UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended OctoberJanuary 31, 20232024

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission File Number: 001-38876

ATIF HOLDINGS LIMITED

(Exact Name of Registrant as Specified in Its Charter)

308-888-8888

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ YES ☐ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ YES ☒ NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of December 15, 2023March 13, 2024, there were 9,627,452 shares of the registrant’s common stockordinary shares issued and outstanding.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements.  The statements herein which are not historical reflect our current expectations and projections about the Company’s future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and our interpretation of what we believe to be significant factors affecting our business, including many assumptions about future events.  Such forward-looking statements include statements regarding, among other things:

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “will,” “plan,” “could,” “target,” “contemplate,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these or similar words.  Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including the ability to raise sufficient capital to continue the Company’s operations.  These statements may be found under Part I, Item 2-“Management’s Discussion And Analysis Of Financial Condition And Results Of Operations,” as well as elsewhere in this Quarterly Report on Form 10-Q generally.  Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, matters described in this Quarterly Report on Form 10-Q.  

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Quarterly Report on Form 10-Q will in fact occur.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q.  Such statements are presented only as a guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change.  You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q. 

This Quarterly Report on Form 10-Q also contains estimates and other statistical data prepared by independent parties and by us relating to market size and growth and other data about our industry. These estimates and data involve a number of assumptions and limitations, and potential investors are cautioned not to give undue weight to these estimates and data. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report on Form 10-Q. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ATIF HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unauditedcondensed consolidated financial statements.

ATIF HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME

The accompanying notes are an integral part of these condensed consolidated financial statements.

ATIF HOLDINGS LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2024 AND 2023

For the Three Months Ended January 31, 2024 and 2023

For the Six Months Ended January 31, 2024 and 2023

The accompanying notes are an integral part of these condensed consolidated financial statements. 

ATIF HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSSCASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATIF HOLDINGS LIMITED

UUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED OCTOBER 31, 2023 AND 2022

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATIF HOLDINGS LIMITED

UUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

ATIF Holdings Limited (“ATIF” or the “Company”), formerly known as Eternal Fairy International Limited and Asia Times Holdings Limited, was incorporated under the laws of the British Virgin Islands (“BVI”) on January 5, 2015, as a holding company to develop business opportunities in the People’s Republic of China (the “PRC” or “China”). The Company adopted its current name on March 7, 2019. The Company is primarily engaged in providing business advisory and financial consulting services to small and medium-sized enterprise customers.

On October 6 and October 7, 2022, ATIF Inc., a wholly owned subsidiary of ATIF, established ATIF Business Consulting LLC (“ATIF BC”) and ATIF Business Management LLC (“ATIF BM”) under the laws of the State of California of the United States, respectively. On April 25, 2022, the Company established ATIF Investment Limited (“ATIF Investment”) under the laws of BVI. On December 22, 2021, ATIF Inc. established ATIF BD LLC (“ATIF BD”) under the laws of California of the United States.

On August 1, 2022, the Company entered into a sales agreement with a third party, pursuant to which the Company sold all of its equity interest in ATIF GP at the cost of $50,000. The management believed the disposition does not represent a strategic shift because it is not changing the way it is running its consulting business. The Company has not shifted the nature of its operations. The termination is not accounted as discontinued operations in accordance with ASC 205-20. Upon the closing of the Agreement, ATIF GP is no longer our subsidiary and ATIF USA ceased to be the investment manager of ATIF LP.

As of OctoberJanuary 31, 2023,2024, the Company’s unaudited condensed consolidated financial statements reflect the operating results of the following entities:

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 – LIQUIDITY ANDand GOING CONCERN

For the three and six months ended OctoberJanuary 31, 2023 and 2022,2024, the Company reported a net loss of approximately $0.6$0.4 million and $0.1approximately $1.0 million, respectively,respectively. For the three and six months ended January 31, 2023, the Company reported a net income of approximately $0.8 million and $0.7 million, respectively. For the six months ended January 31, 2024 and 2023, the Company reported operating cash inflowsoutflows of $17,413 and approximately $0.2$0.8 million, and $0.4 million.respectively. In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments.

As of OctoberJanuary 31, 2023,2024, the Company had cash of $0.4approximately $0.1 million, accounts receivable of approximately of $0.5 million and accounts receivablesshort-term investments of $0.7approximately $0.5 million, due from third parties, which were highly liquid. On the other hand, the Company had current liabilities of approximately $1.5 million, among which approximately $0.7 million waswere due to related parties. The balance due to related parties are payable on demand and may be extended. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources.

Because of losses from operations, working capital deficit, and the requirement of additional capital to fund our current operating plan at OctoberJanuary 31, 2023,2024, these factors indicate the existence of an uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates that it will need to raise additional capital immediately in order to continue to fund its operations. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease its operations.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

ATIF HOLDINGS LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

The unaudited condensed consolidated balance sheets as of OctoberJanuary 31 2023, 2024 and for the unaudited condensed consolidated statement of operations and comprehensive loss for the three and six months ended OctoberJanuary 31, 2024 and 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 10-K for the fiscal year ended July 31, 2023, which was filed with the SEC on November 13, 2023.

