UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark one)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended May 31, 2014 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period to |
Commission File Number: 0-28599
CHINESEINVESTORS.COM, INC.
(Exact name of registrant as specified
in its charter)
Indiana |
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91-2008633 |
(State or Other Jurisdiction
of Incorporation or Organization) |
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(IRS Employer
Identification Number) |
13791 E. Rice Place, Suite # 107, Aurora,
CO 80015
(Address of principal executive offices,
including zip code)
(303) 481-4416
(Registrant’s Telephone Number,
Including Area Code)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class |
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Name of exchange on which registered |
Common Stock, $0.001 par value |
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None |
Securities registered pursuant to Section 12(g)
of the Act: All Common Stock $0.001 par value
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
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 þ 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 þ
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. þ
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):
Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
£ (Do not check if a smaller reporting company) |
Smaller reporting company |
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Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The aggregate market value of the
registrant’s voting and non-voting common stock held by non-affiliates of the registrant on September 15,
2014, the last business day of the registrant’s most recently completed second fiscal quarter, computed by reference to
the last sale price of the registrant’s common stock as reported by The NASDAQ Global Select Market on such date, was
approximately $4,895,691. This computation assumes that all executive officers, directors and persons known to the
registrant to be the beneficial owners of more than ten percent of the registrant’s common stock are affiliates of the
registrant. Such assumption should not be deemed conclusive for any other purpose.
As of September 12, 2014, there were outstanding
7,199,305 shares of the issuer’s common stock, par value $0.001 per share and 1,275,000 shares of the issuer’s preferred
stock, par value $0.001 per share.
Documents incorporated by reference:
None
CHINESEINVESTORS.COM, INC
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED MAY 31, 2014
TABLE OF CONTENTS
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PART I |
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ITEM 1. |
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BUSINESS |
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ITEM 1A. |
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RISK FACTORS |
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ITEM 1B. |
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UNRESOLVED STAFF COMMENTS |
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ITEM 2. |
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PROPERTIES |
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ITEM 3. |
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LEGAL PROCEEDINGS |
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ITEM 4. |
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MINE SAFETY DISCLOSURE |
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PART II |
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ITEM 5. |
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
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ITEM 6. |
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SELECTED FINANCIAL DATA |
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ITEM 7. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 7A. |
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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ITEM 8. |
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
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ITEM 9. |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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ITEM 9A. |
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CONTROLS AND PROCEDURES |
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ITEM 9B. |
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OTHER INFORMATION |
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PART III |
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ITEM 10. |
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
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ITEM 11. |
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EXECUTIVE COMPENSATION |
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ITEM 12. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
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ITEM 13. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
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ITEM 14. |
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PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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PART IV |
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ITEM 15. |
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
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SIGNATURES |
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
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F-1 |
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this report
on Form 10-K that are not purely historical are 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, including statements regarding our “expectations,”
“anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future.
Our actual results could differ materially from those in the forward-looking statements. Among the factors that could cause actual
results to differ materially are the factors discussed in Item 1A. “Risk Factors.”
Part I
NOTE: When we use the term(s) “we,” “us,”
“our” and “the Company,” we mean ChineseInvestors.com, an Indiana Corporation.
Item 1. Business.
1.a.) General Development of Business.
ChineseInvestors.com, an Indiana corporation, was incorporated
on January 6, 1997 in the State of Indiana under the corporate name “MAS Acquisition LII Corp.” Prior to June 12, 2000,
the Company was a ‘blank check’ company seeking a business combination with an unidentified business.
On June 12, 2000, we acquired 8,200,000 shares of common stock,
representing 100% of the outstanding shares of Chineseinvestors.com, Inc., which was incorporated in the State of California on
June 15, 1999. In connection with this acquisition, Aaron Tsai, our former sole officer and director, was replaced by Chineseinvestors.com,
Inc.’s officers and directors.
The stockholders of Chineseinvestors.com, Inc. were issued 8,200,000
shares of our common stock, or approximately 96% of our total outstanding common shares. After giving effect to the acquisition,
Chineseinvestors.com, Inc. became a wholly owned subsidiary and we changed our name to Chineseinvestors.com, Inc. Immediately
prior to the acquisition of Chineseinvestors.com, Inc., MAS Capital Inc. returned 8,200,000 shares of common stock for cancellation
without any consideration.
Chineseinvestors.com, Inc. was established as an ‘in language’
(Chinese) financial information web portal, offering various levels of information relative to the US Equity and Financial Markets,
as well as certain other specific financial markets (including China A Shares, FOREX, etc.). Over the years, various informational
components have been added and the general content improved as the Company continues to derive the majority of its income from
various subscription services it offers to its customers. We offer subscription services to provide education about
investing and news and analysis on the stock market as well as news about particular stocks that we are following. Nevertheless,
we do not provide our subscribers with individualized investment advice and never have investment discretion over any subscribers’
or site visitors’ funds.
Chineseinvestors.COM, Inc. has been in continuous operation
since July of 1999 using the web domains (uniform resource locators) of www.chineseinvestors.com and www.chinesefn.com.
We established a Representative Office business presence in
leased office space in Shanghai, China in late 2000 from which we could fulfill most of our support types of service and also have
a leased office presence in Arcadia, California.
In early 2010, the Company began to prepare the necessary documents
and information needed for a Form 10 submission to facilitate the Company’s’ ability to raise capital on the public
market. In particular, we have retained the firm of B F Borgers CPA PC to be our independent auditor.
We filed our Form 10/12G on, or about, November 29, 2010 with
the SEC and responded to all comments, receiving our letter of acknowledgement and completion of that process on or about June
10, 2011. During the interim time period we filed all documents as required by the SEC relative to amendments, forms 10Q’s,
and 8K’s as necessary, and revisions thereto.
We began a search for a market maker in early 2011, eventually
selecting Glendale Securities having offices in Sherman Oaks, California.
As of May 2014, the Company employed 41 (2012-35) persons in
its Shanghai Office in a variety of administrative and operational capacities, including its CEO and office manager. All but 13
(2012 - 3) are employed full time. The Company also has two contract officer(s) and a full time support team member employed in
the US.
1.b.) Shareholder, Company, and
Material Events Recap
In November 2009, the Company completed a private placement
of stock that started in December 2008. We raised a total of $1 million in that private placement. In addition, the Company initiated
work to compile the financial statements and data that would eventually be used in the generation of its audited financial statements.
In December of 2009, the Company purchased a note held by Hollingsworth
LLC, a past majority shareholder for $112,500. The note was related to a purchase of Hollingsworth LLC’s interests in the
Company by Mr. Sabean (hereafter referred to as Sabean), a shareholder in October of 2005 (as noted in our prior disclosures).
In January 2010, the Company repurchased 13,451,461 shares from
Sabean in consideration of a payment of $150,000, forgiveness of the note receivable owed by Sabean (via the Hollingsworth LLC
interests as purchased in October of 2005), and through the issuance of 2,500,000 stock options. The Company then retired these
shares to treasury reducing the total number of shares outstanding accordingly.
In April of 2010 and with Mr. Myers earlier resignation in March
of 2009, the Board of Directors had been seeking a new independent member for the Board of Directors, as it anticipated filing
a Form 10 registration statement in an effort to become a public reporting company later in the year. On April 30, 2010, James
S. Toreson was appointed to the Board of Directors. The Board of Directors felt that Mr. Toreson’s general corporate
experience and past service with the Company (Interim CEO from March 2002 through March 2003) qualified him as an excellent choice
for its first independent director. Mr. Toreson was originally nominated by Hollingsworth LLC as a condition of their participation
and purchase of stock as noted but Mr. Toreson has not been affiliated with the Hollingsworth or its principals since March of
2003.
On June 26, 2010, the Company held an annual meeting of its
shareholders in Arcadia, California. Mr. Wang, Mr. Roper, and Mr. Toreson were elected to full terms as directors at the meeting.
The Company conducted a private placement offer under a Regulation
D offering in January of 2012. The proceeds of the private placement will be focused on continuing our growth. As of May 2012 we
had raised $525,000 through the sale of 4,375,002 shares of common stock at $0.12 per share, adding 17 new shareholders resulting
in a total of 352 shareholders of record. We are not using a broker-dealer to sell our shares.
In June of 2011 the Company elected to increase the target amount
raised within the Regulation D offering from $1 million to $1.5 million.
As of August 29, 2011 the Company had raised $1,069,000 through
the sale of 8,908,335 shares of its common stock to 27 accredited investors.
In August of 2011, the Company repurchased 5,170,106 shares
and retired 2,500,000 options belonging to Sabean in consideration of a payment of $250,000 that included certain repayment terms
and condition. As of August 3, 2012 Sabean is no longer a shareholder in the Company.
In December of 2011, the Company entered into an agreement for
services with KrisWorld Development Limited of Hong Kong in support of their Binary Options business and as noted in various news
releases at that time.
In March of 2012, the Company retired the remaining balance
of the note related to the repurchase of shares as noted above with Sabean at a substantial discount as reflected in our financial
statements.
In March of 2012, the Company completed an offering of its convertible
preferred stock raising $2,003,776 through the sale of 2,003,776 shares of its convertible preferred stock. The terms of the preferred
stock allow the holder to convert each share of preferred stock into 1.25 shares of common stock at any time after six months from
the date of issuance of February 29, 2012. The holders of shares of preferred stock are also entitled to receive cumulative dividends
in preference to any declaration or payment of any dividend at the rate of $.06 per share per annum when, and if declared by the
Board of Directors.
In May of 2012, the Company began to offer various corporate
consulting services as well as public company consulting for smaller private businesses considering various public options and
as noted in various news releases at that time.
In July of 2012, the Company modified its services agreement
with KrisWorld Development Limited of Hong Kong in consideration of deploying a client service center related to supporting service
offerings with KrisWorld in Shanghai, China. This new client service center is designed to accommodate up to 80 employees and began
operations in early August of 2012. This endeavor was ‘shuttered’ in November of 2012 due to a lack of support (financial
and management) from Krisworld as they had primary operating responsibility for the management of this operation.
In March of 2013, The Company noted the default of KrisWorld
Development Limited of Hong Kong and any affiliates related to payments due for services that the Company had performed. During
this interim period (through the filing of this 10K), the Company has and will continue to field comments and complaints from clients
Krisworld Limited of Hong Kong related to their binary options platform performance as well as an inability to withdraw funds from
their (client) related accounts. This is due to our ongoing support services related responsibility(s) per our agreement with KrisWorld
Limited of Hong Kong to all existing account holders.
In April of 2013, The Company entered into an agreement with
Medicine Man Production Company, a Colorado S Corporation to develop and extensive intellectual property base that would reflect
its past we as current experience as a Cannabis Cultivation and Dispensary Operator in Denver, Colorado for the express purpose
of deployment of such into manuals that could then be used to create a new business entity that could market such experience to
those wishing to enter into the Cannabis industry space in other states or countries.
In April of 2014, The Company in conjunction with Medicine Man
Production Corporation established a new corporate entity in Nevada (C Corporation), Medicine Man Technologies, Inc. for the express
purpose of marketing and promoting the new business as an advisor in the Cannabis industry space. In exchange for its support over
the past year plus, the Company (ChineseInvestors.COM) will be receiving an ownership interest in Medicine Man Technologies that
will be designated in the new future. This new enterprise is also expected to pursue a public company strategy in the next year.
1.c.) General Company Information.
Market and Market Prospects
The Company’s primary market focus is on the segment of
the Chinese population (both in the US and abroad) that does not have English language reading and or speaking skills but who wish
to participate in the various financial markets that typically do not offer real time Chinese language information from an investment
and or general information perspective. With the emergence of a Chinese middle class as well as those who have had wealth transferred
to them, there appears to be a continuing expansion of interest by the Chinese public in the general financial and securities marketplace
as a whole.
More recently the Company has begun to focus on the development
of various additional service initiatives including 1) offering consulting services, 2) establishing and operating a client service
center for one of its business partners, 3) offering various investor and public relation services, 4) reworking its content services
division to deliver a higher quality of information as well as building up its current client base, and 5) offering additional
services within its current business channel.
