OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this annual report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report, particularly in "Item 3. Key Information-D. Risk Factors." All amounts included herein with respect to the fiscal years ended March 31, 2025, 2024, and 2023 are derived from our audited consolidated financial statements included elsewhere in this annual report. The audited consolidated financial statements for the fiscal years ended July 31, 2025, 2024, and 2023 have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or US GAAP.
A. Operating Results
Business Overview
We offer financial consulting services to small and medium-sized enterprise customers in Asia and North America. Our goal is to become an international financial consulting company with clients and offices throughout Asia. Since our inception in 2015, the focus of our consulting business has been providing comprehensive going public consulting services designed to help SMEs become public companies on suitable markets and exchanges.
On January 4, 2021, we established an office in California, USA, through our wholly owned subsidiary ATIF Inc., a California corporation, and launched, in addition to our business consulting services, additional service models consisting of asset management, investment holding and media services to expand our business with a flexible business concept to achieve a goal of high growth revenue and strong profit growth.
Currently we provide consulting services to the companies based in North America seeking listing in U.S.. We have a team of qualified and experienced personnel with legal, regulatory, and language expertise in several jurisdictions outside the U.S. Our services were designed to help small and medium-sized enterprises ("SME") in China achieve their goal of becoming public companies. In May 2022, we shifted our geographic focus from China to North America emphasizing on helping mid and small companies in North America become public companies on the U.S. capital markets. We would create a going public strategy for each client based on many factors of such client, including our assessment of the client's financial and operational situations, market conditions, and the client's business and financing requirements. Since our inception and up to the date of this report, we have successfully helped nine Chinese enterprises to be quoted on the U.S. OTC markets, along with three clients getting listed on Nasdaq Stock Market, and are currently assisting our other clients in their respective going public efforts. Most of our current and past clients have been located in China or U.S., and we plan to expand our operations to other Asian countries, including Malaysia, Vietnam, and Singapore, while continuing to focus on the North American market in the coming years.
For the fiscal years ended July 31, 2025 and 2024, we provided consulting services to five and eight customers, respectively, which primarily engaged the Company to provide consulting services relating to going public in the US through IPO, reverse merger and acquisition. We focus on providing consulting services to customers based in North America and other areas.
Our total revenue generated from consulting services amounted to approximately $1.2 million and $0.6 million for the fiscal years ended July 31, 2025 and 2024, respectively.
Key Factors that Affect our Business
We believe the following key factors may affect our consulting services:
Our business success depends on our ability to acquire customers effectively.
Our customer acquisition channels primarily include our sales and marketing campaigns and existing customer referrals. In order to acquire customers, we have made significant efforts in building mutually beneficial long-term relationships with local government, academic institutions, and local business associations. In addition, we also market our consulting services through social media, such as WeChat and Weibo. If any of our current customer acquisition channels becomes less effective, we are unable to continue to use any of these channels or we are not successful in using new channels, we may not be able to attract new customers in a cost-effective manner or convert potential customers into active customers or even lose our existing customers to our competitors. To the extent that our current customer acquisition and retention efforts become less effective, our service revenue may be significantly impacted, which would have a significant adverse effect on our revenues, financial condition, and results of operations.
Our consulting business faces strong market competition.
We are currently facing intense market competition. Some of our current or potential competitors have significantly more financial, technical, marketing, and other resources than we do and may be able to devote greater resources to the development, promotion, and support of their customer acquisition and retention channels. In light of the low barriers to entry into the financial consulting industry, we expect more players to enter this market and increase the level of competition. Our ability to differentiate our services from other competitors will have a significant impact on our business growth in the future.
Our business depends on our ability to attract and retain key personnel.
We rely heavily on the expertise and leadership of our directors and officers to maintain our core competence. Under their leadership, we have been able to achieve rapid expansion and significant growth since our inception in 2015. As our business scope increases, we expect to continue to invest significant resources in hiring and retaining a deep talent pool of financial consultancy professionals. Our ability to sustain our growth will depend on our ability to attract qualified personnel and retain our current staff.
