AUC 10-K & 10-Q changes, risk factors and insider trading

For the fiscal year ended July 31, 2023,2024, we incurred a loss of $2.9$3.2 million. Our operations have been adversely affected by the effect of Coviddeclining 19.Economic environment. In addition, the PRC has recently issued statements that may have the effect of slowing down our business consulting services of assisting PRC companies to go public in the United States. As a result, until the PRC further clarifies its views and regulations regarding PRC companies seeking to go public in the United States, and PRC companies are comfortable with the business climate and seeking our services, we anticipate that we continue to experience losses in the future.

We may not be able to sustain our historical rapid growth and/or may not be able to grow our business at all. Our net revenue increasedwas from $3.6$0.6 million and $2.5 million for the fiscal yearyears ended July 31, 20172024 and $5.32023, million for the fiscal year ended July 31, 2018. However, our net revenue decreased to $1.7 million, $0.9 million and $0.6 million for the fiscal year ended July 31, 2022, 2021 and 2020, respectively. Our net incomeloss was $0.6$3.2 million for the fiscal year ended July 31, 2017, $1.9 million for the fiscal year ended July 31, 2018, and $0.4 million for the fiscal year ended July 31, 2019, and decreased to a net loss of $17.3 million for the fiscal year ended July 31, 2020, and a net loss of $9.0 million for the fiscal year 2021, and our net losses were $2.9 million and $3.4 million for the years ended July 31, 2023 2024 and 20222023, respectively. However, our historical growth rate, limited history of operation, changes to business operations, among other factors, make it difficult to evaluate our prospects.

Because of our losses from operations, working capitalcash deficit,outflow in operating activities, and our requirement of additional capital to fund our current operating plan, at July 31, 2023,2024, these factors indicate the existence of an uncertainty that raises substantial doubt about our ability to continue as a going concern and is dependent on our ability to raise addition working capital through debt or equity financings.

In the normal course of business, we may be subject to challenges from various taxing authorities regarding the amounts of taxes due. The taxing authorities may take the position that we owe more taxes than we have paid. We recorded tax liabilities of approximately $31,200 $3,300 and $0.1 million$31,200 as of July 31, 2023 2024 and 2022,2023, respectively, for the possible underpayment of income and business taxes. It is possible that our tax for past taxes may be higher than those amounts if the authorities determine that we are subject to penalties or that we have not paid the correct amount. Although our management believes it may be able to negotiate with local taxing authorities a reduction to any amounts that such authorities may believe are due and a reduction to any interest or penalties thereon, we have no guarantee that we will be able to negotiate such a reduction. To the extent we are able to negotiate such amounts, national-level taxing authorities may take the position that localities are without power to reduce such liabilities, and such taxing authorities may attempt to collect unpaid taxes, interest and penalties in amounts greatly exceeding exceeding management’s estimates.

On October 6, 2020, weATIF 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 Boustead opted to amend its complaint and filed the amended complaint on November 10, 2020. Boustead’s first amended complaint assertedasserts the the same four causes of action against LGCATIF and usLGC as its original complaint. WeThe 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 usATIF 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.arbitration of Boustead’s Thereafter,claims onin August 3, 2022, the Company filed a motion to compel arbitration.California. Briefing on the Company’s motion to compel concluded on August 23, 20222022. 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, BousteadBoustead, 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.

The audit report included in our annual report on Form 20-F10-K for the yearyears ended July 31, 2021,2024 and 2023, was issued by ZH CPA, a U.S.-based accounting firm that is registered with the PCAOB and can be inspected by the PCAOB. We have no intention of dismissing ZH CPA in the future or of engaging any auditor not based in the U.S. and not subject to regular inspection by the PCAOB. There is no guarantee, however, that any future auditor engaged by the Company would remain subject to full PCAOB inspection during the entire term of our engagement. The PCAOB is currently unable to conduct inspections in China without the approval of Chinese government authorities. If it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate. In addition, under the HFCAA, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges or in the over the counter trading market in the U.S. if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our Ordinary Shares being delisted. Furthermore, on June 22, 2021, the U.S. Senate passed the AHFCAA, which was signed into law on December 29, 2022, amending the HFCAA and requiring the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.

On December 2, 2021, SEC has announced the adoption of amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (Commission-Identified Issuers). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the adopting release provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCAA. The SEC will identify Commission-Identified Issuers for fiscal years beginning after Dec. 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended Dec. 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended Dec. 31, 2022.

