Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Feb. 29, 2016 | Apr. 19, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | Chineseinvestors.com, Inc. | |
Entity Central Index Key | 1,459,482 | |
Document Type | 10-Q | |
Document Period End Date | Feb. 29, 2016 | |
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 | 7,724,305 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Balance Sheets
Balance Sheets - USD ($) | Feb. 29, 2016 | May. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 497,058 | $ 498,189 |
Accounts receivable, net | 118,672 | 101,918 |
Investments, available for sale, in affiliate | 1,778,587 | 1,148,000 |
Investments, available for sale | 126,240 | 301,491 |
Prepaid taxes | 33,165 | 33,165 |
Other current assets | 55,265 | 91,634 |
Total current assets | 2,608,987 | 2,174,397 |
Non-current assets | ||
Property and equipment, net | 12,505 | 9,783 |
Website development, net | 82,543 | 79,644 |
Total non-current assets | 95,048 | 89,427 |
Total assets | 2,704,035 | 2,263,824 |
Current liabilities | ||
Accounts payable | 25,028 | 22,811 |
Accounts payable - due in stock | 52,323 | 114,800 |
Deferred revenue | 382,983 | 206,565 |
Unearned revenue paid in stock | 111,111 | 173,611 |
Unearned rental income | 10,000 | 0 |
Accrued liabilities | 86,900 | 65,844 |
Accrued dividend & interest | 48,854 | 34,947 |
Total current liabilities | 717,199 | 618,578 |
Non-current liabilities | ||
Long-term secured debt | 660,000 | 0 |
Long-term deferred revenue | 44,809 | 48,767 |
Total Non-current liabilities | 704,809 | 48,767 |
Total liabilities | $ 1,422,008 | $ 667,345 |
Commitments and Contingencies | ||
Shareholders' equity | ||
Common stock $0.001 par value 80,000,000 authorized and 7,724,305 were issued and outstanding February 29, 2016 and May 31, 2015, respectively | $ 7,725 | $ 7,725 |
Additional paid-in capital | 14,671,770 | 13,971,170 |
Foreign currency gain | (543) | 536 |
Unrealized gain on investments available for sale | 1,703,406 | 531,631 |
Accumulated deficit | (15,103,771) | (12,917,373) |
Total Shareholders' equity | 1,282,027 | 1,596,479 |
Total liabilities and stockholders' equity | 2,704,035 | 2,263,824 |
Preferred Class A [Member] | ||
Shareholders' equity | ||
Preferred stock | 905 | 905 |
Preferred Class B [Member] | ||
Shareholders' equity | ||
Preferred stock | $ 2,535 | $ 1,885 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Feb. 29, 2016 | May. 31, 2015 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock authorized | 80,000,000 | 80,000,000 |
Common stock issued | 7,724,305 | 7,724,305 |
Common stock outstanding | 7,724,305 | 7,724,305 |
Preferred Class A [Member] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock authorized | 20,000,000 | 20,000,000 |
Preferred stock issued | 905,000 | 905,000 |
Preferred stock outstanding | 905,000 | 905,000 |
Preferred Class B [Member] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock authorized | 20,000,000 | 20,000,000 |
Preferred stock issued | 2,415,000 | 1,885,000 |
Preferred stock outstanding | 2,415,000 | 1,885,000 |
Statement of Comprehensive (Los
Statement of Comprehensive (Loss) and Income - USD ($) | 3 Months Ended | 9 Months Ended | ||
Feb. 29, 2016 | Feb. 28, 2015 | Feb. 29, 2016 | Feb. 28, 2015 | |
Operating revenues | ||||
Investor relations | $ 35,833 | $ 596,190 | $ 265,582 | $ 1,416,402 |
Subscription | 144,039 | 178,158 | 344,942 | 519,766 |
Other revenue | 12,080 | 5,477 | 41,359 | 7,852 |
Total revenue | 191,952 | 779,825 | 651,883 | 1,944,020 |
Cost of services | 249,155 | 290,953 | 761,372 | 718,583 |
Gross profit | (57,203) | 488,872 | (109,489) | 1,225,437 |
Operating expenses | ||||
General and administrative expense | 648,732 | 350,238 | 1,700,210 | 1,062,300 |
Advertising expense | 62,859 | 125,069 | 258,551 | 263,545 |
Total operating expenses | 711,591 | 475,307 | 1,958,761 | 1,325,845 |
Net profit/(loss) from operations | (768,794) | 13,565 | (2,068,250) | (100,408) |
Other income/(expense) | ||||
Interest expense | (9,873) | (8,459) | (13,973) | (25,651) |
Net realized gain/(loss) on marketable equity securities | 64,020 | (443,953) | 55,185 | (506,557) |
Total other expense | 54,147 | (452,412) | 41,212 | (532,208) |
Net income/(loss) | (714,647) | (438,847) | (2,027,038) | (632,616) |
Preferred stock dividend | (38,340) | (9,711) | (108,110) | (9,711) |
Preferred stock deemed dividend | 0 | 0 | (51,250) | 0 |
Net income/(loss) available to common shareholders | $ (752,987) | $ (448,558) | $ (2,186,398) | $ (642,327) |
Earnings per share attributable to common shareholders | ||||
Basic loss per share | $ (.09) | $ (.06) | $ (.26) | $ (.09) |
Weighted average number of shares outstanding - basic | 7,724,305 | 7,249,305 | 7,724,305 | 7,249,305 |
Net Income/(Loss) | $ (752,987) | $ (448,558) | $ (2,186,398) | $ (642,327) |
Other comprehensive income/(loss) | ||||
Net unrealized gain/(loss) on available for sale securities | 1,703,406 | 2,471 | 1,703,406 | (1,174,242) |
Comprehensive income (loss) | $ 950,419 | $ (446,087) | $ (482,992) | $ (1,816,569) |
Weighted average number of common shares outstanding - basic & diluted | 7,724,305 | 7,249,305 | 7,724,305 | 7,249,305 |
Comprehensive earnings/(loss) per share - basic | $ .12 | $ (.06) | $ (.06) | $ (.25) |
Statement of Cash Flows
Statement of Cash Flows - USD ($) | 9 Months Ended | |
Feb. 29, 2016 | Feb. 28, 2015 | |
OPERATING ACTIVTIES | ||
