Cover Page Information [Filing and Registrant Details](index=1&type=section&id=Filing%20and%20Registrant%20Details) This section provides the basic filing information for the Form 10-Q, identifying ATIF Holdings Limited as the registrant, its jurisdiction of incorporation, principal executive offices, and contact number - The report is a Quarterly Report on Form 10-Q for the period ended October 31, 2023[2](index=2&type=chunk) - The registrant is ATIF HOLDINGS LIMITED, incorporated in the British Virgin Islands, with Commission File Number: 001-38876[2](index=2&type=chunk)[3](index=3&type=chunk) [Securities and Filer Status](index=1&type=section&id=Securities%20and%20Filer%20Status) This section details the company's registered securities and its classification under SEC filing requirements, indicating its compliance status and filer type Title of each class | Title of each class | Trading Symbol | Name of exchange on which registered | | :------------------ | :------------- | :----------------------------------- | | Ordinary Shares | ATIF | The Nasdaq Stock Market | - The registrant has filed all required reports during the preceding 12 months and has been subject to such filing requirements for the past 90 days[4](index=4&type=chunk) Filer Status | Filer Status | Status | | :---------------------- | :----- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | [Shares Outstanding](index=1&type=section&id=Shares%20Outstanding) This section provides the total number of common stock shares outstanding as of a recent date - As of December 15, 2023, there were **9,627,452** shares of the registrant's common stock outstanding[6](index=6&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) [FORWARD-LOOKING STATEMENTS](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) [Nature and Identification](index=4&type=section&id=Nature%20and%20Identification) This section clarifies that the report contains forward-looking statements reflecting current expectations about the Company's future, identifiable by specific terminology, and based on available information and management's interpretation of significant factors - Forward-looking statements reflect current expectations and projections about the Company's future results, performance, liquidity, financial condition, prospects, and opportunities[10](index=10&type=chunk) - These statements are generally identifiable by words such as 'may,' 'should,' 'will,' 'plan,' 'expect,' 'anticipate,' 'estimate,' 'believe,' 'intend,' 'seek,' or 'project'[11](index=11&type=chunk) [Risks and Reliance](index=4&type=section&id=Risks%20and%20Reliance) This section warns that actual results may differ materially from forward-looking statements due to various risks and uncertainties, advising investors against undue reliance and stating no obligation to update these statements - Actual results, performance, liquidity, financial condition, and results of operations could differ materially from forward-looking statements due to various risks, uncertainties, and other factors, including the ability to raise sufficient capital[11](index=11&type=chunk) - Potential investors should not place undue reliance on any forward-looking statements, and there is no undertaking to publicly update or revise them[12](index=12&type=chunk) - The report also contains estimates and statistical data from independent parties and the Company, which involve assumptions and limitations, and should not be given undue weight[14](index=14&type=chunk) [PART I-FINANCIAL INFORMATION](index=5&type=section&id=PART%20I-FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, statements of changes in equity, and statements of cash flows, along with detailed notes explaining the company's organization, accounting policies, liquidity, and other financial details for the reported periods [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights | Metric | October 31, 2023 (unaudited) | July 31, 2023 | | :----------------- | :--------------------------- | :------------ | | Total Current Assets | $1,953,257 | $2,542,780 | | Total Assets | $3,040,594 | $3,768,570 | | Total Current Liabilities | $1,495,717 | $1,539,719 | | Total Liabilities | $2,126,704 | $2,229,217 | | Total Equity | $913,890 | $1,539,353 | - Total assets decreased by approximately **$727,976 (19.3%)** from July 31, 2023, to October 31, 2023[19](index=19&type=chunk) - Total equity decreased by approximately **$625,463 (40.6%)** from July 31, 2023, to October 31, 2023[19](index=19&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss Highlights | Metric | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | | :------------------------- | :------------------------------ | :------------------------------ | | Revenues | $125,000 | $300,000 | | Total operating expenses | $781,779 | $567,896 | | Loss from operations | $(656,779) | $(267,896) | | Net loss and comprehensive loss | $(625,463) | $(112,515) | | Loss Per share – basic and diluted | $(0.06) | $(0.01) | - Revenues decreased by **58.3%** from **$300,000** in Q1 2023 to **$125,000** in Q1 2024[20](index=20&type=chunk) - Net loss increased significantly by **455.9%** from **$(112,515)** in Q1 2023 to **$(625,463)** in Q1 2024[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Condensed Consolidated Statements of Changes in Equity Highlights | Metric | October 31, 2023 | October 31, 2022 | | :---------------------- | :--------------- | :--------------- | | Balance at period end | $913,890 | $4,309,137 | | Net loss for the period | $(625,463) | $(112,515) | - Total equity decreased from **$1,539,353** at July 31, 2023, to **$913,890** at October 31, 2023, primarily due to a net loss of **$625,463** for the period[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | | :----------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $195,353 | $363,709 | | Net cash used in investing activities | $(440,150) | $(242,837) | | Net (decrease) increase in cash | $(244,797) | $120,872 | | Cash, end of period | $361,225 | $1,871,009 | - Net cash provided by operating activities decreased by **46.3%** from **$363,709** in Q1 2023 to **$195,353** in Q1 