U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31,April 30, 2023
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 333-184061
| TIANCI INTERNATIONAL, INC. | |||
| (Exact Name of Registrant in its Charter) | |||
| Nevada | 45-5440446 | ||
| (State or Other Jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. No.) | ||
20 Holbeche Road, Arndell Park, NSW, Australia 2148 | |||
(Address of Principal Executive Offices)
| |||
| Issuer’s Telephone Number: | |||
| (Registrant's telephone number, including area code) | |||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading | Name of each exchange on which registered |
| None | None | Not Applicable |
Indicate by check mark whether the registrantRegistrant (1) has filed all reports required to be filed by SectionSections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).files.) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”,company,” and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☒ Smaller reporting company ☒Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to sectionSection 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
March 7,June 13, 2023
Common Voting Stock:
TIANCI INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED JANUARY 31,APRIL 30, 2023
TABLE OF CONTENTS
| i |
PART I – FINANCIAL INFORMATION
| ITEM 1 | FINANCIAL STATEMENTS |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(EXPRESSED IN UNITED STATES DOLLARS)
| January 31, | July 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 13,164 | $ | 9,000 | ||||
| Prepaid expenses | 250 | 1,750 | ||||||
| Prepaid management compensation | – | 11,500 | ||||||
| Total Current Assets | 13,414 | 22,250 | ||||||
| TOTAL ASSETS | $ | 13,414 | $ | 22,250 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities (including unpaid accrued compensation to officers and directors of $120,800 and $41,800, respectively) | $ | 123,928 | $ | 50,499 | ||||
| Due to related parties | 250,909 | 194,888 | ||||||
| Total Current Liabilities | 374,837 | 245,387 | ||||||
| Total Liabilities | 374,837 | 245,387 | ||||||
| Commitments and Contingencies | – | – | ||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Series A Preferred stock, $ par value; shares authorized; and shares issued and outstanding as of January 31, 2023 and July 31, 2022, respectively | 8 | – | ||||||
| Undesignated preferred stock, $ par value; shares authorized; shares issued and outstanding | – | – | ||||||
| Common stock, $par value, shares authorized; shares issued and outstanding | 245 | 245 | ||||||
| Additional paid-in capital | 1,501,014 | 1,477,022 | ||||||
| Accumulated deficit | (1,862,690 | ) | (1,700,404 | ) | ||||
| Total Stockholders' Deficit | (361,423 | ) | (223,137 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 13,414 | $ | 22,250 | ||||
| April 30, | July 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 263,069 | $ | 21,237 | ||||
| Accounts receivable | 115,004 | 737,663 | ||||||
| Prepaid expense and other current assets | 2,500 | – | ||||||
| Due from related party | 54,134 | – | ||||||
| Total current assets | 434,707 | 758,900 | ||||||
| Other assets: | ||||||||
| Lease security deposit | 1,542 | 1,439 | ||||||
| Right-of-Use asset | 7,496 | – | ||||||
| Deferred income tax | – | – | ||||||
| Total non-current assets | 9,038 | 1,439 | ||||||
| TOTAL ASSETS | $ | 443,745 | $ | 760,339 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 146,789 | $ | 444,944 | ||||
| Income taxes payable | 16,422 | 14,202 | ||||||
| Due to related parties | 294,943 | 194,794 | ||||||
| Lease liability - current | 4,316 | – | ||||||
| Advance from customers | 32,636 | – | ||||||
| Accrued liabilities and other payables | 191,892 | 1,640 | ||||||
| Total current liabilities | 686,998 | 655,580 | ||||||
| Lease liability - noncurrent | 3,180 | – | ||||||
| Total liabilities | 690,178 | 655,580 | ||||||
| Commitments and contingencies | – | – | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Series A Preferred stock, $ par value; shares authorized; and shares issued and outstanding as of April 30, 2023 and July 31, 2022, respectively | 8 | – | ||||||
| Undesignated preferred stock, $par value; shares authorized; shares issued and outstanding | – | – | ||||||
| Common stock, $par value, shares authorized; and shares issued and outstanding as of April 30, 2023 and July 31, 2022, respectively* | 590 | 150 | ||||||
| Subscription receivable | – | (50,000 | ) | |||||
| Additional paid-in capital | 3,129 | 82,732 | ||||||
| Retained earnings (accumulated deficit) | (237,471 | ) | 64,689 | |||||
| Total stockholders' equity (deficit) attributable to TIANCI INTERNATIONAL, INC. | (233,744 | ) | 97,571 | |||||
| Non-controlling interest | (12,689 | ) | 7,188 | |||||
| Total stockholders’ equity (deficit) | (246,433 | ) | 104,759 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 443,745 | $ | 760,339 | ||||
| * | Shares are presented on a retroactive basis to reflect the reorganization on March 3, 2023 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
statements.
| 1 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)(EXPRESSED IN UNITED STATES DOLLARS)
| For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| OPERATING REVENUES | ||||||||||||||||
| Products | $ | 115,000 | $ | – | $ | 294,880 | $ | – | ||||||||
| Services | 29,013 | – | 72,233 | 8,792 | ||||||||||||
| Total Operating Revenues | 144,013 | – | 367,113 | 8,792 | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| Products | 88,550 | – | 227,660 | – | ||||||||||||
| Services | 172,150 | 9,026 | 220,395 | 23,245 | ||||||||||||
| Total Cost of Revenues | 260,700 | 9,026 | 448,055 | 23,245 | ||||||||||||
| Gross profit (loss) | (116,687 | ) | (9,026 | ) | (80,942 | ) | (14,453 | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | 39,532 | 2,131 | 47,692 | 8,160 | ||||||||||||
| General and administrative | 157,909 | 13,262 | 191,184 | 35,438 | ||||||||||||
| Total operating expenses | 197,441 | 15,393 | 238,876 | 43,598 | ||||||||||||
| Loss from operations | (314,128 | ) | (24,419 | ) | (319,818 | ) | (58,051 | ) | ||||||||
| Other income (expense) | – | – | – | – | ||||||||||||
| Loss before provision for (benefit from) income taxes | (314,128 | ) | (24,419 | ) | (319,818 | ) | (58,051 | ) | ||||||||
| Provision for (benefit from) income taxes | 1,280 | (4,029 | ) | 2,219 | (9,578 | ) | ||||||||||
| Net loss | (315,408 | ) | (20,390 | ) | (322,037 | ) | (48,473 | ) | ||||||||
| Less: net loss attributable to non-controlling interest | (19,214 | ) | (2,039 | ) | (19,877 | ) | (4,847 | ) | ||||||||
| Net loss attributable to TIANCI INTERNATIONAL, INC. | $ | (296,194 | ) | $ | (18,351 | ) | $ | (302,160 | ) | $ | (43,626 | ) | ||||
| Weighted average number of common shares* | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Earnings (loss) per common share attributable to TIANCI INTERNATIONAL, INC.* | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | – | $ | – | $ | – | $ | – | ||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative expenses | 45,086 | 45,964 | 91,377 | 76,660 | ||||||||||||
| Professional fees | 60,133 | 11,993 | 70,909 | 28,443 | ||||||||||||
| Total Operating Expenses | 105,219 | 57,957 | 162,286 | 105,103 | ||||||||||||
| Loss from Operations | (105,219 | ) | (57,957 | ) | (162,286 | ) | (105,103 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Other expenses | – | – | – | – | ||||||||||||
| Total Other Income (Expense) | – | – | – | – | ||||||||||||
| Loss before Income Taxes | (105,219 | ) | (57,957 | ) | (162,286 | ) | (105,103 | ) | ||||||||
| Provision for income taxes | – | – | – | – | ||||||||||||
| Net Loss | $ | (105,219 | ) | $ | (57,957 | ) | $ | (162,286 | ) | $ | (105,103 | ) | ||||
| Basic and diluted loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted weighted average common shares outstanding | ||||||||||||||||
| * | Shares are presented on a retroactive basis to reflect the reorganization on March 3, 2023 |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
statements.