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended July 31, 2023. The results of operations for the three and six months ended OctoberJanuary 31, 20232024 and 20222023 are not necessarily indicative of the results for the full years.

The unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates

In preparing the condensed consolidated   financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance for credit losses, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, revenue recognition, provision necessary for contingent liabilities and realization of deferred tax assets. Actual results could differ from those estimates.

Accounts Receivable, net

On August 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable.

ATIF HOLDINGS LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable, net (continued)

Prior to the Company’s adoption of ASU 2016-13, accounts receivable are presented net of allowance for doubtful accounts. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of operations and comprehensive loss. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

After the adoption of ASU 2016-13, The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to accounts receivable and the estimated credit losses charged to the allowance is classified as “General and administrative expenses” in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company uses loss-rate methods to estimate allowance for credit loss. The Company assesses collectability by reviewing accounts receivable on an individual basis because the Company had limited customers and each of them has difference characteristics, primarily based on business line and geographical area. In determining the amount of the allowance for credit losses, the Company multiplied the loss rate with the amortized cost of accounts receivable. The loss rate refers to the corporate default rate published by credit rating companies, which considers current economic conditions, reasonable and supportable forecasts of future economic conditions. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.  

Fair Value of Financial Instruments

ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Fair value of investment in trading securities are based on quoted prices in active markets. The carrying amounts of the Company’s other financial instruments including cash and cash equivalents, accounts receivable, deposits, due from related parties, and other current assets, accounts payable, due to related parties and accrued expenses and other current liabilities approximate their fair values because of the short-term nature of these assets and liabilities. For lease liabilities, fair value approximates their carrying value at the year-end as the interest rates used to discount the host contracts approximate market rates. For the three and six months ended OctoberJanuary 31, 20232024 and 2022,2023, there are no transfers between different levels of inputs used to measure fair value.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 Revenue from Contracts with Customers (“ASC 606”).

To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange.

For the three and six months ended OctoberJanuary 31, 20232024 and 2022,2023, the Company primarily generated revenues from consulting services to customers who would like to go public.

The Company provides various consulting services to its members, especially to those who have the intention to be publicly listed in the stock exchanges in the United States and other countries. The Company categorizes its consulting services into three Phases:

Phase I consulting services primarily include due diligence review, market research and feasibility study, business plan drafting, accounting record review, and business analysis and recommendations. Management estimates that Phase I normally takes about three months to complete based on its past experience.

Phase II consulting services primarily include reorganization, pre-listing education and tutoring, talent search, legal and audit firm recommendation and coordination, VIE contracts and other public-listing related documents review, merger and acquisition planning, investor referral and pre-listing equity financing source identification and recommendations, and independent directors and audit committee candidate’s recommendation. Management estimates that Phase II normally takes about eight months to complete based on its past experience.

Phase III consulting services primarily include shell company identification and recommendation for customers expecting to become publicly listed through reverse merger transaction; assistance in preparation of customers’ public filings for IPO or reverse merger transactions; and assistance in answering comments and questions received from regulatory agencies. Management believes it is very difficult to estimate the timing of this phase of service as the completion of Phase III services is not within the Company’s control.  

Each phase of consulting services is stand-alone and fees associated with each phase are clearly identified in service agreements. Revenue from providing Phase I and Phase II consulting services to customers is recognized ratably over the estimated completion period of each phase as the Company’s performance obligations related to these services are carried out over the whole duration of each Phase. Revenue from providing Phase III consulting services to customers is recognized upon completion of the reverse merger transaction or IPO transaction when the Company’s promised services are rendered and the Company’s performance obligations are satisfied. Revenue that has been billed and not yet recognized is reflected as deferred revenue on the balance sheet.

Depending on the complexity of the underlying service arrangement and related terms and conditions, significant judgments, assumptions, and estimates may be required to determine when substantial delivery of contract elements has occurred, whether any significant ongoing obligations exist subsequent to contract execution, whether amounts due are collectible and the appropriate period or periods in which, or during which, the completion of the earnings process occurs. Depending on the magnitude of specific revenue arrangements, adjustment may be made to the judgments, assumptions, and estimates regarding contracts executed in any specific period.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company did not have unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of OctoberJanuary 31, 2023.2024. As of OctoberJanuary 31, 2023,2024, all of the Company’s income tax returns for the tax years ended December 31, 20182019 through December 31, 20222023 remain open for statutory examination by relevant tax authorities.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is Mr. Liu, the Chairman of the Board of Directors and CEO.

The Company’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but not limited to, customer base, homogeneity of service and technology. The Company’s operating segments are based on such organizational structure and information reviewed by the CODM to evaluate the operating segment results. Based on management’s assessment, the management has determined that the Company now operates in one operating segment with one reporting segment as of OctoberJanuary 31, 20232024 and July 31, 2023, which is the consulting service business.

