ATIF Holdings Ltd 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the Exchange Act, as of July 31, 2024. Based on that evaluation, our management has concluded that, as of July 31, 2024, our disclosure controls and procedures were not effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our conclusion is based on the fact that we do not have sufficient full-time accounting and financial reporting personnel with appropriate levels of accounting knowledge and experience to monitor the daily recording of transactions, to address complex U.S. GAAP accounting issues and the related disclosures under U.S. GAAP. In addition, there was a lack of sufficient documented financial closing procedure and a lack of risk assessment in accordance with COSCO 2013 framework. Our management is currently in the process of evaluating the steps necessary to remediate the ineffectiveness, such as (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework, and (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel, and (iii) establishing an internal audit function and standardizing the Company’s semi-annual and year-end closing and financial reporting processes. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In assessing our internal control over financial reporting, prior to the offering in April 2019, we have been a private company with limited accounting personnel and other resources to address our internal controls and procedures. Our independent registered public accounting firm, has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements for the year ended July 31, 2024, we identified four “material weaknesses” in our internal control over financial reporting. ● We did not have sufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP. Specifically, our control did not operate effectively to ensure the appropriate and timely analysis of and accounting for unusual and non-routine transactions and certain financial statement accounts; ● We have not established an internal control department and had a lack of adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned; ● We have not established sufficient risk assessment in accordance with the requirement of COSCO 2013 Framework; and ● We did not have sufficient documentations and descriptions on journal entries; 42 A material weakness is a deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have hired additional accounting staffs and are in the progress of improving our system security environment and conducting regular backup plan and penetration testing to ensure the network and information security. In addition, we plan to address the weaknesses identified above by implementing the following measures: Furthermore, we are in the process of implementing a number of measures to address the first to third material weakness that has been identified, including: 1) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; and 2) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel. Especially for the identified material weakness related to internal control, we will hire experts to improve and test our internal control and the set up a series of standard and recurring internal audit work procedures before July 2025. We schedule to will perform self-assessment of internal control effectiveness on a continuous basis, which will be led by our accounting and risk management department within year 2025. We will also hire more competent personnel and involve professional service companies to help us implement SOX 404 compliance together with the establishment of our internal audit function. However, we cannot assure you that we will remediate our material weaknesses in a timely manner. Attestation Report of the Registered Public Accounting Firm This annual report on Form 10-K does not include an attestation report of our registered public accounting firm regarding the effectiveness of the Company’s internal control over financial reporting, as such report is not required due to the Company’s status as a smaller reporting company. Changes in Internal Control over Financial Reporting Except as disclosed above, there have been no changes in our internal controls over financial reporting that occurred during fiscal year ended July 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENTS INSPECTIONS Not applicable. 43 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors, Executive Officers and Significant Employees The following table and text set forth the names and ages of our current directors, executive officers and significant employees as of the date of this annual report. Our Board of Directors is comprised of five (5) members. Name Age Position(s) Jun Liu 48 President, Chief Executive Officer, Chairman and Director Yue Ming 37 Chief Financial Officer and Director Kwong Sang Liu 63 Independent Director Yongyuan Chen 62 Independent Director Lei Yang 44 Independent Director Business Experience Mr. Jun Liu has been our director since June 2019, our President and Chairman since July 2020 and our Chief Executive Officer since August 2021, also having previously served as our Chief Executive Officer from June 2019 to July 2020. Since November 2015, Mr. Liu has served as the President and Director of Asian Equity Exchange Group Co., Ltd., a subsidiary of a U.S. public company Asia Equity Exchange Group, Inc. (“AEEX”), a corporation that develops and manufactures software solutions for equity market. Mr. Liu served as the Chairman of the Board of Directors, President, and CEO of AEEX from July 2015 to September 2017. From December 2000 to December 2001, he served as the head of marketing for the South China Branch of Alibaba. Mr. Liu received his Ph.D. in International Finance from Camden University U.S.A. in 2015 and his bachelor’s degree in Applied Physics from the Harbin Institute of Technology in 1998. Mr. Liu has over 20 years of enterprise management experience and served in management positions at Fortune 500 companies. Mr. Liu is well qualified to serve on our board of directors based on his management experience and prior executive experience serving in public and private companies. Ms. Yue Ming has been our Chief Financial Officer (“CFO”) and director since August 2021. She has served as our accountant since August 1, 2018. Prior to joining the Company, she was employed by Asia Equity Exchange Group, Inc. and acted as financial manager from December 1, 2014 to July 31, 2018. Ms. Ming started her accounting career at Shenzhen Huitian Accounting Firm on July 1, 2009 after she graduated from Central China Normal University where she majored in international trade. Ms. Ming has more than 10 years of corporate finance and accounting experience. Based on the above and Ms. Ming’s experience in finance and accounting, we believe that Ms. Ming is well qualified to serve on our board of directors. Mr. Kwong Sang Liu has served as our independent director since April 2019. Since May 1997, Mr. Liu has managed K.S. Liu & Company, CPA Limited, a company he founded. He is currently a non-executive director in a number of Hong Kong Stock Exchange listed companies. Mr. Liu graduated with honors from the Hong Kong Polytechnic University with a bachelor’s degree in Accountancy in 1997 and obtained a Master of Business Administration degree from the University of Lincoln, England in 2002. He is a chartered tax advisor of the Institute of Chartered Accountants in England and Wales, the Association of Chartered Certified Accountants, the Institute of Financial Accountants of the United Kingdom, the Institute of Public Accountants of Australia, the Institute of Certified Public Accountants of Hong Kong, the Taxation Institute of Hong Kong, and the Society of Registered Financial Planners. Mr. Liu has been a practicing accountant in Hong Kong for over 20 years specializing in audit, taxation and corporate financial advisory. Based on the above qualifications and Mr. Liu’s experience in finance and accountancy, the Company believes Mr. Liu is qualified to be on the Board. Mr. Yongyuan Chen has served as our independent director since April 2019. He is currently the director of China Commercial Law Co. Australia Pty Limited specializing in foreign investment, merger, and acquisition and intellectual property laws. He received a bachelor’s degree in international law from Jilin University of China in 1986, a Master’s degree in international economic law from Renmin University of China in 1988, and a Doctor’s degree in law from the University of Sydney in 2002. He formerly served as legal counsel of the Ministry of Foreign Economic Relations and Trade, China National Technology Import and Export Corporation, and chief of the Policy and Regulation Division of Shenzhen Science and Technology Bureau. From April 2011, Mr. Chen has worked as senior partner at Guangdong Huashang Law Firm, Sydney Branch. Mr. Chen has been a practicing lawyer in China and Australia for over 20 years. The Board believes that Mr. Chen’s extensive experience and legal background qualifies him to serve on the Board. 44 Ms. Lei Yang has served as our independent director since August 2021. She received her first master’s degree in Information Management from Nanjing University in 2004, and her second master’s degree in Accounting from Bentley University in 2010. Ms. Yang is certified by the American Institute of Certified Public Accountants. Ms. Yang has 17 years working experience in several Fortune 500 companies, engaged in business analysis, internal audit, and financial management, etc. She received her first master’s degree in Information Management from Nanjing University in 2004, and her second master’s degree in Accounting from Bentley University in 2010. Ms. Yang is an American Institute of Certified Public Accountants Certified and an economist. Based on the above qualifications and Ms. Yang’s experience in management, the Board believes Ms. Yang is well qualified to serve on the Board. Involvement in Certain Legal Proceedings To the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. Family Relationships and Arrangements None of the directors or executive officers have a family relationship as defined in Item 401 of Regulation S-K. Code of Business Conduct and Ethics for Employees, Executive Officers, and Directors We adopted a code of business conduct and ethics (the “Code of Conduct”) on December 11, 2018, which is applicable to all of our employees, executive officers and directors. The Code of Conduct is available at the Investors Relations section of our website at https://ir.atifchina.com/. Information contained on or accessible through this website is not a part of this Annual Report, and the inclusion of such website address in this Annual Report is an inactive textual reference only. Any amendments to the Code of Conduct, or any waivers of its requirements, are expected to be disclosed on its website to the extent required by applicable rules and exchange requirements. Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and Annual Reports concerning their ownership, of Ordinary shares and other of our equity securities on Forms 3, 4, and 5, respectively. To our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports were required, all Section 16(a) filing requirements applicable to officers, directors and greater than ten percent shareholders were complied with during the fiscal year ended July 31, 2024. Board Practices Pursuant to our amended and restated articles of association, the minimum number of directors shall consist of not less than one person unless otherwise determined by resolution of directors or resolution or shareholders and by filing an amended version of the articles of association at the BVI Registry of Corporate affairs approving such change. Unless removed or re-appointed, each director shall be appointed for a term fixed by the resolution of members or resolution of directors appointing the director. 