VIIQ 10-K & 10-Q changes, risk factors and insider trading
VisitIQ Corp. · OTC · Services-Prepackaged Software · CIK 1470129 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our success and revenue growth depends on our ability to add and retain customers.”
New heading “We are subject to payment-related risks if customers dispute, do not pay their invoices, or decrease their amount of spend due to unforeseen downturns in their financial condition. Any decreases or significant delays in payments could have a material adverse effect on our business, operating results and financial condition. These risks may be heightened during economic downturns or customer impacts from such downturns, including supply chain disruptions or shortages.”
New heading “We may experience fluctuations in our operating results which could make our future operating results difficult to compare and predict. Consequently, we may not be able to meet our expectations or those of securities analysts and investors.”
New heading “If we do not manage our growth effectively, the quality of our platform and solutions may suffer, and our business, operating results and financial condition may be adversely affected.”
New heading “Our industry is intensely competitive, and if we do not effectively compete against current and future competitors or fail to innovate and make the right investment decisions in our product offerings and platform, our business, operating results and financial condition could be harmed.”
New heading “Our success depends on our ability to retain key members of our management team, and on our ability to hire, train, retain and motivate new employees.”
New heading “Acquisitions or strategic investments could be difficult to identify and may divert the attention of management and disrupt our business, dilute stockholder value and adversely affect our business, operating results and financial condition.”
New heading “Our business is subject to the risk of catastrophic events such as pandemics, hurricanes, wildfires, tornadoes, earthquakes, extreme weather events, flooding, droughts and power outages, and to business and operational interruption by man-made problems such as war, conflicts and terrorism.”
New heading “If we are not able to maintain and enhance our reputation and brand recognition, our business, financial conditions and results of operations will be harmed.”
New heading “The estimates of market opportunity and forecasts of market growth included in this Annual Report may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all.”
New heading “AI and Machine Learning are emerging technologies and involve significant risks and uncertainties.”
New heading “The risk of non-compliance with laws and regulations, including, but not limited to, the risk of changes to laws and regulations, could adversely affect our business.”
New heading “We will need additional capital in the future to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to meet our financial obligations and grow our business.”
New heading “Risks Related to Certain Tax Matters”
New heading “Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.”
New heading “Risks Related to Public Reporting Matters and an Investment in Our Common Stock”
New heading “We may issue additional equity or debt securities in the future in order to raise capital. Additional issuances of equity securities would dilute the investment of our current stockholders and could cause the market price of our common stock to decline, and we may also expend substantial funds to satisfy a portion of our tax withholding and remittance obligations that arise upon the vesting and/or settlement of certain of our option awards, which may have an adverse effect on our financial condition and results of operations.”
New heading “The nature of our business requires the application of accounting guidance that requires management to make estimates and assumptions. Reported results under GAAP may vary from key metrics used to measure our business. Additionally, changes in accounting guidance may cause us to experience greater volatility in our quarterly and annual results.”
New heading “Anti-takeover provisions contained in our charter documents and Nevada law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.”
New heading “Risks Related to Our Financial Position and Need for Additional Capital”
New heading “We are an early-stage company with a history of operating losses and may not maintain profitability in the future.”
New heading “We expect to require additional capital to fund our operations in the near-term, and this capital might not be available on acceptable terms, if at all.”
New heading “We have historically invested in engineering and development efforts that further enhance our products. Such investments may affect our operating results and liquidity, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.”
New heading “Risks Related to Data Collection and Security, Intellectual Property and Technology Industry Regulations”
New heading “The technology industry is subject to increasing scrutiny that could result in U.S. government actions that could negatively affect our business.”
New heading “Our business and the effectiveness of our platform depends on our ability to collect and use online data. New tools used by consumers to limit data collection, regulatory restrictions and potential changes to web browsers and mobile operating systems affect our ability to collect such data, which could harm our operating results and financial condition.”
New heading “Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition and the price of our common stock.”
New heading “Our intellectual property rights may be difficult to enforce and protect, which could enable others to copy or use aspects of our technology without compensating us, thereby eroding our competitive advantage and having an adverse effect on our business, results of operations and financial condition.”
New heading “Any unfavorable publicity or negative public perception of current data collection practices could in the future harm our business, results of operations, financial condition and the price of our common stock, including from additional regulations which may impact the effectiveness of our data cloud and platform.”
New heading “A significant inadvertent disclosure or breach of confidential and/or personal information we may be deemed to process, or a security breach of our or our customers’, suppliers’, or other partners’ IT Systems could be detrimental to our business, reputation, financial performance and results of operations.”
New heading “We depend on third-party data providers, systems and technologies to operate our business, the disruption of which could adversely affect our business, operating results and financial condition.”
New heading “If we fail to detect or prevent fraud or malware intrusion on our platform, devices, or systems, or into the systems or devices of our customers and their consumers, publishers could lose confidence in our platform, and we could face legal claims and regulatory investigations, any of which could adversely affect our business, operating results and financial condition.”
New heading “The standards that private entities and inbox service providers adopt in the future to regulate the use and delivery of email may interfere with the effectiveness of our platform and our ability to conduct business.”
New heading “Risks Related to Ownership of Our Common Stock”
New heading “We do not anticipate paying any cash dividends in the foreseeable future.”
New heading “Because our common stock does not trade on a national securities exchange, the prices of our common stock may be more volatile and lower than if we were listed.”
New heading “General Risk Factors”
New heading “If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock, or if our results of operations do not meet their expectations, our stock price and trading volume could decline.”
New heading “We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.”
Removed heading “There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.”
Removed heading “If we are unable to continue to attract course participants to enroll in our courses, our revenues may decline and we may not be able to maintain profitability.”
Removed heading “Failure to attract and retain qualified personnel and experienced senior management could disrupt our operations and adversely affect our business and competitiveness.”
Removed heading “We have been operating under our current ownership structure for a limited time which may make it difficult for you to evaluate our business and prospects.”
Removed heading “We are dependent on the Shanxi North Campus, Shanxi South Campus and Sichuan Guang’an School for all of our revenues. Any adverse development relating to any of these schools could materially and adversely affect our future results of operations.”
Removed heading “We may lose market share and our profitability may be materially and adversely affected, if we fail to compete effectively with our present and future competitors or to adjust effectively to changing market conditions and trends.”
Removed heading “If we fail to develop and introduce new courses, services and products that meet our target customers’ expectations, or adopt new technologies important to our business, our competitive position and ability to generate revenues may be materially and adversely affected.”
Removed heading “Risks Relating to Regulation of Our Business and to Our Structure”
Removed heading “The education sector, in which all of our business is conducted, is subject to extensive regulation in the PRC, and our ability to conduct business is highly dependent on our compliance with these regulatory frameworks.”
Removed heading “The preferential tax treatment status of the educational institutions we operate places limitations on our ability to freely operate our business, including limitations on pricing and our ability to withdraw profits from the educational institutions we operate for distribution to shareholders or for use in other parts of our business. The educational institutions we operate may incur additional costs if they seek to convert to non-preferential tax treatment status and we cannot assure you that the educational institutions we operate will be able to retain their preferential tax treatment status.”
Removed heading “The PRC’s economic, political and social conditions, as well as governmental policies, could affect the financial markets in the PRC and our liquidity and access to capital and our ability to operate our business.”
Removed heading “Recent regulations relating to offshore investment activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties that could restrict our overseas and cross-border investment activity, and a failure by our shareholders who are PRC residents to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us and our PRC resident shareholders to liability under PRC law.”
Removed heading “The tuition charged by the educational institutions are all subject to price controls administered by the PRC government, and our revenue is highly dependent on the level of these tuition charges.”
Removed heading “The PRC tax authorities may require us to pay additional taxes in connection with our acquisitions of offshore entities that conducted their PRC operations through their affiliates in the PRC.”
Removed heading “Restrictions on currency exchange may limit our ability to utilize our revenues effectively.”
Removed heading “If the educational institutions we operate are unable to obtain necessary governmental approvals for their expansion plans, our business and our prospects for growing our business may be adversely affected.”
