Item 1. Business
ITEM 1. BUSINESS
Overview
We
are a British Virgin Islands business company. We are a business consulting company providing financial consulting services
to small and medium-sized enterprises (“SMEs”) and prior to August 1, 2022, our Affiliated Entity ATIF USA, managed a private
equity fund with approximately $1.3 million assets under management (“AUM”). Since our inception in 2015, the main focus of
our consulting business has been providing comprehensive going public consulting services designed to help SMEs become public companies
on suitable stock markets and exchanges. Our goal is to become an international financial consulting company with clients and offices
throughout North America and Asia. In order to expand our business with a flexible business concept and reach our goal of high growth
revenue and strong profit growth, on January 4, 2021, we opened an office in California, USA, through our wholly owned subsidiary ATIF
USA. Our c lients located within United States are serviced by ATIF USA. ATIF BVI relies on a professional
service team, who is rich in business consulting experiences, extensive social relations, and international integrated services, to make
the IPO process as easy as possible for its clients. We operate with competitive fee schedules and in the cases of clients with attractive
financial performance and/or great growth potential, we would offer the option of paying no fees upfront.
To
mitigate the potential risks arising from the PRC government provision of new guidance to and restrictions on China-based companies raising
capital offshore, we decided to divest our PRC subsidiaries. As of May 31, 2022, we completed the transfer of our equity interest in ATIF
Limited, a Hong Kong corporation (“ATIF HK”) and Huaya Consulting (Shenzhen) Co., Ltd., corporation formed under the laws
of the PRC (“Huaya”) to Mr. Pishan Chi, our former director and CEO, for no consideration.
We
have primarily focused on helping clients going public on the national stock exchanges and OTC Markets in the U.S. As of the date of
this annual report, we have provided financial consulting services to SMEs in the United States, Mexico, China and Hong Kong. The following
table illustrates the breakdown of our total revenue, organized by customers’ locations for the years
ended July 31, 2023 and 2022.
Year ended
July 31,
2023
Percentage of Total
Year ended
July 31,
2022
Percentage of Total
Revenue
revenue
Revenue
revenue
Hong Kong
600,000
24.5 %
497,594
29.8 %
Mainland China
-
1,128,508
67.7 %
USA
1,200,000
49.0 %
41,208
2.5 %
Mexico
650,000
26.5 %
-
-
Total revenue, net
$ 2,450,000
100 %
$ 1,667,310
100 %
1
Recent Developments
On
January 4, 2021, we announced the relocation of our operating headquarter to California, USA, through our wholly owned subsidiary ATIF
USA. As part of this relocation, we transitioned our services from the variable interest entity (“VIE”), Qianhai Asia Times
(Shenzhen) International Financial Services Co., Ltd. (“Qianhai”), to ATIF USA and Huaya by terminating the VIE agreements
between the Company and Qianhai on February 3, 2021. We did this to simplify the management chain and improve management control, with
the goal of lowering costs. We believe that this streamlined management model and strategic partnership strategy is in line with the current
fast-changing and competitive business environment and will provide us with strong growth capability. The termination of the VIE agreement
with Qianhai did not adversely affect Huaya, our business, financial condition, and results of operations.
On
January 14, 2021, the Company entered into the sales and purchase agreement (the “Sales and Purchase Agreement”) with the
majority shareholders of Leaping Group Co., Ltd. (“LGC”) consisting
of Jiang Bo, Jiang Tao and Wang Di (collectively the “LGC Buyers”) to sell our 51.2% equity interest in LGC. Pursuant to the
Sales and Purchase Agreement, the Company sold 10,217,230 ordinary shares of LGC in exchange for (i) 5,555,548 ordinary shares of the
Company owned by the LGC Buyers, and (ii) a cash payment of US$2,300,000 payable by January 14, 2023 at an interest rate of 10% per annum.
As of the date of this annual report, the 5,555,548 ordinary shares owned by the LGC Buyers have been returned to the Company and the
$2.3 million cash payment has not yet been received from the LGC Buyers. For the years ended July 31, 2021 and 2020, we reported net loss
of $6.6 million and $11.0 million from discontinued operations of LGC as a separate component in the consolidated statements of operations.
In addition, for the year ended July 31, 2023, the Company provided full provision against the principal and interest aggregating approximately
$2.7 million due from the shareholders of LGC.
