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, Inc.
Chineseinvestors.com 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, the 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 its common stock, or approximately 96% of the total outstanding common shares. After giving
effect to the acquisition, Chineseinvestors.com, Inc. became a wholly owned subsidiary and its name was changed 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 that provides information about US Equity and Financial
Markets, as well as other financial markets. Over the years, various informational components have been added to the Company’s
web portal and the general content has been improved as the Company continues to derive a material portion of its income from various
subscription services it offers to its customers. The Company’s subscription services provide education about investing,
news, and analysis on the US Equity Markets as well as news about particular stocks that the Company follows. Nevertheless, the
Company does not provide its subscribers with individualized investment advice and it never has investment discretion over any
subscribers’ or site visitors’ funds.
In addition, the Company provides investor
relations services for other companies, especially those requiring Mandarin language support, which now accounts for one of the
Company’s most significant revenue sources. In that regard, the Company translates client releases into English from Mandarin
or vice versa , features client advertisements on the www.chinesefn.com website, and otherwise assists clients in achieving their
particular goals, which may include, increasing the client’s stock price, increasing general awareness about the client
and their stock, and/or moving from pink sheets to an established public securities market. All of those goals are not shared
by every client. However, promotions geared to the Chinese American market are the underlying common thread, generally in the
form of advertisements on the chinesefn.com website.
In exchange for the services it provides, the Company
generally receives a fee consisting of cash, client securities or a mix of cash and equity. Equity compensation provides success
incentives, aligning the interests of the Company and its clients.
Chineseinvestors.com, Inc. has been in
continuous operation since July 1999 using the web domains (uniform resource locators) of www.chineseinvestors.com and www.chinesefn.com.
The
Company established representative offices in leased office space in Shanghai, China in late 2000, where it fulfills most of its
support services. In addition, the Company maintains offices in San Gabriel, California, New York City, New York and Flushing,
New York and Richmond, British Columbia.
In 2010, the Company filed a Form 10 registration
statement to become a public reporting company under the Exchange Act of 1934 in order to facilitate the Company’s ability
to raise capital on the public market and retained B F Borgers CPA PC to act as its independent auditor.
Glendale Securities, with offices in Sherman
Oaks, California, was selected as the Company’s market maker for its common stock, the price of which is quoted on the OTC:QB
marketplace. The symbol for the Company’s common stock is CIIX.
As of May 31, 2019, the Company employed
twenty-two (22) full-time employees in its Shanghai Office in a variety of administrative and operational capacities. The Company
also employs approximately thirty-one (31) full-time employees and approximately eight (8) independent contractors in the U.S.
XiBiDi Biotechnology Co., Ltd./CBD
Biotechnology Co. Ltd.
In March 2017,
the Company established and registered XiBiDi Biotechnology Co. Ltd./CBD Biotechnology Co. Ltd. (“CBD Biotech”) in
Pudong Free-Trade Area in Shanghai, Peoples Republic of China, founded as a wholly owned foreign enterprise (“WOFE”)
of ChineseInvestors.com Inc. CBD Biotech’s primary focus is online and retail sales of industrial hemp-infused skincare products
and liquor in the PRC. CBD Biotech’s first product launch was CBD Magic Hemp Series, an industrial hemp-infused skincare
line.
Thereafter in
November 2017, CBD Biotech obtained Wholesale Alcohol License from the Shanghai Wine Monopoly Bureau, effective October 24, 2017
for a three-year term, which allows CBD Biotech to act as a liquor distributor. CBD Biotech entered into a wholesale agreement
with China GuiZhou HanTai Wine, Inc. to distribute its liquor product - Yantai 1985. The Company announced plans to
spin off CBD Biotech in February 2018, which was later postponed. Thereafter, in December 2018, the Company announced that it had
retained an underwriter for the planned Initial Public Offering (“IPO”) of CBD Biotech concurrently with a listing
on a national securities exchange.
On or about February
27, 2019, CBD Biotech, Inc., an exempted company with limited liability incorporated in the Cayman Islands, was formed (“CBD
Biotech Cayman”). CBD Biotech Cayman is solely owned by Wei Wang, ChineseInvestors.com, Inc.’s Chief Executive Officer,
and Alex Hamilton, Chairman and Chief Financial Officer of CBD Biotech. Currently, ChineseInvestors.com, Inc. is in the process
of entering into a Share Exchange Agreement with CBD Biotech and the shareholders of CBD Biotech Cayman (the “Share Exchange
Agreement”). Under the terms of the proposed Share Exchange Agreement, the Company will transfer all of its shares of CBD
Biotech, which represents 100% of CBD Biotech’s outstanding shares to CBD Biotech Cayman (the “Share Exchange”).
In exchange for the transfer of the CBD Biotech shares, CBD Biotech Cayman will issue 2,521,739 shares of its Class A Ordinary
Shares and 2,320,000 of its Class B Ordinary Shares to the Company. Following the Share Exchange, CBD Biotech will become a wholly
owned subsidiary of CBD Biotech Cayman. Following the Share Exchange, pre-initial public offering (“IPO”) Company
will own approximately 71.6% of CBD Biotech Cayman’s Class A shares and 86.3% of the class B shares. Post-IPO, the Company
will own 65.4% of CBD Biotech Cayman’s Class A shares and 48.6% of the Class B shares. All operations will be conducted
through CBD Biotech and CBD Biotech will continue to operate two business lines, cosmetics and liquor.
As of May 31,
2019, CBD Biotech employed sixteen (16) full-time employees in its Shanghai Office in a variety of administrative and operational
capacities. Its CFO, Alex Hamilton, is based in the Company’s New York office.
ChineseHempOil.com, Inc.
In April 2017,
the Company established ChineseHempOil.com, Inc. dba “Chinese Wellness Center,” a Delaware corporation (“CHO”),
as a wholly owned subsidiary of the Company. CHO is responsible for online and retail sales of industrial hemp products in the
United States. Chinese Wellness Center is the Company’s retail store located in the predominantly Chinese community of San
Gabriel, California, next to the Company’s headquarters. In or about February 2018, the Company announced its plans to spin
off CHO, which was later postponed. In December 2018, the Company announced that it had retained an underwriter for the planned
Initial Public Offering (“IPO”) of CBD Biotech, concurrently with a listing on a national securities exchange. CHO
will no longer be part of this planned spin-off.
As of May 31, 2019, ChineseHempOil.com, Inc. employed six (6) full-time employees in the
United States.
CBD Biotechnology Co. Ltd.
In June 2017, the Company formed CBD Biotechnology
Ltd. (“CBD Canada”), a corporation incorporated in the Province of British Columbia, which is anticipated to focus
on the sales of industrial hemp- products, via online and other distribution channels. CBD Canada has not generated any income
as of May 31, 2019.
Newcoins168.com LTD
On or about January 25, 2018, a certificate
of incorporation was filed with the Registrar in St. Vincent and the Grenadines establishing Newcoins168.com, LTD (“Newcoins
Grenadine”). Pursuant to the Certificate of Incumbency, issued on May 28, 2018, the Registered Office for Newcoins Grenadine
is Suite 305, Griffith Corporate Centre, Beachmont, P.O. Box 15 l O. Kingstown. Saint Vincent and the Grenadines. All of Newcoins
Grenadine’s registered shares, 1000 shares, were issued to ChineseInvestors.com, Inc.’s CEO, Wei Wang. Wei Wang holds
these shares as agent for ChneseInvestors.com, Inc. Newcoins Grenadine’s total authorized capital is $1,000,000.
Newcoins Grenadine was established to develop
a full-service retail Forex and CFD platform that connects with one of the market’s leading trading platforms to provide
customers with Forex/CFD market trading service, as well as offering education, market information, and insights for customers
related to the Forex/CFD market. The platform has 992 subscribers in the Philippines, Malaysia, Indonesia, Russia, Hong Kong, Brunei
and India It does not have registered users in the US. As of August 19, 2019, none of these registered users have deposited funds
in their accounts.
In that regard on or about February 27,
2019 Newcoins Grenadine entered into a Technology Solution Agreement with Match-Trade Technologies (“MTT”), pursuant
to which MTT agreed to provide Newcoins Grenadine with a trading infrastructure (integrated electronic systems and software) designed
to offer a platform to Newcoins Grenadine’s clients for the trading of financial products, i.e., Forex and/or CFDs and/or
other financial instruments offered to Newcoins Grenadine’s clients. In or about March 2019, Newcoins Grenadine entered
into an agreement with Forexstreet S.L. (“FS”) pursuant to which FS agreed to provide daily news feeds and updates.