Removed heading “Delay or failure in obtaining necessary approvals and building ownership certificates for the buildings of the educational institutions we operate may have an adverse impact on our business and operations.”
Removed heading “Changes in U.S. generally accepted accounting principles may impact our reported financial results of operations.”
Removed heading “You may face difficulties in protecting your interests because we conduct all of our operations in the PRC and most of our officers reside in the PRC.”
Removed heading “As a result of the Merger, KL became a subsidiary of ours and since we are subject to the reporting requirements of federal securities laws, this can be expensive and may divert resources from other projects, thus impairing its ability to grow.”
Removed heading “Public company compliance may make it more difficult to attract and retain officers and directors.”
Removed heading “Because we became public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.”
Removed heading “Our stock price may be volatile.”
Removed heading “We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.”
Removed heading “Our shares of common stock are very thinly traded, and the price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock either now or in the future.”
Removed heading “There is currently a limited liquid trading market for our common stock and we cannot ensure that one will ever develop or be sustained.”
Removed heading “Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.”
Removed heading “Because our directors and executive officers are among our largest stockholders, they can exert significant control over our business and affairs and have actual or potential interests that may depart from those of our other stockholders.”
Largest changes
“We may face claims relating to the information or content that is made available through our platform. Though we contractually require our customers to represent that they will follow our policies with respect to all information or content they upload to our systems, we may be exposed to potential liability if our customers do not abide by such policies. …”see in full comparison
“Our communications with consumers are also subject to certain laws and regulations, including the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act of 2003, the Telephone Consumer Protection Act of 1991 (the “TCPA”), and the Telemarketing Sales Rule and analogous state laws, that could expose us to significant damages awards, fines and other penalties that could materially impact our business. …”see in full comparison
“If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. …”see in full comparison
“We cannot provide assurance that the measures we have taken to date and may take in the future will prevent or avoid potential future material weaknesses. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. …”see in full comparison
“In the U.S., numerous state laws impose standards relating to the privacy, security, transmission and breach reporting of personal information. Such laws and regulations are subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us, our customers and our strategic partners. For example, the CCPA creates individual privacy rights for California consumers and imposes privacy and security obligations on entities handling personal information. …”see in full comparison
“We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.”see in full comparison
Full comparison: every changed paragraph (203)
In addition to the other information set forth in this Annual Report on Form 10-K, you should carefully consider the risks and uncertainties described below, which could materially adversely affect our business, operating results, financial condition, and cash flow.
There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.
Risks RelatingRelated to Our Business and Our Industry
Our success and revenue growth depends on our ability to add and retain customers.
Our success is dependent on regularly adding new customers and increasing our existing customers’ usage of our platform and added features. Our customers may also choose to decrease their overall marketing spend for any reason, including if they do not believe they are generating a sufficient return on their marketing spend. Further, we may not be successful at educating and training our new and existing customers on how to use our platform.
Accordingly, we must continually work to win new customers and educate and retain existing customers, increase their usage of our platform and capture a larger share of their marketing spend.
We are subject to payment-related risks if customers dispute, do not pay their invoices, or decrease their amount of spend due to unforeseen downturns in their financial condition. Any decreases or significant delays in payments could have a material adverse effect on our business, operating results and financial condition. These risks may be heightened during economic downturns or customer impacts from such downturns, including supply chain disruptions or shortages.
We may become involved in disputes with our customers over the operation of our platform, the terms of our agreements or our billings for purchases made by them through our platform. In the past, certain customers have sought to slow their payments to us or been forced into filing for bankruptcy protection, resulting in delay or cancelation of their pending payments to us. In certain cases, customers have been unable to timely make payments, and we have suffered losses. Certain of our contracts with marketing agencies state that if their customer does not pay the agency, the agency is not liable to us, and we must seek payment solely from their customer, a type of arrangement called sequential liability. Contracting with these agencies, which in some cases have or may develop higher-risk credit profiles, may subject us to greater credit risk than if we were to contract directly with the customer.
If we are unable to collect customers’ fees on a timely basis or at all, we could incur write-offs for bad debt, which could have a material adverse effect on our business, operating results and financial condition for the periods in which the write-offs occur. In the future, bad debt may exceed reserves for such contingencies, and our bad debt exposure may increase over time. Even if we are not paid by our customers on time or at all, we may still be obligated to pay for the inventory we have purchased for our customers’ marketing campaigns, and consequently, our results of operations and financial condition would be adversely impacted.
We may experience fluctuations in our operating results which could make our future operating results difficult to compare and predict. Consequently, we may not be able to meet our expectations or those of securities analysts and investors.
Our quarterly and annual operating results have fluctuated in the past, and we expect our future operating results to fluctuate due to a variety of factors, many of which are beyond our control. Our liquidity and revenue can fluctuate quarter to quarter as certain of our customers have seasonal marketing activity. In addition, the varying nature of our pricing mix between periods, customers and products may also make it more difficult for us to forecast our future operating results. Further, these factors may make it more difficult to make comparisons between prior, current and future periods. As a result, period-to-period comparisons of our operating results should not be relied upon as an indication of our future performance.
In addition, the following factors may cause our operating results to fluctuate:
Any one of the factors referred to above or herein or the cumulative effect of any combination of factors referred to above or herein may result in our operating results that are below our expectations and the expectations of securities analysts and investors, or may result in significant fluctuations in our quarterly and annual operating results, including fluctuations in our key performance indicators (“KPIs”). This variability and unpredictability could result in our failure to meet our business plan or the expectations of securities analysts or investors for any period. In addition, a significant percentage of our operating expenses are fixed in nature in the short term and based on forecasted revenue trends. Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate the negative impact on our results of operations in the short term.
If we do not manage our growth effectively, the quality of our platform and solutions may suffer, and our business, operating results and financial condition may be adversely affected.
The planned growth in our business may place demands on our infrastructure and our operational, managerial, administrative and financial resources. Our success will depend on the ability of our management to manage growth effectively. Among other things, this will require us at various times to:
If we do not manage our growth well, the efficacy and performance of our platform may suffer, which could harm our reputation, reduce demand for our platform and solutions and have an adverse effect on our business, operating results and financial condition.
Our industry is intensely competitive, and if we do not effectively compete against current and future competitors or fail to innovate and make the right investment decisions in our product offerings and platform, our business, operating results and financial condition could be harmed.
Our industry is intensely competitive. To sustain and grow our revenue, we must continuously respond to the different trends driving our industry.
There has also been rapid evolution and consolidation in the marketing technology industry, and we expect this trend to continue. Larger companies typically have more assets to purchase emerging companies or technologies, which gives them a competitive edge. If we are not able to effectively compete with these consolidated companies, we may not be able to maintain our market share and may experience a reduction in our revenue.
Our industry is subject to rapid and frequent changes in technology, evolving customer needs and the frequent introduction of new and enhanced offerings by our competitors, making it intensely competitive. To sustain and grow our revenue, we must continuously respond to the different trends driving our industry. We must regularly make investment decisions regarding offerings and technology to maintain the technological competitiveness of our products and platform and meet customer demand and evolving industry standards. As we continue to grow and attract a broader customer base, we will have to invest more time and effort to maintain a certain level of performance in our products and platform.
The complexity and uncertainty regarding the development of new technologies and the extent and timing of market acceptance of innovative products and solutions create difficulties in maintaining this competitiveness. The success of any enhancement or new solution depends on many factors, including timely completion, adequate quality testing, appropriate introduction and market acceptance. If our competitors are able to orientate their product to meet the specific needs of a particular industry better than us, they may be able to amass market share faster than us and by consequence, reduce our current and future revenues.
Without the timely introduction of new products, solutions and enhancements, our offerings could become technologically or commercially obsolete over time, or we may be required to make unanticipated and costly changes to our platform or business model, in which case our revenue and operating results would suffer. New customer demands, superior competitive offerings or new industry standards could require us to make unanticipated and costly changes to our platform or business model. If we fail to enhance our current products and solutions or fail to develop new products to adapt to our rapidly changing industry or to evolving customers’ needs, demand for our platform could decrease, and our business, operating results and financial condition may be adversely affected.