The Company
ChineseInvestors.com, Inc. endeavors to be an innovative company,
specializing in providing real-time market commentary and analysis in the Chinese language. Our services are mainly offered to
Chinese speaking individuals, offering several types of subscription-based services and serve various types of investors and traders
as depicted in our Subscriber Services offering(s) shown herein. Market coverage includes the general range of US financial markets,
Chinese A Shares, and the FOREX market.
The Company has worked toward establishing its web presence.
Due to the lack of site use information in competitor companies and based upon our website access metrics; the Company must acknowledge
that while it has a substantial public audience, it is difficult to ascertain exactly where any specific leadership position lies
and therefore can make no definitive statement as to an overall position of our website and presence within our specific marketplace.
Recently (July 2013 Web Trends Report) the Company experienced over 126,000 unique visitors represented by just under 345,000 visitor
sessions, noting the average site visit lasted just over 21 minutes.
With our screen layout and menu options, we display our research
tools in a manner designed for ease of use. The content and technology comprising our integrated information platform is also designed
to be adaptable so that as we develop new research tools and adopt new content and features, these new research tools, content
and features can be easily integrated with our existing platform.
Our service offerings permit users to subscribe to several of
our service packages and we have over 1,600 active paying subscribers. Our registered users are Internet users who maintain a registered
account with either www.chinesefn.com or www.chineseinvestors.com.
Our website presents analysis, commentary, and computer generated
quantitative analysis to provide our subscribers and users with a broad view of the world financial markets. We do not attempt
to convince our users to buy or sell any securities or to invest in any specific investments. We believe our subscribers and users
view us as an unbiased provider of financial information. A substantial portion of our revenue is derived from the annual and monthly
subscription fees charged for our service offerings. We receive subscription fees at the beginning of the subscribers’ subscription
periods noting that the related revenue is deferred over the specific subscription period(s).
It should be noted that ChineseInvestors.com is not a Registered
Investment Advisor or a Broker/Dealer. All information provided must be understood as information provided and not investment advice.
ChineseInvestors.com advises all readers and subscribers to seek advice from a registered professional securities representative
before deciding to trade in any companies featured by ChineseInvestors.com or anyone. All statements and expressions are the opinion
of the companies featured and are not meant to be a solicitation or recommendation to buy, sell, or hold securities.
The accuracy or completeness of the information on this website
is only as reliable as the sources they were obtained from all to be public sources. ChineseInvestors.com, its officers, directors,
employees or any affiliated parties make no representation or warranty as to the accuracy of the information provided. All information
concerning the companies featured herein should be verified independently with the featured company. Factual statements are made
as of the date stated and are subject to change without notice. ChineseInvestors.com is not responsible for any claims made by
any company.
The receipt of any of our publications does not create any implication
that there has been no change in the affairs of the company profiled since the date of review. We do not provide any analysis of
the featured company's financial position. Investments in all stocks are generally deemed to be highly speculative and do involve
substantial high risk, making it appropriate for readers to consult with professional investment advisors and to make independent
investigations before acting on information published by ChineseInvestors.com.
ChineseInvestors.com et al may increase or decrease its ownership
interest in any featured companies at any time before, during or after distribution of information. We may profit in the event
the shares of the company featured by us increase in value. These positions may be liquidated from time to time even after we have
made positive comments regarding the company. The receipt of this information constitutes your acceptance of these terms and conditions.
To facilitate the offering of our services the Company has several
full time editorial staff members. Each staff member is a graduate of a college or university in China and is fluent
in English. These staff members monitor CNBC, Bloomberg and other sources of financial news for developments on the
stocks being tracked. They listen to conference calls conducted by the management of the tracked stocks, but do not
ask questions. The staff members translate the news, developments and their notes and provide that information to the
subscribers. The stocks tracked are generally large capitalization stocks traded on the NYSE or NASDAQ-NMS. Companies
are selected based on industry and market segment. The Company periodically selects and or drops the companies being
tracked.
More recently the Company has begun to provide corporate support
to a variety of public companies in the form of an Investor Awareness service whereby the Company provides information about these
companies to our client base.
Our Subscription Services
A substantial portion of our revenue is derived from the annual
and monthly subscription fees charged for our service offerings. We receive subscription fees at the beginning of the subscribers’
subscription periods and defer recognition of these fees for revenue recognition purposes over the period over which the revenue
is earned. Membership Services include, but are not limited to, the following:
VIP Golden Membership Subscription Services
Our registered VIP Golden Members enjoy the following services;
1) timely and important information about US-listed companies; 2) real-time analysis and tracking of the US stock market quotations;
3) trend analysis of the overall market and individual sectors; and 4) access to a sample investment portfolio selected by the
Company for educational simulation relative to individual stock research as well as real-time trading demonstrations of various
trading techniques. We typically follow and provide analyses for large capitalization companies listed on the New York Stock
Exchange (NYSE) and the NASDAQ® National Market System (NASDAQ-NMS). This service also includes access to various other
services including our Market Hotspot Report (this report provides current as well as historical performance information on active
issues as well as sectors within the US Marketplace), Intraday Market Analysis (after close), Weekly Market Commentary, etc.
Our VIP service offers educational demonstrations through which
our editors illustrate basic rules and skills to our subscribers as a group on how to evaluate various investments through fundamental
and technical analysis. We do not provide this service to individual subscribers to help them make personal investment
decisions. This service is intended to teach subscribers how to use technical analyses to invest in and trade stocks.
In our VIP Golden Membership Subscription Services, subscribers
can input the market news, their own views, or other information, and share the results with other subscribers in an open forum
format. However, we do not offer a function that allows members to input specifics such as their current net worth,
risk sensitivity, investment objectives and time frame that would then generate investment suggestions.
At the time of publication, our editors may or may not hold
the securities that are identified for use as part of an example portfolio. This portfolio can change its holdings at any time
and the results of the analysis of the individual components of the portfolio are reflected in our updates. Under no circumstances
does the information in our services represent a recommendation to buy or sell stocks.
Education Materials (Video Training), Stock Investment
These training materials are offered in a CD/DVD format and
are shipped to the purchaser immediately upon purchase and include 1) fundamentals critical to a consistent investment strategy,
2) what to look for in creating a fundamental analysis, 3) how to spot various trading opportunities, 4) how to find swing trading
opportunities for individual stocks, and 5) what is position trading and holding time analysis. In addition we also
provide evaluations as well as analyze all the sample shareholdings and volatile stocks in our sample portfolio. In
this way we strive to help you understand why you may be making certain moves so that you can learn various rationales and strategies,
thus becoming a better investor. These educational materials are based upon historic performance information and do not provide
advice on current potential investments, but rather provide an educational point of reference only.
Option Investment & Trading Subscription Services
This program includes 1) instructional analysis for Market Index
Option Trading, 2) instructional analysis for Stock Option Trading, 3) instruction and analysis for long term Stock Option Trading,
4) introductory articles for Options, 5) real-time market education and analysis, and 6) pre-market analysis of three stock indexes
daily chart analysis of the Dow-Jones Industrial average, the NASDAQ index and the Standard & Poor’s index with our views
and outlook for the three index options including a sample daily tracking of option portfolio, etc.
FOREX (Foreign Currency Exchange) Subscription Services
Offering services including 1) a daily FOREX Headline, 2) a
daily Video FOREX Market Analysis, 3) educational alerts for our training sample portfolio transactions, and 4) a daily comment(s)
review of key FOREX activity, etc.
Dark Horse Subscription Services
The Dark Horse column focuses on the US-listed small-cap stocks
(with trading caps below 100 million shares over the twelve months calendar year); a place where investors from novices to professionals
come to for ideas on which companies demonstrate certain characteristics indicating growth even in a challenged economy.
This is a subscription based service that analyzes individual stocks and provides an experienced investor’s opinion to all
members of the service on various companies. This analysis does not provide individual investment advice but rather
provides an outlook as to the company’s current and potential performance to the entire group. The Dark Horse
research staff spends time daily researching small-cap stocks (virtually all of which are listed for trading on the NYSE or NASDAQ-NMS)
to identify those issues with advancement potential based upon various commonly used measurement metrics every week from more than
9,000 US-listed stocks for the service's model portfolio.
Research reports on Dark Horse Stocks include a detailed analysis
for those stocks where/when the price reaches a potential entering point, key business backdrop, market potential of the subordinated
sector, fund statement of top-10 shareholders, ratings by boutique firms as well as the earnings per share, P/E ratio and P/B ratio
(price to earnings and price to book value) of any of those stocks would be included in the reports. The Company selects
four to ten stocks periodically for inclusion on the watch list. Our staff monitors news, analysts’ calls, reported
trades by material shareholders and other persons required to publicly report trades, press releases and provides analysis and
alerts to subscribers. Tracking of Dark Horse Model Portfolio Stocks subscribers are alerted to the release of reports
on traded stocks from broker-dealers and important news releases and our analyses of the material developments for the tracked
Dark Horse stocks are provided as well. All the news related to the model portfolio stocks is provided in timely
manner while the potential influences price fluctuation of the stock is also analyzed. Dark Horse Model Portfolio
Performances (Profit and loss conditions of the portfolio) are shown in a table, price movements of model portfolio updated daily,
and the yield conditions of the model portfolio is therefore clearly displayed.
General Content Production
To facilitate the offering of our services the Registrant has
five full time editorial staff members. Each staff member is a graduate of a college in China. Each is fluent
in English. The staff members monitor CNBC, Bloomberg and other sources of financial news for developments on the stocks
being tracked. They do in fact listen to conference calls conducted by the management of the tracked stocks, but do
not ask questions. The staff members translate the news, developments and their notes and provide that information to
the subscribers. The stocks tracked are generally large capitalization stocks traded on the NYSE or NASDAQ-NMS. Companies
are selected based on industry and market segment. The Registrant periodically selects or drops the companies being
tracked.
General Advertising Services
The Company provides website based advertising services in the
form of various types of advertising as may be observed throughout the website.
Free Analysis and Research Tools
We also provide a free stocks and research tool to its customers
including the following services:
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Price charts of relevant stocks as well as the price and volume changes of the day. |
After the ticker of a specific stock is searched on the chinesefn.com
website, the price chart of a certain period (today, 5d, 1m, etc.) will be displayed with clear information of price movement,
volume change as well as the highest and lowest points of 52 weeks. Dividend payment information will also be provided.
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News updates for relevant stocks. |
News updates including the latest boutique firm ratings, company
earnings, conference calls, merger and acquisition activity, as well as other information that may influence the price movements
of relevant stocks are also provided for free.
Planned Additional Education Services
We plan to continue to expand our presence in China through
the establishment of additional related services that will likely be provided by third party vendor(s) working directly with us. The
Company has not as of yet identified such potential relationships, but is working on updating its formal business strategy and
plans to identify such potential third party or other partners prior to publishing its curricula.
We plan to substantially increase our presence in the US as
well as China, expanding our educational training and seminar products substantially.
We believe that we have the requisite blend of experience and
technical skills related to financial market awareness and content publication to develop a series of courses devoted to investor
education and offered in the Mandarin language. Based on the demands of individuals in China and outside China, as well
as on the structure and features of the financial markets, we anticipate we will be able to substantially increase our presence
and revenues once we are able to offer services within China (Peoples Republic of China).
These courses will range in content providing basic knowledge
and practical trading skills. They will be coupled with training in the use of digitalized, randomized, and quantified
analyses for stock trading analysis and trading; helping the participants to be more skillful in practical trading as they progress
through the course work.
Courses will also provide a number of actual cases and samples
focusing on formal trading practice as well as the practical trading practices of experts that can be shared. The course
will also provide valuable real world experience from which to develop the participants’ own style of trading.
News
Our news feature allows users to search and view breaking economic
and financial news and information from around the world. Through our website content, our subscribers can access timely and customized
financial information and reports, categorized and integrated into topics and sub-topics that they select, based on their investment
and analysis needs.
