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, 20232024
☐ 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.) | ||
| |||
(Address of Principal Executive Offices) | |||
| 00000 | |||
| 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 ☐ 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, 2023February 26, 2024
Common Voting Stock:
TIANCI INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED JANUARY 31, 2023
2024
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
| ITEM 1 | FINANCIAL STATEMENTS |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED 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 | ||||
| January 31, | July 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 799,377 | $ | 256,342 | ||||
| Accounts receivable | 86,513 | – | ||||||
| Prepaid expense | 250 | 1,750 | ||||||
| Due from related party | – | 54,134 | ||||||
| Total current assets | 886,140 | 312,226 | ||||||
| Other assets: | ||||||||
| Lease security deposit | 1,656 | 1,542 | ||||||
| Right-of-use asset | – | 6,436 | ||||||
| Total non-current assets | 1,656 | 7,978 | ||||||
| TOTAL ASSETS | $ | 887,796 | $ | 320,204 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | – | $ | 779 | ||||
| Income taxes payable | 38,270 | 26,298 | ||||||
| Due to related parties | 30,215 | 276,077 | ||||||
| Lease liability - current | – | 4,368 | ||||||
| Advances from customers | – | 29,070 | ||||||
| Accrued liabilities and other payables | 125,019 | 260,176 | ||||||
| Total current liabilities | 193,504 | 596,768 | ||||||
| Lease liability - noncurrent | – | 2,068 | ||||||
| Total liabilities | 193,504 | 598,836 | ||||||
| Commitments and contingencies | – | – | ||||||
| Stockholders’ equity (deficit): | ||||||||
| Series A Preferred stock, $ par value; shares authorized; and shares issued and outstanding as of January 31, 2024 and July 31, 2023 | – | 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 January 31, 2024 and July 31, 2023, respectively | 1,478 | 590 | ||||||
| Additional paid-in capital | 882,424 | 4,982 | ||||||
| Accumulated deficit | (211,172 | ) | (276,521 | ) | ||||
| Total stockholders' equity (deficit) attributable to TIANCI INTERNATIONAL, INC. | 672,730 | (270,941 | ) | |||||
| Non-controlling interest | 21,562 | (7,691 | ) | |||||
| Total stockholders’ equity (deficit) | 694,292 | (278,632 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 887,796 | $ | 320,204 | ||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementsstatements.
TIANCI INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| 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 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements
TIANCI INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
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 | ) | ||||||||||||||
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 condensed financial statements
| 3 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS
(UNAUDITED)(EXPRESSED IN UNITED STATES DOLLARS)
| For the three months ended January 31, | For the six months ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| OPERATING REVENUES | ||||||||||||||||
| Global logistics services | $ | 2,819,056 | $ | – | $ | 4,000,776 | $ | – | ||||||||
| Other revenue | 75,072 | 98,730 | 220,000 | 223,100 | ||||||||||||
| Total Operating Revenues | 2,894,128 | 98,730 | 4,220,776 | 223,100 | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| Global logistics services | 2,504,764 | – | 3,534,734 | – | ||||||||||||
| Other revenue | 50,260 | 78,800 | 113,161 | 187,355 | ||||||||||||
| Total Cost of Revenues | 2,555,024 | 78,800 | 3,647,895 | 187,355 | ||||||||||||
| Gross profit | 339,104 | 19,930 | 572,881 | 35,745 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | 133,763 | 6,001 | 235,834 | 8,160 | ||||||||||||
| General and administrative | 136,721 | 19,202 | 255,426 | 34,214 | ||||||||||||
| Total operating expenses | 270,484 | 25,203 | 491,260 | 42,374 | ||||||||||||
| (Loss) income from operations | 68,620 | (5,273 | ) | 81,621 | (6,629 | ) | ||||||||||
| Other income | 24,953 | – | 24,953 | – | ||||||||||||
| Income (loss) before provision for (benefit from) income taxes | 93,573 | (5,273 | ) | 106,574 | (6,629 | ) | ||||||||||
| Provision for (benefit from) income taxes | (7,141 | ) | 224 | 11,972 | – | |||||||||||
| Net income (loss) | 100,714 | (5,497 | ) | 94,602 | (6,629 | ) | ||||||||||
| Less: net income (loss) attributable to non-controlling interest | 19,581 | (550 | ) | 29,253 | (663 | ) | ||||||||||
| Net income (loss) attributable to TIANCI INTERNATIONAL, INC. | $ | 81,133 | $ | (4,947 | ) | $ | 65,349 | $ | (5,966 | ) | ||||||
| Weighted average number of common shares* | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Loss per common share attributable to TIANCI INTERNATIONAL, INC.* | ||||||||||||||||
| Basic and diluted | $ | $ | ) | $ | $ | ) | ||||||||||
| * | Shares are presented on a retroactive basis to reflect the reorganization on March 3, 2023 |
| 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 | ||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statementstatements.
| 4 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2024 AND 2023
(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, 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 (unaudited) | – | $ | – | 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 (unaudited) | – | $ | – | 1,500,000 | $ | 150 | $ | – | $ | 157,461 | $ | 58,723 | $ | 6,525 | $ | 222,859 | ||||||||||||||||||||
| 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, 2023 | 80,000 | $ | 8 | 5,903,481 | $ | 590 | $ | – | $ | 4,982 | $ | (276,521 | ) | $ | (7,691 | ) | $ | (278,632 | ) | |||||||||||||||||
| Net loss | – | – | – | – | – | – | (15,784 | ) | 9,672 | (6,112 | ) | |||||||||||||||||||||||||
| Balance at October 31, 2023 (unaudited) | 80,000 | $ | 8 | 5,903,481 | $ | 590 | $ | – | $ | 4,982 | $ | (292,305 | ) | $ | 1,981 | $ | (284,744 | ) | ||||||||||||||||||
| Conversion of liabilities to common stock | – | – | 445,109 | 44 | – | 445,065 | – | – | 445,109 | |||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | (80,000 | ) | (8 | ) | 8,000,000 | 800 | – | (792 | ) | – | – | – | ||||||||||||||||||||||||
| Private offering | – | – | 433,213 | 44 | – | 433,169 | – | – | 433,213 | |||||||||||||||||||||||||||
| Net income | – | – | – | – | – | – | 81,133 | 19,581 | 100,714 | |||||||||||||||||||||||||||
| Balance at January 31, 2024 (unaudited) | – | $ | – | 14,781,803 | $ | 1,478 | $ | – | $ | 882,424 | $ | (211,172 | ) | $ | 21,562 | $ | 694,292 | |||||||||||||||||||
| * | 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.
