The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
Notes To Consolidated Financial Statements
Three and Nine Months Ended April 30, 2023 and
2022
(Unaudited)
NOTE 1 – NATURE OF BUSINESS AND ORGANIZATION
Tianci International, Inc. (the “Company”,
“Tianci”) was incorporated under the laws of the State of Nevada 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 is a holding company. As of April 30, 2023, the Company had one operating subsidiary, Roshing International Co., Ltd.
(“Roshing”). The Company owns 90% of the capital stock of Roshing through RQS United, a wholly-owned subsidiary The Company’s
fiscal year end is July 31.
On February 13, 2023, the Company incorporated
a wholly owned subsidiary Tianci Group Holding Limited in the Republic of Seychelles.
Reorganization
On March 3, 2023 the Company entered into a Share
Exchange Agreement with RQS United Group Limited (“RQS United”) and RQS Capital Limited (“RQS Capital”), which
was the sole shareholder of RQS United (the “Exchange Agreement”). RQS United owns 90% of the equity in Roshing International
Co., Ltd. (“Roshing”), which is engaged in the business of distributing electronic components and providing software services.
Pursuant to the Exchange Agreement, on March 6, 2023 RQS Capital transferred all of the issued and outstanding capital stock of RQS United
to the Company, and the Company issued to RQS Capital 1,500,000 shares of our common stock and paid a cash price of $350,000 (the “Share
Exchange”). Pursuant to the Exchange Agreement, the Company also issued a total of 700,000 shares of our common stock to nine employees
or affiliates of Roshing to induce continued services to Roshing.
As a result of the Share Exchange, RQS United
became our wholly-owned subsidiary and the former RQS United Stockholders became our controlling stockholders. The share exchange transaction
was treated as a reverse acquisition, with RQS United as the acquirer and the Company as the acquired party for accounting purposes. Unless
the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation
of the reverse acquisition, we are referring to the business and financial information of RQS United and its consolidated subsidiary,
Roshing.
RQS United is a holding company incorporated on
November 4, 2022 in the Republic of Seychelles. RQS United has no substantive operations other than holding 90% of the outstanding
share capital of its subsidiary, Roshing, which was incorporated on June 22, 2011 in Hong Kong and is principally engaged in sales
of electronic device hardware components, development of software and websites, technical consulting, and maintenance support on customized
software. Roshing’s business is primarily carried out in Hong Kong and China.
Prior to the Share Exchange, the Company was a
shell company as defined in Rule 12b-2 under the Exchange Act. As a result of the transactions under the Exchange Agreement, the Company
ceased to be a shell company.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim financial information referred to
above has been prepared and presented in U.S. dollars 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. These interim financial statements include all adjustments that, in the opinion of management,
are necessary in order to make the financial statements not misleading. This report on Form 10-Q should be read in conjunction with the
Company’s financial statements for the years ended July 31, 2022 and 2021 and notes thereto included in the Company’s Form
8-K filed with the SEC on March 6, 2023.
Results of the nine months ended April 30, 2023
are not necessarily indicative of the results that may be expected for the year ending July 31, 2023 or any other future periods.
Principles of consolidation
The unaudited interim consolidated financial statements
include the financial statements of Tianci and its subsidiaries. All transactions and balances among the Company and its subsidiaries
have been eliminated upon consolidation.
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 periods.
Actual results could differ from these good faith estimates and judgments.
Foreign currency translation and transactions
The Company uses the U.S. dollar as its reporting
currency and functional currency. Transaction gains and losses are recognized in the consolidated statement of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of bank deposits with original
maturities of three months or less, which are unrestricted as to withdrawal and use. The Company maintains its bank accounts in United
States and Hong Kong.
Accounts receivable, net
Accounts receivable include trade accounts due
from customers which are generally collected within six months. In establishing the allowance for doubtful accounts, management considers
historical collection experience, aging of the receivables, the economic environment, industry trend analysis, and the credit history
and financial condition of the customer. Management reviews its receivables on a regular basis to determine if the allowance for doubtful
accounts is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against the allowance
for doubtful accounts after management has determined that the likelihood of collection is not probable. As of April 30, 2023 and July
31, 2022, no allowance for doubtful accounts was deemed necessary.
Fair Value Measurements
The accounting standard regarding fair value of
financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial
instruments held by the Company.