Our Websites
Our website content and our research tools are the key components
of our information platform. Our websites have two primary functions:
|
• |
To attract visitors and market our subscription based service offerings; and |
|
• |
To store content and serve as an integral part of our information platform. |
In order to attract visitors to our websites, we offer a significant portion of our website content free of charge. This free content includes stock quotes, trading volumes and pricing indicators for listed companies in the United States. Our websites also have an important marketing function for our subscription based service offerings. We provide examples to our visitors on our websites of the enhanced content and features they can access by becoming a subscriber to one of our service offerings.
Our premium content and features are accessible through our
web-based research tools. Subscribers to our web-based research tools are required to register and maintain personal accounts with
our websites.
We believe our websites are designed for ease of use and accommodate
low bandwidth access to the Internet. In addition, we have also historically derived some revenue from online advertising. We plan
to attract more advertising revenue as our subscriber base increases.
We currently offer different service packages incorporating
some or all of our research tools to our users. Our service packages provide research tools focused around three main areas: securities
market data, technical analysis, and fundamental analysis. We view the migration of existing subscribers and the attraction of
new subscribers to our service offerings with more comprehensive research tools as one of our most important growth strategies.
We may, from time to time, offer discounts or promotions, depending
on our perceived need in accordance with our pricing policy. Any of such discounts or promotions could apply to new or repeat subscribers
as we may determine.
We have taken steps to protect our customer and proprietary
information through deployment of additional security contracted for through our web hosting service provider, IT Software Design. To
our knowledge no such dissemination of Company information has occurred as of the date of this documents submittal. We
are unsure of what material adverse effect such an event would cause. We are in the process of securing service and
trade mark protection for our Chineseinvestors.com and Chinesefn.com names.
Customer Support
Our customer support center provides our subscribers real-time
and personal support. Our customer support personnel, in addition to their sales and marketing functions, help our existing and
prospective subscribers to resolve any technical problems they may have. We have an in-house training program for our customer
support personnel, which include training courses on world financial markets, our service features and functionalities, technical
problem solving skills in respect of our research tools and general customer service guidelines.
The Company maintains a customer service center that is open
twenty four hours a day, seven days a week (24/7) in Shanghai China. The center is staffed with individuals having both
Chinese and English Language skills who are available by both telephone (1-800-808-8760) as well as email (info@chinesefn.com). Once
an inquiry call or email is initiated, follow up provided by an individual best suited to answering the specific question is undertaken
often times resulting in a new email address point of contact as it relates to the specific Customer Service Representative responding
to the inquiry. The Company also provides various levels of translation support for its advertisers as may be contracted
for.
Typical Customer Service or Technical Support Calls include:
|
• |
What's the website address of chinesefn.com; |
|
• |
How do I access the website or how do I register online; |
|
• |
What products are free and which ones are offered at a cost; |
|
• |
What is the cost of a particular product; |
|
• |
Where to login our membership section; |
|
• |
Company intro and what content they can get access to our website; |
|
• |
When and where they can find the updated news; |
|
• |
Where are the archives, etc.; |
|
• |
Customer can't login to the website; (technical support) |
|
• |
The computer can't refresh the webpage; (technical support) |
|
• |
The computer can't submit user's message; (technical support) |
|
• |
The computer can't show the web content in traditional Chinese (technical support) |
Sales and Marketing
We market our service offerings through our websites, as well
as through customer support personnel at our telemarketing and customer service center in Shanghai, China. Our websites provide
detailed descriptions of our service offerings while our customer support personnel are available to explain to callers the various
features of our offerings and to resolve our subscribers’ technical problems. We charge our subscribers a subscription fee
for the use of our service packages over an agreed upon service period, typically three months to one year. Our subscribers either
pay us by cash, by online bank transfer, or by direct wiring of cash. Upon receipt of payment, we promptly activate our subscribers’
accounts with us.
The Company currently utilizes several advertising relationships
in a continuing effort to build its brand awareness including SVC Media Services, AM1300 Radio, Phoenix Satellite Television, SINA,
etc. The Company plans to continue to use these resources as well as add new media providers based upon need, performance,
and cost. The Company plans to continue with other advertising efforts in the form of seminars, referrals, and the planned
offering of educational services.
While the Company does not currently have a formal budget for
advertising, it plans to develop a more substantial plan and outlook in the near future as a part of its business planning and
strategy development efforts and as it achieves revenues and or funding that will allow it to continue to expand its business.
The market potentials for our Portal, IR and PR marketing and
Conference and Online Platform businesses are extremely competitive and rapidly changing. We note that at this time
we have not as yet developed offerings for these particular online services and may fail to do so in a manner that might affect
our businesses ability to remain competitive. Please note that while we are aware our Company may develop service offerings
as noted we have not as of yet explored the potential products related to the offerings as noted above and therefore cannot describe
these businesses and planned offerings as we currently have none.
We are working on identifying other possible products that could
be deployed as well as produce income for the Company as they relate to "Portal, IR and PR marketing and Conference and
Online Platform businesses" that could include those designed to 1) integrate with our portal such as various hybrid advertising
services (word specific, etc.), 2) investor and or public relations promotional material dissemination (on behalf of various businesses
and or advertisers) via website delivery mechanisms, and 3) sponsoring as well as hosting related online (interactive) educational
programs and conference events, etc.
We do offer various educational conferences (both free and fee
based) in both China and the US on a regular basis as well as the services and information available to our subscribers and visitors
on our website. These educational conferences typically include various segments dedicated to the various sectors our subscribers
and guests may be interested including US Equities, Foreign Currency Exchange, China Stocks, etc. These events generally
include other speakers that have specific education and experience skills within these various sectors. These events
generally last between two and three hours and are held at public venues such as conference centers, hotels, etc.
Database Technology
We have developed database technology to address the specific
requirements of our information services. Our database design and search techniques allow for efficient data retrieval within the
unique operating parameters of the Internet.
General Corporate Support Services
In June of 2012 the Company initiated its first corporate support
service (hybrid IR) support effort by providing Nova Lifestyle, Inc. (Nova) an OTCQB status company having global operations with
interim general share and shareholder support via messaging and information delivery to the Company’s subscribers. The initial
period (began June 15, 2012) was so successful that Nova engaged the Company for a twenty four month services contract in exchange
for 100,000 shares of Nova’s (Symbol “STVS”) common stock.
We provide corporate awareness and general stock support though
our relationships with our subscribers that is generally active in the OTC and other broader exchanges (NASDAQ and NYSE). As of
the date of this filing May 31, 2014) we have provided some level of investor relations services to over 40 different companies,
generating over $3,000,000 stock related revenue in the annual period ending May 31, 2014.
Medicine Man Technologies Inc. Support Services
The Company is participating in the startup as well as initial
operations of Medicine Man Technologies in consideration of receiving shares of common stock of the business.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2
of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company currently maintains leased space in Shanghai, China
(as described in the Financials) as well as an office presence in Arcadia, California. It also maintains a correspondence
address in Arcadia, California on a month to month basis as well as an executive office suite in Aurora, Colorado.
Shanghai Offices |
333 Huai Hai Zhong Road, 12/F Shui On Plaza, Shanghai, China, 200021 (lease expires September 2016) |
|
|
Correspondence Address |
411 E. Huntington Drive, #107-228, Arcadia, CA 91006 (currently month to month as a correspondence address only, the Company having ceased active business operations in Californian in 2012) |
|
|
Corporate Offices |
13791 East Rice Place, Suite #107,
Aurora, CO 80015 (currently month to month) |
The Company has no other real property holdings or leases other than those as disclosed above.
Item 3. Legal Proceedings
The Company is a party to various any legal proceeding, none
of which, in the opinion of management are more likely than not to have a material adverse effect upon its business or financial
position.
Item 4. Mine Safety Disclosure
Not applicable.
Part II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters, and Issuer Purchases of Equity Securities
During the year ended May 31, 2013, the Company raised $275,000
of cash from a private equity firm by issuing 861,306 shares of its common stock.
During the year ended May 31, 2014, the Company converted 728,776
shares of preferred stock for 910,970 shares at a conversion rate of $1.25 per share of preferred stock.
During March 2014 the Company granted 300,000 shares of common
stock for compensation. Half the shares were valued at $0.90 per share and the remaining 150,000 shares were valued at $0.77 per
share. The Company also issued 18,750 shares for services valued at $0.89 per share. The compensation and consulting expense was
recorded as general and administrative expenses for the year ended May 31, 2014.
Item 6. Selected Financial Data
Financial Tables and Explanations (years ending May 31st)
Description | |
2014 | | |
2013 | | |
2012 | | |
2011 | | |
2010 | |
| |
(audited) | | |
(audited) | | |
(audited) | | |
(audited) | | |
(audited) | |
Total Revenues | |
$ | 3,902,403 | | |
$ | 1,639,373 | | |
$ | 897,105 | | |
$ | 845,097 | | |
$ | 939,817 | |
Less: Cost of Goods Sold | |
$ | (821,248 | ) | |
$ | (974,966 | ) | |
$ | (686,865 | ) | |
$ | (556,195 | ) | |
$ | (531,184 | ) |
Operating Income | |
$ | 3,081,155 | | |
$ | 664,407 | | |
$ | 210,240 | | |
$ | 288,902 | | |
$ | 408,633 | |
Expenses, General & Administration | |
$ | (1,592,600 | ) | |
$ | (1,662,220 | ) | |
$ | (1,995,918 | ) | |
$ | (1,033,582 | ) | |
$ | (954,846 | ) |
Income <Loss>, Continuing Operations | |
$ | 1,149,590 | | |
$ | (1,118,041 | ) | |
$ | (2,206,158 | ) | |
$ | (744,681 | ) | |
$ | (546,213 | ) |
Income <Loss>, Per Share (Continuing Operations) | |
$ | .18 | | |
$ | (.21 | ) | |
$ | (.44 | ) | |
$ | (0.17 | ) | |
$ | (0.12 | ) |
Total Shares Outstanding (includes Options) | |
$ | 9,182,090 | | |
| 6,358,620 | | |
| 4,992,454 | | |
| 4,281,322 | | |
| 4,411,462 | |
Long Term Obligations | |
$ | 80,777 | | |
$ | 6,584 | | |
$ | 3,871 | | |
$ | 5,797 | | |
$ | 8,015 | |
Cash Dividends Declared per Common Share | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
Total Assets | |
$ | 2,998,013 | | |
$ | 1,000,575 | | |
$ | 1,248,967 | | |
$ | 354,655 | | |
$ | 252,063 | |
Total Revenues describes all income from all Company
related activities including subscription sales, advertising sales, FOREX support service fees, consulting fees, investor awareness
campaigning, and education/training sales.
Cost of Goods Sold refers to all operating expense
related to the cost of delivery of content services including direct expenses related to binary option revenues and all of the
general Shanghai office expenses.
Expenses, General & Administration
refers to the expense related to general advertising, US operational overhead, salaries and related expenses of US Citizens,
the costs of note and share repurchases, the costs of options granted, US based web hosting services, etc.
Income <Loss>, refers to the value remaining
when subtracting Expenses, General & Administration from the Operating Revenues value.
Income <Loss>, Per Share refers to any income
or loss per share value when dividing the Income <Loss>, value by the number of common shares outstanding.
Weighted Averages Shares Outstanding refers to
the total number of shares outstanding at any given year end period.
Long Term Obligations, refer to those specific
values associated with defined Long Term Obligations as shown in our Financial Statements.
Cash Dividends Declared per Common Share refers
to any dividends that may have paid out on behalf of the common stock shareholder; noting the Company has never paid any such dividend.
Total Assets refers to the total assets as may
be reflected in the Financial Statements.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Fiscal Year Ending May 31, 2014
Revenues
Subscription Revenue: The Company
experienced a significant increase in subscription based revenues ($495,154 in fiscal year 2013 increased to $722,887 in fiscal
year 2014) as the Company expanded various service offerings within the marketplace and individual investors of the general equity
marketplace. This revenue item grew steadily through fiscal year 2014 as the Company was able to provide even great expertise in
the market as it developed its investor relations offerings. Additionally, our support team is being tasked with improving our
content as well as generating new subscribers (free as well as paid service related) through various new initiatives.
