DEF: Tianci Seeks Shareholder Approval for Reverse Split, Capital Raise

Tianci International, Inc. will hold its 2026 annual meeting to vote on key proposals including a reverse stock split to maintain Nasdaq listing, an increase in authorized shares, and a discounted preferred stock sale to its CEO's entity.

Summary

• Shareholders to vote on seven key proposals at the Annual Meeting on February 13, 2026.
• Proposals include the election of seven directors, an advisory vote on executive compensation, and a vote on the frequency of future compensation advisory votes (Board recommends every three years).
• Ratification of Bush & Associates CPA LLC as the independent registered public accounting firm for fiscal year 2026.
• Approval to increase authorized common stock from 100,000,000 to 2,000,000,000 shares to facilitate future growth, acquisitions, and financing.
• Authorization for a reverse stock split at a ratio between 1:2 and 1:100 to regain compliance with Nasdaq's $1.00 minimum bid price requirement and improve stock marketability.
• Approval for the sale of 30,000 shares of Series C Preferred Stock to RQS Capital (owned by CEO Shufang Gao) for $30,000, despite a fair value of $37 per share, as compensation for Mr. Gao's leadership and strategic initiatives.
• The company received a Nasdaq deficiency letter on October 29, 2025, for failing to meet the $1.00 minimum bid price, with a compliance deadline of April 27, 2026.
• As of January 9, 2026, 24,531,803 shares of common stock were outstanding, with a closing price of $0.37 per share.
• Shufang Gao, CEO and Chairman, beneficially owns 57.68% of outstanding common stock, including shares held by RQS Capital Limited.

Sentiment

Score: 3

Explanation: The company is facing a Nasdaq delisting threat due to its low stock price and reported a substantial net loss for FY2025. While management is proposing actions like a reverse split and increased authorized shares to address these issues and pursue new ventures, the highly dilutive and discounted preferred stock sale to the CEO's entity, framed as compensation, raises significant concerns about corporate governance, shareholder value, and potential further dilution. The overall outlook is negative despite strategic intentions.

Positives

• The company is proactively addressing Nasdaq listing compliance issues through the proposed reverse stock split.
• The proposed increase in authorized shares provides flexibility for future growth, acquisitions, and equity financing, which could strengthen the balance sheet.
• Management is focused on strategic development, including expanding global logistics services and venturing into blockchain technology and cryptocurrency mining.
• The Board has established independent audit, compensation, and nominating & corporate governance committees, with a majority of independent directors, indicating sound corporate governance.
• Implementation of a Clawback Policy aligns with Nasdaq Rules and good governance practices.

Negatives

• The company's stock price is below Nasdaq's $1.00 minimum bid requirement, indicating potential delisting risk.
• The proposed sale of Series C Preferred Stock to RQS Capital (CEO Shufang Gao's entity) at a significant discount ($1.00 vs. $37 fair value) will result in substantial dilution (10.8%) for existing shareholders.
• The implicit value of the preferred stock sale ($1,071,937) will be recorded as a compensation expense, potentially causing stockholders' equity to fall below Nasdaq's $2.5 million minimum.
• The preferred stock sale will increase CEO Shufang Gao's voting control from 57.68% to 62.29%, further entrenching his control.
• The company reported a net loss of $(2,640,789) for fiscal year 2025, a significant decline from a net income of $54,450 in fiscal year 2024.
• Total Shareholder Return (TSR) for fiscal year 2025 was negative (80.3).
• There is no assurance that the reverse stock split will increase the stock price or maintain Nasdaq compliance, and it could decrease liquidity.

