Tianci International, Inc. - Quarter Report: 2017 April (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10–Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ________________

Commission file number: 333-184061

TIANCI INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Xusheng Building, Yintian Road, Bo’an District,

Shenzhen, Guangdong Province,

People’s Republic of China

(Address of principal executive offices)

86-0755 83695082

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☐  No ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☒ No ☐

As of June 16, 2017, there were 1,746,357 shares of the issuer’s common stock, par value $0.0001 per share, outstanding.

TIANCI INTERNATIONAL, INC.

Form 10-Q

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-K for year ended July 31, 2016, as filed on January 13, 2017.  You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. The Company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

TIANCI INTERNATIONAL, INC.

Balance Sheets

The accompanying notes are an integral part of these unaudited condensed financial statements.

TIANCI INTERNATIONAL, INC.

Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

TIANCI INTERNATIONAL, INC.

Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

TIANCI INTERNATIONAL, INC.

Notes to the Unaudited Condensed Financial Statements

April 30, 2017

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Tianci International, Inc. (“the Company”, “Tianci”) was incorporated under the laws of the State of Nevada, U.S. as Freedom Petroleum, Inc. on June 13, 2012. In May 2015, the Company changed its name to Steampunk Wizards Inc. and on November 9, 2016, the Company changed its name to Tianci International, Inc. The Company’s fiscal year end is July 31.

On October 13, 2016, the Company entered into a spin-off agreement (the “Spin-Off Agreement”) with Steampunk Wizards Ltd., the Company’s wholly owned subsidiary and a company incorporated pursuant to the laws of Malta (“Steampunk”), and Praefidi Holdings Limited (the “Buyer”), an entity organized under the laws of Malta and owned by Brendon Grunewald, former director of the Company. Pursuant to the Spin-Off Agreement, the Buyer shall receive all of the issued and outstanding capital stock of Steampunk and the Company shall receive $2,000 as purchase price. The Buyer shall become the sole equity owner of the Steampunk and the Company shall have no further interest in Steampunk.

On October 26, 2016, the Company entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Tianci International, Inc., a newly formed Nevada Corporation (“Merger Sub”), formed on November 09, 2016, with Merger Sub being the surviving entity. The transaction contemplated in the Merger Agreement (“Merger”) which became effective on November 9, 2016.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The interim financial information referred to above has been prepared and presented in conformity with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures that are necessary and required by applicable laws and regulations. This report on Form 10-Q should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended July 31, 2016 filed on January 13, 2017.

The unaudited condensed financial statements and notes are presented in accordance with accounting principles generally accepted in the United States of America (GAAP). These interim financial statements include all adjustments that, in the opinion of management, are necessary in order to make the financial statements not misleading.

Results of the nine months ended April 30, 2017 are not necessarily indicative of the results that may be expected for the year ended July 31, 2017 and any other future periods.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Going Concern Matters

As of April 30, 2017, the Company had $17,659 in cash on hand, had incurred a net loss from continued operations of $137,045, and used $206,085 in cash for continued operating activities for the nine months ended April 30, 2017.

The Company’s cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses for the next twelve months from the date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through equity and debt financing arrangements, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report.  However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures, working capital, and other requirements. Management intends to make every effort to identify and develop sources of funds. The outcome of these matters cannot be predicted at this time. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital and continue profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of April 30, 2017 and July 31, 2016, the Company has $17,659 and $0 in cash and cash equivalents, respectively.

Foreign Currency Translation and Re-measurement

The Company’s functional and reporting currency is the U.S. dollar. All transactions initiated in EURO are translated into U.S. dollars in accordance with ASC 830-30, “Translation of Financial Statements,” as follows:

Adjustments arising from such translations are included in accumulated other comprehensive income (loss) in shareholders’ equity (deficit).

Basic and Diluted Earnings (Loss) Per Share

Earnings per share is calculated in accordance with ASC 260. Basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of April 30, 2017 and July 31, 2016.

Reclassification

Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net income (loss) or accumulated deficit.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued and their potential effect on our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s condensed financial statements.