Binary Option Service Revenues: This revenue
category (related to support services as provided to KrisWorld Limited of Hong Kong) in the 2013 fiscal year generated $740,354
in revenue. In April of 2013, The Company noted the default of KrisWorld Development Limited of Hong Kong and any affiliates related
to payments due for services to the Company. During the interim period through the filing of this 10K, the Company has fielded
several complaints from clients Krisworld Limited of Hong Kong related to their binary options platform performance as well as
an inability to withdraw funds from their (client) related accounts. The last fees and or reimbursements for services to this company
were received in January of 2013. At the conclusion of this relationship, Chineseinvestors.com, Inc. was owed $77,708 for various
reimbursements and fees from Krisworld Development Limited. The Company recognized this as a cost of generating the binary option
revenue by writing this balance off as uncollectable as a charge to cost of goods sold at May 31, 2013. This revenue source has
been eliminated in fiscal year 2014.
Investor Relations Revenue: The
Company has had great success in growing its business services revenue as we continue to expand investor awareness, general corporate
strategic support, and pre-public company consulting. This revenue stream multiplied by almost a factor of ten over the prior year
from $377,407 to $3,166,516 in the current fiscal year. We expect this revenue base to continue to be strong as we move into fiscal
year 2015 and continue to add new clients and related services. It should be noted that the Company began to accept SEC Rule 144
stock in fiscal year 2013 (which is a special restricted class of stock received as payment for services) in the various clients
as a part of its compensation which will have an initial negative cash flow impact as the shares become liquid in nature six (6)
months or more after services have been provided (in most cases). The value of these shares is computed quarterly based upon the
closing price quoted within the exchange they are registered on and adjustments to those values from prior quarters are reflected
in the unrealized gain on marketable equity securities as noted in the Statements of Stockholders’ Equity which for the fiscal
year ended May 31, 2014 had a balance of $291,984 that was not reflected on the Company’s Income Statement.
Overall revenues in fiscal year 2014 ($3,902,403) increased
significantly in comparison to fiscal year 2013 ($1,639,373).
Expenses
Cost of Services Sold: These related costs
decreased (from $974,966 in fiscal year 2013 to $821,248 in fiscal year 2014) for the most part due to illuminating the costs associated
with servicing the binary option revenue stream which incurred more direct expenses to generate than our current revenue product
mix.
General & Administrative Expense: These expenses increased
by approximately $250,000 from $1,434,779 in fiscal year 2013 to $1,681,361 in fiscal year 2014, primarily driven by costs related
to developing and serving our business services clients. Management expects that this expense category will remain at near its
current level as the company continues to develop and service this revenue source.
Advertising Expenses: Advertising related
expenses were stable ($227,441 in fiscal year 2013 to $195,131 in fiscal year 2014). These expenses are generally related to outside
advertising costs and various other related expenses. As the company continues to become more focused on it investor relations
related revenue it expects that advertising expenses will stay fairly close to the $200,000 annual expenditure rate as direct sales
efforts are more effective than general advertising in this revenue category.
Liquidity
The Company is currently addressing its
liquidity concerns, by continually building upon its revenue generation subscription service
products, increasing its advertising based revenues (as discussed), and by increasing its offerings of other consulting services.
Since inception in 1997, the Company has at times relied primarily upon proceeds from private placements and sales of shares of
its equity securities to fund its operations. We anticipate continuing to rely on sales of our securities as well as increasing
our general revenues in order to continue to fund our business operations. We may from time to time secure credit through loans
backed by securities the Company holds and owns as it did in fiscal year 2014. In the last two years the company has used an average
of just under $1,000,000 in cash to fund its current operations. However a significant portion of that is related to nature of
receiving stock as revenue instead of cash. The Company is past the six month restriction period on over $1,000,000 in stock value
and is currently in the process of liquidating that stock to fund its operations. As the Company is currently holding over $2,000,000
in available for sale securities it is management’s opinion that the Company has sufficient capital to fund its operation
for the following year. However, there can be no assurance that the Company currently has sufficient capital or access to capital
needed for operations for the next annual period.
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are
indexed to our shares and classified as stockholder’s equity. Furthermore, we do not have any retained or contingent interest
in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do
not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support
to us or engages in leasing, hedging, or research and development services with us.
Contractual Obligations
We have no contractual obligations outstanding other than those
based on a month to month continuing basis as they relate to technical services (web hosting, Bloomberg services, etc.) and as
they relate to a specific office space lease in Shanghai, China (located at 333 Huai Hai Zhong Road, 12/F Shui On Plaza, Shanghai,
China, 200021).
Item 7.A. Quantitative and Qualitative Disclosures About
Market Risk
We are a smaller reporting company as defined by Rule 12b-2
of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 8. Financial Statements and Supplementary Data
Reference is made to the Financial Statements, the Notes thereto,
and the Report of Independent Public Accountants thereon commencing at page F-1 of this Report, which Financial Statements, Notes,
and report are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9.A. Controls and Procedures
Management’s Annual Report on Internal Control Over
Financial Reporting
Our management is responsible for establishing
and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our
management assessed the effectiveness of our internal control over financial reporting as of May 31, 2014. In making this assessment,
our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
in Internal Control-Integrated Framework. Our management has concluded that, as of May 31, 2014, our internal control over financial
reporting is not effective primarily based on these criteria, due to material weaknesses resulting from our failure to 1) implement
and monitor specific cutoff procedures, 2) properly review and approve bank reconciliations or provide correct responsibilities
to adequately segregate activity in the area of cash receipts and cash disbursements, 3) effectively implement comprehensive entity
level internal controls, 4) adequately segregate duties within the accounting department due to an insufficient number of staff,
and 5) implement appropriate information technology controls. In consideration of our smaller size, the burden of elimination of
these material weaknesses would create an undue financial burden on the Company.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal
financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K, have concluded that, based
on such evaluation, our disclosure controls and procedures were not effective to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our
principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
Changes in Controls and Procedures
In the current year the Company continued
to implement a new accounting information system that had started to be implemented in the preceding year to address several of
our internal controls issues. There were no other significant changes in our internal controls over financial reporting or in other
factors identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during
the year ended May 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.
Management’s Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness
to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness
of our internal controls over financial reporting as of May 31, 2014 based on the framework in Internal Control-Integrated Framework,
published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we have concluded
that our internal controls over financial reporting were not effective as of May 31, 2014. Once again, implementation of such controls
would have a devastating effect on the Company, likely causing its demise. As we continue to grow our revenues to a point where
such controls and requirements can be affordably implemented, we will continue to remain aware of these weaknesses. Management
continues to work to improve its disclosure controls and procedures over financial reporting and to resolve deficiencies.
This Annual Report on Form 10-K does
not include an attestation report by our registered public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only our management’s report in this Annual Report on Form 10-K.
Item 9.B. Other Information
None.
Part III
Item 10. Directors, Executive Officers, and Corporate Governance
Name |
|
Age |
|
Served Since |
|
Position |
Warren (Wei) Wang |
|
47 |
|
Dec. 1999 |
|
Chief Executive Officer and Chairman of the Board |
Brett Roper |
|
62 |
|
Mar. 2002 |
|
Secretary of the Board of Directors and Chief Operating Officer |
Paul Dickman |
|
34 |
|
Aug. 2012 |
|
Chief Financial Officer |
James S. Toreson |
|
72 |
|
Apr. 2010 |
|
Director (Independent) (Previous Board Service Mar. 2002 thru Apr. 2003) |
Notes:
|
I. |
All terms are set for the single annual period between our Annual Shareholders Meeting(s). |
|
II. |
James S. Toreson served on the Board of Directors previously in association with the Hollingsworth LLC ownership time period from March of 2002 through August of 2003. Mr. James S. Toreson is the single voting member of our audit, nominating, and compensation committees although Mr. Warren Wang and Mr. Brett Roper serve on these committees in a non-voting capacity as Management Representatives. |
|
III. |
Mr. Toreson and Mr. Roper had no relationship with Mr. Wang or each other prior to October of 2001 when they were introduced to each other, as well as the Company and Hollingsworth LLC as a part of the Due Diligence Team assembled to provide consideration and support to Hollingsworth LLC prior to their investment in the Company, occurring in March of 2002. |
|
IV. |
Mr. Roper served on the Board of Directors starting in March of 2002 (through December of 2005 as the Hollingsworth LLC Representative) and continues to serve in that capacity as of this date. Mr. Roper’s general business experience is very broad based, having exposure to operating company management, real estate investment and rehabilitation projects, and a wide variety of industry channels. He currently services as the Company’s COO as well as Secretary of the Board of Directors. |
|
V. |
The Audit Committee was enlarged to three persons in June of 2010 with James S. Toreson serving as its Chairman and single voting member as of this date. Mr. Toreson, who is independent within the meaning of Regulation S-K Item 407(d)(5)(i)(B) has been determined to have the necessary financial experience to serve as the committee financial expert. Mr. Toreson is qualified as a financial expert due to his understanding of generally accepted accounting principles which he has gained through a combination of education and experience as a key executive for over 30 years in a wide variety of businesses. A brief summary of his business experience is listed below Mr. Roper and Mr. Wang serves on the committee in a non-voting capacity. |
|
VI. |
Mr. Dickman has served as the Chief Financial Officer starting in July of 2010 and continues to serve in that capacity as of this date. Mr. Dickman has a broad range of accounting and finance experience. He began his career working as an auditor and financial consultant with several regional accounting firms. In addition to his work as Chief Financial Officer for Chineseinvestors.com, Inc. he has also been the Chief Financial Officer for several other public and private companies. |
Item 11. Executive Compensation
The following information summarizes the compensation earned
during the year ending May 31, 2014 and May 31, 2013.
Officers and Management
Name and Principal Position | |
Year | | |
Salary | | |
Bonus | | |
Stock
Awards | | |
Option
Awards | | |
Non
Equity Incentive Plan Comp | | |
Non-
Qualified Defer. Comp | | |
All
Other Compensation (3) | | |
Totals | |
Warren Wang | |
| 2014 | | |
$ | 140,000 | | |
$ | – | | |
$ | 77,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 79,361 | | |
$ | 296,361 | |
Chief
Executive Officer | |
| 2013 | | |
$ | 120,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 120,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Brett Roper | |
| 2014 | | |
$ | 90,000 | | |
$ | – | | |
$ | 38,500 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 15,225 | | |
$ | 143,725 | |
VP, Corporate Services | |
| 2013 | | |
$ | 84,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 84.000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Lan Jiang | |
| 2014 | | |
$ | 79,000 | | |
$ | – | | |
$ | 43,200 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 122,200 | |
Office
Manager, Shanghai | |
| 2013 | | |
$ | 72,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 72,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Paul Dickman | |
| 2014 | | |
$ | 63,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 63,000 | |
Chief
Financial Officer | |
| 2013 | | |
$ | 57,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 57,000 | |
Name and Principal Position | |
Fees
Earned or Paid in Cash | | |
Stock
Awards | | |
Option
Awards | | |
Non-Equity
Incentive Plan Compensation | | |
Non-
Qualified Defer. Compensation | | |
All
Other Compensation | | |
Totals | |
Warren Wang, Chairman of
the Board | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Brett Roper, Secretary of
the Board | |
$ | 12,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 12,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
James S. Toreson, Director | |
$ | 16,200 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 16,200 | |
____________
(1) |
Brett Roper took on the role of Chief Operating Officer in March of
2012 |
(2) |
Mrs. Lan Jiang is not an officer of the corporation, does not serve on the
Board of Directors, and is included in this table as a part of our related party disclosure as she is the spouse of the CEO,
Mr. Warren Wang. |
|
|
(3) |
This compensation was in the form of commissions paid
for directly generated new business without the involvement of Company sales staff. |
Employment Contracts
The Company currently does not have any active employment agreement(s)
with any employee associated with the Company.