Newcoins Grenadine platform has not generated any revenues to date. Given the platform’s target audience is outside of the
US and China, it has been challenging to convert leads generated as a result of advertising and marketing efforts into account
deposits that will lead to trading due to the significant language barrier. The Company has determined that the expense that would
be required to hire and trains native speakers to assist the platform’s potential account holders/traders would outweigh
the potential gain and has decided to focus its efforts on the Company’s core, traditional business lines. In an effort
to reduce fixed costs associated with the platform, the Company is in the process of cancelling these service agreements and is
considering discontinuing the platform.
Newcoins168.com Digital Media Technology
Ltd.
In April 2018, the Company established
a wholly owned foreign enterprise, NewCoins168.com Digital Media Technology Ltd (Shanghai), registered in China Free Trade Zone
with registered capital of 10 million RMB. As of May 31, 2019, NewCoins168 employed two (2)
full-time employees in its Shanghai Office in a variety of administrative and operational capacities.
Bitcoin Trading Academy, LLC
In or about March 2018, the Company established
Bitcoin Trading Academy, LLC, a California limited liability company, formerly known as Stock Surge Momentum. LLC, a California
limited liability company (“BTA LLC”), with Warren (Wei) Wang, the Company’s CEO, as its sole managing member.
Mr. Wang has transferred all of his interest in BTA LLC to the Company for $1 consideration. BTA LLC began offering in person
and on-line courses on cryptocurrency investment and trading in July 2018. BTA LLC has since ceased to offer its cryptocurrency
news and courses due to decreased consumer demand, presumably related to the 2018 Cryptocurrency Crash. Although the cryptocurrency
market is slowly rebounding, currently, the Company does not have short-term plans to resume these programs.
CIIX Online LTD
In August 2018,
the Company formed CIIX Online Ltd. (“CIIX Online”), a corporation incorporated in the Province of British Columbia,
which is anticipated to focus on the sales of the Company’s subscription service to consumers.
As of May
31, 2019, CIIX Online employed two (2) full-time employees in its Canada Office in a variety of administrative and operational
capacities.
Blue Ocean
Capital Holding LLC
On November 11,
2018, the Company established Blue Ocean Capital Holding LLC (“BO”), a Delaware limited liability company. On January
23, 2019, BO entered into an Equity Transfer Agreement (“ETA”) with The Connell Company (“CC”) whereby
CC will sell its 100% ownership stake in Connell Securities LLC (“CS”) to BO. CS is a registered broker-dealer and
member of FINRA. BO is a Delaware limited liability company with two members — Wei Wang, the Company’s chief executive
officer, who owns 10% of the issued and outstanding member units and CIIX, which owns 90% of the issued and outstanding member
units. Pursuant to the ETA, the purchase price of CS is $75,000 and is subject to review and approval of FINRA before the sale
can be consummated. In accordance with the ETA, BO’s $75,000 purchase price is held in escrow and will be disbursed to CC
upon closing or returned to BO if no closing occurs. Prior to the ETA in or about August 2017 the Company explored purchasing
a broker-dealer, Global Emerging Capital Group, LLC fka Radnor Research & Trading (“GEC”). Claudette Burgess-Gay
was the CEO, CCO, CFO, FINOP for GEC. With regard to this transaction, GEC was represented by William Uchimoto, Esq. The Company
declined to proceed with the acquisition of GEC. Thereafter, on or about October 1, 2018, the Company entered into a compensation
agreement with Ms. Burgess-Gay, pursuant to which Ms. Burgess-Gay was to receive compensation in the amount of $5,000.00/month
in exchange for her efforts to locate a full-service broker-dealer being offered for sale, to assist in negotiating the terms
with the seller for acquisition of 100% of the broker-dealer and to ensure full compliance with all broker-dealer requisites.
Mr. Uchimoto represents the Company’s subsidiary, BO, with regard to its efforts to purchase CS. Following closing of the
purchase of CS, Ms. Burgess-Gay is to be the President, Chief Compliance Officer, Chief Anti-Money Laundering Officer and Financial
and Operations Principal of the broker-dealer that will be renamed AMC International Securities LLC.
Donald Capital, LLC
Donald Capital, LLC, is a Delaware limited
liability company established on May 7, 2018. In exchange for capital contributions totaling $160,000 from ChineseInvestors.com,
Inc., the Company received a 24.9% interest in Donald Capital LLC. The remaining 75.1% is held equally by Hamilton Strategy Group,
Inc. and McDonald Global Enterprises LLC. Alex Hamilton is the CFO of CBD Biotech Cayman and is the President of Donald Capital
LLC. Mr. Hamilton is also the owner of Hamilton Strategy Group. Donald Capital LLC is a registered broker dealer approved by FINRA
effective May 14, 2019. Donald Capital LLC will serve clients around the globe in the private, micro, small and middle capitalization
arenas through pre-capital raise and strategic advisory, capital raise and other services that will be offered through network
partners.
1.b.) Shareholder, Company, and Material
Events Recap
During the third quarter of fiscal year
2013, effective February 29, 2012, the Company issued 2,003,776 shares of preferred stock as Series 2012 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
were entitled to receive a dividend of $0.06 per share per annum for the first two years from the issuance of the instruments.
The Company maintained the right to suspend the dividend at its discretion if it is deemed necessary. During the year ended May
31, 2019, no shares of Series 2012 Convertible Preferred Stock were converted into common stock and 445,000 shares remain unconverted
as of May 31, 2019.
In the years ended May 31, 2016 and 2015,
respectively, the Company issued 720,000 and 1,885,000 shares of preferred stock as Series A-2014 Convertible Preferred Stock for
total proceeds of $2,605,000. The terms of the preferred stock allow the holder to convert each share of preferred stock into 2.5
shares of common. The holders of shares of preferred stock shall have the right to one vote for each share of common stock into
which such preferred stock could convert. The holders of shares of preferred stock are entitled to receive a dividend of $0.06
per share per annum for the first two (2) years from the issuance of the instruments. The Company maintained the right to suspend
the dividend at its discretion if it is deemed necessary. During the year ended May 31, 2019, 250,000 shares of Series A-2014 Convertible
Preferred Stock were converted into common stocks and 356,000 shares remain unconverted as of May 31, 2019.
In December 2016, the Company issued 5,000,043
shares of its Series C-2016 Preferred Stock at a price of $1.00 per share for total proceeds of $5,000,043. The terms of the preferred
stock allow the holder to convert each share of preferred stock into 3 shares of common stock. The holders of shares of preferred
stock are entitled to receive a dividend of $0.06 per share per annum for the first year from the issuance of the instruments,
which has been recorded as an accrued dividend on the liabilities section of the balance sheet. The Company maintained the right
to suspend the dividend at its discretion if it is deemed necessary. During the year ended May 31, 2019, 429,958 shares of Series
C-2016 Convertible Preferred Stock were converted into common stocks and 193,000 shares remain unconverted as of May 31, 2019.
In the year ended May 31, 2018, the Company
issued 6,793,050 shares of its Series D-2017 Preferred stock at a price of $1.00 per share for total proceeds of $6,793,050. The
terms of the preferred stock allow the holder to convert each share of preferred stock into 2 shares of common stock. The holders
of shares of preferred stock are entitled to receive a dividend of $0.06 per share per annum for the first two years from the
issuance of the instruments, which has been recorded as an accrued dividend on the liabilities section of the balance sheet. The
Company maintained the right to suspend the dividend at its discretion if it is deemed necessary. During the year ended May 31,
2019, the Company issued 3.578,000 shares of its Series D-2017 Preferred stock at a price of $1.00 per share for total proceeds
of $3,578,000. 4,184,000 shares of Series D-2017 Convertible Preferred Stock were converted into common stocks and 6,037,050 shares
remain unconverted as of May 31, 2019.
In August 2018, the board of directors
of the Company approved the Company to offer unsecured one-year term notes (the “2018 Notes-10%”) to individual lenders
for a maximum $3,000,000 with 10% annual interest rate. As of May 31, 2019, the Company had issued 2018 Notes-10% in the total
amount of $3,030,000 from various individual lenders.