Results of Operations
Comparison of Operation Results for the Years Ended July 31, 2025 and 2024
The following table summarizes the results of our operations for the fiscal years ended July 31, 2025 and 2024, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
| For the year ended July 31, | Changes | |||||||||||||||
| 2025 | 2024 |
Amount Increase (Decrease) |
Percentage Increase (Decrease) | |||||||||||||
| Revenues - third parties | $ | 1,200,000 | $ | 420,000 | 780,000 | 186 | % | |||||||||
| Revenues - a related party | - | 200,000 | (200,000 | ) | (100 | )% | ||||||||||
| $ | 1,200,000 | $ | 620,000 | 580,000 | 94 | % | ||||||||||
| Operating expenses | ||||||||||||||||
| Selling expenses | (120,000 | ) | (333,500 | ) | 213,500 | (64 | )% | |||||||||
| General and administrative expenses | (1,922,349 | ) | (2,265,612 | ) | 343,263 | (15 | )% | |||||||||
| Reversal of provision against accounts receivable due from a related party | - | 19,103 | (19,103 | ) | (100 | )% | ||||||||||
| Total operating expenses | (2,042,349 | ) | (2,580,009 | ) | 537,660 | (21 | )% | |||||||||
| Loss from operations | (842,349 | ) | (1,960,009 | ) | 1,117,660 | (57 | )% | |||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | 60,916 | 26 | 60,890 | 234192 | % | |||||||||||
| Other (expense) income, net | (260,046 | ) | (846,871 | ) | 586,825 | (69 | )% | |||||||||
| Loss from investment in trading securities | (3,556,519 | ) | (381,370 | ) | (3,175,149 | ) | 833 | % | ||||||||
| Total other (expense) income | (3,755,649 | ) | (1,228,215 | ) | (2,527,434 | ) | 206 | % | ||||||||
| Loss before income taxes | (4,597,998 | ) | (3,188,224 | ) | (1,409,774 | ) | 44 | % | ||||||||
| Income tax expenses | - | (3,300 | ) | 3,300 | 100 | % | ||||||||||
| Net loss | $ | (4,597,998 | ) | $ | (3,191,524 | ) | (1,406,474 | ) | 44 | % | ||||||
Revenues. Our total revenue increased by approximately $0.6 million, or 94%, from approximately $0.6 million in fiscal year 2024, to $1.2 million in fiscal year 2025, primarily attributable to increase in revenue from consulting services to clients in Hong Kong and Singapore.
We provided services to five and eight customers for the years ended July 31, 2025 and 2024, respectively. The service completed in fiscal year 2025 were mainly for phase I work.
Selling expenses. Our selling expenses primarily consisted of advertising and promotion expenses. Selling expenses decreased by approximately $0.2 million, or 64%, from approximately $0.3 million in year ended July 31, 2024 to approximately $0.1 million in the year ended July 31, 2025. The decrease was primarily due to a decrease of amortization expenses of approximately $0.2 million TV promotion videos.
As a percentage of sales, our selling expenses were 10% and 54% of our total revenues for the fiscal years ended July 31, 2025 and 2024, respectively.
General and administrative expenses. Our general and administrative expenses primarily consisted of salary and welfare expenses of management and administrative team, professional expenses, and office expenses. The general and administrative expenses decreased by $0.4 million, or 15%, from approximately $2.3 million for the year ended July 31, 2024, to $1.9 million for the year ended July 31, 2025. The decrease was primarily due to decrease of payroll expenses from the compensation adjustments following changes in executive leadership roles.
Reversal of provision against accounts receivable due from a related party. For the fiscal year ended July 31, 2024, we reversed provision of $19,103 against the accounts receivable due from Huaya.
Loss from investment in trading securities. Loss from investment in trading securities represented fair value changes from investment in trading securities, which was measured at market price. For the fiscal years ended July 31, 2025 and 2024, we recorded an investment loss of approximately $3.6 million and $0.4 million, respectively.
Income taxes. We are incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, we are not subject to tax on income or capital gains in the British Virgin Islands. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed.
ATIF Inc, ATIF BD, ATIF BC and ATIF BM were established in the U.S and are subject to federal and state income taxes on their business operations. The federal tax rate is 21% and state tax rate is 8.84%. We also evaluated the impact from the tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and Health and Economic Recovery Omnibus Emergency Solutions Act ("HERO Act"), which were both passed in 2020, No material impact on the ATIF US is expected based on our analysis. We will continue to monitor the potential impact going forward.
For the year ended July 31, 2025 and 2024, we recognized income tax expenses $nil and $3,300, respectively.
Net loss. As a result of foregoing, net loss was approximately $4.6 million for the fiscal year ended July 31, 2025, an increase of loss of $1.4 million from net loss of $3.2 million in fiscal year 2024.