| 2 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICITEQUITY
(UNAUDITED)FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2023 AND 2022
(EXPRESSED IN UNITED STATES DOLLARS)
| Preferred Stock | Preferred Stock amount* | Common stock* | Common stock amount* | Subscription receivable* | Additional Paid-in Capital | (Accumulated Deficit) Retained Earnings | Noncontrolling interest | Total | ||||||||||||||||||||||||||||
| Balance at July 31, 2021 | – | $ | – | 1,500,000 | $ | 150 | $ | (50,000 | ) | $ | 62,686 | $ | (79,460 | ) | $ | (8,829 | ) | $ | (75,453 | ) | ||||||||||||||||
| Payments of Shenzhen China rent by related parties (Note 3) | – | – | – | – | – | 2,865 | – | – | 2,865 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | (6,588 | ) | (732 | ) | (7,320 | ) | ||||||||||||||||||||||||
| Balance at October 31, 2021 | – | $ | – | 1,500,000 | $ | 150 | $ | (50,000 | ) | $ | 65,551 | $ | (86,048 | ) | $ | (9,561 | ) | $ | (79,908 | ) | ||||||||||||||||
| Payments of Shenzhen China rent by related parties (Note 3) | – | – | – | – | – | 5,799 | 5,799 | |||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (18,687 | ) | (2,076 | ) | (20,763 | ) | |||||||||||||||||||||||||
| Balance at January 31, 2022 | – | $ | – | 1,500,000 | $ | 150 | $ | (50,000 | ) | $ | 71,350 | $ | (104,735 | ) | $ | (11,637 | ) | $ | (94,872 | ) | ||||||||||||||||
| Payments of Shenzhen China rent by related parties (Note 3) | – | – | – | – | – | 5,832 | – | – | 5,832 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | (18,351 | ) | (2,039 | ) | (20,390 | ) | ||||||||||||||||||||||||
| Balance at April 30, 2022 | – | $ | – | 1,500,000 | $ | 150 | $ | (50,000 | ) | $ | 77,182 | $ | (123,086 | ) | $ | (13,676 | ) | $ | (109,430 | ) | ||||||||||||||||
| Balance at July 31, 2022 | – | $ | – | 1,500,000 | $ | 150 | $ | (50,000 | ) | $ | 82,732 | $ | 64,689 | $ | 7,188 | $ | 104,759 | |||||||||||||||||||
| Payments of Shenzhen China rent by related parties (Note 3) | – | – | – | – | – | 3,519 | – | – | 3,519 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (1,019 | ) | (113 | ) | (1,132 | ) | |||||||||||||||||||||||||
| Balance at October 31, 2022 | – | $ | – | 1,500,000 | $ | 150 | $ | (50,000 | ) | $ | 86,251 | $ | 63,670 | $ | 7,075 | $ | 107,146 | |||||||||||||||||||
| RQS United Subscription receivable | – | – | – | – | 50,000 | – | – | – | 50,000 | |||||||||||||||||||||||||||
| Capital contribution | – | – | – | – | 65,650 | – | – | 65,650 | ||||||||||||||||||||||||||||
| Payments of Shenzhen China rent by related parties (Note 3) | – | – | – | – | – | 5,560 | – | – | 5,560 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | (4,947 | ) | (550 | ) | (5,497 | ) | ||||||||||||||||||||||||
| Balance at January 31, 2023 | – | $ | – | 1,500,000 | $ | 150 | $ | – | $ | 157,461 | $ | 58,723 | $ | 6,525 | $ | 222,859 | ||||||||||||||||||||
| Payments of Shenzhen China rent by related parties (Note 3) | – | – | – | – | – | 5,648 | – | – | 5,648 | |||||||||||||||||||||||||||
| Stock compensation issued | – | – | 700,000 | 70 | – | 209,930 | – | – | 210,000 | |||||||||||||||||||||||||||
| Reverse merger adjustment | 80,000 | 8 | 3,703,481 | 370 | – | (369,910 | ) | – | – | (369,532 | ) | |||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | (296,194 | ) | (19,214 | ) | (315,408 | ) | ||||||||||||||||||||||||
| Balance at April 30, 2023 | 80,000 | $ | 8 | 5,903,481 | $ | 590 | $ | – | $ | 3,129 | $ | (237,471 | ) | $ | (12,689 | ) | $ | (246,433 | ) | |||||||||||||||||
For the Three and Six Months Ended January 31, 2023
| Common Stock | Series A Preferred Stock | Additional | Total | |||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Deficit | ||||||||||||||||||||||
| Balance - July 31, 2022 | 2,450,148 | $ | 245 | – | $ | – | $ | 1,477,022 | $ | (1,700,404 | ) | $ | (223,137 | ) | ||||||||||||||
| Net loss for the period | – | – | – | – | – | (57,067 | ) | (57,067 | ) | |||||||||||||||||||
| Balance - October 31, 2022 | 2,450,148 | 245 | – | – | 1,477,022 | (1,757,471 | ) | (280,204 | ) | |||||||||||||||||||
| Net loss for the period | – | – | – | – | – | (105,219 | ) | (105,219 | ) | |||||||||||||||||||
| Sale of preferred shares | – | – | 80,000 | 8 | 23,992 | – | 24,000 | |||||||||||||||||||||
| Balance - January 31, 2023 | 2,450,148 | $ | 245 | 80,000 | $ | 8 | $ | 1,501,014 | $ | (1,862,690 | ) | $ | (361,423 | ) | ||||||||||||||
| * | Shares are presented on a retroactive basis to reflect the reorganization on March 3, 2023 |
For the Three and Six Months Ended January 31, 2022
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Deficit | ||||||||||||||||||||||||
| Balance - July 31, 2021 | 2,450,148 | $ | 245 | – | – | $ | 1,127,306 | $ | (1,452,661 | ) | $ | (325,110 | ) | |||||||||||||||
| Debt forgiveness by former related parties | – | – | – | – | 349,716 | – | 349,716 | |||||||||||||||||||||
| Net loss for the period | – | – | – | – | – | (47,146 | ) | (47,146 | ) | |||||||||||||||||||
| Balance - October 31, 2021 | 2,450,148 | 245 | – | – | 1,477,022 | (1,499,807 | ) | (22,540 | ) | |||||||||||||||||||
| Net loss for the period | – | – | – | – | – | (57,957 | ) | (57,957 | ) | |||||||||||||||||||
| Balance - January 31, 2022 | 2,450,148 | $ | 245 | – | – | $ | 1,477,022 | $ | (1,557,764 | ) | $ | (80,497 | ) | |||||||||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
statements.
| 3 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(EXPRESSED IN UNITED STATES DOLLARS)
| Six Months Ended | ||||||||
| January 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (162,286 | ) | $ | (105,103 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | 1,500 | 7,000 | ||||||
| Prepaid management compensation | 11,500 | (11,500 | ) | |||||
| Accounts payable and accrued liabilities | 73,429 | 11,294 | ||||||
| Net cash used in operating activities | (75,857 | ) | (98,309 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from related parties | 56,021 | 95,560 | ||||||
| Repayment to related parties | – | (1,202 | ) | |||||
| Sale of preferred shares | 24,000 | – | ||||||
| Net cash provided by financing activities | 80,021 | 94,358 | ||||||
| Net change in cash | 4,164 | (3,951 | ) | |||||
| Cash - beginning of period | 9,000 | 3,951 | ||||||
| Cash - end of period | $ | 13,164 | $ | – | ||||
| Supplemental Cash Flow Disclosures | ||||||||
| Cash paid for interest | $ | – | $ | – | ||||
| Cash paid for income taxes | $ | – | $ | – | ||||
| Non-cash financing and investing activities | ||||||||
| Debt forgiveness by related parties | $ | – | $ | 349,716 | ||||
| For the nine months ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (322,037 | ) | $ | (48,473 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Deferred income tax benefit | – | (9,578 | ) | |||||
| Stock compensation issued | 210,000 | – | ||||||
| Change in operating assets and liabilities: | – | |||||||
| Accounts receivable | 622,659 | – | ||||||
| Prepaid expense and other assets | 647 | – | ||||||
| Advance from customers | 32,636 | – | ||||||
| Accounts payable | (301,282 | ) | – | |||||
| Income taxes payable | 2,220 | – | ||||||
| Accrued liabilities and other payables | 69,452 | – | ||||||
| Net cash (used in) provided by operating activities | 314,295 | (58,051 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Cash received in connection with reverse acquisition | 4,186 | – | ||||||
| Subscription receivable collected | 50,000 | – | ||||||
| Capital contribution received | 65,650 | – | ||||||
| Working capital advance from related party | 61,490 | 2,008 | ||||||
| Repayment of working capital advance from related party | (341,885 | ) | (12,280 | ) | ||||
| Operating expenses directly paid by shareholders | 73,369 | 52,227 | ||||||
| Payments of Shenzhen China rent by related parties | 14,727 | 14,496 | ||||||
| Net cash (used in) provided by financing activities | (72,463 | ) | 56,451 | |||||
| Net increase (decrease) in cash | 241,832 | (1,600 | ) | |||||
| Cash, beginning | 21,237 | 20,249 | ||||||
| Cash, ending | $ | 263,069 | $ | 18,649 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | – | $ | – | ||||
| Income taxes | $ | – | $ | – | ||||
| Non-Cash Activities: | ||||||||
| Initial recognition of right-of-use assets and lease liabilities | $ | 7,496 | $ | – | ||||
| Noncash assets (liabilities) received in connection with reverse acquisition: | ||||||||
| Prepaid expense and other current assets | $ | 3,250 | $ | – | ||||
| Accounts payable | (3,127 | ) | – | |||||
| Due to related parties | (253,041 | ) | – | |||||
| Accrued liabilities and other payables | (120,800 | ) | – | |||||
| Net | $ | (373,718 | ) | $ | – | |||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statement
statements.
| 4 |
TIANCI INTERNATIONAL, INC.