In October 2018, the board of directors
of the Company approved the Company to offer unsecured one-year term notes (the “2018 Notes-8%”) to individual lenders
for a maximum $3,000,000 with 8% annual interest rate. At the time the Notes were executed, the Company held 220,000 shares of
NF Energy Savings Corporation (“NFEC”) (the “Securities”). As of May 31, 2019, the Company had issued
2018 Notes-8% in the total amount of $1,154,800 to various individual lenders. The 2018 Notes – 8% included an incentive
based on the NFEC share value of $10.38 per share (the “Base Value”). As provided for in the 2018 Notes – 8%,
the Company/ Borrower agreed that if Borrower, at its sole discretion, sold any of the Securities, all of the Lenders in the Class
would be entitled to receive in the aggregate, twenty percent (20%) of the excess of the sales proceeds of such Securities over
the Base Value (the “Incentive Payment”). The Lender’s share of the Incentive Payment would be determined by
the fraction of the total loan to all loans in the class, not exceed $3,000,000. As of May 31, 2019, the Company sold all holdings
in NEFC and accrued incentives totaling $51,314 incentive payable to the lenders.
In October 2018, the board of directors
of the Company approved the Company to offer the Company’s common stock at $0.55 per share to accredited investors. As of
May 31, 2019, the Company issued 1,109,818 shares of for total proceeds of $610,450.
On February 2019, the board of directors
of the Company approved the Company offering unsecured one-year term notes (the “2019 Notes-10%”) to individual lenders
for a maximum $5,000,000 with 10% annual interest rate. As of May 31, 2019, the Company had issued 2019 Notes-10% in the total
amount of $ 1,688,908 from various individual lenders.
INDUSTRIAL
HEMP BUSINESS LINES
Xibidi Biotechnology
Co. Ltd
ChineseHempOil.com,
Inc.
CBD Biotechnology Co. Ltd.
See Item 1.
Business, 1.a.) General Development of Business, pages 1 and 2
OTHER INVESTMENTS
Breakwater MB, LLC
In March 2017, the Company made a $250,000
investment in Breakwater MB, LLC (“Breakwater”), a cannabis-focused investment and consulting company, formed by Paul
Dickman, former CFO and former board member of ChineseInvestors.com, Inc., as a means to invest capital in and provide consulting
services to private, cannabis-focused companies as they transition into the public market. The invested capital will primarily
be used to cover the costs of becoming a publicly traded company, a strategy the Company expects will provide significant investment
appreciation and opportunity for liquidity. All opportunities will be evaluated by the investment committee comprised of ChineseInvestors.com,
Inc.’s CEO, Warren Wang, Medicine Man Technologies CEO, Andy Williams, and Paul Dickman, he is a managing member of Breakwater.
Warren Wang serves as an advisor to Breakwater receiving no compensation for his services.
Breakwater completed its planned raise
of $1,000,000 for 50% of Breakwater’s equity by December 2017. ChineseInvestors.com, Inc.’s board reviewed and approved
the investment with Mr. Dickman abstaining from voting. Mr. Dickman held 30% of the equity of Breakwater as of May 31, 2019 after
a $5,000 cash investment in Breakwater MB equity in addition to the services that Mr. Dickman renders.
Subsequently in August 23, 2018, the Company
entered into a Redemption Agreement and Mutual Release with Mr. Dickman to liquidate 40% the Company’s investment in Breakwater.
Mr. Dickman agreed to pay an aggregate purchase price of $100,000 ($75,000 at the closing and $25,000 no later than September
15, 2018) to redeem the portion of equity (the “Redemption Agreement”) The Redemption Agreement provides for a mutual
release and waiver with regard to any claims the parties to the Redemption Agreement ever had, owned or held, or now have, own
or hold, as against one another resulting from, arising out of or in any manner relating to or based on the Company’s investment
in Breakwater, the redemption, or otherwise relating to the Company’s relationship with Breakwater. As of May 31, 2019,
the Company only received $75,000, therefore, the Company’s current ownership at 8.75%. Breakwater issued a dividend to
the Company using the stock holding Breakwater has in Grow Flow Corp. Breakwater transferred 400,000 shares of Grow Flow Corp
to the Company which was valued at $35,000 as of May 31, 2019.
In September 2017, the Company entered
a letter of intent to invest $60,000 (44.45% of ownership) to jointly operate Beijing New Sino-North America Financial Information
Co., Ltd and its subsidiaries (“Sino-U.S. Finance”) with three Chinese individuals for a mobile application under the
name of “Sino-U.S. Finance” which was intended to provide a platform of information and analysis for Chinese-speaking
investors in the PRC and US. The Company accounts for the investment under the equity method. The Company has abandoned the Sino-US
Finance project.
Blue Ocean
Capital Holding LLC
Donald Capital, LLC
See Item 1.
Business, 1.a.) General Development of Business, page 4
CRYPTOCURRENCY INVESTMENTS &
BUSINESS LINES
In November 2017, the Company launched
www.newcoins168.com, a free portal providing news and investment education in the Chinese language for the global Chinese community
covering cryptocurrency basics, trading guidelines, market commentary and analysis regarding cryptocurrency, blockchain technology
and mining, sector-related stock trends and ETFs and strategies and opportunities to capitalize on the cryptocurrency market.
See Item 1.
Business, 1.a.) General Development of Business
Newcoins168.com LTD
Bitcoin Trading Academy, LLC
Newcoins168.com Digital Media Technology
Ltd.
See Item 1.
Business, 1.a.) General Development of Business, pages 3 and 4
Cryptocurrency Subscriptions and
Education
In or about 2018, the Company began working
with Wall Street Multimedia (“WSM”), an independent news agency located at the NYSE, to produce a daily cryptocurrency
video newscast in Chinese, intended to provide information and analysis regarding the digital crypto- world, including specific
cryptocurrencies, such as Bitcoin and Ethereum, industry trends, price movement, blockchain technology, sector-related stocks and
ETFs, etc.
In April 2018, the Company also launched
BITCOIN MILIONAIRE VIP LIVESTREAM, a paid cryptocurrency subscription service following the Company’s core business model
and providing one of the world’s first Chinese cryptocurrency live broadcast streaming 6.5 hours/day, featuring analysts
providing live trading demonstrations. As of May 31, 2019, the service has no subscribers and the Company has not generated any
revenue associated with the service.
In July 2018, the Company officially launched
the BITCOIN TRADING ACADEMY offering three course packages, taught both live and online. BITCOIN TRADING ACADEMY launched in July
2018. As of May 31, 2019, the service had generated $32,898 in revenue.
In addition to the above cryptocurrency
operations/investments, the Company also hosts a Bitcoin ATM at its San Gabriel, California office; however, plans to launch its
own Bitcoin ATM network in California have been put on hold indefinitely.
As of May 31, 2019, the Company has ceased
offering the majority of its news and courses related to cryptocurrency due to decreased consumer demand, presumably related to
the 2018 Cryptocurrency Crash, with the exception of limited cryptocurrency education products that are being bundled with
the Company’s traditional products so that subscribers who continue to follow the cryptocurrency market will have access
to some basic cryptocurrency news and education. Currently, the Company does not have short-term plans to resume these programs
in their original form.
Cryptocurrency Mining
In or about January 2018, the Company
invested in cryptocurrency mining with the purchase of ASIC (Application Specific Integrated Circuit) machines mining SHA-256
or crypt mining algorithms to earn cryptocurrencies such as Bitcoin and Litecoin. In that regard the Company entered into a Service
Agreement with Blockchain Holdings, LLC, a California limited liability company (“BCH”) pursuant to which BCH agreed
to provide strategic and technical consulting and managed services for blockchain mining, including but not limited to, purchasing
and setup of mining equipment, hardware management, mining pool administration and management for optimization of the Company’s
mining equipment. In connection with the mining operation, the Company entered into a separate Colocation and Hosting Agreement
with ScaleMatrix Holdings, Inc. dba ScaleMatrix, a California corporation (“SM”). Both the BCH Service Agreement and
the SM Colocation and Hosting Agreement were for a one-year term. Upon the expiration of the Service Agreements, the Company ceased
its mining operations and all mined currency was transferred to the Company. The Company is currently arranging for the return
of its mining equipment housed with SM. The Company has generated $18,916 income for the year end May 31, 2019 related to this
operation.
TRADITIONAL BUSINESS LINES
CIIX Online LTD
See Item 1.
Business, 1.a.) General Development of Business, page 4
1.c.) General Company Information.
Market and Market Prospects
A significant market focus of the Company
is the segment of the Chinese population (in both the US and abroad) that does not have English language reading and or speaking
skills, but who wishes 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
inherited wealth, there appears to be a continuing growing interest by the Chinese public in the general financial and securities
marketplace as a whole.
In addition, the Company continues to
provide various additional service initiatives to businesses including consulting services and various investor and public relations
services. Meanwhile, the Company continues to build its current client base with regard to its content-based consumer services
and its business to business services.
Chineseinvestors.com, Inc.