The accounting standard defines fair value, establishes
as a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value
measures. The three levels are defined as follow:
| · |
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| |
|
|
| · |
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments. |
| |
|
|
| · |
|
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Financial instruments included in current assets
and current liabilities (such as cash, accounts receivable, due from related party accounts payable, and due to related parties) are reported
in the unaudited consolidated balance sheets at cost, which approximates fair value because of the short period of time between the origination
of such instruments and their expected realization.
Revenue recognition
The Company follows the Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606. This standard requires the use of a five-step model
to recognize revenue from customer contracts. The five-step model requires that the Company (i) identifies the contract with
the customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, including
variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocates the transaction
price to the respective performance obligations in the contract, and (v) recognizes revenue when (or as) the Company satisfies the
performance obligations.
The Company records revenue net of sales taxes
which are subsequently remitted to governmental authorities and are excluded from the transaction price.
The Company’s revenue recognition policies
are as follows:
a. Electronic Device Hardware Components Products Sales
The Company is a distributor of electronic device
hardware components and generates revenue through resale of these components. The Company’s products include high performance computer
chips, Wi-Fi modules, Bluetooth modules, 4G network modules, LED screens, and touch screens. In accordance with ASC 606, Revenue Recognition:
Principal Agent Consideration, an entity is a principal if it controls the specified good or service before that good or service is transferred
to a customer. Otherwise, the entity is an agent in the transaction. The Company evaluates three indicators of control in accordance with
ASC 606: 1) For hardware sales, the Company is the most visible entity to customers and assumes fulfillment risk and risks related to
the acceptability of products, including addressing customer complaints directly and handling of product returns or refunds directly.
2) The Company is exposed to inventory risk before transfer of control to customers 3) The Company determines the resale price of
hardware products. After evaluating the above circumstances, the Company considers itself the principal of these arrangements and records
hardware sales revenue on a gross basis.
Hardware sales contracts are on a fixed price
basis with no separate sales rebate, discount, or other incentive. Revenue is recognized at a point in time when the Company has delivered
products that have been accepted by its customer with no future obligations. The Company generally permits returns of products due to
product failure; however, returns are historically insignificant.
b. Software and Website Development Services
The Company generates revenue by developing customized
freight shipping and related logistic software and websites, which are generally on a fixed-priced basis. The software helps wholesalers,
ecommerce retailers, and freight shipping providers to manage complex workflows and improve work efficiency. The Company generally has
no enforceable right to payment for performance completed to date and is only entitled to payment after software is fully developed, delivered,
tested, and accepted by the customer. As a result, revenues from software development contracts are recognized at a point in time when
services are fully rendered, and written acceptances have been received from customers.
c. Technical Consulting and Training Services
The Company provides technical consulting and
training services to help customers, generally its existing customers, to better understand and properly use its customized software and
related hardware. Services are generally carried out on a per-time fixed rate basis. Revenue is recognized at a point in time when service
is rendered and the customer confirms the completion of consulting or training.
d. Software Maintenance and Business Promotion Services
The Company provides software maintenance service
to keep customer’s software up to date and assists customers in promoting business with ongoing marketing support. The Company charges
a flat rate for a fixed duration on a subscription basis, generally 12 months. Revenue is recognized ratably each month over the contract
period.
Cost of revenues
For hardware products sales, the cost of revenue
consists primarily of the costs of hardware products sold.
For software related services, the cost of revenue
consists primarily of costs paid to outsourced service providers and compensation expenses paid the Company’s software engineers.
Advertising costs
Advertising costs amounted to $0 and $192 for
the three months ended April 30, 2023 and 2022, respectively, and $192 and $192 for the nine months ended April 30, 2023 and 2022 respectively.
Advertising costs are expensed as incurred and included in selling and marketing expenses.
Operating leases
Effective August 1, 2022, the Company adopted
FASB ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess:
(1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and
(3) initial direct costs for any expired or existing leases. For lease terms of twelve months or less, a lessee is permitted to make an
accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows
lessees to treat the lease and non-lease components of a lease as a single lease component. Upon adoption of ASU 2016-02 effective August
1, 2022, the Company recognized a $8,704 right of use (“ROU”) asset and operating lease liabilities in January 2023 based
on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 5%.
The Company determines if a contract contains
a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for
financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation
includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods
when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty.
All of the Company’s real estate leases are classified as operating leases.
