ATIF (ATIF) - 2023 Q1 - Quarterly Report

PART I-FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for the three months ended October 31, 2022, show a reduced net loss, positive operating cash flow, and a going concern assessment based on expected receivables Condensed Consolidated Balance Sheet Highlights | Metric | Oct 31, 2022 ($) | July 31, 2022 ($) | | :--- | :--- | :--- | | Total Assets | $8,561,916 | $8,136,955 | | Total Liabilities | $4,252,779 | $3,784,348 | | Total Equity | $4,309,137 | $4,721,652 | Condensed Consolidated Statement of Operations (Three Months Ended Oct 31) | Metric | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Revenues | $300,000 | $516,475 | | Loss from operations | ($267,896) | ($586,793) | | Net Loss | ($112,515) | ($899,525) | | Loss Per Share | ($0.01) | ($0.12) | Condensed Consolidated Statement of Cash Flows (Three Months Ended Oct 31) | Metric | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash from operating activities | $363,709 | ($153,135) | | Net cash from investing activities | ($242,837) | $433,770 | | Cash, end of period | $1,871,009 | $5,957,136 | - The company's management believes it can continue as a going concern for the next 12 months, despite having cash of $1.9 million and current liabilities of $3.3 million, based on expected collection of $2.5 million in consulting fees and a $2.7 million receivable from the disposal of LGC[33] - For the three months ended October 31, 2022, one customer accounted for 100% of the company's consolidated revenue and 100% of its accounts receivable from third parties[65] Management's Discussion And Analysis Of Financial Condition And Results Of Operations Management discusses the company's strategic shift to North American going-public consulting services, highlighting a 42% revenue decrease but an 87% net loss reduction due to lower expenses, and asserts sufficient liquidity based on expected receivable collections - The company has shifted its geographic focus from China to North America, aiming to help small and mid-sized companies in North America go public on U.S. capital markets[121] Comparison of Operations (Three Months Ended Oct 31, 2022 vs 2021) | Metric | 2022 ($) | 2021 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $300,000 | $516,475 | ($216,475) | (42)% | | Selling expenses | $5,000 | $225,113 | ($220,113) | (98)% | | General & admin expenses | $562,896 | $878,155 | ($315,259) | (36)% | | Net loss | ($112,515) | ($899,525) | $787,010 | (87)% | - The decrease in selling expenses was primarily due to a $0.2 million reduction in consulting service fees, as the company did not engage outsourced professionals for due diligence work during the quarter[131] - As of October 31, 2022, the company had cash of $1.9 million and current liabilities of $3.3 million, with management asserting its ability to continue as a going concern based on expected collection of $2.5 million in service fees and a $2.7 million receivable due in early 2023[144] 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 is not required to provide quantitative and qualitative disclosures about market risk[160] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of October 31, 2022, due to material weaknesses including insufficient U.S. GAAP expertise and lack of formal internal controls, with remediation plans underway - Management concluded that as of October 31, 2022, the company's disclosure controls and procedures were not effective[161] - Material weaknesses identified include: insufficient personnel with U.S. GAAP knowledge, lack of an internal audit function, insufficient risk assessment per the COSO 2013 framework, and a lack of documented financial closing policies[161][163] - Remediation plans involve hiring more qualified accounting personnel, implementing U.S. GAAP training, and establishing an internal audit function with standardized procedures before July 2023[161][165][166] PART II-OTHER INFORMATION Legal Proceedings The company is involved in a pending breach of contract lawsuit filed by Boustead Securities, LLC, related to the acquisition of LGC, with management deeming the outcome currently unpredictable - The company is involved in a lawsuit with Boustead Securities, LLC, which alleges that ATIF's acquisition of a 51.2% interest in LGC in April 2020 breached an exclusive underwriting agreement[169][170] - Boustead's claims have been amended, with the current complaint alleging only breach of contract, and while the company's motion to dismiss was denied, a subsequent motion to compel arbitration is pending[172][173] - Management believes it is premature to predict the outcome of this pending litigation[173] Risk Factors As a smaller reporting company, the company is not required to provide risk factor disclosures in its quarterly report - As a smaller reporting company, ATIF is not required to provide risk factor disclosures in its quarterly report[175] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - This item is not applicable[175] Defaults Upon Senior Securities This item is not applicable for the reporting period - This item is not applicable[175] Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[175] Other Information This item is not applicable for the reporting period - This item is not applicable[175] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - The filed exhibits include CEO and CFO certifications (Rule 13a-14(a) and Section 906) and XBRL interactive data files[177]