Tianci International, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2020, three months ended October 31, 2019. The filing was signed December 16, 2019. The company is a Nevada holding company and currently has no substantive operations; management describes it as a shell company seeking to identify and merge with an operating business.
Financial position and operating results
| Metric | Q1 FY2020 / Oct. 31, 2019 | Comparable period or prior balance |
|---|---|---|
| Revenue | $0 | $0 in Q1 FY2019 |
| Operating expenses | $22,707 | $22,816 in Q1 FY2019 |
| Operating loss | $22,707 | $22,816 in Q1 FY2019 |
| Net loss | $22,707 | $22,816 in Q1 FY2019 |
| Basic and diluted loss per share | $0.00, as reported | $0.00, as reported |
| Cash and cash equivalents | $3,968 | $3,968 at July 31, 2019 |
| Total assets | $12,968 | $15,998 at July 31, 2019 |
| Total liabilities | $212,553 | $192,876 at July 31, 2019 |
| Stockholders’ deficit | $199,585 | $176,878 at July 31, 2019 |
Operating expenses consisted primarily of professional fees and office and miscellaneous expenses. No income tax provision was recorded. The filing does not provide a meaningful margin measure because the company had no revenue.
Cash flow, debt, and liquidity
- Net cash used in operating activities was $12,668, compared with $15,248 in the prior-year quarter.
- There was no investing cash flow.
- Financing cash flow was $12,668, consisting of advances from a related-party shareholder; prior-year financing cash flow was $17,216.
- Cash was unchanged at $3,968 because related-party financing offset operating cash usage.
- Amounts due to related parties increased to $198,373 from $185,705. These advances are non-interest bearing and due on demand.
- The company reported a working-capital deficit of $199,585, compared with $176,878 at July 31, 2019.
Material changes versus the prior comparable period
- Revenue remained $0 and the company continued to incur losses without substantive operating activity.
- Operating expenses and net loss decreased slightly by $109, or approximately 1%.
- Operating cash usage improved by $2,580, but this was fully funded by related-party advances.
- Compared with July 31, 2019, total assets declined $3,030, liabilities increased $19,677, and stockholders’ deficit worsened by $22,707.
- The company continued to have 5,054,985 common shares outstanding; no preferred shares were outstanding.
Outlook, risks, contingencies, and unusual items
Management states that cash and expected revenues are insufficient to fund operations for the next twelve months and that substantial doubt exists regarding the company’s ability to continue as a going concern. The financial statements do not include adjustments that could result from this uncertainty.
Management plans to seek additional working capital through equity or 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; equity financing could dilute existing shareholders.
The company is in discussions with an operating business affiliated with its executive officers regarding a potential acquisition, but no assurance is provided that an acquisition will occur. Management expects expenses could increase if an operating company is identified and acquired.
Disclosure controls and procedures were ineffective as of October 31, 2019. Reported material weaknesses included limited information-processing controls, inadequate segregation of duties, lack of an audit committee financial expert, and insufficient formal procedures for reviewing significant accounting transactions.
The company reported no pending material litigation, no unregistered equity sales during the quarter, and no material off-balance-sheet arrangements. The filing does not provide a separate quantitative risk-factor discussion because the company qualifies as a smaller reporting company.
Important facts for investors to verify
- Whether the company can obtain sufficient financing to fund operations and satisfy approximately $212,553 of current liabilities.
- The terms, source, and continued availability of related-party advances totaling $198,373 at October 31, 2019.
- Whether the proposed acquisition of an affiliated operating business will occur, and the potential related-party and dilution implications.
- Whether the company can develop revenue-generating operations; it has reported no operating revenue in the periods presented.
- Progress toward remediating the disclosed material weaknesses in internal controls.
- The impact of the going-concern uncertainty on the company’s ability to continue operations and meet obligations.