Net Income/(Loss) | $ (2,186,398) | $ (642,327) |
Adjustments to reconcile net loss (income) to net cash (used in) provided by operating activities: | ||
Non-cash revenue received as available for sale securities | 1,753,614 | (86,009) |
Net impact of available for sale securities | (1,841,087) | (506,557) |
Deemed dividend for beneficial conversion of convertible preferred stock | 51,250 | 0 |
Depreciation and amortization | 15,230 | 20,472 |
Stock based compensation | 0 | 25,000 |
Non-cash expenses paid with available for sale securities | 0 | 14,983 |
Changes in operating assets and liabilities | ||
Accounts receivable | (16,754) | 15,648 |
Other current assets | 36,369 | 5,929 |
Accounts payable | 2,218 | 58,455 |
Deferred revenue | 182,460 | (168,384) |
Accrued liabilities | (42,500) | (36,091) |
Deferred interest | 13,907 | (12,858) |
Net cash used in operating activities | (2,031,691) | (1,311,735) |
Cash flows from investing activities | ||
Purchase of equipment | (20,852) | (28,350) |
Proceeds from note receivable - affiliate | 0 | 0 |
Proceeds from the sale of marketable equity securities | 741,412 | 633,539 |
Net cash provided by investing activities | 720,560 | 605,189 |
Cash flows from financing activities | ||
Cash raised through sale of class B preferred stock | 650,000 | 1,405,000 |
Cash used in paying off short-term debt | 0 | (440,000) |
ST debt | 660,000 | 0 |
Net cash provided by financing activities | 1,310,000 | 965,000 |
Net increase/(decrease) in cash and cash equivalents | (1,131) | 258,450 |
Cash and cash equivalents, beginning of year | 498,189 | 429,199 |
Cash and cash equivalents, end of year | 497,058 | 687,649 |
Supplemental cash flow disclosures | ||
Cash paid for interest | 0 | 35,346 |
Cash paid for income taxes | 0 | 0 |
Cash paid for China representative office tax | 28,208 | 34,071 |
Non-cash financing and investing activities | ||
Unrealized loss in marketable equity securities | $ 1,171,776 | $ (1,174,242) |
Organization and Nature of Oper
Organization and Nature of Operations | 9 Months Ended |
Feb. 29, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Business Description During May, 2000, the Company entered into an agreement with MAS Financial Corp. (MASF) whereby MASF agreed to transfer control of a public shell corporation to the Company and perform certain consulting services for a fee of $30,000. During June, 2000, the Company completed reorganization with MAS Acquisition LII Corp. (MASA) with no operations or significant assets. Pursuant to the terms of the agreement, the Company acquired approximately 96% of the issued and outstanding common shares of MASA in exchange for all of its issued and outstanding common stock. MASA issued 8,200,000 shares of its restricted common stock for all of the issued and outstanding common shares of the Company. This reorganization was accounted for as though it were a recapitalization of the Company and sale by the Company of 319,900 shares of common stock in exchange for the net assets of MASA. In conjunction with the reorganization MASA changed its name to Chineseinvestors.com, Inc. The Company is now incorporated as a C corporation in the State of Indiana as of June 1, 1997. |
1. Liquidity and Capital Resour
1. Liquidity and Capital Resources | 9 Months Ended |
Feb. 29, 2016 | |
Capital [Abstract] | |
Liquidity and Capital Resources | Cash Flows Cash flows used in operations for the nine months ending February 29, 2016 and 2015 were ($2,031,691) and ($1,311,735), respectively, which was an increase from prior years. The increase of cash used in operations was primarily from the reduced revenue received as available for sale securities, the net loss generated from increased operating costs, and a reduced gross profit. Capital Resources Since inception in 1997, the Company has primarily relied upon proceeds from private placements of its equity securities to fund its operations. The Company anticipates continuing to rely on sales of our securities in order to continue to fund business operations. Issuances of additional shares will result in dilution to its existing stockholders. There is no assurance that the Company will be able to complete any additional sales of our equity securities or that it will be able arrange for other financing to fund our planned business activities. Going Concern |
2. Critical Accounting Policies
2. Critical Accounting Policies and Estimates | 9 Months Ended |
Feb. 29, 2016 | |
Accounting Policies [Abstract] | |
Critical Accounting Policies and Estimates | Basis of Presentation Investment in Affiliate Foreign Currency Selling Price and Market Financing Expenses Numerous Intercompany Transactions Due to the functional and reporting currency both being in U.S. dollars, ASC 830-10-45-17 states that a currency translation is not necessary. Revenue recognition The Company recognizes revenue pursuant to revenue recognition principles presented in SAB Topic 13. First, persuasive evidence of an arrangement. Second, delivery has occurred or services have been rendered, thirdly the sellers price to the buyer is fixed or determinable and lastly collectability is reasonably assured. 1. Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services, advertising and promotion fees for customers in the Companys Chinese Investment Guides, sponsorship fees from investment seminars, road shows, and forums. The sales prices of these services are fixed and determinable at the time the contracts are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. 