Our success depends on our ability to retain key members of our management team, and on our ability to hire, train, retain and motivate new employees.
Our success depends upon the continued service of members of our senior management team and other key employees. We do not maintain “key person” insurance for any member of our senior management team or any of our other key employees. Our senior management and key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason and without notice. As a result, we may be unable to retain them, which could make it difficult to operate our business, cause us to lose expertise or know-how and increase our recruitment and training costs.
Our success also depends on our ability to hire, train, retain and motivate new employees. We have incurred stock-based compensation expense and will continue to incur stock-based compensation expense in future years as a result of our VisitIQ Corp. 2025 Incentive Award Plan (the “Incentive Plan”), under which we grant time-based stock option awards. Competition for employees in our industry can be intense, and we compete for experienced personnel with many companies that have greater resources than we have. We believe that there is significant competition for sales personnel with the sales skills and technical knowledge that we require. Our ability to achieve growth in revenue in the future will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel with relevant industry knowledge and strong selling skills.
Acquisitions or strategic investments could be difficult to identify and may divert the attention of management and disrupt our business, dilute stockholder value and adversely affect our business, operating results and financial condition.
As part of our growth strategy, we may acquire or invest in other businesses, assets or technologies that are complementary to and fit within our strategic goals. Acquisitions are inherently risky and if they fail, they can result in costly remediating steps such as litigation and divesture. Any acquisition or investment may divert the attention of management and require us to use significant amounts of cash, issue dilutive equity securities or incur debt. The anticipated benefits of any acquisition or investment may not be realized, and we may be exposed to unknown risks, any of which could adversely affect our business, operating results and financial condition, including risks arising from:
To fund acquisitions, we may pay cash, which would diminish our cash reserves, or issue additional shares of our common stock, which could dilute current stockholders’ holdings in our company. Borrowing to fund an acquisition would result in increased fixed obligations and could also subject us to covenants or other restrictions that could limit our ability to effectively run our business.
If we are unable to continue to attract course participants to enroll in our courses, our revenues may decline and we may not be able to maintain profitability.
The success of our business depends primarily on the number of enrollments in our schools and the amount of tuition that we can charge. Therefore, our ability to continue to attract course students to enroll in our courses and maintain revenue growth is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new courses and enhance existing courses to respond to changes in market trends and demands of students, to effectively market our schools to a broader base of prospective course participants, to train and retain qualified lecturers and tutors, to develop additional high-quality educational content and to respond to competitive pressures. If we are unable to increase our enrollments in some of our relatively new courses and generate sufficient tuition to exceed the incremental costs associated with developing and delivering such new courses, we may be unable to maintain substantial revenue growth.
Failure to attract and retain qualified personnel and experienced senior management could disrupt our operations and adversely affect our business and competitiveness.
Our continuing success is dependent, to a large extent, on our ability to attract and retain qualified personnel and experienced senior management. If one or more of our senior management team members are unable or unwilling to continue to work for us, we may not be able to replace them within a reasonable period of time or at all, and our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional expenses in recruiting and training additional personnel. If any of our senior management joins a competitor or forms a competing business, our business may be severely disrupted.
We have been operating under our current ownership structure for a limited time which may make it difficult for you to evaluate our business and prospects.
We acquired all of the issued and outstanding capital of Kahibah Limited in June 2010. Shanxi North Campus and Sichuan Guang'an School commenced operations in 1998 and 2002, respectively. We acquired the Shanxi South Campus on August 31, 2011 and the school commenced operations in 2002. Accordingly, we have a limited history for our operation upon which you can evaluate the viability and sustainability of our business and its acceptance by students. Our present and future competitors may have longer operating histories, larger student enrollments, larger teams of professional staff and greater financial, technical, marketing and other resources.
We are dependent on the Shanxi North Campus, Shanxi South Campus and Sichuan Guang’an School for all of our revenues. Any adverse development relating to any of these schools could materially and adversely affect our future results of operations.
Shanxi North Campus, Shanxi South Campus and Sichuan Guang’an School account for all of our revenue. Unless we are successful in acquiring control of and operating other educational institutions, all of our revenue will continue to be derived from these three schools. As a result, any development that has a material adverse effect on one or more of these schools may have a material adverse effect upon our business and financial performance, including developments such as the following:
We may lose market share and our profitability may be materially and adversely affected, if we fail to compete effectively with our present and future competitors or to adjust effectively to changing market conditions and trends.
We face competition from providers of online vocational/career education, training, and expect to face increasing competition from existing competitors and new market entrants in the traditional education. The provision of professional education and test preparation courses over the Internet is a relatively recent concept. Although traditional classroom instruction is generally viewed as a more accepted method, online education is increasingly apparent as an acceptable means of receiving training and instruction. We therefore compete with providers of online education institutions and training centers in the various subject areas for which we offer courses. In addition, due to low barriers to entry for Internet-based businesses, we expect to face increasing competition from both existing domestic competitors and new entrants on the online education side. We may face increased competition from international competitors that cooperate with local businesses to provide services based on the foreign partners’ technology and experience developed in their home markets.
If we fail to develop and introduce new courses, services and products that meet our target customers’ expectations, or adopt new technologies important to our business, our competitive position and ability to generate revenues may be materially and adversely affected.
Our core business is centered on acquiring control of schools that provide kindergarten, primary school, secondary school and high school educations in urban communities. As the growing trend toward urbanization is expected to result in more people seeking job and career advancement opportunities in urban areas, the development of new courses, services and products is subject to risks and uncertainties. Unexpected technical, operational, logistical, regulatory or other problems could delay or prevent the introduction of one or more of new courses, service or products. Moreover, we cannot assure you that any of these courses, products and services will match the quality or popularity of those developed by our competitors, achieve widespread market acceptance or generate the desired level of income. The technology used in internet and value-added telecommunications services and products in general, and in online education services in particular, has evolved a lot in recent years. The online course providers seek to satisfy the demand of self-taught learners for high-level education and part-time workers seeking time flexibility. Providers of traditional education may lose part of the target course participants, if they fail to anticipate and adapt to such technological changes.
Risks Relating to Regulation of Our Business and to Our Structure
The education sector, in which all of our business is conducted, is subject to extensive regulation in the PRC, and our ability to conduct business is highly dependent on our compliance with these regulatory frameworks.
The PRC government regulates all aspects of the education sector, including licensing of parties to perform various services, pricing of tuition and other fees, curriculum content, standards for the operations of schools and learning centers associated with foreign participation. The laws and regulations applicable to the education sector are in some aspects vague and uncertain, and often lack detailed implementing regulations. These laws and regulations are subject to change, and new laws and regulations may be adopted, some of which may have retroactive application or have a negative effect on our business. For example, in 2003, the PRC government adopted a new regulatory framework for Chinese-foreign cooperation in education. This new framework may encourage institutions with more experience, better reputations, greater technological know-how and larger financial resources than we have to compete against us and limit our growth. In addition, because the PRC government and the public view the conduct of educational institutions as a vital social service, there is considerable ongoing scrutiny of the education sector and its participants.
We must comply with PRC’s extensive regulations on private and foreign participation in the education sector, which has caused us to adopt complex structural arrangements with our PRC subsidiary and PRC affiliated entity. If the relevant PRC authorities decide our structural arrangements do not comply with these restrictions, we would be precluded from conducting some or all of our current business.
Although our corporate structure and business are designed to comply with the limitations on foreign investment and participation in the education sector, we cannot assure you that we will not be found to be in violation of any current or future PRC laws and regulations. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations. If we or our PRC subsidiary or PRC affiliated entity are found to be or to have been in violation of PRC laws or regulations limiting foreign ownership or participation in the education sector, the relevant regulatory authorities have broad discretion in dealing with such violation, including but not limited to:
Any of these or similar actions could cause significant disruption to our business operations or render us unable to conduct all or a substantial portion of our business operations.
