UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-K
(Mark One)
FOR THE FISCAL YEAR ENDED JULY 31, 2023
For the transition period from _____ to _____
Commission File No. 333-184061
TIANCI INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
(Address of Principal Executive Offices)
Securities Registered Pursuant to Section 12(b)
of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
None None Not Applicable
Securities Registered Pursuant to Section 12(g)
of the Act:
Common Stock, $.001 par value per share
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 406 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant 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.) 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,” “smaller reporting company,”
and "emerging growth 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 Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐ No
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 31. 2023 (the last business day of the most recently
completed second fiscal quarter) the aggregate market value of the common stock held by non-affiliates was $1,393,153.
As of October 20, 2023, there were 5,903,481 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED
This Annual Report contains certain forward-looking
statements regarding Tianci International, Inc., its business and financial prospects. All statements that address events or developments
that we expect or anticipate will occur in the future are forward-looking statements. These statements represent Management’s best
estimate of what will happen. Nevertheless, there are numerous risks and uncertainties that could cause our actual results to differ dramatically
from the results suggested in this Report, including the contingencies described in this Report under Item 1A titled "Risk Factors".
Because these and other risks may cause the Company’s
actual results to differ from those anticipated by Management, the reader should not place undue reliance on any forward-looking statements
that appear in this Report.
PART 1
Item 1. Business
The Share Exchange
On March 6, 2023 Tianci International, Inc. ("Tianci"),
which had previously been a shell corporation with no business operations, completed a share exchange with RQS Capital Limited (“RQS
Capital”), in which RQS Capital transferred all of the issued and outstanding capital stock of RQS United Group Limited (“RQS
United”) to Tianci, and Tianci issued to RQS Capital 1,500,000 shares of its common stock and paid a cash price of $350,000
(the “Share Exchange”).
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”). Shufang Gao and
Ying Deng, who are officers and members of Tianci's Board of Directors are also officers and directors of Roshing. Ying Deng owns the
10% of Roshing that is not owned by RQS United.
The Share Exchange has been accounted for as a
“reverse acquisition” effected as a recapitalization, wherein RQS United was considered the acquirer for accounting and
financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill
has been recognized on Tianci’s financial statements.
The Business of Roshing
Roshing was incorporated on June 22, 2011 and is
engaged in the sale of components of electronic devices, 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 we realize a substantial portion
of our software development and related services revenue in Singapore.
To date, Roshing has carried on operations in five
categories:
a. Electronic Device Hardware Components Product
Sales
Roshing distributes hardware components to manufacturers
of electronic devices. Roshing’s product line includes high performance computer chips, Wi-Fi modules, Bluetooth modules, 4G network
modules, LED screens, and touch screens. Roshing markets off-the-shelf products, which it ships directly from the manufacturer to Roshing’s
customer.
b. Software and Website Development Services
Roshing develops customized freight shipping and
related logistic software and websites. The software helps wholesalers, ecommerce retailers, and freight forwarders to manage complex
workflows and improve work efficiency by enabling shipping workflow management, sea shipping container management, ecommerce inventory
and shipping management, and logistics data analysis.
c. Technical Consulting and Training Services
Roshing 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.
d. Software Maintenance and Business Promotion
Services
Roshing provides software maintenance service to
keep customer’s software up to date. Roshing also 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.
e. Business Consulting Services
Roshing assists business enterprises in preparing
applications for immigration and non-immigration visas. Roshing performs background checks and cash analysis, then assists the client
in preparing the visa application(s). The Company charges a flat fee for these services.
Moving forward, by leveraging the professional
experience and market resources of the senior management team, Roshing is expected to provide a wide variety of shipping & freight
forward services, including sea freight forwarding, air freight forwarding, trucking, and warehousing.
Marketing
Roshing markets its hardware products directly
to the electronic device industry and markets its software directly to wholesalers. In each case, the primary method of marketing is participation
by our engineering staff in events such as expos, seminars and industry association meetings that are focused on our target markets. We
present Roshing as a valuable assistant to the customer, with the goal of developing a long-term relationship with repeat orders. As a
result of this strategic focus, almost 96% of our sales during fiscal year 2022 were made to just five customers, and 52% of our sales
during fiscal year 2023 were made to two customers.