It is the Company’s intent to enter
into an employment contract in the near future with its CEO and Founder, Mr. Warren Wang as well as any other employee(s) or contractor(s)
determined by the Board of Directors to be critical to the Company’s future operations.
Non-Statutory Stock
The Company does not currently have any
type of stock based compensation, award, or incentive plan document but plans to create such a plan in the near future in consultation
with and the approval of our Compensation Committee.
Compensation Plan
The Company’s current compensation plan for key individuals
is as follows:
The Compensation Committee intends (as
already noted) to create a stock based compensation and incentive plan in the near future that would address performance of Board
of Director(s) duties as well as reward employee job performance.
The Compensation Committee plans to formalize a compensation
plan in the near future in consultation with and the approval of our Compensation Committee.
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
The following table sets forth certain
information as of the date of this Filing with respect to the beneficial ownership of the Company’s Common Stock
and Warrants by all persons known by the Company to be beneficial owners of more than 5% of any such outstanding classes.
Unless otherwise specified, the named beneficial owner has, to the Company’s knowledge, sole voting and investment
power.
| | |
| |
Amount of | | |
Percent of Class | |
Title Of Class | | |
Name, Title and Address of Beneficial Owner of Shares | |
Beneficial Ownership(1) | | |
Before Offering | | |
After Offering | |
| Common | | |
Warren Wang, CEO, Chairman of the Board, Director(2) | |
| 978,393 | | |
| 23.0 | % | |
| 15.6 | % |
| Common | | |
Brett Roper, COO & Secretary of the Board of Directors (3) | |
| 62,500 | | |
| 00.3 | % | |
| 00.2 | % |
Notes:
1. |
As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or share investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of a security). Current Ownership (options included) currently stands at 8,633,736 shares of common stock (includes options). |
2. |
The address for Warren Wang is c/o ChineseInvestors.com, Inc., 150 North Santa Anita Ave., Suite 300, Arcadia, California, 91006. Mr. Wang currently has 312,500 Options (related to the repurchase of shares as previously disclosed) exercisable at $0.80 per option over a four-year time period (78,125 per year) after the Company is listed (BB or equal) and trading. |
3. |
The address for Brett Roper is 13791 E Rice Place, Aurora, Colorado, 80015. These shares were awarded to Mr. Roper by Hollingsworth LLC in May of 2002 for services performed for that entity. Mr. Roper has no other stock related interests in the Company. |
|
|
4. |
The offering referred to above was the convertible preferred share offering which resulted in the Company selling 2,003,776 shares of preferred stock that could be converted into an additional 2,504,720 shares of common stock after all applicable restriction periods end. |
Item 13. Certain Relationships and Related Transactions,
and Director Independence
The board of directors must approve all related party transactions.
All material related party transactions will be made or entered into on terms that are no less favorable to us than can be obtained
from unaffiliated third parties. As of May 31, 2014 the Company had outstanding commission payable to various officers of $71,432.
These payable do not bear interest and are treated by the Company as standard payables.
Director Independence
James S. Toreson is our only non-employee director, and our
board of directors has determined that he meets the qualification of being an independent pursuant to the current SEC guidelines. The
Board has adopted the NASDAQ® definition of an independent director. Under those rules, Mr. Toreson would be considered
independent if he is not an employee of the Company and he does not have a relationship with the Company that would interfere with
his exercise of independent judgment in acting as a director of the Company. Mr. Toreson has advised Messrs. Wang and
Roper that he has no such relationship that would interfere with his exercising independent judgment as a director of the Company.
Item 14. Principal Accounting Fees and Services
Audit Fees
The following table sets forth the aggregate fees billed by
our auditors, B. F. Borgers CPA, PC in fiscal year 2014 and fiscal year 2013. Our Board of Directors has considered these fees
and professional services rendered compatible with maintaining the independence of that firm.
|
|
For Year Ending May 31, |
|
|
|
2014 |
|
|
2013 |
|
Audit Fees (1) |
|
$ |
20,000 |
|
|
$ |
20,000 |
|
Audit-Related Fees (2) |
|
|
15,000 |
|
|
|
15,000 |
|
Tax Fees (3) |
|
|
1,000 |
|
|
|
1,000 |
|
Totals |
|
$ |
36,000 |
|
|
$ |
36,000 |
|
_________________________
(1) |
Audit Fees consist of fees for the audit of our annual financial statements, review of our interim financial statements and review in connection with our statutory and regulatory filings. |
(2) |
Audit-Related Fees consist of fees related to assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”. |
(3) |
Tax Fees consist of fees related to tax compliance, tax advice, and tax planning. |
Part IV
Item 15. Exhibits, Financial Statement Schedules
(b) Exhibits.
Exhibit Number |
|
Exhibit Description |
|
|
|
31.1* |
|
Certification of the Principal Executive Officer Pursuant to 17 CFR 240.13a-14(a), as Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of the Principal Financial Officer Pursuant to 17 CFR 240.13a-14(a), as Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002. |
101.INS* |
|
XBRL Instance Document |
101.SCH* |
|
XBRL Taxonomy Extension Schema Document. |
101.CAL* |
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |
|
XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* |
|
XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* |
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
* Filed or “Furnished” herewith.
CHINESEINVESTORS.COM, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2013 AND
2012
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm |
F-2 |
|
|
Balance Sheets as of May 31, 2014 and 2013 |
F-3 |
|
|
Statements of Stockholders’ Equity (Deficit) for the years ended May 31, 2014 and 2013 |
F-4 |
|
|
Statements of Operations for the years ended May 31, 2014 and 2013 |
F-5 |
|
|
Statements of Cash Flows for the years ended May 31, 2014 and 2013 |
F-6 |
|
|
Notes to the Financial Statements |
F-7 to F-16 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of ChineseInvestors.com,
Inc.:
We have audited the accompanying balance
sheets of ChineseInvestors.com, Inc. (“the Company”) as of May 31, 2014 and 2013 and the related statements of operations,
stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of ChineseInvestors.com, Inc., as of May 31,
2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity generally accepted
accounting principles in the United States of America.
The company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly,
we express no such opinion.
/s/ B.F. Borgers CPA PC
B F Borgers CPA PC
Denver, CO
September 12, 2014
Chineseinvestors.com, Inc.
BALANCE SHEETS
| |
(Expressed
in U.S. Dollars)
As of May 31st | |
| |
2014 | | |
2013 | |
| |
| | |
| |
| |
| | |
| |
ASSETS | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 429,199 | | |
$ | 211,442 | |
Accounts receivable, net | |
| 17,422 | | |
| 3,667 | |
Note receivable - affiliate | |
| 17,648 | | |
| – | |
Investments, available for sale | |
| 2,331,139 | | |
| 652,021 | |
Prepaid taxes | |
| 58,963 | | |
| – | |
Other current assets | |
| 26,404 | | |
| 33,795 | |
Total current assets | |
| 2,880,775 | | |
| 900.925 | |
| |
| | | |
| | |
Property & equipment, net | |
| 22,960 | | |
| 32,705 | |
Website development, net | |
| 94,278 | | |
| 66,945 | |
Total assets | |
| 2,998,013 | | |
| 1,000,575 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
| 53,986 | | |
| 5,361 | |
Accounts payable-due in stock | |
| 99,702 | | |
| – | |
Accrued interest | |
| 11,068 | | |
| 60,114 | |
Other liabilities | |
| 78,545 | | |
| 51,936 | |
Deferred revenue | |
| 342,742 | | |
| 394,679 | |
Unearned revenue paid in cash | |
| 120,208 | | |
| – | |
Unearned revenue paid in stock | |
| 545,491 | | |
| 306,079 | |
Short-term debt | |
| 440,000 | | |
| – | |
Total current liabilities | |
| 1,691,742 | | |
| 818,169 | |
| |
| | | |
| | |
Long-term deferred revenue | |
| 80,777 | | |
| 6,584 | |
Total liabilities | |
| 1,772,519 | | |
| 824,753 | |
| |
| | | |
| | |
Commitments | |
| | | |
| | |
| |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock par value $0.001, 20,000,000 shares authorized and 1,275,000 (2014) and 2,033,775 (2013) shares issued and outstanding | |
| 1,285 | | |
| 2,004 | |
Common stock par value $0.001, 80,000,000 shares and 7,199,305 (2014) and 5,969,585 (2013) share issued and outstanding | |
| 7,200 | | |
| 5,970 | |
Additional paid-in capital | |
| 10,587,500 | | |
| 10,320,823 | |
Foreign currency gain | |
| 1,350 | | |
| 1,306 | |
Unrealized gain/(loss) on trading securities | |
| (291,984 | ) | |
| 75,166 | |
Retained deficit | |
| (9,079,857 | ) | |
| (10,229,447 | ) |
Total stockholders’ equity | |
| 1,225,494 | | |
| 175,822 | |
Total liabilities and stockholders’ equity | |
| 2,998,013 | | |
| 1,000,575 | |
See accompanying notes
Chineseinvestors.com, Inc.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(DEFICIENCY)
Year ended May 31st |
(Expressed in U.S. Dollars) |
| |
Common
Stock | | |
Preferred
Stock | | |
Additional
Paid in | | |
Foreign
Currency Gain / | | |
Unrealized
Gain on | | |
Stockholders' | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Loss | | |
Securities | | |
(Deficit) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance-May 31, 2012 | |
| 5,108,279 | | |
$ | 5,109 | | |
| 2,003,776 | | |
| 2,004 | | |
$ | 10,046,684 | | |
$ | 1,738 | | |
| – | | |
$ | (9,111,406 | ) | |
$ | 944,129 | |
Common stock issued for
cash | |
| 861,306 | | |
| 861 | | |
| – | | |
| – | | |
| 274,139 | | |
| – | | |
| – | | |
| – | | |
| 275,000 | |
Unrealized gain on available
for sale securities | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 75,166 | | |
| – | | |
| 75,166 | |
Unrealized foreign currency
gain | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (432 | ) | |
| – | | |
| – | | |
| (432 | ) |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (1,118,041 | ) | |
| (1,118,041 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance-
May 31, 2013 | |
| 5,969,585 | | |
| 5,970 | | |
| 2,003,776 | | |
| 2,004 | | |
| 10,320,823 | | |
| 1,306 | | |
| 75,166 | | |
| (10,229,447 | ) | |
| 175,822 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for compensation | |
| 300,000 | | |
| 300 | | |
| – | | |
| – | | |
| 250,200 | | |
| – | | |
| – | | |
| – | | |
| 250,500 | |
Stock issued for services | |
| 18,750 | | |
| 19 | | |
| – | | |
| – | | |
| 16,669 | | |
| – | | |
| – | | |
| – | | |
| 16,688 | |
Conversion of preferred
stock to common stock | |
| 910,970 | | |
| 911 | | |
| (718,776 | ) | |
| (719 | ) | |
| (192 | ) | |
| – | | |
| – | | |
| – | | |
| – | |
Unrealized gain on available
for sale securities | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| | | |
| (367,150 | ) | |
| – | | |
| (367,150 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Unrealized foreign currency
gain | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 44 | | |
| – | | |
| – | | |
| 44 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net profit/ (loss) for
the year | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| 1,149,590 | | |
| 1,149,590 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance-
May 31, 2014 | |
| 7,199,305 | | |
$ | 7,200 | | |
| 1,275,000 | | |
$ | 1,285 | | |
$ | 10,587,500 | | |
$ | 1,350 | | |
$ | (291,984 | ) | |
$ | (9,079,857 | ) | |
$ | 1,225,494 | |
See accompanying notes
Chineseinvestors.Com, Inc.