Risks

• Failure to regain and maintain compliance with Nasdaq's $1.00 minimum bid price requirement could lead to delisting, impairing liquidity and marketability of common stock.
• The effect of the reverse stock split upon the market price of common stock cannot be predicted with certainty, and the price may not rise proportionally or remain above $1.00.
• The market price of common stock may decrease due to factors unrelated to the reverse stock split.
• Even if the minimum bid price is met, delisting could occur due to failure to meet other continued listing requirements (e.g., Equity Rule, minimum public float, market value of public float).
• The reverse stock split may decrease the liquidity of common stock due to a reduced number of outstanding shares.
• Issuance of additional shares of common stock (under the Authorized Shares Proposal) or convertible securities may dilute the proportionate ownership and voting power of existing stockholders and depress the market price.
• The sale of Series C Preferred Stock to RQS Capital will dilute existing shareholders' interest by 10.8% and could reduce the per share market price.
• The compensation expense from the preferred stock sale could cause stockholders' equity to fall below Nasdaq's $2.5 million minimum, risking delisting.
• Increased voting control by Shufang Gao (from 57.68% to 62.29%) could extend his control over shareholder votes.

Future Outlook

The company intends to pursue growth through acquisitions, preferably equity-financed, to maximize potential and improve its balance sheet. Management aims to expand its global logistics services and leverage a new relationship with BTC Digital Ltd. to establish business operations in blockchain technology, specifically cryptocurrency mining, guided by CEO Shufang Gao's expertise.

Management Comments

• "Our current leadership structure suits our current leadership needs as we seek to implement our new sustainable business strategy and reinvent our business model for sustainable success and value creation."
• "The Board believes that Tianci will, in the next several years, pursue growth by acquisition of compatible entities and business operations, most of which will require financing, preferable equity financing, in order to maximize their potential."
• "Management believes that the availability of a significant amount of authorized common stock could make opportunities available for investment or expansion transactions that would strengthen Tiancis balance sheet and facilitate the expansion of our operations."
• "The Board is of the opinion that vesting control of Tianci in Mr. Gao serves the best interests of Tianci, as his experience in the markets served by Tianci enables him to wisely assess the long term future of those markets and to implement appropriate policies."
• "Mr. Gao has agreed to serve with a modest salary so that Tiancis cash resources may be focused on the development of Tiancis business operations."

Industry Context

Tianci International is navigating a challenging period, evidenced by its Nasdaq minimum bid price deficiency, a common issue for smaller-cap companies. The strategic pivot towards global logistics and the announced venture into blockchain technology and cryptocurrency mining reflects a broader trend of companies seeking diversification and higher-growth sectors. However, the significant discount offered in the preferred stock sale to the CEO's entity, coupled with the company's negative net income and TSR, raises questions about corporate governance and shareholder value alignment, especially when compared to industry peers that typically offer more transparent and market-aligned compensation structures.

Comparison to Industry Standards

• The company's stock price of $0.37 is significantly below the Nasdaq minimum bid price of $1.00, indicating underperformance relative to listing standards.
• The proposed sale of Series C Preferred Stock to RQS Capital (CEO Shufang Gao's entity) at $1.00 per share, when its fair value is $37 per share, represents a substantial discount that is highly unusual and potentially detrimental to minority shareholders compared to standard market-based compensation practices.
• The negative net income of $(2,640,789) for FY2025 and a Total Shareholder Return of (80.3) contrast sharply with the positive performance seen in FY2024 (Net Income $54,450, TSR 438), suggesting a significant downturn in operational or market performance that is not aligned with typical growth expectations for companies seeking to expand into new ventures like blockchain.
• The CEO's stated monthly compensation of $8,000, while claimed to be "dramatically below the median rate" for Nasdaq CEOs, is being supplemented by a highly dilutive and discounted preferred stock issuance, which complicates a direct comparison to industry standard compensation packages.
• The increase in CEO Shufang Gao's voting control from 57.68% to 62.29% through a related-party transaction at a significant discount raises corporate governance concerns regarding minority shareholder rights and control, which is often scrutinized against best practices for publicly traded companies.