Vendors
Roshing distributes electronic components manufactured
by a variety of vendors. There is no vendor that, were our relationship to terminate, we could not adequately replace promptly.
Roshing employs two software engineers and a logistics
project manager, who are together dedicated to fulfillment of the software development contracts entered by Roshing. When the flow of
software development contracts exceeds the production capacities of those three employees, Roshing subcontracts to third party developers
that it has tested for competence.
The core software package that Roshing markets
to wholesalers was designed under an Entrusted Custom Development Protocol signed by Roshing and Vendor A. The Protocol provides for Vendor
A’s continued involvement in Roshing’s marketing of software, detailing the terms under which Roshing may engage Vendor A
to develop specific applications of the software package for customers of Roshing.
Competition
Roshing competes in all of its market operations
with a large number of competitors, big and small. Roshing competes based on the quality of its services and attention to the needs of
its customers. Specifically, we focus on the following factors to capture customer preference:
· Commitment to product and service quality, development, and innovation.
· Comprehensive and high standard product range.
· Special focus on logistic industry
Employees
Roshing has eight employees in addition to its
directors: Shufang Gao and Ying Deng. Two employees are focused on marketing and administration; the remaining six are engineers or project
managers. Roshing believes its relations with its employees are good.
Our Plan for the Future
Our plan is to rely on the following key factors
to enable the growth of our business.
· Our ability to retain and increase customers
Our ability to increase our revenues and our profitability
will depend on our ability to retain our existing customers as well as to continue to increase our customer base and revenue per customer.
To achieve this, we strive to increase our marketing efforts and to enhance the quality and capabilities of our software solutions. Currently
we have customers in Hong Kong and Singapore, and we expect to continue expanding our business to other countries of the Asia-Pacific
region.
· Investment in talent
We believe that a core element of the competitiveness
of our business is talent. To retain existing and attract potential customers, we will continue to rely on our people and their knowledge
and experience in the industry. We intend to acquire top talent to keep pace with the growth of our target industries and continue to
offer cutting-edge hardware and software solutions.
· Our ability to pursue strategic opportunities for growth
To enhance Roshing’s capabilities, we intend
to pursue strategic acquisitions and make investments in select technologies and businesses, particularly in industries with which our
senior management has experience. We believe that a solid acquisition and investment strategy will be critical for us to accelerate our
growth and strengthen our competitive position in the future.
Item 1A.Risk Factors
Investing in our common stock involves risk.
You should carefully consider the risks described below together with all of the other information contained in this Report, including
the financial statements and the related notes, before deciding whether to purchase any shares of our common stock. If any of the following
risks is realized, our business, financial condition or operating results could materially suffer. In that event, the trading price of
our common stock could decline and you may lose all or part of your investment.
I.RISKS RELATED TO OUR BUSINESS
We have a limited operating history and face significant challenges
and will incur substantial expenses as we build our capabilities.
We have a limited operating history and are subject
to the risks inherent in a growing company, including, among other things, risks that we may not be able to hire sufficient qualified
personnel and establish operating controls and procedures. As we build our own capabilities, we expect to encounter risks and uncertainties
frequently experienced by growing companies in new and rapidly evolving fields, including the risks and uncertainties related to the evolving
effects of the COVID-19 pandemic and those described herein. If we are unable to build our own capabilities, our operating and financial
results could differ materially from our expectations, and our business could suffer.
We are currently dependent on a small group of customers for
most of our revenue. If we cannot expand our customer base many-fold, our business will not be successful.
The revenue generated to date by our business has
come from a small number of customers. During the year ended July 31, 2022, five customers were responsible for over 95% of our revenue.
During the year ended July 31, 2023, two customers were responsible for over 52% of our revenue. In order for Tianci to be viable as a
public company, we must multiply our revenue many-fold. To accomplish that, we must dramatically expand our customer base. If we fail
to multiply our customers, Tianci’s stock will have no significant value.
If we are unable to hire, retain or motivate qualified personnel,
consultants, independent contractors, and advisors, we may not be able to grow effectively.