ATIF HOLDINGS LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Risks and Uncertainty

(a) Credit risk

As of OctoberJanuary 31, 2023,2024, the Company held cash and cash equivalents of approximately $0.4$0.1 million deposited in the banks located in the U.S., which were insured by FDIC up to $250,000, and held cash and cash equivalents of $21,011$12,458 deposited in the investment bank accounts located in the U.S. which are not insured by FDIC.

(b) Concentration risk

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

The Company has a concentration of its revenues and receivables with specific customers. For the three months ended OctoberJanuary 31, 2023, three customers accounted for 48%, 40% and 12% of the Company’s consolidated revenue, respectively. For the three months ended October 31, 2022,2024, one customer accounted for 100% of the Company’s consolidated revenue. For the three months ended January 31, 2023, three customers accounted for 34%, 34% and 32% of the Company’s consolidated revenue.

For the six months ended January 31, 2024, four customers accounted for 40%, 33%, 17% and 10% of the Company’s consolidated revenue. For the six months ended January 31, 2023, four customers accounted for 30%, 30%, 27% and 14% of the Company’s consolidated revenue.

As of OctoberJanuary 31, 2023,2024, two customers accounted for 56%60% and 44%40% of the Company’s consolidated accounts receivable, respectively. As of July 31, 2023, two customers accounted for 54% and 46% of the Company’s consolidated accounts receivable, respectively.

For the three and six months ended OctoberJanuary 31, 20232024 and 2022,2023, substantially all of the Company’s revenues was generated from providing going public related consulting services to customers. The concentration risk   is mitigated by the Company’s plan to transition its consulting services from the PRC based customers to more international customers.

(c) Other risks and uncertainties

The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET

Property and equipment, net, consisted of the following:

Depreciation expense was $9,669 and $16,656$16,655 for the three months ended OctoberJanuary 31, 2024 and 2023, respectively. Depreciation expense was $19,338 and 2022,$33,311 for the six months ended January 31, 2024 and 2023, respectively.

NOTE 6 – INTANGIBLE ASSETS

Net intangible assets consisted of the following:

Amortization expense was $20,000 and $20,000 for the three months ended OctoberJanuary 31, 2024 and 2023, respectively. Amortization expense was $40,000 and 2022,$40,000 for the six months ended January 31, 2024 and 2023, respectively.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7 – INVESTMENTS IN TRADING SECURITIES

As of OctoberJanuary 31, 20232024 and July 31, 2023, the balance of investments in trading securities represented certain equity securities of listed companies purchased through various open market transactions by the Company during the relevant periods. All trading securities were invested by ATIF. The investments are initially recorded at cost, and subsequently measured at fair value with the changes in fair value recorded in other income (expenses), net in the consolidated statement of operations and comprehensive loss.(loss) income. For the three months ended OctoberJanuary 31, 2024 and 2023, the Company recorded an increase in fair value of $80,670 and 2022,$39,120, respectively. For the six months ended January 31, 2024 and 2023, the Company recorded a decrease in fair value of $109,403$28,734 and $20,004,an increase in fair value of $19,116, respectively.

NOTE 8 – OPERATING LEASES

The Company leases offices spacespaces and a car under non-cancelable operating leases, with lease terms ranging between 14 months to 60 months. Among the lease agreements, one office space agreement was entered into with a related party (Note 11). The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Rent expense for the three months ended OctoberJanuary 31, 2024 and 2023 was $120,692 and 2022$130,169, respectively. Rent expense for the six months ended January 31, 2024 and 2023 was $125,679$246,371 and $120,692,$250,861, respectively. During the three and six months ended January 31, 2024, the Company early terminated a car lease arrangement, and recognized losses of $62,282 arising from early termination in the condensed consolidated statements of operations comprehensive (loss) income. The losses of $62,282 was comprised of $7,600 arising from the derecognition of operating right-of-use assets and operating lease liabilities, and $$54,682 arising from penalties.

Effective August 1, 2019, the Company adopted the new lease accounting standard using a modified retrospective transition method, which allows the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allows the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed below. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.

The following table presents the operating lease related assets and liabilities recorded on the balance sheets as of OctoberJanuary 31, 2023204 and July 31, 2023. 

The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of JulyJanuary 31, 2023 and 2022:

The following is a schedule of maturities of lease liabilities as of October 31, 20232024 and July 31, 2023:

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 – OPERATING LEASES (continued)

The following is a schedule of maturities of lease liabilities as of January 31, 2024 and July 31, 2023:

NOTE 9 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

NOTE 10 – DEFERRED REVENUE

As of OctoberJanuary 31, 20232024 and July 31, 2023, the balance of deferred revenue represented the Company’s contract liabilities, including payments received in advance of providing consulting services which will be recognized as revenue as the Company completed the performances. As of OctoberJanuary 31, 20232024 and July 31 2023, the Company had deferred revenues of $nil and $70,000, respectively.

