Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Nov. 30, 2013 | Jan. 14, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Chineseinvestors.com, Inc. | ' |
Entity Central Index Key | '0001459482 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Nov-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--05-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 5,969,585 |
Document Fiscal Period Focus | 'Q2 | ' |
Document Fiscal Year Focus | '2014 | ' |
Balance_Sheets
Balance Sheets (USD $) | Nov. 30, 2013 | 31-May-13 |
Current assets | ' | ' |
Cash and cash equivalents | $111,643 | $211,442 |
Accounts receivable, net | 17,141 | 3,667 |
Investments, available for sale | 1,404,604 | 652,021 |
Other current assets | 49,856 | 33,795 |
Total current assets | 1,583,244 | 900,925 |
Property & equipment, net | 24,153 | 32,705 |
Website development, net | 68,441 | 66,945 |
Total assets | 1,675,838 | 1,000,575 |
Current liabilities | ' | ' |
Accounts payable | 11,111 | 5,361 |
Deferred revenue | 303,546 | 394,679 |
Unearned revenue paid in stock | 387,625 | 306,079 |
Short-term debt, secured by stock | 460,000 | 0 |
Accrued interest | 74,902 | 60,114 |
Accrued liabilities | 68,542 | 51,936 |
Total current liabilities | 1,305,726 | 818,169 |
Long-term deferred revenue | 24,235 | 6,584 |
Total liabilities | 1,329,961 | 824,753 |
Commitments | ' | ' |
Subsequent events | ' | ' |
Stockholders' equity | ' | ' |
Preferred stock Authorized 20,000,000 common shares with a par value of $0.001 per 2,003,776 shares issued and outstanding (2013 - 2,003,776) preferred shares | 2,004 | 2,004 |
Common stock Authorized 80,000,000 common shares with a par value of $0.001 per share, 5,969,585 shares issued and outstanding (2013 - 5,108,279) common shares | 5,970 | 5,970 |
Additional paid-in capital | 10,320,823 | 10,320,823 |
Foreign currency gain | 1,306 | 1,306 |
Unrealized gain on securities | 10,568 | 75,166 |
Retained (Deficit) | -9,994,794 | -10,229,447 |
Total stockholders' equity/(deficit) | 345,877 | 175,822 |
Total liabilities and stockholders' equity (deficit) | $1,675,838 | $1,000,575 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Nov. 30, 2013 | 31-May-13 |
Stockholders' equity [note 3] | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock authorized | 20,000,000 | 20,000,000 |
Preferred stock issued | 2,003,776 | 2,003,776 |
Preferred stock outstanding | 2,003,776 | 2,003,776 |
Common stock par value | $0.00 | $0.00 |
Common stock authorized | 80,000,000 | 80,000,000 |
Common stock issued | 5,969,585 | 5,969,585 |
Common stock outstanding | 5,969,585 | 5,969,585 |
Statements_of_Operations_and_L
Statements of Operations and Loss (USD $) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2013 | Nov. 30, 2012 | Nov. 30, 2013 | Nov. 30, 2012 | |
Operating revenues | ' | ' | ' | ' |
Binary option service provider fees | $0 | $304,364 | $0 | $581,515 |
Subscription revenue | 172,073 | 97,439 | 344,425 | 193,297 |
Business services revenue | 644,680 | 37,301 | 991,494 | 63,221 |
Other revenue | 3,224 | 20,930 | 9,069 | 47,677 |
Total revenue | 819,977 | 460,034 | 1,344,988 | 885,710 |
Cost of services sold | 217,023 | 267,154 | 389,199 | 490,442 |
Gross Profit | 602,954 | 192,880 | 955,789 | 395,268 |
General & administrative expenses | 269,719 | 403,197 | 555,494 | 783,363 |
Advertising expenses | 57,196 | 29,744 | 90,740 | 106,101 |
Net profit/(loss) from operations | 267,039 | -240,061 | 309,555 | -494,196 |
Other expenses | ' | ' | ' | ' |
Interest expense | -43,153 | -30,057 | -74,902 | -60,114 |
Net gain/(loss) | 232,886 | -270,118 | 234,653 | -554,310 |
Other comprehensive loss | ' | ' | ' | ' |
Unrealized gain/(loss) on marketable equity securities | -56,989 | -1,542 | -64,598 | -1,542 |
Comprehensive gain/(loss) for the period | $175,897 | ($271,660) | $170,055 | ($555,852) |
Weighted average number of common shares outstanding - basic and diluted | 5,969,585 | 4,872,491 | 5,969,585 | 4,872,491 |
Earnings (loss) per share - basic | $0.03 | ($0.06) | $0.03 | ($0.11) |
Statements_of_Cash_Flows
Statements of Cash Flows (USD $) | 6 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
OPERATING ACTIVTIES | ' | ' |
Net gain/(loss) for the six month period | $234,653 | ($554,310) |
Adjustment to reconcile net gain/(loss) to net cash used in operating activities: | ' | ' |
Non-cash revenue | -735,635 | 0 |
Depreciation & amortization | 12,844 | 16,699 |
Other current assets | -16,061 | -71,607 |
Accounts receivable | -13,474 | 3,344 |
Accounts payable | 5,750 | -38,534 |
Unearned revenue | -73,482 | -32,074 |
Deferred interest | 14,788 | 60,114 |
Other accrued liabilities | 16,606 | -2,247 |
Net cash (used in) operating activities | -554,011 | -618,615 |
INVESTING ACTIVITIES | ' | ' |
Purchase of equipment | -5,788 | -53,570 |
FINANCING ACTIVITIES | ' | ' |
Cash raised by issuance of debt | 460,000 | 0 |
(Decrease) in cash and cash equivalents | -99,799 | -672,185 |
Cash and cash equivalents, beginning of period | 211,442 | 1,065,564 |
Cash and cash equivalents, end of period | 111,643 | 393,379 |
Supplemental disclosure of cash flow information | ' | ' |
Cash paid for interest | 0 | 0 |
Cash paid for income taxes | 0 | 0 |
Cash paid for China representative office tax | $32,568 | $25,986 |
Organization_and_Nature_of_Ope
Organization and Nature of Operations | 6 Months Ended |
Nov. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization and Nature of Operations | ' |