| 5 |
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
| For the six months ended January 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 94,602 | $ | (6,629 | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Deferred income tax benefit | – | – | ||||||
| Amortization of operating lease right-of-use asset | 356 | 162 | ||||||
| Debt forgiven by related party | (24,953 | ) | – | |||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | (86,513 | ) | 540,914 | |||||
| Prepaid expense | 1,500 | – | ||||||
| Lease security deposit | (114 | ) | (103 | ) | ||||
| Due from related party | 54,137 | – | ||||||
| Advances from customers | (29,070 | ) | – | |||||
| Accounts payable | (779 | ) | (325,062 | ) | ||||
| Income taxes payable | 11,972 | 939 | ||||||
| Operating lease liabilities | (356 | ) | (162 | ) | ||||
| Accrued liabilities and other payables | 89,040 | 6,941 | ||||||
| Net cash provided by operating activities | 109,822 | 217,000 | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds received from private offerings | 433,213 | – | ||||||
| Subscription receivable collected | – | 50,000 | ||||||
| Capital contribution received | – | 65,650 | ||||||
| Working capital advance from related party | – | 61,490 | ||||||
| Repayment of working capital advance from related party | – | (296,884 | ) | |||||
| Operating expenses directly paid by shareholders | – | 47,360 | ||||||
| Payments of Shenzhen China rent by related parties | – | 9,079 | ||||||
| Net cash (used in) provided by financing activities | 433,213 | (63,305 | ) | |||||
| Net increase in cash | 543,035 | 153,695 | ||||||
| Cash, beginning | 256,342 | 21,237 | ||||||
| Cash, ending | $ | 799,377 | $ | 174,932 | ||||
| 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 | $ | – | $ | 8,704 | ||||
| Early termination of right-of-use assets and lease liabilities | $ | 6,080 | $ | – | ||||
| Conversion of liabilities to common stock | $ | 445,109 | $ | – | ||||
| Conversion of preferred stock to common stock | $ | 800 | $ | – | ||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
| 6 |
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three andAnd Six Months Ended January 31, 2024 And 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, 2023, it2024, the 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% of the equity in Roshing International Co., Ltd. (“Roshing”), which is engaged in the business of providing global logistics services including ocean freight forwarding and related logistics solutions, 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 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 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 stockholder became our controlling stockholder. The share exchange transaction was treated as a going concern will depend upon whether Roshing International Co., Ltd. can operate profitablyreverse acquisition, with RQS United as the acquirer and whether the Company’s management can expandCompany as the operationsacquired 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 Roshing International and/or complement them with additional acquisitions, as well as attract such financing as may be necessary for suchthe reverse acquisition, we are referring to the business expansion. The accompanyingand financial statements do not include any adjustments that might result from the outcomeinformation of this uncertainty.RQS United and its consolidated subsidiary, Roshing.
Prior to the Share Exchange, the Company was a shell company as defined in Rule 12b-2 under the Exchange Act. As a result of the transactions under the Exchange Agreement, the Company ceased to be a shell company.
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, which was incorporated on June 22, 2011 in Hong Kong, is principally engaged in global logistics services. In addition, less than 6% of its revenue for the six months ended January 31, 2024 was derived from sales of electronic device hardware components, development of logistics software and websites, technical consulting, and software maintenance. Roshing’s business is primarily carried out in Hong Kong.
| 7 |
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
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, 2023 and 2022 and notes thereto included in the Company’s Form 10-K forfiled with the fiscal year ended July 31, 2022, filedSEC on October 31, 2022.23, 2023.
Results of the three and six months ended January 31, 20232024 are not necessarily indicative of the results that may be expected for the year endedending July 31, 20232024 or any other future periods.
Principles of consolidation
TIANCI INTERNATIONAL, INC.
Notes To Condensed Financial Statements
ThreeThe 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.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
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 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 January 31, 2023,2024 and July 31, 2022, respectively.2023, 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 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.
Recent Accounting PronouncementsRevenue 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.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
The Company’s revenue recognition policies are as follows:
a. Global Logistics Services
The Company provides global logistics services, including ocean freight forwarding and related logistics solutions. As a non-asset-based carrier, the Company does not own transportation assets.
The Company derives its revenues by entering into agreements that are generally comprised of a single performance obligation, which is that freight is shipped for and received by the customer via either container ships or general cargo vessels. The most significant drivers of changes in gross revenues and related transportation expenses are volume and weight.
In general, each shipment transaction or service order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed upon transaction price exists. The transaction price, which is based on volume, weight, and shipping time, is fixed and not contingent upon the occurrence or non-occurrence of any other event.
The Company typically satisfies its performance obligations at a point in time when freight is shipped to destination port and accepted by its customers. The Company does not have significant variable consideration in its contracts. Taxes assessed concurrently with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenues.
The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling the promise to provide the services, when it assumes risk of loss, when it has discretion in setting the prices for the services to the customers, and when the Company has the ability to direct the use of the services provided by the third party. In most cases we act as an indirect carrier. When acting as an indirect carrier, we issue a Fixture Note to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, we receive a Master Ocean Bill of Lading.