For the three months ended OctoberJanuary 31, 2024 and 2023, no advance from customer balance as of July 31, 2023 and 2022 $nilwere recognized as revenues, respectively. For the six months ended January 31, 2024 and 2023, $nil and $20,785 of advance from customer balance as of July 31, 2023 and 2022 were recognized as revenues, respectively.

For the three and six months ended OctoberJanuary 31, 2023,2024, $nil and $70,000 of advance from customer balance as of July 31, 2023 was recognized as other income.income, respectively. 

ATIF HOLDINGS LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11 – RELATED PARTY TRANSACTIONS

1) Nature of relationships with related parties

The table below sets forth the major related parties and their relationships with the Company, with which the Company entered into transactions during the three and six months ended OctoberJanuary 31, 20232024 and 2022,2023, or recorded balances as of OctoberJanuary 31, 20232024 and July 31, 2023:

2) Transactions with related parties

For the three and six months ended OctoberJanuary 31, 2023,2024, the Company repaid loans of $nil and $17,710 to Asia International Securities Exchange Co., Ltd. The loans were interest free and was repayable on demand.

As of the date of this report, the Company did not repay the loans. As of January 31, 2024, the Company had payables of $712,258 due to the related party.

For the three and six months ended OctoberJanuary 31, 2022,2023, the Company make a loan of $nil ofand $100,000 to Huaya to support its operations. The loan was interest free and was repayable on demand. Huaya made repayments of $20,000 and $1,500, respectively, for the six months ended January 31, 2024 and 2023, respectively.

In June 2022, the Company entered into an office lease agreement with Zachary Group. Pursuant to the agreement, the Company would lease the office space for a lease term of 5 years, matured in May 2027. The monthly rental fee was $20,000, payable on a monthly basis. For the three months ended OctoberJanuary 31, 2024 and 2023, the Company collected loansrecorded rental expenses of $20,000 to Huaya.$60,000 and $60,000, respectively. For the six months ended January 31, 2024 and 2023, the Company recorded rental expenses of $120,000 and $120,000, respectively.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – RELATED PARTY TRANSACTIONS (continued) 

3) Balances with related parties

As of October 1, 2023January 31, 2024 and July 31, 2023, the balances due from related parties were as follows:

As of October 1, 2023January 31, 2024 and July 31, 2023, the balances due to related parties were as follows:

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 12 – TAXES

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

British Virgin Islands

Under the current laws of the British Virgin Islands, the Company and ATIF Investment are not subject to tax on income or capital gains in the British Virgin Islands. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed.

USA

For the US jurisdiction, ATIF Inc., ATIF BC, ATIF BM, and ATIF BD are subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 8.84%. The Company also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which both were passed in 2020, no material impact on the Company is expected based on the analysis. The Company will continue to monitor the potential impact going forward. 

For the threesix months ended OctoberJanuary 31, 2023 and 2022,2024, the Company did not incur income tax expenses. For the six months ended January 31, 2023, the Company incurred income tax expenses of $566,957.

The Company follows ASC 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company’s deferred tax assets primarily derived from the net operating loss (“NOL”). For the three and six months ended OctoberJanuary 31, 2023 and 2022,2024, the Company suffered net operating losses due to limited number of customers for ATIF’s consulting service. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion or all of the deferred tax assets will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes, and other relevant factors. As of OctoberJanuary 31, 20232024 and July 31, 2023, management believes that the realization of the deferred tax assets appears to be uncertain and may not be realizable in the near future. Therefore, a 100% valuation allowance has been provided against the deferred tax assets.

Uncertain tax positions

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. There were no uncertain tax positions as of OctoberJanuary 31, 20232024 and July 31, 2023 and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

ATIF HOLDINGS LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 – CONTIGENCIESCONTINGENCIES 

From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Pending Legal Proceeding with Boustead Securities, LLC (“Boustead”)

On May 14, 2020, Boustead filed a lawsuit against the Company and LGC for breaching the underwriting agreement Boustead had with each of the Company and LGC, in which Boustead was separately engaged as the exclusive financial advisor to provide financial advisory services to the Company and LGC.

In April 2020, the Company acquired 51.2% equity interest in LGC after LGC terminated its efforts to launch an IPO on its own. Boustead alleged that the acquisition transaction between the Company and LGC was entered into during the tail period of the exclusive agreement between Boustead and the Company, and therefore deprived Boustead of compensation that Boustead would otherwise have been entitled to receive under its exclusive agreement with the Company and LGC. Therefore, Boustead is attempting to recover from the Company an amount equal to a percentage of the value of the transaction it conducted with LGC.

Boustead’s Complaint alleges four causes of action against the Company, including breach of contract; breach of the implied covenant of good faith and fair dealing; tortious interference with business relationships and quantum meruit.

On October 6, 2020, ATIF filed a motion to dismiss Boustead’s Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and 12(b)(5). On October 9, 2020, the United States District Court for the Southern District of New York directed Boustead to respond to the motion or amend its Complaint by November 10, 2020.  Boustead opted to amend its complaint and filed the amended complaint on November 10, 2020.  Boustead’s amended complaint asserts the same four causes of action against ATIF and LGC as its original complaint. The Company filed another motion to dismiss Boustead’s amended complaint on December 8, 2020.