45 Controlled Company Mr. Jun Liu beneficially owns approximately 47.4% of the aggregate voting power of our outstanding ordinary shares. As a result, we are deemed a “controlled company” for the purpose of the Nasdaq listing rules and are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements, including: ● the requirement that our director nominees be selected or recommended solely by independent directors; and ● the requirement that we have a nominating and corporate governance committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purposes and responsibilities of the committees. Although we do not intend to rely on the controlled company exemptions under the Nasdaq listing rules even though we are deemed a controlled company, we could elect to rely on these exemptions in the future, and if so, you would not have the same protection afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. Board of Directors Our board of directors consist of five directors as of the date of this annual report. Our board of directors is responsible for establishing broad corporate policies and for overseeing our overall performance. Our board of directors reviews significant developments affecting us and acts on other matters requiring its approval. Duties of Directors Under British Virgin Islands law, our directors owe fiduciary duties both at common law and under statute, including a statutory duty to act honestly, in good faith and with a view to our best interests. When exercising powers or performing duties as a director, our directors also have a duty to exercise the care, diligence and skills that a reasonable director would exercise in comparable circumstances, taking into account without limitation the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken by him. In exercising the powers of a director, the directors must exercise their powers for a proper purpose and shall not act or agree to the company acting in a manner that contravenes our amended and restated memorandum and articles of association or the BVI Act. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association. We have the right to seek damages if a duty owed by our directors is breached. The functions and powers of our board of directors include, among others: ● appointing officers and determining the term of office of the officers; ● authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds, or associations as deemed advisable; ● exercising the borrowing powers of the company and mortgaging the property of the company; ● executing checks, promissory notes, and other negotiable instruments on behalf of the company; and ● maintaining or registering a register of relevant charges of the company. 46 Terms of Directors and Executive Officers Each of our directors holds office until a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for reelection. All of our executive officers are appointed by and serve at the discretion of our board of directors. Our current directors were re-elected by our shareholders at our 2024 Annual General Meeting, which was held on July 26, 2024, until the next shareholders meeting and until their successors are duly elected and qualified. Qualification There is currently no shareholding qualification for directors. Board Composition, Committees and Independence Under the rules of NASDAQ, “independent” directors must make up a majority of a listed company’s Board of Directors. In addition, applicable NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent within the meaning of the applicable NASDAQ rules. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Our Board has undertaken a review of the independence of each director and considered whether any director has a material relationship with us that could compromise the director’s ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board determined that Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang are independent directors as defined in the listing standards of NASDAQ and SEC rules and regulations. A majority of our directors are independent, as required under applicable NASDAQ rules. As required under applicable NASDAQ rules, our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present. Committees of the Board of Directors We have established three committees under the board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. We have adopted a charter for each of the three committees. Copies of the charters for each committee are available at http://ir.atifchina.com. Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang. Mr. Kwong Sang Liu is the chairman of our audit committee. We have determined that Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. Our board also has determined that Mr. Kwong Sang Liu qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. 47 Compensation Committee. Our compensation committee consists of Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang. Ms. Lei Yang is the chairman of our compensation committee. We have determined that Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang satisfy the “independence” requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things: ● reviewing and approving to the board with respect to the total compensation package for our most senior executive officers; ● approving and overseeing the total compensation package for our executives other than the most senior executive officers; ● reviewing and recommending to the board with respect to the compensation of our directors; ● reviewing periodically and approving any long-term incentive compensation or equity plans; ● selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and ● programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. Nominating and Corporate Governance Committee. Our nominating and corporate governance committee currently consists of Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang. Mr. Yongyuan Chen is the chairman of our nominating and corporate governance committee. Messrs. Kwong Sang Liu and Yongyuan Chen, and Ms. Lei Yang satisfy the “independence” requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy; ● reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; ● identifying and recommending to our board the directors to serve as members of committees; ● advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. Director Qualifications In accordance with its charter, our nominating and corporate governance committee develops and recommends to our board of directors appropriate criteria, including desired qualifications, expertise, skills and characteristics, for selection of new directors and periodically reviews the criteria adopted by our board of directors and, if appropriate, recommends changes to such criteria. 48 Board Diversity Our board of directors desires to seek members from diverse professional backgrounds who combine a strong professional reputation and knowledge of our business and industry with a reputation for integrity. Our board of directors does not have a formal policy with respect to diversity and inclusion but is in process of establishing a policy on diversity. Diversity of experience, expertise and viewpoints is one of many factors the nominating and corporate governance committee considers when recommending director nominees to our board of directors. Further, our board of directors is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. Our board of directors also seeks members that have experience in positions with a high degree of responsibility or are, or have been, leaders in the companies or institutions with which they are, or were, affiliated, but may seek other members with different backgrounds, based upon the contributions they can make to our company. We believe that our current board composition reflects our commitment to diversity in the areas of gender and professional background. Board Diversity Matrix (as of November 1, 2024) Total Number of Directors 5 Female Male Part I: Gender Identity Directors 2 3 Part II: Demographic Background Asian 2 3 Indemnification Agreements We executed a standard form of indemnification agreement (“Indemnification Agreement”) with each of our Board members and executive officers (each, an “Indemnitee”). Pursuant to and subject to the terms, conditions and limitations set forth in the Indemnification Agreement, we agreed to indemnify each Indemnitee, against any and all expenses incurred in connection with proceedings relating to the Indemnitee’s service as our officer and or director, or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, or other entity or enterprise but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interest, and in the case of a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. In addition, the indemnification provided in the indemnification agreement is applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven. Additionally, the Indemnification Agreement establishes processes and procedures for indemnification claims, advancement of expenses and costs and contribution obligations. Employees As of July 31, 2024, we had approximately 8 full-time employees, including 1 in China and 7 in America. The table below sets forth the numbers of employees by functions as of July 31, 2024: Function Number of Employees % of Total Executive Office 1 12.5 % Legal Department 1 12.5 % Financial Department 2 25.0 % IPO Department 2 25.0 % Engineering and IR Department 1 12.5 % Marketing Department 1 12.5 % Total 8 100 % There is no labor union. We believe our relations with our employees are good. 49 ITEM 11. EXECUTIVE COMPENSATION Compensation for our Named Executive Officers The following table sets forth certain information with respect to compensation for the fiscal years ended July 31, 2024 and July 31, 2023 earned by or paid to our chief executive officer and principal executive officer, our principal financial officer, and our other most highly compensated executive officer. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Nonequity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Jun Liu* 2024 120,000 20,000 140,000 President and Chairman of ATIF, CEO of ATIF 2023 240,000 240,000 Yue Ming ** 2024 36,566 36,566 CFO of ATIF 2023 30,240 30,240 * Jun Liu was appointed as our president and chairman of our Board on July 10, 2020, and appointed as our CEO on August 4, 2021. ** Yue Ming was appointed as our CFO On August 4, 2021. We are required by PRC laws and regulations to make contributions equal to certain percentages of each employee’s salary for his or her retirement benefit, medical insurance benefits, housing funds, unemployment, and other statutory benefits. We paid retirement and similar benefits for our executive officers for the fiscal years ended July 31, 2024 and 2023. Benefit Plans We do not have any profit sharing plan or similar plans for the benefit of our officers, directors or employees. However, we may establish such plan in the future. Equity Compensation Plan Information We do not have any equity compensation plan or similar plans for the benefit of our officers, directors or employees. However, we may establish such plan in the future. Outstanding Equity Awards as of July 31, 2024 We had no outstanding equity awards as of July 31, 2024. Nonqualified Deferred Compensation Our named executive officers did not participate in, nor earn any benefits under, a nonqualified deferred compensation plan during the fiscal year ended July 31, 2024. Hedging or Offsetting Against Compensatory Securities We have adopted a policy that our employees (including officers) and directors shall not purchase securities or other financial instruments, or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted as compensation to, or held directly or indirectly by, those persons. We also have adopted a formal claw-back policy for the recovery of incentive-based executive compensation erroneously awarded to executive officers based on misstated financial reporting measures once Nasdaq’s listing standards. 