The Company’s evaluation determined that it is in control of establishing the transaction price, managing all aspects of the shipment process and assumes the risk of loss for delivery, collection, and returns. Based on its evaluation of the control of services and risk involved, the Company determined that it acts as a principal rather than an agent in global logistics service arrangements and such revenues are reported on a gross basis.
b. 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; and 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.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
c. 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.
d. 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.
e. 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.
f. Business Consulting Services
The Company provides business consulting services to help customers apply for immigration and non-immigration visas. The Company is responsible for performing background checks, case analysis, and preparing related application paper works. The Company charges a flat fee for the visa application services. Revenue is recognized at a point in time when an application is submitted with proper authorities.
Cost of revenues
For global logistics services, cost of revenue consists primarily of cargo space charged by direct ocean carriers, freight forwarders and ancillary logistics services fees.
For hardware products sales, the cost of revenue consists primarily of the costs of hardware products sold.
For software, consulting, services-based revenue, the cost of revenue consists primarily of costs paid to outsourced service providers and compensation expenses paid the Company’s service vendor.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
Advertising costs
Advertising costs amounted to $0 and $192 for the six months ended January 31, 2024 and 2023, 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 uses 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.
The lease for the Company’s Hong Kong office facility was early terminated in September 2023, which resulted in a derecognition of $6,080 right of use (“ROU”) asset and operating lease liabilities in August 2023.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
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.
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 2017 and subsequent years are subject to examination by the applicable tax authorities.
The US tax returns filed for 2021 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. As of January 31, 2024 and July 31, 2023, there were and dilutive shares outstanding related to the convertible Series A Preferred Stock (see Note 4),respectively.
Noncontrolling Interests
The Company’s noncontrolling interest represents the minority shareholder’s 10% ownership interest in Roshing. The noncontrolling interest is presented in the consolidated balance sheets separately from stockholders’ equity attributable to Tianci. Noncontrolling interest in the results of Roshing are presented on the consolidated statements of operations as allocations of the total income or loss of Roshing for the three and six months ended January 31, 2024 and 2023 between the noncontrolling interest holder and the shareholders of RQS United.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
Related parties
Parties, which can be a corporation, other business entity, or an 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.
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 adoption of this standard on August 1, 2023 has not had and is not expected to have a material impact on the Company’s future 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 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 consolidated Financial Statements.
NOTE 4 – DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
NOTE 3 – RELATED PARTIES BALANCES AND TRANSACTIONS
Due from related party consists of:
Due from related party represents a receivable of $54,167 from RQS Capital at July 31, 2023. The receivable, which was non-interest bearing and due on demand, was collected by the Company in December 2023.
Due to related parties consist of:
| Schedule of due to related parties | January 31, | July 31, | ||||||||||||||||||
| 2023 | 2022 | Transaction | January 31, | 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 | 2024 | 2023 | ||||||||||||||||
| Zhigang Pei* | Former Chairman of the Board | Working capital advances and operating expenses paid on behalf of the Company | $ | – | $ | 220,909 | ||||||||||||||
| RQS Capital | 68% shareholder | Company cash collection due to RQS Capital | 2,132 | 2,132 | ||||||||||||||||
| Ying Deng** | RQS Capital 30% owner and Roshing’s 10% owner | Working capital advances and operating expense paid on behalf of the Company | 28,083 | 53,036 | ||||||||||||||||
| TOTAL | $ | 250,909 | $ | 194,888 | $ | 30,215 | $ | 276,077 | ||||||||||||
| * | $220,909 of this liability was converted to 220,909 shares of common stock on January 19, 2024. |
| ** | $24,953 of this liability was forgiven in November 2023. |
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.
Employment agreements with officers and director retainer agreements
On August 27, 2021, the Company executed threeTianci currently maintains two employment agreements and threesix 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 three and six months ended January 31, 2023 and 2022,2024, we accrued management compensation expenses of $ and $, respectively. These amounts are included in “general and administrative expenses” in the accompanying condensedconsolidated statement of operations.
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three andAnd Six Months Ended January 31, 2024 And 2023 and 2022
(Unaudited)
Office space sharing agreement with related parties
On August 28, 2021, Roshing entered into an office space sharing agreement with Shufang Gao, 60% owner of RQS Capital, and Ying Deng, 30% owner of RQS Capital, for office space in Shenzhen, China. The agreement provided 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 $1,726) to RMB 13,583 (approximately $1,903) on behalf of Roshing. The rent expenses paid by Gao and Deng were 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 January 31, 2024 and 2023, the Company has accounted for this agreement by charging general and administrative expenses for $0 and $5,560, respectively, and crediting additional paid-in capital for $0 and $5,560, respectively. For the six months ended January 31, 2024 and 2023, the Company has accounted for this agreement by charging general and administrative expenses for $0 and $9,079, respectively, and crediting additional paid-in capital for $0 and $9,079, respectively. The office sharing agreement was terminated on May 31, 2023 when Roshing moved all of its operations to its office in Hong Kong.
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, 2023,2024, regarding the classes of capital stock that are authorized by the Articles of Incorporation of Tianci International, Inc.
| Class | Shares Authorized | Shares Outstanding | ||||||
| Common Stock, $.0001 par value | 100,000,000 | 2,450,148 | ||||||
| Series A Preferred Stock, $.0001 par value | 80,000 | 80,000 | ||||||
| Undesignated Preferred Stock, $.0001 par value | 20,000,000 | 0 | ||||||
| Schedule of capital stock authorized | ||||||||
| January 31, 2024 | ||||||||
| Class | Shares Authorized | Shares Outstanding | ||||||
| Common Stock, $.0001 par value | 100,000,000 | 14,781,803 | ||||||
| Series A Preferred Stock, $.0001 par value | 80,000 | – | ||||||
| Undesignated Preferred Stock, $.0001 par value | 20,000,000 | – | ||||||
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.