Support Services
Medicine Man Technologies Inc. Support
Services
The Company participated in the startup,
as well as initial operations of, Medicine Man Technologies (“MDCL”) for which it received 2,800,000 shares of MDCL
common stock, valued at $0.41 per share, on a private basis, in the period ended May 31, 2016. Since being listed on the OTC marketplace
under ticker MCDL, as a fully reporting OTC:QB listed enterprise, the MDCL stock has traded in the $1.50 to $2.50 price range with
limited trading. In January 2019, the Company received 31,250 shares for investor relations services to be performed for 6 months.
At May 31, 2019 and 2018, the Company still held 72,488 and 41,238 shares of MDCL stock representing $260,232 and $74,696, respectively
of value based upon the closing market price of $3.59 and $1.86, respectively.
In addition to providing services related
to corporate awareness and general stock support to its corporate clients, the Company also offers other various support services
to foreign companies, including but not limited to, providing practical advice on US capital markets and the US securities markets,
among other practical issues. Moreover, the Company sends information about its corporate clients to its subscribers, with appropriate
disclaimers regarding its relationship with these corporate clients. Typical corporate clients are corporations whose shares are
listed on the OTC and other public securities exchanges such as NASDAQ and NYSE. As of the date of this filing, the Company has
provided some level of investor relations services to over seventy (70) different companies since commencing its investor relations
services offerings.
The Company’s investor relations
services generated total $1,323,506 revenue in the annual period ended May 31, 2019. In the fiscal year ended May 31, 2019, the
Company experienced increase in value over what was reported in prior periods due to market recovery of the stock of other companies
that the Company received as compensation for services rendered. All such stock is accepted as restricted and not liquidated at
any point during which the Company actively provides support or advertising services to a client. The majority of the Company’s
corporate support service clients are not in a financial position to offer full cash consideration. By agreeing to accept a mix
of cash and equity as compensation, the Company is effectively investing the clients’ potential growth, while sharing the
risk of potential losses.
Subscription Services
ChineseInvestors.com, Inc. endeavors to
be an innovative company, specializing in providing real-time market commentary and analysis in the Chinese language. The Company
offers several types of subscription-based services serving various Chinese speaking investors and traders in the US and Canada
as more specifically described in our Subscriber Service offerings shown herein. Market coverage includes US financial markets
and the other global markets as the Company may elect to provide coverage for.
The Company has worked toward establishing
its web presence, but due to the lack of site use information for competitor companies, and based upon the Company’s website
access metrics, the Company must acknowledge that, while it has a substantial public audience potential, it is difficult to ascertain
exactly where any specific leadership position lies; therefore, the Company can make no definitive statement as to an overall position
of its website and its presence within its specific marketplace. Recently (July 2019 Web Trends Report) the Company's website,
www.Chinesefn.com, received 99,758,983 impressions and 550,986 visitor sessions represented by 63,306 unique visitors with an average
session time of 31:58 on the site.
The Company’s screen layout and menu
options display its research tools in a manner designed for ease of use. The content and technology comprising that makes up the
integrated information platform is also designed to be adaptable so that as the Company develops new research tools and adopts
new content and features, these new research tools, content and features can be easily integrated with the existing platform.
The Company’s service offerings permit
users to subscribe to several of its service packages and as of May 31, 2019, the Company had over 854 active paying subscribers,
approximately 70,528 free subscribers and 99,575 valid email addresses. Registered users are Internet users who maintain a registered
account with either www.chinesefn.com or www.chineseinvestors.com.
The Company’s website presents analysis,
commentary, and computer-generated quantitative analysis to provide subscribers and users with a broad view of the world financial
markets. We do not attempt to convince users to buy or sell any securities or to invest in any specific investments. Rather, we
believe our subscribers and users view us as an unbiased provider of financial information. A substantial portion of the Company’s
revenue is derived from annual and monthly subscription fees charged for 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 website users acknowledge the same upon signing into the Company’s
website that they understand that we provide information not investment advice. The Company advises all readers and subscribers
to seek advice from a registered professional securities representative before deciding to trade in the securities of any companies
featured by ChineseInvestors.com, Inc. 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.
General Advertising Services
The Company provides website-based advertising.
Free Analysis and Research Tools
The Company also provides a free stock and research tool to
subscribers including:
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1.
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Price charts of relevant stocks as well as the price and volume changes of the day.
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After the ticker of a specific
stock is searched on the chinesefn.com website, the price chart of a certain period (today, 5 days, 1 month, 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.
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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.
Additional Education Services Planned
The Company plans to continue efforts to
increase its presence in both the US and China by expanding its educational product offerings. More specifically, in an effort
to expand its presence in China, the Company is looking to establish relationships with third parties to assist the Company in
providing complimentary services for this market. As of May 31, 2019, the Company has not established any such third-party relationships,
In providing services, the Company employs
individuals with the experience and technical skills related to financial markets and content publication to develop its educational
products offered in the Mandarin language. Based on consumer demand in China for such educational tools, the Company believes
it will be able increase its presence and revenues once it establishes the relationships required to enable it to offer services
within PRC. Like the Company’s US educational offerings, these products will range in content, including but not limited
to, providing basic knowledge and practical trading skills, and training in the use of digitalized, randomized, and quantified
stock analyses all designed to help participants to gain practical trading skills.
News
The Company’s news feature allows
users to search and view breaking economic and financial news and information from around the world. Through our website content,
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.
The Company’s Websites
The Company’s website content and
research tools are the key components of its information platform. The Company’s websites have two primary functions:
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To attract visitors and market subscription-based service offerings; and
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To store content and serve as an integral part of our information platform.
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In order to attract visitors to our websites,
the Company offers a significant portion of its website content free of charge. This free content includes stock quotes, trading
volumes and pricing indicators for listed companies in the United States. The Company’s websites also have an important marketing
function for our subscription-based service offerings where we provide examples of the enhanced content and features that may be
accessed by becoming a subscriber to one of our paid service offerings.
The Company’s 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 we continue to increase our subscriber base.
The Company currently offers different
service packages which 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.
The Company 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 the Company may determine.
The Company has 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
document submittal. We are unsure of what material adverse effect such an event would cause.
With regard to the ChineseInvestors.com
mark and design, the United States Patent and Trademark Office (USPTO) allowed the application and published the mark for opposition
beginning on June 11, 2019. The Company is not aware of any opposition received within the thirty (30) day publication period and
is awaiting its Certificate of Registration. With regard to the ChineseFN.com mark and design, the USPTO allowed the application
published the mark for opposition beginning on February 26, 2019, no opposition was received within the thirty (30) day publication
period and the Certificate of Registration was issued effective May 14, 2019.
Customer Support
The Company’s customer support center
provides subscribers real-time and personal support. Customer support personnel, in addition to their sales and marketing functions,
help existing and prospective subscribers to resolve technical problems. The Company has an in-house training program for customer
support personnel, which includes training courses on world financial markets, the Company’s service features and functionalities,
and technical problem-solving skills as it relates to the Company’s 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.
Sales and Marketing
The Company markets its services/products
through its websites, as well as through customer support personnel at its telemarketing and customer service center in Shanghai,
China and its corporate offices in San Gabriel, California. The Company’s websites provide detailed descriptions of its service
offerings, while customer support personnel are available to provide customers explanation regarding the various features of the
Company’s offerings and to resolve subscribers’ technical problems. Customers are charged a subscription to use the
Company’s service packages over an agreed upon service period, typically three (3) months to one (1) year. Subscribers either
pay by cash, by online bank transfer, or wire transfer. Upon receipt of payment, subscribers’ accounts are promptly activated.
Database Technology
The Company has 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.
Cryptocurrency
Trading Education
Newcoins168.com LTD
See 1.b.) Shareholder, Company, and
Material Events Recap, page 5
GENERAL RISKS ASSOCIATED WITH OPERATING A CRYPTOCURRENCY
BUSINESS
The Company
may rely on computer hardware purchased or leased from or software licensed from third parties to facilitate the Company’s
cryptocurrency related businesses including its planned domestic cryptocurrency ATM Network.
Any damage to,
or failure of these third-party systems generally could result in interruptions in the Company’s services. Such interruptions
may cause end-users to terminate use of the Company’s services. The Company will be harmed if others believe its services
are unreliable.
Hardware, software,
data and cloud computing platforms may not continue to be available at reasonable prices, on commercially reasonable terms or at
all.
Any loss of the
right to use any of these hardware, software or cloud computing platforms could significantly increase the Company’s expenses
and otherwise result in delays in the provisioning of its services until equivalent technology is either developed or, if available,
is identified and obtained through purchase or license and thereafter integrated into the Company’s services. If the Company
were to experience significant strains on its data capacity, customers could experience performance degradation or service outages
that may harm its business.