Lease payments for an operating lease transitioning
to ASC 842 using the effective date are based on future payments at the transition date and on the present value of lease payments over
the remaining lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental
borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental
borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the
lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value
of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable
certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating
lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception;
therefore, operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Lease expense
is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU
assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived
assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations.
Income taxes
The Company accounts for current income taxes
in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year as adjusted
for items which are non-taxable or non-deductible. It is calculated using tax rates that have been enacted or substantively enacted
by the balance sheet date.
Deferred taxes are accounted for using the asset
and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the unaudited interim consolidated financial statements and the corresponding tax bases used in the computation of taxable income (loss).
In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the
extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred
tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred
tax is charged or credited in the statements of operations, except when it is related to items credited or charged directly to equity,
in which case the deferred tax is dealt with in equity. Net deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that has a greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest
incurred related to underpayment of income tax for uncertain tax positions are classified as income tax expense in the period incurred.
The Hong Kong tax returns filed for 2016 and subsequent
years are subject to examination by the applicable tax authorities.
The US tax returns filed for 2020 and subsequent
years are subject to examination by the applicable tax authorities.
Earnings (loss) per share
The Company computes earnings (loss) per share
(“EPS”) in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires companies to present
basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for
the period. Diluted EPS presents the diluted effect on a per share basis of the potential ordinary shares (e.g., convertible securities,
options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary
shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from
the calculation of diluted EPS. For the three and nine months ended April 30, 2023 and 2022, there were no dilutive shares outstanding.
Noncontrolling Interests
The Company’s noncontrolling interest represents
the minority shareholder’s 10% ownership interest inRoshing. The noncontrolling interest is presented in the unaudited consolidated
balance sheets separately from stockholders’ equity attributable to RQS United. Noncontrolling interest in the results of Roshing
are presented on the unaudited consolidated statements of operations as allocations of the total income or loss of Roshing for the three
and nine months ended April 30, 2023 and 2022 between the noncontrolling interest holder and the shareholders of RQS United.
Related parties
Parties, which can be a corporation, other business
entity, or individual, are considered to be related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related
if they are subject to common control or common significant influence.
Recently issued accounting pronouncements
The Company considers the applicability and impact
of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under
the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of
an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which
delays the adoption of these accounting standards until they would apply to private companies.
In May 2019, the FASB issued ASU 2019-05,
which is an update to ASU Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses
on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added
Topic 326, Financial Instruments — Credit Losses, and made several consequential amendments to the Codification.
Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed
for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments — Credit
Losses — Available-for-Sale Debt Securities. The amendments in this Update provide an option to irrevocably elect
the fair value option for certain financial assets previously measured at amortized cost basis. In November 2019, the FASB issued
ASU No. 2019-10, which updates the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations
and certain smaller reporting companies. The new effective date for these preparers is for fiscal years beginning after December 15,
2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning August 1, 2023 as the
Company is qualified as an emerging growth company. The Company is currently evaluating the impact ASU 2019-05 may have on its
unaudited consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting
for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application
of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the
amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods
within fiscal years beginning after December 15, 2022. The adoption of this standard on August 1, 2022 did not have a material
impact on the Company’s unaudited consolidated financial statements.
In October 2020, the FASB issued ASU 2020-08,
“Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs”. The
amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and
easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual
and interim reporting periods beginning August 1, 2021. All entities should apply the amendments in this Update on a prospective
basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not
change the effective dates for Update 2017-08. The adoption of this standard on August 1, 2021 did not have a material impact
on the Company’s unaudited consolidated financial statements.
Except as mentioned above, the Company does not
believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s
unaudited consolidated Financial Statements.
NOTE 3 – RELATED PARTIES BALANCES AND TRANSACTIONS
Due from related party consists of:
Due from related party represents a receivable
of $54,134 from RQS Capital, which was subsequently collected.
Due to related parties consist of:
| Schedule of due to related parties | |
| |
| |
| | | |
| | |
| | |
| |
Transaction | |
April 30, | | |
July 31, | |
| Name | |
Relationship | |
Nature | |
2023 | | |
2022 | |
| Zhigang Pei | |
Tianci chief executive officer from August 26, 2021 to January 27, 2023 | |
Working capital advances and operating expenses paid on behalf of the Company | |
$ | 220,909 | | |
$ | – | |
| RQS Capital | |
Parent Company | |
Company cash collection due to RQS Capital | |
| 32,132 | | |
| – | |
| Ying Deng | |
RQS Capital 30% owner and Roshing’s 10% minority interest owner | |
Working capital advances and operating expense paid on behalf of the Company | |
| 41,902 | | |
| 194,794 | |
| | |
| |
| |
| | | |
| | |
| TOTAL | |
| |
| |
$ | 294,943 | | |
$ | 194,794 | |
These liabilities are unsecured, non-interest
bearing, and due on demand.