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TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
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 TransactionsIssuances of Preferred Stock and Common Stock
On January 27, 2023, the CompanyTianci sold shares of its Series A Preferred Stock to RQS Capital Limited. The shares were sold for a cash payment of $24,000.$24,000 cash.
TIANCI INTERNATIONAL, INC.
Notes To Condensed Financial Statements
Three and Six Months Ended January 31, 2023 and 2022
(Unaudited)
NOTE 6 – SUBSEQUENT EVENTS
Incorporation of Subsidiary Company
On February 13, 2023, the Company incorporated a fully owned subsidiary Tianci Group Holding Limited in the Republic of Seychelles.
Sale of Common Stock
On March 1, 2023, the Company entered into agreements to sellTianci sold a total of shares of ourits common stock to 13 investors fornon-US persons at a price of U.S.$ per share i.e. an aggregate priceor $376,000 total.
On March 6, 2023, Tianci issued shares of U.S. $376,000). The shares were issued in a private offeringits common stock 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 1933RQS Capital 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.
OnShare Exchange Agreement dated March 3, 2023 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”)(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.
Prior to For the Share Exchange,year ended July 31, 2023, the Company was a shell company as defined in Rule 12b-2 underaccounted for this issuance by expensing the Exchange Act. As a result$210,000 estimated fair value of the transactions under the Exchange Agreement, the Company ceased700,000 shares of common stock to be a shell company.(1) cost of revenues-services ($144,000), (2) selling and marketing ($36,000), and (3) general and administrative ($30,000).
On January 19, 2024 the Company sold an aggregate of shares of its common stock to five present or former members of the Company’s Board of Directors for an aggregate price of $445,109 or $1.00 per share. The purchasers included Zhigang Pei, who received 220,909 shares in settlement of a loan by Mr. Pei to the Company in the amount of $220,909, and five present or former members of the Company’s Board of Directors, who received an aggregate of 224,200 shares (Zhigang Pei – 110,200 shares; David Wei Fang – 64,600 shares; Jack Fan Liu – 22,100 shares, Jimmy Weiyu Zhu – 5,200 shares; and Yee Man Yung - 22,100 shares) in satisfaction of the Company’s liability to them for unpaid compensation.
* * * *On January 19, 2024 the Company issued shares of its common stock to RQS Capital Limited. The shares were issued upon RQS Capital’s exercise of its right to convert shares of the Company’s Series A Preferred Stock into 8,000,000 shares of common stock.
On January 24, 2024 the Company sold an aggregate of shares of its common stock to nine investors for an aggregate price of $433,213 or $1.00 per share. The shares were issued in a private offering to investors.
Overview; Termination of Shell Company Status
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
From October 2016 until March 3, 2023 Tianci was a shell company, as defined
NOTE 5 – INCOME TAXES
Income Taxes
Seychelles
RQS United is incorporated in Rule 12b-2Seychelles and is not subject to tax on income generated outside of Seychelles under the Exchange Act. It hadcurrent law. In addition, upon payment of dividends, no subsidiaries and no business operations. On March 3, 2023, however, we acquired the outstanding capital stock of RQS United Group Limited ("RQS United"). RQS United owns 90% of the capital stock of Roshing International Co., Ltd. (“Roshing”), an operating company. As a result of the acquisition, we ceased to be a shell company. withholding tax is imposed under current law.
Hong Kong
Roshing wasis 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 realizes a substantial portion ofand is subject to Hong Kong Profits Tax on the taxable income as reported in its software development and related services revenuestatutory financial statements adjusted in Singapore.
For information regarding the business carried on by Roshing, including the consolidated financial results of RQS United 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
accordance with relevant Hong Kong tax laws. The following table provides selected financial data about Tianci as of January 31, 2023 and July 31, 2022 andapplicable tax rate is 8.25% in Hong Kong. Hong Kong income tax expenses (benefit) for the six months ended January 31, 2024 and 2023 amounted to $11,972and 2022.$0, respectively.
Balance Sheet Data
| 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 EndedFor the six months ended January 31, 2024, the income before provision for income taxes of $106,574, consisted of United States source loss of $(197,930) and Hong Kong source income of $304,504. For the six months ended January 31, 2023, Compared to Three Months Ended January 31, 2022the loss before benefit from income taxes of $(6,629) was all Hong Kong source loss.
| 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 | ) | |||
Significant components of the provision for income taxes are as follows:
| Schedule of components of income tax expense | ||||||||
| For the six months ended | ||||||||
January 31, 2024 | January 31, 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current Hong Kong | $ | 11,972 | $ | – | ||||
| Deferred Hong Kong | – | – | ||||||
| Provision (benefit) for income taxes | $ | 11,972 | $ | – | ||||
The following table reconciles the Hong Kong statutory rates to the Company’s Hong Kong effective tax rate:
| Schedule of effective income tax reconciliation | ||||||||
For the six months ended 2024 | For the six months ended 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Hong Kong statutory income tax rate | 8.25% | 8.25% | ||||||
| Prior year overaccrual of provision for income taxes | (4.32)% | – | ||||||
| Change in deferred tax asset valuation allowance | (8.25)% | |||||||
| Effective tax rate | 3.93% | –% | ||||||
Revenue. During the three months ended January 31, 2023, and 2022, we did not generate any revenues.
Operating Expenses. Operating expenses were $105,219 and $57,957 for the three months ended January 31, 2023 and 2022, respectively. Operating expenses mainly consisted of professional fees, executive compensation and office and miscellaneous expenses. The increase in operating expenses resulted primarily from the increase in accounting and legal related professional fees.TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Loss from Operations. 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.