Notes To CondensedConsolidated Financial Statements
Three and SixNine Months Ended January 31,April 30, 2023 and 2022
(Unaudited)
NOTE 1 – DESCRIPTIONNATURE OF BUSINESS AND ORGANIZATION
Tianci International, Inc. (the “Company”, “Tianci”) was incorporated under the laws of the State of Nevada as Freedom Petroleum, Inc. on June 13, 2012. In May 2015, the Company changed its name to Steampunk Wizards, Inc. and on November 9, 2016, the Company changed its name to Tianci International, Inc. The Company is a holding company and, ascompany. As of January 31,April 30, 2023, itthe Company had no subsidiaries and no business operations.one operating subsidiary, Roshing International Co., Ltd. (“Roshing”). The Company owns 90% of the capital stock of Roshing through RQS United, a wholly-owned subsidiary The Company’s fiscal year end is July 31.
On February 13, 2023, the Company incorporated a wholly owned subsidiary Tianci Group Holding Limited in the Republic of Seychelles.
NOTE 2 – GOING CONCERN MATTERSReorganization
As of January 31, 2023, the Company had $13,164 in cash. The Company incurred a net loss of $162,286 and used $75,857 in cash for operating activities during the six months ended January 31, 2023.
The Company’s insignificant cash balance at January 31, 2023 and its absence of revenues raised substantial doubt about the Company’s ability to continue as a going concern absent a significant change in its financial condition and business. EffectiveOn March 3, 2023 the Company acquired the capital stock ofentered into a Share Exchange Agreement with RQS United Group Limited (“RQS United”) and RQS Capital Limited (“RQS Capital”), which was the sole shareholder of RQS United (the “Exchange Agreement”). RQS United owns 90%90% of the equity in Roshing International Co., Ltd. (“Roshing”), which is engaged in the business of distributing electronic components and providing software services. (See: NotePursuant to the Exchange Agreement, on March 6, “Subsequent Events”2023 RQS Capital transferred all of the issued and outstanding capital stock of RQS United to the Company, and the Company issued to RQS Capital 1,500,000 shares of our common stock and paid a cash price of $350,000 (the “Share Exchange”).) Pursuant to the Exchange Agreement, the Company also issued a total of 700,000 shares of our common stock to nine employees or affiliates of Roshing to induce continued services to Roshing.
The abilityAs a result of the Company to continueShare Exchange, RQS United became our wholly-owned subsidiary and the former RQS United Stockholders became our controlling stockholders. The share exchange transaction was treated as a going concern will depend upon whetherreverse acquisition, with RQS United as the acquirer and the Company as the acquired party for accounting purposes. Unless the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of RQS United and its consolidated subsidiary, Roshing.
RQS United is a holding company incorporated on November 4, 2022 in the Republic of Seychelles. RQS United has no substantive operations other than holding 90% of the outstanding share capital of its subsidiary, Roshing, International Co., Ltd. can operate profitablywhich was incorporated on June 22, 2011 in Hong Kong and whetheris principally engaged in sales of electronic device hardware components, development of software and websites, technical consulting, and maintenance support on customized software. Roshing’s business is primarily carried out in Hong Kong and China.
Prior to the Company’s management can expandShare Exchange, the operationsCompany was a shell company as defined in Rule 12b-2 under the Exchange Act. As a result of Roshing International and/or complement them with additional acquisitions, as well as attract such financing as maythe transactions under the Exchange Agreement, the Company ceased to be necessary for such business expansion. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.a shell company.
NOTE 32 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim financial information referred to above has been prepared and presented in U.S. dollars in conformity with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures that are necessary and required by applicable laws and regulations. These interim financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading. This report on Form 10-Q should be read in conjunction with the Company’s financial statements for the years ended July 31, 2022 and 2021 and notes thereto included in the Company’s Form 10-K for8-K filed with the fiscal year ended July 31, 2022, filedSEC on October 31, 2022.March 6, 2023.
Results of the sixnine months ended January 31,April 30, 2023 are not necessarily indicative of the results that may be expected for the year endedending July 31, 2023 or any other future periods.
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Principles of consolidation
TIANCI INTERNATIONAL, INC.
Notes To Condensed Financial Statements
ThreeThe unaudited interim consolidated financial statements include the financial statements of Tianci and Six Months Ended January 31, 2023its subsidiaries. All transactions and 2022
(Unaudited)balances among the Company and its subsidiaries have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make 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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period.periods. Actual results could differ from these good faith estimates and judgments.
Foreign currency translation and transactions
The Company uses the U.S. dollar as its reporting currency and functional currency. Transaction gains and losses are recognized in the consolidated statement of operations.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in trust, and all highly liquid debt instrumentsconsist primarily of bank deposits with original maturities of sixthree months or less.less, which are unrestricted as to withdrawal and use. The Company had $13,164maintains its bank accounts in United States and $Hong Kong.
9,000Accounts receivable, net in cash
Accounts receivable include trade accounts due from customers which are generally collected within six months. In establishing the allowance for doubtful accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and cash equivalents asthe credit history and financial condition of January 31,the customer. Management reviews its receivables on a regular basis to determine if the allowance for doubtful accounts is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of April 30, 2023 and July 31, 2022, respectively.no allowance for doubtful accounts was deemed necessary.
Fair Value Measurements
The carrying amountsaccounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the Company’sfair value of financial instruments includingheld by the Company.
The accounting standard defines fair value, establishes as a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follow:
| · | 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 prices for identical assets and liabilities in inactive markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments. | |
| · | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Financial instruments included in current assets and current liabilities (such as cash, andaccounts receivable, due from related party accounts payable, and accrued liabilities, approximatedue to related parties) are reported in the unaudited consolidated balance sheets at cost, which approximates fair value because of the short period of time between the origination of such instruments and their short maturities.expected realization.
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Revenue recognition
The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606. This standard requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identifies the contract with the customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocates the transaction price to the respective performance obligations in the contract, and (v) recognizes revenue when (or as) the Company satisfies the performance obligations.
The Company records revenue net of sales taxes which are subsequently remitted to governmental authorities and are excluded from the transaction price.
The Company’s revenue recognition policies are as follows:
a. Electronic Device Hardware Components Products Sales
The Company is a distributor of electronic device hardware components and generates revenue through resale of these components. The Company’s products include high performance computer chips, Wi-Fi modules, Bluetooth modules, 4G network modules, LED screens, and touch screens. In accordance with ASC 606, Revenue Recognition: Principal Agent Consideration, an entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. Otherwise, the entity is an agent in the transaction. The Company evaluates three indicators of control in accordance with ASC 606: 1) For hardware sales, the Company is the most visible entity to customers and assumes fulfillment risk and risks related to the acceptability of products, including addressing customer complaints directly and handling of product returns or refunds directly. 2) The Company is exposed to inventory risk before transfer of control to customers 3) The Company determines the resale price of hardware products. After evaluating the above circumstances, the Company considers itself the principal of these arrangements and records hardware sales revenue on a gross basis.
Hardware sales contracts are on a fixed price basis with no separate sales rebate, discount, or other incentive. Revenue is recognized at a point in time when the Company has delivered products that have been accepted by its customer with no future obligations. The Company generally permits returns of products due to product failure; however, returns are historically insignificant.
b. Software and Website Development Services
The Company generates revenue by developing customized freight shipping and related logistic software and websites, which are generally on a fixed-priced basis. The software helps wholesalers, ecommerce retailers, and freight shipping providers to manage complex workflows and improve work efficiency. The Company generally has no enforceable right to payment for performance completed to date and is only entitled to payment after software is fully developed, delivered, tested, and accepted by the customer. As a result, revenues from software development contracts are recognized at a point in time when services are fully rendered, and written acceptances have been received from customers.
c. Technical Consulting and Training Services
The Company provides technical consulting and training services to help customers, generally its existing customers, to better understand and properly use its customized software and related hardware. Services are generally carried out on a per-time fixed rate basis. Revenue is recognized at a point in time when service is rendered and the customer confirms the completion of consulting or training.
d. Software Maintenance and Business Promotion Services
The Company provides software maintenance service to keep customer’s software up to date and assists customers in promoting business with ongoing marketing support. The Company charges a flat rate for a fixed duration on a subscription basis, generally 12 months. Revenue is recognized ratably each month over the contract period.