Mr. Jun Liu, who is our President, Chief Executive Officer and Chairman of the Board, is currently the beneficial owner of 5,268,3305,652,808 ordinary shares (as adjusted to reflect the Reverse Split), or 54.7%47.4% of our current outstanding Ordinary Shares (36.0%32.2% directly held by Mr. Liu including 28.9% directly held by Tianzhen Investments Limited,Limited which is an entity that 100% owned by Mr. Liu, and the remaining 19.0%15.3% that may be deemed to be beneficially owned by Mr. Liu through the assignment of a proxy agreement entered with Eno Group Limited on September 30, 2018 to Tianzhen Investments Limited on February 10, 2021). Mr. Liu has the power to elect all directors and approve all matters requiring shareholder approval without the votes of any other shareholder, significant influence over a decision to enter into any corporate transaction, and the ability to prevent any transaction that requires the approval of shareholders, regardless of whether or not our directors or other shareholders believe that such a transaction is in our best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of our Ordinary Shares or prevent our shareholders from realizing a premium over the then-prevailing market price for their Ordinary Shares.

We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. As we are an “emerging growth company,” we are expected to first include a management report on our internal controls over financial reporting in our annual report in the second fiscal year end following the effectiveness of our IPO. As such, these requirements applied to our annual report on Form 10-K for the fiscal year ending on July 31, 2023. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

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”) 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 nine 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 fiscal years ended July 31, 2023 2024 and 2022,2023, we provided consulting services to threeeight and three customers, respectively, which primarily engaged the Company to 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 in connection with the expansion and provision of our business services in China. From April 2022 through the date of this report, the Company entered into consulting agreements with fivenine customers, among which fourthree are based in the North America.

Our total revenue generated from consulting services amounted to $2.5approximately $0.6 million and $1.7$2.5 million for the fiscal years ended July 31, 20232024 and 2022, 2023, respectively.

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

Revenues. Our total revenue increased decreased by $0.8approximately $1.8 million, or 47%,75%, from $1.7 million in fiscal year 2022, toapproximately $2.5 million in fiscal year 2023, to approximately $0.6 million in fiscal year 2024, primarily attributable to ana increase decrease of $0.5approximately $0.7 million and $1.1 million, respectively, from consulting services to third parties and related parties.

The increasedecrease in revenues from related parties was primarily because we provided consulting services to moreless customers on behalf of related parties. For the fiscal year ended July 31, 2024 and 2023, we provided consulting services to one and two customers on behalf of a related party, while for the same period ended July 31, 2022, we provided consulting services to one customer on behalf of a related party.respectively.

Selling expenses. Selling expenses expenses decreasedincreased by $0.4approximately $0.1 million, or 64%,61%, from $0.6approximately $0.2 million in year ended July 31, 20222023 to $0.2approximately $0.3 million in the same period ended July 31, 2023. 2024. Our selling expenses primarily consisted of outsourced service fees charged by third-party service providers, business development expenses, potential customer referral commissions, salarypromotion and welfare expenses of our business development team, and business traveladvertising expenses. The decreaseincrease in our selling expenses was primarily due to aan decreaseincrease of $0.3amortization expenses of approximately $0.1 million in consulting expenses. For the year ended July 31, 2023, the Company identified potential customers on its own and did not engage consultants to develop new customers. Accordingly, the Company did not incur consulting expenses for theTV year ended July 31, 2023.promotion videos.

As a percentage of sales, our selling expenses were 8%54% and 34%8% of our total revenues for the fiscal years ended July 31, 20232024 and 2022,2023, respectively.

General and administrative expenses. Our general and administrative expenses decreasedkept bystable $0.4at million, or 15%, from $2.7$2.3 million in fiscal year 2022 toand $2.2 million inFor the fiscal yearyears 2023.ended July 31, 2024 and 2023, respectively. Our general and administrative expenses primarily consisted of salary and welfare expenses of management and administrative team, professional expenses, office expenses, operating lease expenses. The decrease increase in general and administrative expenses was primarily becausedue theto generalan andincrease administrativeof legal expenses of theapproximately year 2022 included the expenses of $0.4$0.5 million incurredfor legal proceedings with both Boustead Securities, LLC and J.P Morgan Securities LLC, partially offset by ATIFa HKdecrease of approximately $0.2 million in rental expenses because we modified an office lease agreement, a decrease of approximately $0.1 million in payroll expenses because we adjusted monthly payroll expenses to Mr. Jun Liu from $20,000 to $1 since February 2024, and Huaya,a thedecrease equityof interestapproximately $0.1 million in whichoffice were transferred in May 2022.expenses.