Industry-specific
regulation and other requirements and standards are evolving, and unfavorable industry-specific laws, regulations, interpretive
positions or standards could harm the Company’s cryptocurrency related business endeavors.
Regulators in
certain industries have adopted and may in the future adopt regulations or interpretive positions regarding services such as those
to be provided by the Company. The costs of compliance with, and other burdens imposed by, industry-specific laws, regulations
and interpretive positions may limit the Company’s customers’ use and adoption of the Company’s products and
services. Compliance with these regulations may also require it to devote greater resources to support certain adopters and end-users
that the Company may not have or the ability to acquire.
Further, in some
cases, industry-specific laws, regulations or interpretive positions may also apply directly to the Company if it is deemed to
be a regulated securities business in the United States such as a broker-dealer or investment adviser under state and federal law.
The interpretation of many of these statutes, regulations, and rulings is evolving in the courts and among regulators, and an inability
to comply may have an adverse impact on the Company’s business and results. Any failure or perceived failure to comply with
such requirements could have an adverse impact on the Company’s business.
If the Company
is unable to scale its operations and increase productivity, the Company may not be able to successfully implement its business
plan.
The Company’s
success will depend in part upon the ability of the Company’s senior management to manage its projected growth of the cryptocurrency
division. To do so, the Company must continue to increase the productivity of its existing employees hire, train and manage new
employees as needed. To manage the expected domestic and international growth of the Company’s operations and personnel,
it will need to continue to improve operational, financial and management controls, its reporting systems and procedures, and compliance
with the laws and regulations in which it transacts business. If the Company fails to successfully scale its operations and increase
productivity, the Company may be unable to execute its business plan.
The Company’s
operating results are likely to fluctuate.
Important factors
that may cause the Company’s revenues, operating results and cash flows to fluctuate include: the Company’s ability
to retain and increase users of its products and services and satisfy their requirements; the Company’s ability to retain
and increase users of the products services and satisfy their requirements; the Company’s ability to realize benefits from
strategic partnerships, acquisitions or investments; general economic conditions, which may adversely affect usage rates; variations
in the revenue mix of the Company’s services and respective growth rates; general economic conditions, which may adversely
affect usage rates; changes in terms of contracts, whether initiated by us or because of competition; changes in payment methods,
terms and the timing of such payments, including the use or obsolescence of digital currency media; changes in foreign currency
or cryptocurrency exchange rates; the amount and timing of operating costs and capital expenditures related to the operations and
expansion of the Company’s business; expenses related to significant, unusual or discrete events; extraordinary expenses
such as litigation or other dispute-related settlement payments; income tax effects, including the impact of changes in USA federal
and state and international tax laws applicable to the Company’s business and use of blockchain-related media for payment;
technical difficulties or interruptions in the Company’s services; and regulatory compliance costs. Many of these factors
are outside of the Company’s control.
The Company may in the future be sued by third parties
for various claims including alleged infringement of proprietary rights.
The Internet and
financial services industries are characterized by the existence of a large number of patents, trademarks and copyrights and by
frequent litigation based on allegations of infringement or other violations of intellectual property rights. While the Company
has not been the subject of such actions, we may in the future be sued by third parties for alleged infringement of their claimed
proprietary rights. The Company’s technologies may be subject to injunction if they are found to infringe the rights of a
third-party or it may be required to pay damages, or both. The outcome of any such claims or litigation should they occur, regardless
of the merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, whether through
settlement or licensing discussions, or litigation, could be time-consuming and expensive to resolve, divert management attention
from executing the Company’s business plan, result in efforts to enjoin the Company’s activities, lead to attempts
on the part of other parties to pursue similar claims and, in the case of intellectual property claims, require the Company to
change its technology, change the Company’s business practices, pay monetary damages or enter into short- or long-term royalty
or licensing agreements.
Any adverse
determination related to intellectual property claims or other litigation could prevent the Company that from offering its services
to others could adversely affect the Company
Any failure
in the Company’s delivery of high-quality technical support services may adversely affect its relationships with customers
and financial results.
Any failure
to maintain high-quality technical support, or a market perception that the Company does not maintain high-quality support, could
adversely affect the Company’s reputation and its business.
The Services
may not be widely adopted and may have limited users.
As noted herein, to date, the Company’s
cryptocurrency products and services have not been adopted by a large number of individuals/subscribers, companies or other entities.
As there has been a limited public interest in the creation and development of such products and services, possibly related to
the 2018 Cryptocurrency Crash, the Company has ceased offering a majority of its cryptocurrency news and education products. Limited
cryptocurrency education products are being bundled with the Company’s traditional products so that subscribers who
wish to continue to follow the cryptocurrency market will have access to some basic cryptocurrency news and education. Currently,
the Company does not have short-term plans to resume these programs in their original form and has reduced the resources allocated
to these projects.
Moreover the Company
is not currently developing any new products or services relative to this division.
Meanwhile as the
Company’s cryptocurrency mining business did not generate the revenues expected the corresponding service agreements were
terminated and/or allowed to expire and the Company ceased its mining operations. All mined currency was transferred to the Company.
The Company is arranging for the return of its mining equipment that was housed with SM. The Company continues to host a Bitcoin
ATM at its San Gabriel, California office, however, plans to launch its own Bitcoin ATM network in California have been put on
hold indefinitely.
Alternative
networks may be established that compete with or are more widely used than the Company’s.
It is possible
that alternative products and service offerings could be established to facilitate services that are materially similar to those
offered by the Company’s cryptocurrency division. The Company may be unable to compete with these alternative service providers.
The regulatory
regime governing the blockchain technologies, cryptocurrencies, tokens and token offerings is uncertain, and new regulations or
policies may materially adversely affect the development of the Company’s cryptocurrency related businesses.
Regulation of
blockchain technologies, cryptocurrencies, tokens and token offerings tokens is likely to rapidly evolve, varies significantly
among international, federal, state and local jurisdictions and is subject to significant uncertainty. Various legislative and
executive bodies in the United States and in other countries may in the future, adopt laws, regulations, guidance, or other actions,
which may severely impact the development and growth of the Company’s cryptocurrency related businesses. Failure by the Company
or certain users of its services to comply with any laws, rules and regulations, some of which may not exist yet or are subject
to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and
fines, all of which may affect the operations of the Company’s cryptocurrency related businesses.
As blockchain networks and blockchain assets have grown in
popularity and in market size, federal and state agencies in the United States have begun to take interest in, and in some cases
regulate, their use and operation.
The regulatory
responses to emerging technologies, and to blockchain in particular in the US vary. The U.S. federal government has not exercised
its constitutional preemptive power to regulate blockchain to the exclusion of states or even expressed intention to do so, regardless
of the interest of federal agencies and so the states remain free to introduce their own rules and regulations. As an example,
in 2015 New York became the first state in the U.S. to regulate virtual currency companies through state agency rulemaking. Initially,
the Company intends to offer certain products and services in California, including a network of cryptocurrency ATMs, with plans
to expand to other states. To date, California has failed at its attempts at creating a license, through a “Digital Currency
Business Enrollment Program,” to conduct business related to “digital currency” within the state. Other states,
such as Texas, have published guidance on how their existing regulatory regimes apply to virtual currencies. Some states, like
New Hampshire, North Carolina, and Washington, have amended their statutes and regulations to include virtual currencies into existing
securities regulation regimes. As such, there can be no assurances that the current regulatory framework, will continue in effect
in states where the Company may conduct business for as long as the Company exists, or that other states will adopt or implement
favorable regulation or legislation that may facilitate the utilization of the Company’s cryptocurrency products/services
in the United States. Treatment of virtual currencies continues to evolve under the federal law of the United States as well. The
United States Department of the Treasury, the United States Securities Exchange Commission (“SEC”), and the Commodity
Futures Trading Commission (“CFTC”), for example, have published guidance on the treatment of virtual currencies, tokens
an instrument similar to tokens. Self-regulatory organizations such as the Financial Industry Regulatory Authority (“FINRA”)
and the National Futures Association (“NFA”) have also issued such guidance. The United States Internal Revenue Service
has released guidance treating virtual currency as property that is not currency for United States federal income tax purposes,
although there is no indication yet whether other United States courts or federal or state regulators will follow this classification.