2024[23](index=23&type=chunk) - Net cash used in investing activities increased by **81.2%** from **$(242,837)** in Q1 2023 to **$(440,150)** in Q1 2024[23](index=23&type=chunk) [NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=9&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering the company's organization, significant accounting policies, liquidity, related party transactions, contingencies, and subsequent events [NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS](index=9&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) ATIF Holdings Limited, incorporated in the British Virgin Islands, operates as a holding company primarily providing business advisory and financial consulting services to small and medium-sized enterprises, with recent expansion into US-based subsidiaries - ATIF Holdings Limited was incorporated on January 5, 2015, in the British Virgin Islands and is primarily engaged in providing business advisory and financial consulting services to SMEs[24](index=24&type=chunk) - The Company established several wholly-owned subsidiaries in the U.S. (ATIF BC, ATIF BM, ATIF BD) and BVI (ATIF Investment) between 2021 and 2022 to expand its operations[25](index=25&type=chunk)[27](index=27&type=chunk) - On August 1, 2022, the Company sold all its equity interest in ATIF GP for **$50,000**, which was not considered a strategic shift[26](index=26&type=chunk) [NOTE 2 – LIQUIDITY AND GOING CONCERN](index=10&type=section&id=NOTE%202%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN) The Company reported net losses and declining operating cash flows, leading to a working capital deficit and substantial doubt about its ability to continue as a going concern, necessitating immediate additional capital Net Loss and Operating Cash Flow | Metric | Three Months Ended Oct 31, 2023 | Three Months Ended Oct 31, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | | Net loss | $(0.6) million | $(0.1) million | | Operating cash inflows | $0.2 million | $0.4 million | - As of October 31, 2023, the Company had **$0.4 million** in cash and **$0.7 million** in accounts receivable, but current liabilities of **$1.5 million**, including **$0.7 million** due to related parties[29](index=29&type=chunk) - Losses from operations, a working capital deficit, and the need for additional capital raise substantial doubt about the Company's ability to continue as a going concern[30](index=30&type=chunk) [NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%203%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and policies used in preparing the financial statements, including the basis of presentation, use of estimates, revenue recognition, and treatment of financial instruments, income taxes, and segment reporting [Basis of Presentation and Principles of Consolidation](index=10&type=section&id=Basis%20of%20Presentation%20and%20Principles%20of%20Consolidation) The interim unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include the accounts of the Company and its subsidiaries, with all intercompany balances and transactions eliminated - Financial statements are prepared in accordance with U.S. GAAP and SEC rules, without audit, and should be read with the annual Form 10-K[32](index=32&type=chunk)[33](index=33&type=chunk) - The consolidated financial statements include the accounts of the Company and its subsidiaries, with intercompany balances and transactions eliminated[35](index=35&type=chunk) [Use of Estimates](index=11&type=section&id=Use%20of%20Estimates) Management makes significant estimates and assumptions in preparing the financial statements, which affect reported amounts of assets, liabilities, revenues, and expenses, and actual results may differ - Significant estimates include allowance for credit losses, useful lives of assets, recoverability of long-lived assets, revenue recognition, contingent liabilities, and realization of deferred tax assets[36](index=36&type=chunk) [Accounts Receivable, net](index=11&type=section&id=Accounts%20Receivable%2C%20net) The Company adopted ASU 2016-13 (CECL model) on August 1, 2023, for measuring credit losses on financial instruments, which involves using loss-rate methods and individual assessment for limited customers - The Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), on August 1, 2023, using a modified retrospective transition method[37](index=37&type=chunk) - The new guidance replaces the incurred loss impairment model with a forward-looking current expected credit losses (CECL) model[37](index=37&type=chunk) - The Company maintains an allowance for credit losses as an offset to accounts receivable, estimated using loss-rate methods and individual assessment due to a limited customer base[39](index=39&type=chunk) [Fair Value of Financial Instruments](index=11&type=section&id=Fair%20Value%20of%20Financial%20Instruments) The Company uses a three-level fair value hierarchy for financial instruments, with trading securities valued at Level 1 (quoted prices in active markets) and other short-term instruments approximating fair value - Fair value is defined as the price received to sell an asset or paid to transfer a liability in an orderly transaction[40](index=40&type=chunk) - A three-level fair value hierarchy prioritizes inputs: Level 1 (quoted prices in active markets), Level 2 (quoted prices for similar assets/liabilities or observable market data), and Level 3 (unobservable inputs)[40](index=40&type=chunk)[41](index=41&type=chunk) - Investment in trading securities are based on **Level 1** inputs, while other financial instruments approximate fair value due to their short-term nature[41](index=41&type=chunk)[42](index=42&type=chunk) [Revenue Recognition](index=13&type=section&id=Revenue%20Recognition) The Company recognizes revenue from consulting services in accordance with ASC 606, categorizing services into three phases (Phase I, II, III) with revenue recognized ratably over the estimated completion period for Phase I and II, and upon transaction completion for Phase III - The Company recognizes revenue in accordance with **ASC 606 Revenue from Contracts with Customers**[43](index=43&type=chunk) - Consulting