Our performance will be largely dependent on the
talents and efforts of highly skilled individuals that we attract to our company. Our future success depends on our continuing ability
to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization: technological as well as
entrepreneurial. Competition for such qualified employees is intense. If we do not succeed in attracting competent personnel or in retaining
or motivating them, we may be unable to grow effectively. In addition, our future success depends largely on our ability to retain key
consultants and advisors. Our inability to retain their services could negatively impact our business and our ability to execute our business
strategy.
We do not presently maintain fire, theft, product liability or
any other property insurance, which leaves us with exposure in the event of loss or damage to our properties or claims filed against us.
We do not maintain fire, theft, product liability
or other insurance of any kind. We bear the economic risk with respect to loss of or damage or destruction to our property and to the
interruption of our business, as well as liability to third parties for damage or destruction to them or their property that may be caused
by our personnel or products. Such liability could be substantial and the occurrence of such loss or liability may have a material adverse
effect on our business, financial condition and prospects.
II.RISKS RELATED TO DOING BUSINESS IN HONG KONG
All our operations are in Hong Kong. However, due to the long
arm provisions under the current PRC laws and regulations, the Chinese government may exercise significant oversight and discretion over
the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our
operations and/or the value of our common stock.
Tianci is a holding company and we conduct our
operation through our operating subsidiary Roshing in Hong Kong. Our operations are primarily located in Hong Kong and a few of our clients
are PRC corporations. At the present time, we are not materially affected by recent statements by the Chinese Government indicating an
intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.
However, due to long arm provisions under the current PRC laws and regulations, there remains regulatory uncertainty with respect to the
implementation of Chinese law in Hong Kong. The PRC government may choose to exercise significant oversight and discretion, and the policies,
regulations, rules, and the enforcement of laws of the Chinese government to which we are subject may change rapidly and with little advance
notice to us or our shareholders. These laws and regulations may be interpreted and applied inconsistently by different agencies or authorities,
and inconsistently with our current policies and practices. New laws, regulations, and other government directives in the PRC may also
be costly to comply with.
We are aware that recently the PRC government initiated
a series of regulatory actions and statements to regulate business operations in certain areas in China with little advance notice, including
cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using
variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making
bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,
if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept
foreign investments and list on an U.S. or other foreign exchange.
China’s government may intervene or influence
our operations at any time or may exert more control over offerings conducted overseas and foreign investment in China-based issuers,
which may result in a material change in our operations and/or the value of our common stock. The promulgation of new laws or regulations,
or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or
way we conduct our business and could require us to change certain aspects of our business to ensure compliance, which could decrease
demand for our services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject
us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial
condition and results of operations could be adversely affected as well as materially decrease the value of our common stock.
We will rely on dividends and other distributions on equity paid
by our Hong Kong subsidiary to fund any cash and financing requirements we may have. In the future, the PRC government may impose restrictions
on our ability to transfer funds out of Hong Kong to fund operations or for other use outside of Hong Kong. Any limitation on the ability
of our subsidiary to make payments to us could have a material adverse effect on our ability to conduct our business and might materially
decrease the value of our common stock.
We are a holding company incorporated in the United
States, and we rely on dividends and other distributions on equity paid by our subsidiary in Hong Kong for our cash and financing requirements,
including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If
our subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends
or make other distributions to us.
Under the current practice of the Inland Revenue
Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by Roshing. The PRC laws and regulations
do not currently have any material impact on transfers of cash from Roshing to Tianci or from Tianci to Roshing. However, the Chinese
government may, in the future, impose restrictions or limitations on our ability to transfer money out of Hong Kong, to distribute earnings
and pay dividends to and from the other entities within our organization, or to reinvest in our business outside of Hong Kong. Such restrictions
and limitations, if imposed in the future, may delay or hinder the expansion of our business to outside of Hong Kong and may affect our
ability to receive funds from our operating subsidiary in Hong Kong. The promulgation of new laws or regulations, or the new interpretation
of existing laws and regulations, in each case, that restrict or otherwise unfavorably impact the ability or way we conduct our business,
could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our services, reduce
revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities.
To the extent any new or more stringent measures are implemented, our business, financial condition and results of operations could be
adversely affected and such measured could materially decrease the value of our common stock.
Changes in international trade policies, trade disputes, barriers
to trade, or the emergence of a trade war may dampen growth in Hong Kong, China and other markets where the majority of our clients reside.