Business Description Chinseinvestors.com, Inc. (the Company) was incorporated on June 15, 1999 in the State of California. 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. | |
ChineseInvestors.com, Inc. endeavors to be an innovative company, specializing in (a) providing real-time market commentary, analysis, and educational related endeavors in Chinese language character sets (traditional and simplified), (b) providing support services to our various partners, (c) providing consultative services to smaller private companies considering becoming a public company, (d) providing various advertising as well as public relation support services, (e) providing various programming in China relative to the US Financial Marketplace via cable television and our various relationship and (f) other services we may identify having the potential to create value or partnership opportunity with our existing services. | |
The Company remains incorporated as a C corporation in good standing as of this filing date with the State of Indiana (as of June 1, 1997). |
1_Liquidity_and_Capital_Resour
1. Liquidity and Capital Resources | 6 Months Ended |
Nov. 30, 2013 | |
Capital [Abstract] | ' |
Liquidity and Capital Resources | ' |
Cash Flows — During the quarter ending November 30, 2013, the Company primarily utilized cash, cash equivalents and proceeds from a series of loans guaranteed by securities it holds to fund its operations. | |
Cash flows used in operations for the quarters ended November 30, 2013 and 2012 were $554,011 and $618,615, respectively. | |
Capital Resources — As of November 30, 2013, the Company had cash and cash equivalents of $111,643 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 lending or sales of our securities in order to continue to fund business operations. The potential issuances of additional shares will result in dilution to our 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
2. Critical Accounting Policies and Estimates | 6 Months Ended | ||||||||||||||||
Nov. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Critical Accounting Policies and Estimates | ' | ||||||||||||||||
Basis of Presentation — The 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. | |||||||||||||||||
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 Accounting Standards Codification (“ASC”) section 830-10-55. | |||||||||||||||||
Selling Price and Market - As a representative office in 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 expenses are paid in US dollars. The expenses generated in PRC are paid by a monthly cash transfer from the US when the expenses are due, resulting in very little foreign currency exposure. This indicates that the functional currency is US dollars. | |||||||||||||||||
Numerous Intercompany Transactions – The Company has multiple transactions each month between the US and Chinese representative offices. This indicates that 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. | |||||||||||||||||
Reclassifications — Certain amounts in the prior period’s financial statements have been reclassified to conform to the current quarter’s presentation and to correct prior period errors. | |||||||||||||||||
Revenue recognition — Revenues are derived from six different sources: | |||||||||||||||||
1. Fees from banner advertisement, webpage hosting and maintenance, translation services, web based advertising and promotion fees for customers. These revenues are recognized within the corresponding quarter and finalized 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 in association with Forex. These fees are recognized when earned. It should be noted at this time that such fees represent approximately one (1%) percent of the overall revenues as represented and, as such, are included in the general business services category. | |||||||||||||||||
4. Binary option fees were earned through various efforts supporting Option World, a Chinese based binary option trading platform for which the company had a contract with Krisworld Limited of Hong Kong. In March of 2013, the Company severed its relationship with Krisworld Limited of Hong Kong, due to lack of response to their clients for which the Company had responsibility for coordinating, lack of payment on existing billings for services that resulted in a significant write off for the Company in Fiscal Year 2013, and for general lack of response to the Company’s repeated inquiries on behalf of Krisworld Limited of Hong Kong related clients. Since March 2013, the Company has generated no revenue from binary option commissions and does not expect to pursue this revenue source in the foreseeable future. | |||||||||||||||||
5. Consulting revenues as associated with various pre-public company services, as well as assistance in the development of general corporate strategies having to do with becoming a public company on various publically traded exchanges. | |||||||||||||||||
6. Service provider income is earned by the Company in return for publicizing other publicly traded companies, in return for shares of the company’s common stock. These revenues are prepaid by the client company, and then the revenue is recognized over the term of the services agreement. All valuation calculations were tied to the active trading value of the client’s stock on the specific stock exchange, and therefore are considered a fair market level one item as directed by Accounting Standards Codification 820. | |||||||||||||||||