On August 25, 2021, the United States District Court for the Southern District of New York granted ATIF’s motion to dismiss Boustead’s first amended complaint. In its order and opinion, the United States District Court for the Southern District of New York allowed Boustead to move for leave to amend its causes of action against ATIF as to breach of contract and tortious interference with business relationships, but not breach of the implied covenant of good faith and fair dealing and quantum meruit. On November 4, 2021, Boustead filed a motion seeking leave to file a second amended complaint to amend its cause of action for Breach of Contract. The Court granted Boustead’s motion for leave and Boustead filed the second amended complaint on December 28, 2021 alleging only breach of contract and dropping all other causes of action alleged in the original complaint. On January 18, 2022, the Company filed a motion to dismiss Boustead’s second amended complaint. Boustead filed its opposition on February 1, 2022 and the Company replied on February 8, 2022.

On July 6, 2022, the Court denied our motion to dismiss the second amended complaint. Thereafter, on August 3, 2022, the Company filed a motion to compel arbitration of Boustead’s claims in California. Briefing on the Company’s motion to compel concluded on August 23, 2022. Since the agreement between ATIF and Boustead contains a valid arbitration clause that applies to Boustead’s breach of contract claim, and the parties have not engaged in discovery, on February 14, 2023, the Court ordered that ATIF’s motion to compel arbitration is granted and this case is stayed pending arbitration.

On March 10, 2023, Boustead, filed Demand for Arbitration against ATIF (the Respondent) before JAMS in California and the assigned JAMS case Ref. No. is 5220002783. On May 25, 2023, ATIF filed its answer to deny Boustead’s Demand for Arbitration, which was unsuccessful and the arbitration process was initiated. The arbitrator ordered a motion to be filed by Boustead for a determination of contact interpretation, prior to extensive discovery into issues such as the alleged merits and damages, and to determine whether the contract interpretation should allow the matter to further proceed. Boustead had filed the Motion for Contract Interpretation Determination. ATIF filed its opposition to that Motion on October 16, 2023. The hearing on the motion was held on November 8, 2023, during which the arbitrator extended the hearing to February 29, 2024. The arbitrator also established December 15, 2023, as the deadline for Boustead to submit its reply regarding the contract interpretation issues raised by the Company. Simultaneously, the Company was granted until February 12, 2024, to present its response brief.

That hearing was then continued and is now scheduled for March 19, 2024. 

Our management believes it is premature to assess and predict the outcome of this pending arbitrationarbitration.

.

NOTE 14 – SUBSEQUENT EVENTPending Legal Proceeding with J.P Morgan Securities LLC (“JPMS”)

On December 4, 2023, the Company, together with ATIF Inc., ATIF-1 GP, LLC, Jun Liu and Zhiliang received a correspondence from Morgan, Lewis & Bockius LLP on behalf of its client J.P Morgan Securities LLC (“JPMS”).JPMS. The correspondence concerns a potential lawsuit against each of the aforementioned entities and individuals with respect to JPMS’s assertion that it is entitled to recover $5,064,160 in damages plus interest and attorneys’ fees relating to a stock transaction by ATIF-1 GP, LLC.

On December 22, 2023, J.P Morgan Securities LLC (“JPMS”) filed a lawsuit in the Superior Court of California, County of Orange, bearing Case Number 30-2023-01369978-CU-FR-CJC against ATIF Holdings Limited (“Holdings”), ATIF Inc., ATIF-1 GP, LLC (ATIF-1 GP”), and two officers of Holdings and ATIF Inc., Jun Liu and Zhiliang “Ian” Zhou, alleging and asserting that it is entitled to recover $5,064,160 in damages plus interest and attorneys’ fees relating to a stock transaction by ATIF-1 GP. 

The management assessed the Company would not be liable for the claim because it sold ATIF-1 GP, LLC in August 2022. As ofThe parties have agreed to attempt to mediate the date of this report, JPMS has not commenced an action against the parties.

dispute before proceeding to litigation.  The mediation is scheduled for May 6, 2024.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion and analysis should be read together with the Company’s annual report on Form 10-K for the fiscal year ended July 31, 2023 and the audited consolidated financial statements and notes included therein (collectively, the “2023 Annual Report”), as well as the Company’s unaudited condensed consolidated financial statements and the related notes included in this report. Pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K promulgated by the SEC, in preparing this discussion and analysis, the Company has presumed that readers have access to and have read the disclosure under the same heading contained in the 2023 Annual Report. This discussion and analysis contains forward-looking statements. Please see the cautionary note regarding these statements at the beginning of this report.

Business Overview

We offer financial consulting services to small and medium-sized enterprise customers in Asia and North America. Our goal is to become an international financial consulting company with clients and offices throughout Asia. Since our inception in 2015, the focus of our consulting business has been providing comprehensive going publicgoing-public consulting services designed to help SMEs small and medium-sized enterprises (“SME”) become public companies on suitable markets and exchanges.