Political events, international trade disputes,
and other business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse
effect on us and our customers, service providers, and other partners. International trade disputes could result in tariffs and other
protectionist measures which may materially and adversely affect our business.
Tariffs could increase the cost of the goods and
products which could affect customers’ investment decisions. In addition, political uncertainty surrounding international trade
disputes and the potential of the escalation to a trade war could have a negative effect on customer confidence, which could materially
and adversely affect our business. We may also have access to fewer business opportunities, and our operations may be negatively impacted
as a result. In addition, the current and future actions or escalations by either the United States or China that affect trade relations
may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results of operations, as
well as the financial condition of our customers. and we cannot provide any assurances as to whether such actions will occur or the form
that they may take.
Under the Basic Law of the Hong Kong Special Administrative
Region of the People’s Republic of China, Hong Kong is exclusively in charge of its internal affairs and external relations, while
the government of the PRC is responsible for its foreign affairs and defense. As a separate customs territory, Hong Kong maintains and
develops relations with foreign states and regions. However, based on recent political development, the U.S. State Department has indicated
that the United States no longer considers Hong Kong to have significant autonomy from China. Hong Kong’s preferential trade status
was removed by the United States government and the United States may impose the same tariffs and other trade restrictions on exports
from Hong Kong that it places on goods from mainland China. These and other recent actions may represent an escalation in political and
trade tensions involving the U.S, China and Hong Kong, which could potentially harm our business.
III.RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK
Even if a market for our common stock develops, the stock price
is nevertheless likely to be volatile. You may have difficulty obtaining a price for your shares that you consider reasonable.
Although Tianci’s common stock is listed
for trading on the OTC Pink Market maintained by OTC Markets, the market for the common stock is very thin, with only occasional trades
at prices that increase or decrease significantly and suddenly. Therefore, if an investor wants to sell shares, there may be no buyer
available, or the price offered may be less than the actual value of the shares. Unless and until significant daily volume occurs in the
trading market for our shares, the price of the common stock will be affected by many factors that are beyond our control and may not
be directly related to our operating performance. As a result of these factors, you cannot be assured that when you are ready to sell
your shares, the market price will accurately reflect the value of your shares or that you will be able to obtain a reasonable price for
your shares.
Our CEO beneficially owns the majority of our outstanding stock
and, accordingly, will have control over stockholder matters, the Company’s business and management.
Shufang Gao, the Chief Executive Officer of Tianci,
through his holding company owns securities with 68% of the voting power in Tianci. As a result, Mr. Gao will have the ability to:
· Elect or defeat the election of our directors;
· Amend or prevent amendment of our articles of incorporation or bylaws;
· Effect or prevent a merger, sale of assets or other corporate transaction; and
· Affect the outcome of any other matter submitted to the stockholders for vote.
Moreover, because of the significant ownership
position held by Mr. Gao, new investors will not be able to effect a change in the Company’s business or management, and therefore,
shareholders would be subject to decisions made by management and the majority shareholder.
In addition, Management’s stock ownership
may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce
our stock price or prevent our stockholders from realizing a premium over our stock price.
The sale of securities by us in any equity or debt financing
could result in dilution to our existing stockholders and have a material adverse effect on our earnings.
Our Board of Directors is authorized to issue up
to 100,000,000 shares of common stock and up to 20,000,000 shares of undesignated preferred stock. Our Board of Directors has the authority
to issue additional shares of common stock without consent of any of our stockholders. In addition, our Articles of Incorporation provide
that the Board can designate the voting rights, liquidation rights, dividend rights and other rights of holders of the preferred stock.
The Board, therefore, could use the Preferred Stock to give an investor group disproportionate voting rights or priority over the common
stock in the allocation of benefits from the operations of Roshing, including preferential dividends. The Board could also use the Preferred
Stock to create a poison pill to prevent a takeover of Tianci that might be considered beneficial by the common shareholders.
Any sale of common stock by us in a future private
placement offering could result in dilution to the existing stockholders as a direct result of our issuance of additional shares of our
capital stock. In addition, our business strategy may include expansion through internal growth by acquiring complementary businesses,
acquiring, or licensing additional brands, or establishing strategic relationships with targeted customers and suppliers. In order to
do so, or to finance the cost of our other activities, we may issue additional equity securities that could dilute our stockholders’
stock ownership. We may also assume additional debt and incur impairment losses related to goodwill and other tangible assets, and this
could negatively impact our earnings and results of operations.