NOTE 3 – DISCONTINUED OPERATIONS

On October 13, 2016, the Company entered into a spin-off agreement (the “Spin-Off Agreement”) with Steampunk Wizards Ltd., the Company’s wholly owned subsidiary and a company incorporated pursuant to the laws of Malta (“Steampunk”), and Praefidi Holdings Limited (the “Buyer”), an entity organized under the laws of Malta and owned by Brendon Grunewald, former director of the Company. Pursuant to the Spin-Off Agreement, the Buyer shall receive all of the issued and outstanding capital stock of Steampunk and the Company shall receive $2,000 as purchase price. The Buyer shall become the sole equity owner of Steampunk and the Company shall have no further interest in Steampunk.

During the nine months ended April 30, 2017, the Company recorded a gain on the sale of $200,528. The Company has no continuing involvement in the operations of Steampunk. The sale of Steampunk qualified as a discontinued operation of the Company and accordingly, the Company has excluded results of Steampunk’ operations from its Statements of Operations and Comprehensive Income (Loss) to present this business in discontinued operations.

The following table shows the results of operations of Steampunk for nine months ended April 30, 2017 and 2016 which are included in the gain (loss) from discontinued operations:

The following table shows the carrying amounts of the major classes of assets and liabilities associated with the steampunk as of the October 13, 2016.

The following table presents the carrying amounts of the major classes of assets and liabilities associated with Steampunk reported as discontinued operations and classified as held for sale on our accompanying balance sheets.

NOTE 4 – DUE TO RELATED PARTIES

On October 6, 2016, the Company entered into the debt conversion agreement with the former Chief Executive Officer (“CEO”) and shareholder of the Company. The former CEO is owed $120,000 (“Debt”) as payment for preciously unpaid salary and accrued expense from January 2015 to January 2016 to convert into shares of the Company’s common stock. During the three months ended October 31, 2016, Debt of $120,000 was converted into shares of common stock, at a price per share of 0.047, for an aggregate number of 2,553,191 shares. As of April 30, 2017 and July 31, 2016, the Company owed $0 and $120,000 to the former CEO and shareholder. 

During the nine months ended April 30, 2017, the Company had a change of control, pursuant to which former shareholders paid $118,640 for outstanding accounts payable. The $118,640 was immediately forgiven and recorded as contributed capital pursuant conditions of the change of control. 

During the year ended July 31, 2016, a shareholder of the Company made vendor payments of $11,824 directly on behalf of the Company. As of April 30, 2017 and July 31, 2016, the Company owed $11,824 to a shareholder of the Company. This loan is non-interest bearing and due on demand. 

NOTE 5 - EQUITY 

Share capital 

Preferred Stock 

The Company has 20,000,000 authorized preferred shares with a par value of $0.0001 per share. The Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. 

There were no shares of preferred stock issued and outstanding as of April 30, 2017 and July 31, 2016. 

Common Stock 

During the nine months ended April 30, 2017, the Company issued the shares of common stock as follows; 

Reverse Stock Split transaction 

On March 15, 2017, the Company filed a Certificate of Correction with the Nevada Secretary of State, which was effective April 6, 2017 upon its receipt of the written notice from Financial Industry Regulatory Authority ("FINRA"). Pursuant to the Certificate of Correction, the Company effectuated a 1-for-40 reverse stock split of its issued and outstanding shares of common stock, $0.0001 par value, whereby 49,854,280 outstanding shares of the Company’s common stock were exchanged for 1,246,357 shares of the Company's common stock. 

As a result of the above transactions, there were 1,746,357 and 694,182 shares of common stock issued and outstanding as of April 30, 2017 and July 31, 2016, respectively. 

NOTE 7 -SUBSEQUENT EVENTS 

Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no additional events have occurred that require disclosure except below. 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

This Quarterly Report on Form 10-Q, including this discussion and analysis by management, contains or incorporates forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Results of Operations

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities, but we cannot guarantee that we will be able to achieve same.

We have not yet generated significant revenues and have accumulated deficit of $1,094,553 since inception through April 30, 2017.

The following table provides selected financial data about our company as of April 30, 2017 and July 31, 2016.

Balance Sheet Data

Three Months Ended April 30, 2017, Compared to Three Months Ended April 30, 2016

Revenue

For the three months ended April 30, 2017 and 2016, we generated no revenue.