STATEMENTS OF OPERATIONS AND (LOSS)
(AUDITED)
Year ended May 31st |
(Expressed in U.S. Dollars) |
| |
2014 | | |
2013 | |
Operating Revenues | |
| | | |
| | |
Subscription Revenue | |
$ | 722,887 | | |
$ | 495,154 | |
Binary Option Services | |
| – | | |
| 740,354 | |
Investor Relations Revenue | |
| 3,166,516 | | |
| 377,407 | |
Other Revenue | |
| 13,000 | | |
| 26,458 | |
Total Revenue | |
| 3,902,403 | | |
| 1,639,373 | |
| |
| | | |
| | |
Cost of Services Sold | |
| 821,248 | | |
| 974,966 | |
| |
| | | |
| | |
Gross Profit | |
| 3,081,155 | | |
| 644,407 | |
| |
| | | |
| | |
General & Administrative Expenses | |
| 1,684,167 | | |
| 1,434,779 | |
Advertising Expenses | |
| 195,131 | | |
| 227,441 | |
Total Expenses | |
| 1,879,298 | | |
| 1,662,220 | |
| |
| | | |
| | |
Operating profit/(loss) for the Year | |
| 1,201,857 | | |
| (997,813 | ) |
| |
| | | |
| | |
Other (expense) income | |
| | | |
| | |
Interest expense | |
| (111,407 | ) | |
| (120,228 | ) |
Realized gain | |
| 59,140 | | |
| – | |
| |
| | | |
| | |
Loss before tax | |
| 1,149,590 | | |
| (1,118,041 | ) |
| |
| | | |
| | |
Net income (loss) | |
$ | 1,149,590 | | |
$ | (1,118,041 | ) |
| |
| | | |
| | |
Tax | |
| – | | |
| – | |
| |
| | | |
| | |
Net loss | |
$ | 1,149,590 | | |
$ | (1,118,041 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding – basic and diluted | |
| 6,269,517 | | |
| 5,270,436 | |
| |
| | | |
| | |
Earnings (loss) per share - basic | |
$ | 0.18 | | |
$ | (0.21 | ) |
See accompanying notes
Chineseinvestors.Com, Inc.
STATEMENTS OF CASH FLOWS
(AUDITED)
Year ended May 31, |
(Expressed in U.S. Dollars) |
| |
2014 | | |
2013 | |
| |
| | |
| |
OPERATING ACTIVITIES | |
| | | |
| | |
Net income (loss) for the twelve month period | |
$ | 1,149,590 | | |
$ | (1,118,041 | ) |
Adjustment to reconcile net (loss) to net cash used in operating activities: | |
| | | |
| | |
Available for sale securities received for services provided | |
| (2,341,960 | ) | |
| (270,775 | ) |
Net unrealized gain on investment | |
| (59,140 | ) | |
| | |
Expenses paid in stock | |
| 99,702 | | |
| | |
Stock paid for compensation | |
| 250,500 | | |
| | |
Stock paid for services | |
| 16,688 | | |
| | |
Depreciation & amortization | |
| 32,043 | | |
| 34,121 | |
Deposits | |
| 7,391 | | |
| (2,850 | ) |
Pre-paid taxes | |
| (58,963 | ) | |
| | |
Accounts receivable | |
| (13,755 | ) | |
| 75,322 | |
Accounts payable | |
| 48,625 | | |
| (55,744 | ) |
Deferred revenue | |
| 22,256 | | |
| 249,201 | |
Unearned revenue paid in cash | |
| 120,208 | | |
| | |
Accrued interest | |
| (49,046 | ) | |
| 60,114 | |
Other accrued liabilities | |
| 26,609 | | |
| (39,735 | ) |
| |
| | | |
| | |
Net cash used in operating activities | |
| (749,252 | ) | |
| (1,068,387 | ) |
| |
| | | |
| | |
INVESTING ACTIVITIES | |
| | | |
| | |
Purchase of equipment | |
| (11,787 | ) | |
| (60,735 | ) |
Web development | |
| (37,800 | ) | |
| | |
Proceeds from the sale of investments | |
| 594,244 | | |
| | |
Notes receivable-affiliate | |
| (17,648 | ) | |
| | |
Net cash provided by (used in) investing activities | |
| 527,009 | | |
| (60,735 | ) |
| |
| | | |
| | |
FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds from private placement of common stock | |
| – | | |
| 275,000 | |
Proceeds from short-term debt | |
| 880,000 | | |
| – | |
Payment of principal on short-term debt | |
| (440,000 | ) | |
| – | |
Net cash provided by financing activities | |
| 440,000 | | |
| 275,000 | |
| |
| | | |
| | |
Increase (decrease) in cash and cash equivalents | |
| 217,757 | | |
| (854,122 | ) |
Cash and cash equivalents, beginning of year | |
| 211,442 | | |
| 1,065,564 | |
Cash and cash equivalents, end of year | |
| 429,199 | | |
| 211,442 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information | |
| | | |
| | |
Cash paid for interest | |
| 160,515 | | |
| 120,228 | |
Cash paid for income taxes | |
| – | | |
| – | |
Cash paid for China representative office tax | |
| 39,271 | | |
| 38,652 | |
See accompanying notes are an integral
part of these statements
NOTES TO THE FINANCIAL STATEMENTS
(AUDITED)
Organization and Nature of Operations:
Business Description – Chinseinvestors.com,
Inc. (the “Company”) was incorporated on June 15, 1999 in the State of California. The Company is a provider of Chinese
language web-based real-time financial information. The Company’s operations had been located in California until September
2002 at which time the operations were relocated to Shanghai, in the People’s Republic of China (PRC).
During May, 2000, the Company entered into an agreement with
MAS Financial Corp. (“MASF”) whereby MASF agreed to transfer control of a public shell corporation to the Company and
perform certain consulting services for a fee of $30,000.
During June, 2000, the Company completed reorganization with
MAS Acquisition LII Corp. (“MASA”) with no operations or significant assets. Pursuant to the terms of the agreement,
the Company acquired approximately 96% of the issued and outstanding common shares of MASA in exchange for all of its issued and
outstanding common stock. MASA issued 8,200,000 shares of its restricted common stock for all of the issued and outstanding common
shares of the Company. This reorganization was accounted for as though it were a recapitalization of the Company and sale by the
Company of 319,900 shares of common stock in exchange for the net assets of MASA. In conjunction with the reorganization MASA changed
its name to Chineseinvestors.com, Inc.
The Company is now incorporated as a C corporation in the State
of Indiana as of June 1, 1997.
1. |
Liquidity and Capital Resources: |
Cash Flows – During the year ending May
31, 2014, the Company primarily utilized cash and cash equivalents and proceeds from issuances of its common and preferred stock
to fund its operations. The Company received $0 and $275,000 of proceeds from the sale of common stock during the years ended May
31, 2014 and May 31, 2013, respectively.
Cash flows used in operations for the years ended May 31, 2014
and 2013 were ($749,252) and ($1,068,387), respectively, which was a decrease from prior years. The decrease of cash used in operations
was generated by the net income offset by increased general and administrative costs.
Capital Resources – As of May 31, 2014,
the Company had cash and cash equivalents of $429,199 as compared to cash and cash equivalents of $211,442 as of May 31, 2013.
Since inception in 1997, the Company has primarily relied upon
proceeds from private placements of its equity securities to fund its operations. The Company anticipates continuing to rely on
sales of our securities in order to continue to fund business operations. Issuances of additional shares will result in dilution
to its existing stockholders. There is no assurance that the Company will be able to complete any additional sales of our equity
securities or that it will be able arrange for other financing to fund our planned business activities.
2. |
Critical Accounting Policies and Estimates: |
Basis of Presentation – These accompanying
financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America
(“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for annual financial statements.
Investment in Affiliate –The Company invested
in an affiliate during April 2014, implementing the equity method of accounting. The stock received had a value of zero and the
affiliate generated a loss through May 31, 2014. The Company has no further commitment to fund losses, therefore management has
deemed it proper to discontinue applying the equity method for the investment as defined by Accounting Standards Codification (“ASC”)
323-10-35-20 for the year ended May 31, 2014. If the affiliate subsequently reports net income, the Company will resume application
of the equity method only after its share of unrecognized net income equals the share of net losses not recognized during the period
the equity method was suspended.
Foreign Currency – The Company has
operations in the PRC, however the functional and reporting currency is in US dollars. To come to this conclusion the Company
considered the direction of ASC section 830-10-55.
Selling Price and Market – As a representative
office is located in the PRC, the Company is not allowed to sell directly to PRC based customers. Over 90% of its customers
are in the United States and 100% of all sales are paid in US dollars. This indicates the functional currency is US
dollars.
Financing – The Company’s financing has been
generated exclusively in US dollars from the United States. This indicates the functional currency is US dollars.
Expenses – The majority of expense are paid in
US dollars. The expenses generated in PRC are paid by a monthly or weekly cash transfer from the US when the expenses
are due, resulting in very little foreign currency exposure. This indicates the functional currency is US dollars.
Numerous Intercompany
Transactions – The Company has multiple transactions each month between the US and Chinese representative office.
This indicates the functional currency is US dollars.
Due to the functional and reporting currency
both being in US dollars, ASC 830-10-45-17 states that a currency translation is not necessary.
Revenue recognition
— Revenue was derived from six different sources:
The Company recognizes revenue pursuant to revenue recognition
principles presented in SAB Topic 13. First, persuasive evidence of an arrangement. Second, deliver has occurred or services have
been rendered, thirdly the seller’s price to the buyer is fixed or determinable and lastly collectability is reasonably
assured.
1. Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services,
advertising and promotion fees for customers in the Company’s Chinese Investment Guides, sponsorship fees from investment
seminars, road shows, and forums. The sales prices of these services are fixed and determinable at the time the contracts
are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant
contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured.
2. Fees from
membership subscriptions: these revenues are recognized over the term of the subscription. Subscription terms are generally between
3 and 12 months but can occasionally be as short as 1 month or as long as 24 months. Long term deferred revenues are recognized
from subscriptions over 12 months.
3. Fees related to setting up and providing ongoing administrative and translation support
for currency trading accounts are in association with Forex. These fees are recognized when earned.
4. Fees related to
setting up binary option accounts for Option World, a Chinese based binary option trading platform. As an incentive to encourage
people to set up larger accounts, Option World made gifts of various consumer electronic products, for example, a new $10,000
account receives an Ipad or Iphone and a $20,000 account receives a Macbook Air. Since Chineseinvestors.com, Inc. was responsible
to maintain a customer support relationship with these Option World clients, the Company provided these products to the customers
and then Option World was required to reimburse Chineseinvestors.com for these expenses. During the year ended May 31, 2013, the
cost of these incentives was $156,213, both received and spent. Since these transactions were basically “pass-through transactions,”
these numbers were netted against each other and were not included in revenue or expense. The Company does not expect this type
of transaction to be repeated in future periods as the relationship with Option World was terminated in the fiscal year ended
May 31, 2013.
5. Investor relations income is earned by the Company in return for publicizing other publicly traded companies
in return for shares of the client company’s common stock or warrants. These revenues are prepaid by the client company
and then the revenue is recognized over the term of the agreement.
6. Investor relations income is earned by the Company
in return for delivering current, publicly available information related to our client companies. These revenues are prepaid by
the client company and as such are initially recorded as an asset with an offsetting unearned revenue liability. This revenue
is recognized over the term of the services period while the services are being provided. The value of the revenue earned is recognized
every quarter based upon the client company’s stock closing price multiplied by the numbers of shares earned within that
specific accounting period. By recognizing the revenue incrementally we are following the guidelines of SAB Topic 13, in that
we are only recognizing revenue once the value of the revenue received is fixed and determinable. In addition we are applying
the definition of readily determinable fair value presented at Accounting Standards Codification 820-10-15-5 in assessing the
amount to recognize in each accounting period. The number of shares earned is a function of the time period for which services
are provided over the contract period in relation to the price of the shares at the time of the services being delivered, added
to the value of cash received if any, then recognized as revenue in the period the services were delivered.
Costs of Services Sold – Costs of services
sold are the total direct cost of the Company’s operations in Shanghai.