Because we will be subject to “penny stock” rules,
the level of trading activity in our stock may be reduced.
Until we are able to secure a listing for our common
stock on a national securities exchange, it is likely that our common stock will be classified as a “penny stock”. Penny stocks
generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges).
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by penny stock rules adopted by the
Securities and Exchange Commission. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for
the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities
to persons other than established customers and “accredited investors” must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently,
these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject
to the penny stock rules. If a trading market does develop for our common stock, these regulations will likely be applicable, and investors
in our common stock may find it difficult to sell their shares.
FINRA sales practice requirements may limit a stockholder’s
ability to buy and sell our stock.
FINRA has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.
Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts
to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least
some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which
may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to
make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1B. Cybersecurity
Not applicable.
Item 2.Properties
The executive offices of Roshing are located in
Hong Kong at 2/F No. 18, Area 2, So Kuwn Wat Village, Tuen Mun Hong Kong. Roshing leases the offices for a monthly rent of HKD 3,000 (@
U.S.$386). The lease terminates on January 12, 2025.
Roshing also utilized office space in Shenzhen,
China located at Building 8, 26/F, Suite 2605A, Qianhai Zhuoyue Jinrong Center (Phase 1) Unit 2, Guiwan Area, Nanshan District, Shenzhen.
Roshing used the space under a sublease that will terminate on August 31, 2024. The monthly rental (from $1,827 to $2,014) is paid by
Shufang Gao and Ying Deng, members of Tianci’s Board of Directors and directors of Roshing, as a contribution to the capital of
RQS Limited. The sublease was terminated on May 31, 2023.
Management believes the real property leased by
Roshing will be adequate for its operations for the foreseeable future.
Item 3. Legal Proceedings
Neither Tianci International nor any of its subsidiaries
is party to material pending legal proceedings, other than ordinary routine litigation incidental to the product distribution business.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder
Matters And Issuer Purchases Of Equity Securities.
(a) Market Information
The Company’s common stock is quoted on the
OTC Pink Market under the symbol "CIIT". The quotations reported on the OTC Pink Market reflect inter-dealer prices without
retail markup, markdown or commissions, and may not necessarily represent actual transactions.
The Company's common stock is thinly traded. The
quoted bid and asked prices for the Common Stock vary significantly from week to week. An investor holding shares of the Company's Common
Stock may find it difficult to sell the shares and may find it impossible to sell more than a small number of shares at the quoted bid
price.
(b) Shareholders
Our shareholders list contains the names of 111
stockholders of record of the Company’s Common Stock.
(c) Dividends
Any future decisions regarding dividends will be
made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business
and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to
pay dividends, subject to the approval of our stockholders. Even if our board of directors decides to pay dividends, the form, frequency
and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual
restrictions and other factors that the board of directors may deem relevant.
(d) Securities Authorized for Issuance Under
Equity Compensation Plans
The Company had no securities authorized for issuance
under equity compensation plans as of July 31, 2023.
(e) Sale of Unregistered Securities
The Company did not make
any sale of unregistered securities during the 4th quarter of fiscal year 2023.
(f) Repurchase of Equity Securities
The Company did not repurchase any shares of its
common stock during the 4th quarter of fiscal year 2023.
Overview
On March 3, 2023, Tianci
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 Limited.
RQS United is a holding
company incorporated in the Republic of Seychelles. RQS United has no operations other than holding 90% of the outstanding share capital
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 engaged in the sale of components of electronic devices, development of software and
websites, technical consulting, and providing maintenance support on customized software. Roshing started also providing immigration-related
consulting services in the most recent quarter. Moving forward, by leveraging the professional experience and market resources of the
senior management team, Roshing is expected to provide a wide variety of freight forward services, including sea freight forwarding, air
freight forwarding, trucking, warehousing, and custom clearance services. Roshing’s business is primarily carried out in Hong Kong,
although we realize a substantial portion of our software development revenue in Singapore.