As a percentage of sales, our general and administrative expenses were 91%365% and 159%91% of our total revenues for the fiscal years ended July 31, 20232024 and 2022,2023, respectively.

Provision(Reversal of provision) provision against accounts receivable due from a related party. For the fiscal year ended July 31, 2023, the Companywe provided full provision of $762,000 against the accounts receivable due from Huaya as the management assessed it is remote to collect the outstanding balance. For the fiscal year ended July 31, 2024, we reversed provision of $19,103 because Huaya paid salary expenses of $19,103 on our behalf.

Gain Loss (loss gain) from investment in trading securities. Loss (gains) from investment in trading securities represented fair value changes from investment in trading securities, which was measured at market price. For the fiscal years ended July 31, 20232024 and 2022,2023, we recorded an investment gainloss of $0.2approximately $0.4 million and aan lossinvestment gain of $2.4approximately $0.2 million, respectively.

ATIF Inc, ATIF GP, ATIF LP, ATIF BD, ATIF BC and 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 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 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.

Net loss. As a result of foregoing, net loss was $2.9approximately $3.2 million for the fiscal year ended July 31, 2023,2024, aan decreaseincrease of $0.5$0.3 million from net loss of $3.4$2.9 million in fiscal year 2022. 2023.

For the years ended July 31, 2023 2024 and 2022,2023, the Company reported a net loss of approximately $2.9$3.2 million and $3.4$2.9 million, respectively, and operating cash outflows from continuing operations of approximately $2.3$0.1 million and $0.1$2.3 million. 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. commitments.Because of losses from operations, cash out from operating activities, and the requirement of additional capital to fund our current operating plan at July 31, 2024, these factors indicate the existence of an uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern.

As of July 31, 2023,2024, the Company had cash of $0.6 $1.2 million, short-term investment in trading securities of $0.4 million, due from a related party of $0.9 million and accounts receivables of $0.6$0.2 million due from a related party, which were highly liquid. On the other hand, the Company had current liabilities of $1.5$1.0 million, among which $0.7 million was due to related parties.million. The balanceCompany’s duecash to related parties are payable on demandhand andcould maywell becover extended.the current liabilities. 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.

Net cash used in operating activities was $2.3 approximately $0.1 million in fiscal year ended July 31, 2023.2024. Net cash used in operating activities was primarily comprised of net loss of $2.9approximately $3.2 million, adjusted for provisionloss of $2.7approximately $0.4 million against due from buyers of LGC, and provision of $0.8 million against accounts receivable due from ainvestment relatedin party,trading securities, and net changes in our operating assets and liabilities, principally comprising of (i) ana increasedecrease of accounts receivable of approximately $0.7 million due from third parties and $0.6$0.4 million due from a related party, respectively. The increasedecrease was inbecause linewe withcollected increaseoutstanding ofbalance revenues,due andfrom customers, (ii) a decrease of prepaid expenses and other current assets of approximately $0.3 million, which was due to amortization of advertising service fees, and (iii) an increase of accrued expenses and other current liabilities of approximately $2.0$1.3 million as the Company was no longer liable to an investment bank for loss making since disposal of ATIF GP.million.

Net cash used in operating activities was $0.1 approximately $2.3 million in fiscal year ended July 31, 2022.2023. Net cash used in operating activities was primarily comprised of net loss of $3.4approximately $2.9 million, adjusted for lossprovision of $2.4approximately $2.7 million against due from investmentbuyers inof tradingLGC, and securities,provision of approximately $0.8 million against accounts receivable due from a related party, and net changes in our operating assets and liabilities, principally comprising of (i) an increase of accounts receivable of $0.8approximately $0.7 million due from third parties and approximately $0.6 million due from a related party, respectively. The increase was in line with increase of revenues, and an(ii) increasea decrease of accrued expenses and other current liabilities of $1.8approximately $2.0 million as the Company iswas no longer liable to an investment bank for loss making duringsince thedisposal yearof endedATIF July 31, 2022.GP.

Net cash used in investing activities was approximately $1.6 million in fiscal year 2022,2024, primarily consisting of purchaseloans of approximately $0.9 million made to a related party and investment of $1.4approximately $0.7 million in listedtrading equity securities, investment of $0.3 million in two equity securities, partially offset against proceeds of $0.2 million from disposal of property and equipment.securities.