Costs of Services Sold — Costs of services sold are the total direct costs 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 six months or less to be cash equivalents. At certain times, cash in bank may exceed the amount covered by FDIC insurance. At November 30, 2013 and May 31, 2013, there were deposit balances in a US bank of $111,113 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 November 30, 2013 and May 31, 2013, there were deposits of $530 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. Revenue related to the binary option revenue and Krisworld start-up support are paid with a one month lag, noting this relationship was severed in March of 2013. As of November 30, 2013 and May 31, 2013, the Company had accounts receivable of $17,141 and $3,667, respectively. | |||||||||||||||||
The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of November 30, 2013 and May 31, 2013, the Company determined that, based on historically having no bad debts, an allowance was not needed. | |||||||||||||||||
The operations of the Company (Representative Office status for general back of the house support) are partially 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. | |||||||||||||||||
Investments available for sale – Investments available for sale is comprised of publicly traded stock and private company stock received in return for providing various levels of corporate messaging support and certain investor relation services to a variety of unrelated companies with service contracts ranging from one week to twenty-four months, starting in August 2012. The Company considers the securities to be liquid and convertible to cash, based upon the specific holding period requirements of Rule 144, in consideration of the corporate structure of the issuing entity. The Company has the ability and intent to liquidate or leverage 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 cost method. These shares were classified as available for sale securities in accordance with ASC 948-310-40-1, as the Company's intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, a trading security that has a readily determinable fair value shall be measured subsequently at fair value in the statement of financial position. "Unrealized holding gains and losses for trading securities shall be included in earnings". | |||||||||||||||||
When the shares will be earned over a term longer than within the current reporting period, the Company has deferred the recognition of the earnings of the revenue over the period the services are performed. The value recorded is determined by multiplying the average of the closing price on the last day of the month for the period being reported on, based on quotes from a reliable quotation source. Upon receipt, these shares will be recorded as an asset on the Company’s financials as "Available for sale securities". The Company will also record a corresponding contra-asset account titled "Unearned Revenue". | |||||||||||||||||
Since all securities held were received in exchange for service they were delivered with a standard 144 restriction (restricts them from sale for six months from date certificate is issued). All current certificates will be free trading at various times starting in December of 2013 with the last certificate being freely trading by May 31, 2014. It should be noted that most of the stock owned by the company would be classified a “penny stock” and therefore is generally volatile in nature. There is no guarantee that the cash received will equal the current carrying value of the stock at November 30, 2013, when it sold. | |||||||||||||||||
Other Current Assets — Other current assets are comprised primarily of deposits in Chinese RMB on building space under an operating lease and are stated at the current exchange rate at quarter end. | |||||||||||||||||
Other current assets were $49,856 and $33,795 at November 30, 2013 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 $12,844 and $16,699 for the six months ended November 30, 2013 and 2012, 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, plant 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 November 30, 2013 and May 31, 2013. | |||||||||||||||||
Accrued Liabilities— Accrued liabilities are comprised of the following: | |||||||||||||||||
November 30, | May 31, | ||||||||||||||||
2013 | 2013 | ||||||||||||||||
China Employees’ Salaries and Commissions Accrual | $ | 39,843 | $ | 36,956 | |||||||||||||
Representative Office Tax Accrual | 10,153 | 9,198 | |||||||||||||||
Other Accruals | 18,546 | 5,782 | |||||||||||||||
$ | 68,542 | $ | 51,936 | ||||||||||||||
Unearned revenue, investor relations work – The Company has received total shares of stock with a value of $1,404,604, at November 30, 2013 as payment for investor relations work that the Company has provided and will continue to provide over a period starting August 1, 2012 and going through December 31, 2015. At November 30, 2013 the stock held by the Company that had not yet been earned was valued at $387,625. As the Company earns the fee for this work, this balance will be reduced to reflect the portion still to be earned. | |||||||||||||||||
Short-term debt, secured by stock – The Company has obtained short term debt of $460,000 from various individuals, secured by 100,000 shares of the company owned stock in Nova Lifestyles, Inc. The notes are due to be repaid February 28, 2014 and are extendable for another 180 days at the lender’s option. These notes have a variable interest rate of a minimum of 12% annually, but may increase based on various factors. As of November 30, 2013, the assets securing these loans were valued at $425,000 and the effective interest rate was 12%. | |||||||||||||||||
Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||||||||||
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 67,500 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: | |||||||||||||||||
30-Nov-13 | 31-May-13 | ||||||||||||||||
Level 1 | Level 2 | Level 1 | Level 2 | ||||||||||||||
Cash | 111,643 | – | 211,442 | – | |||||||||||||
Investments | 1,337,104 | 67,500 | 592,021 | 60,00 | |||||||||||||
Total Financial Instruments | 1,448,747 | 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, 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 $90,740 and $106,101 for the six months ended November 30, 2013 and 2012, respectively. | |||||||||||||||||
Earnings (Loss) Per Share — Earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128), “Earnings Per Share”. | |||||||||||||||||
Stock Based Compensation — The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards, based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model. | |||||||||||||||||
Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18, when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18, these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse. | |||||||||||||||||
Share based expense paid to outside companies is expensed as occurred. Since the Company’s stock is publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. | |||||||||||||||||
Stock option activity was as follows (converted post reverse split): | |||||||||||||||||
Weighted | |||||||||||||||||
Average | |||||||||||||||||
Number of | Exercise | ||||||||||||||||
Shares | Price ($) | ||||||||||||||||
Balance at May 31, 2012 | 389,035 | 0.48 | |||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | – | |||||||||||||||
Forfeited or expired | – | – | |||||||||||||||
Balance at May 31, 2013 | 389,035 | $ | 0.48 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | – | |||||||||||||||
Forfeited or expired | – | – | |||||||||||||||
Balance at November 30, 2013 | 389,035 | $ | 0.48 | ||||||||||||||
The following table presents information regarding options outstanding and exercisable as of November 30, 2013: | |||||||||||||||||
Weighted average contractual remaining term — options outstanding | 1.19 years | ||||||||||||||||
Aggregate intrinsic value — options outstanding | $ | 121,050 | |||||||||||||||
Options exercisable | $ | 92,865 | |||||||||||||||
Weighted average exercise price — options exercisable | $ | 0.56 | |||||||||||||||
Aggregate intrinsic value — options exercisable | $ | 27,860 | |||||||||||||||
Weighted average contractual remaining term — options exercisable | 1.84 years | ||||||||||||||||
As of November 30, 2013, 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 | 90.60% | ||||||||||||||||
Dividend rate | 0% | ||||||||||||||||
3_Stockholders_Equity
3. Stockholders' Equity | 6 Months Ended |
Nov. 30, 2013 | |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
At November 30, 2013 and May 31, 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. | |
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 six 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 2012, 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 six 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
4. Property and Equipment | 6 Months Ended | ||||||||
Nov. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment: | ' | ||||||||
Property and equipment are recorded at cost, net of accumulated depreciation, and are comprised of the following: | |||||||||
November 30, | May 31, | ||||||||
2013 | 2013 | ||||||||
Furniture & fixtures | $ | 70,711 | $ | 70,711 | |||||
Leasehold improvements | 13,405 | 13,405 | |||||||
84,116 | 84,116 | ||||||||
Less: accumulated depreciation | (59,963 | ) | (51,411 | ) | |||||
$ | 24,153 | $ | 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 six months ended November 30, 2013 and 2012 was $8,554 and $6,372, respectively. |
5_Intangible_Assets
5. Intangible Assets | 6 Months Ended | ||||||||
Nov. 30, 2013 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Intangible Assets | ' | ||||||||
Intangible assets are comprised of the following: | |||||||||
November 30, | May 31, | ||||||||
2012 | 2012 | ||||||||
Website development costs | $ | 139,906 | $ | 134,118 | |||||
Less: accumulated amortization | (71,465 | ) | (67,173 | ) | |||||
$ | 68,441 | $ | 66,945 | ||||||
Amortization is calculated over a straight-line basis using the economic life of the asset. Amortization expense for the six months ended November 30, 2013 and 2012 was $4,290 and $10,327, respectively. |
6_Commitments_and_Concentratio
6. Commitments and Concentrations | 6 Months Ended |
Nov. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
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 — During the first quarter of 2013, the Company signed a new office lease in Shanghai for a one year period ending September 30, 2014, resulting in future lease commitments of $63,745, based on the exchange rate at November 30, 2013. | |
Concentrations — During the period’s ending November 30, 2013 and 2012, the majority of the Company’s revenue was derived from its operations in PRC from individuals, primarily in the United States and Canada. During the period ended November 30, 2013, the majority of the Company’s accounts receivable were due from one company. | |