Both United States federal and state agencies in the United States have instituted enforcement actions against those violating
their interpretation of existing laws. The Company may not be able to implement or provide access to some of its cryptocurrency
products and services, for example, its planned cryptocurrency ATM Network, in certain areas in the United States, if at all, due
to changes in such laws and regulations. Further, the regulation of non-currency use of blockchain assets is also uncertain. The
CFTC has publicly taken the position that certain blockchain assets are commodities, and the SEC has issued a public report stating
United States federal securities laws require treating some blockchain assets as securities. To the extent that a domestic government
or quasi-governmental agency in the United States exerts regulatory authority over a blockchain network or asset, the Company may
be materially and adversely affected.
Blockchain
networks also face an uncertain regulatory landscape in many foreign jurisdictions such as the European Union, China and Russia.
Various foreign
jurisdictions may in the near future, adopt laws, regulations or directives that affect the Company. Such laws, regulations or
directives may conflict with those of the United States and other countries and may directly and negatively impact the Company’s
business. The effect of any future regulatory changes is impossible to predict, but such changes could be substantial and materially
adverse to the development and growth of the Company.
If the Company
is unable to satisfy data protection, security, privacy, and other government and industry specific requirements, its growth may
be impaired.
To the extent
not previously discussed, there are several data protection, security, privacy and other government- and industry-specific requirements,
including those that require companies to notify individuals of data security incidents involving certain types of personal data.
Security compromises could harm the Company’s reputation, erode user confidence in the effectiveness of its security measures,
negatively impact its ability to attract new users, or cause existing users to stop using the Company’s products and services.
The further
development and acceptance of blockchain networks which are a part of a new and rapidly changing industry are subject to a variety
of factors that are difficult to evaluate.
The slowing or
stopping of the development or acceptance of blockchain networks and blockchain assets would have an adverse material effect on
the successful development of the Company’s cryptocurrency division.
The growth
of the blockchain industry in general, and its volatility.
The prices of blockchain assets are extremely
volatile as evidenced by the 2018 cryptocurrency crash. Fluctuations in the price of digital assets have materially and adversely
affected our business. The prices of cryptocurrencies such as Bitcoin have historically been subject to dramatic fluctuations and
are highly volatile. Several factors have likely influenced the market demand for the Company’s cryptocurrency products and
services including, but not limited to: Global blockchain asset supply; Global blockchain asset demand, which can be influenced
by the growth of retail merchants' and commercial businesses' acceptance of blockchain assets like cryptocurrencies as payment
for goods and services, the security of online blockchain asset exchanges and digital wallets that hold blockchain assets, the
perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions on their use; Currency
exchange rates, including the rates at which digital assets may be exchanged for fiat currencies; Fiat currency withdrawal and
deposit policies of blockchain asset exchanges and liquidity on such exchanges; Interruptions in service from or failures of major
blockchain asset exchanges; Monetary policies of governments, trade restrictions, currency devaluations and revaluations; Regulatory
measures, if any, that affect the use of blockchain assets; Global or regional political, or economic or financial events and situations.
A decrease in the price of a single blockchain asset may cause volatility in the entire blockchain asset industry and may affect
other blockchain assets. For example, a security breach that affects investor or user confidence in Bitcoin may affect the industry
as a whole and may also cause the price of other blockchain assets to fluctuate.
ChineseHempOil.com, Inc.
History
In April 2017,
ChineseHempOil.com, Inc. was incorporated in Delaware and registered as a foreign corporation with the California Secretary of
State. Its principal offices located in San Gabriel, California, doing business as Chinese Wellness Center (retail).
Overview
CHO’s first
product release was its a white label, hemp oil product line, OptHemp, a premium, private label oil, made from full-spectrum, Colorado
grown, GMO-Free, hemp, and manufactured using a CO2 extraction process.
The Company announced its plans to spin
off CHO. in February 2018, which was later postponed. Currently, the Company does not have plans to spin off its US business.
Ownership
ChineseHempOil.com, Inc. is a wholly owned subsidiary of Chineseinvestors.com,
Inc.
Product Overview
ChineseHempOil.com Inc’s industrial hemp products include:
OptHemp Ultra-Premium Hemp Oil - Peppermint
Flavor: 250mg of pure full-spectrum hemp oil derived from a proprietary CO2 (supercritical) extraction process; 100% Colorado grown,
organic hemp; made and bottled in US; Non-GMO
OptHemp Ultra-Premium Hemp Oil Soft Gels
- Nano Water Soluble Soft gels utilizing advanced, nano-particulate technology and proprietary water-soluble hemp oil
OptHemp Ultra-Premium Hemp Gummies: made
from sugar, gelatin, citric acid, natural flavoring, natural coloring, coconut oil, and hemp oil Extract.
Plan
In early 2019,
the Company announced the completion of its re-branding of ChineseHempOil.com, Inc.’s consumer product line under the new
opt brand. In conjunction with the rebranding, the Company announced the consolidation of its retail e-commerce sites into
a single site, www.365CWC.com, providing consumers with a single platform intended drive overall sales. Thereafter, in May 2019,
the Company launched a trial pop-up kiosk in the Glendale Galleria mall, located in Glendale, California, offering various industrial
hemp/CBD products, including its own opt product line and other select brands. As of August 2019, since the revenues generated
were not sufficient to cover the fixed costs associated with this sales channel, the Company closed the kiosk. Although, the Company
intends to continue conservatively invest into the operations of ChineseHempOil.com, Inc., including its domestic salesforce, the
Company’s goal is to convert the leads generated from recent advertising campaigns into sales with repeat buyers.
Market Overview
Domestic Markets
According to New
Frontier Data, the U.S. Hemp CBD Market is expected to triple by 2022. Likewise, according to Hemp Industry Daily
market projections, the national market for hemp-derived CBD is expected to balloon to $7 billion by 2023. The Hemp
Industry Daily report indicates that "with the removal of hemp from federal prohibition under the Controlled
Substances Act of 1970 (CSA), the total U.S. hemp industry now looks to expand at a healthy 18.4% through a 5-year combined
annual growth rate (CAGR) from 2018-2022.” It is anticipated that removing hemp from the CSA will have immediate
impacts, i.e. banking and credit card processing for hemp-derived CBD accounts, both online and in mass-market retailers, and
giving confidence to mass-market retailers that may have been hesitant to carry hemp-CBD brands. See
https://newfrontierdata.com/marijuana-insights/u-s-hemp-cbd-market-to-triple-by-2022. As a first mover in the industry,
particularly as it relates to the domestic Chinese community, CHO seeks to capitalize on recent market developments and
consumer confidence through education and targeted marketing.
International
Market
Currently, ChineseHempOil.com,
Inc. does not have plans to market its opt product line internationally; however, this could change as international markets
show an interest in such products.
Market Opportunity
CHO intends to
leverage its first to market advantage of promoting industrial hemp products to the domestic Chinese community. CHO seeks to capitalize
on recent legal, market developments and projections and growing consumer confidence through education and targeted marketing.
Competition
At present, industrial
hemp health products are widely available in the United States. That said, the Company’s main goal is to distinguish itself
from the competitors through targeted marketing in the domestic Chinese community and enhanced product delivery technology.
Government
Regulation
The Agricultural Improvement Act
was Signed into Law on December 20, 2018 Removing Hemp from the Controlled Substances Act.
On December 14, 2016, the Drug Enforcement
Agency (“DEA”) made an update to the Federal Register item (21 CFR Part 1308), creating a new Administration Controlled
Substances Code Number for Marihuana Extract (hereinafter, the “Marijuana Extract Rule”). Marijuana Extract is defined
therein as “. . . an extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis,
other than the separated resin (whether crude or purified) obtained from the plant.” The Marijuana Extract Rule confirms
that as of January 17, 2017, a harsher cannabis law will be put into place reclassifying non-THC cannabis oil as a schedule 1 drug,
despite the fact cannabidiol (“CBD”) extracts are non-psychoactive.
Approximately two years later, in December
2018, the Agriculture Improvement Act of 2018 was signed into law. Among other things, this new law changes certain federal authorities
relating to the production and marketing of hemp, defined as cannabis (Cannabis sativa L.), and derivatives of cannabis with extremely
low (less than 0.3 percent on a dry weight basis) concentrations of the psychoactive compound delta-9-tetrahydrocannabinol (THC).
These changes include removing hemp from the Controlled Substances Act. That said, Congress explicitly preserved the FDA’s
current authority to regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug, and Cosmetic
Act (FD&C Act) and section 351 of the Public Health Service Act, which allows the FDA to continue enforcing the law to protect
patients and the public while also providing potential regulatory pathways for products containing cannabis and cannabis-derived
compounds. In short, products containing cannabis or cannabis-derived compounds are treated like any other FDA-regulated products
— meaning they’re subject to the same authorities and requirements as FDA-regulated products containing any other substance.
