Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion
and analysis should be read in conjunction with our financial statements and the related notes thereto. The management’s discussion
and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations, and intentions. Any statements
that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,”
“intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or
future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or
similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties,
including those under “Risk Factors,” that could cause actual results or events to differ materially from those expressed
or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated
in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements
to reflect events or circumstances occurring after the date of this Report.
Overview
On March 3, 2023, we
acquired ownership of RQS United Group Limited, a company organized under the laws of the Republic of Seychelles (“RQS United”),
pursuant to the Share Exchange Agreement dated March 3, 2023 among the Company, RQS United and RQS Capital Limited, the prior owner of
RQS United.
RQS United is a holding
company incorporated in the Republic of Seychelles. RQS United has no operations other than holding 90% of the outstanding share capital
of its subsidiary, Roshing International Co., Limited, a company organized under the laws of Hong Kong (“Roshing”). Roshing
was incorporated on June 22, 2011 and is primarily engaged in logistics solutions, including shipping operation management. We also generate
a small portion of our revenue from our non-core businesses that we carry on through Roshing, including software development services,
consulting services, and the sale of electronic parts.
Our primary line of business
is global shipping logistics. The Company, through its subsidiary, Roshing, provides global logistics services, encompassing booking,
the transportation arrangement, and related logistics solutions. Roshing’s customized logistics solutions are tailored to meet the
diverse needs of its customers.
For the container shipping
service, Roshing charters cargo space from shipping suppliers (such as shipowners, ship carriers or non-vessel operating common carriers)
and then sub-charters that space to its customers (cargo owners or cargo agents). For the bulk goods shipping service, Roshing issues
fixture notes to customers, and then arranges the booking of ships, and signs chartering contracts with suppliers (such as shipowners).
Roshing also tailors the selection of transport options, and arranges to transport the goods from the port of loading to the port of destination,
so as to complete the performance of the contract.
Roshing currently does
not own or operate any transportation assets. By leveraging our senior management’s expertise in the global logistics industry and
adopting an asset-light strategy at the early stage, Roshing has seen a significant growth in logistics revenue since 2023. Shufang Gao,
our Chief Executive Officer, previously worked for a globally renowned shipping conglomerate, acquiring over 20 years of management experience.
His expertise spans shipping operation management and logistics transportation. Leveraging this experience, he has provided the Company
with the managerial framework to expand its global logistics business, as well as access to relevant customer and supplier resources in
the shipping industry. Roshing’s business is primarily carried out in Hong Kong and other locations in the Asia-Pacific region,
mainly in Japan, South Korea and Vietnam. Roshing’s logistics services also include the shipment of goods to African countries.
Roshing also generates
a small portion of its revenue from the sale of electronic parts, and certain business and technical consulting services, independent
from its global logistics business.
During 2025, we prepared
the Company to expand into global trade of bulk chrome and manganese ore by sourcing high-grade minerals directly from resource-rich regions
and building up inventory. We intend to utilize optimized bulk vessel and container shipping, and provide end-to-end supply chain solutions
for metallurgical and steelmaking customers. The introduction of the mineral trade business is expected to generate operational and strategic
synergies with our existing logistics business lines, enhancing overall efficiency and value creation.
On April 11, 2025, we
completed a $7 million initial public offering and became a listed company on Nasdaq.
Key factors that
affect operating results
Our performance of operations
and financial conditions have been, and are expected to continue to be, affected by a multitude of factors. Among the significant factors
are:
Economic Conditions
in Hong Kong. We are a Nevada company with operations conducted by our subsidiary Roshing, which is based in Hong Kong. Accordingly,
if Hong Kong experiences any adverse economic, political or regulatory conditions, such as local economic downturn, natural disasters,
contagious disease outbreaks, terrorist attacks, or if the government adopts regulations that place restrictions or burdens on us or on
our industry in general, our business, financial condition, results of operations and prospects may be materially and adversely affected.