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 not a party to any lawsuit or proceedings which, individually or in the aggregate, in the opinion of management, is reasonably likely to have a material adverse effect on the financial condition, results of operation or cash flow of the Company. |
7_Subsequent_Events
7. Subsequent Events | 6 Months Ended |
Nov. 30, 2013 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
During the month of December 2013, the Company sold 50,000 shares of Nova Lifestyles stock for $215,250 and used a portion of the proceeds to repaid $200,000 of its currently outstanding debt at it was related to six (6) outstanding loans of $20,000 to $50,000 each and paid interest as associated with this repayment of principal in the amount of $9,386.24. |
2_Critical_Accounting_Policies1
2. Critical Accounting Policies and Estimates (Policies) | 6 Months Ended | ||||||||||||||||
Nov. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Basis of Presentation | ' | ||||||||||||||||
Basis of Presentation — The 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. | |||||||||||||||||
Foreign Currency | ' | ||||||||||||||||
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 Accounting Standards Codification (“ASC”) section 830-10-55. | |||||||||||||||||
Selling Price and Market - As a representative office in 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 expenses are paid in US dollars. The expenses generated in PRC are paid by a monthly cash transfer from the US when the expenses are due, resulting in very little foreign currency exposure. This indicates that the functional currency is US dollars. | |||||||||||||||||
Numerous Intercompany Transactions – The Company has multiple transactions each month between the US and Chinese representative offices. This indicates that 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. | |||||||||||||||||
Reclassifications | ' | ||||||||||||||||
Reclassifications — Certain amounts in the prior period’s financial statements have been reclassified to conform to the current quarter’s presentation and to correct prior period errors. | |||||||||||||||||
Revenue recognition | ' | ||||||||||||||||
Revenue recognition — Revenues are derived from six different sources: | |||||||||||||||||
1. Fees from banner advertisement, webpage hosting and maintenance, translation services, web based advertising and promotion fees for customers. These revenues are recognized within the corresponding quarter and finalized 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 in association with Forex. These fees are recognized when earned. It should be noted at this time that such fees represent approximately one (1%) percent of the overall revenues as represented and, as such, are included in the general business services category. | |||||||||||||||||
4. Binary option fees were earned through various efforts supporting Option World, a Chinese based binary option trading platform for which the company had a contract with Krisworld Limited of Hong Kong. In March of 2013, the Company severed its relationship with Krisworld Limited of Hong Kong, due to lack of response to their clients for which the Company had responsibility for coordinating, lack of payment on existing billings for services that resulted in a significant write off for the Company in Fiscal Year 2013, and for general lack of response to the Company’s repeated inquiries on behalf of Krisworld Limited of Hong Kong related clients. Since March 2013, the Company has generated no revenue from binary option commissions and does not expect to pursue this revenue source in the foreseeable future. | |||||||||||||||||
5. Consulting revenues as associated with various pre-public company services, as well as assistance in the development of general corporate strategies having to do with becoming a public company on various publically traded exchanges. | |||||||||||||||||
6. Service provider income is earned by the Company in return for publicizing other publicly traded companies, in return for shares of the company’s common stock. These revenues are prepaid by the client company, and then the revenue is recognized over the term of the services agreement. All valuation calculations were tied to the active trading value of the client’s stock on the specific stock exchange, and therefore are considered a fair market level one item as directed by Accounting Standards Codification 820. | |||||||||||||||||
Costs of Services Sold | ' | ||||||||||||||||
Costs of Services Sold — Costs of services sold are the total direct costs of the Company’s operations in Shanghai. | |||||||||||||||||
Website Development Costs | ' | ||||||||||||||||
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 | ' | ||||||||||||||||
Cash and Cash Equivalents - The Company considers all highly liquid instruments with an original maturity of six months or less to be cash equivalents. At certain times, cash in bank may exceed the amount covered by FDIC insurance. At November 30, 2013 and May 31, 2013, there were deposit balances in a US bank of $111,113 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 November 30, 2013 and May 31, 2013, there were deposits of $530 and $1,442, respectively, in The Bank of China. | |||||||||||||||||
Accounts Receivable and Concentration of Credit | ' | ||||||||||||||||