Three And Six Months Ended January 31, 2024 And 2023 Compared to Six Months Ended
(Unaudited)
For United States income tax purposes, Tianci has a net operating loss carry forward of approximately $1,165,337 at January 31, 20222024. Management has not determined that it is more likely than not that this carryforward will be realized and thus the Company maintained a 100% valuation allowance for the deferred tax asset relating to the United States net operating loss carryforward. Current United States income tax law limits the amount of loss available to offset against future taxable income when a substantial change in ownership occurs.
| 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 | ) | |||
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of January 31, 2024 and July 31, 2023, the Company did not have any significant unrecognized uncertain tax positions.
As of January 31, 2024, tax years 2021 and forward generally remain open for examination for United States Federal and State tax purposes and tax years 2017 and forward generally remain open for examination for foreign tax purposes.
RevenueNOTE 6 — CONCENTRATION OF RISK
Credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash held in banks. The cash balance in each financial institution in the United States is insured by the FDIC up to $250,000. DuringAs of January 31, 2024, no United States account balance exceeded $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 January 31, 2024, a cash balance of $676,256 was maintained at a financial institution in Hong Kong of which approximately $612,000 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 six months ended January 31, 2023,2024, two customers accounted for 68.4% and 2022, we did not generate any16.9% of the Company’s total revenues.
Operating Expenses. Operating expenses were $162,286 and $105,103 for the six months ended January 31, 2023 and 2022, respectively. Operating expenses 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, four customers accounted for 23.3% 26.9%, 16.2% and 2022, we incurred a loss from operations13.4% of $162,286 and $105,103, respectively. The increase in loss from operations was attributable to the increase in our operating expenses.Company’s total revenues.
Other expenses.As of January 31, 2024, one customer accounted for 100% of the Company’s total accounts receivable.
Vendor concentration risk
For the six months ended January 31, 2024, two vendors accounted for 59.9% and 16.2% of the Company’s total purchases. For the six months ended January 31, 2023, four vendors accounted for 51.1%, 21.9%, 15.2%, and 2022, we did not incur any other expenses. Other expenses consisted11.7% 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.Company’s total purchases.
Liquidity and Capital Resources
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
Working CapitalNOTE 7— COMMITMENTS AND CONTINGENCIES
| 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 | ) | |||
As of January 31, 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 due to related parties.
Cash FlowsLease commitments
| 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 ActivitiesOn 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 agreement does not contain any material residual value guarantees or material restrictive covenants. The lease does not contain an option to extend at the time of expiration. The lease was early terminated in September 2023 which resulted in a derecognition of $6,080 right of use (“ROU”) asset and operating lease liabilities in August 2023.
DuringIn September 2023, the sixCompany entered into a one-year lease with a monthly lease payment of approximately $828 (HKD 6500).
Rent expenses were $2,484 and $6,478 for the three months ended January 31, 2024 and 2023, net cash used in operating activities was $75,857, compared to $98,309respectively, and $5,669 and $11,076 for the six months ended January 31, 2022. The decrease in net cash used in operating activities was mainly due to the increase in accounts payable2024 and accrued liabilities offset by the increase in net loss.2023, respectively.
Cash Flow from Investing ActivitiesContingencies
DuringFrom time to time, the six months endedCompany may be a party to legal proceedings, as well as certain asserted and un-asserted claims. The Company was not involved in any material legal proceedings nor asserted claims as of January 31, 2023 and 2022, we had no cash flow from investing activities.
2024.
Cash Flow from Financing ActivitiesNOTE 8 — ENTERPRISE-WIDE DISCLOSURE
During the six months ended January 31, 2023, net cash provided by financing activities was $80,021, compared to $94,358 for the six months ended January 31, 2022. The decrease in net cash provided by financing activities was mainly due to the decrease in proceeds from related parties offset by cash received from the sale of preferred shares.
On January 27, 2023, we sold 80,000 shares of Series A Preferred Stock 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.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies
The preparationCompany 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 his 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 financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues, and expenses,gross profit by business lines and related disclosuresby regions (Hong Kong, Vietnam, Japan and Singapore) for purposes of contingent assetsallocating resources and liabilities inevaluating financial performance. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the financial statements 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.consolidated unit level. Based on this definition, we have not identified any additional critical accounting policiesqualitative and judgments. We also have other key accounting policies, which involvequantitative criteria established by ASC 280, the use of estimates, judgments and assumptions that are significantCompany considers itself to understanding 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.
Impact of Accounting Pronouncements
There were no recent accounting pronouncements that have or will have a material effect on the Corporation’s financial position or results of operations.
Not applicable.be operating within one reportable segment.
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
Disaggregated information of revenues by business lines are as follows:
| Schedule of information of revenues by business | ||||||||||||||||
| For the three months ended | For the six months ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Electronic Device Hardware Components Sales | $ | 43,479 | $ | 75,686 | $ | 103,381 | $ | 179,880 | ||||||||
| Software and Website Development Services | – | – | 19,230 | – | ||||||||||||
| Technical Consulting and Training Services | – | 8,044 | – | 14,470 | ||||||||||||
| Software Maintenance and Business Promotion Services | 14,013 | 15,000 | 29,276 | 28,750 | ||||||||||||
| Business Consulting Services | 17,580 | – | 68,113 | – | ||||||||||||
| Global Logistics Services | 2,819,056 | – | 4,000,776 | – | ||||||||||||
| Total revenues | $ | 2,894,128 | $ | 98,730 | $ | 4,220,776 | $ | 223,100 | ||||||||
Disaggregated information of revenues by regions are as follows:
| Schedule of information of revenues by regions | ||||||||||||||||
| For the three months ended | For the six months ended | |||||||||||||||
| January 31, | January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Hong Kong | $ | 2,151,434 | $ | 91,230 | $ | 3,202,451 | $ | 209,350 | ||||||||
| Vietnam | 538,694 | – | 712,225 | – | ||||||||||||
| Japan | 204,000 | – | 304,850 | – | ||||||||||||
| Singapore | – | 7,500 | 1,250 | 13,750 | ||||||||||||
| Total revenues | $ | 2,894,128 | $ | 98,730 | $ | 4,220,776 | $ | 223,100 | ||||||||
NOTE 9 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Unaudited)
The Company performed a test on the restricted net assets of its consolidated subsidiaries in accordance with Rule 4-08(e)(3) of Regulation S-X promulgated by the SEC, “General Notes to Financial Statements” and concluded that it was applicable and the Company is required to disclose the required financial statement information for the parent company.