50 Employment Agreements and Arrangements Pursuant to employment agreements, the form of which is filed as Exhibit 10.3 to our F-1 registration statement filed with the SEC on December 11, 2018, we agree to employ each of our executive officers for a specified time period, which will be renewed upon both parties’ agreement thirty days before the end of the current employment term, and payment of cash compensation and benefits became payable when we became a public reporting company in the US. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited to the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice. Each executive officer has agreed to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information. Our employment agreement with Jun Liu, our President and Former CEO, is for a term of three years beginning on June 6, 2019, and provides for an annual salary of $240,000. On July 10, 2020, we amended our employment agreement with Jun Liu to clarify that he had ceased to be employed as our CEO and had been appointed as our president. On August 4, 2021, we amended our employment agreement with Jun Liu to include his appointment as the chief executive officer. On February 29, 2024, we entered into a new employment agreement for a term of three years beginning on February 1, 2024 with Jun Liu which provides for a monthly salary of $1. On April 29, 2024, the Company entered into a deferred salary conversion agreement (“Deferred Salary Conversion Agreement”) with Mr. Jun Liu, the president, chief executive officer and chairman of the board of directors of the Company. Pursuant to the Agreement, the Company agreed to issue and Mr. Liu agreed to accept 384,478 ordinary shares (“Deferred Salary Debt Shares”), $0.001 par value in lieu of an unpaid salary of $349,875 owed to Mr. Liu at a per share price of $0.91 which was the Nasdaq consolidated closing bid price per share of the Company’s ordinary shares on April 29, 2024. Our employment agreement with Yue Ming, our CFO, is for a term of three years beginning on August 9,2021, and provides for an annual salary of US$36,566. Other Benefits Our employees are eligible to participate in various employee benefit plans, including medical, dental, and vision care plans, flexible spending accounts for health and dependent care, life, accidental death and dismemberment, disability, and paid time off. Non-Employee Director Compensation The following table sets forth information concerning the compensation of non-employee directors for services rendered for the year ended July 31, 2024. Jun Liu and Yue Ming are our executive officers and employees and are not included in the table. All compensation earned by Mr. Liu and Ms. Ming for services rendered in their capacity as our executive officers and employees, is included under the heading in this section titled “Compensation for our Named Executive Officers.” Mr. Liu and Ms. Ming received no compensation for their service as a director. Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) All other compensation ($) Total ($) Kwong Sang Liu 18,000 18,000 Yongyuan Chen 18,000 18,000 Lei Yang 14,400 14,400 51 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Ordinary Shares as of the date of this annual report. ● each of our directors and executive officers who beneficially own our Ordinary Shares; and ● each person known to us to own beneficially more than 5.0% of our Ordinary Shares. Beneficial ownership includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Ordinary Shares shown as beneficially owned by them. Percentage of beneficial ownership of each listed person is based on 11,917,452 Ordinary Shares outstanding as of November 12, 2024. Information with respect to beneficial ownership has been furnished by each director, officer, or beneficial owner of 5% or more of our Ordinary Shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares underlying options, warrants, or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this annual report are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all Ordinary Shares shown as beneficially owned by them. Ordinary Shares Beneficially Owned Number Percent Directors and Executive Officers (1) : Jun Liu (2) 5,683,972 47.69 % Yue Ming 0 % Kwong Sang Liu 0 % Yongyuan Chen 0 % Lei Yang 0 % All directors and executive officers as a group (five persons): 5,652,808 47.69 % 5% Shareholders: Tianzhen Investments Limited 3,472,024 29.14 % Eno Group Limited 1,820,000 15.27 % Jinglin Lu 1,092,512 9.17 % * Less than 1% (1) Unless otherwise indicated, the business address of each of the individuals is 25391 Commercentre Dr., Ste 120, Lake Forest, CA. (2) Jun Liu, our President, Chief Executive Officer and Chairman, may be deemed to beneficially own 5,693,972 ordinary shares (as adjusted to reflect the Reverse Split), which consists of (i) 3,472,024ordinary shares, or approximately 29.14%, through his 100% ownership of Tianzhen Investments Limited, (ii) 1,820,000 ordinary shares, or approximately 15.3%, which are held indirectly through a voting rights proxy agreement with Eno Group Limited, which was assigned to Tianzhen Investments Limited. And (iii) 391,948 ordinary shares directly held by Mr. Liu. 52 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Transaction with related parties The following includes a summary of certain relationships and transactions, including transactions since August 1, 2022 to July 31, 2024 and any currently proposed transactions, to which we were or are to be a participant, in which (1) the amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii) one percent (1%) of the average of our total assets for the last two completed fiscal years, and (2) any of our directors, executive officers or holders of more than five percent (5%) of our capital stock, or any affiliate or member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest other than compensation and other arrangements that are described under the section titled “Executive Compensation.” 1) Nature of relationships with related parties The table below sets forth the major related parties and their relationships with the Company, with which the Company entered into transactions during the years ended July 31, 2024 and 2023, or recorded balances as of July 31, 2024 and 2023: Name Relationship with the Company Mr. Jun Liu The Chief Executive Officer of the Company Huaya Wholly owned by Mr. Pishan Chi, the former Chief Executive Officer of the Company Asia International Securities Exchange Co., Ltd. Wholly owned by Mr. Jun Liu Zachary Group LLC (“Zachary Group”) Wholly owned by Mr. Jun Liu 2) Transactions with related parties As of July 31, 2024 2023 Provision of consulting services to related parties Asia International Securities Exchange Co., Ltd. $ 200,000 $ 1,300,000 $ 200,000 $ 1,300,000 In June 2022, the Company entered into an office lease agreement with Zachary Group. Pursuant to the agreement, the Company would lease the office space for a lease term of 5 years, matured in May 2027. The monthly rental fee was $20,000, payable on a monthly basis. On March 1, 2024, the Company and Zachary Group modified the lease agreement to reduce the lease term and office space. The modified agreement was for a lease term of 2 years through February 2026, and monthly rental fee was $3,000, payable on a monthly basis. For the year ended July 31, 2024 and 2023, the Company recorded rental expenses of $95,000 and $240,000, respectively. In April 2024, the Company made a three-month loan of $300,000 to Mr. Jun Liu. The loan was interest free and was fully repaid in July 2024. On April 29, 2024, the Company entered into a deferred salary conversion agreement (“Deferred Salary Conversion Agreement”) with Mr. Jun Liu, the president, chief executive officer and chairman of the board of directors of the Company. Pursuant to the Agreement, the Company agreed to issue and Mr. Liu agreed to accept 384,478 ordinary shares (“Deferred Salary Debt Shares”), $0.001 par value in lieu of an unpaid salary of $349,875 owed to Mr. Liu at a per share price of $0.91 which was the Nasdaq consolidated closing bid price per share of the Company’s ordinary shares on April 29, 2024. During the year ended July 31, 2024, the Company also made a prepayment of $900,000 to Asia International Securities Exchange Co., Ltd. for security purchase. However the transaction was subsequently canceled. The Company expected to collect the prepayments before November 30, 2024. For the year ended July 31, 2023, the Company make a loan of $100,000 to Huaya to support its operations. The loan was interest free and was repayable on demand. For the year ended July 31, 2024 and 2023, Huaya made repayments of $40,539 and $59,461 to the Company. 53 Related Person Transactions Policy We plan to adopt a new written related person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration, and oversight of “related person transactions.” For purposes of policy only, a “related person transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements or relationships) in which we or any of our subsidiaries are participants involving an amount, as long as we are a SEC smaller reporting company, that exceeds the lesser of (a) $120,000 or (b) 1% of the average of our total assets for the last two completed fiscal years, in which any “related person” has a material interest. Transactions involving compensation for services provided to us as an employee, consultant or director will not be considered related person transactions under this policy. A related person is any executive officer, director, nominee to become a director or a holder of more than 5% of any class of our voting securities (including our ordinary shares), including any of their immediate family members and affiliates, including entities owned or controlled by such persons. Under the policy, the related person in question or, in the case of transactions with a holder of more than 5% of any class of our voting securities, an officer with knowledge of a proposed transaction, must present information regarding the proposed related person transaction to our audit committee (or, where review by our audit committee would be inappropriate, to another independent body of our board of directors) for review. To identify related person transactions in advance, we will rely on information supplied by our executive officers, directors and certain significant shareholders. In considering related person transactions, our audit committee will take into account the relevant available facts and circumstances, which may include, but are not limited to: ● the risks, costs, and benefits to us; ● the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated; ● the terms of the transaction; ● the availability of other sources for comparable services or products; ● the terms available to or from, as the case may be, unrelated third parties; and ● our audit committee will approve only those transactions that it determines are fair and in our best interests. Director Independence A majority of our Board of Directors are independent directors, see the discussion above under the section “Item 10. Directors, Executive Officers and Corporate Governance–Board Composition, Committees and Independence.” 