The preferential tax treatment status of the educational institutions we operate places limitations on our ability to freely operate our business, including limitations on pricing and our ability to withdraw profits from the educational institutions we operate for distribution to shareholders or for use in other parts of our business. The educational institutions we operate may incur additional costs if they seek to convert to non-preferential tax treatment status and we cannot assure you that the educational institutions we operate will be able to retain their preferential tax treatment status.
The educational institutions we operate are classified as educational institutions with preferential tax treatment, entitling them to certain tax benefits including exemption from income, turnover and property taxes. However, as a result of their preferential tax treatment status, the educational institutions we operate are prohibited from setting prices for educational services and accommodations above certain price thresholds set by the PRC government and are required to reinvest distributable profits into operations rather than being allowed to distribute profits as investment returns to the educational institutions’ owners. As a result, the educational institutions we operate are limited in the prices they may charge for educational services and accommodations and may not distribute their profits to Shanxi Taiji. These restrictions limit the financial returns the educational institutions we operate may achieve and prevent Shanxi Taiji from receiving profits from the educational institutions for investment in other high schools, acquisitions of other high schools and universities or use in other parts of its business. The only fees we anticipate that Shanxi Taiji will be able to receive from the educational institutions we operate are service fees to be paid by the educational institutions for technical services, investment and management consulting services provided by Shanxi Taiji to the educational institutions we operate. As a result, for as long as the educational institutions we operate retain their preferential tax treatment status, Shanxi Taiji will be unable to use the profits from the operations of the educational institutions it owns for reinvestment in or expansion of its business (other than reinvestment of the funds in the educational institutions from which the profits were derived) or for distribution to its shareholders. Accordingly, we anticipate that at some point in the future Shanxi Taiji will convert the educational institutions we operate to non-preferential tax treatment entities to enable it to distribute their profits to Shanxi Taiji for use in other parts of its business. We are not able to predict the time of such conversion at this time. Factors to be considered in determining whether to undertake this conversion include, our ability to acquire control of additional educational institutions, the pace at which we are able to acquire control of additional educational institutions, our competitive position in the education industry in the PRC and any negative impact the increase in tax expense will have on the network of educational institutions’ operating margins. Potential problems related to the conversion decision include, but are not limited to, Shanxi Taiji’s ability to obtain the necessary regulatory approvals for such a conversion. The conversion of the educational institutions we operate from entities that receive preferential tax treatment to entities that do not receive preferential tax treatment may result in an increase in the price of educational services provided by the network educational institutions in order to mitigate the effect of increased taxes and maintain the same profit margin. Any increase in prices for our services may result in the loss of price sensitive students. If the educational institutions we operate are converted into entities that do not receive preferential tax treatment entities, they will only be able to pay to Shanxi Taiji profits that have been generated from and after the date of conversion. An educational institution that does not receive preferential tax treatment is permitted to set its own pricing schemes and may distribute profits to its investors, but is required to pay corporate income taxes in the PRC. As a result, if Shanxi Taiji converts the educational institutions we operate to entities that do not receive preferential tax treatment, the educational institutions we operate will be less competitive against the state-sponsored high schools, colleges and universities which receive preferential tax treatment, as they will be required to pay income taxes on the their profits from and after the date of conversion. At the time of conversion, those educational institutions will become subject to corporate income tax in the PRC and we will be required to make payments to the local governments. A change in laws or a failure by one of the educational institutions we operate to satisfy the requirements of maintaining preferential tax treatment status may cause one or more of the educational institutions we operate to lose preferential tax treatment status. As a result, we cannot assure you that the educational institutions we operate or expect to operate will continue to qualify as preferential tax treatment entities and enjoy this preferential tax treatment in the future. We also cannot assure you that the laws will remain the same and that Shanxi Taiji will be able to convert the educational institutions we operate to non-preferential tax treatment entities at times that are desirable for our business. A loss of preferential tax treatment status by any of the educational institutions we operate before the desired time, or an inability to convert any of the educational institutions we operate to non-preferential tax treatment status at the desired time, may have a material adverse effect on our business, competitive position, cash flows, financial condition, results of operations and prospects.
The PRC’s economic, political and social conditions, as well as governmental policies, could affect the financial markets in the PRC and our liquidity and access to capital and our ability to operate our business.
The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth over the past, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us.
The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC are still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth through the allocation of resources, controlling payment of foreign currency- denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government implemented a number of measures, such as raising bank reserves against deposit rates to place additional limitations on the ability of commercial banks to make loans and raise interest rates, in order to slow down specific segments of the PRC economy which it believed to be overheating. These actions, as well as future actions and policies of the PRC government, could materially affect our liquidity and access to capital and our ability to operate our business.
The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past 33 years has significantly enhanced the protections afforded to various forms of foreign investment in the PRC. Our PRC subsidiary, Taiyuan Taiji, is a wholly foreign-owned enterprise which is an enterprise incorporated in the PRC and wholly-owned by foreign investors. Taiyuan Taiji is subject to laws and regulations applicable to foreign investment in the PRC in general and laws and regulations applicable to wholly foreign-owned enterprises in particular. However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.
Recent regulations relating to offshore investment activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties that could restrict our overseas and cross-border investment activity, and a failure by our shareholders who are PRC residents to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us and our PRC resident shareholders to liability under PRC law.
The PRC National Development and Reform Commission, or NDRC, and SAFE recently promulgated regulations that require PRC residents and PRC corporate entities to register with and obtain approvals from relevant PRC government authorities in connection with their direct or indirect offshore investment activities. These regulations apply to our shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future.
Under the SAFE regulations, PRC residents who make, or have previously made, direct or indirect investments in offshore companies will be required to register those investments. In addition, any PRC resident who is a direct or indirect shareholder of an offshore company is required to file with the local branch of SAFE, with respect to that offshore company, any material change involving capital variation, such as an increase or decrease in capital, transfer or swap of shares, merger, division, long term equity or debt investment or creation of any security interest over the assets located in the PRC. If any PRC shareholder fails to make the required SAFE registration, the PRC subsidiaries of that offshore parent company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation, to their offshore parent company, and the offshore parent company may also be prohibited from injecting additional capital into their PRC subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
The tuition charged by the educational institutions are all subject to price controls administered by the PRC government, and our revenue is highly dependent on the level of these tuition charges.
Our revenue comes primarily from the tuition revenue from our schools, and the tuition charges are subject to price controls administered by various price control offices. In light of the substantial increase in tuitions and other education-related fees in the PRC in recent years, the PRC’s price control authorities may impose stricter price control on tuition charges in the future. If the tuition charges, upon which our revenue depends, were to be decreased or if they were not to be increased in line with increases in our costs because of the actions of PRC’s administrative price controls, our revenue and profitability would be adversely affected. We cannot assure you that all of the educational institutions will not be found to be in violation of any requirement regarding the tuition charges. The failure by the educational institutions to comply with applicable laws and regulations could subject them to administrative penalties such as fines, which will adversely affect our business and operation.
The PRC tax authorities may require us to pay additional taxes in connection with our acquisitions of offshore entities that conducted their PRC operations through their affiliates in the PRC.
Our operations and transactions are subject to review by the PRC tax authorities pursuant to relevant PRC laws and regulations. However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, in the case of some of our acquisitions of offshore entities that conducted their PRC operations through their affiliates in the PRC, we cannot assure you that the PRC tax authorities will not require us to pay additional taxes in relation to such acquisitions. In the event that the sellers failed to pay any taxes required under PRC law in connection with these transactions, the PRC tax authorities might require us to pay the tax, together with late-payment interest and penalties.
Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
Management's Discussion & Analysis (MD&A)
New heading “Recent Developments”
New heading “Recent Financing and Capital Structure Transactions”
New heading “Trends and Other Factors Affecting Our Business”
New heading “Customer Concentration”
New heading “Continued Investment and Innovation”
New heading “Macroeconomic Conditions and Other World Events”
New heading “See “Risk Factors - Risks Related to Our Business and Industry-Our business is subject to the risk of catastrophic events such as pandemics, hurricanes, wildfires, tornadoes, earthquakes, extreme weather events, flooding, droughts and power outages, and to business and operational interruption by man-made problems such as war, conflicts and terrorism” and “We may be adversely affected by the effects of inflation.””