Website Development Costs – The Company
accounts for its Development Costs in accordance with ASC 350-50, “Accounting for Website Development Costs.” The Company’s
website comprises multiple features and offerings that are currently developed with ongoing refinements. In connection with the
development of its products, the Company has incurred external costs for hardware, software, and consulting services, and internal
costs for payroll and related expenses of its technology employees directly involved in the development. All hardware costs are
capitalized as fixed assets. Purchased software costs are capitalized in accordance with ASC codification 350-50-25 related to
accounting for the costs of computer software developed or obtained for internal use. All other costs are reviewed to determine
whether they should be capitalized or expensed.
Cash and Cash Equivalents – The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. At certain times, cash in bank may exceed the amount covered by FDIC insurance. At May 31, 2014 and 2013 there were deposit balances in a United States bank of $427,190 and $210,000 respectively. In addition, the Company maintains cash balance in The Bank of China, which is a government owned bank. The full balance of the deposits in China is secured by the Chinese government. At May 31, 2014 and 2013 there were deposits of $2,009 and $1,442, respectively, in The Bank of China.
Accounts Receivable and Concentration
of Credit Risk – The Company extends unsecured credit to its customers in the ordinary course of business. Accounts
receivable related to subscription revenue is recorded at the time the credit card transaction is completed, and is completed
when the merchant bank deposits the cash to the Company bank account. Revenues related to advertising and Forex are regularly
collected within 30 days of the time of services being rendered. However, since these are ongoing contracts, there has been no
instance of failure to pay. As of May 31, 2014 and May 31, 2013, the Company had accounts receivable of $17,442 and $3,667, respectively.
The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of May 31, 2014 and 2013, the Company determined that an allowance was not needed.
The operations of the Company are located in the People’s Republic of China (“PRC”). Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy.
Note receivable – affiliate
– The note receivable – affiliate is related to expenses covered on Medicine Man Technologies behalf as the company
was being established. At May 31, 2014 the total outstanding was $17,648. The entire balance was repaid prior to the
issuance of this report.
Prepaid taxes –A percentage
of the Company’s aggregate gross amount of reportable payment transactions settled through one of the Company’s merchant
banks were withheld and remitted to the Internal Revenue Service (IRS) under IRS regulation Section 6050W. The Company is
filing the tax return to refund the withholdings as management does not believe the Company’s revenue transactions fall
within the rules of Section 605W. Management expects to receive a full refund of the entire $58,963 withheld.
Investments available for sale
– Investments available for sale is comprised of publicly traded stock received in return for providing investor relations
services to client companies. The investor relations services range from one month to a year, from the inception of the
contract. The Company considers the securities to be liquid and convertible to cash in under a year.
The Company has the ability and intent to liquidate any security that the Company holds to fund operations over the next twelve months, if necessary, and as such has classified all of its marketable securities as short-term.
The Company followed the guidance of ASC 320-10-30 to determine the initial measure of value based on the quoted price of an otherwise identical unrestricted security of the same issuer, adjusted for the effect of the restriction, in accordance with the provisions of topic 820-10-15-5, which states that an equity security has a readily determinable fair value if it meets the condition of having a “sales prices or bid-and-asked quotations which are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotation systems or by the OTC Markets Group Ins. Restricted stock meets that definition if the restriction terminates within one year.” These shares were classified as available for sale securities in accordance with ASC 948-310-40-1 as the Companies intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, equity securities that have readily determinable fair values that are classified as available-for-sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for Available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized."
As these shares will be earned over the term of the contracts,
the Company will defer the recognition of the earnings of the revenue over the period the services are performed. The value recorded
will be determined by multiplying the average of the closing price on the last day of the month for the period being reported based
on closing market price per share.
Upon receipt, these shares were recorded as an asset on the
Companies financials as "Investments, available for sale". The Company will also record a corresponding contra-asset
account titled "Unearned Revenue paid in stock".
Other Current Assets – Other current assets
is comprised of deposits in Chinese Renminbi on building space under an operating lease and are stated at the current exchange
rate at year end.
Other current assets were $26,404 and $33,795 for the years
ended May 31, 2014 and May 31, 2013, respectively.
Property and Equipment – Property and equipment
are stated at cost. Depreciation and amortization of property and equipment is provided using the straight-line method over estimated
useful lives ranging from three to five years. Leasehold improvements are amortized over the life of the lease. Depreciation and
amortization expense was $32,043 and $34,121 for the years ended May 31, 2014 and 2013, respectively.
Expenditures for major renewals and betterments that extend
the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as
incurred. Gains and losses from retirement or replacement are included in operations.
Impairment of Long-life Assets – In accordance
with ASC Topic 360, the Company reviews its long-lived assets, including property and equipment, for impairment whenever events
or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the
expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying amount of the asset. There was no impairment as of May 31, 2014 and May 31, 2013.
Accounts payable – due in stock – In the current year the Company agreed to pay one of its sales consultants a percentage of the total value received as compensation for IR work, including the value of stock. The balance May 31, 2014 of $99,702 is the total due which will be payable upon the stock being sold.
Accrued Liabilities – Accrued liabilities
are comprised of the following:
| |
May 31, | | |
May 31, | |
| |
2014 | | |
2013 | |
China Employees Salaries and Commissions Accrual | |
$ | 60,908 | | |
$ | 36,956 | |
Representative Office Tax Accrual | |
| 10,524 | | |
| 9,198 | |
Other Accruals | |
| 7,113 | | |
| 5,782 | |
| |
$ | 78,545 | | |
$ | 51,936 | |
Unearned revenue, revenue paid in stock –
During fiscal year 2014, the Company received 16,043,070, shares of stock and warrants as payment for investor relations work that
the Company will be providing through March 2015. The stock that had not been earned was valued at $545,491 at May 31, 2014. As
the Company earns the fee for this work, this balance will be reduced to reflect the portion still to be earned.
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 disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
The financial statements include some amounts that are based
on management's best estimates and judgments. The most significant estimates relate to depreciation and useful lives, and contingencies.
These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.
Fair Value of Financial Instruments – The
Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework
for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair
value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the
source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs)
and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
|
• |
Level one – Quoted market prices in active markets for identical assets or liabilities; |
|
• |
Level two – Inputs other than level one inputs that are either directly or indirectly observable; and |
|
• |
Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
The majority of the Company’s financial instruments are
level one and are carried at market value, requiring no adjustment to book value. The financial instruments classified as level
one were deemed to qualify as that classification because their value was determined by the price of identical instruments traded
on an active exchange. It should be noted that 60,000 shares of the stock earned for consulting work, currently being held qualifies
as a Level two instrument and has a book value of $67,500. The Company determined that the instrument was Level two because the
market for this instrument was less active, as it was currently being distributed through a private placement memorandum, and was
not a freely trading public stock. The value of the stock has been verified to be consistent with the carrying value and, therefore,
not requiring an adjustment.
The following table summarizes the assets we are carrying and
the fair value category in which they are currently classified:
| |
May 31, 2014 | | |
May 31, 2013 | |
| |
Level 1 | | |
Level 2 | | |
Level 1 | | |
Level 2 | |
Cash | |
| 429,199 | | |
| – | | |
| 211,442 | | |
| – | |
Investments | |
| 2,263,639 | | |
| 67,500 | | |
| 592,021 | | |
| 60,000 | |
Total Financial Instruments | |
| 2,692,838 | | |
| 67,500 | | |
| 803,463 | | |
| 60,000 | |
Income Taxes – Income taxes are accounted
for under the asset and liability method of ASC 740. Deferred tax assets and liabilities are recognized for net operating loss
and other credit carry forwards and the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which the tax effect of transactions are expected to be realized.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the
year that includes the enactment date.
Deferred tax assets are reduced by a full valuation allowance
since it is more likely than not that the amount will not be realized. Deferred tax assets and liabilities are classified as current
or noncurrent based on the classification of the underlying asset or liability giving rise to the temporary difference or the expected
date of utilization of the carry forwards.
Advertising Costs – Advertising costs are
expensed when incurred. Advertising costs totaled $195,131 and $227,441 in the years ended May 31, 2014 and 2013, respectively.
Earnings (Loss) Per Share – Earnings (loss)
per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted
ASC 260 (formerly SFAS128), “Earnings Per Share”.
Stock Based Compensation – The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.
Stock compensation expense for stock options is recognized over
the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous
or current service without further recourse. The Company issued stock options to contractors and external companies that had been
providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized
as expense in the period issued because they were given as a form of payment for services already rendered with no recourse.
Share based expense paid to through direct stock grants is expensed
as occurred. Since the Company’s stock is publicly traded, the value is determined based on the number of shares issued and
the trading value of the stock on the date of the transaction. The company recognized $250,500 in expenses for stock based compensation
to employees through direct stock grants of 300,000 shares and $16,688 in expenses to nonemployee consultants through stock grants
of 18,750 shares.
Stock option activity was as follows (converted post reverse
split):
| |
Number of Shares | | |
Weighted Average Exercise Price ($) | |
Balance at May 31, 2012 | |
| 389,039 | | |
| 0.48 | |
Granted | |
| – | | |
| | |
Exercised | |
| | | |
| | |
Forfeited or expired | |
| – | | |
| – | |
Balance at May 31, 2013 | |
| 389,035 | | |
$ | 0.48 | |
Granted | |
| | | |
| | |
Exercised | |
| – | | |
| – | |
Forfeited or expired | |
| – | | |
| – | |
Balance at May 31, 2014 | |
| 389,035 | | |
$ | 0.48 | |
The following table presents information regarding options outstanding
and exercisable as of May 31, 2014:
Weighted average contractual remaining term – options outstanding |
|
|
0 years |
|
Aggregate intrinsic value – options outstanding |
|
$ |
155,614 |
|
Options exercisable |
|
|
389,035 |
|
Weighted average exercise price – options exercisable |
|
$ |
.48 |
|
Aggregate intrinsic value – options exercisable |
|
$ |
66,136 |
|
Weighted average contractual remaining term – options exercisable |
|
|
.59 years |
|
As of May 31, 2014, future compensation costs related to options
issued was $0.
The fair value of each option granted is estimated on the date
of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:
Risk-free interest rate |
1.44% |
|
Expected life of options |
4-5 years |
|
Annualized volatility |
90.6% |
|
Dividend rate |
0% |
|
As of May 31, 2014 and 2013, the Company was authorized to issue
80,000,000 shares of common stock, $0.001 par value per share. In addition, 20,000,000 shares of $.001 par value preferred stock
were authorized. All common stock shares have full dividend rights. However, it is not anticipated that the Company will be declaring
distributions in the foreseeable future.
During the year ended May 31, 2014, the Company converted 728,776
shares of preferred stock for 910,970 shares at a conversion rate of $1.25 per share of preferred stock.
During March 2014, the Company granted 300,000 shares of common
stock for compensation. Half the shares were valued at $0.90 per share and the remaining 150,000 shares were valued at $0.77 per
share. The Company also issued 18,750 shares for services valued at $0.89 per share. The compensation and consulting expense was
recorded as general and administrative expenses for the year ended May 31, 2014.
In October 2011, the Company executed the final documents with
a private capital source, describing the provision of a financing facility to the Company, having a face value of $1.5 million;
to be made available in $500,000 tranches, in exchange for purchasing the Company's stock under a proposed S1 registration statement
at 85% of the lowest daily volume average share price over a five (5) trading day period once the Company calls for the funding.
The agreement would remain in force for 24 months from the date of contemplated execution. This registration statement was cleared
by the SEC in June of 2012.
When the final facility was approved and executed, the Company
paid a document preparation fee to the funding source of $10,000 and paid them 50,000 restricted shares of the Company's stock,
in consideration of the Facility's creation and funds availability. On November 4, 2011, when the shares were issued, the most
recent shares sold at the market rate of $0.96, resulting in a non-cash expense of $48,000 being recognized in the current quarter.
