Tianci International, Inc. — Form 10-Q Summary
Reporting period: Three months ended October 31, 2021, representing fiscal 2022 first quarter. The interim financial statements are unaudited, prepared under U.S. GAAP, and presented in U.S. dollars. Tianci is a Nevada holding company and self-described shell company with no meaningful assets or substantive operating business.
Business Context and Corporate Changes
- On August 26, 2021, Silver Glory Group Limited acquired 1,793,000 shares, or approximately 73.18% of the outstanding common stock, for $525,000 and obtained control of the Company.
- The former directors and officers resigned, forgave amounts owed by the Company, and were replaced by a new management team and board. Zhigang Pei became CEO, CFO, Secretary, and Director.
- The Company continues efforts to identify and merge with an operating company but has generated no operating revenue.
Key Financial Metrics
| Metric | Three Months Ended October 31, 2021 | Three Months Ended October 31, 2020 |
|---|
| Revenue | $0 | $0 |
| Operating expenses | $47,146 | $14,811 |
| Operating loss | $47,146 | $14,811 |
| Net loss | $47,146 | $14,811 |
| Basic and diluted loss per share | $0.02 loss | $0.01 loss |
| Net cash used in operating activities | $20,502 | $11,088 |
| Net cash provided by financing activities | $16,551 | $11,088 |
| Balance Sheet Metric | October 31, 2021 | July 31, 2021 |
|---|
| Cash | $0 | $3,951 |
| Total assets | $10,500 | $17,951 |
| Total liabilities | $33,040 | $343,061 |
| Working capital | $(22,540) | $(325,110) |
| Shareholders’ deficit | $(22,540) | $(325,110) |
| Accumulated deficit | $(1,499,807) | $(1,452,661) |
Material Changes Versus Prior Comparable Period
- Revenue remained zero.
- Operating expenses and net loss increased by $32,335, or approximately 218%, primarily because of higher executive compensation and related administrative costs.
- Operating cash usage increased by $9,414, or approximately 85%.
- Cash declined to zero at October 31, 2021.
- Liabilities declined by $310,021, primarily because former officers and related parties forgave amounts owed. The $349,716 forgiveness was recorded as additional paid-in capital.
- Amounts owed to related parties declined from $333,165 to zero. During the quarter, related parties advanced $17,753 and the Company repaid $1,202.
- Shares outstanding were 2,450,148 at both October 31, 2021 and July 31, 2021.
Liquidity, Debt, Outlook, and Risks
- Management stated that cash and anticipated revenues are insufficient to cover operating expenses for the next twelve months, creating substantial doubt about the Company’s ability to continue as a going concern.
- Management plans to seek additional working capital through equity and debt financing, loans from directors, private placements, improved profitability, and operational restructuring. There is no assurance that financing will be available on acceptable terms or at all.
- The Company has no interest-bearing debt reported at October 31, 2021; prior related-party balances were non-interest-bearing and due on demand, and were eliminated through forgiveness or repayment.
- Any equity financing could dilute existing shareholders. Failure to obtain funding could prevent execution of the business plan or force the Company to cease operations.
- The filing provides no revenue, profitability, or operating guidance and states that the quarter’s results are not necessarily indicative of future periods.
- The Company reported no pending material legal proceedings and no material off-balance-sheet arrangements.
Unusual Items, Compensation, and Controls
- The change in control resulted in management turnover and $349,716 of related-party debt forgiveness recorded in equity.
- The Company accrued $30,600 for compensation of its CEO and five directors during the quarter. The CEO’s employment agreement provides for monthly compensation of $3,800 through August 26, 2024, subject to termination provisions and potential change-in-control payments.
- Directors and independent directors entered into retainer agreements providing monthly compensation of $3,800 and $1,300, respectively, as applicable.
- Management concluded that disclosure controls and procedures were not effective as of October 31, 2021. Reported material weaknesses include limited information-processing controls, inadequate segregation of duties, no audit committee financial expert, and insufficient formal review procedures for significant accounting transactions.
Investor Verification Points
- Verify the Company’s ability to raise capital and fund operations given zero cash, no revenue, recurring losses, and the disclosed going-concern uncertainty.
- Review the terms and potential financial impact of the change-of-control transaction, related-party debt forgiveness, and executive and director compensation agreements.
- Assess the Company’s plan and timeline for identifying or merging with an operating business.
- Monitor whether reported internal-control material weaknesses are remediated.
- Confirm the current ownership, share count, and any future equity issuance or dilution.