Net cash provided by financing activities was approximately $2.3 million in fiscal year 2024, which was provided by proceeds of approximately $2.3 million from issuance of ordinary shares pursuant to a private placement Net cash provided by financing activities was approximately $0.7 million in fiscal year 2023, which was provided by borrowings of approximately $0.7 million from a related party.

For the three and six months ended JanuaryApril 31,30, 2025 and 2024, we provided consulting services to one customer,customer. For the nine months ended April 30, 2025 and 2024, we provided consulting services to two and four customers, respectively, which primarily engaged the Company to provide consulting services relating to going public in the US through IPO, reverse merger and acquisition.

Our total revenue generated from consulting services amounted to $0.2$0.25 million and approximately$0.2 $25,000million for the three months ended January 31,April 30, 2025 and 2024, respectively. Our total revenue generated from consulting services amounted to $0.2$0.45 million and approximately$0.35 $0.2 million for the sixnine months ended JanuaryApril 31,30, 2025 and 2024, respectively.

Comparison of Operation Results for the Three Months ended January 31,April 30, 2025 and 2024

The following table summarizes the results of our operations for the three months ended JanuaryApril 31,30, 2025 and 2024, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

Revenues. Our Our total revenue increased by approximately$50,000, or 25%, from $0.2 million, or 700%, from $25,000million for the three months ended JanuaryApril 31,30, 2024, to $0.2$0.25 million in for the three months ended JanuaryApril 31,30, 2025.

Selling expenses. Our selling expenses primarily consisted of advertising and promotion expenses. For the three months ended January 31,April 30, 2025, our selling expenses was $48,000,$nil, representing a decrease of $45,000,$86,000, or 48%,100%, from $93,000$86,000 for the three months ended January 31,April 30, 2024. The decrease was primarily due to a decrease of amortization expenses of $45,000 for TV promotion videos.

General and administrative expenses. Our general and administrative expenses primarily consisted of salary and welfare expenses of management and administrative team, professional expenses, office expenses, operating lease expenses. Our general and administrative expenses increased decreased by $23,281,$0.2 million, or 5%,31%, from approximately $0.5$0.6 million for the three months ended JanuaryApril 31,30, 2024, to $0.5$0.4 million for the three months ended JanuaryApril 31,30, 2025. 2025.The decrease was primarily due to decrease of payroll expenses from the compensation adjustments following changes in executive leadership roles.

Loss (gain) from investment in trading securities. Loss (gain) from investment in trading securities represented fair value changes from investment in trading securities, which was measured at market price. For the three months ended JanuaryApril 31,30, 2025 and 2024, we recorded an investment loss of approximately $1.3 $1.4 million and an investment gain of approximately $0.1$0.3 million, respectively.

For the three months ended April January 31,30, 2025 and 2024, we did not recognize income tax expenses.

Net income (loss). As a result of foregoing, net loss was approximately $1.9$1.6 million for the three months ended JanuaryApril 31,30, 2025, an increase of loss of approximately $1.5 $0.8 million from net loss of $0.4$0.8 million for the three months ended JanuaryApril 31,30, 2024.

Comparison of Operation Results for the SixNine Months ended January 31,April 30, 2025 and 2024

The following table summarizes the results of our operations for the sixnine months ended JanuaryApril 31,30, 2025 and 2024, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

Revenues. Our Our total revenue increased by $50,000$0.1 million from approximately $0.2$0.35 million for the sixnine months ended JanuaryApril 31,30, 2024, to $0.2$0.45 million in sixnine months ended April January 31,30, 2025.

During the sixnine months ended April January 31,30, 2025, we provided IPO assistance services to onetwo customercustomers and recognized revenues of $0.2$0.45 million. For the sixnine months ended April January 31,30, 2024, we provided certain IPO assistance services to four customers and recognized revenues of $150,000.$0.35 million.

Selling expenses. expenses. Our selling expenses primarily consisted of advertising and promotion expenses. For the sixnine months ended JanuaryApril 31, 30, 2025, our selling expenses was $120,000, representing a decrease of $45,000,$131,000, or 27%,52%, from $165,000$251,000 for the sixnine months ended JanuaryApril 31, 30, 2024. The decrease was primarily due to a decrease of amortization expenses for TV promotion videos.