New heading “Components of Results of Operations”
New heading “Legal and Professional Fees”
New heading “Personnel Expenses”
New heading “General and Administrative Expenses”
New heading “Selling and Marketing Expenses”
New heading “Depreciation and Amortization Expenses”
New heading “Credit Loss Expenses”
New heading “Stock-Based Compensation Expenses”
New heading “Impairment Losses on Equity Investments”
New heading “Loss on Disposition of Software Assets”
New heading “Interest Expense”
New heading “Interest income”
New heading “Gain on Exchange of Convertible Notes Payable for Series B Convertible Preferred Stock”
New heading “Loss Recognized upon Dissolution of DrivenIQ”
New heading “Gross Profit (Loss)”
New heading “Legal and Professional Fees”
New heading “Personnel Expenses”
New heading “Selling and Marketing Expenses”
New heading “Depreciation and Amortization Expenses”
New heading “Credit Loss Expenses”
New heading “Stock-Based Compensation Expenses”
New heading “Impairment Losses on Equity Investments”
New heading “Loss on Disposition of Software Assets”
New heading “Gain on Exchange of Convertible Notes Payable for Series B Convertible Preferred Stock”
New heading “Loss Recognized upon Dissolution of DrivenIQ”
New heading “April 2025 Convertible Notes”
New heading “November 2025 Convertible Notes”
New heading “March 2026 Financing”
New heading “Cash Flow Summary”
New heading “Contractual Obligations”
New heading “Implications of Being a Smaller Reporting Company”
New heading “Critical Accounting Policies and Significant Estimates”
New heading “Stock-Based Compensation”
New heading “Fair Value Measurements”
New heading “Basis of Presentation of Financial Information”
Removed heading “Highlights and Executive Summary”
Removed heading “Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)”
Removed heading “Plan of Operations”
Removed heading “Impairment analysis for long-lived assets and intangible assets”
Largest changes
“General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in Israel and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders.”see in full comparison
“The Revenue Loan and Security Agreement requires monthly payments of Fixed Payment Amounts (as set forth in the Revenue Loan and Security Agreement) with all outstanding advances and the Interest (as defined in them Revenue Loan and Security Agreement) being due at maturity on March 26, 2030 (unless accelerated upon a change of control or the occurrence of other events of default). Interest does not accrue on advance(s) pursuant to the Loan Agreement, rather a minimum amount of Interest (as defined in the Loan Agreement) is due pursuant to the terms of the Loan Agreement. …”see in full comparison
“The Revenue Loan and Security Agreement requires monthly payments of Fixed Payment Amounts (as set forth in the Revenue Loan and Security Agreement) with all outstanding advances and the Interest (as defined in the Revenue Loan and Security Agreement) being due at maturity on March 26, 2030 (unless accelerated upon a change of control or the occurrence of other events of default). Interest does not accrue on advance(s) pursuant to the Loan Agreement, rather a minimum amount of Interest (as defined in the Loan Agreement) is due pursuant to the terms of the Loan Agreement. …”see in full comparison
“See “Risk Factors - Risks Related to Our Business and Industry-Our business is subject to the risk of catastrophic events such as pandemics, hurricanes, wildfires, tornadoes, earthquakes, extreme weather events, flooding, droughts and power outages, and to business and operational interruption by man-made problems such as war, conflicts and terrorism” and “We may be adversely affected by the effects of inflation.””see in full comparison
“Impairment analysis for long-lived assets and intangible assets”see in full comparison
Full comparison: every changed paragraph (177)
The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with our audited consolidated financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements based upon our current expectations, estimates and projections, and involves numerous risks and uncertainties. Actual results may differ materially from those contained in any forward-looking statements due to, among other considerations, the matters discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Overview
VisitIQ is an AI-powered campaign targeting engine that gives marketers, agencies, and enterprise go-to-market (GTM) teams the ability to find, define, and activate the audiences most likely to convert. The platform identifies anonymous website visitors, generates real-time Ideal Customer Profiles (ICPs), builds high-precision lookalike audiences, detects in-market behavior, maps real-world movement patterns, and activates every audience across paid media, email, CRM, and marketing automation platforms—while integrating seamlessly with existing go-to-market workflows and tools.
VisitIQ is needed by GTM teams now more than ever, because the modern go-to-market landscape has shifted under their feet. AI-driven search experiences have collapsed organic visibility across the web. Zero-click search has removed the very behavior relied on to generate inbound demand. Paid acquisition costs continue to rise as platforms consolidate inventory and shrink signal availability. Most website visitors remain anonymous, most campaigns waste spend on the wrong audiences, and most brands have no practical way to understand who is on their site, what they want, or whether they’re actively in a buying cycle.
VisitIQ solves this problem by delivering a unified, AI-driven targeting layer that sits across the entire go-to-market stack - continuously enriching data, clarifying ICPs, identifying high-intent prospects, and delivering audiences directly into the execution tools companies already use to run their GTM efforts.
Recent Developments
Recent Financing and Capital Structure Transactions
As more fully described in the notes to the audited consolidated financial statements included elsewhere in this Annual Report, in October 2024, the Company entered into a note purchase agreement with Arena, pursuant to which the Company issued to Arena a convertible promissory note (the “October Note”) with a principal amount of $1,333,333. The October Note was issued with an original issue discount and resulted in gross proceeds to the Company of $1,200,000. In April 2025, the October Note, and the related accrued interest, was converted into 3,903,065 shares of Series B Convertible Preferred Stock. In November 2024 we completed a capital restructuring to simplify our capital structure whereby convertible notes payable and warrants were exchanged for Series B Convertible Preferred Stock. Additionally, in April 2025 and November 2025, we signed convertible note agreements with our largest shareholder of convertible preferred stock, Arena, which has provided the Company with approximately $3.75 million of funding to date. In November 2025, we also received a $391,000 investment from our main outsourced technology development partner into our Series C Convertible Preferred Stock. The investment was comprised of $80,000 of cash and cancellation of approximately $311,000 in outstanding payables to this vendor.
In March 2026, the Company, VisitIQ, LLC and Vern Hanzlik, as a key person of the Company, entered into a Revenue Loan and Security Agreement, dated March 26, 2026 (the “Revenue Loan and Security Agreement”) with Decathlon Alpha V, L.P. (“Decathlon”) relating to a secured financing of $2,200,000 (the “Revenue Loan Amount”), with $1,000,000 being advanced to the Company upon execution of the Revenue Loan and Security Agreement and one or more addition advances available for the remainder of the Revenue Loan Amount available to the Company upon request, provided that the Company has satisfied all conditions with respect to such advance.
The Revenue Loan and Security Agreement requires monthly payments of Fixed Payment Amounts (as set forth in the Revenue Loan and Security Agreement) with all outstanding advances and the Interest (as defined in them Revenue Loan and Security Agreement) being due at maturity on March 26, 2030 (unless accelerated upon a change of control or the occurrence of other events of default). Interest does not accrue on advance(s) pursuant to the Loan Agreement, rather a minimum amount of Interest (as defined in the Loan Agreement) is due pursuant to the terms of the Loan Agreement. The Revenue Loan and Security Agreement further provides for the payment of fees by the Borrower and includes customary representations and warranties, indemnification provisions, covenants and events of default. Subject in some cases to cure periods, amounts outstanding and otherwise due under the Revenue Loan and Security Agreement may be accelerated for typical defaults including, but not limited to, the failure to make when due payments, the failure to perform any covenant, the inaccuracy of representations and warranties, and the occurrence of debtor-relief proceedings.
In connection with the Revenue Loan and Security Agreement, the Company, VisitIQ, LLC, Decathlon and Arena also entered into a Subordination Agreement (the “Subordination Agreement”), dated March 26, 2026, pursuant to which Arena subordinated all security interests or liens that Arena may have in the property of the Company or VisitIQ, LLC to Decathlon.
Trends and Other Factors Affecting Our Business
We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report titled “Risk Factors.”