Employment agreements with officers and
director retainer agreements
Tianci currently maintains four employment agreements
and three director retainer agreements with its officers and directors. The agreements have terms of 3 years and each provide for monthly
compensation in amounts ranging from $1,300 per month to $3,800 per month.
For the three and nine months ended April 30,
2023, we accrued management compensation expenses of $60,000. These amounts are included in “general and administrative expenses”
in the accompanying consolidated statement of operations.
Office space sharing agreement with related
parties
On August 28, 2021, Roshing entered into an office
space sharing agreement with Shufang Gao, 60% owner of RQS Capital and Ying Deng, 30% owner of RQS Capital, for office space in Shenzhen,
China. The agreement provides for Gao and Deng, sub lessees under a separate office space sharing agreement relating to the use of the
premises from August 28, 2021 to August 31, 2024, to pay monthly rent to the lessee ranging from RMB 12,320 (approximately $1,827) to
RMB 13,583 (approximately $2,014) on behalf of Roshing. The agreement is continuous until amended in writing by either party at their
sole discretion. The rent expenses paid by Gao and Deng are billed directly to Gao and Deng by the Lessee and the sublease is between
Gao and Deng and the Lessee. The Company has no obligation, directly or indirectly, to reimburse or otherwise compensate Gao and Deng
for paying these expenses. For the three months ended April 30, 2023 and 2022, the Company has accounted for this agreement by charging
general and administrative expenses for $5,648 and $5,832, respectively, and crediting additional paid-in capital for $5,648 and $5,832,
respectively. For the nine months ended April 30, 2023 and 2022, the Company has accounted for this agreement by charging general and
administrative expenses for $14,727 and $14,496, respectively, and crediting additional paid-in capital for $14,727 and $14,496, respectively.
NOTE 4 – STOCKHOLDERS EQUITY
On January 26, 2023 the Company filed with the
Nevada Secretary of State a Certificate of Amendment of Articles of Incorporation (the “Amendment”). The Amendment amended
Article 3 of the Company’s Articles of Incorporation to provide that the authorized capital stock of the Company will be 120,080,000
shares of capital stock consisting of 100,000,000 shares of common stock, $0.0001 par value, 80,000 shares of Series A Preferred Stock,
$0.0001 par value, and 20,000,000 shares of undesignated preferred stock, $0.0001 par value.
The following table sets forth information, as
of April 30, 2023, regarding the classes of capital stock that are authorized by the Articles of Incorporation of Tianci International,
Inc.
| Schedule of capital stock authorized | |
| | |
| |
| Class | |
Shares Authorized | | |
Shares Outstanding | |
| Common Stock, $.0001 par value | |
| 100,000,000 | | |
| 5,903,481 | |
| Series A Preferred Stock, $.0001 par value | |
| 80,000 | | |
| 80,000 | |
| Undesignated Preferred Stock, $.0001 par value | |
| 20,000,000 | | |
| 0 | |
Series A Preferred Stock
Each share of Series A Preferred Stock may be
converted by the holder of the share into 100 shares of common stock, subject to equitable adjustment of the conversion rate. Each holder
of Series A Preferred Stock will have voting rights equal to the holder of the number of shares of common stock into which the Series
A Preferred Stock is convertible. Upon liquidation of the Company, each holder of Series A Preferred Stock will be entitled to receive,
out of the net assets of the Company, $0.01 per share, then to share in the distribution on an as-converted basis.
Undesignated Preferred Stock
The Board of Directors has the authority, without
shareholder approval, to amend the Company’s Articles of Incorporation to divide the class of undesignated Preferred Stock into
series, and to determine the relative rights and preferences of the shares of each series, including (i) voting power, (ii) the rate
of dividend, (iii) the price at which, and the terms and conditions on which, the shares may be redeemed, (iv) the amount payable
upon the shares in the event of liquidation, (v) any sinking fund provision for the redemption or purchase of the shares, and (vi) the
terms and conditions on which the shares may be converted to shares of another series or class, if the shares of any series are issued
with the privilege of conversion.