services are categorized into three phases: Phase I (due diligence, market research, etc., ~3 months), Phase II (reorganization, pre-listing education, etc., ~8 months), and Phase III (shell company identification, public filing assistance)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - Revenue for Phase I and II is recognized ratably over the estimated completion period, while Phase III revenue is recognized upon completion of the reverse merger or IPO transaction[49](index=49&type=chunk) [Income Taxes](index=14&type=section&id=Income%20Taxes) The Company accounts for income taxes under ASC 740, recognizing deferred tax assets and liabilities for temporary differences and establishing valuation allowances when realization is uncertain - The Company accounts for income taxes under **ASC 740**, recognizing deferred tax assets and liabilities for future tax consequences of temporary differences[51](index=51&type=chunk) - Uncertain tax positions are recognized if it is 'more likely than not' that the position would be sustained in an examination[52](index=52&type=chunk) [Segment reporting](index=14&type=section&id=Segment%20reporting) Based on management's assessment, the Company operates in a single reporting segment, which is the consulting service business - The Company's Chief Operating Decision Maker (CODM) is Mr. Liu, the Chairman and CEO[53](index=53&type=chunk) - As of October 31, 2023, and July 31, 2023, the Company operates in one operating segment: the consulting service business[54](index=54&type=chunk) [Risks and Uncertainty](index=14&type=section&id=Risks%20and%20Uncertainty) The Company faces credit risk from cash deposits and unsecured accounts receivable, and significant concentration risk with a few customers accounting for a large portion of revenue and receivables. Other risks include natural disasters and health epidemics - The Company's cash and cash equivalents are deposited in US banks, with FDIC insurance up to **$250,000**[55](index=55&type=chunk) - For the three months ended October 31, 2023, three customers accounted for **48%**, **40%**, and **12%** of consolidated revenue, respectively[57](index=57&type=chunk) - As of October 31, 2023, two customers accounted for **56%** and **44%** of consolidated accounts receivable[58](index=58&type=chunk) - The Company plans to mitigate concentration risk by transitioning consulting services from PRC-based customers to more international customers[59](index=59&type=chunk) [NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=16&type=section&id=NOTE%204%20%E2%80%93%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid expenses and other current assets primarily consist of prepayments for advertising services, which decreased from July 31, 2023, to October 31, 2023 Prepaid Expenses and Other Current Assets | Item | October 31, 2023 (unaudited) | July 31, 2023 | | :------------------------------ | :--------------------------- | :------------ | | Prepayment for advertising service fee | $336,000 | $408,000 | | Advance to vendors | $- | $10,000 | | Others | $36,540 | $11,570 | | Total | $372,540 | $429,570 | - Prepayment for advertising services decreased by **$72,000** from July 31, 2023, to October 31, 2023[62](index=62&type=chunk) [NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET](index=16&type=section&id=NOTE%205%20%E2%80%93%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT%2C%20NET) Net property and equipment decreased slightly from July 31, 2023, to October 31, 2023, with depreciation expense also decreasing year-over-year Property and Equipment, Net | Item | October 31, 2023 (unaudited) | July 31, 2023 | | :---------------------------- | :--------------------------- | :------------ | | Furniture, fixtures and equipment | $208,536 | $204,204 | | Less: accumulated depreciation | $(120,236) | $(110,567) | | Property and equipment, net | $88,300 | $93,637 | - Depreciation expense for the three months ended October 31, 2023, was **$9,669**, a decrease from **$16,656** in the same period of 2022[63](index=63&type=chunk) [NOTE 6 – INTANGIBLE ASSETS](index=16&type=section&id=NOTE%206%20%E2%80%93%20INTANGIBLE%20ASSETS) Net intangible assets, primarily software, decreased from July 31, 2023, to October 31, 2023, with consistent amortization expense year-over-year Intangible Assets, Net | Item | October 31, 2023 (unaudited) | July 31, 2023 | | :------------------------ | :--------------------------- | :------------ | | Software | $320,000 | $320,000 | | Less: accumulated amortization | $(266,669) | $(246,669) | | Intangible assets | $53,331 | $73,331 | - Amortization expense remained constant at **$20,000** for both the three months ended October 31, 2023, and 2022[64](index=64&type=chunk) [NOTE 7 – INVESTMENTS IN TRADING SECURITIES](index=17&type=section&id=NOTE%207%20%E2%80%93%20INVESTMENTS%20IN%20TRADING%20SECURITIES) The Company's investments in trading securities significantly increased from July 31, 2023, to October 31, 2023, but also resulted in a higher loss from fair value changes during the period Investments in Trading Securities | Metric | October 31, 2023 (unaudited) | July 31, 2023 | | :----------------------------------- | :--------------------------- | :------------ | | Balance of investments in trading securities | $459,353 | $130,649 | Loss from Investment in Trading Securities | Period | Loss from Investment in Trading Securities | | :----------------------------------- | :----------------------------------------- | | Three months ended October 31, 2023 | $(109,403) | | Three months ended October 31, 2022 | $(20,004) | - The loss from investment in trading securities increased by **$89,399 (446.9%)** from the prior year period[65](index=65&type=chunk) [NOTE 8 – OPERATING LEASES](index=17&type=section&id=NOTE%208%20%E2%80%93%20OPERATING%20LEASES) The Company leases office space and a car under non-cancelable operating leases, with ROU assets and lease liabilities decreasing slightly from July 31, 2023, to October 31, 2023, while the weighted average discount rate remained constant Operating Lease Related Assets and Liabilities | Item | October 31, 2023 (unaudited) | July 31, 2023 | | :------------------------------ | :--------------------------- | :------------ | | Right-of-use assets, net | $945,706 | $1,058,822 | | Operating lease liabilities, current | $375,278 | $415,411 | | Operating lease liabilities, noncurrent | $630,987 | $689,498 | | Total operating lease liabilities | $1,006,265 | $1,104,909 | Weighted Average Lease Terms and Discount Rates | Metric | October 31, 2023 (unaudited) | July 31, 2023 | | :------------------------------ | :--------------------------- | :------------ | | Weighted average remaining lease term (years) | 3.26 | 3.35 | | Weighted average discount rate | 4.90% | 4.90% | - Rent expense for the three months ended October 31, 2023, was **$125,679**, an increase from **$120,692** in the same period of 2022[66](index=66&type=chunk) [NOTE 9 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=19&type=section&id=NOTE%209%20%E2%80%93%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses and other current liabilities increased from July 31, 2023, to October 31, 2023, primarily driven by a rise in accrued payroll expenses Accrued Expenses and Other Current Liabilities | Item | October 31, 2023 (unaudited) | July 31, 2023 | | :---------------------- | :--------------------------- | :------------ | | Accrued payroll expenses | $308,620 | $212,953 | | Rental deposit payable | $66,000 | $66,000 | | Others | $2,361 | $14,187 | | Total | $376,981 | $293,140 | - Accrued payroll expenses increased by **$95,667 (44.9%)** from July 31, 2023, to October 31, 2023[70](index=70&type=chunk) [NOTE 10 – DEFERRED REVENUE](index=19&type=section&id=NOTE%2010%20%E2%80%93%20DEFERRED%20REVENUE) Deferred revenue decreased to zero as of October 31, 2023, with $70,000 recognized as other income due to customer agreement terminations where advances were not refunded Deferred Revenue Balance | Date | Deferred Revenue | | :-------------- | :--------------- | | October 31, 2023 | $nil | | July 31, 2023 | $70,000 | - For the three months ended October 31, 2023, **$70,000** of advance from customer balance as of July 31, 2023, was recognized as other income due to terminated agreements[72](index=72&type=chunk) [NOTE 11 – RELATED PARTY TRANSACTIONS](index=19&type=section&id=NOTE%2011%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) The Company engaged in various transactions with related parties, including loan repayments and collections, resulting in significant balances due to and from these parties as of October 31, 2023 - Key related parties include Huaya (wholly owned by former CEO Mr. Pishan Chi) and Asia International Securities Exchange Co., Ltd. (wholly owned by current CEO Mr. Jun Liu)[73](index=73&type=chunk) - For the three months ended October 31, 2023, the Company repaid **$17,710** to Asia International Securities Exchange Co., Ltd. and collected **$20,000** from Huaya[74](index=74&type=chunk) Balances with Related Parties (October 31, 2023) | Item | Balance (unaudited) | | :------------------------ | :------------------ | | Accounts receivable (Asia International Securities Exchange Co., Ltd.) | $- | | Other receivable (Huaya) | $20,539 | | Other payables (Asia International Securities Exchange Co., Ltd.) | $712,258 | [NOTE 12 – TAXES](index=21&type=section&id=NOTE%2012%20%E2%80%93%20TAXES) The Company's BVI entities are not subject to income tax, while its US entities are subject to federal and state income taxes. No income tax expenses were incurred in the reported periods, and a 100% valuation allowance is provided against deferred tax assets due to net operating losses - The Company's BVI entities (ATIF and ATIF Investment) are not subject to income or capital gains tax in the British Virgin Islands[78](index=78&type=chunk) - US subsidiaries (ATIF Inc., ATIF BC, ATIF BM, ATIF BD) are subject to federal (**21%**) and state (**8.84%**) income taxes[79](index=79&type=chunk) - No income tax expenses were incurred for the three months ended October 31, 2023, and 2022[80](index=80&type=chunk) - A **100%** valuation allowance has been provided against deferred tax assets due to the uncertainty of their realization, primarily stemming from net operating losses[82](index=82&type=chunk) [NOTE 13 – CONTINGENCIES](index=22&type=section&id=NOTE%2013%20%E2%80%93%20CONTINGENCIES) The Company is involved in a pending legal proceeding with Boustead Securities, LLC, concerning an alleged breach of an underwriting agreement. The case is currently in arbitration, with a hearing on contract interpretation extended to February 29, 2024, and the outcome is premature to assess - On **May 14, 2020**, Boustead Securities, LLC filed a lawsuit against the Company and LGC for breaching an underwriting agreement[85](index=85&type=chunk) - The lawsuit alleges that the Company's acquisition of LGC during an exclusive agreement period deprived Boustead of compensation[86](index=86&type=chunk) - The case is currently in arbitration, initiated on March 10, 2023, with a hearing on contract interpretation extended to **February 29, 2024**[91](index=91&type=chunk) - Management believes it is premature to assess and predict the outcome of this pending arbitration[92](index=92&type=chunk) [NOTE 14 – SUBSEQUENT EVENT](index=22&type=section&id=NOTE%2014%20%E2%80%93%20SUBSEQUENT%20EVENT) On December 4, 2023, the Company received correspondence from J.P. Morgan Securities LLC regarding a potential lawsuit for $5,064,160 in damages related to a stock transaction by ATIF-1 GP, LLC, which management believes it is not liable for due to the prior sale of the entity - On **December 4, 2023**, the Company received correspondence from J.P. Morgan Securities LLC concerning a potential lawsuit for **$5,064,160** in damages[93](index=93&type=chunk)[94](index=94&type=chunk) - The claim relates to a stock transaction by ATIF-1 GP, LLC, which the Company sold in August 2022[94](index=94&type=chunk) - Management believes the Company would not be liable for the claim as ATIF-1 GP, LLC was sold prior to the alleged event[94](index=94&type=chunk) [ITEM 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=24&type=section&id=ITEM%202.