On January 4, 2021, we established an office in California, USA, through our wholly owned subsidiary ATIF Inc., a California corporation, and launched, in addition to our business consulting services, additional service models consisting of asset management, investment holding and media services to expand our business with a flexible business concept to achieve a goal of high growth revenue and strong profit growth.

Our financial consulting services 

Currently we provide consulting services to the companies based in North America seeking listing in U.S.. We launched our consulting services in 2015. Our aim was to assist Chinese enterprises by filling the gaps and forming a bridge between PRC companies and overseas stock markets and exchanges. We have a team of qualified and experienced personnel with legal, regulatory, and language expertise in several jurisdictions outside the U.S. Our services were designed to help small and medium-sized enterprises (“SME”)SMEs in China achieve their goal of becoming public companies. In May 2022, we shifted our geographic focus from China to North America emphasizing on helping mid and small companies in North America become public companies on the U.S. capital markets. We would create a going public strategy for each client based on many factors of such client, including our assessment of the client’s financial and operational situations, market conditions, and the client’s business and financing requirements. Since our inception and up to the date of this report, we have successfully helped three Chinese enterprises to be quoted on the U.S. OTC markets and are currently assisting our other clients in their respective going public efforts. Most of our current and past clients have been Chinese, U.S. and Mexican companies, and we plan to expand our operations to other Asian countries, such as Malaysia, Vietnam, and Singapore with continuing focus on the North American market in the coming years.

For the threesix months ended OctoberJanuary 31, 20232024 and 2022,2023, we provided consulting services to threefour and onefour customers, respectively, which primarily engaged the Company to provide consulting services relating to going public in the US through IPO, reverse merger and acquisition. On May 31, 2022, we completed the transfer of our equity interest in ATIF HK and Huaya, through which we provided consulting services to Chinese companies. We plan to focus on providing consulting services to customers based in North America and other areas and intend to continue cooperating with Huaya, which was one of our subsidiaries before May 2022, in connection with the expansion and provision of our business services in China.

Our total revenue generated from consulting services amounted to $0.1 millionwas $25,000 and $0.3approximately $1.9 million for the three months ended OctoberJanuary 31, 2024 and 2023, respectively. Our total revenue generated from consulting services was approximately $0.2 million and $2.2 million for the six months ended January 31 2024 and 2022, respectively.

Key Factors that Affect our Business

We believe the following key factors may affect our consulting services:

Our business success depends on our ability to acquire customers effectively.

Our customer acquisition channels primarily include our sales and marketing campaigns and existing customer referrals. In order to acquire customers, we have made significant efforts in building mutually beneficial long-term relationships with local government, academic institutions, and local business associations. If any of our current customer acquisition channels becomes less effective, we are unable to continue to use any of these channels or we are not successful in using new channels, we may not be able to attract new customers in a cost-effective manner or convert potential customers into active customers or even lose our existing customers to our competitors. To the extent that our current customer acquisition and retention efforts become less effective, our service revenue may be significantly impacted, which would have a significant adverse effect on our revenues, financial condition, and results of operations.

Our consulting business faces strong market competition.

We are currently facing intense market competition. Some of our current or potential competitors have significantly more financial, technical, marketing, and other resources than we do and may be able to devote greater resources to the development, promotion, and support of their customer acquisition and retention channels. In light of the low barriers to entry into the financial consulting industry, we expect more players to enter this market and increase the level of competition. Our ability to differentiate our services from other competitors will have a significant impact on our business growth in the future.future.

Our business depends on our ability to attract and retain key personnel.

We rely heavily on the expertise and leadership of our directors and officers to maintain our core competence. As our business scope increases, we expect to continue to invest significant resources in hiring and retaining a deep talent pool of financial consultancy professionals. Our ability to sustain our growth will depend on our ability to attract qualified personnel and retain our current staff.

Results of Operations

Comparison of Operation Results for the Three Months ended January 31, 2024 and 2023

The following table summarizes the results of our operations for the three months ended OctoberJanuary 31, 20232024 and 2022,2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

Revenues. Our total revenue decreased by approximately $0.2$1.9 million or 58%, from $0.3approximately $1.9 million in the three months ended October 31, 2022, to $0.1 million in the same period of October 31, 2023.

For the three months ended October 31, 2022, we completed phase II service for one customer and recognized service fees of $0.3 million, while for the same period ended October 31, 2023, we provided certain IPO assistance services to three customers and recognized revenues of $0.1 million.

Selling expenses. Selling expenses increased by $67,000, or 1,340%, from $5,000 for the three months ended OctoberJanuary 31, 20222023, to $72,000$25,000 in the same periodthree months ended OctoberJanuary 31, 2023. Our selling expenses primarily consisted of promotion and advertising expenses.2024.