International Trade
Environment. The demand for our shipping operation services is driven by the levels of international trade, which is in turn affected
by global political, economic and social conditions. Any changes in a particular country’s trade policy could trigger retaliatory
actions by affected countries, potentially eventually resulting in a trade war, which could increase the cost of goods and thus reduce
customer demand for products if the parties have to pay tariffs which increase their prices or if trading partners limit their trade with
the particular country. Our business is also susceptible to downturns and disruptions in the business activities of our direct customers
that are beyond our control. If sales in a particular geographical market in which our direct customers operate decline, due to unstable
regional and/or global political and economic conditions, such decline will likely lead to a corresponding plunge in the international
trade volume which, in turn, could reduce the demand for freight forward services and adversely affect our results of operations.
Our Ability to Source
Cargo Space from Vendors on a Cost-Efficient Manner. A significant portion of our cost of revenue is the fees that we pay to our vendors.
As a result, our results of operation depend on our ability to source vendors in a cost-efficient manner by obtaining a favorable price
and effectively controlling the cost.
Results of Operation
Comparison of the
years ended July 31, 2025 and 2024
For the Years Ended July 31, Change
Revenues
Our total revenue
increased by 8%, or $665,732, to $9,282,997 for the year ended July 31, 2025, from $8,617,265 for the year ended July 31, 2024. The increase
was primarily attributable to an increasing customer base, especially the number of high-paying customers that each contributed more than
$100,000 in this period.
As we pivoted to the
logistics service business, our revenue streams for the years ended July 31,2025 and 2024 are categorized as follows: the logistics service
revenue represented 97% of our total revenue in both of the years ended July 31, 2025 and 2024. We believe this trend will continue as
we keep growing our logistics business line, and the proportion of our historical product and other services revenue is likely to keep
decreasing.
For the Years Ended July 31,
Cost of Revenues
Our cost of revenues
from our revenue categories are summarized as follows:
For the Years Ended July 31,
Our cost of revenues
from global logistics services represented 98% of total cost of revenues during both of the years ended July 31, 2025 and 2024. Cost of
global logistics services primarily includes cargo space charged by direct ocean carriers, freight forwarders and ancillary logistics
services fees.
Total cost of revenue
increased by 17% from $7,562,086 to $8,832,874 for the year ended July 31, 2025. The change was in line with changes in revenue in each
period. However, the rate of cost increase has outpaced that of revenue in the same period as we continue to experience growing costs
from our logistics vendors but kept our service price to our customers relatively stable.
Gross Profit
Our gross profits from
each of our revenue categories are summarized as follows:
Margins
For the Years Ended July 31,
Global Logistics Service
Gross Profit Percentage 3.93% 10.67%
Hardware Product Sales
Gross Profit Margin $ – $ 16,294
Gross Profit Percentage – 15.76%
Other Services
Total
Gross Profit Percentage 4.85% 12.24%
Our gross profit decreased
from $1,055,179 to $450,123 for the year ended July 31, 2025. The decrease in gross profit was primarily attributable to a higher growth
rate on logistics costs as compared to the growth rate on logistics revenue as we continue to experience rising logistics costs while
our service price remains relatively stable. For the year ended July 31, 2025, our overall gross profit margin was 4.85%, a decrease from
gross profit margin of 12.24% for the year ended July 31, 2024. We are currently adopting a customer-friendly pricing strategy to build
up our market share quickly. As we continue to grow, we plan to further diversify our service region to include long-distance shipping
lines, which generally produce higher profit margins as compared to short-distance shipping lines within East Asia. Our negotiation power
over service vendors would also grow as our business grows, and vice versa. In 2025, we have prepared for an expansion into the global
trade of bulk chrome and manganese ore, marking our entry into the global commodity trading arena. Leveraging our core resource control
capabilities and supply chain integration strengths, this business is expected to gradually become a new profit driver for the company.