%20Management%27s%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including a business overview, key factors affecting the business, detailed analysis of revenues and expenses, liquidity, capital resources, and critical accounting policies [Business Overview](index=24&type=section&id=Business%20Overview) ATIF Holdings Limited offers financial consulting services to SMEs in Asia and North America, specializing in 'going public' services. The company has shifted its geographic focus to North America and plans further international expansion, while also diversifying into asset management, investment holding, and media services - The Company provides financial consulting services to small and medium-sized enterprise customers in Asia and North America, with a focus on comprehensive 'going public' consulting services[96](index=96&type=chunk) - In May 2022, the Company shifted its geographic focus for consulting services from China to North America, aiming to help mid and small companies list on U.S. capital markets[98](index=98&type=chunk) - Total revenue from consulting services decreased from **$0.3 million** for the three months ended October 31, 2022, to **$0.1 million** for the same period in 2023[100](index=100&type=chunk) [Key Factors that Affect our Business](index=25&type=section&id=Key%20Factors%20that%20Affect%20our%20Business) The Company's business success is significantly influenced by its ability to effectively acquire and retain customers, navigate intense market competition, and attract and retain key personnel - Business success depends on the ability to acquire customers effectively through sales, marketing, and referrals, with potential adverse effects if channels become less effective[101](index=101&type=chunk) - The consulting business faces strong market competition from entities with greater resources, and the Company's growth depends on its ability to differentiate its services[102](index=102&type=chunk) - The Company relies heavily on the expertise of its directors and officers and its ability to attract and retain qualified financial consultancy professionals for sustained growth[103](index=103&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) The Company experienced a significant decline in revenue and a substantial increase in net loss for the three months ended October 31, 2023, compared to the prior year, driven by increased selling and general & administrative expenses, and higher losses from trading securities Results of Operations Summary (Three Months Ended October 31) | Metric | 2023 | 2022 | Change Amount | Change Percentage | | :-------------------------------- | :---------- | :---------- | :------------ | :---------------- | | Revenues | $125,000 | $300,000 | $(175,000) | (58)% | | Selling expenses | $72,000 | $5,000 | $67,000 | 1,340% | | General and administrative expenses | $709,779 | $562,896 | $146,883 | 26% | | Loss from operations | $(656,779) | $(267,896) | $388,883 | 145% | | Other income, net | $140,720 | $59,500 | $81,220 | 137% | | Loss from investment in trading securities | $(109,404) | $(20,004) | $89,400 | 447% | | Net loss | $(625,463) | $(112,515) | $512,948 | 456% | - Revenues decreased by **$0.2 million (58%)** due to providing IPO assistance to three customers in 2023 (**$0.1 million**) compared to completing Phase II service for one customer in 2022 (**$0.3 million**)[106](index=106&type=chunk)[107](index=107&type=chunk) - Selling expenses surged by **1,340%** to **$72,000**, primarily due to **$72,000** in monthly promotion expenses incurred since December 2022[108](index=108&type=chunk) - General and administrative expenses increased by **$0.1 million (26%)**, mainly due to a rise in payroll and welfare expenses[112](index=112&type=chunk) - Other income, net, increased by **$81,220**, primarily from a **$70,000** reversal of deferred revenues due to customer agreement terminations[114](index=114&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The Company's liquidity is strained by net losses and a working capital deficit, necessitating immediate additional capital. Cash flows from operating activities decreased, while cash used in investing activities increased, leading to a net decrease in cash for the period - The Company anticipates needing to raise additional capital immediately to fund operations due to losses, working capital deficit, and the requirement of additional capital[120](index=120&type=chunk)[123](index=123&type=chunk) Cash Flow Summary (Three Months Ended October 31) | Cash Flow Activity | 2023 | 2022 | | :----------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $195,353 | $363,709 | | Net cash used in investing activities | $(440,150) | $(242,837) | | Net (decrease) increase in cash | $(244,797) | $120,872 | | Cash, end of period | $361,225 | $1,871,009 | - Net cash provided by operating activities decreased due to net loss, loss from trading securities, and changes in accounts receivable, prepaid expenses, deferred revenue, and accrued expenses[127](index=127&type=chunk) - Net cash used in investing activities primarily consisted of **$0.4 million** in investments in trading securities[130](index=130&type=chunk) [Critical Accounting Policies and Estimate](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimate) Management states that due to the current level of activity and lack of complex transactions, there are no critical accounting policies and estimates that materially affect the preparation of the financial statements - Critical accounting policies involve difficult, subjective, or complex judgments that could materially affect financial condition or results of operations[132](index=132&type=chunk) - Due to the level of activity and lack of complex transactions, the Company believes there are currently no critical accounting policies and estimates that affect the preparation of its financial statements[133](index=133&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, ATIF Holdings Limited is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide information regarding quantitative and qualitative disclosures about market