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. Revenue related to the binary option revenue and Krisworld start-up support are paid with a one month lag, noting this relationship was severed in March of 2013. As of November 30, 2013 and May 31, 2013, the Company had accounts receivable of $17,141 and $3,667, respectively. | |||||||||||||||||
The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of November 30, 2013 and May 31, 2013, the Company determined that, based on historically having no bad debts, an allowance was not needed. | |||||||||||||||||
The operations of the Company (Representative Office status for general back of the house support) are partially 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. | |||||||||||||||||
Investments available for sale | ' | ||||||||||||||||
Investments available for sale – Investments available for sale is comprised of publicly traded stock and private company stock received in return for providing various levels of corporate messaging support and certain investor relation services to a variety of unrelated companies with service contracts ranging from one week to twenty-four months, starting in August 2012. The Company considers the securities to be liquid and convertible to cash, based upon the specific holding period requirements of Rule 144, in consideration of the corporate structure of the issuing entity. The Company has the ability and intent to liquidate or leverage 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 cost method. These shares were classified as available for sale securities in accordance with ASC 948-310-40-1, as the Company's intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, a trading security that has a readily determinable fair value shall be measured subsequently at fair value in the statement of financial position. "Unrealized holding gains and losses for trading securities shall be included in earnings". | |||||||||||||||||
When the shares will be earned over a term longer than within the current reporting period, the Company has deferred the recognition of the earnings of the revenue over the period the services are performed. The value recorded is determined by multiplying the average of the closing price on the last day of the month for the period being reported on, based on quotes from a reliable quotation source. Upon receipt, these shares will be recorded as an asset on the Company’s financials as "Available for sale securities". The Company will also record a corresponding contra-asset account titled "Unearned Revenue". | |||||||||||||||||
Since all securities held were received in exchange for service they were delivered with a standard 144 restriction (restricts them from sale for six months from date certificate is issued). All current certificates will be free trading at various times starting in December of 2013 with the last certificate being freely trading by May 31, 2014. It should be noted that most of the stock owned by the company would be classified a “penny stock” and therefore is generally volatile in nature. There is no guarantee that the cash received will equal the current carrying value of the stock at November 30, 2013, when it sold. | |||||||||||||||||
Other Current Assets | ' | ||||||||||||||||
Other Current Assets — Other current assets are comprised primarily of deposits in Chinese RMB on building space under an operating lease and are stated at the current exchange rate at quarter end. | |||||||||||||||||
Other current assets were $49,856 and $33,795 at November 30, 2013 and May 31, 2013, respectively. | |||||||||||||||||
Property and Equipment | ' | ||||||||||||||||
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 $12,844 and $16,699 for the six months ended November 30, 2013 and 2012, 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 | ' | ||||||||||||||||
Impairment of Long-life Assets — In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant 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 November 30, 2013 and May 31, 2013. | |||||||||||||||||
Accrued Liabilities | ' | ||||||||||||||||
Accrued Liabilities— Accrued liabilities are comprised of the following: | |||||||||||||||||
November 30, | May 31, | ||||||||||||||||
2013 | 2013 | ||||||||||||||||
China Employees’ Salaries and Commissions Accrual | $ | 39,843 | $ | 36,956 | |||||||||||||
Representative Office Tax Accrual | 10,153 | 9,198 | |||||||||||||||
Other Accruals | 18,546 | 5,782 | |||||||||||||||
$ | 68,542 | $ | 51,936 | ||||||||||||||
Unearned revenue, investor relations | ' | ||||||||||||||||
Unearned revenue, investor relations work – The Company has received total shares of stock with a value of $1,404,604, at November 30, 2013 as payment for investor relations work that the Company has provided and will continue to provide over a period starting August 1, 2012 and going through December 31, 2015. At November 30, 2013 the stock held by the Company that had not yet been earned was valued at $387,625. As the Company earns the fee for this work, this balance will be reduced to reflect the portion still to be earned. | |||||||||||||||||
Short-term debt, secured by stock | ' | ||||||||||||||||
Short-term debt, secured by stock – The Company has obtained short term debt of $460,000 from various individuals, secured by 100,000 shares of the company owned stock in Nova Lifestyles, Inc. The notes are due to be repaid February 28, 2014 and are extendable for another 180 days at the lender’s option. These notes have a variable interest rate of a minimum of 12% annually, but may increase based on various factors. As of November 30, 2013, the assets securing these loans were valued at $425,000 and the effective interest rate was 12%. | |||||||||||||||||