The subsidiaries did not pay any dividends to the parent during the periods presented. For the purpose of presenting parent only financial information, the Company records its investment in its subsidiaries under the equity method of accounting. Such investments are presented on the separate parent only balance sheets as “investment in subsidiaries” and the income (loss) of the subsidiaries is presented as “share of income (loss) of subsidiaries.” Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed or are not required.
| 21 |
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
PARENT COMPANY BALANCE SHEET
| Parent Company Balance Sheet | ||||
| January 31, | ||||
| 2024 | ||||
| (Unaudited) | ||||
| ASSETS | ||||
| Cash | $ | 117,661 | ||
| Prepaid expense | 250 | |||
| Receivable from subsidiaries | 207,584 | |||
| Investment in subsidiaries | 359,167 | |||
| Total Assets | $ | 684,662 | ||
| LIABILITIES | ||||
| Accounts payable and other accrued liabilities | $ | 9,800 | ||
| Due to related parties | 2,132 | |||
| Total Liabilities | 11,932 | |||
| Stockholders’ equity | ||||
| Series A Preferred stock, $ par value; shares authorized; and shares issued and outstanding as of January 31, 2024 and July 31, 2023, respectively | – | |||
| Undesignated preferred stock, $ par value; shares authorized; shares issued and outstanding | – | |||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of January 31, 2024 and July 31, 2023, respectively | 1,478 | |||
| Additional paid-in capital | 882,424 | |||
| Accumulated deficit | (211,172 | ) | ||
| Total stockholders’ equity | 672,730 | |||
| Total Liabilities and Stockholders’ Equity | $ | 684,662 | ||
| 22 |
TIANCI INTERNATIONAL, INC.
Notes To Condensed Consolidated Financial Statements
Three And Six Months Ended January 31, 2024 And 2023
(Unaudited)
PARENT COMPANY STATEMENT OF OPERATIONS
| Parent Company Statement of Operations | ||||
For the six months ended January 31, | ||||
| 2024 | ||||
| (Unaudited) | ||||
| EXPENSES: | ||||
| General and administrative | $ | (197,930 | ) | |
| OTHER INCOME: | ||||
| Income from investment in subsidiaries | 263,279 | |||
| Net Income | $ | 65,349 | ||
PARENT COMPANY STATEMENT OF CASH FLOWS
| Parent Company Statement of Cash Flows | ||||
For the six months ended | ||||
| January 31, 2024 | ||||
| Cash flows from operating activities: | ||||
| Net income | $ | 65,349 | ||
| Adjustments to reconcile net income to net cash (used in) operating activities: | ||||
| Share of gain from investment in subsidiaries | (263,279 | ) | ||
| Change in operating assets and liabilities: | ||||
| Prepaid expense | 1,500 | |||
| Accounts payable and other accrued liabilities | (7,578 | ) | ||
| Net cash (used in) operating activities | (204,008 | ) | ||
| Cash flows from financing activities: | ||||
| Proceeds received from private offerings | 433,213 | |||
| Repayment of operating funds to related party | (178,097 | ) | ||
| Net cash provided by financing activities | 255,116 | |||
| Net increase in cash and cash equivalents | 51,108 | |||
| Cash and cash equivalents at beginning of period | 66,553 | |||
| Cash and cash equivalents at end of period | $ | 117,661 | ||
| 23 |
| Item2. |
Overview
On March 3, 2023, we acquired ownership of RQS United Group Limited, a company organized under the laws of the Republic of Seychelles (“RQS United”), pursuant to the Share Exchange Agreement dated March 3, 2023 among the Company, RQS United and RQS Capital Limited, the prior owner of RQS United.
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 of its subsidiary, Roshing International Co., Ltd., a company organized under the laws of Hong Kong (“Roshing”). Roshing was incorporated on June 22, 2011 and is primarily engaged in logistics solutions, including sea freight forwarding, and logistic software development and maintenance. We also generate revenue from the sale of electronic parts, and certain technical consulting services.
As a non-asset-based freight forwarder, we currently do not own or operate any transportation assets. In our role as an indirect carrier, we issue fixture notes to customers as the contract of carriage. In turn, when the freight is physically tendered to a direct carrier, we receive a contract of carriage known as a Master Ocean Bill of Lading (MOBL). By leveraging our senior management’s expertise on the global logistics industry and adopting an asset-light strategy at the early stage, we’ve seen a significant growth in logistics revenue during the six months ended January 31, 2024. Our business is primarily carried out in Hong Kong and other locations in the Asia-Pacific region.
We are optimistic about the future of the logistics service industry. We expect that the global demand for coal, grains and iron ore, electric vehicles, and green energy equipment will continue to increase in response to changes in international trade flows and growing emerging market economies, as well as post pandemic stimulus policies in many countries, all of which should boost demand for global logistics services. Our vision is to continue exploring opportunities in the Asia-Pacific region, and other emerging markets to increase our customer base and global logistics service revenue.