Issuances of Preferred Stock and Common
Stock
On January 27, 2023, Tianci sold 80,000 shares
of its Series A Preferred Stock to RQS Capital for $24,000 cash.
On March 1, 2023, Tianci sold a total of 1,253,333
shares of its common stock to 13 non-US persons at a price of $0.30 per share or $376,000 total.
On March 6, 2023, Tianci issued 1,500,000 shares
of its common stock to RQS Capital pursuant to the Share Exchange Agreement dated March 3, 2023 (see Note 1 above).
Also on March 6, 2023 pursuant to the Share Exchange
Agreement dated March 3, 2023, Tianci issued a total of 700,000 shares of its common stock to nine employees or affiliates of Roshing
to induce continued services to Roshing. For the three and nine months ended April 30, 2023, the Company accounted for this issuance by
expensing the $210,000 estimated fair value of the 700,000 shares of common stock to (1) cost of revenues-services ($144,000), (2) selling
and marketing ($36,000), and (3) general and administrative ($30,000).
NOTE 5 – INCOME TAXES
Income Taxes
The Company computes its
tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date pre-tax income(loss) from recurring
operations and adjusting for discrete tax items arising in that quarter.
The Company had an effective
tax rate of (0.41%) and 16.5% for the three months ended April 30, 2023 and 2022, and (0.69%) and 16.5% for the nine
months ended April 30, 2023 and 2022, respectively. The Company has incurred U.S. operating losses and has minimal taxable profits
in foreign jurisdictions.
The Company has evaluated
all available evidence, both positive and negative, including historical levels of income and expectations and risks associated with estimates
of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in
the United States. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation
allowance against its United States deferred tax assets.
The Company is subject to
income taxes in the United States and foreign jurisdictions. As of April 30, 2023, tax years 2020 and forward generally remain open
for examination for U.S. federal and state tax purposes, and tax years 2017 and forward generally remain open for examination for foreign
tax purposes.
The Company has applied ASC
740 and determined that it does not have uncertain tax positions giving rise to unrecognized tax benefits for each of the three and nine
months ended April 30, 2023 and 2022. The Company does not anticipate any significant changes to unrecognized tax benefits over the
next 12 months.
On August 16, 2022, President
Biden signed the Inflation Reduction Act of 2022 (the Inflation Act) into law. The Inflation Act contains certain tax measures, including
a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on stock repurchases. For the three and
nine months ended April 30, 2023, the Inflation Act had no material impact to the Company. The Company is continuing to evaluate
the various provisions of the Inflation Act and does not anticipate the impact, if any, will be material to the Company.
NOTE 6 — CONCENTRATION OF RISK
Credit risk
Financial instruments that
potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The cash balance in each financial
institution in the United States is insured by the FDIC up to $250,000. The Hong Kong Deposit Protection Board pays compensation
up to a limit of HKD 500,000 (approximately US$64,000) if the bank with which an individual/company holds its eligible deposit fails.
As of April 30, 2023, a cash balance of $140,695 was maintained at a financial institution in Hong Kong of which approximately $76,000
was subject to credit risk. Management believes that the financial institution is of high credit quality and continually monitors its
credit worthiness.
Customer concentration risk
For the nine months ended April
30, 2023, two customers accounted for 47.7% and 14.1% of the Company’s total revenues. For the nine months ended April 30, 2022,
one customer accounted for 100% of the Company’s total revenues.
As of April 30, 2023, one customer
accounted for 100% of the Company’s total accounts receivable. As of July 31, 2022, five customers accounted for 41.1%, 24.4%,10.8%,
10.8%, and 10.5% of the Company’s total accounts receivable.
Vendor concentration risk
For the nine months ended April
30, 2023, two vendors accounted for more than 75.8% and 15.8% of the Company’s total purchases.
As of April 30, 2023, two vendors
accounted for 86.9% and 13.1% of the Company’s total accounts payable. As of July 31, 2022, four vendors accounted for 44.5%,
28.1%, 16.6%, and 10.8% of the Company’s total accounts payable.