These shares are restricted, in that they cannot be sold for nine months. In addition, if the Company does not use the capital
raise or the funding source is unable to generate the agreed upon capital, the shares are to be returned to the Company. However,
in consideration of the accounting principal of “more likely than not,” as explained in accounting standards codification
350-25-35-30 and 740-10-25-6, the Company recognized the expenses in the second quarter in general and administrative expense.
On September 8, 2010, in the third quarter of fiscal year 2011,
the Company reverse split its shares at a rate of 8 to 1, resulting in total shares outstanding changing from 38,579,925 to 4,822,491.
All Company financial statements are retroactively adjusted at this ratio.
Series A Convertible Preferred Stock:
During the third quarter, effective February 29, 2012, the Company issued 2,003,776 shares of preferred stock as Series A convertible preferred stock for total proceeds of $2,003,776. The terms of the preferred stock allow the holder to convert each share of preferred stock into 1.25 shares of common stock at any time after nine months from the date of issuance. The holders of shares of preferred stock are also entitled to receive cumulative dividends in preference to any declaration or payment of any dividend at the rate of $0.06 per share per annum, when and if declared by the Board of Directors.
Upon issuance of preferred stock convertible in shares of common
stock at a price lower than the fair market value of common stock on the date of issuance, in accordance with the guidance provided
in ASC 505-10-50 and Emerging Issues Task Force (“EITF”) No. 00-27, we will record the intrinsic value of this beneficial
conversion feature which we calculated to be $520,982 ($1.06 common stock price February 29th, 2012 compared to $0.80 effective
conversion rate of $0.26 per share. $0.26 times 2,003,776 = $520,982), as a deemed dividend recognizable in the current year. This
deemed dividend was calculated based upon a closing price on February 29, 2012 (the date the shares were formally accepted by the
Company) of $1.06 per share and an effective sale price (with conversion) per the preferred share agreement of $0.80 per share
of common stock.
4. |
Property and Equipment: |
Property and equipment are recorded at cost, net of accumulated
depreciation and are comprised of the following:
| |
May 31, | | |
May 31, | |
| |
2014 | | |
2013 | |
Furniture & fixtures | |
$ | 72,530 | | |
$ | 70,711 | |
Leasehold improvements | |
| 23,417 | | |
| 13,405 | |
| |
| 95,947 | | |
| 84,116 | |
Less accumulated depreciation | |
| (72,987 | ) | |
| (51,411 | ) |
| |
$ | 22,960 | | |
$ | 32,705 | |
Depreciation on equipment is provided on a straight line basis
over its expected useful lives at the following annual rates
Computer equipment |
3 years |
Furniture & fixtures |
3 years |
Leasehold improvements |
Term of the lease |
Depreciation expense for the years ended May 31, 2014 and 2013
was $21,576 and $25,489, respectively.
Intangible assets are comprised of the following:
| |
May 31, | | |
May 31, | |
| |
2013 | | |
2012 | |
Website development costs | |
$ | 171,918 | | |
$ | 134,118 | |
Less: accumulated amortization | |
| (77,640 | ) | |
| (67,173 | ) |
| |
$ | 94,278 | | |
$ | 66,945 | |
Amortization is calculated over a straight-line basis using
the economic life of the asset. Amortization expense for the twelve months ended May 31, 2014 and 2013 was $10,467 and $8,632 respectively.
6. |
Commitments and Concentrations: |
The Company reimburses its Chief Executive Officer (CEO) for
an apartment pursuant to a month-to-month lease for the use of the CEO and his family in PRC for a monthly expense of approximately
$900. This lease could be terminated at any time with no additional payments required.
Office Lease – Shanghai – The Company
entered into a lease for new office space in Shanghai, China. The lease period started October 1, 2013 and will terminate September
31, 2016, resulting in the following future commitments, based on the exchange rate at May 31, 2014 of the following:
2015 fiscal year |
|
$ |
62,940 |
|
2016 fiscal year |
|
|
62,940 |
|
2017 fiscal year |
|
|
20,980 |
|
Concentrations – During the periods ending
May 31, 2014 and 2013, the majority of the Company’s revenue was derived from its operations in PRC from individuals, primarily
in the United States and Canada.
Litigation – The Company is involved in
legal proceedings from time to time in the ordinary course of its business. As of the date of this filing, the Company is a party
to three lawsuits which, in the opinion of management, upon consideration of corporate council advice, it believes it is reasonably
likely to not have a adverse effect on the financial condition, results of operation or cash flow of the Company in the future.
The Company recorded no income tax provision or benefit for
the years ended May 31, 2014 and 2013, because the Company believes it is more likely than not that these will not be utilized
in the near future due to net losses. The Company generated no taxable income. The income tax provision (benefit) differs from
the amount computed by applying the U.S. Federal income tax rate of 34% plus applicable state rates to the loss before income taxes
due to the unrecognized benefit resulting from the Company’s valuation allowance, as well as due to nondeductible expenses.
For income tax reporting purposes, the Company has approximately
$2.7 million of net operating loss carry forwards that expire at various dates through
2034. The Tax Reform Act of 1986 contains provisions that may limit the net operating loss carry forwards and tax credits available
to be used in any given year if certain events occur, including significant changes in ownership interests. Realization of net
operating loss and tax credit carry forwards is dependent on generating sufficient taxable income prior to their expiration dates.
As of May 31, 2014 and 2013, the Company had approximately $704,000
and $2,132,000, respectively, of net deferred tax assets, comprised primarily of the potential future tax benefits from net operating
loss carry forwards. Based upon the level of historical taxable income and projections for future taxable income over the period
in which the deferred tax assets are deductible, management could not conclude that realization of the deferred tax assets as of
May 31, 2014 and 2013, was more likely than not, and therefore, the Company has recorded a valuation allowance to reduce the net
deferred tax assets to zero. The valuation allowance increased approximately $265,000 during the year ended May 31, 2014 and decreased
approximately $753,000 during the year ended May 31, 2013, respectively. The amount of deferred tax assets considered realizable
could be adjusted in the near term if future taxable income is generated.
The Company’s effective tax rate differs from the statutory
rate due to the following (expressed as a percentage of pre-tax income):
Description | |
2014 | | |
2013 | |
Federal Statutory Rate | |
| 35 | % | |
| 35 | % |
State Statutory Rate | |
| 9 | % | |
| 6 | % |
Change in Rate / Other | |
| 8 | % | |
| (2 | %) |
Permanent Tax Differences | |
| (1 | %) | |
| (12 | %) |
Calculated Rate | |
| 51 | % | |
| 27 | % |
Actual Calculated Rate | |
| (51 | %) | |
| (27 | %) |
Difference | |
| 0 | % | |
| 0 | % |
The Company obtained $440,000 in short
term debt from various individuals, secured by 50,000 shares of common stock of NVFY and 40,000 shares of DHRM. The lender will
receive an incentive of 25% appreciation of the stock value for NVFY and DHRM at the maturity of the short-term notes, 15 months
after inception. The short-term notes were issued on January 15, 2014 and February 25, 2014. The 25% appreciation is based on
stock prices of $6.81 and $9.92 for NVFY and DHRM, respectively. The calculation of the embedded derivative is as follows: (i)
the lender will receive 25% of the appreciation of the stock value of NVFY and DHRM from the date of inception for the short-term
notes, January 15, 2014 and February 25, 2014, respectively. The closing stock price at the termination of the short-term debt,
15 months after inception, must be 25% greater than $6.81 and $9.92 for NVFY and DHRM, respectively. To calculate this the Company
took (ii) projected future stock prices based on trend analysis of the average stock price of NVFY and DHRM since inception or
over four years, respectively; and (iii) discount rate determined based on the observed weighted average cost capital of a group
of publicly traded comparable companies using a discounted cash flow model. The model is most sensitive to the future price of
the stock and repayment date of the short-term debt.
There were no changes to the valuation
techniques for the year ended May 31, 2014.
The following table presents information
about significant unobservable inputs to the Company’s Level 3 financial assets and liabilities measured at fair value on
a recurring basis as of May 31, 2014:
Description | |
Fair Value | | |
Valuation Technique | |
Significant Unobservable Inputs | |
Range of Inputs Range |
Embedded derivative | |
$ | 0 | | |
Discounted cash flow model | |
Repayment Discount rate | |
Stock closing price at January 1, 2014 and February 25, 2014, respectively through maturity 25% |
Future decreases in the credit adjusted discount rate will result
in an increase in the fair value of the embedded derivative.
Changes to the estimates of timing of repayment of the short-term
debt further out into future periods would cause a decrease in the value of the embedded derivative.
Management has determined through the trend analysis that the
embedded derivative liability related to NVFY is zero. In order for the lenders to receive the incentive on the NVFY stock, the
price at the short-term note maturity needs to be $8.51. Since the inception of the short-term notes the average stock price is
approximately $5.34. The change in fair value of the embedded derivative from the date of closing to May 31, 2014 resulted in a
cumulative change in fair value of approximately ($1,500). The fair value of the embedded derivative as of May 31, 2014 was approximately
($4,500). The price per share of NOVA as of May 31, 2014 was $4.01.
Management has determined through the trend analysis that the
embedded derivative liability related to DHRM is zero. In order for the lenders to receive the incentive on the DHRM stock, price
at the short-term note maturity needs to be $12.03. Since the inception of the short-term notes the average stock price is approximately
$6.31. The change in fair value of the embedded derivative from the date of closing to May 31, 2014 resulted in a cumulative change
in fair value of approximately ($6,000). The fair value of the embedded derivative as of May 31, 2014 was approximately ($13,000).
The price per share of DHRM as of May 31, 2014 was $5.80.
Consequently, as a result of the trend analysis the Company
has booked no additional liabilities related to this derivative as at this time it is believed that no additional liability over
the stated loan amount exists.
There was no change to the valuation techniques
of the embedded derivative for the year ended May 31, 2014.
Subsequent to year end, Medicine Man Technologies, a company that Chineseinvestor.com., Inc. has a 29% ownership interest in developed from being pre-revenue to generating revenue of approximately $250,000 in the period from June 1, 2014 to August 31, 2014.
Signatures
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
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ChineseInvestors.com, Inc. |
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(Registrant) |
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Date: September 15, 2014 |
By: |
/s/ Paul Dickman |
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Paul Dickman |
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Chief Financial Officer |
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Date: September 15, 2014 |
By: |
/s/ Wei Wang |
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Wei Wang |
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Chief Executive Officer |
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Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14 OF
THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Wei Wang, Chief Executive Officer of
the registrant, certify that:
1. I have
reviewed this Annual Report on Form 10-K for the fiscal year ended May 31, 2014 of ChineseInvestors.com, Inc. (the
“Registrant”);
2. Based on my
knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my
knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. I am responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have:
a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated
the effectiveness of the Registrant's disclosure controls and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed
in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most
recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. I have disclosed,
based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee
of the Registrant's board of directors (or persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal
control over financial reporting.
Date: September 15, 2014
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/s/ Wei Wang |
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Wei Wang
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Paul Dickman, Chief Financial Officer
of the registrant, certify that:
1. I have reviewed
this Annual Report on Form 10-K for the fiscal year ended May 31, 2014 of ChineseInvestors.com, Inc. (the “Registrant”);
2. Based on my
knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my
knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. I am responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have:
a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated
the effectiveness of the Registrant's disclosure controls and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) Disclosed
in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most
recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. I have disclosed,
based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee
of the Registrant's board of directors (or persons performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information;
and
b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal
control over financial reporting.
Date: September 15, 2014
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/s/ Paul Dickman |
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Paul Dickman
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on
Form 10-K of ChineseInvestors.com, Inc. (the “Company”) for the fiscal year ended May 31, 2014, as filed with the Securities
and Exchange Commission on August 29, 2013 (the “Report”), the undersigned officer of the Company does hereby certify,
pursuant to Title 18 of the United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that to his knowledge:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.
Date: September 15, 2014
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/s/ Warren Wang |
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Warran Wang |
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Chief Executive Officer |
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/s/ Paul Dickman |
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Paul Dickman
Chief Financial Officer |