ATIF Holdings (AUC) risk factors, FY2024 10-K

Risks Relating to our Business

1. 01We have a limited operating history and are subject to the risks encountered by early-stage companies
2. 02We have incurred net losses for the year ended July 31, 2024 and expect losses to continue in the near future
3. 03Raising additional capital may cause dilution to our existing stockholders
4. 04Stockholders’ Equity Requirement
5. 05As of July 31, 2024, the Company’s stockholders’ equity was $1,753,754
6. 06Our historical financial results may not be indicative of our future performance
7. 07Substantial doubt about our ability to continue as a going concern
8. 08We may incur liability for unpaid taxes, including interest and penalties
9. 09Changes in the U.S. capital markets could make our services less attractive to our clients and adversely affect our business and financial condition
10. 10Failure to maintain or enhance our brand or image could have a material and adverse effect on our business and results of operations
11. 11We may not be successful in implementing important new strategic initiatives, which may have an adverse impact on our business and financial results
12. 12Increasing competition within our industry could have an impact on our business prospects
13. 13Our results of operations and cash flows may fluctuate due to the non-recurring nature of our going public consulting services provided to our clients
14. 14Arbitration proceedings, legal proceedings, investigations, and other claims or disputes are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures, or prevent us from taking certain actions, any of which could adversely affect our business
15. 15On 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
16. 16Boustead’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
17. 17We may be subject to damages resulting from unauthorized access or hacking and other cyber risks
18. 18If we fail to hire, train, and retain qualified managerial and other employees, our business and results of operations could be materially and adversely affected
19. 19Any failure to protect our trademarks and other intellectual property rights could have a negative impact on our business
20. 20We depend heavily on a limited number of clients
21. 21We rely on information management systems and any damage, interruption or compromise of our information management systems or data could disrupt and harm our business
22. 22We may not be successful in the implementation of our business strategy or our business strategy may not be successful, either of which will impede our development and growth
23. 23Our service offerings may not be accepted

Risks Relating to Doing Business in China

1. 24Changes in China’s economic, political, or social conditions or government policies could have a material adverse effect on our business and operations
2. 25The Chinese government exerts substantial influence over the manner in which we conduct our business activities in PRC
3. 26For example, the Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that Didi Global Inc.’s application be removed from all the smartphone application stores in China
4. 27Changes in the policies of the PRC government could have a significant impact upon our ability to generate revenue from the PRC
5. 28We may face negative tax implications due to the termination of the VIE structure
6. 29Risks related to a future determination that the Public Company Accounting Oversight Board (the “PCAOB”) is unable to inspect or investigate our auditor completely

Risks Relating to the our Ordinary Shares

1. 30The Warrants we sold in a Private Placement Completed on November 5, 2020 contain repricing features which may have the effect of limiting our ordinary share price and make it more expensive to raise capital in the future
2. 31Sales of a significant number of our Ordinary Shares in the public market, or the perception that such sales could occur, could depress the market price of our Ordinary Shares
3. 32Our largest shareholder owns approximately 47.4% of our Ordinary Shares, which will allow him the ability to elect directors and approve matters requiring shareholder approval by way of resolution of members
4. 33Since we are deemed a “controlled company” under the Nasdaq listing rules, we may follow certain exemptions from certain corporate governance requirements that could adversely affect our public shareholders
5. 34We do not intend to pay dividends for the foreseeable future
6. 35If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud
7. 36If securities or industry analysts do not publish research or reports about our business, or if the publish a negative report regarding our Ordinary Shares, the price of our Ordinary Shares and trading volume could decline
8. 37The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance
9. 38If we were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business and the price of our Ordinary Shares
10. 39Anti-takeover provisions in our amended and restated memorandum and articles of association may discourage, delay, or prevent a change in control
11. 40Because we are a BVI company, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain
12. 41Our board of directors may decline to register transfers of ordinary shares in certain circumstances
13. 42(v) the proceedings pursuant to which judgment was obtained were not contrary to natural justice
14. 43You may have more difficulty protecting your interests than you would as a shareholder of a U.S. corporation
15. 44The laws of BVI provide limited protections for minority shareholders, so minority shareholders will not have the same options as to recourse in comparison to the United States if the shareholders are dissatisfied with the conduct of our affairs
16. 45There are no pre-emptive rights in favor of holders of ordinary shares so you may not be able to participate in future equity offerings
17. 46Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets
18. 47Volatility in the market price of our ordinary shares could lead to losses by investors