Use of Estimates | ' | ||||||||||||||||
Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||||
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 67,500 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: | |||||||||||||||||
30-Nov-13 | 31-May-13 | ||||||||||||||||
Level 1 | Level 2 | Level 1 | Level 2 | ||||||||||||||
Cash | 111,643 | – | 211,442 | – | |||||||||||||
Investments | 1,337,104 | 67,500 | 592,021 | 60,00 | |||||||||||||
Total Financial Instruments | 1,448,747 | 67,500 | 803,463 | 60,000 | |||||||||||||
Income Taxes | ' | ||||||||||||||||
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, 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 — Advertising costs are expensed when incurred. Advertising costs totaled $90,740 and $106,101 for the six months ended November 30, 2013 and 2012, respectively. | |||||||||||||||||
Earnings (Loss) Per Share | ' | ||||||||||||||||
Earnings (Loss) Per Share — Earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128), “Earnings Per Share”. | |||||||||||||||||
Stock Based Compensation | ' | ||||||||||||||||
Stock Based Compensation — The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards, based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model. | |||||||||||||||||
Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18, when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18, these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse. | |||||||||||||||||
Share based expense paid to outside companies is expensed as occurred. Since the Company’s stock is publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. | |||||||||||||||||
Stock option activity was as follows (converted post reverse split): | |||||||||||||||||
Weighted | |||||||||||||||||
Average | |||||||||||||||||
Number of | Exercise | ||||||||||||||||
Shares | Price ($) | ||||||||||||||||
Balance at May 31, 2012 | 389,035 | 0.48 | |||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | – | |||||||||||||||
Forfeited or expired | – | – | |||||||||||||||
Balance at May 31, 2013 | 389,035 | $ | 0.48 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | – | |||||||||||||||
Forfeited or expired | – | – | |||||||||||||||
Balance at November 30, 2013 | 389,035 | $ | 0.48 | ||||||||||||||
The following table presents information regarding options outstanding and exercisable as of November 30, 2013: | |||||||||||||||||
Weighted average contractual remaining term — options outstanding | 1.19 years | ||||||||||||||||
Aggregate intrinsic value — options outstanding | $ | 121,050 | |||||||||||||||
Options exercisable | $ | 92,865 | |||||||||||||||
Weighted average exercise price — options exercisable | $ | 0.56 | |||||||||||||||
Aggregate intrinsic value — options exercisable | $ | 27,860 | |||||||||||||||
Weighted average contractual remaining term — options exercisable | 1.84 years | ||||||||||||||||
As of November 30, 2013, 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 | 90.60% | ||||||||||||||||
Dividend rate | 0% | ||||||||||||||||
2_Critical_Accounting_Policies2
2. Critical Accounting Policies and Estimates (Tables) | 6 Months Ended | ||||||||||||||||
Nov. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Accrued Liabilities | ' | ||||||||||||||||
November 30, | May 31, | ||||||||||||||||
2013 | 2013 | ||||||||||||||||
China Employees’ Salaries and Commissions Accrual | $ | 39,843 | $ | 36,956 | |||||||||||||
Representative Office Tax Accrual | 10,153 | 9,198 | |||||||||||||||
Other Accruals | 18,546 | 5,782 | |||||||||||||||
$ | 68,542 | $ | 51,936 | ||||||||||||||
Carrying and fair value of assets | ' | ||||||||||||||||
30-Nov-13 | 31-May-13 | ||||||||||||||||
Level 1 | Level 2 | Level 1 | Level 2 | ||||||||||||||
Cash | 111,643 | – | 211,442 | – | |||||||||||||
Investments | 1,337,104 | 67,500 | 592,021 | 60,00 | |||||||||||||
Total Financial Instruments | 1,448,747 | 67,500 | 803,463 | 60,000 | |||||||||||||
Stock option activity | ' | ||||||||||||||||
Weighted | |||||||||||||||||
Average | |||||||||||||||||
Number of | Exercise | ||||||||||||||||
Shares | Price ($) | ||||||||||||||||
Balance at May 31, 2012 | 389,035 | 0.48 | |||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | – | |||||||||||||||
Forfeited or expired | – | – | |||||||||||||||
Balance at May 31, 2013 | 389,035 | $ | 0.48 | ||||||||||||||
Granted | – | $ | – | ||||||||||||||
Exercised | – | – | |||||||||||||||
Forfeited or expired | – | – | |||||||||||||||
Balance at November 30, 2013 | 389,035 | $ | 0.48 | ||||||||||||||
Options outstanding and exercisable | ' | ||||||||||||||||
Weighted average contractual remaining term — options outstanding | 1.19 years | ||||||||||||||||
Aggregate intrinsic value — options outstanding | $ | 121,050 | |||||||||||||||
Options exercisable | $ | 92,865 | |||||||||||||||
Weighted average exercise price — options exercisable | $ | 0.56 | |||||||||||||||
Aggregate intrinsic value — options exercisable | $ | 27,860 | |||||||||||||||
Weighted average contractual remaining term — options exercisable | 1.84 years | ||||||||||||||||
Weighted Average Assumptions | ' | ||||||||||||||||
Risk-free interest rate | 1.44% | ||||||||||||||||
Expected life of options | 4-5 years | ||||||||||||||||
Annualized volatility | 90.60% | ||||||||||||||||
