landscape for AI-driven media. For additional information regarding our business, see our most recent Annual Report on Form 10-K and the Business section of our Registration Statement on Form S-1.
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, 2026 was $1,501,839 and $7,168,497, respectively. Our total revenue reported for the three and nine months ended May 31, 2025 was $1,845,189 and $3,530,082, respectively.
The increase was primarily driven by growth in the IP segment. Revenue for the nine months ended May 31, 2026, was mainly attributable to licensing for broadcast and download, embedded marketing services, consulting services, license of short-form drama for AI training pilots, and licensing of the uFilm platform, along with continued revenue from the NFT MMM platform and our Mt. Kisco Theatre. In contrast, revenue for the comparable 2025 periods 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.
The decrease in revenue for the three months ended May 31, 2026, compared to the three months ended May 31, 2025, was primarily attributable to the absence of revenue from the sale of movie copyrights to related and third parties, as well as lower revenue from embedded marketing services and broadcasting activities. These decreases were partially offset by revenue generated from the licensing of short-form dramas for AI training pilot programs, licensing of the uFilm platform, and continued revenue from the NFT MMM platform and the Mt. Kisco Theatre.
Beginning in the third quarter of 2026, the Company initiated a strategic restructuring to align its operations with its long-term growth strategy. Management redirected resources from certain legacy business activities, including license fees for download and embedded marketing services, toward the expansion of the uFilm platform and the licensing of short-form drama copyrights for AI training. While certain legacy revenue streams were reduced, the Company continued to operate its other business lines, with the restructuring intended to strengthen its future growth and monetization opportunities.
The year-over-year growth resulted from the combined impact of: (i) new licensing streams, including short-form drama for AI training pilots $955,270 and the uFilm platform $1,322,300, (ii) expanded broadcast/download licensing, (iii) higher embedded marketing and consulting services, and (iv) continued NFT MMM licensing, partially offset by lower copyright sales and a modest decline in theatre revenue due to programming mix.
Operation of our movie theatre started in October of 2022. For the nine months ended May 31, 2026, we generated total revenue of $176,824, including $123,069 from ticket sales, and $49,037 from food and beverage sales and $4,718 from advertisement. 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. The decrease in revenue was mainly due to less renowned and popular movies on screen compared to the corresponding period in 2025.
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For the three months ended May 31, 2026, we generated total revenue of $63,019, including $44,692 from ticket sales, and $18,327 from food and beverage sales and $0 from advertisement. 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. The increase in revenue was primarily attributable to higher ticket sales and increased food and beverage sales resulting from improved theatre attendance, which more than offset the absence of advertising revenue during the 2026 period.
We expect future revenue growth from continued expansion of embedded marketing, broadcast/download licensing, short-form drama AI training, and uFilm platform services, supplemented by theatre operations.
Operating Costs and Expenses
Operating costs and expenses were $5,692,530 for the nine months ended May 31, 2026, as compared to $3,457,876 for the nine months ended May 31, 2025. Our operating costs and expenses for the nine months ended May 31, 2026 consisted of theatre operating costs of $85,681, amortization expenses of $3,467,411, general and administrative expenses of $1,155,449 and related party salary and wages of $983,989. In contrast, 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.
Operating expenses increased to $2,780,743 for the three months ended May 31, 2026 from $1,933,965 for the three months ended May 31, 2025. Our operating expenses for three months ended May 31, 2026 consisted of theatre operating costs of $35,849, amortization expenses of $1,445,409, general and administrative expenses of $715,496 and related party salary and wages of $583,989. In contrast, 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.
We experienced a decrease in theatre operating costs for the nine months ended May 31, 2026 as compared to the corresponding period in 2025, mainly due to the decrease in admission revenues and the decrease in movie exhibition costs as a percentage of admission revenue. The theatre operating costs decreased to $85,681 for the nine months ended May 31, 2026 from $118,598 for the nine months ended May 31, 2025.
We experienced an increase in theatre operating costs for the three months ended May 31, 2026 as compared to the corresponding period in 2025. The increase was mainly due to higher movie exhibition costs resulting from increased ticket sales. Movie exhibition costs generally vary with admission revenue under the Company's revenue-sharing arrangements with film distributors. The theatre operating costs increased to $35,849 for the three months ended May 31, 2026 from $25,995 for the three months ended May 31, 2025.
We experienced an increase in amortization expenses for the nine months ended May 31, 2026 as compared to the corresponding period in 2025, mainly due to having more newly acquired intangible assets for nine months ended May 31, 2026 as compared to the corresponding period in 2025.
We experienced an increase in amortization expenses for the three months ended May 31, 2026 as compared to the corresponding period in 2025, mainly due to having more newly acquired intangible assets for three months ended May 31, 2026 as compared to the corresponding period in 2025.
The costs of copyrights sold during the three and nine months ended May 31, 2026 was nil. 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 while 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.
