Forward-Looking Statements
Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally are identified by the words "believes,"
"project," "expects," "anticipates," "estimates," "intends," "strategy," "plan,"
"may," "will," "would," "will be," "will continue," "will likely result," and
similar expressions. We intend such forward-looking statements to be covered by
the safe-harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and are including this
statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. Our ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on our operations
and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of
capital, interest rates, competition, and generally accepted accounting
principles. These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
Results of Operations
Revenues
Our total revenue for the year ended August 31, 2022 was $2,928,000, as compared
with the revenue of $115,091 for the year ended August 31, 2021.
The significant increase in revenue for the year ended August 31, 2022 was
mainly attributable to revenue from the sale of mainland China copyright and
broadcast rights for a number of movies to third parties and a related party
owned by our officer and director, Mr. Chiyuan Deng, as well as license fee
income in connection with the license of our NFT MMM platform to a third party.
For the same period last year in 2021 , we had to shutdown of the performance
matching platform (Ai Bian Quan Qiu). Since no large social gathering was
allowed as a result of COVID-19, there has been no revenue generated from the
performance matching platform (Ai Bian Quan Qiu) since the end of January,
2020. Our revenue in 2021 was mainly attributable to patent sublicensing.
Our cost of revenues was $3,221,789 for the year ended August 31, 2022, as
compared with $1,494,328 for the year ended August 31, 2021. The increase in
cost of revenues was mainly due to the result of amortizing movie copyrights and
broadcast rights as a result of the Company obtaining more movie copyrights and
broadcast rights in fiscal 2022 as compared to fiscal 2021.
As a result, we had a gross loss of $293,789 for the year ended August 31, 2022,
as compared with a gross loss of $1,379,237 for the year ended August 31, 2021.
The negative gross profits for the years ended August 31, 2022 and 2021 were
attributable to the amortization of movie broadcast rights exceeded the revenue
from the copyright sales of films and patent sublicensing, respectively.
We expect to generate increased revenue in the future by selling movie and TV
drama copyrights and broadcast rights, achieving enough customers to start
subscriptions for ABQQ.tv and generating movie tickets and related revenues from
our Mt. Kisco movie theatre in New York. We also hope to generate more license
revenue from our NFT MMM platform.
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Operating Expenses
Operating expenses was $1,737,998 for the year ended August 31, 2022, as
compared to $1,844,670 for the year ended August 31, 2021.
Our operating expenses for year ended August 31, 2022 consisted of general and
administrative expenses of $1,190,360 and related party salary and wages of
$547,638. In contrast, our operating expenses for the years ended August 31,
2021 consisted of general and administrative expenses of $1,511,333 and related
party salary and wages of $333,337.
We experienced a decrease in general and administrative expenses in fiscal 2022
as compared to fiscal 2021, mainly as a result of decreased consulting fees and
depreciation expense, while salaries, professional fees, travel and
entertainment increased in 2022 as compared with 2021.
We experienced an increase in related party salary and wages in fiscal 2022 as
compared to fiscal 2021. During the years ended August 31, 2022 and 2021, the
Company paid the Chief Executive Offer and Chief Financial Officer total
compensation of $393,165 and $270,125, respectively. The Company also paid Chief
Investment Officer total compensation of $154,473 and $63,212, respectively, for
the years ended August 31, 2022 and 2021.
We anticipate our operating expenses will increase as we undertake our plan of
operations, including increased costs associated with marketing, personnel, and
other general and administrative expenses, along with increased professional
fees associated with SEC and COVID compliance as our business grows more complex
and more expensive to maintain. On the COVID front, we expect that restrictions
will ease moving forward, but there may still be setbacks as variants to the
virus emerge and governments take lockdown measures in response. These and other
costs for COVID expenditures may increase our operational costs in fiscal 2023
at various levels of operation.