As
a result of termination of the VIE agreements and sale of all our equity interests in LGC, we currently do not have a VIE structure.
On
February 16, 2021, we established ATIF-1, LP (“ATIF LP”) as a private equity fund, with ATIF USA as the investment manager
and ATIF-1 GP, LLC (“ATIF GP”), a Delaware limited liability company, as the general partner of ATIF LP. As of July 31, 2022,
we owned a 76.6% interest in ATIF LP as a limited partner. As of July 31, 2022, ATIF LP had approximately $1.3 million assets under management
(“AUM”). ATIF GP’s investment strategy involves directional long and short investments in equity securities, primarily
issued by large cap U.S. companies, and American Depositary Receipts (“ADRs”) related to Chinese companies of various sizes,
including private companies. Due to significant volatility in stock market, the private equity fund lost $1.5 million in fiscal year 2022
as compared to gain $0.2 million in fiscal year 2021. On August 1, 2022, ATIF USA entered into and closed a sales and purchase agreement
(the “ATIF GP Agreement”) with Asia Time (HK) International Finance Service Limited (the “Buyer”) pursuant to
which ATIF USA sold all of its membership interests in ATIF GP to the Buyer for cash consideration of US$50,000. Upon the
closing of the Agreement on August 1, 2022, ATIF GP is no longer our subsidiary and ATIF USA ceased to be the investment manager of ATIF
LP. For the year ended July 31, 2023, the Company recorded a gain of $56,038 from the transfer of equity interest.
On
August 23, 2021, we completed a one (1) for five (5) reverse stock split of our issued and outstanding ordinary shares.
On
December 22, 2021, we established ATIF BD which is engaged in consultancy and information technology support services.
On
April 25, 2022, we established ATIF Investment which is engaged in consultancy and information technology support services.
On
May 31, 2022, we completed the transfer of our equity interest in ATIF HK and Huaya to Mr. Pishan Chi, our former director and CEO, for
no consideration. The transfer of equity interest was to mitigate the potential risks arising from the PRC government provision of new
guidance to and restrictions on China-based companies raising capital offshore.
On
October 6, 2022, we established ATIF Business Consulting which is engaged in IPO consulting services in North America.
On
October 7, 2022, we established ATIF Business Management which plans to provide comprehensive services, such as investors’ relationships
and secretarial services in North America in future.
2
Corporate Structure
The
following diagram illustrates our current corporate structure :
Competitive Strengths
We believe that the following strengths enable
us to stand out in the financial service industry and differentiate us from our competitors:
Experienced and Highly
Qualified Team
We
have a highly qualified professional service team with extensive experience in going public consulting services. Our professional team
members have an average of five years of experience in their respective fields of international finance, capital market, cross-border
and domestic listing services, and marketing. The majority of the members of our team previously worked in the technology or finance industries.
We highly value members of our qualified professional team and are on the constant lookout for new talents to join our team.
Recognition and Reputation
Achieved from Our Previous Success
Since
our inception in 2015, we have successfully helped eight clients to be quoted on the U.S. OTC markets and one client listed on the U.S
Nasdaq market, respectively. We believe we are one of the few going public consulting service providers that possess the necessary resources
and expertise to provide comprehensive personalized one-stop going public consulting services to clients.
Long-Term Cooperation
Relationship with Third-Party Professional Providers
We
have established long-term professional relationships with a group of well-known third-party professional providers both domestically
and in the U.S., such as investment banks, certified public accounting firms, law firms, and investor relations agencies, whose services
and support are necessary for us to provide high-quality one-stop going public consulting service to our clients. It took us years of
hard work to demonstrate to these professional organizations that we are a worthy partner capable of providing high-quality professional
services that conforms to their high standards. As a result, our clients are able to gain direct access to and obtain high-quality professional
services from our third-party professional providers.
3
Cash Distribution
Under
our current corporate structure, to fund any liquidity requirements an entity in our corporate group may have, an Affiliated Entity may
rely on dividend payments from ATIF BVI and ATIF BVI may receive distributions or cash transfers from an Affiliated Entity. As of the
date of this annual report, there are no currency exchange restrictions or limitations imposed on the transfer of capital within our corporate
structure, except that the transfers are subject to money laundering and anti-corruption rules and regulations. However, there is no guarantee
that the applicable government will not promulgate new laws or regulations that may impose such restrictions on currency exchanges in
the future. As of the date of this annual report, no transfer of non-cash assets has occurred between ATIF BVI and any of its subsidiaries.