risk[134](index=134&type=chunk) [ITEM 4. Controls and Procedures](index=30&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The Company's disclosure controls and procedures were deemed ineffective as of October 31, 2022, due to insufficient accounting personnel, lack of documented financial closing procedures, and inadequate risk assessment. Management is evaluating remediation steps, and no material changes occurred in internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=30&type=section&id=Disclosure%20Controls%20and%20Procedures) - As of **October 31, 2022**, the Company's disclosure controls and procedures were not effective[135](index=135&type=chunk) - Ineffectiveness was attributed to insufficient full-time accounting and financial reporting personnel, lack of documented financial closing procedures, and lack of risk assessment in accordance with the COSO 2013 framework[135](index=135&type=chunk) - Management is evaluating remediation steps, including hiring more qualified accounting personnel, implementing training programs, and establishing an internal audit function[135](index=135&type=chunk) [Changes in Internal Control over Financial Reporting](index=30&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - Except for the disclosed ineffectiveness of disclosure controls and procedures, there have been no material changes in internal controls over financial reporting during the fiscal quarter ended October 31, 2023[136](index=136&type=chunk) [PART II-OTHER INFORMATION](index=31&type=section&id=PART%20II-OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=31&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is involved in an ongoing legal proceeding with Boustead Securities, LLC, alleging breach of an underwriting agreement. The case has progressed to arbitration, with a hearing on contract interpretation scheduled for February 29, 2024, and the outcome remains uncertain - On **May 14, 2020**, Boustead Securities, LLC filed a lawsuit against the Company and Leaping Group Co., Ltd. (LGC) for breaching an underwriting agreement[140](index=140&type=chunk) - Boustead alleges that the Company's acquisition of LGC during an exclusive agreement period deprived Boustead of compensation[141](index=141&type=chunk) - The case is currently in arbitration before JAMS in California, with a hearing on contract interpretation extended to **February 29, 2024**[147](index=147&type=chunk) - Management believes it is premature to assess and predict the outcome of this pending arbitration[148](index=148&type=chunk) [ITEM 1A. Risk Factors](index=32&type=section&id=ITEM%201A.%20Risk%20Factors) As a smaller reporting company, ATIF Holdings Limited is not required to provide specific disclosures regarding risk factors - As a smaller reporting company, the registrant is not required to provide the information regarding risk factors[149](index=149&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to ATIF Holdings Limited for the reporting period - This item is marked as 'Not applicable'[150](index=150&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=32&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to ATIF Holdings Limited for the reporting period - This item is marked as 'Not applicable'[151](index=151&type=chunk) [ITEM 4. Mine Safety Disclosures](index=32&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to ATIF Holdings Limited for the reporting period - This item is marked as 'Not applicable'[152](index=152&type=chunk) [ITEM 5. Other Information](index=32&type=section&id=ITEM%205.%20Other%20Information) This item is not applicable to ATIF Holdings Limited for the reporting period - This item is marked as 'Not applicable'[153](index=153&type=chunk) [ITEM 6. Exhibits](index=33&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL documents - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[155](index=155&type=chunk) - The filing also includes various Inline XBRL Taxonomy Extension Documents and a Cover Page Interactive Data File[155](index=155&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) [Report Signatures](index=34&type=section&id=Report%20Signatures) The report is duly signed on behalf of ATIF Holdings Limited by its Chief Executive Officer, Jun Liu, as of December 15, 2023 - The report was signed by Jun Liu, Chief Executive Officer of ATIF Holdings Limited, on **December 15, 2023**[158](index=158&type=chunk)[160](index=160&type=chunk)

Revenue Growth - Total revenue increased by $0.8 million, or 47%, from $1.7 million in fiscal year 2022 to $2.5 million in fiscal year 2023[202]. - Revenue from third parties was $1,150,000 for the year ended July 31, 2023, representing a 27% increase from $905,310 in 2022[206]. - Revenue from related parties increased by $538,000, or 71%, from $762,000 in 2022 to $1,300,000 in 2023[206]. Profitability - Gross profit rose to $2,450,000 in 2023, a 143% increase from $1,007,310 in 2022[206]. - The company reported a net loss of $2,882,299 for the year ended July 31, 2023, a decrease of $488,800, or 14%, from the previous year[206]. - The company reported a net loss of $2.9 million for the year ended July 31, 2023, a decrease from a net loss of $3.4 million in the previous fiscal year[224]. Expenses Management - Selling expenses decreased by $362,291, or 64%, from $569,529 in 2022 to $207,238 in 2023[210]. - General and administrative expenses decreased by $409,735, or 15%, from $2,651,361 in 2022 to $2,241,626 in 2023[212]. Cash Flow and Liquidity - Operating cash outflows from continuing operations were approximately $2.3 million for the year ended July 31, 2023, compared to $0.1 million in the prior year[226]. - As of July 31, 2023, the company had cash of $0.6 million and accounts receivable of $0.6 million, with current liabilities totaling $1.5 million[227]. - Net cash used in operating activities was $2.3 million for the fiscal year ended July 31, 2023, primarily due to the net loss and adjustments for provisions against receivables[233]. - Net cash provided by investing activities was $0.4 million in fiscal year 2023, mainly from the disposal of investments and collection of loans[235]. - Net