Operating Expenses
There was a significant
increase in operating expenses in the year ended July 31, 2025 as compared to the same period in the last year. Our operating expenses
primarily include payroll expenses, commissions, advertising, rent and professional fees relating to our obligations as a public company.
There was an increase of $2,406,376 in our general and administrative expenses, from $520,884 for the year ended July 31, 2024 to $2,927,260
in the year ended July 31, 2025. The significant increase in general and administrative expenses was primarily attributable to 1) a charge
of approximately $ 500,000 as we entered into an agreement with a vendor who will identify logistics service companies that are candidates
for acquisition; 2) a charge of approximately $ 500,000 as we entered into an agreement with a vendor who will provide public relations
services relating to our listing on Nasdaq; 3) a one-time cash bonus of $ 480,000 to certain members of management for successfully completing
our public offering; 4) a representative warrant with a value of $158,412 that we issued to a consultant, the warrant having vested immediately
and being exercisable in six months after issuance; 5) an increase of $119,140 in accounting and audit related expenses; 6) an increase
of approximately $245,000 for commercial service consulting fees. The increase in general and administrative expenses was partially offset
by a decrease in selling and marketing expenses, which was $230,778 for the year ended July 31, 2025, as compared to $365,992 for the
same period in last fiscal year. The reduction evidences our efforts to operate with less dependence on brokers for business development
and to reduce commission-based expenses.
Income tax expense
Our income tax expenses
amounted to $5,833 and $35,906 for the years ended July 31, 2025 and 2024, respectively. The change was due to the loss we incurred this
year as a result of increases in operating expenses.
Net Income (loss)
As a result of the
foregoing, we incurred a net loss of $2,686,357 and a net income of $110,320 for the years ended July 31, 2025 and 2024,
respectively. As the Company owns only 90% of its operating subsidiary, Roshing, 10% of the net income realized by Roshing was
attributed to the minority interest. Therefore, the net loss for the years ended July 31, 2025 and 2024 attributable to the
shareholders of the Company was $2,640,789 and a net income of $54,450, respectively.
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, 2025, despite a net loss of $2,686,357 for the year ended July 31, 2025,
we had working capital of $2,905,601, which consisted primarily of cash in the amount of $ 2,405,352 that was a portion of the amount
we received upon the completion of our public offering. To date, we have financed our operations primarily through capital contributions
from shareholders, private placements of equity, and the public offering of common stock.
We believe that our liquidity
and working capital will be sufficient to sustain our business operations for the next twelve months. We may, however, need additional
cash resources in the future if there are changes in business conditions or other adverse developments or if the company finds and wishes
to pursue opportunities for investment, acquisition, capital expenditure, or similar actions.
We started providing
shipping & freight forwarding services in 2023. Although the business grew quickly, we may require significant capital expenditure,
such as acquiring transportation assets, for developing our market share. If we determine that our cash requirements exceed the amount
of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities.
The issuance and sale of additional equity may result in dilution to our shareholders. Any loans that we may secure would result in increased
fixed obligations and could result in operating covenants that would restrict our operations. Our obligation to bear credit risk for certain
financing transactions we facilitate may also strain our operating cash flow. We cannot assure you that financing will be available in
amounts or on terms acceptable to us, if at all.
The following table summarizes
the key components of our cash flows for the years ended July 31,2025 and 2024.
For the Years Ended
Net cash provided by (used in) operating activities $ (3,225,714 ) $ 112,740
Net cash used in investing activities – –
Operating activities
Net cash of $3,225,714
used in operating activities for the year ended July 31, 2025 was primarily the result of our net loss of $ 2,686,357. In addition, we
recorded an increase of $ 215,346 in inventory, an increase of $380,737 in prepayment and other current assets, a decrease of $46,087
in income taxes payable, and a decrease of $52,395 in accrued liabilities, all of which brought our net use of cash to $3,225,714.