The following table illustrates the breakdown of our cash transfer within our organization as of July 31, 2023:
Lender
Borrower
Amount Due
ATIF BVI
ATIF USA
$
2,357,000
ATIF BVI
ATIF INVESTMENT LTD
$
397,172
ATIF Business Consulting LLC
ATIF BVI
$
935,000
The
following table illustrates the breakdown of our cash transfer within our organization as of the day of the year ended July
31, 2022:
Lender
Borrower
Amount Due
ATIF BVI
ATIF HK
$
8,278,243.47
ATIF BVI
ATIF USA
$
1,200,000.00
ATIF HK
VIE
$
-
ATIF HK
Huaya
$
640,964.92
Following
the completion of the transfer of equity interest in ATIF HK and termination of VIE structure, the Company doesn’t have any interest
or obligation in relation to the outstanding loan between ATIF HK, VIE and Huaya.
As of the date of this annual
report, neither ATIF BVI nor its subsidiaries has a cash management policy. None of ATIF BVI’s subsidiaries has ever paid dividends,
made distributions, transferred cash or other assets by kind to ATIF BVI or its shareholders directly or indirectly. However, there is
no assurance that the Chinese government will not, in the future, intervene or impose restrictions or limitations on the Company’s
ability to generate income out of mainland China and Hong Kong. Also ATIF BVI has not made any distributions or paid dividends to its
shareholders, including U.S. investors, as of the date of this annual report.
As of the date of this annual
report, none of the Affiliate Entities has made any dividends or distributions to ATIF BVI, nor has ATIF BVI made any dividends or distributions
to its shareholders. We intend to keep any future earnings to re-invest in and finance the expansion of our business on global platform.
If ATIF BVI determines to pay dividends on any of its Ordinary Shares in the future, as a holding company, it may derive funds for such
distribution from its own cash position or contributions from its subsidiaries.
Our
Business
We are a British Virgin Islands business company.
We are a business consulting company providing financial consulting services to small and medium-sized enterprises (“SMEs”).
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. Our goal is to become an international financial consulting company
with clients and offices throughout Asia and North America. On January 4, 2021, we established an office in California, USA, through our
wholly owned subsidiary ATIF Inc., a California corporation, which was incorporated on October 26, 2020, 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. Clients located within
United States will be serviced by ATIF Inc., while clients outside United States will be supported by ATIF Inc.’s business strategic
cooperative partner Huaya.
Since
our inception, our revenue has been mainly generated from our going public consulting services. In April 2020, we acquired a 51.2% equity
interest in Leaping Group Co., Ltd. (“LGC”) and our revenue was mainly comprised of going public consulting services and event
execution and planning services for the year ended July 31, 2020. On January 29, 2021, we completed a disposition of 51.2% of the equity
interest of LGC with three individuals. For the years ended July 31, 2021 and 2020, we reported net loss of $6.6 million and $11.0 million
from discontinued operations of LGC as a separate component in the consolidated statements of operations.
4
Beginning in August 2018, to complement and facilitate
the growth of our going public consulting service, we launched AT Consulting Center to offer financial consulting programs in Shenzhen,
and in September 2018, we acquired CNNM, or www.chinacnnm.com, a news and media website focused on distributing financial news and information.
In July 2019, we launched an investment and financing analysis reporting business. We have not generated any revenue from this financial
and news platform since its acquisition, and based on our current financial condition and operating performance, our management has assessed
that the likelihood of future use of the financial and news platform is remote, and we provided full impairment on the financial and news
platform in the year ended July 31, 2020.
In China, a fast-growing economy and a positive
market environment have created many entrepreneurial and high-growth enterprises, many of which need assistance in obtaining development
funds through financing. Due to restrictions imposed by China’s foreign exchange regulations, it is difficult for foreign capital
to enter China’s capital market. Because of the strict listing policies and a relatively closed financial environment in mainland
China, most small to medium sized enterprises in the development stage are unable to list on domestic exchanges in China. Therefore, many
Chinese enterprises strive to enter international capital markets through overseas listing for equity financing. However, in China, there
is a general lack of understanding of the international capital markets, as well as a lack of professional institutions that provide overseas
going public consulting services to these companies, and many of them may not be familiar with overseas listing requirements.