Comparison of Operation Results for the Years Ended July 31, 2024 and 2023
The following table summarizes the results of our operations for the fiscal years ended July 31, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
| For the years ended | Changes | |||||||||||||||
|
July 31, 2024 |
July 31, 2023 |
Amount Increase (Decrease) |
Percentage Increase (Decrease) | |||||||||||||
| Revenues - third parties | $ | 420,000 | $ | 1,150,000 | $ | (730,000 | ) | (63 | )% | |||||||
| Revenues - a related party | 200,000 | 1,300,000 | (1,100,000 | ) | (85 | )% | ||||||||||
| Revenues | $ | 620,000 | $ | 2,450,000 | $ | (1,830,000 | ) | (75 | )% | |||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | 333,500 | 207,238 | 126,262 | 61 | % | |||||||||||
| General and administrative expenses | 2,265,612 | 2,241,626 | 23,986 | 1 | % | |||||||||||
| (Reversal of provision) provision against accounts receivable due from a related party | (19,103 | ) | 762,000 | (781,103 | ) | (103 | )% | |||||||||
| Total operating expenses | 2,580,009 | 3,210,864 | (630,855 | ) | (20 | )% | ||||||||||
| Loss from operations | (1,960,009 | ) | (760,864 | ) | 1,199,145 | 158 | % | |||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income, net | 26 | 1,874 | (1,848 | ) | (99 | )% | ||||||||||
| Other (expenses) income, net | (846,871 | ) | 314,518 | (1,161,389 | ) | (369 | )% | |||||||||
| Provision against due from buyers of LGC | - | (2,654,767 | ) | (2,654,767 | ) | (100 | )% | |||||||||
| (Loss) gain from investment in trading securities | (381,370 | ) | 192,102 | (573,472 | ) | (299 | )% | |||||||||
| Gain from disposal of subsidiaries and VIE | - | 56,038 | (56,038 | ) | (100 | )% | ||||||||||
| Total other expense, net | (1,228,215 | ) | (2,090,235 | ) | (862,020 | ) | (41 | )% | ||||||||
| Loss before income taxes | (3,188,224 | ) | (2,851,099 | ) | 337,125 | 12 | % | |||||||||
| Income tax provision | (3,300 | ) | (31,200 | ) | (27,900 | ) | (89 | )% | ||||||||
| Net loss | $ | (3,191,524 | ) | $ | (2,882,299 | ) | $ | 309,225 | 11 | % | ||||||
Revenues. Our total revenue decreased by approximately $1.8 million, or 75%, from approximately $2.5 million in fiscal year 2023, to approximately $0.6 million in fiscal year 2024, primarily attributable to a decrease of approximately $0.7 million and $1.1 million, respectively, from consulting services to third parties and related parties.
The decrease in revenues from third parties was primarily because we provided listing related consulting services for seven customers and earned consulting service fees of approximately $0.4 million for the fiscal year ended July 31, 2024, while we provided phase completed phase I and phase II services for two customers and earned consulting service fees of approximately $1.2 million for the fiscal year ended July 31, 2023. The phase I and phase II service fees are higher than listing related consulting services, because the phase I and phase II services take longer time.
The decrease in revenues from related parties was primarily because we provided consulting services to less customers on behalf of related parties. For the fiscal year ended July 31, 2024 and 2023, we provided consulting services to one and two customers on behalf of a related party, respectively.
Selling expenses. Selling expenses increased by approximately $0.1 million, or 61%, from approximately $0.2 million in year ended July 31, 2023 to approximately $0.3 million in the same period ended July 31, 2024. Our selling expenses primarily consisted of promotion and advertising expenses. The increase in our selling expenses was primarily due to an increase of amortization expenses of approximately $0.1 million for TV promotion videos.
As a percentage of sales, our selling expenses were 54% and 8% of our total revenues for the fiscal years ended July 31, 2024 and 2023, respectively.
General and administrative expenses. Our general and administrative expenses kept stable at $2.3 million and $2.2 million for the fiscal years ended July 31, 2024 and 2023, respectively. Our general and administrative expenses primarily consisted of salary and welfare expenses of management and administrative team, professional expenses, office expenses, operating lease expenses. The increase in general and administrative expenses was primarily due to an increase of legal expenses of approximately $0.5 million for legal proceedings with both Boustead Securities, LLC and J.P Morgan Securities LLC, partially offset by a decrease of approximately $0.2 million in rental expenses because we modified an office lease agreement, a decrease of approximately $0.1 million in payroll expenses because we adjusted monthly payroll expenses to Mr. Jun Liu from $20,000 to $1 since February 2024, and a decrease of approximately $0.1 million in office expenses.
As a percentage of sales, our general and administrative expenses were 365% and 91% of our total revenues for the fiscal years ended July 31, 2024 and 2023, respectively.