We regularly evaluate several metrics, including the metrics presented in the table below, to measure our performance, identify trends affecting our business, prepare financial projections, make strategic decisions and establish performance goals for compensation and we periodically review and revise these metrics to reflect changes in our business.
Bookings are defined as a contracted future platform license in contracted dollars.
Customer Concentration
During the year ended August 31, 2025, three customers accounted for 29%, 15% and 11% of consolidated revenue. As of August 31, 2025, these three customers accounted for 61% of consolidated accounts receivable, net.
During the year ended August 31, 2024, one customer accounted for 22% of consolidated revenue. As of August 31, 2024, three customers, inclusive of the customer with the revenue concentration, accounted for 54% of consolidated accounts receivable, net.
Continued Investment and Innovation
We continue to invest in our platform by working to develop innovative solutions to address our customers’ needs and focus on our customers identifying the most impactful areas for advancement. We believe this process has contributed significantly to our increases in bookings and customer growth. We believe that continued investments in our products are important to our future growth and, as a result, we expect our software development costs to continue to increase, which may adversely affect our near-term liquidity.
Macroeconomic Conditions and Other World Events
General economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks and acts of war or terrorism (including, for example, the ongoing military conflicts in Israel and in Ukraine and the economic sanctions related thereto), have added uncertainty in timing of customer orders.
See “Risk Factors - Risks Related to Our Business and Industry-Our business is subject to the risk of catastrophic events such as pandemics, hurricanes, wildfires, tornadoes, earthquakes, extreme weather events, flooding, droughts and power outages, and to business and operational interruption by man-made problems such as war, conflicts and terrorism” and “We may be adversely affected by the effects of inflation.”
Components of Results of Operations
Revenue
Revenues arise primarily from the Company’s proprietary AI-driven technology platform, which is named VisitIQ, via subscription fees and volume-based utilization fees.
We also offer media activation services to our customers and this service consists of the fees charged for the Company’s management of media campaigns for customers, and the activation of the data to the related media campaign.
Cost of Sales
Our cost of sales is largely related to the costs of our customer data that drives our technology platform, the hosting fees for that data and our platform, and other costs related to maintaining our platform and its responsiveness.
Legal and Professional Fees
Legal and professional fees relate mainly to fees paid to our lawyers in connection with various financing agreements our other capital structure-related items, in addition to fees paid to our auditors and tax accountants.
Personnel Expenses
Personnel expenses consist primarily of salaries and related personnel costs for individuals working on our team.
General and Administrative Expenses
General and administrative expenses consist primarily of our insurance expense, non-capitalized software costs, general corporate costs, and rent.
Selling and Marketing Expenses
Sales and marketing expenses consist primarily of costs related to advertising, marketing promotions, and travel costs.
Depreciation and Amortization Expenses
Depreciation and amortization expenses primarily relate to the amortization of our capitalized software development costs, which are expensed over a period of 3 years.
Credit Loss Expenses
Credit loss expenses relate to the expense incurred when accounts receivable are considered to be uncollectable.
Stock-Based Compensation Expenses
Stock-based compensation expenses relate primarily to the Company’s majority stockholder entering into a consulting agreement with the Company. As payment under this consulting agreement, the stockholder was allowed to convert 42,814,596 shares of their Series B Convertible Preferred Stock into 57,086,261 shares of Series C Convertible Preferred Stock. The Company determined the fair value of the Series C Convertible Preferred Stock received as consideration under the consulting agreement was approximately $2,528,000 greater than the fair value of the Series B Convertible Preferred Stock at the conversion date and recorded this excess amount as Stock-based compensation expense in the consolidated statements of operations. Additionally, the Company incurred approximately $419,000 in stock-based compensation expense for stock option awards granted to employees, contractors, Directors and Board advisors.
Impairment Losses on Equity Investments
Impairment losses in the year ended August 31, 2024 were related to an investment the Company had in an entity where the Company determined that there was a partial impairment and reduced the recorded amount by $16,000.
Loss on Disposition of Software Assets
During the year ended August 31, 2024, the Company recorded a loss of approximately $377,000 related to the disposition of capitalized software that was no longer being used by the Company.
Interest Expense
Interest expense primarily consists of interest incurred and amortization of original issue discount under our outstanding convertible debt agreements.
Interest income
Interest income of approximately $19,000 was recorded during the year ended August 31, 2024 related to interest received on a certain investment the Company had at that time.
Gain on Exchange of Convertible Notes Payable for Series B Convertible Preferred Stock
The Company recorded a gain on the exchange of a non-related party’s convertible debt to Series B Convertible Preferred Stock, calculated as the difference between the carrying amount of this debt and accrued interest, in comparison to the estimated valuation of the Series B Convertible Preferred Stock received upon conversion.
Loss Recognized upon Dissolution of DrivenIQ
The Company recorded a loss on the dissolution of this entity in June 2025.
Income Taxes
The Company recorded income tax expense of $19,890 for the year ended August 31, 2025, which related to temporary differences. No provision for, or benefit from, income taxes was recorded for the year ended August 31, 2024. Due to the level of historical losses, we maintain a full valuation allowance on the deferred tax assets as of August 31, 2025 and 2024 against U.S. federal and state deferred tax assets as we have concluded as of August 31, 2025 and 2024 it is more likely than not that these deferred tax assets will not be realized.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this document. The following discussion contains forward-looking statements. The words or phrases “would be,” “will allow,” “expect to”, “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” or similar expressions are intended to identify forward-looking statements. Such statements include, among others, those statements concerning our expected financial performance, our corporate strategy and operational plans. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including, among others: (a) those risks and uncertainties related to general economic conditions in the PRC, including regulatory factors that may affect such economic conditions; (b) whether we are able to manage our planned growth efficiently and operate profitable operations, including whether our management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations; and (d) whether we are able to successfully fulfill our primary requirements for cash which are explained below under “Liquidity and Capital Resources”. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or any other circumstances after the date of such statement unless required by law. For additional information regarding these risks and uncertainties, see “Risk Factors”. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. In addition, our consolidated financial statements and the financial data included in this document reflect the Merger and have been prepared as if our current corporate structure had been in place throughout the relevant periods.
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide information that is supplemental to, and should be read together with, the Company’s consolidated financial statements and the accompanying notes contained in this Annual Report on Form 10-K. Information in this Item 7 is intended to assist the reader in obtaining an understanding of the consolidated financial statements, the changes in certain key items in those financial statements from year to year, the primary factors that accounted for those changes, and any known trends or uncertainties that the Company is aware of that may have a material effect on the Company’s future performance, as well as how certain accounting principles affect the consolidated financial statements. MD&A includes the following sections:
Highlights and Executive Summary
What changed in the latest 10-Q
Risk Factors
Not required for smaller reporting companies.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “General and Administrative Expenses”
New heading “Interest Expense”
Removed heading “For the Nine Months Ended May 31, 2012 Compared to the Nine Months Ended May 31, 2011”
Removed heading “Cost of Revenue”
Removed heading “Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)”
Removed heading “Comprehensive Income”
Largest changes
“For the Nine Months Ended May 31, 2012 Compared to the Nine Months Ended May 31, 2011”see in full comparison
“Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)”see in full comparison
Full comparison: every changed paragraph (38)
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this document. The following discussion contains forward-looking statements. The words or phrases “would be,” “will allow,” “expect to”, “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” or similar expressions are intended to identify forward-looking statements. Such statements include, among others, those statements concerning our expected financial performance, our corporate strategy and operational plans. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including, among others: (a) those risks and uncertainties related to general economic conditions in the PRC, including regulatory factors that may affect such economic conditions; (b) whether we are able to manage our planned growth efficiently and operate profitable operations, including whether our management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations; and (d) whether we are able to successfully fulfill our primary requirements for cash which are explained below under “Liquidity and Capital Resources”. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or any other circumstances after the date of such statement unless required by law. For additional information regarding these risks and uncertainties, see “Risk Factors” in our filings with the SEC.. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. In addition, our consolidated financial statements and the financial data included in this document have been prepared as if our current corporate structure had been in place throughout the relevant periods.