54 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Independent Auditor For the years ended July 31, 2024 and 2023, the Company’s independent public accounting firm was ZH CPA, LLC (“ZH CPA”). Fees Paid to Principal Independent Registered Public Accounting Firm The aggregate fees billed by our Independent Registered Public Accounting Firm, for the years ended July 31, 2024 and 2023 are as follows: For the Fiscal Years Ended July 31, 2024 2023 Audit Fees(1) $ 165,000 $ 175,000 Audit-Related Fees(2) - - Tax Fees(3) - - All Other Fees(4) - - Total $ 165,000 $ 175,000 (1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report. (2) Audit-related fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.” (3) ZH CPA did not provide us with tax compliance, tax advice or tax planning services. (4) All other fees include fees billed by our independent auditors for products or services other than as described in the immediately preceding three categories. No such fees were incurred during the fiscal years ended July 31, 2024 and 2023. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm The policy of our audit committee is to pre-approve all audit and non-audit services provided by ZH CPA, LLC, our independent registered public accounting firm, including audit services, audit-related services, tax services and other services as described above. Our independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by our independent registered public accounting firm in accordance with this preapproval, and the fees for the services performed to date. All of the services relating to the fees described in the table above were approved by our audit committee. 55 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) Financial Statements Financial Statements and Report of Independent Registered Public Accounting Firms are set forth on pages F-1 through F-28 of this report. (2) Financial Statement Schedules All schedules have been omitted because the required information is included in the financial statements or notes thereto or because they are not required. 56 (3) Exhibits: The exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below. (b) The following exhibits are filed as part of this Annual Report. Exhibit No. Description 3.1 Form of Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.1 to the registration statement on Form F-1 (File No. 333-228750), as amended, initially filed with the Securities and Exchange Commission on December 11, 2018) 3.2 Amendment No. 1 to Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 1.2 to Form 6-K filed with the Securities and Exchange Commission on September 8, 2021) 3.3 Amendment No. 2 to Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 1.3 to Form 6-K filed with the Securities and Exchange Commission on September 8, 2021) 4(vi) Description of registrant’s securities (incorporated herein by reference to Exhibit 4(vi) to the annual report for the year ended July 31, 2022 filed with the Securities and Exchange Commission on November 2, 2022) 4.1 Registrant’s Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.1 to the registration statement on Form F-1 (File No. 333-228750), as amended, initially filed with the Securities and Exchange Commission on December 11, 2018) 4.2 Form of Warrant (incorporated herein by reference to Exhibit 4.1 to Form 6-K filed with the Securities and Exchange Commission on November 4, 2020) 4.3 Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.2 to Form 6-K filed with the Securities and Exchange Commission on November 4, 2020) 4.4 Form of Warrant (incorporated herein by reference to Exhibit 4.18 to Form F-1 filed with the Securities and Exchange Commission on April 27, 2021) 4.5 Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.19 to Form F-1 filed with the Securities and Exchange Commission on April 27, 2021) 10.1 Agreement of Website (CNNM) Transfer dated September 20, 2018, between ATIF HK and Shenzhen Shangyuan Electronic Commerce Ltd. (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1 (File No. 333-228750), as amended, initially filed with the Securities and Exchange Commission on December 11, 2018) 10.2# Form of Employment Agreement by and between executive officers and the Registrant (incorporated herein by reference to Exhibit 10.3 to the registration statement on Form F-1 (File No. 333-228750), as amended, initially filed with the Securities and Exchange Commission on December 11, 2018) 10.3# Form of Indemnification Agreement between directors and the Registrant (incorporated herein by reference to Exhibit 10.4 to the registration statement on Form F-1 (File No. 333-228750), as amended, initially filed with the Securities and Exchange Commission on December 11, 2018) 10.4 Form of Securities Purchase Agreement (incorporated herein by reference to Exhibit 10.1 to Form 6-K filed with the Securities and Exchange Commission on November 4, 2020) 10.5 Sale and Purchase Agreement regarding issued shares of Leaping Group Co., Ltd. (incorporated herein by reference to Exhibit 99.1 to Form 6-K filed with the Securities and Exchange Commission on January 19, 2021) 10.6 Form of Securities Purchase Agreement (incorporated herein by reference to Exhibit 4.17 to Form F-1 filed with the Securities and Exchange Commission on April 27, 2021) 10.7 Consulting Agreement entered into between ATIF Holdings Limited and Massimo Motor Sports, LLC dated August 10, 2022 (incorporated herein by reference to Exhibit 10.1 to Form 8-K filed with the Securities and Exchange Commission on August 18, 2022) 10.8 Share Transfer Agreement dated May 20, 2022 between ATIF Holdings Inc. and Pishan Chi (incorporated herein by reference to Exhibit 10.8 to the annual report for the year ended July 31, 2022 filed with the Securities and Exchange Commission on November 2, 2022) 10.9 Sale and Purchase Agreement dated August 1, 2022 between ATIF Inc. and Asia Time (HK) International Finance Service Limited (incorporated herein by reference to Exhibit 10.9 to the annual report for the year ended July 31, 2022 filed with the Securities and Exchange Commission on November 2, 2022) 14.1 Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration statement on Form F-1 (File No. 333-228750), as amended, initially filed with the Securities and Exchange Commission on December 11, 2018) 21.1* List of subsidiaries of the Registrant 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Code of Business Conduct and Ethics 97.1 Form of Claw Back Policy 101. INS* Inline XBRL Instance Document 101. SCH* Inline XBRL Taxonomy Extension Schema Document 101. CAL* Inline XBRL Taxonomy Calculation Linkbase Document 101. DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101. LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101. PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith # Indicates management contract or compensatory plan or arrangement. ITEM 16. Form 10-K Summary None. 57 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 13, 2024 ATIF Holdings Limited By: /s/ Jun Liu Name: Jun Liu Title: Chief Executive Officer ( Principal Executive Officer ) By: /s/ Yue Ming Name: Yue Ming Title: Chief Financial Officer ( Principal Financial Officer ) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jun Liu Chief Executive Officer and Chairman of the Board November 13, 2024 Jun Liu ( Principal Executive Officer ) /s/ Yue Ming Chief Financial Officer and Director November 13, 2024 Yue Ming ( Principal Financial and Accounting Officer ) /s/ Kwong Sang Liu Director November 13, 2024 Kwong Sang Liu /s/ Yongyuan Chen Director November 13, 2024 Yongyuan Chen /s/ Lei Yang Director November 13, 2024 Lei Yang 58 FINANCIAL STATEMENTS Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB # 6413 , Denver, CO) F-2 Consolidated Balance Sheets as of July 31, 2024 and 2023 F-3 Consolidated Statements of Operations and Comprehensive Income (loss) for the years ended July 31, 2024 and 2023 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the years ended July 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the years ended July 31, 2024 and 2023 F-6 Notes to Consolidated Financial Statements F-7 to F-23 F- 1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of ATIF Holdings Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of ATIF Holdings Limited and its subsidiaries (the “Company”) as of July 31, 2024 and 2023, and the related consolidated statements of income(loss), comprehensive income(loss), stockholders’ equity, and cash flows for each of the years in the two-year period ended July 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended July 31, 2024, in conformity with accounting principles generally accepted in the United States of America. The Company’s ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred significant losses and negative cash flows from operating activities. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ ZH CPA, LLC We have served as the Company’s auditor since 2021. Denver, Colorado November 13, 2024 F- 2 ATIF HOLDINGS LIMITED CONSOLIDATED BALANCE SHEETS As of July 31, 2024 2023 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,249,376 $ 606,022 Accounts receivable - 650,000 Accounts receivable – a related party 200,000 600,000 Deposits 3,000 86,000 Investment in trading securities 424,148 130,649 Due from a related party 900,000 40,539 Prepaid expenses and other current assets 122,224 429,570 Total current assets 2,898,748 2,542,780 Property and equipment, net 60,047 93,637 Intangible assets, net - 73,331 Right-of- use assets, net 53,793 1,058,822 TOTAL ASSETS $ 3,012,588 $ 3,768,570 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable, accrued expenses and other current liabilities $ 957,057 $ 293,140 Deferred revenue - 70,000 Taxes payable 19,985 31,200 Due to related parties - 729,968 Operating lease liabilities, current 11,375 415,411 Total current liabilities 988,417 1,539,719 Operating lease liabilities, noncurrent 20,417 689,498 Long-term payable 250,000 TOTAL LIABILITIES 1,258,834 2,229,217 Commitments SHAREHOLDERS’ EQUITY Ordinary shares, $ 0.001 par value, 100,000,000,000 shares authorized, 11,917,452 shares and 9,627,452 shares issued and outstanding as of July 31, 2024 and 2023, respectively 11,917 9,627 Additional paid-in capital 32,599,985 29,196,350 Accumulated deficit ( 30,858,148 ) ( 27,666,624 ) Total Shareholders’ Equity 1,753,754 1,539,353 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,012,588 $ 3,768,570 The accompanying notes are an integral part of these consolidated financial statements. F- 3 ATIF HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Years Ended July 31, 2024 2023 Revenues – third parties $ 420,000 $ 1,150,000 Revenues – a related party 200,000 1,300,000 Revenues 620,000 2,450,000 Operating expenses: Selling expenses 333,500 207,238 General and administrative expenses 2,265,612 2,241,626 (Reversal of provision) provision against accounts receivable due from a related party ( 19,103 ) 762,000 Total operating expenses 2,580,009 3,210,864 Loss from operations ( 1,960,009 ) ( 760,864 ) Other income (expenses): Interest income, net 26 1,874 Other (expenses) income, net ( 846,871 ) 314,518 Provision against due from buyers of LGC - ( 2,654,767 ) (Loss) gain from investment in trading securities ( 381,370 ) 192,102 Gain from disposal of subsidiaries and VIE - 56,038 Total other expense, net ( 1,228,215 ) ( 2,090,235 ) Loss before income taxes ( 3,188,224 ) ( 2,851,099 ) Income tax provision ( 3,300 ) ( 31,200 ) Net loss and comprehensive loss $ ( 3,191,524 ) $ ( 2,882,299 ) Loss Per share – basic and diluted $ ( 0.31 ) $ ( 0.30 ) Weighted Average Shares Outstanding – Basic and diluted 10,247,476 9,627,452 The accompanying notes are an integral part of these consolidated financial statements. F- 4 ATIF HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED JULY 31, 2024 AND 2023 Ordinary Share Additional Paid in Accumulated Noncontrolling Shares Amount Capital deficit interests Total Balance at July 31, 2022 9,627,452 $ 9,627 $ 29,496,350 $ ( 24,784,325 ) $ ( 369,045 ) $ 4,352,607 Net loss for the year - - - ( 2,882,299 ) - ( 2,882,299 ) Disposal of ATIF GP - - ( 300,000 ) - 369,045 69,045 Balance at July 31, 2023 9,627,452 $ 9,627 $ 29,196,350 $ ( 27,666,624 ) $ - $ 1,539,353 Net loss for the year - - - ( 3,191,524 ) - ( 3,191,524 ) Issuance of ordinary shares pursuant to a private placement 1,905,522 1,906 2,341,886 - - 2,343,792 Issuance of ordinary shares to settle payroll payable due to a management 384,478 384 349,491 - - 349,875 Waive of liabilities by a related party - - 712,258 - - 712,258 Balance at July 31, 2024 11,917,452 $ 11,917 $ 32,599,985 $ ( 30,858,148 ) $ - $ 1,753,7 54 The accompanying notes are an integral part of these consolidated financial statements. F- 5 ATIF HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended July 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 3,191,524 ) ( 2,882,299 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 112,009 138,805 Amortization of right-of-use assets 273,367 434,135 Loss from early termination of an operating lease 7,690 - Provision against due from buyers of LGC - 2,654,767 (Reversal of provision) provision against accounts receivable due from a related party ( 19,103 ) 762,000 Loss from disposal of property and equipment - 49,702 Loss (gain) from investment in trading securities 381,370 ( 192,102 ) Loss from disposal of a subsidiary - 69,045 Changes in operating assets and liabilities: Accounts receivable 650,000 ( 650,000 ) Accounts receivable – a related party 400,000 ( 600,000 ) Deposits 83,000 55,000 Prepaid expenses and other current assets 309,636 221,644 Deferred revenue ( 70,000 ) ( 20,785 ) Taxes payable ( 11,215 ) 31,200 Accounts payable, accrued expenses and other current liabilities 1,303,432 ( 1,982,117 ) Lease liabilities ( 349,145 ) ( 422,894 ) Net cash used in operating activities ( 120,483 ) ( 2,333,899 ) Cash flows from investing activities: Purchase of property and equipment ( 5,086 ) ( 1,444 ) Proceeds from disposal of property and equipment - 72,000 Payment for investment in trading securities ( 674,869 ) - Proceeds from redemption of trading securities - 94,799 Proceeds from disposal of investment in an equity investee - 335,000 Loans to a related party - ( 100,000 ) Prepayment made to a related party ( 900,000 ) - Collection of loans from a related party - 59,461 Net cash (used in) provided by investing activities ( 1,579,955 ) 459,816 Cash flows from financing activities: Borrowings from a related party - 729,968 Proceeds from issuance of ordinary shares pursuant to a private placement 2,343,792 - Net cash provided by financing activities 2,343,792 729,968 Net increase (decrease) in cash 643,354 ( 1,144,115 ) Cash, beginning of year 606,022 1,750,137 Cash, end of year $ 1,249,376 $ 606,022 Supplemental disclosure of cash flow information: Cash paid for interest expenses $ - $ - Cash paid for income tax $ 14,515 $ - Supplemental disclosure of Non-cash investing and financing activities Right-of-use assets obtained in exchange for operating lease obligations $ 67,571 $ 109,492 Issuance of ordinary shares to settle payroll payable due to a management $ 349,875 $ - Waive of liabilities by a related party $ 712,258 $ - Disposal of right-of-use assets with decrease of operating lease obligations $ 799,232 $ - The accompanying notes are an integral part of these consolidated financial statements. F- 6 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS ATIF Holdings Limited (“ATIF” or the “Company”), formerly known as Eternal Fairy International Limited and Asia Times Holdings Limited, was incorporated under the laws of the British Virgin Islands (“BVI”) on January 5, 2015, as a holding company to develop business opportunities in the People’s Republic of China (the “PRC” or “China”). The Company adopted its current name on March 7, 2019. The Company is primarily engaged in providing business advisory and financial consulting services to small and medium-sized enterprise customers. On October 6 and October 7, 2022, ATIF Inc., a wholly owned subsidiary of ATIF, established ATIF Business Consulting LLC (“ATIF BC”) and ATIF Business Management LLC (“ATIF BM”) under the laws of the State of California of the United States, respectively. On April 25, 2022, the Company established ATIF Investment Limited (“ATIF Investment”) under the laws of BVI. On December 22, 2021, ATIF Inc. established ATIF BD LLC (“ATIF BD”) under the laws of California of the United States. Enter into a sales agreement of ATIF GP On January 21, 2021, the Company incorporated ATIF-1 GP, LLC (“ATIF GP”) under the laws of Delaware of the United States. ATIF GP is a wholly owned subsidiary of the Company, and focuses on fund management business. On February 16, 2021, ATIF-1, LP (“ATIF LP”) was established 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, the Company owns 76.6 % limited partner interest in ATIF, LP. The investment manager for the fund is ATIF Inc. On August 1, 2022, the Company entered into a sales agreement with a third party, pursuant to which the Company sold all of its equity interest in ATIF GP at the cost of $ 50,000 . The management believed the disposition does not represent a strategic shift because it is not changing the way it is running its consulting business. The Company has not shifted the nature of its operations. The termination is not accounted as discontinued operations in accordance with ASC 205-20. Upon the closing of the Agreement, ATIF GP is no longer our subsidiary and ATIF USA ceased to be the investment manager of ATIF LP. Disposal of ATIF HK and Huaya On May 20, 2022, the Company entered into a share transfer agreement with Mr. Pishan Chi, pursuant to which the Company transferred all of its equity interest in ATIF HK and its wholly owned subsidiary, Huaya to Mr. Chi at $nil consideration. Mr. Chi was the Company’s former Chief Executive Officer for the period from July 10, 2020 through August 4, 2021. The transfer of equity interest was closed on May 31, 2022. The transfer of equity interest in ATIF HK and Huaya was for the purpose of mitigation of restrictions on China-based companies raising capital offshore by the PRC government. Upon the transfer of ATIF HK and Huaya, the Company would continue its effort to provide financial consulting services to clients from North America and other areas. The management believed the disposition does not represent a strategic shift because it is not changing the way it is running its business. The Company has not shifted the nature of its operations, not is it exiting the North America market, which is the Company’s major geographic market area. The termination is not accounted as discontinued operations in accordance with ASC 205-20. As of July 31, 2024, the Company’s consolidated financial statements reflect the operating results of the following entities: Name of Entity Date of Incorporation Place of Incorporation % of Ownership Principal Activities Parent company: ATIF Holdings Limited (“ATIF”) January 5, 2015 British Virgin Islands Parent Investment holding Wholly owned subsidiaries of ATIF ATIF Inc. (“ATIF USA”) October 26, 2020 USA 100% Consultancy and information technology support ATIF Investment LLC (“ATIF Investment”) April 25, 2022 BVI 100% Consultancy and information technology support ATIF BD December 22, 2021 USA 100% owned by ATIF USA Consultancy and information technology support ATIF BC October 6, 2022 USA 100% owned by ATIF USA Consultancy and information technology support ATIF BM October 6, 2022 USA 100% owned by ATIF USA Consultancy and information technology support F- 7 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – LIQUIDITY and GOING CONCERN For the years ended July 31, 2024 and 2023, the Company reported a net loss of approximately $ 3.2 million and $ 2.9 million, respectively, and operating cash outflows approximately $ 0.1 million and $ 2.3 million. In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. Because of losses from operations, cash out from operating activities, and the requirement of additional capital to fund our current operating plan at July 31, 2024, these factors indicate the existence of an uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern. As of July 31, 2024, the Company had cash of $ 1.2 million, short-term investment in trading securities of $ 0.4 million, due from a related party of $ 0.9 million and accounts receivables of $ 0.2 million due from a related party, which were highly liquid. On the other hand, the Company had current liabilities of $ 1.0 million. The Company’s cash on hand could well cover the current liabilities. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Use of Estimates In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, revenue recognition, provision necessary for contingent liabilities and realization of deferred tax assets. Actual results could differ from those estimates. F- 8 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents Cash includes cash on hand and demand deposits in accounts maintained with commercial banks. The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains all of its bank accounts in the United States. Accounts Receivable, net On August 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable. Prior to the Company’s adoption of ASU 2016-13, accounts receivable are presented net of allowance for doubtful accounts. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the condensed consolidated statements of operations and comprehensive loss. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. After the adoption of ASU 2016-13, The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to accounts receivable and the estimated credit losses charged to the allowance is classified as “General and administrative expenses” in the consolidated statements of operations and comprehensive loss. The Company uses loss-rate methods to estimate allowance for credit loss. The Company assesses collectability by reviewing accounts receivable on an individual basis because the Company had limited customers and each of them has difference characteristics, primarily based on business line and geographical area. In determining the amount of the allowance for credit losses, the Company multiplied the loss rate with the amortized cost of accounts receivable. The loss rate refers to the corporate default rate published by credit rating companies, which considers current economic conditions, reasonable and supportable forecasts of future economic conditions. Delinquent account balances are written-off against the allowance for credit losses after management has determined that the likelihood of collection is not probable. For the year ended July 31, 2024, the Company did not provide allowance for credit losses. Investment in Trading Securities Equity securities not accounted for using the equity method are carried at fair value with changes in fair value recorded in the consolidated statements of operations and comprehensive loss, according to ASC 321 “Investments — Equity Securities”. During the years ended July 31, 2024 and 2023, the Company purchased certain publicly-listed equity securities through various open market transactions and accounted for such investments as “investment in trading securities” and subsequently measure the investments at fair value. The Company recognized a loss of $ 381,370 and a gain of $ 192,102 from investment in trading securities for the years ended July 31, 2024 and 2023. F- 9 