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Cost of revenues
For hardware products sales, the cost of revenue consists primarily of the costs of hardware products sold.
For software related services, the cost of revenue consists primarily of costs paid to outsourced service providers and compensation expenses paid the Company’s software engineers.
Recent Accounting PronouncementsAdvertising costs
Advertising costs amounted to $0 and $192 for the three months ended April 30, 2023 and 2022, respectively, and $192 and $192 for the nine months ended April 30, 2023 and 2022 respectively. Advertising costs are expensed as incurred and included in selling and marketing expenses.
Operating leases
Effective August 1, 2022, the Company adopted FASB ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption of ASU 2016-02 effective August 1, 2022, the Company recognized a $8,704 right of use (“ROU”) asset and operating lease liabilities in January 2023 based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 5%.
The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.
Lease payments for an operating lease transitioning to ASC 842 using the effective date are based on future payments at the transition date and on the present value of lease payments over the remaining lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception; therefore, operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Lease expense is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted for items which are non-taxable or non-deductible. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
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Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited interim consolidated financial statements and the corresponding tax bases used in the computation of taxable income (loss). In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the statements of operations, except when it is related to items credited or charged directly to equity, in which case the deferred tax is dealt with in equity. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a 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 for uncertain tax positions are classified as income tax expense in the period incurred.
The Hong Kong tax returns filed for 2016 and subsequent years are subject to examination by the applicable tax authorities.
The US tax returns filed for 2020 and subsequent years are subject to examination by the applicable tax authorities.
The Company computes earnings (loss) per share (“EPS”) in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the diluted effect on a per share basis of the potential ordinary 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 ordinary 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 three and nine months ended April 30, 2023 and 2022, there were dilutive shares outstanding.
Noncontrolling Interests
The Company’s noncontrolling interest represents the minority shareholder’s 10% ownership interest inRoshing. The noncontrolling interest is presented in the unaudited consolidated balance sheets separately from stockholders’ equity attributable to RQS United. Noncontrolling interest in the results of Roshing are presented on the unaudited consolidated statements of operations as allocations of the total income or loss of Roshing for the three and nine months ended April 30, 2023 and 2022 between the noncontrolling interest holder and the shareholders of RQS United.
Related parties
Parties, which can be a corporation, other business entity, or individual, are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
Recently issued accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has consideredelected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
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In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments — Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments — Credit Losses — Available-for-Sale Debt Securities. The amendments in this Update provide an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In November 2019, the FASB issued ASU No. 2019-10, which updates the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning August 1, 2023 as the Company is qualified as an emerging growth company. The Company is currently evaluating the impact ASU 2019-05 may have on its unaudited consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The adoption of this standard on August 1, 2022 did not have a material impact on the Company’s unaudited consolidated financial statements.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning August 1, 2021. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The adoption of this standard on August 1, 2021 did not have a material impact on the Company’s unaudited consolidated financial statements.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting pronouncements and their potential effect on the financial statements. The Company's management believes that these recent pronouncements will notstandards, if currently adopted, would have a material effect on the Company's condensed financial statements.Company’s unaudited consolidated Financial Statements.
NOTE 43 – DUE TO RELATED PARTIES BALANCES AND RELATED PARTY TRANSACTIONS
Due from related party consists of:
Due from related party represents a receivable of $54,134 from RQS Capital, which was subsequently collected.
Due to related parties consist of:
| Schedule of due to related parties | January 31, | July 31, | ||||||||||||||||||
| 2023 | 2022 | Transaction | April 30, | July 31, | ||||||||||||||||
| Due to Zhigang Pei, Tianci chief executive officer from August 26, 2021 to January 27, 2023 | $ | 220,909 | $ | 194,888 | ||||||||||||||||
| Due to RQS Capital Limited, an entity which by its acquisition of 80,000 shares of the Company’s Series A Preferred Stock on January 27,2023 has voting control of the Company | 30,000 | – | ||||||||||||||||||
| Name | Relationship | Nature | 2023 | 2022 | ||||||||||||||||
| Zhigang Pei | Tianci chief executive officer from August 26, 2021 to January 27, 2023 | Working capital advances and operating expenses paid on behalf of the Company | $ | 220,909 | $ | – | ||||||||||||||
| RQS Capital | Parent Company | Company cash collection due to RQS Capital | 32,132 | – | ||||||||||||||||
| Ying Deng | RQS Capital 30% owner and Roshing’s 10% minority interest owner | Working capital advances and operating expense paid on behalf of the Company | 41,902 | 194,794 | ||||||||||||||||
| TOTAL | $ | 250,909 | $ | 194,888 | $ | 294,943 | $ | 194,794 | ||||||||||||
These liabilities are unsecured, non-interest bearing, and due on demand.
On August 26, 2021, pursuant to a Stock Purchase Agreement dated on August 6, 2021, Chuah Su Mei, the Company’s former Chief Executive Officer, President and Director and all other former officers forgave all amounts due to them from the Company. In regard to this forgiveness, the Company recognized debt forgiveness by related parties of $349,716 as additional paid-in-capital during the quarter ended October 31, 2021.
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Employment agreements with officers and director retainer agreements
On August 27, 2021, the Company executed threeTianci currently maintains four employment agreements and three director retainer agreements with its officers and directors. The agreements have terms of 3 years and each provide for monthly compensation in amounts ranging from $1,300 per month to $3,900$3,800 per month.
For the sixthree and nine months ended January 31,April 30, 2023, and 2022, we accrued management compensation expenses of $
Office space sharing agreement with related parties
TIANCI INTERNATIONAL, INC.
Notes To Condensed Financial Statements
ThreeOn August 28, 2021, Roshing entered into an office space sharing agreement with Shufang Gao, 60% owner of RQS Capital and Six Months Ended JanuaryYing Deng, 30% owner of RQS Capital, for office space in Shenzhen, China. The agreement provides for Gao and Deng, sub lessees under a separate office space sharing agreement relating to the use of the premises from August 28, 2021 to August 31, 2024, to pay monthly rent to the lessee ranging from RMB 12,320 (approximately $1,827) to RMB 13,583 (approximately $2,014) on behalf of Roshing. The agreement is continuous until amended in writing by either party at their sole discretion. The rent expenses paid by Gao and Deng are billed directly to Gao and Deng by the Lessee and the sublease is between Gao and Deng and the Lessee. The Company has no obligation, directly or indirectly, to reimburse or otherwise compensate Gao and Deng for paying these expenses. For the three months ended April 30, 2023 and 2022, the Company has accounted for this agreement by charging general and administrative expenses for $5,648 and $5,832, respectively, and crediting additional paid-in capital for $5,648 and $5,832, respectively. For the nine months ended April 30, 2023 and 2022, the Company has accounted for this agreement by charging general and administrative expenses for $14,727 and $14,496, respectively, and crediting additional paid-in capital for $14,727 and $14,496, respectively.
(Unaudited)
NOTE 54 – STOCKHOLDERS EQUITY
On January 26, 2023 the Company filed with the Nevada Secretary of State a Certificate of Amendment of Articles of Incorporation (the “Amendment”). The Amendment amended Article 3 of the Company’s Articles of Incorporation to provide that the authorized capital stock of the Company will be 120,080,000 shares of capital stock consisting of shares of common stock, $0.0001$ par value, shares of Series A Preferred Stock, $0.0001$ par value, and shares of undesignated preferred stock, $0.0001$ par value.
The following table sets forth information, as of January 31,April 30, 2023, regarding the classes of capital stock that are authorized by the Articles of Incorporation of Tianci International, Inc.
| Schedule of capital stock authorized | ||||||||||||||||
| Class | Shares Authorized | Shares Outstanding | Shares Authorized | Shares Outstanding | ||||||||||||
| Common Stock, $.0001 par value | 100,000,000 | 2,450,148 | 100,000,000 | 5,903,481 | ||||||||||||
| Series A Preferred Stock, $.0001 par value | 80,000 | 80,000 | 80,000 | 80,000 | ||||||||||||
| Undesignated Preferred Stock, $.0001 par value | 20,000,000 | 0 | 20,000,000 | 0 | ||||||||||||
Series A Preferred Stock
Each share of Series A Preferred Stock may be converted by the holder of the share into 100 shares of common stock, subject to equitable adjustment of the conversion rate. Each holder of Series A Preferred Stock will have voting rights equal to the holder of the number of shares of common stock into which the Series A Preferred Stock is convertible. Upon liquidation of the Company, each holder of Series A Preferred Stock will be entitled to receive, out of the net assets of the Company, $0.01 per share, then to share in the distribution on an as-converted basis.