This is true regardless of the source of the substance, including whether the substance is derived from a plant that is classified
as hemp under the Agriculture Improvement Act.
While products containing cannabis and
cannabis-derived compounds remain subject to the FDA’s authorities and requirements, there are pathways available to lawfully
introduce these products into interstate commerce. These pathways include ways for companies to seek approval from the FDA to market
with therapeutic claims a human or animal drug that is derived from cannabis.
In addition, the agency has issued notices
related to hulled hemp seeds, hemp seed protein and hemp seed oil indicating that these products can be legally marketed in human
foods for these uses without food additive approval, assuming compliance with all other requirements and restriction.
Our business is subject to strict
government regulations.
The processing, formulation, manufacturing,
packaging, labeling, advertising, and distribution of our products are subject to federal laws and regulation by one or more federal
agencies, including the FDA, the FTC, the Consumer Product Safety Commission, the U.S. Department of Agriculture, and the Environmental
Protection Agency. These activities are also regulated by various state, local, and international laws and agencies of the states
and localities in which our products are sold. Government regulations may prevent or delay the introduction, or require the reformulation,
of our products, which could result in lost revenues and increased costs to us. For instance, the FDA regulates, among other things,
the composition, safety, labeling, and marketing of dietary supplements (including vitamins, minerals, herbs, and other dietary
ingredients for human use). The FDA may not accept the evidence of safety for any new dietary ingredient that we may wish to market,
may determine that a particular dietary supplement or ingredient presents an unacceptable health risk, and may determine that a
particular claim or statement of nutritional value that we use to support the marketing of a dietary supplement is an impermissible
drug claim, is not substantiated, or is an unauthorized version of a “health claim.”
Any of these actions could prevent us from
marketing particular dietary supplement products or making certain claims or statements of nutritional support for them. The FDA
could also require us to remove a particular product from the market. Any future recall or removal would result in additional costs
to us, including lost revenues from any additional products that we are required to remove from the market, any of which could
be material. Any product recalls or removals could also lead to liability, substantial costs, and reduced growth prospects. With
respect to FTC matters, if the FTC has reason to believe the law is being violated (e.g. failure to possess adequate substantiation
for product claims), it can initiate an enforcement action. The FTC has a variety of processes and remedies available to it for
enforcement, both administratively and judicially, including compulsory process authority, cease and desist orders, and injunctions.
FTC enforcement could result in orders requiring, among other things, limits on advertising, consumer redress, and divestiture
of assets, rescission of contracts, or such other relief as may be deemed necessary. Violation of these orders could result in
substantial financial or other penalties. Any action against us by the FTC could materially and adversely affect our ability to
successfully market our products.
Additional or more stringent regulations
of dietary supplements and other products have been considered from time to time. These developments could require reformulation
of some products to meet new standards, recalls or discontinuance of some products not able to be reformulated, additional record-keeping
requirements, increased documentation of the properties of some products, additional or different labeling, additional scientific
substantiation, adverse event reporting, or other new requirements. Any of these developments could increase our costs significantly.
For example, the Dietary Supplement and Nonprescription Drug Consumer Protection Act (S.3546), which was passed by Congress in
December 2006, imposes significant regulatory requirements on dietary supplements including reporting of “serious adverse
events” to FDA and recordkeeping requirements. This legislation could raise our costs and negatively impact our business.
In June 2007, the FDA adopted final regulations on GMPs in manufacturing, packaging, or holding dietary ingredients and dietary
supplements, which apply to the products we may manufacture and sell. These regulations require dietary supplements to be prepared,
packaged, and held in compliance with certain rules. These regulations could raise our costs and negatively impact our business.
Additionally, our third-party suppliers or vendors may not be able to comply with these rules without incurring substantial expenses.
If our third-party suppliers or vendors are not able to timely comply with these new rules, we may experience increased cost or
delays in obtaining certain raw materials and third-party products. Also, the FDA has announced that it plans to publish guidance
governing the notification of new dietary ingredients. Although FDA guidance is not mandatory, it is a strong indication of the
FDA’s current views on the topic discussed in the guidance, including its position on enforcement.
Marijuana businesses may still not
be able to secure bank accounts.
Though more banks are providing services
to marijuana businesses, most banks and financial institutions will not because they worry about criminal liability under the
federal Controlled Substances Act and under the Bank Secrecy Act for money laundering. Even after the passage of the Agriculture
Improvement Act of 2018, industrial hemp businesses may still find it difficult to establish banking relationships. Though FinCEN
issued guidelines in 2014 that allow financial institutions to provide bank accounts to marijuana businesses, few banks have taken
advantage of those guidelines and many marijuana businesses still operate on an all-cash basis. This makes it tough for cannabis
businesses to manage their businesses, pay their employees and taxes, and having so much cash on hand also creates significant
public safety issues. Many ancillary businesses that service cannabis businesses have to deal with the unpredictability of their
clients or customers not having a bank account.
IRC 280E
Internal Revenue Code section 280E continues
to prohibit marijuana businesses from deducting their ordinary and necessary business expenses, other than costs of goods sold,
forcing marijuana businesses to contend with higher effective federal tax rates than similar companies in other industries. The
effective tax rate on a marijuana business depends on how large its ratio of nondeductible expenses is to its total revenues,
but it can be as high as 90%, affecting the future profitability of a marijuana business or even ancillary business. The Company
sells a number of industrial hemp/CBD products but does not market or sell marijuana therefore the restrictions imposed by Section
280E should not be applicable to the Company.
The U.S. Food and Drug Administration
has not Approved use of Cannabidiol as a Dietary Supplement.
The FDA has concluded that cannabidiol
products are excluded from the dietary supplement definition under section 201(ff)(3)(B)(ii) of the Food Drug and Cosmetic (“FD&C”)
Act. The FDA’s ruling could have broad implications for an industry built atop the potential health benefits of CBDs, including
marketing strategies and product labeling to account for such rules which state that companies cannot make claims as to proven
health or medical efficacy without FDA approval. As such, even if we generally try to comply with existing FDA rules to the extent
possible, compliance may not guarantee escaping regulatory scrutiny. Still, a compliance strategy should decrease risk exposure,
including from truth-in-advertising claims brought by consumers related to CBD products that we intend to market.
Employees
ChineseHempOil.com,
Inc. currently has six (6) full-time employees.
Property
ChineseHempOil.com,
Inc.’s corporate headquarters are located at 227 W. Valley Blvd, Suite 208B, San Gabriel, California, where it rents approximately
949 square feet of retail/office space.
Litigation
There are no
claims filed against CHO and the Company does not know of any potential claims against CHO.
XiBiDi Biotechnology Co., Ltd./CBD Biotechnology Co.
Ltd.
History
In March 2017, the Company established
and registered XiBiDi Biotechnology Co., Ltd./CBD Biotechnology Co. Ltd. (“CBD Biotech”) in the Pudong Free-Trade
Area in Shanghai, established as a wholly owned foreign enterprise (“WOFE”).
Overview
In April 2017, the Company appointed XiangYang
Yun as CEO of this WOFE. CBD Biotech’s primary focus is online, retail and direct sales of industrial hemp-infused cosmetics
and liquor products in China, which began with the launch of the CBD Magic Hemp Series cosmetics line. On November 7, 2017, CBD
Biotech was issued a wholesale alcohol license from the Shanghai Wine Monopoly Bureau effective October 24, 2017 for a three-year
term. Thereafter, CBD Biotech entered into a wholesale agreement with China GuiZhou HanTai Wine, Inc. to distribute baijiu liquor,
Yantai 1985.
Ownership
CBD was founded as a wholly owned foreign enterprise of Chineseinvestors.com,
Inc. The Company announced its plans to spin off CBD Biotech in February 2018, which was later approved to postpone after May 31,
2019, the end of the Company’s 2019 fiscal year by the Company’s Board of Directors. Earlier this year, in February
2019, CBD Biotech formed CBD Biotech, Inc., an exempted company with limited liability incorporated in the Cayman Islands (“CBD
Biotech Cayman”) which is solely owned by Wei Wang, CEO of ChineseInvestors.com, Inc. and Alex Hamilton, Chairman and Chief
Financial Officer of CBD Biotech.