NOTE 7— COMMITMENTS AND CONTINGENCIES
Lease commitments
The Company has an office space
sharing agreement with Shufang Gao and Ying Deng to use office space located in Shenzhen, China. (See Note 3)
On January 1, 2021, Roshing
entered into an operating lease agreement for office space in Hong Kong with a third party. The agreement had a term of two years
and provided for monthly rent of HKD 2,800 (approximately $360). On January 13, 2023, the Company entered a new operating lease agreement
for office space in Hong Kong with a third party for two years with monthly rent of HKD 3,000 (approximately $382). Upon adoption of ASU
2016-02 effective August 1, 2022, the Company recognized a $8,704 right of use (“ROU”) asset and operating lease liabilities
in January 2023 based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 5%.
The Company’s lease agreements
do not contain any material residual value guarantees or material restrictive covenants. The leases generally do not contain options to
extend at the time of expiration.
As of April 30, 2022, the Company’s
operating leases had a weighted average remaining lease term of approximately 1.67 years
Rent expenses were $6,794 and
$6,909 for the three months ended April 30, 2023 and 2022, respectively, and $17,870 and $17,732 for the nine months ended April 30, 2023
and 2022, respectively.
The total future minimum lease
payments under the non-cancellable operating leases as of April 30, 2023 are as follows:
| Schedule of operating lease payments | |
| | |
| Year ending July 31, | |
Minimum lease
payments | |
| | |
(Unaudited) | |
| 2023 (remaining three months) | |
$ | 1,146 | |
| 2024 | |
| 4,586 | |
| 2025 | |
| 2,096 | |
| Total lease payments | |
| 7,828 | |
| Less: Interest | |
| (333 | ) |
| Present value of lease liabilities | |
$ | 7,496 | |
Future amortization of the
Company’s ROU asset is presented below:
| Schedule of future amortization | |
| | |
| Year ending July 31, | |
| |
| | |
(Unaudited) | |
| 2023 (remaining nine months) | |
$ | 1,059 | |
| 2024 | |
| 4,368 | |
| 2025 | |
| 2,069 | |
| Total | |
$ | 7,496 | |
Contingencies
From time to time, the Company
may be a party to legal proceedings, as well as certain asserted and un-asserted claims.
NOTE 8 — ENTERPRISE WIDE DISCLOSURE
The Company follows ASC 280,
Segment Reporting, which requires companies to disclose segment data based on how management makes decisions about allocating resources
to each segment and evaluates their performances. The Company’s chief operating decision-makers (i.e., the Company’s
chief executive officer and her direct assistants, including the Company’s chief financial officer) review financial information
presented on a consolidated basis, accompanied by disaggregated information about revenues, cost of revenues, and gross profit by business
lines and by regions (primarily in Hong Kong and Singapore) for purposes of allocating resources and evaluating financial performance.
There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the
consolidated unit level. Based on qualitative and quantitative criteria established by ASC 280, the Company considers itself to be
operating within one reportable segment.
Disaggregated information
of revenues by business lines are as follows:
| Schedule of information of
revenues by business | |
| | | |
| | | |
| | | |
| | |
| | |
For the three months ended April 30, | | |
For the nine months ended April 30, | |
| | |
2023 (Unaudited) | | |
2022 (Unaudited) | | |
2023 (Unaudited) | | |
2022 (Unaudited) | |
| Electronic Device Hardware Components Sales | |
$ | 115,000 | | |
$ | – | | |
$ | 294,880 | | |
$ | – | |
| Technical Consulting and Training Services | |
| – | | |
| – | | |
| 14,470 | | |
| 8,792 | |
| Software Maintenance and Business Promotion Services | |
| 29,013 | | |
| – | | |
| 57,763 | | |
| – | |
| Total revenues | |
$ | 144,013 | | |
$ | – | | |
$ | 367,113 | | |
$ | 8,792 | |
Disaggregated information
of revenues by regions are as follows:
| Schedule of information of
revenues by regions | |
| | | |
| | | |
| | | |
| | |
| | |
For the three months ended April 30, | | |
For the nine months ended April 30, | |
| | |
2023 (Unaudited) | | |
2022 (Unaudited) | | |
2023 (Unaudited) | | |
2022 (Unaudited) | |
| Hong Kong | |
$ | 122,500 | | |
$ | – | | |
$ | 331,850 | | |
$ | 8,792 | |
| Singapore | |
| 21,513 | | |
| – | | |
| 35,263 | | |
| – | |
| Total revenues | |
$ | 144,013 | | |
$ | – | | |
$ | 367,113 | | |
$ | 8,792 | |
NOTE 9 — SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company’s management has performed
subsequent events procedures through the date these financial statements were issued and determined that there are no reportable subsequent
events.