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We experienced an increase in general and administrative expenses for the nine months ended May 31, 2026 as compared to the corresponding period in 2025, mainly driven by non-recurring professional fees including financing services fees, technology service fees for short drama data cleaning, consulting fees for Ufilm project and Ufilm platform maintenance expense for the nine months ended May 31, 2026 in contrast to the corresponding period in 2025.
We experienced an increase in general and administrative expenses for the three months ended May 31, 2026 as compared to the corresponding period in 2025, mainly driven by non-recurring professional fees including financing services fees, technology service fees for short drama data cleaning, consulting fees for Ufilm project and Ufilm platform maintenance expense for the three months ended May 31, 2026 in contrast to the corresponding period in 2025.
We experienced an increase in related party salary and wages for the nine months ended May 31, 2026 as compared to corresponding period in 2025, mainly due to a one-time stock-based bonus of $400,000 awarded to our Chief Executive Officer and one-time stock-based sign-on bonus of $471,111 awarded to our President, former Chief Executive Officer and Chief financial officer. During the nine months ended May 31, 2025, the Company incurred total compensation of $499,000 for the Chief Executive Officer. This is mainly due to compensation of $99,000 and bonus compensation of $400,000 paid by shares to the Chief Executive Officer.
We experienced an increase in related party salary and wages for the three months ended May 31, 2026 as compared to corresponding period in 2025, mainly due to one-time stock-based sign-on bonus of $471,111 awarded to our President, former Chief Executive Officer and Chief financial officer. During the three months ended May 31, 2025, the Company incurred total compensation of $400,000 for the Chief Executive Officer. This is mainly due to bonus compensation of $400,000 paid by shares to the Chief Executive Officer.
Dr. Ahmad Moradi resigned as Chief Executive Officer on May 7, 2026, and Mr. Dzmitry Kastahorau resigned as Chief Financial Officer on June 3, 2026. Compensation recorded during the period reflects amounts earned prior to their resignations.
We anticipate that operating expenses will increase as we execute our growth strategy, particularly in connection with the commercialization of the uFilm platform and continued content acquisitions.
Other Income (expenses)
We had other expense of $3,204,786 for the nine months ended May 31, 2026, as compared with other expense of $32,555 for the corresponding period in 2025. Our other expense for the nine months ended May 31, 2026 was the net amount of the interest expense, the loss on change in fair value of warrant liabilities, and gain on change in fair value of derivative liabilities. Our other income (expenses) for the corresponding period in 2025 was the net amount of the other income and the interest expense – related parties.
We had other expense of $3,050,093 for the three months ended May 31, 2026, as compared with other expense of $36,468 for the corresponding period in 2025. Our other expense for the three months ended May 31, 2026 was the net amount of the interest expense, the loss on change in fair value of warrant liabilities, and gain on change in fair value of derivative liabilities. Our other income for the corresponding period in 2025 was the interest expense – related parties.
Net Income/ Net Loss
We incurred a net loss in the amount of $1,728,819 and net income of $39,651 for the nine months ended May 31, 2026 and 2025, respectively.
We incurred a net loss in the amount of $4,328,997 and $125,244 for the three months ended May 31, 2026 and 2025, respectively.
Liquidity and Capital Resources
As of May 31, 2026, we had $576,957 in current assets consisting of cash, prepaid expenses and accounts receivable. Our total current liabilities as of May 31, 2026 were $7,483,645. As a result, we have a working capital deficit of $6,906,688 as of May 31, 2026 as compared with a working capital deficit of $3,250,026 as of August 31, 2025.
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Operating activities generated $1,025,009 in cash for the nine months ended May 31, 2026, as compared with $3,876,764 used in cash for the nine months ended May 31, 2025.
Our positive operating cash flow for the nine months ended May 31, 2026 was mainly the result of the cash generated in net loss combined with the amortization of intangible assets, salaries and consulting fees paid in stock, loss on change in fair value of warrant liabilities and increase in deferred revenue offset by cash used in the purchase of intangible assets and increase in accounts receivable and gain on change in fair value of derivative liabilities.
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.
We did not have any investing activities during the nine months ended May 31, 2026 and 2025.
Financing activities used $922,864 for the nine months ended May 31, 2026, as compared with $3,907,850 provided in financing activities for the nine months ended May 31, 2025. Our negative financing cash flow for the nine months ended May 31, 2026 was due to repayment of related party loan, which was partly offset by the proceeds from our private placement and net proceeds from issuance of convertible note. 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.
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, 2026, the Company had limited cash, loss from operation of approximately $1.3 million, an accumulated deficit of approximately $12.1 million and a working capital deficit of approximately $6.9 million. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders or external financing and achieving operating profits. 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 continued financial support from its stockholders or external financing. Management’s plans include (i) continued utilization of the $30 million equity purchase agreement entered into with Monroe Street Capital Partners, LP on February 21, 2026, (ii) expected cash flows from expanded licensing of short-form drama content for AI training and uFilm SaaS platform, (iii) additional private placements and convertible note financings, (iv) ongoing financial support from the President, (v) pursuit of a direct listing on NYSE American supported by the Craft Capital advisory engagement entered into on April 18, 2026, and (vi) strategic advisory services from the newly appointed Vice Chairman effective June 12, 2026. These actions are expected to provide sufficient liquidity to fund operations for at least the next twelve months. However, there can be no assurance that these plans will be successful, 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 provide the opportunity for the Company to continue as a going concern.