Since December 2022, the Company incurred monthly promotion expenses of $24,000 to promote its services in US social groups and social media. ForDuring the three months ended OctoberJanuary 31, 2023,2024, the Company incurred promotion expensesprovided listing related consulting services for one customer and earned consulting service fees of $72,000.

For$25,000. During the three months ended OctoberJanuary 31, 2022, the Company incurred a one-off advertisement expense2023, we completed both phase I and phase II services for three customers and earned consulting service fees of $5,000. $1.9 million.

Selling expenses. Our selling expenses primarily consisted of advertising and promotion expenses. For the three months ended January 31, 2024, our selling expenses was $93,000, representing an increase of $45,000, or 94%, from $48,000 for the three months ended January 31, 2023. The increase was primarily due to an increase of amortization expenses of $45,000 for TV promotion videos.

As a percentage of sales, our absolute amount of selling expenses were approximately 58%negative 372% and 2%3% of our total revenues for the three months ended OctoberJanuary 31, 20232024 and 2022,2023, respectively.

General and administrative expenses. Our general and administrative expenses increased by $0.1 million, or 26%, from $0.6 million for the three months ended October 31, 2022 to $0.7 million for the three months ended October 31, 2023. Our general and administrative expenses primarily consisted of salary and welfare expenses of management and administrative team, professional and consultingoffice expenses, operating lease expenses, and operating lease expenses. The increase inprofessional fees such as audit and legal fees. Our general and administrative expenses was primarily caused by an increase of $0.1kept stable at approximately $0.5 million in payrollfor the three months ended January 31, 2024 and welfare expenses.2023.

As a percentage of sales, our general and administrative expenses were 568%1,918% and 188%27% of our total revenues for the three months ended OctoberJanuary 31, 20232024 and 2022,2023, respectively.

Other income, net. Other income, net increased by $81,220 from $59,500 for the three months ended October 31, 2022 to $140,720 for the same period of October 31, 2023. The increase was primarily caused by a reversal of deferred revenues of $70,000 because our customers terminated agreements with us and we did not refund the advances of $70,000 to these customers.

LossGain from investment in trading securities.Loss Gain from investmentinvestments in trading securities represented fair value changesunrealized gains from investment in trading securities, which was measured at market price. For the three months ended OctoberJanuary 31, 2024 and 2023, the Company recorded a gain from investment in trading securities of $80,670 and 2022, we recorded an investment loss of $0.1 million and $20,004,$39,120, respectively.

Income taxes. We are incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, we are not subject to tax on income or capital gains in the British Virgin Islands. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed.

ATIF Inc, ATIF BD, ATIF BC and ATIF BM were established in the U.S and are subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 8.84%. We also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which were both passed in 2020, No material impact on the ATIF US is expected based on our analysis. We will continue to monitor the potential impact going forward.

Income tax expense was $nil for the three months ended January 31, 2024 due to net operating loss incurred in the quarter. Income tax expense was $566,957 for the three months ended January 31, 2023, which arose from net income earned by ATIF BC.

Net (loss) income. As a result of foregoing, net loss was approximately $0.4 million for the three months ended January 31, 2024, a change of approximately 1.2 million from net income of $0.8 million for the same period ended January 31, 2023.

Comparison of Operation Results for the Six Months ended January 31, 2024 and 2023

The following table summarizes the results of our operations for the six months ended January 31, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

Revenues. Our total revenue decreased by approximately $2.0 million from approximately $2.2 million for the six months ended January 31, 2023, to approximately $0.2 million in six months ended January 31, 2024.

During the six months ended January 31, 2024, the Company provided listing related consulting services for four customers and earned consulting service fees of approximately $0.2 million. During the six months ended January 31, 2023, we completed phase I and phase II services for four customers and earned consulting service fees of $2.2 million.

Selling expenses. Our selling expenses primarily consisted of advertising and promotion expenses. For the six months ended January 31, 2024, our selling expenses was $165,000, representing an increase of $112,000, or 211%, from $53,000 for the six months ended January 31, 2023. The increase was primarily due to an increase of amortization expenses of $112,000 for TV promotion videos..

As a percentage of sales, our absolute amount of selling expenses were 110% and 2% of our total revenues for the six months ended January 31, 2024 and 2023, respectively.

General and administrative expenses. Our general and administrative expenses primarily consisted of salary and welfare expenses of management and administrative team, office expenses, operating lease expenses, and professional fees such as audit and legal fees. Our general and administrative expenses increased from approximately $1.1 million in the six months ended January 31, 2023 to $1.2 million in the same period of 2024, which was primarily due to an increase of payroll expenses of approximately $0.1 million for other staff as a result of increase in headcount.

As a percentage of sales, our general and administrative expenses were 793% and 49% of our total revenues for the six months ended January 31, 2024 and 2023, respectively.

(Loss) gain from investment in trading securities. (Loss) gain from investments in trading securities represented unrealized gains or losses from investment in trading securities, which was measured at market price. For the six months ended January 31, 2024 and 2023, the Company recorded a loss from investment in trading securities of $28,734 and a gain from investment int trading securities of $19,116, respectively.