Management Changes

Corporate Governance

Related Party Transactions

• The proposed sale of 30,000 shares of Series C Preferred Stock to RQS Capital for $30,000. RQS Capital is owned by Shufang Gao, the CEO of Tianci International. The fair value of these shares is $1,110,000 (30,000 shares * $37/share), implying a significant discount of $1,071,937.
• Shufang Gao's beneficial ownership includes 14,100,362 shares of common stock owned of record by RQS Capital Limited.
• Roshing International Co., Limited, a subsidiary of Tianci, pays Ying Deng (VP and Director) HKD 30,000 ($3,860 USD) per month and Shufang Gao (CEO) HKD 40,000 ($5,147 USD) per month.
• Director Retainer Agreements: Shufang Gao's monthly compensation as an executive director increased from $3,800 to $8,000 since May 2025. Wei Fang and Ying Deng's monthly compensation increased from $3,800 to $5,300 since May 2025.

Stakeholder Impact

• Shareholders: Face significant dilution (10.8%) from the proposed preferred stock sale to the CEO's entity at a substantial discount. Their voting power will be further concentrated in the CEO. The reverse stock split aims to prevent delisting, which would protect their investment's liquidity, but carries risks of not achieving the desired effect. The negative net income and TSR for FY2025 indicate poor returns.
• Management/Executives: CEO Shufang Gao benefits significantly from the discounted preferred stock sale, which is framed as compensation for his leadership and strategic initiatives, despite a stated "modest salary." Other executive directors also received compensation increases.
• Employees: No direct impact mentioned, but strategic shifts to logistics and blockchain could create new opportunities or require different skill sets.
• Creditors: The potential for stockholders' equity to fall below Nasdaq's minimum due to the compensation expense from the preferred stock sale could signal financial weakness, potentially impacting the company's creditworthiness.
• Regulatory Authorities (Nasdaq): The company is actively addressing a Nasdaq deficiency, and the proposals are designed to regain and maintain compliance. However, the related-party transaction's terms might draw scrutiny.

Next Steps

• Hold the Annual Meeting of Stockholders on February 13, 2026, to vote on all proposals.
• If approved, the Board will determine the exact ratio for the reverse stock split and implement it by filing a Certificate of Change with the Nevada Secretary of State prior to February 13, 2027.
• If approved, the company will file an amendment to the Articles of Incorporation to increase authorized common stock.
• If approved, the Board will proceed with the sale of 30,000 shares of Series C Preferred Stock to RQS Capital.
• The company must regain compliance with Nasdaq's $1.00 minimum bid price requirement by April 27, 2026, or risk delisting.
• The Compensation Committee will consider the outcome of the non-binding say-on-pay vote when considering future executive compensation arrangements.
• The Board will take into account the results of the say-on-frequency vote when determining the frequency of future advisory votes on executive compensation.
• Stockholders interested in submitting proposals for the 2027 Annual Meeting must do so by September 12, 2026.

Key Dates

Recommendation

The company faces an imminent Nasdaq delisting threat due to its sub-$1.00 stock price and reported a substantial net loss of $(2,640,789) for FY2025, coupled with an (80.3) Total Shareholder Return. While a reverse stock split is proposed to address delisting, its success is uncertain. More critically, the proposed sale of Series C Preferred Stock to the CEO's entity at a massive discount ($1.00 vs. $37 fair value) represents extreme shareholder dilution (10.8%) and a significant transfer of value to the CEO, further entrenching his control (from 57.68% to 62.29%). This related-party transaction, disguised as compensation, is highly detrimental to minority shareholders and raises severe corporate governance red flags. The potential for this compensation expense to push stockholders' equity below Nasdaq's minimum further exacerbates the delisting risk. Given the poor financial performance, high dilution, and questionable governance practices, the stock presents a strong sell signal for investors.

Keywords

Tianci International, DEF 14A, Proxy Statement, Reverse Stock Split, Nasdaq Delisting, Authorized Shares, Capital Raise, Preferred Stock Sale, Executive Compensation, Corporate Governance, Shareholder Meeting, CIIT, Financial Reporting, Risk Management, Dilution, Shufang Gao, RQS Capital, Blockchain Technology, Cryptocurrency Mining, Global Logistics