(Reversal of provision) provision against accounts receivable due from a related party. For the fiscal year ended July 31, 2023, we provided full provision of $762,000 against the accounts receivable due from Huaya as the management assessed it is remote to collect the outstanding balance. For the fiscal year ended July 31, 2024, we reversed provision of $19,103 against the accounts receivable due from Huaya.
Provision against due from buyers of LGC. For the fiscal year ended July 31, 2023, we provided full provision of $2,654,767 against the balances due from buyers of LGC as the management assessed it is remote to collect the outstanding balance. The balance due from buyers of LGC arose from our disposition of 51.2% of the equity interest of LGC in January 2021. We did not incur such expenses for the fiscal year ended July 31, 2024.
Loss (gain) from investment in trading securities. Loss (gains) from investment in trading securities represented fair value changes from investment in trading securities, which was measured at market price. For the fiscal years ended July 31, 2024 and 2023, we recorded an investment loss of approximately $0.4 million and an investment gain of approximately $0.2 million, respectively.
Income taxes. We are incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, we are not subject to tax on income or capital gains in the British Virgin Islands. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed.
ATIF Inc, ATIF BD, ATIF BC and ATIF BM were established in the U.S and are subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 8.84%. We also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and Health and Economic Recovery Omnibus Emergency Solutions Act ("HERO Act"), which were both passed in 2020, No material impact on the ATIF US is expected based on our analysis. We will continue to monitor the potential impact going forward.
Income tax expense was $3,300 for the fiscal years ended July 31, 2024, because three of our US subsidiaries are subject to state taxes during the year of 2024. Income tax expense was $31,200 for the fiscal years ended July 31, 2023, because our USA subsidiaries were making taxable income during the year of 2023.
Net loss. As a result of foregoing, net loss was approximately $3.2 million for the fiscal year ended July 31, 2024, an increase of $0.3 million from net loss of $2.9 million in fiscal year 2023.
B. Liquidity and Capital Resources
To date, we have financed our operations primarily through cash flows from operations, working capital loans from our major shareholders, proceeds from our initial public offering, and equity financing through public offerings of our securities. We plan to support our future operations primarily from cash generated from our operations and cash on hand. However, the Company may need to raise the cash flow from related parties, and there is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all.
Liquidity and Going concern
For the year ended July 31, 2025 and 2024, we reported a net loss of approximately $4.6 million and $3.2 million, respectively, and operating cash outflows approximately $2.5 million and approximately $0.1 million. In assessing the ability to continue as a going concern, we monitor and analyze cash and our ability to generate sufficient cash flow in the future to support our operating and capital expenditure commitments. A history of net losses from operations, cash out from operating activities, and the requirement of additional capital to fund our current operating plan during the year ended July 31, 2025, these factors indicate the existence of an uncertainty that raises substantial doubt about our ability to continue as a going concern.
In January 2025, we issued and sold 212,222 ordinary shares to certain non-affiliated institutional investors at a price of US$22.5 per share for gross proceeds of US$4.8 million. We recorded net proceeds of approximately $4.8 million.
In February 2025, we issued and sold 87,778 ordinary shares at a price of US$18 per share, and pre-funded warrants to purchase up to 49,309 Ordinary Shares, and in a concurrent private placement, restricted warrants to purchase an aggregate of up to 137,086 Ordinary Shares to certain non-affiliated institutional investors for gross proceeds of US$2.5 million. We recorded net proceeds of approximately $2.1 million.
In July 2025, we issued and sold 301,932 ordinary shares to certain purchasers whom are "non-U.S. Persons" at a price of US$6.624 per share for gross proceeds of US$2 million. We recorded net proceeds of approximately $2 million.
On June 30, 2025, the board of directors of the Company approved the reverse share split of the Ordinary Shares, at a ratio of 1-for-18, to be effective at the open of business on Friday, August 8, 2025. As required by U.S. GAAP, the above share and per share data have been retroactively restated to reflect reverse stock split effected on August 8, 2025.
As of July 31, 2025, we had cash of approximately $9.0 million, accounts receivables of approximately $0.8 million and short-term investments in trading securities of approximately $0.1 million, which were highly liquid. On the other hand, we had current liabilities of approximately $0.8 million. The cash and short-term investments in trading securities could well cover the current liabilities. Our ability to continue as a going concern is dependent on management's ability to successfully execute our business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources.
We have not declared nor paid any cash dividends to our shareholders. We do not plan to pay any dividends out of our restricted net assets as of July 31, 2025.