We
launched our consulting services in 2015. Our aim was to assist these Chinese enterprises by filling the gaps and forming a bridge between
PRC companies and overseas markets and exchanges. We have a team of qualified and experienced personnel with legal, regulatory, and language
expertise in several overseas jurisdictions. Our services are designed to help SMEs in China achieve their goal of becoming public companies.
We create a going public strategy for each client based on many factors, 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 July
31, 2023, we have successfully helped nine Chinese enterprises to be quoted on the U.S. OTC markets along with one client getting listed
on Nasdaq Stock Market and are currently assisting our other clients in their respective going public efforts. All
of our current and past clients have been Chinese companies, and we plan to expand our operations to other Asian countries, such as Malaysia,
Vietnam, and Singapore, by as opportunities arises.
On January 4, 2021, we announced the relocation
of our operating headquarter to California, USA, through our wholly owned subsidiary ATIF Inc., a California corporation incorporated
on October 26, 2020, 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. As part of this relocation and to streamline the management chain and to improve management control with a goal
of lower costs, we transition the services from our variable interest entity (“VIE”), Qianhai Asia Times (Shenzhen) International
Financial Services Co., Ltd. (“Qianhai”), to ATIF Inc. and Huaya, and terminated the VIE agreements with Qianhai on January
31, 2021. Before the termination, operating revenue generated through Qianhai VIE amounted to $645,127, and net income (loss) amounted
to $(1,562,037) for the years ended July 31, 2020. The termination of the Qianhai VIE agreements did not cause a material impairment of
our long-lived assets (primarily including fixed assets such as office furniture and equipment and automobile) because such assets only
amounted to $184,740 and $68,375 as of July 31, 2020 and 2019, respectively. All of the fixed assets were transferred to Huaya upon termination
of the VIE agreement. In addition, we had discussions with other business organizations to collaborate with a goal of leveraging their
resources to assist us to grow our business centers in other jurisdictions. We believe that this streamlined management model and strategic
partnership strategy is in line with the current fast-changing and competitive business environment and will provide us with strong growth
capability. The termination of the VIE agreement with Qianhai did not adversely affect Huaya, our business, financial condition, and results
of operations.
5
On January 14, 2021, the Company entered into
the Sale and Purchase Agreement with the majority shareholders of LGC consisting of Jiang Bo, Jiang Tao and Wang Di (collectively the
“LGC Buyers”) to sell all interests in LGC. Pursuant to the Sales and Purchase Agreement, the Company sold 10,217,230 ordinary
shares of LGC in exchange for (i) 5,555,548 ordinary shares of the Company owned by the LGC Buyers, and (ii) payment by the LGC Buyers
in the amount of US$2,300,000 plus interest at an interest rate of 10% per annum on the unpaid amount if the principal amount of US$2,300,000
is not paid by January 14, 2022. All principal and accrued and unpaid interest shall be due on January 14, 2023. As of the date of this
annual report, the 5,555,548 shares of ordinary shares owned by the LGC Buyers have been returned to the Company and the $2.3 million
cash payment has not yet been received from the LGC Buyers. For the years ended July 31, 2021 and 2020, we reported net loss of $6.6 million
and $11.0 million from discontinued operations of LGC as a separate component in the consolidated statements of operations. After completion
of the transaction, the Company shall no longer hold any shares of LGC and LGC shall no longer be subsidiary of ATIF. The Sales and Purchase
Agreement closed on January 29, 2021.
We entered into the Sale Purchase Agreement because
we believed that due to the continued impact of COVID-19 in China, it will take longer, and additional capital will be required for traditional
entertainment and cinemas businesses like LGC to recover. Further, in light of the Company moving its headquarter to California and transitioning
to a new business model focusing on business consulting, asset management, investment holding and media services, the Company no longer
believes that its business has synergy with LGC’s cinema advertising and cinema operation business. Our management and LGC’s
management also had different views of LGC’s future business direction.
