Tianci International, Inc. — Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended July 31, 2021; it is an annual report rather than a quarterly filing. Tianci is a Nevada corporation and a shell or blank-check company with no meaningful operating assets, employees, or revenue-generating operations. Its stated objective is to identify and combine with an operating business.
On August 26, 2021, after the fiscal year-end, Silver Glory Group Limited acquired 1,793,000 shares, representing approximately 73.18% of the company, for $525,000. Control changed, the prior officers and directors resigned, and Zhigang Pei became CEO, CFO, secretary, and director. The former officers also forgave amounts owed to them by the company.
Financial results and liquidity
| Metric | Fiscal 2021 | Fiscal 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $63,003 | $73,848 | Down $10,845 |
| Loss from operations | $63,003 | $73,848 | Improved by $10,845 |
| Other expenses | $11,381 | $0 | Increase of $11,381 |
| Net loss | $74,384 | $73,848 | Increase of $536 |
| Basic and diluted loss per share | $0.03 | $0.01 | Loss per share increased |
Operating expenses primarily consisted of professional fees and office and miscellaneous expenses. The $11,381 of other expense was an income tax penalty. No income tax expense was recorded because the company maintains a full valuation allowance against its deferred tax assets.
| Balance-sheet metric | July 31, 2021 | July 31, 2020 |
|---|---|---|
| Cash | $3,951 | $3,968 |
| Total assets | $17,951 | $15,968 |
| Total liabilities | $343,061 | $266,694 |
| Working capital | Deficit of $325,110 | Deficit of $250,726 |
| Stockholders’ deficit | $325,110 | $250,726 |
| Amounts due to related parties | $333,165 | $258,935 |
The related-party advances were non-interest-bearing and due on demand. During fiscal 2021, a shareholder advanced $74,231 for working capital. The company had no conventional debt balance separately identified in the filing, but its related-party obligations materially exceeded its cash and total assets. No off-balance-sheet arrangements were reported.
| Cash-flow metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Cash used in operating activities | $74,248 | $73,230 |
| Cash from investing activities | $0 | $0 |
| Cash from financing activities | $74,231 | $73,230 |
| Net change in cash | $(17) | $0 |
Material changes versus the prior comparable period
- Revenue remained zero and the company continued to have no substantive operating business.
- Operating expenses declined 15%, primarily because of lower professional fees, but the income tax penalty caused net loss to increase slightly.
- Cash remained approximately unchanged at less than $4,000, while total liabilities increased by $76,367 and the working-capital deficit widened by $74,384.
- Related-party amounts due increased by $74,230, effectively funding substantially all operating cash needs.
- Common shares outstanding declined from 4,751,718 to 2,450,148 because 2,301,570 shares were cancelled.
- The August 2021 change in control occurred after year-end and is presented as a subsequent event. Silver Glory Group Limited became the controlling shareholder and beneficial ownership was reported as 73.18%.
Guidance, outlook, risks, contingencies, and unusual items
Management provided no numerical revenue, earnings, or operating guidance. It stated that the company is pursuing a potential acquisition or combination with an operating business, including discussions with a business affiliated with executive officers, but no binding acquisition agreement had been entered into as of the report date.
The auditor and management reported substantial doubt about the company’s ability to continue as a going concern. The company stated that it does not have sufficient funds to operate for the next 12 months and expects to rely on director loans, related-party funding, private placements, or other debt or equity financing. There is no assurance that financing will be available on acceptable terms or at all, and equity financing could dilute existing shareholders.
Other significant risks include the absence of operations and revenue, limited financial resources, dependence on management information in evaluating acquisition targets, competition from better-funded acquisition vehicles, potential inability to complete a business combination, and possible loss of funds spent evaluating transactions that are not completed.
The company reported that its disclosure controls and internal control over financial reporting were not effective as of July 31, 2021. Material weaknesses included limited information-processing controls, inadequate segregation of duties, lack of an audit committee financial expert and board oversight structure, and insufficient formal procedures for reviewing significant accounting transactions. As a smaller reporting company, it was not required to obtain an auditor attestation report on internal control.
The company reported no pending material legal proceedings, no commitments or contingencies as of July 31, 2021, and no material off-balance-sheet arrangements. Its U.S. net operating loss carryforwards were $2,356,937, but the related deferred tax asset was fully offset by a valuation allowance. Management had not completed its evaluation of limitations on NOL utilization under Internal Revenue Code Section 382.
Most important facts for investors to verify
- Confirm that the relevant reporting period is the fiscal year ended July 31, 2021, not a standalone 2021 fourth-quarter filing.
- Review the going-concern qualification and the company’s ability to obtain financing despite $3,951 of cash, no revenue, and a $325,110 working-capital deficit.
- Verify the August 26, 2021 change in control, the $525,000 share purchase, the identity of Silver Glory Group Limited, and the new management team.
- Assess the terms, forgiveness, and continuing implications of the $333,165 related-party payable outstanding at year-end.
- Evaluate the absence of a binding acquisition agreement and the risks associated with the company’s blank-check strategy.
- Review the material weaknesses in disclosure controls and internal control over financial reporting.
- Confirm the share cancellations, 2,450,148 shares outstanding, controlling ownership concentration, and potential dilution from future financings.