Undesignated Preferred Stock
The Board of Directors has the authority, without shareholder approval, to amend the Company’s Articles of Incorporation to divide the class of undesignated Preferred Stock into series, and to determine the relative rights and preferences of the shares of each series, including (i) voting power, (ii) the rate of dividend, (iii) the price at which, and the terms and conditions on which, the shares may be redeemed, (iv) the amount payable upon the shares in the event of liquidation, (v) any sinking fund provision for the redemption or purchase of the shares, and (vi) the terms and conditions on which the shares may be converted to shares of another series or class, if the shares of any series are issued with the privilege of conversion.
Equity Transactions
On January 27, 2023, the Company sold 80,000 shares of Series A Preferred Stock to RQS Capital Limited. The shares were sold for a cash payment of $24,000.
TIANCI INTERNATIONAL, INC.
Notes To Condensed Financial Statements
ThreeIssuances of Preferred Stock and Six Months Ended January 31, 2023 and 2022
(Unaudited)
NOTE 6 – SUBSEQUENT EVENTS
Incorporation of Subsidiary Company
On February 13, 2023, the Company incorporated a fully owned subsidiary Tianci Group Holding Limited in the Republic of Seychelles.
Sale of Common Stock
On January 27, 2023, Tianci sold shares of its Series A Preferred Stock to RQS Capital for $24,000 cash.
On March 1, 2023, the Company entered into agreements to sellTianci sold a total of shares of ourits common stock to 13 investors fornon-US persons at a price of U.S.$ per share i.e. an aggregate price of U.S. $376,000). The shares were issued in a private offering to investors that were acquiring the shares each for his or her own account. The offering, therefore, was exempt from registration under the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act. The sale was also exempt from registration pursuant to Rule 902(1)(i) of Regulation S, as the purchasers were non-U.S. persons and Rule 903 was complied with.
Acquisition of RQS United Group Limited.$376,000 total.
On March 3,6, 2023, Tianci issued shares of its common stock to RQS Capital pursuant to the Company entered into a Share Exchange Agreement with RQS United Group Limited (“RQS United”) and RQS Capital Limited (“RQS Capital”), which was the sole shareholder of RQS United (the “Exchange Agreement”)dated March 3, 2023 (see Note 1 above). RQS United owns 90% of the equity in Roshing International Co., Ltd. (“Roshing”), which is engaged in the business of distributing electronic components and providing software services. Pursuant to the Exchange Agreement,
Also on March 6, 2023 RQS Capital transferred all of the issued and outstanding capital stock of RQS Unitedpursuant to the Company, and the Company issued to RQS Capital 1,500,000 shares of our common stock and paid a cash price of $350,000 (the “Share Exchange”). Pursuant to theShare Exchange Agreement the Company alsodated March 3, 2023, Tianci issued a total of shares of ourits common stock to nine employees or affiliates of Roshing to induce continued services to Roshing. For the three and nine months ended April 30, 2023, the Company accounted for this issuance by expensing the $210,000 estimated fair value of the shares of common stock to (1) cost of revenues-services ($144,000), (2) selling and marketing ($36,000), and (3) general and administrative ($30,000).
PriorNOTE 5 – INCOME TAXES
Income Taxes
The Company computes its tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date pre-tax income(loss) from recurring operations and adjusting for discrete tax items arising in that quarter.
The Company had an effective tax rate of (0.41%) and 16.5% for the three months ended April 30, 2023 and 2022, and (0.69%) and 16.5% for the nine months ended April 30, 2023 and 2022, respectively. The Company has incurred U.S. operating losses and has minimal taxable profits in foreign jurisdictions.
The Company has evaluated all available evidence, both positive and negative, including historical levels of income and expectations and risks associated with estimates of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against its United States deferred tax assets.
The Company is subject to income taxes in the United States and foreign jurisdictions. As of April 30, 2023, tax years 2020 and forward generally remain open for examination for U.S. federal and state tax purposes, and tax years 2017 and forward generally remain open for examination for foreign tax purposes.
The Company has applied ASC 740 and determined that it does not have uncertain tax positions giving rise to unrecognized tax benefits for each of the three and nine months ended April 30, 2023 and 2022. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the Inflation Act) into law. The Inflation Act contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on stock repurchases. For the three and nine months ended April 30, 2023, the Inflation Act had no material impact to the Share Exchange,Company. The Company is continuing to evaluate the Company was a shell company as defined in Rule 12b-2 under the Exchange Act. As a resultvarious provisions of the transactions underInflation Act and does not anticipate the Exchange Agreement,impact, if any, will be material to the Company ceased to be a shell company.Company.
NOTE 6 — CONCENTRATION OF RISK
Credit risk
* * * *
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The cash balance in each financial institution in the United States is insured by the FDIC up to $250,000. The Hong Kong Deposit Protection Board pays compensation up to a limit of HKD 500,000 (approximately US$64,000) if the bank with which an individual/company holds its eligible deposit fails. As of April 30, 2023, a cash balance of $140,695 was maintained at a financial institution in Hong Kong of which approximately $76,000 was subject to credit risk. Management believes that the financial institution is of high credit quality and continually monitors its credit worthiness.
Customer concentration risk
For the nine months ended April 30, 2023, two customers accounted for 47.7% and 14.1% of the Company’s total revenues. For the nine months ended April 30, 2022, one customer accounted for 100% of the Company’s total revenues.
As of April 30, 2023, one customer accounted for 100% of the Company’s total accounts receivable. As of July 31, 2022, five customers accounted for 41.1%, 24.4%,10.8%, 10.8%, and 10.5% of the Company’s total accounts receivable.
Vendor concentration risk
For the nine months ended April 30, 2023, two vendors accounted for more than 75.8% and 15.8% of the Company’s total purchases.
As of April 30, 2023, two vendors accounted for 86.9% and 13.1% of the Company’s total accounts payable. As of July 31, 2022, four vendors accounted for 44.5%, 28.1%, 16.6%, and 10.8% of the Company’s total accounts payable.
NOTE 7— COMMITMENTS AND CONTINGENCIES
Lease commitments
The Company has an office space sharing agreement with Shufang Gao and Ying Deng to use office space located in Shenzhen, China. (See Note 3)
On January 1, 2021, Roshing entered into an operating lease agreement for office space in Hong Kong with a third party. The agreement had a term of two years and provided for monthly rent of HKD 2,800 (approximately $360). On January 13, 2023, the Company entered a new operating lease agreement for office space in Hong Kong with a third party for two years with monthly rent of HKD 3,000 (approximately $382). Upon adoption of ASU 2016-02 effective August 1, 2022, the Company recognized a $8,704 right of use (“ROU”) asset and operating lease liabilities in January 2023 based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 5%.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The leases generally do not contain options to extend at the time of expiration.
As of April 30, 2022, the Company’s operating leases had a weighted average remaining lease term of approximately 1.67 years
Rent expenses were $6,794 and $6,909 for the three months ended April 30, 2023 and 2022, respectively, and $17,870 and $17,732 for the nine months ended April 30, 2023 and 2022, respectively.
The total future minimum lease payments under the non-cancellable operating leases as of April 30, 2023 are as follows:
| Schedule of operating lease payments | ||||
| Year ending July 31, | Minimum lease payments | |||
| (Unaudited) | ||||
| 2023 (remaining three months) | $ | 1,146 | ||
| 2024 | 4,586 | |||
| 2025 | 2,096 | |||
| Total lease payments | 7,828 | |||
| Less: Interest | (333 | ) | ||
| Present value of lease liabilities | $ | 7,496 | ||
| 13 |
Future amortization of the Company’s ROU asset is presented below:
| Schedule of future amortization | ||||
| Year ending July 31, | ||||
| (Unaudited) | ||||
| 2023 (remaining nine months) | $ | 1,059 | ||
| 2024 | 4,368 | |||
| 2025 | 2,069 | |||
| Total | $ | 7,496 | ||
Contingencies
From time to time, the Company may be a party to legal proceedings, as well as certain asserted and un-asserted claims.
NOTE 8 — ENTERPRISE WIDE DISCLOSURE
The Company follows ASC 280, Segment Reporting, which requires companies to disclose segment data based on how management makes decisions about allocating resources to each segment and evaluates their performances. The Company’s chief operating decision-makers (i.e., the Company’s chief executive officer and her direct assistants, including the Company’s chief financial officer) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues, cost of revenues, and gross profit by business lines and by regions (primarily in Hong Kong and Singapore) for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by ASC 280, the Company considers itself to be operating within one reportable segment.