Other Expenses
We had other expenses of $142,184 for the years ended August 31, 2022, as
compared with other expenses of $413,702 for the year ended August 31, 2021. Our
other expenses for fiscal 2022 was the result of penalty expenses recorded in
connection with the conversion of the Company's Series C preferred stocks due to
the fact that the Company was late filing the Form 10-Q for the period ended
February 28, 2022. Our other expenses in fiscal 2021 were mainly the result of
interest expense and the loss from prepaid convertible notes and warrant
exercises.
Net Loss
We incurred a net loss in the amount of $2,173,971 for the year ended August 31,
2022, as compared with a net loss of $3,582,262 for the year ended August 31,
2021.
Liquidity and Capital Resources
As of August 31, 2022, we had $97,258 in current assets consisting of cash and
prepaid expenses. Our total current liabilities as of August 31, 2022 were
$954,124. As a result, we have a negative working capital of $856,866 as of
August 31, 2022 as compared with a negative working capital of $228,669 as of
August 31, 2021.
Operating activities used $1,500,168 in cash for the year ended August 31, 2022,
as compared with $5,143,038 used in cash for the year ended August 31, 2021.
Our negative operating cash flow in fiscal 2022 was mainly the result of our net
loss for the year combined with the purchase and deposit for acquiring movie and
TV series copyrights and broadcast rights, and the decrease of related party
payable balance, offset by the amortization of intangible assets, and increased
account payable and accrued liabilities.
Our negative operating cash flow in fiscal 2021 was mainly the result of our net
loss for the year combined with changes in purchase deposit, accounts payable
and accrued liabilities, purchase of movie and TV series broadcast right and
copyright, and offset by related party payable.
We had no investing activities for the year ended August 31, 2022. We used
$5,000 in cash in investing activities for the year ended August 31, 2021.
Financing activities provided $1,452,138 for the year ended August 31, 2022, as
compared with $2,825,230 provided by financing activities for the year ended
August 31, 2021. Our positive financing cash flow in fiscal 2022 was the result
of proceeds from issuance of our common stock and preferred stock and from
increase of due to stockholders. Our positive financing cash flow in fiscal 2021
was the result of proceeds from convertible notes and sales of our common stock
and preferred stock, offset by payments for warrant termination and prepayments
for convertible notes.
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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 August 31, 2022, the Company had an accumulated
deficit of approximately $8.8 million and a working capital deficit of $856,866.
For the year ended August 31, 2022, the Company incurred a net loss of
approximately $2.2 million and the net cash used in operations was approximately
$1.5 million. Losses have principally occurred as a result of the substantial
resources required for general and administrative expenses associated with our
operations.
Although, the Company generated significant revenue of approximately $2.9
million as the result of selling the mainland China movie and TV series
copyrights and broadcast rights, as well as the licensing fee from the NFTMM
platform in fiscal 2022, the future operations of the Company depend on its
ability to realize forecasted revenues, achieve profitable operations, and
depend on whether or not the Company could obtain the continued financial
support from its stockholders or external financing. Management believes the
existing stockholders will continue to provide the additional cash to meet the
Company's obligations as they become due. The Company also intends to fund
operations through cash flow generated from the operations, including the
expected ticket sales from Mt. Kisco movie theatre, equity financing, debt
borrowings, and additional equity financing from outside investors, to ensure
sufficient working capital. However, no assurance can be given that additional
financing, if required, would be available on favorable terms or at all. If we
are not able to secure additional funding, the implementation of our business
plan will be impaired.
These factors, among others, raise the substantial doubt regarding the Company's
ability to continued 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. Management believes that the
actions presently being taken to obtain additional funding and implement its
strategic plan provides the opportunity for the Company to continue as a going
concern.
Off Balance Sheet Arrangements
As of August 31, 2022, there were no off-balance sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most
"critical accounting polices" in the Management Discussion and Analysis. The SEC
indicated that a "critical accounting policy" is one which is both important to
the portrayal of a company's financial condition and results, and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.
Our critical accounting policies are set forth in Note 2 to the financial
statements.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to
have a significant impact on our results of operations, financial position or
cash flow.
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