Results of Operations
Comparison of the year ended July
31, 2023 and 2022
For the year ended July 31,
Revenues
During the year ended July
31, 2023, our revenue decreased by $300,430, or approximately 40%, to $452,409 for the year ended July 31, 2023 from $752,839 for the
year ended July 31, 2022. We experienced decline in both product and service revenues in 2023 due to diminishing market demand and our
reduction in marketing expenses. We expect our revenue to grow after we add freight forward services to our lines of business.
Our revenues from our
revenue categories are summarized as follows:
For the Year Ended July 31,
Cost of Revenues
Total cost of revenues
decreased by $22,027, or approximately 5%, to $456,494 for the year ended July 31, 2023 as compared to $478,521 for the year
ended July 31, 2022. Our cost of revenues from our revenue categories are summarized as follows:
For the Year Ended July 31,
The year-to-year decrease
in our cost of revenues is primarily attributable to the decrease in our revenue. Thus, our cost of revenues from hardware product sales
decreased to $227,660 for the year ended July 31, 2023, from $336,644 for the year ended July 31, 2022, as we experienced a 41% decrease
in hardware product sales.
Nevertheless, overall cost
of revenue fell only 5%, while overall revenue fell by 40%. The disparity occurred because our cost of revenues from software related
services increased by $86,957 to $228,834 for the year ended July 31, 2023, from $141,877 for the year ended July 31, 2022.
The increase in cost of revenues from software related services resulted from our grant of common stock as an incentive to our internal
software developers. We recorded the $144,000 fair value of the shares as a cost of services.
Gross Profit
We had a gross loss of
$4,085 for the year ended July 31, 2023 compared to a gross profit of $274,318 for the year July 31, 2022, which was primarily due
to the reduction in revenue without a corresponding reduction in our overall cost of revenues, as discussed above.
The gross profit margin
of hardware products decrease by 9.9% to 22.8% for the year ended July 31, 2023, from 32.7% for the year ended July 31, 2022, which was
primarily due to rising raw material cost and increasing market competition, which put downward pressure on our pricing. Our software
related services resulted in a 45.3 % gross loss for the year ended July 31, 2023, again primarily due to the stock-based compensation
issued to our developers.
Operating Expenses
There was significant change
in our total operating expenses, which were $339,909 and $82,502 for the year ended July 31, 2023, and 2022, respectively. Our operating
expenses primarily include payroll expenses, advertising and rent. The increase was partially due to the stock compensation valued at
$66,000 that we issued to the selling and general administrative personnel for their continued service after the reverse merger. The professional
fees and other costs incurred in connection with the Share Exchange in March 2023 also increased our operating expenses for fiscal year
2023.
Income tax expense
Our income tax expense
amounted to $ 12,095 and $ 31,650 for the year ended July 31, 2023, and 2022, respectively. The change was mainly due to the decrease
in profits subject to taxation in Hong Kong.
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 July 31, 2023, our working capital deficit was $(284,543), our cash amounted to
$256,342, our current assets were $312,226 and our current liabilities were $596,768. To date, we have financed our operations primarily
through capital contributions and advances from shareholders. At July 31, 2023 we owed $276,077 to related parties (See Note 3 of the
interim financial statement) and $240,800 to officers for compensation under their employment agreements.
We believe 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.
We are planning to enter the shipping & freight
forwarding services in 2023, which may require significant capital expenditure for developing the business. If we determined that our
cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities
or obtain credit facilities. The issuance and sale of additional equity may result in dilution to our shareholders. The incurrence of
indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. Our
obligation to bear credit risk for certain financing transactions we facilitate may also strain our operating cash flow. We cannot assure
you that financing will be available in amounts or on terms acceptable to us, if at all.
The following summarizes
the key components of our cash flows for the year ended July 31, 2023 and 2022.
For the year ended
Net cash provided by (used in) operating activities $ 324,581 $ (84,161 )
Net cash used in investing activities – –
Net cash provided by (used in) financing activities (89,476 ) 85,148
Net change in cash and restricted cash $ 235,105 $ 987
Operating activities
Despite our net loss of
$356,089, net cash was provided by operating activities for the year ended July 31, 2023 primarily because our accounts receivable decreased
by $737,663 during the period, as we made efforts on the collection process. The decrease was offset by a decrease of $447,292 in our
accounts payable balance attributable to payment to our vendors. In addition, our operating loss of $356,089 included $210,000 in various
noncash items.
