PART I - FINANCIAL INFORMATION Item 1. Financial Statements Financial statements for April 30, 2024, show decreased liabilities, increased equity, an 85% revenue drop, and a $1.8 million net loss, with improved cash from financing but significant going concern doubts and legal risks Condensed Consolidated Balance Sheets As of April 30, 2024, total assets decreased to $3.33 million, while total liabilities significantly reduced to $0.23 million, leading to an increase in total stockholders' equity to $3.10 million Condensed Consolidated Balance Sheet Highlights (as of April 30, 2024 vs. July 31, 2023) | Account | April 30, 2024 (Unaudited) | July 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $3,189,487 | $2,542,780 | | Total Assets | $3,333,449 | $3,768,570 | | Total Current Liabilities | $199,996 | $1,539,719 | | Total Liabilities | $228,860 | $2,229,217 | | Total Stockholders' Equity | $3,104,589 | $1,539,353 | Condensed Consolidated Statements of Operations For the three months ended April 30, 2024, revenue doubled to $0.2 million, but net loss widened to $0.8 million; for the nine-month period, revenue plummeted 85% to $0.35 million, resulting in a $1.84 million net loss Operating Results for the Three Months Ended April 30 | Metric | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Revenues | $200,000 | $100,000 | | Loss from operations | $(521,282) | $(601,934) | | Net Loss | $(807,588) | $(335,770) | | (Loss) per share | $(0.08) | $(0.03) | Operating Results for the Nine Months Ended April 30 | Metric | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Revenues | $350,000 | $2,300,000 | | (Loss) income from operations | $(1,725,577) | $464,058 | | Net (Loss) Income | $(1,840,689) | $362,696 | | (Loss) earnings per share | $(0.19) | $0.04 | Condensed Consolidated Statements of Cash Flows For the nine months ended April 30, 2024, net cash used in operations significantly decreased, while a $2.34 million private placement led to a $1.51 million net cash increase despite $0.75 million used in investing activities Cash Flow Summary for the Nine Months Ended April 30 | Activity | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Net cash used in operating activities | $(84,188) | $(1,361,108) | | Net cash (used in) provided by investing activities | $(749,470) | $78,557 | | Net cash provided by financing activities | $2,343,792 | $0 | | Net increase (decrease) in cash | $1,510,134 | $(1,282,551) | - Non-cash financing activities for the nine months ended April 30, 2024, included issuing shares worth $349,875 to settle payroll and a related party waiving liabilities of $712,25828 Notes to Condensed Consolidated Financial Statements Notes detail the company's financial consulting business, highlight significant going concern doubts due to recurring losses, and cover customer concentration, related-party transactions, and two pending legal proceedings - The company's operations generated net losses of $0.8 million and $1.8 million for the three and nine months ended April 30, 2024, respectively, raising substantial doubt about its ability to continue as a going concern3335 - The company faces significant customer concentration risk, with two customers accounting for 71% and 17% of revenue for the nine months ended April 30, 2024, and one customer representing 100% of accounts receivable64 - In April 2024, the company provided a $300,000 interest-free loan to its CEO, and a related party waived $712,258 in liabilities, recorded as additional paid-in capital8591 - The company is involved in two significant legal proceedings: an arbitration with Boustead Securities, LLC scheduled for September 2024, and a lawsuit from J.P Morgan Securities LLC for over $5 million, for which the company is seeking to compel arbitration107109110 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's shift to North American financial consulting, an 85% revenue decrease leading to a significant net loss, and reiterates going concern doubts despite improved liquidity from financing activities Business Overview The company provides financial consulting services, primarily assisting SMEs with going public, and shifted its geographic focus from China to North America in May 2022 - The company's core business is providing comprehensive going-public consulting services to SMEs112 - In May 2022, the company shifted its geographic focus from China to North America to help mid and small companies access U.S. capital markets114 Results of Operations For the three months ended April 30, 2024, revenue doubled to $0.2 million, but net loss