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
PCAOB ID #822
We have served as the Company’s auditor since 2023.
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN UNITED STATES DOLLARS)
ASSETS
Current assets:
Prepaid expense 1,750 –
Due from related party 54,134 –
Other assets:
Right-of-use asset 6,436 –
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lease liability - current 4,368 –
Advances from customers 29,070 –
Accrued liabilities and other payables 260,176 1,640
Lease liability - noncurrent 2,068 –
Commitments and contingencies – –
Stockholders’ equity (deficit):
Subscription receivable – (50,000 )
Retained earnings (accumulated deficit) (276,521 ) 64,689
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 320,204 $ 760,339
The accompanying notes are an integral part of these consolidated financial statements.
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)
For the year ended July 31,
OPERATING REVENUES
COST OF REVENUES
Operating expenses:
Other income (expense) – –
Net (loss) income attributable to non-controlling interest 14,879 16,017
Weighted average number of common shares*
Earnings (loss) per common share attributable to TIANCI INTERNATIONAL, INC.*
Basic and diluted $ (0.10 ) $ 0.10
Weighted average number of preferred shares*
Basic and diluted 40,659 –
Earnings (loss) per preferred share attributable to TIANCI INTERNATIONAL, INC.*
Basic and diluted $ (8.39 ) $ –
The accompanying notes are an integral part of these consolidated financial statements.
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED JULY 31, 2023 AND 2022
(EXPRESSED IN UNITED STATES DOLLARS)
RQS United subscription receivable – – – – 50,000 – – – 50,000
The accompanying notes are an integral part of these consolidated financial statements.
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
For the year ended July 31,
Cash flows from operating activities:
Deferred income tax benefit – 17,447
Stock compensation issued 210,000 –
Change in operating assets and liabilities:
Prepaid expense 1,397 –
Advance from customers 29,070 –
Accrued liabilities and other payables 137,736 –
Net cash (used in) provided by operating activities 324,581 (84,161 )
Cash flows from financing activities:
Cash received in connection with reverse acquisition 4,186 –
Subscription receivable collected 50,000 –
Capital contribution received 65,650 –
Working capital advance from related party 31,490 2,007
Repayment of working capital advance from related party (341,885 ) (14,280 )
Operating expenses directly paid by shareholders 84,503 77,375
Payments of Shenzhen China rent by related parties 16,580 20,046
Net cash (used in) provided by financing activities (89,476 ) 85,148
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 $ 6,436 $ –
Noncash assets (liabilities) received in connection with reverse acquisition:
Prepaid expense and other current assets $ 3,250 $ –
Accounts payable (3,127 ) –
Due to related parties (253,041 ) –
Accrued liabilities and other payables (120,800 ) –
The accompanying notes are an integral part of these consolidated financial statements.
TIANCI INTERNATIONAL, INC.
Notes To Consolidated Financial Statements
For the years ended July 31, 2023 and 2022
NOTE 1 – NATURE
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. As of July 31, 2023, the Company had 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.
Reorganization
On 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”). 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, on March 6, 2023 RQS Capital transferred all of the issued
and outstanding capital stock of RQS United to the Company, and the Company issued to RQS Capital 1,500,000 shares of our common
stock and paid a cash price of $350,000 (the “Share Exchange”). Pursuant to the Exchange Agreement, the Company also issued
a total of 700,000 shares of our common stock to nine employees or affiliates of Roshing to induce continued services to Roshing.
As a result
of the Share 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 reverse acquisition, with RQS United as the acquirer and the Company as the acquired party
for accounting purposes. Unless the context suggests otherwise, when we refer in this report to business and financial information for
periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of RQS United
and its consolidated subsidiary, Roshing.
RQS United
is a holding company incorporated on November 4, 2022 in the Republic of Seychelles. RQS United has no substantive operations other
than holding 90% of the outstanding share capital of its subsidiary, Roshing, which was incorporated on June 22, 2011 in Hong Kong
and is principally engaged in sales of electronic device hardware components, development of software and websites, technical consulting,
and maintenance support on customized software. Roshing’s business is primarily carried out in Hong Kong and China.
Prior to
the 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.
Going
Concern Uncertainty
The
accompanying consolidated Financial Statements have been prepared applicable to a going concern which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. As of July 31, 2023, the Company had cash of $256,342and
negative working capital of $284,542. For the years ended July 31, 2023 and 2022, the Company had total operating revenues of $452,409and
$752,839,
respectively, and net income (loss) of $(356,089)
and $160,166, respectively. These factors among
others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.
Management plans to seek debt and/or equity financing to operate until such time as the Company has established sufficient ongoing
revenues to cover its costs. However, there is no assurance that management will be successful in accomplishing its plans. These
financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
TIANCI INTERNATIONAL, INC.
Notes To Consolidated Financial Statements
For the years ended July 31, 2023 and 2022
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated
financial statements include the financial statements of Tianci and its subsidiaries. All transactions and 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 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 consist
primarily of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use. The Company
maintains its bank accounts in United States and Hong Kong.
Accounts
receivable, net
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 the credit history and financial condition of the customer. Management reviews its receivables on a regular basis
to determine if the allowance for doubtful accounts is adequate, and adjusts the allowance when necessary. Delinquent account balances