Net cash of $112,740
provided by operating activities for the year ended July 31, 2024 was primarily the result of net income of $110,320. A $35,906 increase
in income taxes payable and $21,498 increase in accrued liabilities were offset by an noncash item, $24,953 of debt forgiven by a related
party, and a decrease of $29,070 in our advances from customers account.
Investing activities
The company had no investing
activities during the years ended July 31, 2025 and 2024.
Financing activities
Net cash provided by
financing activities for the year ended July 31, 2025 was $5,217,937, which is primarily the proceeds from our public offerings in the
net amount of $5,439,333, which was partially offset by repayment of $10,771 to a related party and $219,125 in deferred offering costs
related to our public offering.
Net cash provided by
financing activities for the year ended July 31, 2024 was $44,047, as the proceeds of $513,213 that we received from a private placement
offering was partially offset by the $495,356 in fees that we paid to various service providers in anticipation of a public offering of
stock.
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, 2025, 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.
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 (PCAOB ID#6797)
F-2 Consolidated Balance Sheets as of July 31, 2025 and 2023
F-6 to F-21 Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Shareholders of
Tianci International, Inc.
OPINION ON THE FINANCIAL STATEMENTS
We have audited the accompanying consolidated
balance sheets of Tianci International, Inc. and its subsidiaries (the “Company”) as of July 31, 2025 and 2024, and the related
consolidated statements of operations and comprehensive loss, 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 financial statements present
fairly, in all material respects, the financial position of the Company as of July 31, 2025 and 2024, and the results of its operations
and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 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 audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/ Bush & Associates CPA LLC
We have served as the Company’s auditor since 2024.
Henderson, Nevada
October 3, 2025
PCAOB ID Number 6797
TIANCI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN UNITED STATES DOLLARS)
ASSETS
Current assets:
Deferred offering costs – 495,356
Other assets:
Lease right-of-use asset 119,545 –
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 18,554 $ –
Due to related parties – 2,271
Lease liability-current 57,903 –
Accrued liabilities and other payables 5,077 57,476
Lease liability - noncurrent 61,403 –
Commitments and contingencies – –
Stockholders’ equity:
*Shares are presented on a retroactive basis to reflect the reorganization on March 3, 2023.
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 years ended July 31,
OPERATING REVENUES
COST OF REVENUES
Operating expenses:
Income (loss) before provision for income taxes (2,680,524 ) 146,226
Weighted average number of common shares*
Income (loss) per common share attributable to TIANCI INTERNATIONAL, INC.*
Basic and diluted $ (0.17 ) $ 0.01
Weighted average number of preferred shares A*
Basic and diluted – 37,260
Income (loss) per preferred share A attributable to TIANCI INTERNATIONAL, INC.*
Basic and diluted $ – $ 0.01
Weighted average number of preferred shares B*
Income (loss) per preferred share B attributable to TIANCI INTERNATIONAL, INC.*
Basic and diluted $ (0.17 ) $ 0.01
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, 2024 AND 2023 (EXPRESSED
IN UNITED STATES DOLLARS)
Warrants issuance to consultant – – – – – – – 158,412 – – 158,412
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 years ended July 31,
Cash flows from operating activities:
Adjustments to reconcile net income (loss) to net cash
Amortization of operating lease right-of-use asset 4,937 356
Warrants issuance to consultant 158,412 –
Debt forgiven by related party – (24,953 )
Change in operating assets and liabilities:
Prepayment and other current assets (380,737 ) (70 )
Advances from customers – (29,070 )
Operating lease liabilities (5,177 ) (356 )
Accrued liabilities and other payables (52,395 ) 21,498
Net cash (used in) provided by operating activities (3,225,714 ) 112,740
Cash flows from financing activities:
Repayment of working capital advance to related party (10,771 ) (28,083 )
Operating expenses directly paid by shareholders – 139
Working capital advance from related party 8,500 54,134
Proceeds received from public or private offerings 5,439,333 513,213
–
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ – $ –
Non-Cash Activities:
Early termination of right-of-use assets and lease liabilities $ – $ 6,080
Conversion of liabilities to common stock $ – $ 445,109
Conversion of preferred stock to common stock $ – $ 800
Deferred offering costs net against proceeds from public offering $ 714,481 $ –
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, 2025 and 2024
NOTE
1 – NATURE OF BUSINESS AND ORGANIZATION
On June
13, 2012, Freedom Petroleum Inc. was incorporated under the laws of the State of Nevada. In May 2015, Freedom Petroleum changed its name
to Steampunk Wizards, Inc.; and on November 9, 2016, Steampunk Wizards changed its name to Tianci International, Inc. (the “Company”).