increased to $0.8 million; for the nine-month period, revenue fell 85% to $0.4 million, resulting in a $1.8 million net loss due to service phases, trading losses, and higher legal expenses Comparison of Operation Results for the Three Months Ended April 30, 2024 and 2023 | Metric | 2024 | 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $200,000 | $100,000 | $100,000 | 100% | | Loss from operations | $(521,282) | $(601,934) | $(80,652) | (13)% | | Net loss | $(807,588) | $(335,770) | $471,818 | 141% | Comparison of Operation Results for the Nine Months Ended April 30, 2024 and 2023 | Metric | 2024 | 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $350,000 | $2,300,000 | $(1,950,000) | (85)% | | (Loss) income from operations | $(1,725,577) | $464,058 | $(2,189,635) | (472)% | | Net (loss) income | $(1,840,689) | $362,696 | $(2,203,385) | (608)% | - The 85% decrease in revenue for the nine-month period was due to providing different phases of listing-related consulting services compared to the prior year134136 - General and administrative expenses for the nine-month period increased primarily due to a ~$0.2 million rise in legal expenses for proceedings with Boustead Securities and J.P Morgan Securities139 Liquidity and Capital Resources The company's liquidity is supported by financing, with $2.1 million in cash, but recurring operating losses raise substantial doubt about its going concern ability, despite a $2.3 million private placement and $0.7 million debt waiver - The company reported a net loss of $1.8 million and operating cash outflows of $84,188 for the nine months ended April 30, 2024, raising substantial doubt about its ability to continue as a going concern151154 - As of April 30, 2024, the company had approximately $2.1 million in cash, with its ability to continue dependent on business plan execution and obtaining financing153 - During the nine months ended April 30, 2024, the company raised approximately $2.3 million from a private placement and had a related party waive liabilities of approximately $0.7 million153 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, ATIF Holdings Limited is not required to provide quantitative and qualitative disclosures about market risk169 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of April 30, 2024, due to insufficient U.S. GAAP accounting personnel, undocumented financial closing procedures, and lack of formal risk assessment, with remediation plans underway - Management concluded that disclosure controls and procedures were not effective as of April 30, 2024170 - Identified weaknesses include insufficient U.S. GAAP accounting personnel, lack of documented financial closing procedures, and absence of risk assessment per the COSO 2013 framework170 - Remediation plans include hiring qualified accounting personnel, implementing U.S. GAAP training, and establishing an internal audit function170 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in two significant legal proceedings: an arbitration with Boustead Securities, LLC scheduled for September 2024, and a lawsuit from J.P. Morgan Securities LLC seeking over $5 million, with outcomes currently unpredictable - The company is in a legal dispute with Boustead Securities, LLC over an alleged breach of an underwriting agreement, with arbitration scheduled for September 9 and 10, 2024174180 - J.P. Morgan Securities LLC filed a lawsuit seeking to recover $5,064,160 in damages, for which the company has filed a petition to compel arbitration, with a hearing set for September 19, 2024182183 Item 1A. Risk Factors As a smaller reporting company, ATIF Holdings Limited is not required to provide risk factor disclosures - The company is not required to provide risk factors as it qualifies as a smaller reporting company184 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In April 2024, the company raised approximately $2.34 million from private placements of ordinary shares and issued 384,478 shares to its CEO to settle $349,875 in unpaid salary - In April 2024, the company raised gross proceeds of $1,343,790 and $1,000,003 in two separate private placements by selling ordinary shares at $1.23 per share185186 - On April 29, 2024, the company issued 384,478 ordinary shares to CEO Jun Liu to settle $349,875 in unpaid salary188189 Item 5. Other Information No other information was reported for the period - None192 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including securities purchase agreements, a deferred salary conversion agreement, and CEO/CFO certifications
ATIF(ZBAI) - 2024 Q3 - Quarterly Report