Tianci International, Inc. - Quarter Report: 2017 January (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 January 31, 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 March 16, 2017, there were 49,853,280 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 12, 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

(Unaudited)

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

January 31, 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 unaudited condensed 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 six months ended January 31, 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 unaudited condensed 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

At January 31, 2017, the Company had $19,321 in cash on hand, had incurred a net loss from continued operations of $102,883 and used $171,423 in cash for continued operating activities for the six months ended January 31, 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 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 January 31, 2017 and July 31, 2016, the Company has $19,321 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 in shareholders’ equity.

Basic and Diluted Earnings (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net 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 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 January 31, 2017 and July 31, 2016.

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 unaudited 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 six months ended January 31, 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 the six months ended January 31, 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 six months ended January 31, 2017, 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 January 31, 2017 and July 31, 2016, the Company owed $0 and $120,000 to the former CEO and shareholder.

During the six months ended January 31, 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 January 31, 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 January 31, 2017 and July 31, 2016.

Common Stock

During the six months ended January 31, 2017, the Company issued the shares of common stock as follows;

There were 49,853,280 and 27,767,269 shares of common stock issued and outstanding as of January 31, 2017 and July 31, 2016, respectively.

NOTE 6 -SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date these unaudited condensed 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. 

The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10-K.  We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

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 $1,060,391 since inception through January 31, 2017. 

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

Balance Sheet Data

Three Months Ended January 31, 2017, Compared to the Three Months Ended January 31, 2016

Revenue

For the three months ended January 31, 2017 and 2016 we generated no revenue.

Operating Expenses

Operating expenses decreased $68,669 for the three months ended January 31, 2017 as compared to the three months ended January 31, 2016. The following table presents operating expenses for 2017 and 2016: 

The decrease in operating expenses is primarily as a result of a decrease in general office and miscellaneous expenses  and management fees. In 2017 no management fees were recorded, whereas during the three months ended 2016 $30,000 were recorded.

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 January 31, 2017 and 2016 was $0 and $144,061, respectively.

Six Months Ended January 31, 2017, Compared to Six Months Ended January 31, 2016

Revenue

For the six months ended January 31, 2017 and 2016 we generated no revenue.

Operating Expenses

Operating expenses decreased $131,826 for the six months ended January 31, 2017 as compared to the six months ended January 31, 2016. The following table presents operating expenses for the six months ended January 31, 2017 and 2016: 

The decrease in operating expenses is primarily as a result of a decrease in general office and  miscellaneous and management fees. In 2017 no management fees were recorded, whereas during the three months ended 2016 $60,000 were recorded. 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 six months ended January 31, 2017 and 2016 was $498 and $257,568, respectively. As a result of this agreement, the Company recognized the gain on sale of investment of $200,528 during the six months ended January 31, 2017.

Liquidity and Capital Resources

Working Capital

Working Capital increased due to the spin-off of the subsidiary and a decrease in accounts payable of $68,540 and due to related parties of $120,000.

Cash Flows

Cash Flow from Operating Activities

During the six months ended January 31, 2017, cash used in continued operating activities was $171,423 compared to cash used in continued operating activities of $187,947 during the six months ended January 31, 2016. The decrease in cash used in continued operating activities was due to a decrease in net loss. For the six months ended January 31, 2017, the Company had a net loss from continued operation of $102,883 and a net change in working capital of $68,540.

During the six months ended January 31, 2017, cash used in discontinued operating activities was $498 compared to cash used in discontinued operating activities of $227,977 during the six months ended January 31, 2016.

Cash Flow from Investing Activities

Cash used in continued investing activities were $2,000 and $0 for the six months ended January 31, 2017 and 2016, respectively

During the six months ended January 31, 2017, the Company sold the investment in subsidiary for $2,000 pursuant to the Spin-Off Agreement.

Cash used in discontinued investing activities were $0 and $9,905 for the six months ended January 31, 2017 and 2016, respectively.

Cash Flow from Financing Activities

Cash provided by continued financing activities were $188,744 and $376,134 for the six months ended January 31, 2017 and 2016, respectively. During the six months ended January 31, 2017, the Company received cash of $118,640 from related parties and $70,104 from the issuance of common stock. During the six months ended January 31, 2016, the Company received cash from issuance of 462,420 shares of common of $405,579, loan from the former CEO of $16,822 and the Company repaid $46,267 to the former CEO.

Cash used in discontinued financing activities were $0 and $67,097for the six months ended January 31, 2017 and 2016, respectively. During the six months ended January 31, 2016, the Company received $67,097 short-term loans from unrelated third party. 

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 of January 31, 2017, the Company has incurred losses since inception resulting in an accumulated deficit of $1,060,391. 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.

Information on any and all equity securities we have sold during the six-month period ended January 31, 2017, that were not registered under the Securities Act of 1933 as amended, is set forth below:

On January 4, 2017, the Company issued 19,532,820 shares of its Common Stock, at a per share price of $0.005, in a private placement to 42 investors, for which it received gross cash proceeds of approximately $70,104 and subscriptions receivable of $27,560. The private placement was made pursuant to an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation S thereunder. 

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On February 14, 2017, RBSM LLP (“RBSM”) resigned as Company’s independent registered public accounting firm. The report of RBSM on the Company’s financial statements for the years ended July 31, 2016 and 2015, did not contain an adverse opinion or disclaimer of opinion, and such report was not qualified or modified as to uncertainty, audit scope, or accounting principles. During the years ended July 31, 2016 and 2015, there were no disagreements between the Company and RBSM on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. No reportable event, as described in Item 304(a)(1)(v) of Regulation S-K, has occurred from the resignation of RBSM.

Effective March 2, 2017, the Board of Directors of the Company approved KCCW Accountancy Corp. (“KCCW”) as the independent auditor to audit our financial statements for the fiscal year ending July 31, 2017 and any subsequent interim periods.

During our two most recent fiscal years ended July 31, 2016 and 2015, and during the subsequent period preceding KCCW’s engagement, neither Tianci nor anyone acting on its behalf consulted with KCCW on (i) any matters regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the our consolidated financial statements, and no written report or oral advice was provided to us that KCCW concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was subject to any disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

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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