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Property and Equipment, net Property and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows: Useful life Furniture, fixtures and equipment 3 - 5 years Transportation vehicles 5 years Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations and comprehensive loss as other income or expenses. Intangible assets, net The Company capitalizes certain platform and software development costs related to the consulting services during the application development stage. The costs related to preliminary project activities and post-implementation activities are expensed as incurred. Capitalized software development costs are depreciated on a straight-line basis over the estimated useful life of 4 years . Impairment of Long-lived Assets Long-lived assets, including plant and equipment and intangible with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. For the years ended July 31, 2024 and 2023, the Company did not record impairment against long-lived assets, respectively. F- 10 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fair Value of Financial Instruments ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: ● Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. ● Level 3 – inputs to the valuation methodology are unobservable. Fair value of investment in trading securities are based on quoted prices in active markets. The carrying amounts of the Company’s other financial instruments including cash and cash equivalents, accounts receivable, deposits, due from and due to related parties, other current assets, accounts payable, and accrued expenses and other current liabilities approximate their fair values because of the short-term nature of these assets and liabilities. For lease liabilities and long-term payable, fair value approximates their carrying value at the year-end as the interest rates used to discount the host contracts approximate market rates. For the year end July 31, 2024 and 2023, there are no transfers between different levels of inputs used to measure fair value. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 Revenue from Contracts with Customers (“ASC 606”). To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. For the years ended July 31, 2024 and 2023, the Company primarily generated revenues from consulting services to customers who would like to go public. As of July 31, 2024, the Company had uncompleted performance obligation s of $ 400,000 . The Company provides various consulting services to its members, especially to those who have the intention to be publicly listed in the stock exchanges in the United States and other countries. The Company categorizes its consulting services into three Phases: Phase I consulting services primarily include due diligence review, market research and feasibility study, business plan drafting, accounting record review, and business analysis and recommendations. Management estimates that Phase I normally takes about three months to complete based on its past experience. Phase II consulting services primarily include reorganization, pre-listing education and tutoring, talent search, legal and audit firm recommendation and coordination, VIE contracts and other public-listing related documents review, merger and acquisition planning, investor referral and pre-listing equity financing source identification and recommendations, and independent directors and audit committee candidate’s recommendation. Management estimates that Phase II normally takes about eight months to complete based on its past experience. Phase III consulting services primarily include shell company identification and recommendation for customers expecting to become publicly listed through reverse merger transaction; assistance in preparation of customers’ public filings for IPO or reverse merger transactions; and assistance in answering comments and questions received from regulatory agencies. Management believes it is very difficult to estimate the timing of this phase of service as the completion of Phase III services is not within the Company’s control. F- 11 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue Recognition (continued) Each phase of consulting services is stand-alone and fees associated with each phase are clearly identified in service agreements. Revenue from providing Phase I and Phase II consulting services to customers is recognized ratably over the estimated completion period of each phase as the Company’s performance obligations related to these services are carried out over the whole duration of each Phase. Revenue from providing Phase III consulting services to customers is recognized upon completion of the reverse merger transaction or IPO transaction when the Company’s promised services are rendered and the Company’s performance obligations are satisfied. Revenue that has been billed and not yet recognized is reflected as deferred revenue on the balance sheet. Depending on the complexity of the underlying service arrangement and related terms and conditions, significant judgments, assumptions, and estimates may be required to determine when substantial delivery of contract elements has occurred, whether any significant ongoing obligations exist subsequent to contract execution, whether amounts due are collectible and the appropriate period or periods in which, or during which, the completion of the earnings process occurs. Depending on the magnitude of specific revenue arrangements, adjustment may be made to the judgments, assumptions, and estimates regarding contracts executed in any specific period. Income Taxes The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50 % likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company did not have unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of July 31, 2024. As of July 31, 2024, all of the Company’s income tax returns for the tax years ended December 31, 2019 through December 31, 2023 remain open for statutory examination by relevant tax authorities. Loss per Share The Company computes loss per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the years ended July 31, 2024 and 2023, there were no dilutive shares. F- 12 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Operating Leases Upon adoption of ASC 842, the lease liabilities are recognized upon lease commencement for operating leases based on the present value of lease payments over the lease term. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. As the rates implicit in the lease cannot be readily determined, the incremental borrowing rates at the lease commencement date are used in determining the imputed interest and present value of lease payments. The incremental borrowing rates were determined using a portfolio approach based on the rates of interest that the Company would have to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company recognizes the single lease cost on a straight-line basis over the remaining lease term for operating leases. The Company has elected not to recognize right-of-use assets or lease liabilities for leases with an initial term of 12 months or less; expenses for these leases are recognized on a straight-line basis over the lease term. Government grants Government grants include cash subsidies from various government agencies received by the subsidiaries of the Company. Government grants are recognized as other income when all conditions attached to the grants are fulfilled and recorded in the unaudited condensed consolidated statements of operations and comprehensive loss. For the fiscal years ended July 31, 2024 and 2023, the Company received Employee Retention Tax Credit of $ 51,896 and $ nil from Internal Review Service (“IRS”) of the United States. Statement of Cash Flows In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are formulated based upon the local currencies. Segment reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is Mr. Liu, the Chairman of the Board of Directors and CEO. The Company’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but not limited to, customer base, homogeneity of service and technology. The Company’s operating segments are based on such organizational structure and information reviewed by the CODM to evaluate the operating segment results. Based on management’s assessment, the management has determined that the Company now operates in one operating segment with one reporting segment as of July 31, 2024 and 2023, which is the consulting service business. Commitments and Contingencies In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. F- 13 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Risks and Uncertainty (a) Credit risk As of July 31, 2024, the Company held cash and cash equivalents of $ 395,506 deposited in the banks located in the U.S., which were insured by FDIC up to $ 250,000 , and held cash and cash equivalents of $ 841,409 deposited in the investment bank accounts located in the U.S. and cash and cash equivalents of $ 12,461 deposited in an investment bank accounts located in Singapore, which are not insured by FDIC. (b) Concentration risk Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company has a concentration of its revenues and receivables with specific customers. For the year ended July 31, 2024, two customers accounted for 40 % and 32 % of the Company’s consolidated revenue, respectively. For the year ended July 31, 2023, three customers accounted for 53 %, 25 % and 22 % of the Company’s consolidated revenue, respectively. As of July 31, 2024, one related party customer accounted for 100 % of the Company’s consolidated accounts receivable, respectively. As of July 31, 2023, two customers accounted for 54 % and 46 % of the Company’s consolidated accounts receivable, respectively. For the years ended July 31, 2024 and 2023, substantially all of the Company’s revenues was generated from providing going public related consulting services to customers. The risk is mitigated by the Company’s plan to transition its consulting services from the PRC based customers to more international customers. (c) Other risks and uncertainties The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s operations. F- 14 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (the “SEC”) Regulation S-X 210.4-08(h), Rules of General Application — General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company is in the process of evaluating the impact of ASU 2023-09 on the consolidated financial statements. In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — Codification Amendments in Response to SEC’s Disclosure Update and Simplification Initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows — Overall, 250-10 Accounting Changes and Error Corrections — Overall, 260-10 Earnings Per Share — Overall, 270-10 Interim Reporting — Overall, 440-10 Commitments — Overall, 470-10 Debt — Overall, 505-10 Equity — Overall, 815-10 Derivatives and Hedging — Overall, 860-30 Transfers and Servicing — Secured Borrowing and Collateral, 932-235 Extractive Activities — Oil and Gas — Notes to Financial Statements, 946-20 Financial Services — Investment Companies — Investment Company Activities, and 974-10 Real Estate — Real Estate Investment Trusts — Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of the above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the codification with the SEC’s regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal. The Company is in the process of evaluating the impact of ASU 2023-06 on the consolidated financial statements. In March 2023, the FASB issued new accounting guidance, ASU 2023-01, for leasehold improvements associated with common control leases, which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. The