On
February 16, 2021, we established ATIF-1, LP (“ATIF LP”) as a private equity fund through our indirectly-wholly owned subsidiary,
ATIF-1 GP, LLC (“ATIF GP”), a Delaware limited liability company, as the general partner. As of July 31, 2022, we own a 76.6%
limited partner interest in ATIF LP. ATIF LP manages, as of July 31, 2022, approximately $1.3 million assets under management (“AUM”).
The investment strategy of the fund involves directional long and short investments in equity securities, primarily issued by U.S. large
capitalization companies, and American Depositary Receipts (“ADRs”) related to Chinese companies of various sizes, including
private companies. The investment manager for the fund is ATIF Inc. Due to significant volatility in stock market, the private equity
fund lost $1.5 million in fiscal year 2022 as compared to gain $0.2 million in fiscal year 2021. On August 1, 2022, ATIF USA entered into
and closed a Sale and Purchase Agreement with Asia Time (HK) International Finance Service Limited (the “Buyer”), pursuant
to which ATIF USA sold all of its membership interests in ATIF GP (the “Agreement”) to the Buyer for cash consideration of
US$50,000. Upon the closing of the Agreement, ATIF GP is no
longer our subsidiary and ATIF USA ceased to be the investment manager of ATIF LP. For the year ended July 31, 2023, the Company recorded
a gain of $56,038 from the transfer of equity interest.
On May 31, 2022, we completed the transfer of
our equity interest in ATIF HK and Huaya to Mr. Pishan Chi for $nil consideration. The transfer of equity interest was to mitigate the
potential risks arising from the PRC government provision of new guidance to and restrictions on China-based companies raising capital
offshore. We determined that the transfer of our equity interest in ATIF HK and Huaya did not have a major effect on our operations and
financial results as we did not change our way of running business. We also determined that the transfer of equity interest does not represent
a strategic shift in our business because there was no change to our operation of our consulting services. There was no change to the
nature of our business, and did not affect our customers in North America, which is the major geographic market area of our business.
However, we intend to continue cooperating with Huaya in connection with the expansion and provision of our business services in China.
Before the disposal of ATIF HK and Huaya, operating revenue generated through Huaya amounted to $366,508 and $401,292, and net income
(loss) amounted to $(812,434) and $86,758 for the years ended July 31, 2023 and 2022 respectively. The disposal of Huaya did not cause
a material impairment of our long-lived assets (primarily including fixed assets such as office furniture and equipment and automobile)
because it had no long-lived assets as of May 31, 2022.
6
Marketing and Sales
We believe the success of our consulting business
requires building mutually beneficial long-term relationships with relevant and influential entities, and we have developed our main marketing
channels based on these relationships.
Since our inception, we have cultivated and maintained
cooperation with a number of city and provincial chambers of commerce and business associations in China, including the Zhejiang Chamber
of Commerce in Shenzhen and Guangdong, Shenzhen Industrial Park Association, Meixian Chamber of Commerce in Shenzhen, Wenzhou Chamber
of Commerce in Shenyang, Shenzhen Elite Chamber of Commerce, and the SME Service Platform in Northeast China. There are no contractual
relationships between us and these organizations. However, these local business organizations have helped our marketing efforts greatly,
due to the fact that: (1) they have access to the information of local enterprises and often recommend and connect us with potential
clients; (2) they help us organize going public briefings and international financial lectures with local enterprises; and (3) they
are able to utilize relationships with local government to initiate and organize government sponsored financial forums to promote and
introduce our consulting services to the local enterprises.
We also strive to maintain professional relationships
with our former and prospective clients. Our former clients have benefited from our services and oftentimes are willing and able to introduce
prospective clients to us. After nearly three years operating as a consulting service provider specialized in cross-border going public
services, we have developed a database consisting of former and prospective clients, using each as a resource for business connections
and social relations.
Our employees have been working in various industries
for many years, and accumulated networks of business and social relations including personal connections, corporate associations, and
governmental affiliations, which are all valuable resources through which we can potentially obtain new clients.
We are constantly seeking new and effective marketing
channels in order to grow into an international consulting company with clients and branches throughout Asia and North America. To complement
and facilitate our growth perspectives, in 2018, we launched AT Consulting Center, we believe, it has the great potential in becoming
instrumental in our marketing efforts for continued growth of our consulting business.