2. Fees from membership subscriptions: these revenues are recognized over the term of the subscription. Subscription terms are generally between 3 and 12 months but can occasionally be as short as 1 month or as long as 24 months. Long term deferred revenues are recognized from subscriptions over 12 months. 3. Fees related to setting up and providing ongoing administrative and translation support for currency trading accounts are in association with Forex. These fees are recognized when earned. 4. Investor relations income is earned by the Company in return for delivering current, publicly available information related to our client companies. These revenues are prepaid by the client company and as such are initially recorded as an asset with an offsetting unearned revenue liability. This revenue is recognized over the term of the services period while the services are being provided. The value of the revenue earned is recognized every quarter based upon the client companys stock closing price multiplied by the numbers of shares earned within that specific accounting period. By recognizing the revenue incrementally, we are following the guidelines of SAB Topic 13, in that we are only recognizing revenue once the value of the revenue received is fixed and determinable. In addition, we are applying the definition of readily determinable fair value presented at Accounting Standards Codification 820-10-15-5 in assessing the amount to recognize in each accounting period. The number of shares earned is a function of the time period for which services are provided over the contract period in relation to the price of the shares at the time of the services being delivered, added to the value of cash received if any, then recognized as revenue in the period the services were delivered. Costs of Services Sold Website Development Costs Cash and Cash Equivalents Accounts Receivable and Concentration of Credit Risk The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of February 29, 2016 and May 31, 2015, the Company determined that an allowance was not needed. The operations of the Company are located in the PRC. Accordingly, the Companys 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. Prepaid taxes Investments available for sale The Company followed the guidance of ASC 320-10-30 to determine the initial measure of value based on the quoted price of an otherwise identical unrestricted security of the same issuer, adjusted for the effect of the restriction, in accordance with the provisions of topic 820-10-15-5, which states that an equity security has a readily determinable fair value if it meets the condition of having a sales prices or bid-and-asked quotations which are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotation systems or by the OTC Markets Group Ins. Restricted stock meets that definition if the restriction terminates within one year. These shares were classified as available for sale securities in accordance with ASC 948-310-40-1 as the Companys intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, equity securities that have readily determinable fair values that are classified as available-for-sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized." As these shares will be earned over the term of the contracts, the Company will defer the recognition of the earnings of the revenue over the period the services are performed. The value recorded will be determined by multiplying the average of the closing price on the last day of the month for the period being reported based on closing market price per share. Upon receipt, these shares were recorded as an asset on the Companys financials as "Investments, available for sale". The Company will also record a corresponding contra-asset account titled Unearned revenue investor relations work. Other Current Assets Other current assets were $55,265 and $91,634 at February 29, 2016 and May 31, 2015, respectively. Property and Equipment 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 . Accrued dividend Accrued Liabilities February 29, 2016 May 31, 2015 China Employees' Salaries and Commissions Accrual $ 71,171 $ 50,779 Representative Office Tax Accrual 3,835 Other Accruals 15,729 11,230 $ 86,900 $ 65,844 Unearned revenue, revenue paid in stock Deferred revenue Unearned rental revenue Long-term debt, secured by stock Use of Estimates The financial statements include some amounts that are based on management's best estimates and judgments. The most significant estimates relate to depreciation and useful lives, and contingencies. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. Fair Value of Financial Instruments 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 Companys financial instruments are level one and are carried at market value, requiring no adjustment to book value. The financial instruments classified as level one were deemed to qualify as that classification because their value was determined by the price of identical instruments traded on an active exchange. It should be noted that 60,000 shares of the stock earned for consulting work, currently being held qualifies as a Level two instrument and has a book value of $67,500. The Company determined that the instrument was Level two because the market for this instrument was less active, as it was currently being distributed through a private placement memorandum, and was not a freely trading public stock. The value of the stock has been verified to be consistent with the carrying value and, therefore, not requiring an adjustment. The 1,976,208 shares of the stock owned in the affiliate, currently being held qualifies as a level two instrument and has a book value of $1,778,587 at February 29, 2016. The Company determined that the instrument was level two based upon private sales to investors. The value of the stock was based on an independent valuation professional at May 31, 2015 and upon private sales transactions on February 29, 2016. The following table summarizes the assets we are carrying and the fair value category in which they are currently classified: February 29, 2016 May 31, 2015 Level 1 Level 2 Level 1 Level 2 Level 3 Cash 487,368 498,189 Investments 55,146 1,846,087 233,991 67,500 1,148,000 Total Financial Instruments 542,514 1,846,087 732,180 67,500 1,148,000 Income Taxes 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. As of February 29, 2016, the Company had approximately $1,606,000 of net deferred tax assets, comprised primarily of the potential future tax benefits from net operating loss carry forwards. Based upon the level of historical taxable income and projections for future taxable income over the period in which the deferred tax assets are deductible, management could not conclude that realization of the deferred tax assets as of February 29, 2016, was more likely than not, and therefore, the Company has recorded a valuation allowance to reduce the net deferred tax assets to zero. The amount of deferred tax assets considered realizable could be adjusted in the near term if future taxable income is generated. Advertising Costs Earnings (Loss) Per Share Stock Based Compensation Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse. Share based expense paid to through direct stock grants is expensed as occurred. Since the Companys stock is publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. The company recognized $25,000 in expenses for stock based compensation to employees through direct stock grants of 50,000 shares in the quarter ended August 31, 2014. Stock option activity was as follows (converted post reverse split): Number of Shares Weighted Average Exercise Price ($) Balance at May 31, 2014 389,035 $ 0.48 Granted Exercised Forfeited or expired Balance at May 31, 2015 389,035 $ 0.48 Granted Exercised Forfeited or expired Balance at February 29, 2016 389,035 $ 0.48 The following table presents information regarding options outstanding and exercisable as of February 29, 2016: Weighted average contractual remaining term options outstanding 0 years Aggregate intrinsic value options outstanding $ 9,337 Options exercisable 389,035 Weighted average exercise price options exercisable $ .48 Aggregate intrinsic value options exercisable $ 101,149 Weighted average contractual remaining term options exercisable 0 years As of February 29, 2016, future compensation costs related to options issued was $0. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows: Risk-free interest rate 1.44% Expected life of options 4-5 years Annualized volatility 90.6% Dividend rate 0% |
3. Stockholders' Equity
3. Stockholders' Equity | 9 Months Ended |
Feb. 29, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | As of February 29, 2016 and May 31, 2015, 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 class A preferred stock and 20,000,000 shares of $.001 par value class B preferred stock were authorized. All common stock shares have full dividend rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future. During the year ended May 31, 2015, the Company converted 380,000 shares of preferred stock for 475,000 shares at a conversion rate of $1.25 per share of preferred stock. During the year ended May 31, 2014, the Company converted 718,776 shares of preferred stock for 910,970 shares at a conversion rate of $1.25 per share of preferred stock. During March 2014, the Company granted 300,000 shares of common stock for compensation. Half the shares were valued at $0.90 per share and the remaining 150,000 shares were valued at $0.77 per share. The Company also issued 18,750 shares for services valued at $0.89 per share. The compensation and consulting expense was recorded as general and administrative expenses for the year ended May 31, 2014. During August 2014, the Company granted 50,000 shares of common stock for compensation. At the time the shares were issued, the stock was valued at $0.50. The compensation and consulting expense was recorded as general and administrative expenses. 