For the Three Months Ended MayNovember 31,30, 2012 Compared to the Three Months Ended MayNovember 31,30, 2011
For the three months ended MayNovember 31,30, 2012, we had total revenues of $10,153,351,$11,643,327, an increase of $3,939,411$1,217,341 or 63.4%11.7% as compared to total revenues of $6,213,940$10,425,986 for the three months ended MayNovember 31,30, 2011. The revenue growth was primarily attributable to the acquisition of our third school campus – the Shanxi South School, which led to an increase in enrollment of 4,6811,363 students, or 10.3% to approximately 14,583 students at May 31, 2012 for the current 2011- 20122012-2013 school year from approximately 9,20013,220 students to 13,881 students. We also increased our average full-fare tuition by $226 or 7.2% to $3,352 per student forduring the 2011 – 2012 school year from $3,126 per student for the 2010 – 20112011-2012 school year. The Company recognizes prepaid school fees (including tuition, room & board and other school fees, herein after "School Fees") evenly over the twelve month period corresponding to the school year, which typically runs from September 1 to August 31.
For the 2012-2013 school year we have fully implemented our campus transition for the Shanxi North School campus to become the Taiyuan-area campus for kindergarten, primary and lower middle school classes. Our Shanxi South School campus has now become the Taiyuan-area campus for upper middle school and high school. We believe this transition makes the schools operate more efficiently and competitively as we fully integrate the two schools.
The school year typically runs from September 1 through August 31 and corresponds to the fiscal year end on August 31. The Company recognizes prepaid school fees (including tuition, room & board and other school fees, herein after "School Fees") evenly over the twelve month period. Unrecognized school fees are a liability recorded as deferred school fees until earned.
For the three months ended November 30, 2012, our cost of revenue was $7,749,835 (66.6% of revenues), an increase of $516,805 or 7.1% as compared to cost of revenue of $7,233,030 (69.4% of revenues) for the three months ended November 30, 2011. The increase in cost of revenue was primarily the result of the increased enrollment of 1,363 students. Teacher and staff salaries increased $547,744 or 18.2% to $3,554,255 for the three months ended November 30, 2012 compared to $3,006,511 for the three months ended November 30, 2011. Teacher and staff positions increased 274, or 14.6% to approximately 2,150 teachers and staff for the current 2012-2013 school year from approximately 1,876 teachers and staff during the 2011-2012 school year to support the increased enrollment.
The Shanxi South School campus acquired on August 31, 2011 was previously underutilized and our overall capacity utilization rate decreased from over 90% for our two schools during the year ended August 31, 2011 to approximately 66% for the three schools during the year ended August 31, 2012. For the three months ended November 30, 2012 the capacity utilization increased to 72.9% due to the increased enrollment. The Company continues to work toward increasing the capacity utilization rate of all three schools, which lowers the fixed costs per student based on higher enrollment. The increased costs for the three months ended November 30, 2012 was from the increase in teacher and staff salaries to support the increase in enrollment, as well as $895,379 in depreciation and amortization expense allocated to cost of revenue primarily associated with the approximately $108.2 million acquisition of the Shanxi South School.
For the three months ended May 31, 2012, our cost of revenue was $5,547,069 (54.6% of revenues), as compared to cost of revenue of $2,960,417 (47.6% of revenues) for the three months ended May 31, 2011, representing an increase of $2,586,652 or 87.4%. The increase in cost of revenue was primarily the result of increase in costs in connection with the acquisition of our third campus and the increase in enrollment of 4,681 students. Teacher and staff salaries increased $1,621,159 or 51.6% to $3,139,751 for the three months ended May 31, 2012 from $1,518,592 for the three months ended May 31, 2011. Depreciation and amortization expense allocated to cost of revenue increased $728,825 or 225.7% to $1,051,724 for the three months ended May 31, 2012 from $322,899 for the same period in 2011. As a percentage of revenues, the cost of revenue for the three months ended May 31, 2012 decreased to 54.6% from 58.9% for the nine months ended May 31, 2012 as the Company enrolled more students to better absorb costs in connection with the third school acquisition and did not have as much one-time costs as the start of the school year as in the first fiscal quarter ended November 30, 2011.
With the addition of our third campus, we have allocated students in our middle school from our Shanxi North School to our new Shanxi South School. The current capacity at our three school campuses is set forth below:
We continue to maintain our strict enrollment standards to preserve our strong academic reputation. Based on our historical admission rates, we only enroll one student out of approximately every five applicants. We continue to seek quality applicants to maximize our enrollment, which lowers our cost of revenues as a percentage of revenues as our overhead costs are primarily fixed. We intend to maintain our current balance between enrollment and admission standards as we go forward in accepting new students.students Weas expectwe build back up to achieveour an enrollment of 95% of ourhistorical capacity withinutilization three academic years at our current schools.rate.
General and Administrative Expenses
General and administrative expenses increaseddecreased $1,265$23,894 or 0.2%4.7% to $528,073$480,628 for the three months ended MayNovember 31,30, 2012 from $526,808$504,522 for the same period of 2011. The Company only experienced a slight increasedecrease in general and administrative expenses,expenses was primarily attributable to a decrease in administrative expenses as thecompared administration absorbedto the thirdthree schoolmonths primarilyended throughNovember good30, cost2011 controlwhen measureswe andincurred personneladditional managementaudits costs to efficientlyaccount handlefor theour additionalchange administrativein overheadfiscal associatedyear withend theto newAugust school.31.
Interest Expense
Interest expense increaseddecreased $558,352 or 40.4% to $2,083,241$822,331 for the three months ended MayNovember 31,30, 2012 from $0$1,380,683 for the same period of 2011. The increasebank infinancing interest was a resultcosts of the financingCompany fordecreased the$218,170 acquisition of our third school, comprising $554,043 in interestbased on a banklower loannegotiated ofinterest RMBrate. 100,000,000 (approximately $15,872,260) obtained by theThe Company inalso Augustrecorded 2011 and $1,529,198 on thelower accretion of the implied interest in the long-term and short-term portion of the payable - acquisitionpayable-acquisition resulting from the fair value discount recorded as interest expense based on the payment planpayments to the seller.seller of the Shanxi South School. The net present value of the imputed payments is discounted at the Company’s current financing interest rate of 14%.6.84%.
EBITDA increased $2,184,594$745,096 or 71.5%19.4% to $5,240,518$4,579,468 for the three months ended MayNovember 31,30, 2012 from $3,055,924$3,834,372 for the same period of 2011. The increase was primarily attributable to the increase in revenues as a result of the increase in totalincreased enrollment of 4,6811,363 students for the three months ended MayNovember 31,30, 2012 over the same period of 2011.2012.
As a result of the factors described above, we had net income attributable to shareholders in the amount of $2,003,235$2,620,836 for the three months ended MayNovember 31,30, 2012, as compared to $2,733,024$1,336,367 for the three months ended MayNovember 31,30, 2011. The decreaseincrease of $729,789$1,284,469 or 26.7%96.1% between the periods resulted primarily from the increaseincreased enrollment of students and the decrease in interest,interest depreciation and amortization, primarily associated with the acquisition of the third facility, which totaled $3,237,283 for the three months ended May 31, 2012.expense.
Basic and diluted earningsEarnings per share decreased $0.02increased to $0.07 per share for the three months ended May 31, 2012 from $0.09 per share for the three months ended MayNovember 31,30, 2012 from $0.04 per share for the three months ended November 30, 2011 due to the decreaseincrease inof net income.
The functional currency of the Company is Chinese Renminbi (“RMB”), but we report our results in U.S. Dollars. The conversion of our accounts from RMB to U.S. Dollars results in translation adjustments. As a result, we achieved a currency translation adjustment lossgain of $304,705$526,014 during the three months ended MayNovember 31,30, 2012, a decrease of $783,273 or 163.7% as compared to a gain of $478,568$19,609 during the three months ended MayNovember 31,30, 2011. Our comprehensive income was $1,698,530$3,146,850 for the three months ended MayNovember 31,30, 2012, a decrease of $1,513,062 or 47.1% as compared to $3,211,592$1,355,976 for the three months ended MayNovember 31,30, 2011.