Gain from disposal of subsidiaries. For the threesix months ended OctoberJanuary 31, 2023, the Company did not dispose of subsidiaries, and therefore the Company did not recognize gain or loss from the disposal. For the three months ended October 31, 2022, the Company reported a gain of approximately $56,000$0.06 million from disposal of ATIF GP. For six months ended January 31, 2024, the Company did not record gain or loss from disposal of subsidiaries.

Income taxes. We are incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, we are not subject to tax on income or capital gains in the British Virgin Islands. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed.

ATIF Inc, ATIF BD, ATIF BC and ATIF BM were established in the U.S and are subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 8.84%. We also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which were both passed in 2020, No material impact on the ATIF US is expected based on our analysis. We will continue to monitor the potential impact going forward.

ForIncome tax expense was $nil for the threesix months ended OctoberJanuary 31, 2024 due to net operating loss incurred. Income tax expense was $566,957 for the six months ended January 31, 2023, and 2022, we did not recognizedwhich arose from net income tax expenses.earned by ATIF BC.

Net loss.(loss) income. As a result of foregoing, net loss was $0.6approximately $1.0 million for the threesix months ended OctoberJanuary 31, 2023, representing an increase2024, a change of $0.5$1.7 million from net lossincome of $0.1approximately $0.7 million for the threesix months ended OctoberJanuary 31, 2022.2023.

Capital Commitments and Contingencies

We had no material capital commitments as of January 31, 2024.

From time to time, we are a party to various legal actions arising in the ordinary course of business. We accrue costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in product development services with us.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash flows from operations, working capital loans from our major shareholders, proceeds from our initial public offering, and equity financing through public offerings of our securities. We plan to support our future operations primarily from cash generated from our operations and cash on hand. The Company anticipates that it will need to raise additional capital immediately in order to continue to fund its operations. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease its operations.  

Liquidity and Going concern

For the three and six months ended OctoberJanuary 31, 2023 and 2022,2024, the Company reported a net loss of approximately $0.6$0.4 million and $0.1approximately $1.0 million, respectively,respectively. For the three and six months ended January 31, 2023, the Company reported a net income of approximately $0.8 million and $0.7 million, respectively. For the six months ended January 31, 2024 and 2023, the Company reported operating cash inflowsoutflows of $17,413 and approximately $0.2$0.8 million, and $0.4 million. respectively.

In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments.

As of OctoberJanuary 31, 2023,2024, the Company had cash of $0.4approximately $0.1 million, accounts receivable of approximately of $0.5 million, and accounts receivablesshort-term investments of $0.7approximately $0.5 million, due from third parties, which were highly liquid. On the other hand, the Company had current liabilities of approximately $1.5 million, among which approximately $0.7 million waswere due to related parties. The balance due to related parties are payable on demand and may be extended. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources.

Because of losses from operations, working capital deficit, and the requirement of additional capital to fund our current operating plan at OctoberJanuary 31, 2023,2024, these factors indicate the existence of an uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern.

The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

We have not declared nor paid any cash dividends to our shareholders. We do not plan to pay any dividends out of our restricted net assets as of OctoberJanuary 31, 2023.2024.

We have limited financial obligations denominated in U.S. dollars, thus the foreign currency restrictions and regulations in the PRC on the dividends distribution will not have a material impact on our liquidity, financial condition, and results of operations.

The following table sets forth summary of our cash flows for the yearsperiods indicated:

Operating Activities

Net cash used in operating activities was $0.2 million$17,413 in the threesix months ended OctoberJanuary 31, 2023.2024. Net cash used in operating activities was primarily comprised of net loss of $0.6approximately $1.0 million, adjusted for a lossamortization of $0.1right of use assets of approximately $0.2 million, from investment in trading securities, and net changes in our operating assets and liabilities, principally comprising of (i) a increasedecrease of accounts receivable of approximately $0.2 million and $0.6 million, respectively, due from athird party customers and related party because we collected outstanding balancecustomers as a result of collection of consulting fees from the related party; (ii) a decrease of $57,030 in prepaid expenses and other current assets because we amortized prepaid promotion expenses in the amount of $72,000; (iii) a decrease of $70,000 in deferred revenues because the customers terminated agreements with the Company and the Company would not refund the advances from customers; and (iv) a decrease of $83,842 in accrued expenses and other current liabilities.customers..

Net cash providedused in operating activities was $0.4approximately $0.8 million in the threesix months ended OctoberJanuary 31, 2022.2023. Net cash used in operating activities was primarily comprised of net lossincome of $0.1approximately $0.7 million, adjusted for amortization of right of use assets of $0.1approximately $0.2 million, and net changes in our operating assets and liabilities, principally comprising of an increase of accounts receivable of $0.1approximately $1.7 million due from a customer, and an increase of accrued expenses and other current liabilities of $0.4 million.as we provided financial consulting services to more customers during the six months ended January 31, 2023.