new guidance introduced two issues: terms and conditions to be considered with leases between related parties under common control and accounting for leasehold improvements. The goals for the new issues are to reduce the cost associated with implementing and applying Topic 842 and to promote diversity in practice by entities within the scope when applying lease accounting requirements. The Company assessed that the adoption of ASU 2023-01 had no significant impact on the consolidated financial statements. Recently issued ASUs by the FASB, except for the ones mentioned above, have no material impact on the Company’s consolidated results of operations or financial position. F- 15 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: As of July 31, 2024 2023 Prepayment for advertising service fee (a) $ 120,000 $ 408,000 Advance to vendors - 10,000 Others 2,224 11,570 Total $ 122,224 $ 429,570 (a) Prepayment for advertising services represent the advance payments made by the Company to a third party advertising company for producing advertising contents. These prepayments are typically expensed over the period when the services are performed. NOTE 5 – PROPERTY, PLANT AND EQUIPMENT, NET Property and equipment, net consisted of the following: As of July 31, 2024 2023 Furniture, fixtures and equipment $ 209,290 $ 204,204 Less: accumulated depreciation ( 149,243 ) ( 110,567 ) Property and equipment, net $ 60,047 $ 93,637 For the year ended July 31, 2024, the Company did not dispose of property and equipment. For the year ended July 31, 2023, the Company disposed vehicles with original value of $ 132,670 and net book value of $ 111,940 , and other equipment with original value of $ 15,471 and net book value of $ 9,762 . The Company received proceeds of $ 72,000 , and recognized loss of $ 49,702 on disposal of property and equipment. Depreciation expense was $ 38,677 and $ 58,805 for the years ended July 31, 2024 and 2023, respectively. NOTE 6 – INTANGIBLE ASSETS Net intangible assets consisted of the following: As of July 31, 2024 2023 Total $ 320,000 $ 320,000 Less: accumulated amortization ( 320,000 ) ( 246,669 ) Intangible assets $ - $ 73,331 Amortization expense was $ 73,331 and $ 80,000 for the years ended July 31, 2024 and 2023, respectively. NOTE 7 – INVESTMENTS IN TRADING SECURITIES As of July 31, 2024 and 2023, the balance of investments in trading securities represented certain equity securities of listed companies purchased through various open market transactions by the Company during the relevant periods. The investments are initially recorded at cost, and subsequently measured at fair value with the changes in fair value recorded in other income (expenses), net in the consolidated statement of operations and comprehensive loss. For the years ended July 31, 2024 and 2023, the Company recorded a decrease in fair value of $ 381,370 and an increase in fair value of $ 192,102 , respectively. F- 16 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – OPERATING LEASES As of July 31, 2024, the Company leases offices space under one non-cancelable operating lease with a related party lessor (Note 11). During the year ended July 31, 2024, the Company modified the office lease arrangement, pursuant to which the remaining lease term was modified from 38 months to 24 months, and the office space is reduced. During the year ended July 31, 2024, the Company early terminated a car lease arrangement, and recognized losses of $ 62,282 arising from early termination in the consolidated statements of operations comprehensive loss. The losses of $ 62,282 was comprised of $ 7,690 arising from the derecognition of operating right-of-use assets and operating lease liabilities, and $ 54,592 arising from penalties. During the year ended July 31, 2023, the Company entered into a car lease arrangement with a third party lessor with lease term of 48 months. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Rent expenses for the years ended July 31, 2024 and 2023 were $ 240,771 and $ 497,746 , respectively. Effective August 1, 2019, the Company adopted the new lease accounting standard using a modified retrospective transition method, which allows the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allows the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed below. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term. The following table presents the operating lease related assets and liabilities recorded on the balance sheets as of July 31, 2024 and 2023. As of July 31, 2024 2023 Right-of- use assets, net $ 53,793 $ 1,058,822 Operating lease liabilities, current $ 11,375 $ 415,411 Operating lease liabilities, noncurrent 20,417 689,498 Total operating lease liabilities $ 31,792 $ 1,104,909 The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of July 31, 2024 and 2023: As of July 31, 2024 2023 Remaining lease term and discount rate Weighted average remaining lease term (years) 1.58 3.35 Weighted average discount rate 8.50 % 4.90 % F- 17 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – OPERATING LEASES (continued ) The following is a schedule of maturities of lease liabilities as of July 31, 2024 and 2023: As of July 31, 2024 2023 2024 $ - $ 457,708 2025 14,000 267,239 2026 21,000 267,239 2027 and thereafter - 204,540 Total lease payments 35,000 1,196,726 Less: imputed interest ( 3,208 ) ( 91,817 ) Present value of lease liabilities $ 31,792 $ 1,104,909 NOTE 9 – ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES, AND OTHER LONG-TERM LIABILITIES Accounts payable, accrued expenses and other current liabilities consisted of the following: As of July 31, 2024 2023 Accounts payable, accrued expenses and other current liabilities: Accrued litigation fee, current (a) $ 750,000 $ - Investment securities payable $ 69,621 - Accrued payroll expenses - 212,953 Others 137,436 80,187 $ 957,057 $ 293,140 Other long-term liabilities: Accrued litigation fee, noncurrent (a) $ 250,000 $ - (a) On September 24, 2024, the Company and Boustead Securities, LLC (“Boustead”) entered into a settlement agreement, pursuant to which the Company would compensate Boustead in the amount of $ 1,000,000 (Note 14). The compensation is payable in three instalments, with first instalment of $ 250,000 payable with execution of settlement agreement, the second instalment of $ 500,000 payable before March 1, 2025, and the final instalment of $ 250,000 payable before December 31, 2025. Accordingly, the Company recorded accrued litigation fees of $ 750,000 as current liabilities, and the remaining $ 250,000 as noncurrent liabilities. NOTE 10 – DEFERRED REVENUE As of July 31, 2024 and 2023, the balance of deferred revenue represented the Company’s contract liabilities, including payments received in advance of providing consulting services which will be recognized as revenue as the Company completed the performances. As of July 31, 2024 and 2023, the Company had deferred revenues of $ nil and $ 70,000 , respectively. For the years ended July 31, 2024 and 2023, $ 70,000 and $ 20,785 of advance from customer balance as of July 31, 2023 and 2022 were recognized as revenues in the year ended July 31, 2024 and 2023, respectively. F- 18 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 – RELATED PARTY TRANSACTIONS 1) Nature of relationships with related parties The table below sets forth the major related parties and their relationships with the Company, with which the Company entered into transactions during the years ended July 31, 2024 and 2023, or recorded balances as of July 31, 2024 and 2023: Name Relationship with the Company Mr. Jun Liu The Chief Executive Officer of the Company Huaya Wholly owned by Mr. Pishan Chi, the former Chief Executive Officer of the Company Asia International Securities Exchange Co., Ltd. Wholly owned by Mr. Jun Liu Zachary Group LLC (“Zachary Group”) Wholly owned by Mr. Jun Liu 2) Transactions with related parties As of July 31, 2024 2023 Provision of consulting services to related parties Asia International Securities Exchange Co., Ltd. $ 200,000 $ 1,300,000 $ 200,000 $ 1,300,000 In June 2022, the Company entered into an office lease agreement with Zachary Group. Pursuant to the agreement, the Company would lease the office space for a lease term of 5 years , matured in May 2027. The monthly rental fee was $ 20,000 , payable on a monthly basis. On March 1, 2024, the Company and Zachary Group modified the lease agreement to reduce the lease term and office space. The modified agreement was for a lease term of 2 years through February 2026, and monthly rental fee was $ 3,000 , payable on a monthly basis. For the year ended July 31, 2024 and 2023, the Company recorded rental expenses of $ 95,000 and $ 240,000 , respectively. In April 2024, the Company made a three-month loan of $ 300,000 to Mr. Jun Liu. The loan was interest free and was fully repaid in July 2024. On April 29, 2024, the Company entered into a deferred salary conversion agreement (“Deferred Salary Conversion Agreement”) with Mr. Jun Liu, the president, chief executive officer and chairman of the board of directors of the Company. Pursuant to the Agreement, the Company agreed to issue and Mr. Liu agreed to accept 384,478 ordinary shares (“Deferred Salary Debt Shares”), $ 0.001 par value in lieu of an unpaid salary of $ 349,875 owed to Mr. Liu at a per share price of $ 0.91 which was the Nasdaq consolidated closing bid price per share of the Company’s ordinary shares on April 29, 2024. For the year ended July 31, 2023, the Company make a loan of $ 100,000 to Huaya to support its operations. The loan was interest free and was repayable on demand. For the year ended July 31, 2024 and 2023, Huaya made repayments of $ 40,539 and $ 59,461 to the Company. 3) Balances with related parties As of July 31, 2024 and 2023, the balances due from related parties were as follows: As of July 31, 2024 2023 Accounts receivable: Asia International Securities Exchange Co., Ltd. $ 200,000 $ 600,000 $ 200,000 $ 600,000 Other receivable: Asia International Securities Exchange Co., Ltd. (a) $ 900,000 $ - Huaya - 40,539 $ 900,000 $ 40,539 (a) During the year ended July 31, 2024, the Company also made a prepayment of $ 900,000 to Asia International Securities Exchange Co., Ltd. for security purchase. However the transaction was subsequently canceled. The Company expected to collect the prepayments before November 30, 2024. (b) During the year ended July 31, 2023, the Company provided full provision of $ 762,000 against accounts receivable due from Huaya because the management assessed the collection was remote. For the year ended July 31, 2024, Huaya paid salaries of $ 19,103 on behalf of the Company, and the Company reversed provision of $ 19,103 against accounts receivable due from Huaya. F- 19 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 – RELATED PARTY TRANSACTIONS ( continued ) As of July 31, 2024 and 2023, the balances due to related parties were as follows: As of July 31, 2024 2023 Other payables: Asia International Securities Exchange Co., Ltd. $ - $ 729,968 $ - $ 729,968 In April 2024, Asia International Securities Exchange Co., Ltd. waived debts of $ 712,258 due from the Company. The forgiveness of liabilities was considered as a contribution from the principal shareholder and recorded as additional paid-in capital. NOTE 12 – TAXES The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. British Virgin Islands Under the current laws of the British Virgin Islands, the Company and ATIF Investment are not subject to tax on income or capital gains in the British Virgin Islands. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed. USA For the US jurisdiction, ATIF Inc., ATIF BC, ATIF BM, ATIF BD are subject to federal and state income taxes on its business operations. The federal tax rate is 21 % and state tax rate is 8.84 %. The Company also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which both were passed in 2020, no material impact on the Company is expected based on the analysis. The Company will continue to monitor the potential impact going forward. For the year ended July 31, 2024, the Company incurred current income tax expenses of $ 3,300 , all of which was state income tax expenses. For the year ended July 31, 2023, the Company incurred current income tax expenses of $ 31,200 , including federal income tax expenses of $ 22,800 and state income tax expenses of $ 8,400 , respectively. The following table reconciles the statutory federal rate of 21 % for the years ended July 31, 2024 and 2023 to the Company’s effective tax rate: For the Years Ended July 31, 2024 2023 % % Statutory federal rate 21 21.0 State tax rate, net of statutory federal effect 8.8 8.8 Rate differential ( 17.2 ) ( 23.8 ) Permanent difference on non-deductible expenses ( 0.1 ) ( 0.1 ) Permanent difference on non-taxable income 0.5 - Utilization of net operation losses brought forward - ( 4.8 ) Change in valuation allowance ( 13.1 ) ( 2.2 ) Effective tax rate ( 0.1 ) ( 1.1 ) F- 20 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 – TAXES (continued) Deferred tax assets and liabilities The Company’s deferred tax assets and liabilities are comprised of the following: As of July 31, 2024 2023 Net operating losses $ 743,120 $ 282,004 Operating lease - 13,780 Property, equipment and others - 11,503 Gross deferred tax assets 743,120 307,287 Operating lease ( 6,565 ) - Property, equipment and others ( 10,262 ) - Gross deferred tax liabilities ( 16,827 ) - Gross deferred tax assets, net of gross deferred tax liabilities 726,293 307,287 Less: valuation allowance ( 726,293 ) ( 307,287 ) Deferred tax assets, net of valuation allowance $ - $ - The Company follows ASC 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company’s deferred tax assets primarily derived from the net operating loss (“NOL”). For the years ended July 31, 2024 and 2023, the Company suffered net operating losses due to limited number of customers for ATIF’s consulting service. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion or all of the deferred tax assets will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes, and other relevant factors. As of July 31, 2024 and 2023, management believes that the realization of the deferred tax assets appears to be uncertain and may not be realizable in the near future. Therefore, a 100 % valuation allowance has been provided against the deferred tax assets. Uncertain tax positions The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 % likely of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. There were no uncertain tax positions as of July 31, 2024 and 2023 and the Company does not believe that its unrecognized tax benefits will change over the next twelve months. F- 21 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 – EQUITY Ordinary shares As of July 31, 2023, the Company had a total of 9,627,452 ordinary shares issued and outstanding. On April 23, 2024, the Company issued an aggregate 1,905,522 ordinary shares to three investors, at the purchase price of $ 1.23 per ordinary share. The Company raised gross proceeds of $ 2,343,792 from the private placements. The difference of $ 2,341,886 between the par value of ordinary shares and the gross proceeds were recorded as additional paid-in capital. On April 30, 2024, the Company issued and Mr. Jun Liu agreed to accept 384,478 ordinary shares to settle accrued payroll expenses due to Mr. Liu (Note 11). The difference of $ 349,491 between the par value of ordinary shares and carrying amount of accrued payables is recorded as additional paid in capital. As of July 31, 2024, the Company had a total of 11,917,452 ordinary shares issued and outstanding. Additional paid-in capital As of July 31, 2023, the Company had additional paid-in capital of $ 29,196,350 . As mentioned in Note 13 – Equity - ordinary shares , the Company had an increase in additional paid-in capital $ 2,341,886 and $ 349,491 , respectively, from issuance of shares in private placements and to settle accrued payable due to Mr. Jun Liu. For the year ended July 31, 2024, the Company entered into an agreement with Asia International Securities Exchange Co., Ltd., which waived debts of $ 712,258 due from the Company. The forgiveness of liabilities was considered as a contribution from the principal shareholder and recorded as additional paid-in capital. As of July 31, 2024, the Company had additional paid-in capital of $ 32,599,985 . NOTE 14 – CONTIGENCIES From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Legal Proceeding with Boustead Securities, LLC (“Boustead”) On May 14, 2020, Boustead filed a lawsuit against the Company and LGC for breaching the underwriting agreement Boustead had with each of the Company and LGC, in which Boustead was separately engaged as the exclusive financial advisor to provide financial advisory services to the Company and LGC. In April 2020, the Company acquired 51.2 % equity interest in LGC after LGC terminated its efforts to launch an IPO on its own. Boustead alleged that the acquisition transaction between the Company and LGC was entered into during the tail period of the exclusive agreement between Boustead and the Company, and therefore deprived Boustead of compensation that Boustead would otherwise have been entitled to receive under its exclusive agreement with the Company and LGC. Therefore, Boustead is attempting to recover from the Company an amount equal to a percentage of the value of the transaction it conducted with LGC. F- 22 ATIF HOLDINGS LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14 – CONTIGENCIES (continued) Boustead’s Complaint alleges four causes of action against the Company, including breach of contract; breach of the implied covenant of good faith and fair dealing; tortious interference with business relationships and quantum meruit. On October 6, 2020, ATIF filed a motion to dismiss Boustead’s Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and 12(b)(5). On October 9, 2020, the United States District Court for the Southern District of New York directed Boustead to respond to the motion or amend its Complaint by November 10, 2020. Boustead opted to amend its complaint and filed the amended complaint on November 10, 2020. Boustead’s amended complaint asserts the same four causes of action against ATIF and LGC as its original complaint. The Company filed another motion to dismiss Boustead’s amended complaint on December 8, 2020. On August 25, 2021, the United States District Court for the Southern District of New York granted ATIF’s motion to dismiss Boustead’s first amended complaint. In its order and opinion, the United States District Court for the Southern District of New York allowed Boustead to move for leave to amend its causes of action against ATIF as to breach of contract and tortious interference with business relationships, but not breach of the implied covenant of good faith and fair dealing and quantum meruit. On November 4, 2021, Boustead filed a motion seeking leave to file a second amended complaint to amend its cause of action for Breach of Contract. The Court granted Boustead’s motion for leave and Boustead filed the second amended complaint on December 28, 2021 alleging only breach of contract and dropping all other causes of action alleged in the original complaint. On January 18, 2022, the Company filed a motion to dismiss Boustead’s second amended complaint. Boustead filed its opposition on February 1, 2022 and the Company replied on February 8, 2022. On July 6, 2022, the Court denied our motion to dismiss the second amended complaint. Thereafter, on August 3, 2022, the Company filed a motion to compel arbitration of Boustead’s claims in California. Briefing on the Company’s motion to compel concluded on August 23, 2022. Since the agreement between ATIF and Boustead contains a valid arbitration clause that applies to Boustead’s breach of contract claim, and the parties have not engaged in discovery, on February 14, 2023, the Court ordered that ATIF’s motion to compel arbitration is granted and this case is stayed pending arbitration. On March 10, 2023, Boustead, filed Demand for Arbitration against ATIF (the Respondent) before JAMS in California and the assigned JAMS case Ref. No. is 5220002783. On May 25, 2023, ATIF filed its answer to deny Boustead’s Demand for Arbitration, which was unsuccessful and the arbitration process was initiated. The arbitrator ordered a motion to be filed by Boustead for a determination of contact interpretation, prior to extensive discovery into issues such as the alleged merits and damages, and to determine whether the contract interpretation should allow the matter to further proceed. Boustead had filed the Motion for Contract Interpretation Determination. ATIF filed its opposition to that Motion on October 16, 2023. The hearing on the motion was held on November 8, 2023, during which the arbitrator extended the hearing to February 29, 2024. The arbitrator also established December 15, 2023, as the deadline for Boustead to submit its reply regarding the contract interpretation issues raised by the Company. Simultaneously, the Company was granted until February 12, 2024, to present its response brief. On September 24, 2024, the Company and Boustead entered into a settlement agreement, pursuant to which the Company shall pay a total amount of $ 1,000,000 to Boustead. The payment is made in three instalments, the first instalment of $ 250,000 is payable upon execution of the settlement agreement, the second instalment of $ 500,000 is payable before March 1, 2025, and the final instalment of $ 250,000 is payable before December 31, 2025. Pending Legal Proceeding with J.P Morgan Securities LLC (“JPMS”) On December 22, 2023, J.P Morgan Securities LLC (“JPMS”) filed a lawsuit in the Superior Court of California, County of Orange, bearing Case Number 30-2023-01369978-CU-FR-CJC against ATIF Holdings Limited (“Holdings”), ATIF Inc., ATIF-1 GP, LLC (ATIF-1 GP”), and two officers of Holdings and ATIF Inc., Jun Liu and Zhiliang “Ian” Zhou, alleging and asserting that it is entitled to recover $ 5,064,160 in damages plus interest and attorneys’ fees relating to a stock transaction by ATIF-1 GP. The parties have agreed to attempt to mediate the dispute before proceeding to litigation. A mediation was held on May 6, 2024, but the parties could not come to a resolution. The Defendants’ time to respond to the lawsuit was May 20, 2024. On May 15, 2024, the Defendants filed a Petition with the Superior Court of California seeking to compel arbitration under the operative agreements and stay the underlying State Court action. On or about August 16, 2024, the parties agreed that JPMS and ATIF-1 GP, LLC would submit any disputes between the two of them only, to FINRA arbitration, and stay the California state court case pending such arbitration. At this time, the management is still in the process of evaluating the claims and defenses. NOTE 15 – SUBSEQUENT EVENTS In connection with the legal proceeding with Boustead (Note 14), on September 24, 2024, the Company and Boustead entered into a settlement agreement, pursuant to which the Company shall pay a total amount of $ 1,000,000 to Boustead. The payment is made in three instalments, the first instalment of $ 250,000 is payable upon execution of the settlement agreement, the second instalment of $ 500,000 is payable before March 1, 2025, and the final instalment of $ 250,000 is payable before December 31, 2025. F-23