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 S-1 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. These shares are restricted, in that they cannot be sold for nine months. In addition, if the Company does not use the capital raise or the funding source is unable to generate the agreed upon capital, the shares are to be returned to the Company. However, in consideration of the accounting principal of more likely than not, as explained in accounting standards codification 350-25-35-30 and 740-10-25-6, the Company recognized the expenses in general and administrative expense. On September 8, 2010, in the third quarter of fiscal year 2011, the Company reverse split its shares at a rate of 8 to 1, resulting in total shares outstanding changing from 38,579,925 to 4,822,491. All Company financial statements are retroactively adjusted at this ratio. Series A Convertible Preferred Stock: During the third quarter, effective February 29, 2012, the Company issued 2,003,776 shares of preferred stock as Series A convertible preferred stock for total proceeds of $2,003,776. The terms of the preferred stock allow the holder to convert each share of preferred stock into 1.25 shares of common stock at any time after nine months from the date of issuance. The holders of shares of preferred stock are also entitled to receive cumulative dividends in preference to any declaration or payment of any dividend at the rate of $0.06 per share per annum, when and if declared by the Board of Directors. Upon issuance of preferred stock convertible in shares of common stock at a price lower than the fair market value of common stock on the date of issuance, in accordance with the guidance provided in ASC 505-10-50 and Emerging Issues Task Force (EITF) No. 00-27, we will record the intrinsic value of this beneficial conversion feature which we calculated to be $520,982 ($1.06 common stock price February 29th, 2012 compared to $0.80 effective conversion rate of $0.26 per share. $0.26 times 2,003,776 = $520,982), as a deemed dividend recognizable in the current year. This deemed dividend was calculated based upon a closing price on February 29, 2012 (the date the shares were formally accepted by the Company) of $1.06 per share and an effective sale price (with conversion) per the preferred share agreement of $0.80 per share of common stock . Series B Convertible Preferred Stock During the nine months ended February 29, 2016 the Company issued 650,000 shares of preferred stock as Series B convertible preferred stock for total proceeds of $650,000. The terms of the preferred stock allow the holder to convert each share of preferred stock into 2.5 shares of common stock at any time after six months from the date of issuance. At the time of preferred stock issuance in the current quarter the conversion price resulted in the company booking a deemed dividend of $51,250. This deemed dividend was calculated based upon a closing price on the date of the stock sale (the date the shares were formally accepted by the Company) averaging approximately $.478 per share and an effective sale price (with conversion) per the preferred share agreement of $0.40 per share of common stock (650,000 times $0.078 = $52,500) . During the year ended May 31, 2015 the Company issued 1,885,000 shares of preferred stock as Series B convertible preferred stock for total proceeds of $1,885,000. The terms of the preferred stock allow the holder to convert each share of preferred stock into 2.5 shares of common stock at any time after six months from the date of issuance. 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 also entitled to receive dividends in preference to any declaration or payment of any dividend at the rate of $.06 per share per annum when, and if declared by the Board of Directors for two years from issuance. No dividends have been declared as of February 29, 2016. However, 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 $1,475,700 as a deemed dividend recognizable over the nine months as the stock , resulting in a line item on the income statement under the Net Income (Loss) line for Deemed dividend for beneficial conversion of convertible preferred stock of $1,475,700 which will increase our paid-in capital and reduce our retained earnings. This deemed dividend was calculated based upon a trading price ranging from $0.45 to $0.76 per share closing price of trading on the OTCBB exchange where are stock is traded and effective sale price (with conversion) of $1.13 to $1.90 per share of common stock. The company has accrued the expense associated with delivering this dividend of 6% resulting in current accrued expense of $34,947 of accrued liability in the period ending May 31, 2015. |
4. Property and Equipment
4. Property and Equipment | 9 Months Ended |
Feb. 29, 2016 | |
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: February 29, 2016 May 31, 2015 Furniture & Fixtures $ 86,173 $ 75,527 Leasehold Improvements 23,417 23,416 $ 109,590 $ 98,943 Less: Accumulated Depreciation (97,084 ) (89,160 ) $ 12,506 $ 9,783 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 nine months ending February 29, 2016 and 2015 was $7,924 and $11,821, respectively. |
5. Intangible Assets
5. Intangible Assets | 9 Months Ended |
Feb. 29, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible assets are comprised of the following: February 29, 2016 May 31, 2015 Website development 175,580 165,374 Less: Accumulated Depreciation (93,037 ) (85,730 ) $ 82,543 $ 79,644 Amortization is calculated over a straight-line basis using the economic life of the asset. Amortization expense for the six months ended February 29, 2016 and 2015 was $7,308 and $8,651 respectively. |
6. Commitments and Concentratio
6. Commitments and Concentrations | 9 Months Ended |
Feb. 29, 2016 | |
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 Shanghai 2016 fiscal year $ 15,572 2017 fiscal year $ 20,348 Office Lease Denver, Colorado 2016 fiscal year 5,400 2017 fiscal year 18,687 2018 fiscal year 19,355 Office Lease New York 2016 fiscal year $ 7,100 Office Lease San Gabriel, California 2016 fiscal year $ 13,970 2017 fiscal year 9,300 Concentrations Litigation |
9. Subsequent Event
9. Subsequent Event | 9 Months Ended |
