AI Era Corp. (AERA) is a micro-cap IP licensing and cinema operator with a balance sheet dominated by intangible assets under the liquidation lens. As of February 28, 2026, total assets are $9.05M against total liabilities of $2.83M, yielding book equity of $6.22M. However, under liquidation assumptions, the asset side collapses: cash of $509K recovers at 100%; accounts receivable of $678K recovers at 90-95% (~$610-640K); the operating lease right-of-use asset of $189K and PP&E of $2K are negligible; and intangible assets net of $7.11M recover at 0% under the standard intangibles haircut. Purchase deposits for intangible assets of $500K (classified under PrepaidExpenseAndOtherAssets) also carry zero recovery as they represent prepayments toward copyright acquisitions with no independently realizable value in a wind-down. This yields estimated liquidation asset recovery of roughly $1.1-1.2M before liabilities. Total current liabilities of $2.83M are held at face value and include: $696K derivative liabilities (Level 3 fair value, convertible note embedded features), $235K operating lease obligation, $192K convertible notes payable net of discount, $222K deferred revenue (no cash recovery in liquidation), $83K accounts payable and accrued liabilities, and $11K related-party loan. The liability stack at face value exceeds recoverable assets by approximately $1.6-1.7M, consistent with the MFFAIS-reported cash liquidation value of negative $2.04M and liquid liquidation value of negative $1.37M. The working capital deficit per MD&A is $1.62M at period end, improved from $3.25M at August 31, 2025, primarily due to operating cash generation and partial related-party loan repayment. The going concern qualification remains in place. Key changes since the prior filing (Q1 FY2026, November 30, 2025): (1) $895K face value convertible notes were issued in Q2 carrying variable-priced conversion features bifurcated as $696K derivative liabilities—a new liability class not present at November 30, 2025; (2) intangible assets increased from roughly $5.76M net (implied from segment assets) to $7.11M net through $2.71M in new copyright acquisitions; (3) cash increased from $12K to $509K due to operating cash generation plus $632K private placement proceeds and $795K convertible note proceeds, partially offset by $3.6M related-party loan repayment (net settlement basis); (4) accumulated deficit improved from approximately $10.0M (per prior MD&A) to $7.79M, reflecting the $2.6M net income for the six-month period. The filing discusses derivative liabilities on the convertible notes in MD&A but the balance-sheet XBRL tags DerivativeLiabilitiesCurrent ($696K) and ConvertibleNotesPayableCurrent ($192K) are present in TAG_CONTEXT. The warrant liability ($1.39M fair value) is discussed in the notes but is not separately tagged as a balance-sheet liability in TAG_CONTEXT—it appears embedded within the equity section accounting or captured under other tags; practitioners should note this disclosure gap. Post-period executive employment agreements (CEO sign-on $500K in stock, President sign-on $300K in stock, CFO sign-on $300K in stock) and a 10M-share 2026 equity incentive plan create material contingent dilution and future compensation liabilities not reflected on the February 28, 2026 balance sheet.
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