The following table sets forth summary of our cash flows for the years indicated:
| For the Years Ended July 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Net cash used in operating activities | (2,457,396 | ) | (120,483 | ) | (2,333,899 | ) | ||||||
| Net cash provided by (used in) investing activities | 1,262,072 | (1,579,955 | ) | 459,816 | ||||||||
| Net cash provided by financing activities | 8,896,719 | 2,343,792 | 729,968 | |||||||||
| Net increase (decrease) in cash | 7,701,395 | 643,354 | (1,144,115 | ) | ||||||||
| Cash, beginning of year | 1,249,376 | 606,022 | 1,750,137 | |||||||||
| Cash, end of year | $ | 8,950,771 | $ | 1,249,376 | $ | 606,022 | ||||||
Operating Activities
Net cash used in operating activities was approximately $2.5 million in fiscal year ended July 31, 2025. Net cash used in operating activities was primarily comprised of net loss of approximately $4.6 million, adjusted for loss of approximately $3.6million from investment in trading securities, and net changes in our operating assets and liabilities, principally comprising of (i) an increase of $0.6 million in accounts receivable attributed to the increase in revenue, (ii) an increase of $0.5million in prepaid expenses and other current assets, and (iii) a decrease of approximately $0.5 million in accounts payable, accrued expenses and other current liabilities mainly because we paid litigation liabilities of approximately $0.8 million.
Net cash used in operating activities was approximately $0.1 million in fiscal year ended July 31, 2024. Net cash used in operating activities was primarily comprised of net loss of approximately $3.2 million, adjusted for loss of approximately $0.4 million from investment in trading securities, and net changes in our operating assets and liabilities, principally comprising of (i) a decrease of accounts receivable of approximately $0.7 million due from third parties and $0.4 million due from a related party, respectively. The decrease was because we collected outstanding balance due from customers, (ii) a decrease of prepaid expenses and other current assets of approximately $0.3 million, which was due to amortization of advertising service fees, and (iii) an increase of accrued expenses and other current liabilities of approximately $1.3 million.
Net cash used in operating activities was approximately $2.3 million in fiscal year ended July 31, 2023. Net cash used in operating activities was primarily comprised of net loss of approximately $2.9 million, adjusted for provision of approximately $2.7 million against due from buyers of LGC, and provision of approximately $0.8 million against accounts receivable due from a related party, and net changes in our operating assets and liabilities, principally comprising of (i) an increase of accounts receivable of approximately $0.7 million due from third parties and approximately $0.6 million due from a related party, respectively. The increase was in line with increase of revenues, and (ii) a decrease of accrued expenses and other current liabilities of approximately $2.0 million as the Company was no longer liable to an investment bank for loss making since disposal of ATIF GP.
Investing Activities
Net cash provided by investing activities was $1.3 million in fiscal year 2025, primarily consisting of net proceeds from investment in trading securities of approximately $0.4 million and collection of borrowings from a related party of $0.9 million.
Net cash used in investing activities was approximately $1.6 million in fiscal year 2024, primarily consisting of loans of approximately $0.9 million made to a related party and investment of approximately $0.7 million in trading securities.
Net cash provided by investing activities was approximately $0.4 million in fiscal year 2023, primarily consisting of proceeds of approximately $0.3 million from disposal of investments in two equity securities, redemption of $94,799 from short-term investments, proceeds of $72,000 from disposal of property and equipment, and collection of loans of $59,000 from a related party, partially offset against loans of approximately $0.1 million made to a related party.
Financing Activities
Net cash provided by financing activities was approximately $8.9 million in fiscal year 2025, which represented proceeds from issuance of ordinary shares and warrants.
Net cash provided by financing activities was approximately $2.3 million in fiscal year 2024, which was provided by proceeds of approximately $2.3 million from issuance of ordinary shares pursuant to a private placement
Net cash provided by financing activities was approximately $0.7 million in fiscal year 2023, which was provided by borrowings of approximately $0.7 million from a related party.
C. Research and development, patents, and licenses, etc.
Please refer to Item 4 Subparagraph B "Information on the Company-Business Overview-Research and Development", "Information on the Company-Business Overview- Trademarks, Copyrights, Patents and Domain Names" and "Information on the Company-Business Overview-Licenses, Permits and Government Regulations."
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
E. Critical Accounting Estimates
Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and related allowance for doubtful accounts, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, inventory reserve, goodwill impairment, income taxes related to realization of deferred tax assets and uncertain tax position, provisions necessary for contingent liabilities and contingent consideration. The current economic environment has increased the degrees of uncertainty inherent in those estimates and assumptions, actual results could differ from those estimates.