Steampunk Wizards, Inc. — Form 10-Q Summary
Business Context and Reporting Period
The provided filing is for Steampunk Wizards, Inc., not Tianci International, Inc. It covers the three and six months ended January 31, 2016, within the fiscal year ending July 31, 2016. The company develops mobile games and gaming technology through its Malta subsidiary. Following an August 21, 2015 share exchange, the company abandoned its former oil-and-gas business and completed a reverse acquisition and recapitalization.
Financial Performance and Position
| Metric | Three Months Ended January 31, 2016 | Six Months Ended January 31, 2016 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $261,037 | $494,673 |
| Net loss | $270,513 | $492,277 |
| Comprehensive loss | $256,524 | $494,011 |
| Basic and diluted loss per share | $0.01 | $0.02 |
| Operating cash flow | Not separately provided for the quarter | $(468,454) |
- Gross and operating margins are not meaningful because the company generated no revenue.
- At January 31, 2016, cash and cash equivalents were $15,663, compared with $53,472 at July 31, 2015.
- Total assets were $69,594; total liabilities were $339,360; and stockholders’ deficit was $269,766.
- Current assets were $56,413 versus current liabilities of $339,360, producing a working-capital deficiency of $282,947.
- Short-term loans totaled $118,258, including secured 7% loans from Deep Blue Trading and unsecured 7% loans from Galloway.
- Amounts due to related parties totaled $153,514, including accrued management fees and loans owed to the former CEO and other related parties.
Material Changes Versus Comparable Period
- Revenue remained at $0, while six-month net loss increased to $492,277 from $68,199 in the prior comparable period.
- Six-month operating expenses increased to $494,673 from $68,199, driven by $98,931 of development costs, $254,851 of office and miscellaneous expenses, and $140,891 of professional fees.
- Six-month operating cash use increased to $468,454 from $27,779.
- Cash declined by $37,809 during the six months, compared with a $62,155 increase in the prior comparable period.
- Common shares outstanding increased to 27,616,096 from 14,908,438 at July 31, 2015, reflecting the reverse-acquisition recapitalization and additional equity issuance.
- During the six months, the company issued 462,420 common shares for $405,579 of cash and received $67,097 of short-term loan proceeds.
- Property and equipment increased to $13,181 from $4,807, while accounts payable and accrued liabilities increased to $67,588 from $47,773.
Outlook, Risks, Contingencies, and Unusual Items
- Management stated that cash and expected revenue are insufficient to fund operations for the next twelve months and disclosed substantial doubt about the company’s ability to continue as a going concern.
- Management plans to seek additional equity and debt financing, improve profitability and cash generation, and restructure operations. The filing states that financing may not be available on acceptable terms, or at all.
- The company had a limited operating history and had not generated operating revenue through January 31, 2016.
- The company planned to expand its mobile-game portfolio, pursue publishing relationships, and explore potential distribution of an unreleased slot-machine game. No firm gambling-platform arrangements had been reached.
- The company disclosed no material litigation, no material off-balance-sheet arrangements, and no other commitments or contingencies beyond a one-year lease with monthly payments of EUR 1,200.
- Disclosure controls and procedures were deemed not effective as of January 31, 2016. Management reported no material changes in internal control over financial reporting during the period.
- The company issued 7,534 additional shares on March 4, 2016, completing shares owed under a previously disclosed $50,000 investment.
Investor Verification Items
- Confirm the issuer identity: the supplied filing names Steampunk Wizards, Inc., while the request identifies Tianci International, Inc.
- Verify the reverse acquisition, change of control, recapitalization, and resulting historical accounting basis.
- Assess the going-concern uncertainty, available cash, negative working capital, and the company’s ability to secure additional financing.
- Reconcile related-party balances, accrued management fees, short-term loans, interest terms, and repayment obligations.
- Review the substantial increase in operating expenses despite zero revenue and determine whether the games can achieve commercial traction.
- Verify share issuances, subsequent issuance of 7,534 shares, dilution, and the accuracy of the reported share count.
- Review the ineffective disclosure controls and related implications for the reliability and timeliness of future filings.