In addition to our marketing efforts described
above, we also market our consulting services, through:
●
Social media, principally WeChat and Weibo;
●
Newsletters to our prospective clients; and
●
Business relationships with well-known corporations and web platforms with large online traffics that can direct traffic to our website through links on their websites.
Competition
We face competition from a number of consulting
companies providing going public consulting services such as Greenpro Capital Corp., Forward Capital, and Dragon Victory, who recently
entered going public consulting services in 2018. We believe that our relatively mature operating history of nearly three years differentiates
our company from other competitors. Our comprehensive one-stop consulting services, through which we are directly involved in each of
the three pre-defined phases of our clients’ going public process, are unlike the services provided by many of our competitors,
who often act as mere initial order takers, and then outsource a majority of services to third-party providers.
7
Currently, many of the going public consulting
providers in China operate on a relatively small scale, only with a few employees. We believe that we are currently one of the few consulting
companies capable of providing comprehensive one-stop going public services to qualified enterprises. However, due to favorable market
conditions, which may have been overheated by various Chinese government stimulus programs offered recently to encourage and reward enterprises
going public, a number of companies have entered and are entering the going public consulting business. As such, we expect competition
will become more intense, and it is possible that we will not be able to maintain the growth rate we have achieved previously.
Major Customers
The
majority of our clients are small to medium-sized enterprises seeking growth and expansion through going public on recognized exchanges,
and $2.5 million and $1.6 million was generated from our consulting services for the fiscal years ended July 31, 2023 and 2022, respectively.
For the year ended July 31, 2023, our clients were based in North
America and Hong Kong. The number of our new consulting service clients was four and five for the fiscal years ended July 31, 2023 and
2022, respectively. Due to the nature of our consulting business, which requires us to dedicate a large amount of resources to each of
our clients, we were able to generate a relatively large revenue from a small number of clients. As a result, we had four and three clients
that accounted for more than 10% of our total revenues, for the fiscal years ended July 31, 2023 and 2022, respectively. As we continue
to expand and grow the number of clients, we expect the risks arising from customer concentration will be mitigated accordingly.
Employees
As
of July 31, 2023, we had 13 full-time employees, including
1 in China and 12 in America. None of our employees are subject to collective bargaining agreements governing their employment with us.
We believe our employee relations are good.
Intellectual
Property
We have received the approval for the following
trademark registrations:
Trademark
Jurisdiction
Category
Effective Date
Expiration Date
ATIF
China
36
May 7, 2019
May 6, 2029
ATIF
Hong Kong
36
January 31, 2019
August 28, 2028
亚洲时代
China
36
May 14, 2017
May 13, 2027
亞洲時代
Hong Kong
35;36;41
November 26, 2019
April 11, 2029
CNNM
Hong Kong
35; 38
August 29, 2018
August 28, 2028
INTERNATIONAL SCHOOL OF FINANCE
Hong Kong
41
August 29, 2018
August 28, 2028
IPOEX
Hong Kong
36
October 27, 2020
October 26, 2030
IPOEX
European Union
36
January 30, 2021
October 15, 2030
IPOEX
China
36
July 28, 2021
July 27, 2031
IPOEX
Singapore
36
October 15, 2020
October 15, 2030
IPOEX
United Kingdom
36
February 19, 2021
October 19, 2030
IPOEX
Korea
36
February 21, 2022
February 21, 2032
We also own five domain names: ipoex.com, atifus.com, atifchina, chinacnnm.com
and dpoex.com.
8
Below
are images of our trademarks:
Recent Regulatory Development
We
are subject to a wide variety of complex laws and regulations in the United States and other jurisdictions in which we operate. The laws
and regulations govern many issues related to our business practices, including those regarding consumer protection, worker classification,
wage and hour, sick pay and leaves of absence, anti-discrimination and harassment, whistleblower protections, background checks, privacy,
data security, intellectual property, health and safety, environmental, competition, fees and payments, pricing, product liability and
disclosures, property damage, communications, employee benefits, taxation, unionization and collective bargaining, contracts, arbitration
agreements, class action waivers, terms of service, and accessibility of our website.
These
laws and regulations are constantly evolving and may be interpreted, applied, created, superseded, or amended in a manner that could harm
our business. These changes may occur immediately or develop over time through judicial decisions or as new guidance or interpretations
are provided by regulatory and governing bodies, such as federal, state and local administrative agencies. As we expand our business into
new markets or introduce new features or offerings into existing markets, regulatory bodies or courts may claim that we are subject to
additional requirements, or that we are prohibited from conducting business in certain jurisdictions. This section summarizes the principal
regulations applicable to our business.
