Tianci International, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended July 31, 2018. The filing was signed October 2, 2018. The company is a Nevada-incorporated shell or blank-check company with no meaningful assets, employees, operating business, or revenue, and is seeking a merger or acquisition target. The filing is not a standalone calendar fourth-quarter report.
Business Context and Corporate Developments
- Tianci discontinued prior oil-and-gas and gaming activities and currently has no substantive operations.
- Management is in discussions regarding a potential acquisition of an operating business affiliated with company executives, but no acquisition agreement had been executed as of the filing date.
- On August 15, 2017, Chuah Su Mei and Chuah Su Chen acquired approximately 87% of the company’s common stock for $350,000 and assumed executive and board roles.
- The company has no employees, owns no property, and uses office space in Malaysia at no cost from its CFO.
Financial Results and Key Metrics
| Metric | FY 2018 | FY 2017 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Operating expenses | $96,747 | $162,151 | Decreased $65,404 |
| Loss from continuing operations | $96,747 | $162,151 | Improved by $65,404 |
| Gain from discontinued operations | $0 | $200,030 | Decreased $200,030 |
| Net income (loss) | $(96,747) | $37,879 | Returned to a loss |
| Net cash used in operating activities | $(109,588) | $(224,693) | Improved by $115,105 |
| Cash and cash equivalents | $2,000 | $2,360 | Decreased $360 |
| Total assets | $6,000 | $2,360 | Increased $3,640 |
| Total liabilities | $94,855 | $11,498 | Increased $83,357 |
| Working capital deficit | $(88,855) | $(9,138) | Worsened by $79,717 |
| Accumulated deficit | $(1,216,406) | $(1,119,659) | Worsened by $96,747 |
Operating expenses consisted primarily of professional fees of $85,807 and office and miscellaneous expenses of $10,940. With no revenue, a conventional operating margin is not meaningful. Basic and diluted loss per share from continuing operations was $0.02 in fiscal 2018, compared with $0.13 in fiscal 2017; weighted-average shares increased to 5,054,985 from 1,296,679 following prior recapitalization and reverse-split transactions.
Financing activities provided $109,228 in fiscal 2018, entirely from related parties. The company had no investing cash flow and did not issue common stock for cash during the year. At July 31, 2018, liabilities included $92,198 owed to a shareholder under a non-interest-bearing loan due on demand and $2,657 of accounts payable.
Material Changes Versus the Prior Comparable Period
- Revenue remained zero, but operating expenses declined approximately 40% because of lower professional fees.
- The company recorded a $96,747 net loss versus $37,879 of net income in fiscal 2017. The prior-year profit was principally attributable to a $200,528 gain on the sale of the former Malta subsidiary, classified as discontinued operations.
- Related-party liabilities increased from zero to $92,198, materially worsening the working capital deficit.
- Operating cash burn decreased, but substantially all funding came from related-party advances rather than operations.
- There were no common-stock issuances during fiscal 2018; year-end shares outstanding remained 5,054,985.
Outlook, Risks, Contingencies, and Unusual Items
- Going concern: The auditor and management reported substantial doubt about the company’s ability to continue as a going concern because of recurring losses, an $88,855 working capital deficit, limited cash, and the need for additional capital. The financial statements contain no adjustments that might result from this uncertainty.
- Management expects to fund the next twelve months through loans from directors and/or private placements of common stock, but there is no assurance that financing will be available on acceptable terms or at all. Equity financing could dilute existing shareholders.
- The company has no operating revenue and may be unable to complete an acquisition or continue operations if financing is unavailable.
- Management acknowledged risks from limited resources, limited due diligence capability, competition for acquisition targets, dependence on information supplied by prospective targets, and potential losses from acquisition efforts that are not completed.
- Disclosure controls and internal control over financial reporting were not effective as of July 31, 2018. Reported material weaknesses included limited information-processing controls, inadequate segregation of duties, lack of a financial-expert audit committee, and insufficient formal review procedures for significant accounting transactions.
- There were no reported material legal proceedings, off-balance-sheet arrangements, commitments, contingencies, or subsequent events requiring disclosure.
- No dividends were paid or planned, and no stock options or equity compensation awards were outstanding.
Important Facts for Investors to Verify
- Whether the company can obtain sufficient financing to meet near-term obligations and avoid cessation of operations.
- Terms, maturity, and repayment expectations for the $92,198 related-party loan due on demand.
- Whether discussions concerning an affiliated operating business will result in a definitive acquisition agreement, including related-party transaction terms and valuation.
- Whether the company can remediate its material weaknesses in internal control and disclosure controls.
- The accuracy of reported ownership figures and transaction share counts, which contain minor inconsistencies in the filing regarding the approximately 87% control block.
- The company’s status as a shell company, lack of revenue, lack of employees, and absence of a demonstrated operating business or acquisition closing.