Disaggregated information of revenues by business lines are as follows:
| Schedule of information of revenues by business | ||||||||||||||||
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2023 (Unaudited) | 2022 (Unaudited) | 2023 (Unaudited) | 2022 (Unaudited) | |||||||||||||
| Electronic Device Hardware Components Sales | $ | 115,000 | $ | – | $ | 294,880 | $ | – | ||||||||
| Technical Consulting and Training Services | – | – | 14,470 | 8,792 | ||||||||||||
| Software Maintenance and Business Promotion Services | 29,013 | – | 57,763 | – | ||||||||||||
| Total revenues | $ | 144,013 | $ | – | $ | 367,113 | $ | 8,792 | ||||||||
Disaggregated information of revenues by regions are as follows:
| Schedule of information of revenues by regions | ||||||||||||||||
For the three months ended April 30, | For the nine months ended April 30, | |||||||||||||||
2023 (Unaudited) | 2022 (Unaudited) | 2023 (Unaudited) | 2022 (Unaudited) | |||||||||||||
| Hong Kong | $ | 122,500 | $ | – | $ | 331,850 | $ | 8,792 | ||||||||
| Singapore | 21,513 | – | 35,263 | – | ||||||||||||
| Total revenues | $ | 144,013 | $ | – | $ | 367,113 | $ | 8,792 | ||||||||
NOTE 9 — SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company’s management has performed subsequent events procedures through the date these financial statements were issued and determined that there are no reportable subsequent events.
| 14 |
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview; Termination of Shell Company StatusOverview
From October 2016 untilOn March 3, 2023, Tianci was a shell company, as defined in Rule 12b-2 under the Exchange Act. It had no subsidiaries and no business operations. On March 3, 2023, however, we acquired the outstanding capital stockownership of RQS United Group Limited, ("a company organized under the laws of the Republic of Seychelles (“RQS United"United”)., pursuant to the Share Exchange Agreement dated March 3, 2023 among the Company, RQS United ownsand RQS Capital Limited, the prior owner of RQS Limited.
RQS United is a holding company incorporated in the Republic of Seychelles. RQS United has no operations other than holding 90% of the outstanding share capital stock of its subsidiary, Roshing International Co., Ltd. (“Roshing”), an operating company. As a resultcompany organized under the laws of the acquisition, we ceased to be a shell company.
Hong Kong (“Roshing”). Roshing was incorporated on June 22, 2011 and is engaged in the sale of components to manufacturers of electronic devices, as well as development of software and websites, technical consulting, and providing maintenance support on customized software. Roshing’s business is primarily carried out in Hong Kong, although it realizeswe realize a substantial portion of itsour software development and related services revenue in Singapore.
For information regardingResults of Operations
Comparison of Three Months Ended April 30, 2023 and 2022
For the three months ended April 30, | ||||||||||||||||
| 2023 | 2022 | Change | Change Percentage | |||||||||||||
| Revenues | 144,013 | – | 144,013 | 100% | ||||||||||||
| Cost of Revenues | 260,700 | 9,026 | 251,674 | 2788% | ||||||||||||
| Gross loss | (116,687 | ) | (9,026 | ) | -107,661 | 1193% | ||||||||||
| Selling and marketing | 39,532 | 2,131 | 37,401 | 1755% | ||||||||||||
| General and administrative | 157,909 | 13,262 | 144,647 | 1091% | ||||||||||||
| Loss from operations | (314,128 | ) | (24,419 | ) | -289,709 | 1186% | ||||||||||
| Provision for (benefit from) income taxes | 1,280 | (4,029 | ) | 5,309 | -132% | |||||||||||
| Net loss | (315,408 | ) | (20,390 | ) | -295,018 | 1447% | ||||||||||
| Less: net (loss) attributable to non-controlling interest | (19,214 | ) | (2,039 | ) | -17,175 | 842% | ||||||||||
| Net (loss) attributable to Tianci | (296,194 | ) | (18,351 | ) | -277,843 | 1514% | ||||||||||
Revenues
During the business carried on by Roshing, including the consolidated financial results of RQS Unitedthree months ended April 30, 2023, our revenue increased to $144,013 for the past two fiscal years and subsequent interim period, please see the Current Report on Form 8-K filed by Tianci on March 6, 2023.
Results of Operations
The following table provides selected financial data about Tianci as of January 31,three months ended April 30, 2023 and July 31, 2022 andfrom $0 for the sixthree months ended January 31,April 30, 2022. The increase was mainly attributed to a significant increase in hardware product sales, and the rendering of software maintenance services. We have one new hardware customer for total sales of $115,000 for the three months ended April 30, 2023, as compared to no hardware sales for the three months ended April 30, 2022. Software maintenance and business promotion services, a new line of service we provide to customers, contributed $29,013 to our revenue for the three months ended April 30, 2023 as compared to $0 in the same period of 2022.
Balance Sheet DataOur revenues from our revenue categories are summarized as follows:
| January 31, | July 31, | |||||||||||
| 2023 | 2022 | Change | ||||||||||
| Cash | $ | 13,164 | $ | 9,000 | $ | 4,164 | ||||||
| Total assets | 13,414 | 22,250 | (8,836 | ) | ||||||||
| Total liabilities | 374,837 | 245,387 | 129,450 | |||||||||
| Stockholders' deficit | $ | (361,423 | ) | $ | (223,137 | ) | $ | (138,286 | ) | |||
Summary Income Statement Data
Three Months Ended January 31, 2023, Compared to Three Months Ended January 31, 2022
| Three Months Ended | ||||||||||||
| January 31 | ||||||||||||
| 2023 | 2022 | Change | ||||||||||
| Net Revenue | $ | – | $ | – | $ | – | ||||||
| Total Operating Expenses | 105,219 | 57,957 | 47,262 | |||||||||
| Loss From Operations | (105,219 | ) | (57,957 | ) | (47,262 | ) | ||||||
| Net Loss | $ | (105,219 | ) | $ | (57,957 | ) | $ | (47,262 | ) | |||
| For the Three Months Ended April, | ||||||||
| 2023 | 2022 | |||||||
| Product Revenues | $ | 115,000 | $ | – | ||||
| Service Revenues | $ | 29,013 | $ | – | ||||
| $ | 144,013 | $ | – | |||||
RevenueCost of Revenues. During
Total cost of revenues increased by $251,674, or approximately 2788%, to $260,700 for the three months ended January 31,April 30, 2023 as compared to $9,026 for the three months ended April 30, 2022. The increase in the cost of revenues is a direct result of our increase in revenue.
Our cost of revenues from our revenue categories are summarized as follows:
| For the Three Months Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| Cost of Product | $ | 88,550 | $ | – | ||||
| Cost of Service | $ | 172,150 | $ | 9,026 | ||||
| $ | 260,700 | $ | 9,026 | |||||
Our cost of revenues from hardware product sales increased to $88,550 for the three months ended April 30, 2023, from $0 for the three months ended April 30, 2022, as we had no hardware product sales during the earlier quarter.
Our cost of revenues from software related services increased by $163,124 to $172,150 for the three months ended April 30, 2023, from $9,026 for the three months ended April 30, 2022. The increase in cost of revenues from software related services resulted from the increase of revenues from software related service for the quarter ended April 30, 2023, as we incurred the cost of internal software developers’ compensation, including stock-based compensation of $144,000.
Gross Profit
Our gross loss increased by $107,661 to $116,687 for the three months ended April 30, 2023 from $9,026 for the three months April 30, 2022. The increase in gross loss was primarily due to the increase in our overall cost of revenues, as discussed above. For the three months ended April 30, 2023, our overall gross loss margin was 81%. There was a dramatic change in our gross loss margin as we added more business lines to the Company in 2022, having had no hardware sales for the three months ended April 30, 2022.
The gross profit margin of hardware products for the three months ended April 30, 2023 was 23.0%. The gross loss margin of our software related services increased to 493.4% for the three months ended April 30, 2023 as we increased total salary and 2022, we did not generate any revenues.stock compensation to our internal software developers.
Operating Expenses. Operating
There was significant change in our total operating expenses, which were $105,219$197,441 and $57,957$15,393 for the three months ended January 31,April 30, 2023, and 2022 respectively. OperatingOur operating expenses mainly consisted of professional fees, executive compensationprimarily include payroll expenses, advertisements and office and miscellaneous expenses.rents. The increase was mainly due to the stock compensation we issued to the selling and general administrative personnel for their continued service after the reverse merger, including $36,000 stock-based compensation which was included in operatingselling and marketing expense for the three and nine months ended April 30, 2023, and another $30,000 stock-based compensation which was included in general and administrative expenses resulted primarily fromfor the increase in accountingthree and legal related professional fees.nine months ended April 30, 2023.
Loss from OperationsIncome tax expense. For
Our income tax expense and (benefit) amounted to $ 1,280 and $ (4,029) for the three months ended January 31, 2023, and 2022, we incurred a loss from operations of $105,219 and $57,957, respectively. The increase in loss from operations was attributable to the increase in our operating expenses.