Dividend rate | 0% |
4_Property_and_Equipment_Table
4. Property and Equipment (Tables) | 6 Months Ended | ||||||||
Nov. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and equipment | ' | ||||||||
November 30, | May 31, | ||||||||
2013 | 2013 | ||||||||
Furniture & fixtures | $ | 70,711 | $ | 70,711 | |||||
Leasehold improvements | 13,405 | 13,405 | |||||||
84,116 | 84,116 | ||||||||
Less: accumulated depreciation | (59,963 | ) | (51,411 | ) | |||||
$ | 24,153 | $ | 32,705 | ||||||
Expected useful life | ' | ||||||||
Computer equipment | 3 years | ||||||||
Furniture & fixtures | 3 years | ||||||||
Leasehold improvements | Term of the lease |
5_Intangible_Assets_Tables
5. Intangible Assets (Tables) | 6 Months Ended | ||||||||
Nov. 30, 2013 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Intangible assets | ' | ||||||||
November 30, | May 31, | ||||||||
2012 | 2012 | ||||||||
Website development costs | $ | 139,906 | $ | 134,118 | |||||
Less: accumulated amortization | (71,465 | ) | (67,173 | ) | |||||
$ | 68,441 | $ | 66,945 |
2_Critical_Accounting_Policies3
2. Critical Accounting Policies and Estimates (Details-Accrued Liabilities) (USD $) | Nov. 30, 2013 | 31-May-13 |
Accrued liabilities | $68,542 | $51,936 |
China Employees' Salaries and Commissions Accrual | ' | ' |
Accrued liabilities | 39,843 | 36,956 |
Representative Office Tax Accrual | ' | ' |
Accrued liabilities | 10,153 | 9,198 |
Other Accruals | ' | ' |
Accrued liabilities | $18,546 | $5,782 |
2_Critical_Accounting_Policies4
2. Critical Accounting Policies and Estimates (Details - Fair Value Financial Instruments) (USD $) | Nov. 30, 2013 | 31-May-13 |
Level 1 | ' | ' |
Cash | $111,643 | $211,442 |
Investments | 1,337,104 | 592,021 |
Total Financial Instruments | 1,448,747 | 803,463 |
Level 2 | ' | ' |
Cash | 0 | 0 |
Investments | 67,500 | 60,000 |
Total Financial Instruments | $67,500 | $60,000 |
2_Critical_Accounting_Policies5
2. Critical Accounting Policies and Estimates (Details-Stock Option Activity) (Stock Options, USD $) | 6 Months Ended | 12 Months Ended |
Nov. 30, 2013 | 31-May-13 | |
Stock Options | ' | ' |
Number of Options Outstanding, Beginning | 389,035 | 389,035 |
Number of Options Granted | ' | ' |
Number of Options Exercised | ' | ' |
Number of Options Forfeited or Expired | ' | ' |
Number of Options Outstanding, Ending | 389,035 | 389,035 |
Weighted Average Exercise Price Outstanding, Beginning | $0.48 | $0.48 |
Weighted Average Exercise Price Granted | ' | ' |
Weighted Average Exercise Price Exercised | ' | ' |
Weighted Average Exercise Price Forfeited or Expired | ' | ' |
Weighted Average Exercise Price Outstanding, Ending | $0.48 | $0.48 |
Weighted average contractual remaining term - options outstanding | '1 year 2 months 8 days | ' |
Aggregate intrinsic value - options outstanding | $121,050 | ' |
Options exercisable | 92,865 | ' |
Weighted average exercise price - options exercisable | $0.56 | ' |
Aggregate intrinsic value - options exercisable | $27,860 | ' |
Weighted average contractual remaining term - options exercisable | '1 year 10 months 2 days | ' |
2_Critical_Accounting_Policies6
2. Critical Accounting Policies and Estimates (Details-Assumptions) (Stock Options) | 6 Months Ended |
Nov. 30, 2013 | |
Stock Options | ' |
Risk free interest rate | 1.44% |
Expected life of options | '4-5 years |
Annualized volatility | 90.60% |
Dividend rate | 0.00% |
2_Critical_Accounting_Policies7
2. Critical Accounting Policies and Estimates (Narrative) (USD $) | 6 Months Ended | |||
Nov. 30, 2013 | Nov. 30, 2012 | 31-May-13 | 31-May-12 | |
Cash and cash equivalents | $111,643 | $393,379 | $211,442 | $1,065,564 |
Depreciation and amortization | 12,844 | 16,699 | ' | ' |
Unearned revenue | 387,625 | ' | 306,079 | ' |
Assets securing notes payable | 425,000 | ' | ' | ' |
Advertising costs | 90,740 | 106,101 | ' | ' |
United States | ' | ' | ' | ' |
Cash and cash equivalents | 111,113 | ' | 210,000 | ' |
China | ' | ' | ' | ' |
Cash and cash equivalents | $530 | ' | $1,442 | ' |
4_Property_and_Equipment_Detai
4. Property and Equipment (Details) (USD $) | Nov. 30, 2013 | 31-May-13 |
Property Plant and Equipment, Gross | $84,116 | $84,116 |
Less: accumulated depreciation | -59,963 | -51,411 |
Property Plant and Equipment. Net | 24,153 | 32,705 |
Furniture & Fixtures | ' | ' |
Property Plant and Equipment, Gross | 70,711 | 70,711 |
Leasehold Improvements | ' | ' |
Property Plant and Equipment, Gross | $13,405 | $13,405 |
4_Property_and_Equipment_Detai1
4. Property and Equipment (Details-Useful Lives) (USD $) | 6 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
Depreciation expense | $8,554 | $6,372 |
Computer Equipment | ' | ' |
Expected Useful Lives | '3 years | ' |
Furniture & Fixtures | ' | ' |
Expected Useful Lives | '3 years | ' |
Leasehold Improvements | ' | ' |
Expected Useful Lives | 'Term of the lease | ' |
5_Intangible_Assets_Details
5. Intangible Assets (Details) (USD $) | 6 Months Ended | ||
Nov. 30, 2013 | Nov. 30, 2012 | 31-May-13 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' | ' |
Website development costs | $139,906 | ' | $134,118 |
Less: accumulated amortization | -71,465 | ' | -67,173 |
Total Intangible Assets | 68,441 | ' | 66,945 |
Amortization expense | $4,290 | $10,327 | ' |
6_Commitments_and_Concentratio1
6. Commitments and Concentrations (Narrative) (USD $) | Nov. 30, 2013 |
Commitments And Concentrations Detail Narratives | ' |
Office lease commitment | $63,745 |