Results of Operations
Comparison of the three months ended January 31, 2024 and 2023
| For the three months ended January 31, | ||||||||||||||||
| 2024 | 2023 | Change | Change Percentage | |||||||||||||
| Revenues | 2,894,128 | 98,730 | 2,795,398 | 2,831% | ||||||||||||
| Cost of Revenues | 2,555,024 | 78,800 | 2,476,224 | 3,142% | ||||||||||||
| Gross profit | 339,104 | 19,930 | 319,174 | 1,601% | ||||||||||||
| Selling and marketing | 133,763 | 6,001 | 127,762 | 2,129% | ||||||||||||
| General and administrative | 136,721 | 19,202 | 117,519 | 612% | ||||||||||||
| (Loss) income from operations | 68,620 | (5,273 | ) | 73,893 | (1,401% | ) | ||||||||||
| Provision for income taxes | 7,141 | (224 | ) | 7,365 | (3,288% | ) | ||||||||||
| Net (loss) income | 100,714 | (5,497 | ) | 106,211 | (1,932% | ) | ||||||||||
| Less: net (loss) income attributable to non-controlling interest | 19,581 | (550 | ) | 20,131 | (3,660% | ) | ||||||||||
| Net (loss) income attributable to Tianci | 81,133 | (4,947 | ) | 86,080 | (1,740% | ) | ||||||||||
| 24 |
Comparison of the six months ended January 31, 2024 and 2023
| For the six months ended January 31, | ||||||||||||||||
| 2024 | 2023 | Change | Change Percentage | |||||||||||||
| Revenues | 4,220,776 | 223,100 | 3,997,676 | 1792% | ||||||||||||
| Cost of Revenues | 3,647,895 | 187,355 | 3,460,540 | 1847% | ||||||||||||
| Gross profit | 572,881 | 35,745 | 537,136 | 1503% | ||||||||||||
| Selling and marketing | 235,834 | 8,160 | 227,674 | 2790% | ||||||||||||
| General and administrative | 255,426 | 34,214 | 221,212 | 647% | ||||||||||||
| (Loss) income from operations | 81,621 | (6,629 | ) | 88,250 | (1331% | ) | ||||||||||
| Provision for income taxes | (11,972 | ) | – | (19,337 | ) | – | ||||||||||
| Net (loss) income | 94,602 | (6,629 | ) | 101,231 | (1527% | ) | ||||||||||
| Less: net (loss) income attributable to non-controlling interest | 29,253 | (663 | ) | 29,916 | (4512% | ) | ||||||||||
| Net (loss) income attributable to Tianci | 65,349 | (5,966 | ) | 71,315 | (1195% | ) | ||||||||||
Revenues
During the three and six months ended January 31, 2024, our revenue increased significantly: to $2,894,128 for the three months ended January 31, 2024 from $98,730 for the three months ended January 31, 2023 and to $4,220,776 for the six months ended January 31, 2024 from $223,100 for the six months ended January 31, 2023. The increase was mainly attributable to the launch and growth of our global logistics service, which contributed 97% of our revenue in the quarter ended January 31, 2024 and 95% of our revenue during the six months ended January 31, 2024.
Our revenues from our revenue streams are categorized as follows:
For the Three Months Ended January 31, | For the Six Months Ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Global Logistics Service Revenue | $ | 2,819,056 | $ | – | $ | 4,000,776 | $ | – | ||||||||
| Product Revenue | 43,479 | 75,686 | 103,381 | 179,880 | ||||||||||||
| Other Service Revenue | 31,593 | 23,044 | 116,619 | 43,220 | ||||||||||||
| Total | $ | 2,894,128 | $ | 98,730 | $ | 4,220,776 | $ | 223,100 | ||||||||
| 25 |
Cost of Revenues
Total cost of revenues increased from $78,800 to $2,555,024 for the three months ended January 31, 2024 and from $187,355 to $3,647,895 for the six months ended January 31, 2024. The increase was attributable to the growth of our global logistics services.
Our cost of revenues from our revenue categories are summarized as follows:
For the Three Months Ended January 31, | For the Six Months Ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Cost of Global Logistics Service | $ | 2,504,764 | $ | – | $ | 3,534,734 | $ | – | ||||||||
| Cost of Product | 37,080 | 65,910 | 87,088 | 139,110 | ||||||||||||
| Cost of Other Service | 13,180 | 12,890 | 26,073 | 48,245 | ||||||||||||
| Total | $ | 2,555,024 | $ | 78,800 | $ | 3,647,895 | $ | 187,355 | ||||||||
Our cost of revenues from global logistics services represented 98% and 97% of total cost of revenues during the three and six months ended January 31, 2024, respectively. We did not have any cost of global logistics service in the same period in 2023 as this is a new service sector. Cost of global logistics services primarily include the cargo space charged by direct ocean carriers, freight forwarders and ancillary logistics services fees.
Our cost of revenues from hardware product sales decreased by 44% and 37% for the three and six month periods ended January 31, 2024, respectively, reflecting the reduction in our revenue from hardware product sales.
Gross Profit
Our gross profits from our major revenue categories are summarized as follows:
Margins
| For the Three Months Ended January 31, |
For the Six Months Ended | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Global Logistics Service | ||||||||||||||||
| Gross Profit Margin | $ | 314,292 | $ | – | $ | 466,042 | $ | – | ||||||||
| Gross Profit Margin | 11.1% | – | 11.6% | – | ||||||||||||
| Hardware Product Sales | ||||||||||||||||
| Gross Profit Margin | $ | 6,399 | $ | 9,776 | $ | 16,293 | $ | 40,770 | ||||||||
| Gross Profit Percentage | 14.7% | 12.3% | 15.8% | 22.7% | ||||||||||||
| Other Services | ||||||||||||||||
| Gross Profit Margin | $ | 18,413 | $ | 10,154 | $ | 90,546 | $ | -5,025 | ||||||||
| Gross Profit Percentage | 58.3% | 44.1% | 77.64% | -11.6% | ||||||||||||
| Total | ||||||||||||||||
| Gross Profit Margin | $ | 339,104 | $ | 19,930 | $ | 572,881 | $ | 35,745 | ||||||||
| Gross Profit Percentage | 11.7% | 20.2% | 13.6% | 16% | ||||||||||||
| 26 |
Our gross profit increased by $319,174 to $339,104 for the three months and by $537,136 to $572,881 during the three and six months ended January 31, 2024, respectively. The increase in gross profit was primarily due to the launch and growth of our global logistics service, as discussed above. For the three and six months ended January 31, 2024, our overall gross profit margin was 11.7% and 13.6%, respectively, a reduction from gross margins of 20.2% and 16.0% during the three and six months ended January 31, 2023. Our overall gross margins fell because the gross margins from our global logistics service was 11.1% and 11.6% during the three and six months ended January 31, 2024. We anticipate that the gross margin realized from logistics services is likely to increase in the future as demand picks up post-pandemic with relatively stable global logistics supply.