Net Loss. For the three months ended January 31, 2023, and 2022, we incurred a net loss of $105,219 and $57,957, respectively. The increase in net loss was primarily attributable to the increase in our operating expenses.
Six Months Ended January 31, 2023, Compared to Six Months Ended January 31, 2022
| Six Months Ended | ||||||||||||
| January 31, | ||||||||||||
| 2023 | 2022 | Change | ||||||||||
| Net Revenue | $ | – | $ | – | $ | – | ||||||
| Total Operating Expenses | 162,286 | 105,103 | 57,183 | |||||||||
| Loss From Operations | (162,286 | ) | (105,103 | ) | (57,183 | ) | ||||||
| Other Expenses | – | – | – | |||||||||
| Net Loss | $ | (162,286 | ) | $ | (105,103 | ) | $ | (57,183 | ) | |||
Revenue. During the six months ended January 31, 2023, and 2022, we did not generate any revenues.
Operating Expenses. Operating expenses were $162,286 and $105,103 for the six months ended January 31,April 30, 2023, and 2022, respectively. Operating expensesThe change was mainly consisted of executive compensation, professional fees, and office and miscellaneous expenses. The increase in operating expenses resulted primarily from the increase in accounting and legal related professional fees.
Loss from Operations. For the six months ended January 31, 2023, and 2022, we incurred a loss from operations of $162,286 and $105,103, respectively. The increase in loss from operations was attributabledue to the increaseminimum tax on profits imposed in our operating expenses.
Other expenses. For the six months ended January 31, 2023, and 2022, we did not incur any other expenses. Other expenses consisted of an income tax penalty.
Net Loss. For the six months ended January 31, 2023, and 2022, we incurred a net loss of $162,286 and $105,103, respectively. The increase in net loss was primarily attributable to the increase in our operating expenses.Hong Kong.
Comparison of Nine Months Ended April 30, 2023 and 2022
For the nine months ended April 30, | ||||||||||||||||
| 2023 | 2022 | Change | Change Percentage | |||||||||||||
| Revenues | 367,113 | 8,792 | 358,321 | 4076% | ||||||||||||
| Cost of Revenues | 448,055 | 23,245 | 424,810 | 1828% | ||||||||||||
| Gross loss | (80,942 | ) | (14,453 | ) | -66,489 | 460% | ||||||||||
| Selling and marketing | 47,692 | 8,160 | 39,532 | 484% | ||||||||||||
| General and administrative | 191,184 | 35,438 | 155,746 | 439% | ||||||||||||
| Loss from operations | (319,818 | ) | (58,051 | ) | -261,767 | 451% | ||||||||||
| Provision for (benefit from) income taxes | 2,219 | (9,578 | ) | 11,797 | -123% | |||||||||||
| Net loss | (322,037 | ) | (48,473 | ) | -273,564 | 564% | ||||||||||
| Less: net (loss) attributable to non-controlling interest | (19,877 | ) | (4,847 | ) | -15,030 | 310% | ||||||||||
| Net (loss) attributable to Tianci | (302,160 | ) | (43,626 | ) | -258,534 | 593% | ||||||||||
Revenues
During the nine months ended April 30, 2023, our revenue increased by $358,321, or approximately 4076%, to $367,113 for the nine months ended April 30, 2023 from $8,792 for the nine months ended April 30, 2022. The increase was mainly attributed to a significant increase in hardware product sales, and the rendering of software maintenance services. We have 5 new hardware customers for total sales of $294,880 for the nine months ended April 30, 2023, as compared to no hardware sales for the nine months ended April 30, 2022. Software maintenance and business promotion services, a new line of service we provide to customers, contributed $72,233 to our revenue for the nine months ended April 30, 2023 as compared to $8,792 in the same period of 2022.
Our revenues from our revenue categories are summarized as follows:
| For the Nine Months Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| Product Revenues | $ | 294,880 | $ | – | ||||
| Service Revenues | $ | 72,233 | $ | 8,792 | ||||
| $ | 367,113 | $ | 8,792 | |||||
Cost of Revenues
Total cost of revenues increased by $424,810, or approximately 1828%, to $448,055 for the nine months ended April 30, 2023 as compared to $23,245 for the nine months ended April 30, 2022. The increase in the cost of revenues is a direct result of our increase in revenue.
Our cost of revenues from our revenue categories are summarized as follows:
For the Nine Months Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| Cost of Product | $ | 227,660 | $ | – | ||||
| Cost of Service | $ | 220,395 | $ | 23,245 | ||||
| $ | 448,055 | $ | 23,245 | |||||
| 17 |
Our cost of revenues from hardware product sales increased to $227,660 for the nine months ended April 30, 2023, from $0 for the nine months ended April 30, 2022, as we had no hardware product sales during the earlier quarter.
Our cost of revenues from software related services increased by $197,150 to $220,395 for the nine months ended April 30, 2023, from $23,245 for the nine months ended April 30, 2022. The increase in cost of revenues from software related services resulted from the increase of revenues from software related service for the nine months ended April 30, 2023, as we incurred the cost of internal software developers’ compensation.
Gross Profit
Our gross loss increased by $66,489 to $80,942 for the nine months ended April 30, 2023 from $14,453 for the nine months April 30, 2022. The increase in gross loss was primarily due to the increase in our overall cost of revenues, as discussed above. For the nine months ended April 30, 2023 and 2022, our overall gross loss margin percentage was 22.0% and 164.4%, respectively. There was a dramatic change in our gross profit margin percentage as we added more business lines to the Company in 2022, having had no hardware sales for the nine months ended April 30, 2022.
The gross profit margin percentage of hardware products for the nine months ended April 30, 2023 was 22.8%. The gross profit margin percentage of our software related services increase to 205.1 % for the nine months ended April 30, 2023 as we increased total salary and stock compensation to our internal software developers.
Operating Expenses
There was significant change in our total operating expenses, which were $238,876 and $43,598 for the nine months ended April 30, 2023, and 2022, respectively. Our operating expenses primarily include payroll expenses, advertisements and rents. The increase was mainly due to the stock compensation we issued to the selling and general administrative personnel for their continued service after the reverse merger.
Income tax expense
Our income tax expense and (benefit) amounted to $ 2,219 and $ (9,578) for the nine months ended April 30, 2023, and 2022, respectively. The change was mainly due to the minimal taxable profits in Hongkong.
Liquidity and Capital Resources
Working Capital
| January 31, | July 31, | |||||||||||
| 2023 | 2022 | Change | ||||||||||
| Current Assets | $ | 13,414 | $ | 22,250 | $ | 8,836 | ) | |||||
| Current Liabilities | 374,837 | 245,387 | 129,450 | |||||||||
| Working Capital (Deficiency) | $ | (361,423 | ) | $ | (223,137 | ) | $ | (138,286 | ) | |||
In assessing our liquidity, we monitor and analyze our cash on-hand and our operating expenditure commitments. Our liquidity needs are to meet our working capital requirements and operating expenses obligations. As of January 31,April 30, 2023, our working capital was $(252,291), our cash amounted to $263,069, our current assets were $434,707 and our current liabilities were $686,998. To date, we have financed our operations primarily through capital contributions and advances from shareholders. At April 30, 2023 we had a working capital deficit of $361,423 as compared to a working capital deficit of $223,137 as of July 31, 2022. The increase in working capital deficit was mainly due to the increase in accounts payable and accrued liabilities and dueowed $294,943 to related parties.parties (See Note 3 of the interim financial statement) and $180,800 to officers for compensation under their employment agreements.
Cash Flows
| Six Months Ended | ||||||||
| January 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash used in operating activities | $ | (75,857 | ) | $ | (98,309 | ) | ||
| Cash provided by investing activities | – | – | ||||||
| Cash provided by financing activities | 80,021 | 94,358 | ||||||
| Net change in cash and cash equivalents | $ | 4,164 | $ | (3,951 | ) | |||
Cash Flow from Operating ActivitiesThe primary component of our working capital at April 30, 2023 was accounts receivable totaling $115,004. Roshing generally affords its customers payment terms of six months as a means of attracting new customers. At April 30, 2023, no account receivable was past-due. Roshing considered that fact and also examined the creditworthiness of its customers and determined that no allowance for doubtful accounts was required.
DuringAfter debt to related parties, the sixprimary offset to working capital at April 30, 2023 was accounts payable. At April 30, 2023 accounts payable totaled $146,789. Most of Roshing’s vendors allow Roshing five-to-six months ended January 31, 2023, netto pay their invoices. These terms on Roshing’s payables allow Roshing to offset the effect on cash used in operating activities was $75,857, comparedflow of the six-month terms that Roshing gives to $98,309most of its customers.