cash provided by financing activities was $0.7 million in fiscal year 2023, sourced from borrowings from a related party[237]. Future Outlook and Plans - The company plans to expand operations to other Asian countries, including Malaysia, Vietnam, and Singapore, while continuing to focus on the North American market[200]. - The company plans to support future operations primarily through cash generated from operations and cash on hand, but may need to raise additional funds[225]. Going Concern and Dividends - The company reported a working capital deficit and indicated uncertainty regarding its ability to continue as a going concern[228]. - The company has not declared or paid any cash dividends to shareholders and does not plan to do so in the near future[230]. Taxation - The federal tax rate for the company's U.S. subsidiaries is 21%, with a state tax rate of 8.84%[223]. Other Achievements - The company successfully assisted three Chinese enterprises to be quoted on the U.S. OTC markets since its inception[200]. Provisions - The company provided a full provision of $2,654,767 against balances due from buyers of LGC for the year ended July 31, 2023[214].

Financial Performance - Total revenues for the three months ended April 30, 2023, were $100,000, a decrease of 61.8% compared to $261,925 for the same period in 2022[19] - Operating expenses for the three months ended April 30, 2023, were $701,934, an increase of 17.3% from $598,620 in the same period of 2022[19] - The net loss attributable to ATIF Holdings Limited for the three months ended April 30, 2023, was $335,770, compared to a net income of $228,316 for the same period in 2022[19] - The company reported a comprehensive loss of $335,770 for the three months ended April 30, 2023, compared to a comprehensive income of $269,055 for the same period in 2022[19] - For the nine months ended April 30, 2023, net income was $362,696 compared to a net loss of $1,992,933 for the same period in 2022[23] - The company reported a net loss of $335,770 for the three months ended April 30, 2023, compared to a net income of $228,316 for the same period in 2022[20] - Cash flows from operating activities resulted in a net cash used of $1,361,108 for the nine months ended April 30, 2023, compared to a net cash used of $283,267 for the same period in 2022[23] - The company had a cash balance of $467,586 at the end of April 30, 2023, down from $1,306,038 at the end of April 30, 2022[23] Assets and Liabilities - Total current assets as of April 30, 2023, were $6,672,023, an increase of 11.4% from $5,992,460 as of July 31, 2022[18] - Total liabilities as of April 30, 2023, were $3,383,237, a decrease of 10.6% from $3,784,348 as of July 31, 2022[18] - Total assets decreased from $5,733,173 at April 30, 2022, to $4,784,348 at April 30, 2023[20] - The Company had cash of $0.5 million as of April 30, 2023, against current liabilities of $2.6 million[30] - The balance of due from buyers of LGC as of April 30, 2023, was $2,654,767, which includes principal of $2,300,000 and interest of $354,767[74] - The balance due to third parties increased to $1,092,828 as of April 30, 2023, from $500,000 as of July 31, 2022, indicating a significant rise of 118.6%[87] Cash and Liquidity - Cash and cash equivalents as of April 30, 2023, were $467,586, reflecting a decrease from previous periods[18] - As of April 30, 2023, the company had cash of $0.5 million, down from $1.8 million as of July 31, 2022, indicating a significant decrease in liquidity[62] - The Company expects to collect consulting service fees of $3.3 million over the next 12 months from four service-in-progress agreements[30] - The Company intends to finance future working capital requirements through cash generated from operating activities and equity financings[31] Operational Insights - The company anticipates future sales and profitability to be influenced by its ability to develop and introduce new products and services[16] - The company plans to expand its sales and marketing capabilities and may consider acquisitions in the future[16] - The company has experienced operating cash outflows of $1.4 million for the nine months ended April 30, 2023, compared to $0.3 million for the same period in 2022[28] - The management believes that the Company will continue as a going concern for the next 12 months despite uncertainties regarding cash flows[30] - The Company operates primarily through ATIF Inc. following the disposal of ATIF HK and Huaya on May 31, 2022[56] Revenue Concentration - For the three months ended April 30, 2023, one customer accounted for 100% of the company's consolidated revenue, compared to 97% for the same period in 2022, highlighting a high concentration risk[66] - For the nine months ended April 30, 2023, four customers accounted for 28%, 28%, 26%, and 17% of the company's consolidated revenue, compared to two customers accounting for 63% and 32% in the same period in 2022[67] - The company plans to transition its consulting services from PRC-based customers to more international customers to mitigate revenue concentration risks[69] Legal Matters - Boustead's litigation against the Company is currently in the pleadings stage, with the Company believing it is premature to predict the outcome[109] - The United States District Court for the Southern District of New York granted the Company's motion to dismiss Boustead's first amended complaint on August 25, 2021[107] - Boustead filed a second amended complaint on December 28, 2021, alleging only breach of contract[107] - The Court denied the Company's motion to dismiss the second amended complaint on July 6, 2022[108] - The Company filed a motion to compel arbitration of Boustead's claims in California on August 3, 2022, with briefing concluding on August 23, 2022[108] - Boustead is seeking a default judgment against LGC, but the Court has not ruled on this request[108] - The Company filed a motion to dismiss Boustead's second amended complaint on January 18, 2022[107] - Boustead's amended complaint asserts the same four causes of action against the Company and LGC as its original complaint[106] - The