Operating Expenses

Operating expenses has decreased by $13,798 to $34,162 for the three months ended April 30, 2017 as compared to $47,960 for the three months ended April 30, 2016. The following table presents operating expenses for the three months ended April 30, 2017 and 2016: 

There are no significant changes for the three months ended April 30, 2017 compared to the same quarter in 2016. The decrease in operating expenses is primarily as a result of a decrease in office expense of $9,440 and professional fees of $4,358.

Discontinued Expenses

Pursuant to the Spin-Off Agreement, the Company recorded all expenses from the subsidiary in Malta as discontinued expenses. Loss from discontinued operations for the three months ended April 30, 2017 and 2016 was $0 and $76,692, respectively.

Nine Months Ended April 30, 2017, Compared to Nine Months Ended April 30, 2016

Revenue

For the nine months ended April 30, 2017 and 2016, we generated no revenue.

Operating Expenses

Operating expenses has decreased by $145,624 to $137,045 for the nine months ended April 30, 2017 as compared to $282,669 for the nine months ended April 30, 2016. The following table presents operating expenses for the nine months ended April 30, 2017 and 2016: 

The decrease in operating expenses is primarily as a result of a decrease in general office and miscellaneous and management fees. No management fees were recorded for the nine months ended April 30, 2017, whereas $60,000 were recorded during the nine months ended 2016. The decrease in professional fees during 2017 is primarily due to the costs of the acquisition of Steampunk Malta in 2016.

Discontinued Expenses

Pursuant to the Spin-Off Agreement, the Company recorded all expenses from the subsidiary in Malta as discontinued expenses. Loss from discontinued operations for the nine months ended April 30, 2017 and 2016 was $498 and $334,260, respectively. As a result of this agreement, the Company recognized the gain on sale of investment of $200,528 during the nine months ended April 30, 2017.

Liquidity and Capital Resources

Working Capital

The decrease in working capital deficiency was mainly due to the spin-off of the subsidiary and a decrease in accounts payable of $69,040 and a decrease in due to related parties of $120,000.

Cash Flows

Cash Flow from Operating Activities

During the nine months ended April 30, 2017, net cash used in continued operating activities was $206,085 compared to net cash provided by continued operating activities of $131,464 during the nine months ended April 30, 2016. The decrease in net cash provided by continued operating activities was primarily due to the decrease in accounts payable and the increase in gain on sale of investment, partially offset by the decrease in loss from continued operations.

For the nine months ended April 30, 2017, the Company had a net loss from continued operation of $137,045 and a net change in working capital of $69,040. During the nine months ended April 30, 2017, cash used in discontinued operating activities was $498 compared to cash used in discontinued operating activities of $334,260 during the nine months ended April 30, 2016.

Cash Flow from Investing Activities

Net cash provided by continued investing activities were $2,000 and $0 for the nine months ended April 30, 2017 and 2016, respectively

During the nine months ended April 30, 2017, the Company sold the investment in subsidiary for $2,000 pursuant to the Spin-Off Agreement.

Net cash used in discontinued investing activities were $0 and $10,468 for the nine months ended April 30, 2017 and 2016, respectively.

During the nine months ended April 30, 2016, the Company used cash of $10,468 to purchase equipment.

Cash Flow from Financing Activities

Net cash provided by continued financing activities were $221,744 and $411,308 for the nine months ended April 30, 2017 and 2016, respectively. During the nine months ended April 30, 2017, the Company received cash of $118,640 from related parties and $103,104 from the issuance of common stock. During the nine months ended April 30, 2016, the Company received cash from issuance of 613,593 shares of common of $440,579, loan from the former CEO of $40,090 and the Company repaid $69,361 to the former CEO.

Net cash provided by discontinued financing activities were $0 and $112,656 for the nine months ended April 30, 2017 and 2016, respectively. During the nine months ended April 30, 2016, the Company received $70,914 short-term loans from unrelated third party and loan from the former CEO of $41,742.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have not identified any additional critical accounting policies and judgments. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in note 2 to our financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Going Concern

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at April 30, 2017, the Company has working capital of $835 and has incurred losses since inception resulting in an accumulated deficit of $1,094,553. Further losses are anticipated in the development of the business, raising substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans from directors and/or private placements of common stock.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not aware of any pending or threatened legal proceeding that, if determined in a manner adverse to us, could have a material adverse effect on our business and operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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