Feb. 29, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Event | Management has evaluated all events subsequent to year end through the date of this filing, noting that none materially impacted the financial statements. Subsequent to year end the audit committee and chief financial officer started to evaluate a change the internal controls related to expense disbursements and corporate expense reimbursements. The Company expects the proposed changes to be fully in place by fiscal year end. |
2. Critical Accounting Polici14
2. Critical Accounting Policies and Estimates (Policies) | 9 Months Ended |
Feb. 29, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation |
Investment in Affiliate | Investment in Affiliate |
Foreign Currency | Foreign Currency Selling Price and Market Financing Expenses Numerous Intercompany Transactions Due to the functional and reporting currency both being in U.S. dollars, ASC 830-10-45-17 states that a currency translation is not necessary. |
Revenue recognition | Revenue recognition The Company recognizes revenue pursuant to revenue recognition principles presented in SAB Topic 13. First, persuasive evidence of an arrangement. Second, delivery has occurred or services have been rendered, thirdly the sellers price to the buyer is fixed or determinable and lastly collectability is reasonably assured. 1. Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services, advertising and promotion fees for customers in the Companys Chinese Investment Guides, sponsorship fees from investment seminars, road shows, and forums. The sales prices of these services are fixed and determinable at the time the contracts are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. 2. Fees from membership subscriptions: these revenues are recognized over the term of the subscription. Subscription terms are generally between 3 and 12 months but can occasionally be as short as 1 month or as long as 24 months. Long term deferred revenues are recognized from subscriptions over 12 months. 3. Fees related to setting up and providing ongoing administrative and translation support for currency trading accounts are in association with Forex. These fees are recognized when earned. 4. Investor relations income is earned by the Company in return for delivering current, publicly available information related to our client companies. These revenues are prepaid by the client company and as such are initially recorded as an asset with an offsetting unearned revenue liability. This revenue is recognized over the term of the services period while the services are being provided. The value of the revenue earned is recognized every quarter based upon the client companys stock closing price multiplied by the numbers of shares earned within that specific accounting period. By recognizing the revenue incrementally, we are following the guidelines of SAB Topic 13, in that we are only recognizing revenue once the value of the revenue received is fixed and determinable. In addition, we are applying the definition of readily determinable fair value presented at Accounting Standards Codification 820-10-15-5 in assessing the amount to recognize in each accounting period. The number of shares earned is a function of the time period for which services are provided over the contract period in relation to the price of the shares at the time of the services being delivered, added to the value of cash received if any, then recognized as revenue in the period the services were delivered. |
Costs of Services Sold | Costs of Services Sold |
Website Development Costs | Website Development Costs |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Accounts Receivable and Concentration of Credit Risk | Accounts Receivable and Concentration of Credit Risk The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of February 29, 2016 and May 31, 2015, the Company determined that an allowance was not needed. The operations of the Company are located in the PRC. Accordingly, the Companys 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. |
Prepaid taxes | Prepaid taxes |
Investments available for sale | Investments available for sale The Company followed the guidance of ASC 320-10-30 to determine the initial measure of value based on the quoted price of an otherwise identical unrestricted security of the same issuer, adjusted for the effect of the restriction, in accordance with the provisions of topic 820-10-15-5, which states that an equity security has a readily determinable fair value if it meets the condition of having a sales prices or bid-and-asked quotations which are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotation systems or by the OTC Markets Group Ins. Restricted stock meets that definition if the restriction terminates within one year. These shares were classified as available for sale securities in accordance with ASC 948-310-40-1 as the Companys intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, equity securities that have readily determinable fair values that are classified as available-for-sale shall be measured subsequently at fair value in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized." As these shares will be earned over the term of the contracts, the Company will defer the recognition of the earnings of the revenue over the period the services are performed. The value recorded will be determined by multiplying the average of the closing price on the last day of the month for the period being reported based on closing market price per share. Upon receipt, these shares were recorded as an asset on the Companys financials as "Investments, available for sale". The Company will also record a corresponding contra-asset account titled Unearned revenue investor relations work. |