The Company is a holding company. As of July 31, 2024, the Company had one operating subsidiary, Roshing International Co., Limited (“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. To date, Tianci
Group Holding Limited has not carried on any business operations.
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., Limited (“Roshing”), which is engaged in the business of providing global logistics
services including ocean freight forwarding and related logistics solutions, distributing electronic components and providing software
services. 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.
Prior to
the Share Exchange, the Company was a shell company as defined in Rule 12b-2 under the Exchange Act. As a result of the transactions under
the Exchange Agreement, the Company ceased to be a shell company.
RQS United
is a holding company incorporated on November 4, 2022 in the Republic of Seychelles. RQS United has no substantive operations other than
holding 90% of the outstanding share capital of its subsidiary. Roshing, which was incorporated on June 22, 2011 in Hong Kong, is principally
engaged in global logistics services. Less than 5% of its revenue for the year ended July 31, 2025 was derived from other business lines:
sales of electronic device hardware components, development of logistics software and websites, technical consulting, and software maintenance.
Roshing’s business is primarily carried out in Hong Kong. During the fourth quarter ended July 31, 2025, the Company prepared to
launch a new mineral ore trading business line, aiming to diversify its revenue streams while further enhancing the synergies between
the new business line and its existing logistic service business line.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). All consolidated financial statements and notes to the consolidated financial statements are presented in United States
dollars (“US Dollar” or “US$” or “$”).
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 the 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 are written-off
against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of
July 31, 2025 and 2024, no
allowance for doubtful accounts was deemed necessary.
Prepayment
and other current assets
Prepayment
and other current assets include cash deposited or advanced to vendors for purchasing goods or services that have not been received
or provided. This amount is refundable and bears no interest. Prepayment and other current assets are classified as either current
or non-current based on the terms of the respective agreements. Prepayment and other current assets are generally unsecured and
reviewed periodically for impairment. As of July 31, 2025 and 2024, the Company made no
allowance for impairment.
Inventory
Inventories
of mineral ore and hardware are stated at the lower of cost or estimated realizable value. Cost includes the Company’s cost of acquiring
mineral ore or hardware products. The cost is charged to cost of products sold on a weighted average basis. Management periodically compares
the cost of inventories with its net realizable value, and will establish an allowance to adjust its inventories to their respective net
realizable value (“NRV”) if NRV is lower than cost. As of July 31, 2025 and 2024, the Company had not started generating mineral
ore sales revenue, and there was no allowance for inventory.
Fair
Value Measurements
The accounting
standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires
disclosure of the fair value of financial instruments held by the Company.
The accounting
standard defines fair value, establishes as a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure
requirements for fair value measures. The three levels are defined as follows:
Financial
instruments included in current assets and current liabilities (such as cash, accounts receivable, due from related party, accounts payable,
and due to related parties) are reported in the consolidated balance sheets at cost, which approximates fair value because of the short
period of time between the origination of such instruments and their expected realization.
Revenue recognition
The Company follows the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 606. This standard requires the use of a five-step model
to recognize revenue from customer contracts. The five-step model requires that the Company (i) identifies the contract with
the customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, including
variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocates the transaction
price to the respective performance obligations in the contract, and (v) recognizes revenue when (or as) the Company satisfies the
performance obligations.