Court allowed Boustead to amend its causes of action against the Company regarding breach of contract and tortious interference[107] - The Company is currently evaluating its response to Boustead's motion for leave[109] Depreciation and Amortization - Depreciation and amortization expenses for the nine months ended April 30, 2023, were $109,967, compared to $136,516 for the same period in 2022[23] - Depreciation expense for the three months ended April 30, 2023, was $16,656, compared to $13,765 for the same period in 2022, indicating an increase in asset depreciation[76] - The company's intangible assets as of April 30, 2023, were valued at $93,331, down from $153,331 as of July 31, 2022, reflecting a decrease in intangible asset value[77] Lease Obligations - Operating lease expenses for the three months ended April 30, 2023, were $121,655, compared to $101,580 for the same period in 2022, representing an increase of approximately 19.9%[83] - Total lease cost for the nine months ended April 30, 2023, was $181,414, a decrease of 51.4% from $372,820 in the same period of 2022[83] - Right-of-use assets, net, decreased to $1,170,495 as of April 30, 2023, from $1,383,464 as of July 31, 2022, reflecting a decline of approximately 15.4%[85] - Total operating lease liabilities decreased to $1,225,937 as of April 30, 2023, from $1,418,310 as of July 31, 2022, a reduction of about 13.5%[85] - The weighted average remaining lease term as of April 30, 2023, was 3.48 years, down from 3.95 years as of July 31, 2022[86] - The total future minimum rentals under non-cancellable operating lease arrangements as of April 30, 2023, were $193,459, with $64,486 due for the three months ending July 31, 2023[86]

Financial Performance - Total revenues for the three months ended January 31, 2023, were $1,900,000, a significant increase from $7,680 in the same period of 2022[22]. - Net income attributable to ATIF Holdings Limited for the three months ended January 31, 2023, was $810,981, compared to a net loss of $1,082,653 in the same period of 2022[22]. - The company reported an operating income of $1,333,888 for the three months ended January 31, 2023, compared to an operating loss of $819,420 in the same period of 2022[22]. - For the six months ended January 31, 2023, the company reported a net income of $698,466 compared to a net loss of $2,253,694 for the same period in 2022, indicating a significant turnaround in performance[30]. - Total revenue from consulting services increased to $1.9 million for the three months ended January 31, 2023, compared to $7,680 for the same period in 2022, representing a growth of 24,640%[128]. - For the six months ended January 31, 2023, total revenue reached $2.2 million, a significant increase of 320% from $524,155 in the same period of 2022[140]. Assets and Liabilities - Total current assets increased to $6,793,260 as of January 31, 2023, up from $5,992,460 as of July 31, 2022[21]. - Total liabilities decreased to $3,314,748 as of January 31, 2023, from $3,784,348 as of July 31, 2022[21]. - The company’s total assets increased to $8,434,866 as of January 31, 2023, from $8,136,955 as of July 31, 2022[21]. - As of January 31, 2023, the company had cash of $829,387 and current liabilities of $2.5 million, highlighting liquidity challenges[32]. - The company had cash of $0.8 million as of January 31, 2023, while current liabilities amounted to $2.5 million[163]. Expenses - Total operating expenses for the three months ended January 31, 2023, were $566,112, down from $827,100 in the same period of 2022[22]. - General and administrative expenses decreased by 37% to $581,112 for the three months ended January 31, 2023, from $827,100 in the same period of 2022[131]. - Rent expense for the six months ended January 31, 2023, was $250,861, compared to $271,240 for the same period in 2022[87]. - The company had a depreciation and amortization expense of $73,311 for the six months ended January 31, 2023, down from $102,751 in the prior year[25]. Customer Concentration - As of January 31, 2023, three customers accounted for 34%, 34%, and 32% of the Company's consolidated revenue, highlighting a concentration risk[68]. - For the six months ended January 31, 2023, four customers accounted for 30%, 30%, 27%, and 14% of the Company's consolidated revenue, showing a shift in customer dependency compared to the previous year[69]. Internal Controls and Compliance - The company identified four "material weaknesses" in its internal control over financial reporting, including insufficient personnel with appropriate accounting knowledge and experience[178]. - The company is currently evaluating steps to improve its disclosure controls and procedures due to identified deficiencies[177]. - The company plans to hire additional qualified accounting personnel and implement continuous U.S. GAAP training programs to strengthen its financial reporting function[184]. - The company is in the process of hiring experts to improve and test its internal control and establish standard internal audit procedures by July 2023[180]. - The company has not established an internal control department and lacks adequate policies and procedures for its internal audit function[178]. Future Plans and Strategies - The company plans to finance future working capital requirements through cash generated from operating activities and equity financings[33]. - The company plans to transition its consulting services from PRC-based customers to more international customers to mitigate revenue concentration risks[71]. - The company aims to become an international financial consulting company with clients and offices throughout Asia[115]. - The company plans to expand operations to other Asian countries, including Malaysia, Vietnam, and Singapore, while maintaining a focus on the North American market[121]. Legal Matters - The company is currently involved in litigation with Boustead Securities, LLC regarding a breach of contract related to an acquisition transaction[188]. - The litigation with Boustead is in the pleadings stage, and the company believes it is premature to predict the outcome[193].