As a percentage of sales, our absolute amount of selling expenses were 60%27% and 110%72% of our total revenues for the sixnine months ended January 31,April 30, 2025 and 2024, 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 decreased from approximately $1.2$1.8 million in the sixnine months ended JanuaryApril 31,30, 2024 to approximately $1.0$1.4 million in the same period of 2025, which was primarily due to decrease of payroll expenses from the compensation adjustments following changes in executive leadership roles.

As a percentage of sales, our general and administrative expenses were 476%309% and 793%521% of our total revenues for the sixnine months ended January 31,April 30, 2025 and 2024, respectively.

Loss from investment in trading securities. Loss from investment in trading securities represented fair value changes from investment in trading securities, which was measured at market price. For the sixnine months ended JanuaryApril 31,30, 2025 and 2024, we recorded an investment loss of approximately $1.1 $2.5 million and $28,374,$0.3 million, respectively.

Income taxes. 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 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 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. For the six nine months ended JanuaryApril 31,30, 2025 and 2024, we did not recognized income tax expenses.

Net loss. As a result of foregoing, net loss was approximately $2.3$3.9 million for the sixnine months ended JanuaryApril 31,30, 2025, an increase of loss of approximately $1.3 $2.1 million from net loss of $1.0$1.8 million for the sixnine months ended JanuaryApril 31,30, 2024.

For the sixnine months ended April January 31,30, 2025 and 2024, we reported a net loss of approximately $2.3$3.9 million and $1.0$1.8 million, respectively, and operating cash outflows approximately $1.2$2.1 million and approximately $0.02$0.08 million. In assessing the ability to continue as a going concern, we monitorsmonitor and analyzes analyze cash and our ability to generate sufficient cash flow in the future to support itsour operating and capital expenditure commitments. Because of a history of net losses from operations, cash out from operating activities, and the requirement of additional capital to fund our current operating plan at JanuaryApril 31,30, 2025, these factors indicate the existence of an uncertainty that raises substantial doubt about our ability to continue as a going concern.

As of JanuaryApril 31,30, 2025, we had cash of approximately $5.3$6.7 million, short-term investments in trading securities of approximately $2.8$1.1 million and due from a related party of $0.6 million, which were highly liquid. On the other hand, we had current liabilities of approximately $0.8 $0.3 million. The cash and short-term investments in trading securities could well cover the current liabilities. Our 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.

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 JanuaryApril 31,30, 2025.

Net cash used in operating activities was approximately $1.2$2.1 million in sixnine months ended JanuaryApril 31,30, 2025. Net cash used in operating activities was primarily comprised of net loss of approximately $2.3$3.9 million, adjusted for loss of approximately $1.1$2.5 million from investment in trading securities, and net changes in our operating assets and liabilities, principally comprising of a decrease of $0.2$0.05 million in accounts receivable and a decrease of approximately $0.5$0.9 million in accounts payable, accrued expenses and other current liabilities because we paid litigation liabilities of approximately $0.3$0.8 million.

Net cash used in operating activities was $17,413$84,188 in the sixnine months ended JanuaryApril 31,30, 2024. Net cash used in operating activities was primarily comprised of net loss of approximately $1.0$1.8 million, adjusted for amortizationloss from investment of righttrading of use assetssecurities of approximately $0.2$0.3 million, and net changes in our operating assets and liabilities, principally comprising of (i) a decrease of accounts receivable of approximately $0.2 $0.5 million and $0.6 million, respectively, due from third party customers and related party customers as a result of collection of consulting fees from customers.customers, (ii) a decrease of prepaid expenses and other current assets of approximately $0.2 million due to amortization of prepaid advertising service fees, and (iii) an increase of accrued expenses and other current liabilities of approximately of $0.2 million as a result of accrual of payroll expenses and legal service fees.

Net cash provided by investing activities was $0.4$0.7 million for the sixnine months ended JanuaryApril 31,30, 2025, primarily consisting of net proceeds from investment in trading securities of approximately $0.4 million and net collection of borrowings from a related party of $0.3 million.

Net cash used in investing activities was approximately $0.4$0.7 million in the sixnine months ended JanuaryApril 31,30, 2024, primarily used in investment in trading securities of approximately $0.4 million and loans made to related parties of approximately $0.3 million.

Net cash provided by financing activities was approximately $4.8$6.9 million in the sixnine months ended JanuaryApril 31,30, 2024,2025, which represented proceeds from from issuance of ordinary shares.