The Company records revenue net of sales taxes
which are subsequently remitted to governmental authorities and are excluded from the transaction price.
The Company’s revenue recognition policies
are as follows:
a. Global Logistics Services
The Company provides global logistics services, including
ocean freight forwarding and related logistics solutions. As a non-asset-based carrier, the Company does not own transportation assets.
The Company derives its revenues by entering into agreements
that are generally comprised of a single performance obligation, which is that freight is shipped for and received by the customer via
either container ships or general cargo vessels. The most significant drivers of changes in gross revenues and related transportation
expenses are volume and weight.
In general, each shipment transaction or service order constitutes
a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed upon transaction price
exists. The transaction price, which is based on volume, weight, and shipping time, is fixed and not contingent upon the occurrence or
non-occurrence of any other event.
The Company typically satisfies its performance obligations
at a point in time when freight is shipped to a destination port and accepted by its customer. The Company does not have significant variable
consideration in its contracts. Taxes assessed concurrently with a specific revenue-producing transaction that are collected by the Company
from a customer are excluded from revenues.
The Company evaluates whether amounts billed to customers
should be reported as gross or net revenue. Revenue is recorded on a gross basis when the Company is primarily responsible for fulfilling
the promise to provide the services, when it assumes risk of loss, when it has discretion in setting the prices for the services to the
customers, and when the Company has the ability to direct the use of the services provided by the third party. In most cases we act as
an indirect carrier. When acting as an indirect carrier, we issue a Fixture Note to the customer as the contract of carriage. In turn,
when the freight is physically tendered to a direct carrier, we receive a Master Ocean Bill of Lading.
The Company’s evaluation determined that it is
in control of establishing the transaction price, managing all aspects of the shipment process and assumes the risk of loss for delivery,
collection, and returns. Based on its evaluation of the control of services and risk involved, the Company determined that it acts as
a principal rather than an agent in global logistics service arrangements and such revenues are reported on a gross basis.
b. Other Products and
Services
b1. Electronic Device
Hardware Components Products Sales
The Company is a distributor of electronic device hardware
components and generates revenue through resale of these components. The Company’s products include high performance computer chips,
Wi-Fi modules, Bluetooth modules, 4G network modules, LED screens, and touch screens. In accordance with ASC 606, Revenue Recognition:
Principal Agent Consideration, an entity is a principal if it controls the specified good or service before that good or service is transferred
to a customer. Otherwise, the entity is an agent in the transaction. The Company evaluates three indicators of control in accordance with
ASC 606: 1) For hardware sales, the Company is the most visible entity to customers and assumes fulfillment risk and risks related to
the acceptability of products, including addressing customer complaints directly and handling of product returns or refunds directly;
2) The Company is exposed to inventory risk before transfer of control to customers; and 3) The Company determines the resale price of
hardware products. After evaluating the above circumstances, the Company considers itself the principal of these arrangements and records
hardware sales revenue on a gross basis.
Hardware sales contracts are on a fixed price basis with no
separate sales rebate, discount, or other incentive. Revenue is recognized at a point in time when the Company has delivered products
that have been accepted by its customer with no future obligations. The Company generally permits returns of products due to product failure;
however, returns are historically insignificant.
b2.Software
and Website Development Services
The Company generates revenue
by developing customized freight shipping and related logistic software and websites, which are generally on a fixed-priced basis. The
software helps wholesalers, ecommerce retailers, and freight shipping providers to manage complex workflows and improve work efficiency.
The Company generally has no enforceable right to payment for performance completed to date and is only entitled to payment after software
is fully developed, delivered, tested, and accepted by the customer. As a result, revenues from software development contracts are recognized
at a point in time when services are fully rendered, and written acceptances have been received from customers.
b3. Technical Consulting
and Training Services
The Company provides technical consulting and training services
to help customers, generally its existing customers, to better understand and properly use its customized software and related hardware.