Other Current Assets | Other Current Assets Other current assets were $55,265 and $91,634 at February 29, 2016 and May 31, 2015, respectively. |
Property and Equipment | Property and Equipment 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 . |
Accrued dividend | Accrued dividend |
Accrued liabilities | Accrued Liabilities February 29, 2016 May 31, 2015 China Employees' Salaries and Commissions Accrual $ 71,171 $ 50,779 Representative Office Tax Accrual 3,835 Other Accruals 15,729 11,230 $ 86,900 $ 65,844 |
Unearned revenue, revenue paid in stock | Unearned revenue, revenue paid in stock |
Deferred revenue | Deferred revenue |
Unearned rental revenue | Unearned rental revenue |
Long-term debt secured by stock | Long-term debt, secured by stock |
Use of Estimates | Use of Estimates The financial statements include some amounts that are based on management's best estimates and judgments. The most significant estimates relate to depreciation and useful lives, and contingencies. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments 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 Companys financial instruments are level one and are carried at market value, requiring no adjustment to book value. The financial instruments classified as level one were deemed to qualify as that classification because their value was determined by the price of identical instruments traded on an active exchange. It should be noted that 60,000 shares of the stock earned for consulting work, currently being held qualifies as a Level two instrument and has a book value of $67,500. The Company determined that the instrument was Level two because the market for this instrument was less active, as it was currently being distributed through a private placement memorandum, and was not a freely trading public stock. The value of the stock has been verified to be consistent with the carrying value and, therefore, not requiring an adjustment. The 1,976,208 shares of the stock owned in the affiliate, currently being held qualifies as a level two instrument and has a book value of $1,778,587 at February 29, 2016. The Company determined that the instrument was level two based upon private sales to investors. The value of the stock was based on an independent valuation professional at May 31, 2015 and upon private sales transactions on February 29, 2016. The following table summarizes the assets we are carrying and the fair value category in which they are currently classified: February 29, 2016 May 31, 2015 Level 1 Level 2 Level 1 Level 2 Level 3 Cash 487,368 498,189 Investments 55,146 1,846,087 233,991 67,500 1,148,000 Total Financial Instruments 542,514 1,846,087 732,180 67,500 1,148,000 |
Income Taxes | Income Taxes 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. As of February 29, 2016, the Company had approximately $1,606,000 of net deferred tax assets, comprised primarily of the potential future tax benefits from net operating loss carry forwards. Based upon the level of historical taxable income and projections for future taxable income over the period in which the deferred tax assets are deductible, management could not conclude that realization of the deferred tax assets as of February 29, 2016, was more likely than not, and therefore, the Company has recorded a valuation allowance to reduce the net deferred tax assets to zero. The amount of deferred tax assets considered realizable could be adjusted in the near term if future taxable income is generated. |
Advertising Costs | Advertising Costs |
Earnings (Loss) Per Share | Earnings (Loss) Per Share |
Stock Based Compensation | Stock Based Compensation Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse. Share based expense paid to through direct stock grants is expensed as occurred. Since the Companys stock is publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction. The company recognized $25,000 in expenses for stock based compensation to employees through direct stock grants of 50,000 shares in the quarter ended August 31, 2014. Stock option activity was as follows (converted post reverse split): Number of Shares Weighted Average Exercise Price ($) Balance at May 31, 2014 389,035 $ 0.48 Granted Exercised Forfeited or expired Balance at May 31, 2015 389,035 $ 0.48 Granted Exercised Forfeited or expired Balance at February 29, 2016 389,035 $ 0.48 The following table presents information regarding options outstanding and exercisable as of February 29, 2016: Weighted average contractual remaining term options outstanding 0 years Aggregate intrinsic value options outstanding $ 9,337 Options exercisable 389,035 Weighted average exercise price options exercisable $ .48 Aggregate intrinsic value options exercisable $ 101,149 Weighted average contractual remaining term options exercisable 0 years As of February 29, 2016, future compensation costs related to options issued was $0. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows: Risk-free interest rate 1.44% Expected life of options 4-5 years Annualized volatility 90.6% Dividend rate 0% |