ChineseInvestors.com, Inc. is currently
arranging to enter into a share exchange agreement with CBD Biotech and the sole shareholders of CBD Biotech, ChineseInvestors.com,
Inc. (the “Share Exchange Agreement”). Under the terms of the proposed Share Exchange Agreement, the ChineseInvestors.com,
Inc. shall transfer all of its shares of CBD Biotech, which represents 100% of CBD Biotech’s outstanding shares, to CBD
Cayman (the “Share Exchange”). As consideration for the Share Exchange, CBD Cayman will issue 2,521,739 shares of
its Class A Ordinary Shares and 2,320,000 of its Class B Ordinary Shares to ChineseInvestors.com, Inc. Following the Share Exchange,
pre-initial public offering (“IPO”) Company will own approximately 71.6% of CBD Biotech Cayman’s Class A shares
and 86.3% of the class B shares. Post-IPO, the Company will own 65.4% of CBD Biotech Cayman’s Class A shares and 48.6% of
the Class B shares. All of CBD Biotech Cayman’s operations will be conducted through CBD Biotech which shall include the
two current business lines: cosmetics and liquor, primarily marketed through online and retail sales channels in the Peoples Republic
of China.
Product Overview
CBD Biotech has two current business lines:
cosmetics and liquor, primarily marketed through online and retail sales channels in the Peoples Republic of China.
At present, CBD Biotech has three categories/lines
of skincare/cosmetic products at varying price points to appeal to a wide range of consumers.
Magic Hemp Series
Launched in October 2017, the Magic Hemp
Series products have a relatively low price point and are mainly sold online.
Live Oxygen Series
Launched in January 2018, the Live Oxygen
Series offers a complete skincare routine. These mid-range products and predominantly sold on Tmall store, the largest B2C retail
platform in Asia, and Toutiao, a Beijing-based news and information content platform.
Classic Series
The Classic Series contains CBD Biotech’s
most popular go-to skincare products including the Aqua Bio Magnetic Mask and the Hemp Hyaluronic Acid Liquid, both introduced
in Spring 2018. This line will contain six (6) new products that will be formally announced shortly.
Liquor
CBD Biotech also entered into a wholesale agreement with China
GuiZhou HanTai Wine, Inc. to distribute baijiu liquor, Yantai 1985.
Plan
CBD Biotech’s
mission is to leverage our first to market advantage of promoting industrial hemp products to the largest market in the world,
the Chinese mainland. To achieve this, CBD Biotech intends to leverage its strategy, marketing, staff and distribution to “grab
land” and provide each customer with a terrific customer experience driving repeat revenue.
CBD Biotech strives
to make the business competitive in the international and domestic markets. To achieve this goal, it may need to cooperate with
other businesses having capital, market, technology, or products. Additionally, the Company will need to recruit and retain a
talented and knowledgeable workforce and actively develop new technology and products for the market.
Market Overview
Domestic Markets
Liquor: According
to the latest population data of the Chinese National Bureau of Statistics (http://www.yanglaozhan.org/xingye/1386.html), the number
of people over 60 was 294.49 million, accounting for 17.9% of the total population. This is important, because an aging population
will have a greater health focus, benefitting CBD Biotech’s hemp wine product. In developed countries, the health industry
accounts for 15% of GDP, but in China it only accounts for 4%-5% of GDP (http://www.sohu.com/a/276940094_100137839), providing
opportunity.
According to a
study by INS Global, the number one reason for drinking wine in China is for its health benefits. According to Wine Intelligence,
only 32% of Chinese wine consumers actually drink wine because they actually enjoy the taste. Most of them, especially the young
female consumers, drink wine for health and beauty purposes (https://ins-globalconsulting.com/enter-wine-market-china-2/).
Moreover, according
to the National Bureau of statistics of China, in 2015, liquor sales were $133.8 billion, an increase of 5.3% compared with the
same period of 2014. The total profit was $14.8 billion, an increase of 3.9% y/y. The sales revenue of other alcoholic beverages
was $4.8 billion, an increase of 18.4% y/y, accounting for 3% of the total sales of the whole industry (health wine is classified
under other alcoholic beverages in China). According to "China's Health Wine Development White Paper," the market size
of the health wine market will reach to $50 billion in the next five years, growing at a 15% CAGR see https://m.21jingji.com/article/20181124/herald/9e1fa5057e60c81e329d17e290d6f203.html
Cosmetics:
The cosmetics sector on the Chinese mainland has been growing at a fast pace in tandem with the rapid development of the
Chinese economy in recent years. Online cosmetics shopping has seen rapid growth, with some mainland consumers beginning to
buy cosmetics and skincare products online. According to the HKTDC survey, 69% of female respondents and 65% of male
respondents would buy skincare products and cosmetics from online stores mainly because "online shopping is
convenient/offers delivery service". The survey also found that female and male consumers spent RMB2,158 and RMB1,681,
respectively, on online purchases of skincare products and cosmetics on average in the preceding year. See
http://china-trade-research.hktdc.com/business-news/article/China-Consumer-Market/China-s-Cosmetics-Market/ccm/en/1/1X000000/
1X002L09.htm
Many
foreign brands have entered the mainland market by acquiring domestic brands and making use of their distribution networks.
For example, MiniNurse and MG were acquired by L'Oréal, TJoy by Coty for a time, and Dabao by Johnson & Johnson.
Some foreign brands are establishing their presence in the mainland market through online shopping platforms. In fact, online
sales of the make-up and personal-care industries are growing at rates 11 times and eight times the respective rate of growth
of sales in physical stores. See
http://china-trade-research.hktdc.com/business-news/article/China-Consumer-Market/China-s-Cosmetics-Market/ccm/en/1/1X000000/1X002L09.htm
Competitive Advantages
and Landscape
Liquor: Currently
there are 5,000 health wine companies across China, but there are only three companies that produce hemp-infused wine in China,
including CBD Biotech. The other two producers are both Guangxi based companies, and their products are mainly sold in their local
markets. They do sell on Taobao, but their monthly sales volume on Taobao is less than 10 units, much less than CBD Biotech’s
2,000 units.
Cosmetics: At
present, the cannabis industry in China is not large and is hindered by current laws. In 2015, Cannabis leaf extract was included
the “Standard Chinese Name List of International Cosmetic Ingredients”, which was published by the China Food and
Drug Administration. In November 2016, Yunnan Hansu Bio-Technology Limited was awarded the cannabis extraction and processing
license issued by the Ministry of Public Security, and officially began legal research and development of cannabis extracts not
containing THC. CBD Biotech currently has only one competitor in the market who manufactures cannabis-related cosmetics, Hanyi
Bio-Technology Limited, a biotech company engaged in industrial cannabis in the field of biopharmaceuticals. In September 2017,
this company launched the “Cannaclear Series” which includes a set of three skincare products.
In the international
market, there are many known competitors. For example, CBD Care Garden specializes in hemp-based wellness and beauty skin care
products. It has launched a set of face products and body products. Additionally, The Body Shop sells a popular product—hemp
hand protector. The market seems exceptionally fragmented.
According to the
statistics of China Food and Drug Administration (CFDA), which is now under the State Administration for Market Regulation (SAMR),
the number of enterprises qualified to produce cosmetics in China at the end of June 2018 was 3,880. Looking at the cosmetics market
as a whole, domestic brands are mostly concentrated in the mid- to low-end segments, while foreign-invested enterprises and joint
ventures dominated the high-end segment, given the capital requirements.
Because of the
rapid development of domestic cosmetics companies, domestic brands’ market share is growing gradually, posing competition
to their foreign counterparts. To seek new sales growth, domestic brands are applying traditional Chinese medicine concepts and
natural extraction methods in developing skincare products. Examples include the Taichi Beauty Retaining series and the Extra Control
series from Herborist and the Herbal Skin Whitening series from Pehchaolin.
The Children’s
skincare products sector is also a sector with huge potential and an increasing number of international childcare heavyweights
are eyeing the China market. Frog Prince, Pigeon, Yumeijing, Giving and Johnson & Johnson are major players in the children’s
market. Competition is expected to become increasingly intense, but we believe we will be well served by CBD Biotechnology’s
first to market presence.
Intellectual
Property
CBD Biotech’s
trademark application in China was approved on June 21, 2018.
Government
Regulation
Although cannabis
is still illegal in China, Cannabis Sativa Leaf Extract can legally be added to skincare products. As noted above in 2015, Cannabis
leaf extract was included on the “Standard Chinese Name List of International Cosmetic Ingredients”, which was published
by the China Food and Drug Administration.
Employees
Currently, CBD
Biotech has twelve (12) full-time employees and five (5) consultants. CBD Biotech employs consultants on an as-needed-basis to
provide specific expertise in needed areas
Property
CBD Biotech’s
corporate headquarters are located in the Pudong Free-Trade Area in Shanghai.
Litigation
There are no claims
filed against CBD Biotech or CBD Biotech Cayman and the Company does not know of any potential claims against these companies.