We believe our liquidity and working capital will be sufficient to sustain our business operation for the six months ended January 31, 2022. The decreasenext twelve months. We may, however, need additional cash resources in net cash usedthe future if there are changes in operating activities was mainly duebusiness conditions or other developments or if the company finds and wishes to the increase in accounts payable and accrued liabilities offset by the increase in net loss.
Cash Flow from Investing Activities
During the six months ended January 31, 2023 and 2022, we had no cash flow from investing activities.
pursue opportunities for investment, acquisition, capital expenditure, or similar actions.
We are planning to enter the glass sales industry in 2023, which may require significant capital expenditure for developing the business. If we determined that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity may result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. Our obligation to bear credit risk for certain financing transactions we facilitate may also strain our operating cash flow. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
The following summarizes the key components of our cash flows for the nine months ended April 30, 2023 and 2022.
| For the Nine Months Ended | ||||||||
| April 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | 314,294 | (58,051 | ) | |||||
| Net cash used in investing activities | – | – | ||||||
| Net cash provided by (used in) financing activities | (72,462 | ) | 56,451 | |||||
| Net change in cash and restricted cash | 241,832 | (1,600 | ) | |||||
Cash Flow from Financing ActivitiesOperating activities
DuringNet cash was provided in operating activities for the sixthe nine months ended January 31,April 30, 2023 primarily because our accounts receivable decreased by $622,659 during the period, as we made efforts on the collection process. The decrease was net against the decrease of $301,283 in our accounts payable balance attributable to payment to our vendors. In addition, our operating loss of $322,037 included $211,208 in various noncash items.
Net cash used in operating activities for the nine months ended April 30, 2022, was primarily attributable to net loss of $(48,473) and noncash deferred income tax benefit adjustment $9,578.
Investing activities
The company has no investing activities for the nine months ended April 30, 2023 and 2022.
Financing activities
Net cash used in financing activities for the the nine months ended April 30, 2023 was $72,462, which was primarily attributable to our repayment of a working capital advance by a related party in the amount of $341,884. Cash outflow was offset by the $61,490 in working capital advance from related parties, $73,369 in operating expenses that were paid directly by shareholders, the payments of Shenzhen China rent by related parties amounting to $14,727, the receipt of a subscription receivable of $50,000, and a capital contribution of $65,650.
Net cash provided by financing activities was $80,021, compared to $94,358 for the sixthe nine months ended January 31, 2022. The decrease in net cash providedApril 30, 2022 was $56,451, which, was primarily attributable to a $2,008 working capital advance from a related party, the payments of Shenzhen China rent by financing activities was mainly due to the decrease in proceeds from related parties amounting to $14,496, and operating expenses paid by shareholders in the amount of $52,227. Cash inflow was offset by cash received from the salea $12,280 repayment of preferred shares.
On January 27, 2023, we sold 80,000 shares of Series A Preferred Stockworking capital advance to RQS Capital Limited. The shares were sold for a cash payment of $24,000, which was contributed to our capital on behalf of RQS Capital Limited by members of its management. Each share of Series A Preferred Stock may be converted by the holder of the share into 100 shares of common stock, subject to equitable adjustment of the conversion rate. The holder of Series A Preferred Stock will have voting rights equal to the holder of the number of shares of common stock into which the Series A Preferred Stock is convertible. The Series A Preferred Stock purchased by RQS Capital Limited helds 76.55% of the aggregate voting power of the Company on January 27, 2023. As a result of its ownership of the Series A Shares, RQS Capital holds a controlling interest in the Company.related party.
Off-Balance Sheet Arrangements
We do not have anyno off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Impact of the COVID-19 Pandemic
The global outbreak of COVID-19 and resulting health crisis has caused, and continues to cause, significant and widespread disruptions to the Hong Kong and global economies, financial and consumer markets. We believe, however, that the COVID-19 outbreak has had very limited impact on our business.
| 19 |
During the course of the COVID-19 pandemic, public health officials and other governmental authorities have or are reasonably likelyimposed and may impose new mitigation measures, regulations and requirements to address the spread of COVID-19. Public health officials and other governmental authorities also have a current orimposed directives and may impose additional directives that could require changes in our business practices. The scope and duration of these mitigation measures and directives continue to evolve throughout the course of the COVID-19 pandemic. Depending on the future course of COVID-19 and further outbreaks, we may experience restrictions and temporary closures of our offices.
Although we have continued to serve our clients and operate our business throughout the COVID-19 pandemic, there can be no assurance that future events will not have an effect on our financial condition, revenues or expenses,business, results of operations liquidity, capital expenditures, or capital resources.financial condition because the extent and duration of the health crisis remains uncertain. Future adverse developments in connection with the COVID-19 crisis, including further outbreaks and new strains or variants of COVID-19, evolving international, federal, state and local restrictions and safety regulations in response to COVID-19, changes in consumer behavior and health concerns, the pace of economic activity in the wake of COVID-19, or other similar issues could adversely affect our business, results of operations or financial condition in the future, or our financial results and business performance in future periods.
We continue to actively manage the impact of the COVID-19 crisis as we face continued uncertainty regarding the impact COVID-19 will have on our financial operations in the near and long term. The need for, or timing of, any future actions in response to COVID-19 is largely dependent on the mitigation of the spread of the virus along with the adoption and continued effectiveness of vaccines, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand for our products and services, all of which are highly uncertain.
Critical Accounting PoliciesEstimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”)and accompanying notes requires us to make estimates and assumptionsjudgments that affect the reported amounts of assets, and liabilities, revenues and expenses, and related disclosuresdisclosure of contingent assets and liabilities in the financial statementsliabilities. We base our estimates on historical experience and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have not identified any additional critical accounting policies and judgments. We also havevarious other key accounting policies, which involve the use of estimates, judgments and assumptions that are significantbelieved to understandingbe reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
In connection with the preparation of our financial statements for the three and nine months April 30, 2023, there was one accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results, which are described in Note 3 to our financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.as follows:
ImpactAccounts receivable, net
Accounts receivable include trade accounts due from customers. Our accounts receivable are generally collected within six months. In establishing the allowance for doubtful accounts, management considers historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history and financial condition of the customer. Management reviews its receivables on a regular basis to determine if the allowance for doubtful accounts is adequate and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of April 30, 2023 and July 31, 2022, no allowance for doubtful accounts was deemed necessary. This determination was primarily based on the fact that the accounts were current and the creditors appeared credit-worthy.
Recently Issued Accounting Pronouncements
There were no recentThe Company considers the applicability and impact of all accounting pronouncementsstandards updates (“ASUs”). Management periodically reviews new accounting standards that have or willare issued. The Company does not believe that any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Corporation’s financial position or resultsCompany’s consolidated balance sheets, statements of operations.operations and comprehensive income and statements of cash flows.
| 20 |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 4 | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures.
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31,April 30, 2023. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms as a result of the following material weaknesses:
| · | Because of the company’s limited resources, there are limited controls over information processing. | |
| · | There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is limited in number, resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible. | |
| · | The Company does not have a sitting audit committee financial expert, and thus the Company lacks the board oversight role within the financial reporting process. | |
| · | There is a lack of formal policies and procedures necessary to adequately review significant accounting transactions. The Company utilizes a third-party independent contractor for the preparation of its financial statements. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions. The third-party independent contractor is not involved in the day to day operations of the Company and may not be provided information from management on a timely basis to allow for adequate reporting/consideration of certain transactions. |
Our management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended January 31,April 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II –- OTHER INFORMATION
| Item 1. | Legal Proceedings |
| None. | |
| Item 1A | Risk Factors |
| As a “smaller reporting company”, we are not required to provide the information required by this Item. | |
| Item 2 | Unregistered Sale of Securities and Use of Proceeds |
| (a) Unregistered sales of equity securities | |
| There were no unregistered sales of equity securities by the Company during the | |
| (c) Purchases of equity securities | |
| The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the | |
| Item 3. | Defaults Upon Senior Securities. |
| None. | |
| Item 4. | Mine Safety Disclosures. |
| Not Applicable. | |
| Item 5. | Other Information. |
| Item 6. | Exhibits |
| 31-a(1) | Rule 13a-14(a) Certification of CEO | |
| 32-a(1) | Rule 13a-14(b) Certification of CEO | |
| 101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH | Inline XBRL Schema | |
| 101.CAL | Inline XBRL Calculation | |
| 101.DEF | Inline XBRL Definition | |
| 101.LAB | Inline XBRL Label | |
| 101.PRE | Inline XBRL Presentation | |
| 104 | Cover page formatted as |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| TIANCI INTERNATIONAL, INC. | |
| Date: | By: /s/ Shufang Gao
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