Operating Expenses
With the significant increase in our operations came a significant increase in our total operating expenses, which were $270,484 and $491,260 for the three and six months ended January 31, 2024, compared to $25,203 and $42,374 for the three and six months ended January 31, 2023, respectively. Our operating expenses primarily include payroll expenses, commissions, advertising, rent and professional fees relating to our obligations as a public company. The increase was mainly due to the increasing commission expense we paid to agents for referring global logistics customers, and professional fees for compliance services.
Income tax expense
Our income tax expense amounted to $7,141 and $11,972 for the three and six months ended January 31, 2024, compared to $0 and $(224) for the three and six months ended January 31, 2023, respectively. The change was due to the increase in revenue realized during the recent six month period.
Net Income
The Company realized net income of $100,714 and $94,602 for the three months and six months ended January 31, 2024. However, since the Company owns only 90% of its operating subsidiary, Roshing, 10% of net income generated by Roshing was attributed to the minority interest. As a result, the net income for the three and six months ended January 31, 2024 attributable to the shareholders of Tianci International was $81,133 and $65,349, respectively. In comparison, during the three and six months ended January 31, 2023, the Company incurred net losses of $5,497 and $6,629 respectively. We believe our pivot to the logistics market gives our shareholders an opportunity to benefit from the opportunity presented by this market as the global economy recovers from the pandemic.
Liquidity and Capital Resources
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, 2024, we had working capital of $692,636, as our cash amounted to $799,377, our current assets were $886,140 and our current liabilities were $193,504. To date, we have financed our operations primarily through capital contributions and advances from shareholders and by private placement of securities. At January 31, 2024 we owed $30,215 to related parties (See Note 3 to the financial statements).
We believe that our liquidity and working capital will be sufficient to sustain our business operation for the next twelve months. We may, however, need additional cash resources in the future if there are changes in business conditions or other developments or if the company finds and wishes to pursue opportunities for investment, acquisition, capital expenditure, or similar actions.
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We started providing shipping & freight forwarding services during the quarter ended October 31, 2023. Although the business grew quickly during its first six months, it may occur that to continue to take advantage of the opportunity offered by this business, we may require significant capital expenditure for developing our position in the market. If we determine 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 table summarizes the key components of our cash flows for the six months ended January 31, 2024 and 2023.
| For the six months ended | ||||||||
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by operating activities | $ | 109,822 | $ | 217,000 | ||||
| Net cash used in investing activities | – | – | ||||||
| Net cash provided by (used in) financing activities | 433,213 | (63,305 | ) | |||||
| Net change in cash and restricted cash | $ | 543,035 | $ | 153,695 | ||||
Operating activities
Net cash of $109,822 provided by operating activities for the six months ended January 31, 2024 was primarily the result of net income of $94,602. While an increase of $86,513 in accounts receivable during the period served to reduce the cash provided by our operations, we offset that item with a $89,040 increase in accrued liabilities..
Net cash of $217,000 provided by operating activities for the six months ended January 31, 2023 was primarily the result of an decrease in accounts receivable of $540,914, which was partially offset by the decrease of $325,062 in accounts payable.
Investing activities
The company has no investing activities during either of the six month periods ended January 31, 2024 and 2023.
Financing activities
Net cash provided by financing activities for the six months ended January 31, 2024 was $433,213. This was attributable to proceeds received from private offering of common stock in that amount.
Net cash of $63,305 used in financing activities during the six months ended January 31, 2023 was primarily attributable to our repayment of a working capital loan of $296,884 during that period. Other than existing cash resources, the funds used to repay the loan were derived from a capital contribution received amounting to $65,650, collection of a subscription receivable amounting to $50,000, and a working capital advance from a related party amounting to $61,490. Our cash balance was also aided by reason of the direct payment of operating expenses by shareholders amounting to $47,360, and the payments of rent for our premises in Shenzhen China by related parties amounting to $9,079.
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Critical Accounting Estimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be 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 six months ended January 31, 2024, there was no accounting estimate we made that was subject to a high degree of uncertainty and was critical to our results.
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. 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 Company’s consolidated balance sheets, statements of operations and comprehensive income and statements of cash flows.
| 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.
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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, 2023.2024. 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, 20232024 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 |
| 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 second quarter of fiscal year | |
| (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 second quarter of fiscal year | |
| Item 3. | Defaults Upon Senior Securities. |
| None. | |
| Item 4. | Mine Safety Disclosures. |
| Not Applicable. | |
| Item 5. | Other Information. |
During the quarter ended January 1, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K. | |
| Item 6. | Exhibits |
| Rule 13a-14(a) Certification of CEO | ||
| Rule 13a-14(a) Certification of CFO | ||
| Rule 13a-14(b) Certification of CEO | ||
| Rule 13a-14(b) Certification of CFO | ||
| 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 |
| Shufang Gao, Chief Executive Officer | ||
| Date: February 27, 2024 | /s/ Wei Fang | |
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