Regulation on Intellectual
Property Rights
Regulations on trademarks
The
Trademark Law of the People’s Republic of China was adopted at the 24th meeting of the Standing Committee of the Fifth National
People’s Congress on August 23, 1982. Three amendments were made on February 22, 1993, October 27, 2001, and August 30,
2013, respectively. The last amendment was implemented on May 1, 2014. The regulations on the implementation of the trademark law
of the People’s Republic of China were promulgated by the State Council of the People’s Republic of China on August 3,
2002, and took effect on September 15, 2002. It was revised on April 29, 2014 and April 23, 2019. The PRC Trademark Office under
the State Administration of Market Regulation handles trademark registrations and grants a term of 10 years to registered trademarks and
another 10 years if requested upon expiration of the first or any renewed 10-year term. Trademark license agreements must be filed with
the PRC Trademark Office for record. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark
registration. Where a trademark to be registered is identical or similar to another trademark which has already been registered or been
subject to a preliminary examination and approval for use on the same kind of or similar goods or services, the application for registration
of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first
obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained
a “sufficient degree of reputation” through such party’s use. After receiving an application, the PRC Trademark Office
will make a public announcement if the relevant trademark passes the preliminary examination. During the three months after this public
announcement, any person entitled to prior rights and any interested party may file an objection against the trademark. The PRC Trademark
Office’s decisions on rejection, objection, or cancellation of an application may be appealed to the PRC Trademark Review and Adjudication
Board, whose decision may be further appealed through judicial proceedings. If no objection is filed within three months after the public
announcement or if the objection has been overruled, the PRC Trademark Office will approve the registration and issue a registration certificate,
at which point the trademark is deemed to be registered and will be effective for a renewable 10-year period, unless otherwise revoked.
For licensed use of a registered trademark, the licensor shall file record of the licensing with the PRC Trademark Office, and the licensing
shall be published by the PRC Trademark Office. Failure of the licensing of a registered trademark shall not be contested against a good
faith third party. For a detailed description of our trademark registrations, please refer to “—Intellectual Property.”
9
Regulations on domain
names
In
accordance with the Measures for the Administration of Internet Domain Names, which was promulgated by the Ministry of Industry and Information
Technology (the “MIIT”) on August 24, 2017 and came into effect on November 1, 2017, the Implementing Rules of China Internet
Network Information Center on Domain Name Registration, which was promulgated by China Internet Network Information Center (the “CNNIC”)
on May 28, 2012 and came into effect on May 29, 2012, and the Measures of the China Internet Network Information Center on Domain Name
Dispute Resolution, which was promulgated by CNNIC on September 1, 2014 and came into effect on the same date, domain name registrations
are handled through domain name service agencies established under relevant regulations, and an applicant becomes a domain name holder
upon successful registration, and domain name disputes shall be submitted to an organization authorized by CNNIC for resolution. Besides,
the MIIT is in charge of the administration of PRC internet domain names. The domain name registration follows a first-to-file principle.
Applicants for registration of domain names shall provide true, accurate, and complete information of their identities to domain name
registration service institutions. In accordance with the Notice from the Ministry of Industry and Information Technology on Regulating
the Use of Domain Names in Internet Information Services, which was promulgated by the MIIT on November 27, 2017 and came into effect
on January 1, 2018, Internet access service providers shall verify the identity of each Internet information service provider, and shall
not provide services to any Internet information service provider which fails to provide real identity information. The applicant will
become the holder of such domain names upon completion of the registration procedure. As of July 31, 2020, we had completed registration
of five domain names, “ipoex.com,” “ chinacnnm.com ,” “ atifchina.com ,” “ atifus.com ,”
and “ dpoex.com ,” in the PRC and became the legal holder of such domain names.
U.S. Labor and
Employment Laws
Various
federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include
minimum wage requirements, overtime pay, unemployment tax rates, workers’ compensation rates, citizenship requirements and sales
taxes. Additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits such
as those to be imposed by recently enacted legislation in California, increased tax reporting and tax payment requirements for employees
who receive gratuities, or a reduction in the number of states that allow tips to be credited toward minimum wage requirements could harm
our operating results.