For the Nine Months Ended May 31, 2012 Compared to the Nine Months Ended May 31, 2011
Revenues
For the nine months ended May 31, 2012, we had total revenues of $31,533,148, an increase of $13,248,505 or 72.5% as compared to total revenues of $18,284,643 for the nine months ended May 31, 2011. The revenue growth was primarily attributable to the acquisition of our third school campus – the Shanxi South School, which led to an increase in enrollment of 4,681 students for the current 2011- 2012 school year from approximately 9,200 students to 13,881 students. We also increased our average full-fare tuition by $226 or 7.2% to $3,352 per student for the 2011 – 2012 school year from $3,126 per student for the 2010 – 2011 school year.
Cost of Revenue
For the nine months ended May 31, 2012, our cost of revenue was $18,574,019 (58.9% of revenues), as compared to cost of revenue of $9,410,816 (51.5% of revenues) for the nine months ended May 31, 2011, representing an increase of $9,163,203 or 97.4%. The increase in cost of revenue was primarily the result of an increase in costs in connection with the acquisition of our third campus and the increase in enrollment of 4,681 students. Teacher and staff salaries increased $5,048,137 or 143.3% to $8,571,149 for the nine months ended May 31, 2012 from $3,523,012 for the nine months ended May 31, 2011. Depreciation and amortization expense allocated to cost of revenue increased $1,930,063 or 224.8% to $2,788,568 for the nine months ended May 31, 2012 from $858,504 for the same period in 2011.
General and administrative expenses increased $431,130 or 35.1% to $1,658,566 for the nine months ended May 31, 2012 from $1,227,436 for the same period of 2011. The increase in general and administrative expenses was primarily attributable to additional administrative overhead associated with the new school, as well as increase in the costs of operating as a public company, including legal, accounting and investor relations fees.
Interest expense increased to $6,228,888 for the nine months ended May 31, 2012 from $0 for the same period of 2011. The increase in interest expense was a result of the financing for the acquisition of our third school, comprising $1,656,638 in interest on a bank loan of RMB 100,000,000 (approximately $15,872,260) obtained by the Company in August 2011 and $4,572,250 on the accretion of the implied interest in the long-term and short-term portion of the payable - acquisition resulting from the fair value discount recorded as interest expense based on the payment plan to the seller. The net present value of the imputed payments is discounted at the Company’s current financing interest rate of 14%.
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)
EBITDA increased $5,928,296 or 68.8% to $14,549,794 for the nine months ended May 31, 2012 from $8,621,498 for the same period of 2011. The increase was primarily attributable to the increase in revenues as a result of the increase in total enrollment of 4,681 students for the nine months ended May 31, 2012.
Net Income
As a result of the factors described above, we had net income attributable to shareholders in the amount of $5,110,841 for the nine months ended May 31, 2012, as compared to $7,672,094 for the nine months ended May 31, 2011. The decrease of $2,561,253 or 33.4% between the periods resulted primarily from the increase in interest expense, depreciation and amortization associated with the acquisition of our third school. Interest, depreciation and amortization, primarily associated with the acqusition of the third school, was $9,438,953.
Basic and diluted earnings per share (“EPS”) decreased $0.09 to $0.17 per share for the nine months ended May 31, 2012 from $0.26 per share for the nine months ended May 31, 2011 due to the decrease in net income.
Comprehensive Income
The functional currency of the Company is Chinese Renminbi (“RMB”), but we report our results in U.S. Dollars. The conversion of our accounts from RMB to U.S. Dollars results in translation adjustments. As a result, we achieved a currency translation adjustment gain of $222,436 during the nine months ended May 31, 2012, a decrease of $1,312,753 or 85.5% as compared to a gain of $1,535,189 during the nine months ended May 31, 2011. Our comprehensive income was $5,333,277 for the nine months ended May 31, 2012, a decrease of $3,874,006 or 42.1% as compared to $9,207,283 for the nine months ended May 31, 2011.
As of MayNovember 31,30, 2012, our cash and cash equivalents were $9,012,557.$9,032,544. Our principal source of cash is prepaid School Fees from students who attend our schools. The Company collects full tuition in advance of the school year and therefore has no accounts receivable. We also use our prepayment and other current assets balance of $2,982,030$1,924,991 to finance school related activities as advances or prepayment for the purchase of school and boarding related materials for the day-to-day operations of the schools. Based on our current operating plan, we believe that our existing resources, including cash flow generated from operations as well as available bank loans, will be sufficient to meet our working capital requirement for our current operations and any prepaid tuition obligations. Our bank loanloans hashave aterms of one yearto term,three typicalyears, of loans inand the PRC,Company butbelieves they may be renewed as needed based on the credit worthiness of the Company. The Company also has $8,139,302$821,504 on November 30, 2012 in related party debtreceivable from its Chairman, which is non-interest bearing and mayis expected to be renewedre-paid beyondby the currentend term.of January 2013. The Company’s short-term payable – acquisition installment payment of $18,721,361$19,017,481 for the acquisition of the Shanxi South Campus is(Short-term payable acquisition) was due on August 31, 2012, but was paid from our cash balance on September 3, 2012. The Company anticipates that it will havehas collected substantially all of its prepaid tuition for the 2012 – 2013 school year at that time and basedrecorded it as a liability under deferred school fees of $45,902,425. Based on itsour profit margin willand beavailable abledebt sources, we believe we have sufficient cash to useoperate aour substantialbusiness. portionWe of those proceeds to retire this debt. The Company isare also considering alternativealternatives for longer-term outside financing of debt or equity based on the asset strength of itsour balance sheet. In order to fully implement our business plan and continue our growth, however, we will require additional capital either from our shareholders or from outside sources, although there is no assurance that we will be able to obtain additional capital at suitable terms if and when it is needed.
Cash used in operating activities increased $2,192,296 or 94.9% to $4,502,254 for the three months ended November 30, 2012 compared to $2,309,958 used in operating activities for the three months ended November 30, 2011. The increase was primarily attributable to the decrease in prepayment and other current assets, higher refundable deposits and the lower accretion of the interest payable because of lower interest rates.
Cash used in operating activities decreased $3,127,956 or 69.5% to $1,372,753 for the nine months ended May 31, 2012 compared to $4,500,709 used in operating activities for the nine months ended May 31, 2011. The decrease was primarily attributable to the decrease in prepayments and operating advance and the addition of non-cash items, including depreciation, amortization and the accretion of the interest expense for the short-term and long-term acqusition notes associated with the acquisition of the new school. The largest use of cash from operating activities was the increase in prepaid school fees from the collection of school fees for the next academic school year 2012-2013, which are paid in advance of the upcoming academic year beginning September 1, 2012. The Company recognizes current academic year prepaid school fees evenly over the twelve-month academic year, which began September 1, 2011.
Cash used in investing activities decreasedincreased $4,358,853$985,905 or 93.9%232.7% to $283,275$1,409,517 for the ninethree months ended MayNovember 31,30, 2012 as compared to $4,642,128$423,612 used in the ninethree months ended MayNovember 31,30, 2011. The decreaseincrease in cash used inby investing activities resulted primarily from thea decreaserelated inparty the deposit associated with the acquisition of the Shanxi South Campus.receivable.
Cash used in financing activities increased $4,496,347$12,331,671 or 370.6% to $15,659,594 for the ninethree months ended MayNovember 31,30, 2012 as compared to $0$3,327,923 used in the ninethree months ended MayNovember 31,30, 2011. The increase in cash used in financing activities resulted from the repayment of loans associated with the acquisition of the Shanxi South School.
The Company’s long-lived assets and other assets (consisting of property and equipment and purchased intangible assets) are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360, “Property, Plant, and Equipment”, and FASB ASC Topic 205 “Presentation of Financial Statements”. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through MayNovember 31,30, 2012, the Company had not experienced impairment losses on its long-lived assets.
VIIQ insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding VIIQ (13F)
None of the 59 investors we track reported a position in their latest 13F.