Net cash was used in operating
activities for the year ended July 31, 2022 primarily because our accounts receivable increased by $737,620 during the year, as we offer
long payment terms to our customers, typically 6 months after delivery of service or products. Nevertheless, cash used in operations during
the fiscal year was only $84,161, as we increased our accounts payable balance by $444,944 attributable to long payment terms from our
vendors, recorded net income of $160,166, and increased deferred income tax expense, inventory, and income taxes payable for a total amount
of $ 48,349.
Investing activities
The company has no investing
activities for the years ended July 31, 2023 and 2022.
Financing activities
Net cash used in financing
activities for the year ended July 31, 2023 was $89,476, which was primarily attributable to our repayment of a working capital advance
by a related party in the amount of $341,885. Cash outflow was offset by the $31,490 in working capital advance from related parties,
$84,503 in operating expenses that were paid directly by shareholders, the payments of Shenzhen China rent by related parties amounting
to $16,580, the receipt of a subscription receivable of $50,000, and a capital contribution of $65,650.
Net cash provided by financing
activities for the year ended July 31, 2022, was primarily attributable to a working capital advance from a related party amounting to
$2,007, the operating expenses that are paid directly by shareholders amounting to $77,375, and the payments of Shenzhen China rent by
related parities amounting to $20,046. Cash inflow was offset by repayment of a working capital advance to related party in the amount
of $14,280.
Impact of the COVID-19 Pandemic
The global outbreak of
COVID-19 and resulting health crisis has caused, and continues to cause, significant and widespread disruptions to the Hong Kong and
global economies, financial and consumer markets. We believe, however, that the COVID-19 outbreak has had very limited impact on
our business.
During the course of the
COVID-19 pandemic, public health officials and other governmental authorities have imposed and may impose new mitigation measures,
regulations and requirements to address the spread of COVID-19. Public health officials and other governmental authorities also have imposed
directives and may impose additional directives that could require changes in our business practices. The scope and duration of these
mitigation measures and directives continue to evolve throughout the course of the COVID-19 pandemic. Depending on the future course
of COVID-19 and further outbreaks, we may experience restrictions and temporary closures of our offices.
Although we have continued
to serve our clients and operate our business throughout the COVID-19 pandemic, there can be no assurance that future events will
not have an effect on our business, results of operations or financial condition because the extent and duration of the health crisis
remains uncertain. Future adverse developments in connection with the COVID-19 crisis, including further outbreaks and new strains
or variants of COVID-19, evolving international, federal, state and local restrictions and safety regulations in response to COVID-19,
changes in consumer behavior and health concerns, the pace of economic activity in the wake of COVID-19, or other similar issues could
adversely affect our business, results of operations or financial condition in the future, or our financial results and business performance
in future periods.
We continue to actively
manage the impact of the COVID-19 crisis as we face continued uncertainty regarding the impact COVID-19 will have on our financial
operations in the near and long term. The need for, or timing of, any future actions in response to COVID-19 is largely dependent
on the mitigation of the spread of the virus along with the adoption and continued effectiveness of vaccines, status of government orders,
directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, and consumer demand
for our products and services, all of which are highly uncertain.
Critical Accounting 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 year ended July 31, 2023, 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 7a Quantitative And Qualitative Disclosures About Market Risk.
Not Applicable.
Item 8. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page
F-1 Report of Independent Registered Public Accounting Firm
F-2 Consolidated Balance Sheets as of July 31, 2023 and 2022.
F-6 to F-20 Notes to Consolidated Financial Statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Tianci International,
Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tianci
International, Inc. (the “Company”) as of July 31, 2023 and July 31, 2022 and the related consolidated statements of operations,
changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Tianci International, Inc. as of July 31, 2023 and July 31, 2022, and the results of its operations and cash flows
for the years then ended in conformity with accounting principles generally accepted in the United States.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s present
financial situation raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard do this
matter are also described in 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period
audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. We determined that there were no critical audit matters.
/s/ Michael T. Studer CPA P.C.
Michael T. Studer CPA P.C.
Freeport, New York
October 20, 2023