Services are generally carried out on a per-time fixed rate basis. Revenue is recognized at a point in time when service is rendered and
the customer confirms the completion of consulting or training.
b4. Software Maintenance
and Business Promotion Services
The Company provides software maintenance services to keep
customers’ software up to date and assists customers in promoting business with ongoing marketing support. The Company charges a
flat rate for a fixed duration on a subscription basis, generally 12 months. Revenue is recognized ratably each month over the contract
period.
b5. Business Consulting Services
The Company provides business consulting services to help
customers apply for immigration and non-immigration visas. The Company is responsible for performing background checks, case analysis,
and preparing related application paper works. The Company charges a flat fee for the visa application services. Revenue is recognized
at a point in time when an application is submitted with proper authorities.
Cost of revenues
For global logistics services, cost of revenue
consists primarily of cargo space charged by direct ocean carriers, freight forwarders and ancillary logistics services fees.
For hardware products sales, the cost of revenue
consists primarily of the costs of hardware products sold.
For software, consulting, services-based revenue,
the cost of revenue consists primarily of costs paid to outsourced service providers and compensation expenses paid the Company’s
service vendor.
Advertising costs
Advertising costs amounted to $3,559
and $0 for
the years ended July 31, 2025 and 2024, respectively. Advertising costs are expensed as incurred and included in selling and
marketing expenses.
Operating leases
Effective August 1, 2022, the Company adopted
FASB ASU 2016-02, “Leases” (Topic 842), and elected the practical expedient that does not require the Company to reassess:
(1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and
(3) initial direct costs for any expired or existing leases. For lease terms of twelve months or less, a lessee is permitted to make an
accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows
lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption of ASU 2016-02 effective August
1, 2022, the Company recognized a $8,704 right of use (“ROU”) asset and operating lease liabilities in January 2023 based
on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 5%.
The Company determines if a contract contains
a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for
financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation
includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods
when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty.
All of the Company’s real estate leases are classified as operating leases.
Lease payments for an operating lease transitioning
to ASC 842 using the effective date are based on future payments at the transition date and on the present value of lease payments over
the remaining lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental
borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental
borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the
lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value
of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable
certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating
lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception;
therefore, operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Lease expense
is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU
assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived
assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations.
The lease for the Company’s Hong Kong office
facility was early terminated in September 2023, which resulted in a derecognition of $6,080 right of use (“ROU”) asset
and operating lease liabilities in August 2023.
In
September 2023, the Company entered into a one-year office rental service agreement with a monthly lease payment of approximately
$828 (HKD 6,500). In September 2024, the Company further renewed the lease for one year with a monthly lease payment of
approximately $847 (HKD 6,650).
Upon the expiration of the above lease, the Company
entered a two-year lease for a new office in July 2025.
Income taxes
The Company accounts for current income taxes
in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted
for items which are non-taxable or non-deductible. It is calculated using tax rates that have been enacted or substantively enacted
by the balance sheet date.
Deferred taxes are accounted for using the asset
and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the unaudited interim consolidated financial statements and the corresponding tax bases used in the computation of taxable income (loss).
In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the
extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred
tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred
tax is charged or credited in the statements of operations, except when it is related to items credited or charged directly to equity,
in which case the deferred tax is dealt with in equity. Net deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that has a greater than 50% likelihood of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest
incurred related to underpayment of income tax for uncertain tax positions are classified as income tax expenses in the period incurred.
During the year ended July 31, 2024, the Company
incurred an IRS penalty of $47,030 for failure to update certain foreign-owned information schedules in a timely manner. The penalty
is included in other expense in the statements of operations for the year ended July 31, 2024. During the year ended July 31, 2025, the
Company received a refund of $27,391 from the IRS for the penalty previously charged. The refund is included in other income in the
statements of operations for the year ended July 31, 2025.
The Hong Kong tax returns filed for the 2019/2020
tax year and subsequent years are subject to examination by the applicable tax authorities.