Off Balance Sheet Arrangements
As of May 31, 2026, there were no off-balance sheet arrangements.
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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 2025 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.
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 May 31, 2026. This evaluation was carried out under the supervision and with the participation of our management, including 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 May 31, 2026, 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 May 31, 2026, 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, 2027: (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.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended May 31, 2026, 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.
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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
Our business, financial condition, and results of operations could be adversely affected by any of the risks and uncertainties described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended August 31, 2025, as updated in our Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 23, 2026, and as further updated below and elsewhere in this Quarterly Report on Form 10-Q.
Investors and prospective investors should carefully consider these risks, together with the information contained in the section captioned “Forward-Looking Statements” and elsewhere in this Quarterly Report, before deciding whether to invest in our securities. The risks described below and in our prior filings are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially and adversely affect our business, financial condition, and results of operations.
Updated Risk Factors
Management Transition and Key Personnel Risk
During and subsequent to the quarter ended May 31, 2026, we experienced significant changes in our executive leadership. Our former Chief Executive Officer resigned on May 7, 2026, and our former Chief Financial Officer resigned on June 3, 2026. These changes, and any future turnover in key management positions, could disrupt our operations, adversely affect our ability to execute our business strategy, and create uncertainty among our employees, customers, and investors. Our success depends to a significant extent on the continued service and performance of our remaining key personnel.
Dilution and Financing Risks
We have raised, and may continue to raise, capital through the issuance of common stock, convertible notes, and other equity-linked securities. These financings have resulted, and will likely continue to result, in substantial dilution to existing stockholders. In addition, the conversion of outstanding convertible notes and the exercise of warrants could further increase the number of shares outstanding and depress the market price of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended May 31, 2026, we issued unregistered shares of our common stock in the following transactions.
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Issuances for Consulting and Financing Services
| • | On various dates during the nine months ended May 31, 2026, the Company issued an aggregate of 184,057 restricted shares of common stock to consultants and advisors in connection with financing and strategic advisory services. The Company recognized approximately $131,800 in financing and consulting services expense related to these issuances. |
Issuances for Officer Compensation and Bonuses
| • | On December 24, 2025, the Company issued 1,000,000 shares of common stock to Chiyuan Deng (then serving as Chief Executive Officer) as a stock-based bonus. The shares were valued at $0.40 per share, for a total value of $400,000. | |
| • | On March 1, 2026, in connection with employment agreements, the Company issued: |
| • | 555,555 shares to Ahmad Moradi as a sign-on bonus (valued at approximately $244,444); and | |
| • | 333,333 shares to Chiyuan Deng as a sign-on bonus (valued at approximately $146,667). |
| • | On March 1, 2026, in connection with employment agreements, the Company issued 333,333 shares to Dzmitry Kastahorau as a sign-on bonus (valued at approximately $80,000) | |
| • | During the three months ended May 31, 2026, the Company issued 11,296 shares of common stock to Ahmad Moradi in settlement of a portion of his base salary. |
Private Placements
| • | On January 14, 2026, the Company issued an aggregate of 658,000 shares of common stock to Mr. Chiyuan Deng and four unrelated investors at a purchase price of $0.86 per share, for total gross proceeds of $565,880. | |
| • | On February 3, 2026, the Company issued 75,000 shares of common stock to an investor at a purchase price of $0.88 per share, for total gross proceeds of $66,000. | |
| • | On February 5, 2026, the Company issued 160,000 shares of common stock to an investor at a purchase price of $0.61 per share. The $97,600 in proceeds were applied as a non-cash deposit toward the purchase of short-form drama series rights. | |
| • | On April 8, 2026, the Company entered into a Stock Purchase Agreement with three investors for the sales of 80,000, 80,000, and 80,000 shares, respectively, at a purchase price of $0.25 per share. The issuances resulted in total cash proceeds of $60,000. | |
| • | On April 28, 2026, the Company entered into a Stock Purchase Agreement with President, Mr. Deng for the sales of 110,000 share, at a purchase price of $1.01 per share. The issuances resulted in total cash proceeds of $ 111,100. |
The securities described above were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder. The recipients represented that they were acquiring the securities for investment purposes only and not with a view toward distribution. The investors were provided with adequate information about the Company to make an informed investment decision. The Company did not engage in any general solicitation or general advertising in connection with these issuances. The shares were issued with appropriate restrictive legends.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
None
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Item 6. Exhibits
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| 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 May 31, 2026 formatted in Extensible Business Reporting Language (XBRL). |
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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.
| AI Era Corp. |
| By: | /s/ Chiyuan Deng |
| President, Interim CEO and CFO (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | |
| July 20, 2026 |
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