The
Federal Americans with Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. Although
our office is designed to be accessible to the disabled, we could be required to make modifications to our office to provide service to,
or make reasonable accommodations for, disabled persons.
U.S. Data Protection
and Privacy Laws
California
has several laws protecting the literary works read by California residents. The California Reader Privacy Act protects information about
the books California residents read from electronic services. Such information cannot be disclosed except pursuant to an individual’s
affirmative consent, a warrant or court order with limited exceptions, such as imminent danger of serious injury. California Education
Code Section 99122 requires for-profit postsecondary educational institutions to post a social media privacy policy on their website.
The
Digital Millennium Copyright Act (DMCA) provides relief for claims of circumvention of copyright protected technologies and includes a
safe harbor intended to reduce the liability of online service providers for hosting, listing, or linking to third-party content that
infringes copyrights of others.
The
Communications Decency Act provides that online service providers will not be considered the publisher or speaker of content provided
by others, such as individuals who post content on an online service provider’s website.
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The
California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, provides consumers the right to know what personal
data companies collect, how it is used, and the right to access, delete, and opt out of the sale of their personal information to third
parties. It also expands the definition of personal information and gives consumers increased privacy rights and protections for that
information. The CCPA also includes special requirements for California consumers under the age of 16.
The
California Privacy Rights Act (CPRA), Virginia Consumer Data Protection Act (CDPA) and Colorado Privacy Act (CPA) all will come into effect
on January 1, 2023. These laws provide consumers with the right to know what personal data companies collect, how it is used, and the
right to access, delete, and opt out of the sale of their personal information to third parties. The CPRA also includes special requirements
for California consumers under the age of 16.
The Holding Foreign Companies Accountable
Act
On May 20, 2020, the U.S.
Senate passed the Holding Foreign Companies Accountable Act (“HFCAA”) requiring a foreign company to certify it is not owned
or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not
subject to PCAOB inspection. On December 18, 2020, the Holding Foreign Companies Accountable Act or HFCAA was signed into law. On September
22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which became law in December 2020 and prohibits foreign companies from
listing their securities on U.S. exchanges if the company has been unavailable for PCAOB inspection or investigation for three consecutive
years. As a result of the HFCAA, trading in ATIF BVI’s securities may be prohibited if the PCAOB determines that it cannot inspect
or fully investigate ATIF BVI’s auditor. Furthermore, in June 2021, the Senate passed the AHFCAA, which was signed into law on December
29, 2022, reducing the time period for delisting of foreign companies under the HFCAA to two consecutive years, instead of three years.
Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect
or investigate completely certain named registered public accounting firms headquartered in mainland China and Hong Kong. Our independent
registered public accounting firm is headquartered in Denver, Colorado, and has been inspected by the PCAOB on a regular basis and as
such, it is not affected by or subject to the PCAOB’s 2021 Determination Report. On August 26, 2022, the SEC issued a statement
announcing that the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China
governing inspections and investigations of audit firms based in China and Hong Kong, jointly agreeing on the need for a framework. On
December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms
headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 Determination Report to the contrary. Notwithstanding
the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide
audit documentations located in China to the PCAOB for inspection or investigation, you may be deprived of the benefits of such inspection
which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading
on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCAA and AHFCAA and/or PCAOB
may consider the need to issue new determinations consistent with the HFCAA and Rule 6100.
The recent developments would
add uncertainties to our offering and we cannot assure you whether Nasdaq would apply additional and more stringent criteria to us after
considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training,
or sufficiency of resources, geographic reach, or experience as it relates to our audit.
Corporate Office
Our principal executive office and production
facility is located in Lake Forest, California, USA, where we lease approximately 7237 square feet of office space and is located in 25391
Commercentre Dr. Ste 200, Lake Forest, CA 92630. The telephone number at our principal executive office is 308-888-8888. We believe
that these existing facilities will be adequate for our current needs and that suitable additional or alternative space will be available
in the future on commercially reasonable terms, if required.
Other Information
Our Internet address is www.ipoex.com. We make
available on our website our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Other than
the information expressly set forth in this annual report, the information contained, or referred to, on our website is not part of this
annual report. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information
regarding issuers, such as us, that file electronically with the SEC.
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