2. Critical Accounting Polici15
2. Critical Accounting Policies and Estimates (Tables) | 9 Months Ended |
Feb. 29, 2016 | |
Accounting Policies [Abstract] | |
Accrued liabilities | February 29, 2016 May 31, 2015 China Employees' Salaries and Commissions Accrual $ 71,171 $ 50,779 Representative Office Tax Accrual 3,835 Other Accruals 15,729 11,230 $ 86,900 $ 65,844 |
Fair value of financial instruments | February 29, 2016 May 31, 2015 Level 1 Level 2 Level 1 Level 2 Level 3 Cash 487,368 498,189 Investments 55,146 1,846,087 233,991 67,500 1,148,000 Total Financial Instruments 542,514 1,846,087 732,180 67,500 1,148,000 |
Stock option activity | Number of Shares Weighted Average Exercise Price ($) Balance at May 31, 2014 389,035 $ 0.48 Granted Exercised Forfeited or expired Balance at May 31, 2015 389,035 $ 0.48 Granted Exercised Forfeited or expired Balance at February 29, 2016 389,035 $ 0.48 |
Options outstanding and exercisable | Weighted average contractual remaining term options outstanding 0 years Aggregate intrinsic value options outstanding $ 9,337 Options exercisable 389,035 Weighted average exercise price options exercisable $ .48 Aggregate intrinsic value options exercisable $ 101,149 Weighted average contractual remaining term options exercisable 0 years |
Weighted Average Assumptions | Risk-free interest rate 1.44% Expected life of options 4-5 years Annualized volatility 90.6% Dividend rate 0% |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 9 Months Ended |
Feb. 29, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | February 29, 2016 May 31, 2015 Furniture & Fixtures $ 86,173 $ 75,527 Leasehold Improvements 23,417 23,416 $ 109,590 $ 98,943 Less: Accumulated Depreciation (97,084 ) (89,160 ) $ 12,506 $ 9,783 |
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) | 9 Months Ended |
Feb. 29, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible assets | February 29, 2016 May 31, 2015 Website development 175,580 165,374 Less: Accumulated Depreciation (93,037 ) (85,730 ) $ 82,543 $ 79,644 |
6. Commitments and Concentrat18
6. Commitments and Concentrations (Tables) | 9 Months Ended |
Feb. 29, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Office lease commitment | Office Lease Shanghai 2016 fiscal year $ 15,572 2017 fiscal year $ 20,348 Office Lease Denver, Colorado 2016 fiscal year 5,400 2017 fiscal year 18,687 2018 fiscal year 19,355 Office Lease New York 2016 fiscal year $ 7,100 Office Lease San Gabriel, California 2016 fiscal year $ 13,970 2017 fiscal year 9,300 |
1. Liquidity and Capital Reso19
1. Liquidity and Capital Resources (Details Narrative) - USD ($) | 9 Months Ended | |||
Feb. 29, 2016 | Feb. 28, 2015 | May. 31, 2015 | May. 31, 2014 | |
Liquidity And Capital Resources Details Narrative | ||||
Cash used in operations | $ (2,031,691) | $ (1,311,735) | ||
Cash and cash equivalents | $ 497,058 | $ 687,649 | $ 498,189 | $ 429,199 |
2. Critical Accounting Polici20
2. Critical Accounting Policies and Estimates (Details - Other liabilities) - USD ($) | Feb. 29, 2016 | May. 31, 2015 |
Accounting Policies [Abstract] | ||
China Employees' Salaries and Commissions Accrual | $ 71,171 | $ 50,779 |
Representative Office Tax Accrual | 0 | 3,835 |
Other accruals | 15,729 | 11,230 |
Accrued liabilities | $ 86,900 | $ 65,844 |
2. Critical Accounting Polici21
2. Critical Accounting Policies and Estimates (Details - Fair Value) - USD ($) | Feb. 29, 2016 | May. 31, 2015 |
Level 1 | ||
Cash | $ 487,368 | $ 498,189 |
Investments | 55,146 | 233,991 |
Total Financial Instruments | 542,514 | 732,180 |
Level 2 | ||
Cash | 0 | 0 |
Investments | 1,846,087 | 67,500 |
Total Financial Instruments | $ 1,846,087 | 67,500 |
Level 3 | ||
Cash | 0 | |
Investments | 1,148,000 | |
Total Financial Instruments | $ 1,148,000 |
2. Critical Accounting Polici22
2. Critical Accounting Policies and Estimates (Details - Option activity) - Stock Options - USD ($) | 9 Months Ended | 12 Months Ended |
Feb. 29, 2016 | May. 31, 2015 | |
Number of Options Outstanding, Beginning | 389,035 | 389,035 |
Number of Options Granted | 0 | 0 |
Number of Options Exercised | 0 | 0 |
Number of Options Forfeited or Expired | 0 | 0 |
Number of Options Outstanding, Ending | 389,035 | 389,035 |
Weighted Average Exercise Price Outstanding, Beginning | $ 0.48 | $ 0.48 |
Weighted Average Exercise Price Granted | 0 | 0 |
Weighted Average Exercise Price Exercised | 0 | 0 |
Weighted Average Exercise Price Forfeited or Expired | 0 | 0 |
Weighted Average Exercise Price Outstanding, Ending | $ 0.48 | $ 0.48 |
Weighted Average contractual remaining term - options outstanding | 0 years | |
Aggregate Intrinsic Value - Options Outstanding | $ 9,337 | |
Options Exercisable | 389,035 | |
Weighted Average Exercise Price - Options Exercisable | $ 0.48 | |
Aggregate Intrinsic Value - Options exercisable | $ 101,149 | |
Weighted Average Contractual Remaining Term - Options Exercisable | 0 years |
2. Critical Accounting Polici23
2. Critical Accounting Policies and Estimates (Details - Assumptions) - Stock Options | 9 Months Ended |
Feb. 29, 2016 | |
Risk free interest rate | 1.44% |
Expected life of options | 4-5 years |
Annualized volatility | 90.60% |
Dividend rate | 0.00% |
2. Critical Accounting Polici24
2. Critical Accounting Policies and Estimates (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Feb. 29, 2016 | Feb. 28, 2015 | Feb. 29, 2016 | Feb. 28, 2015 | May. 31, 2015 | May. 31, 2014 | |
Investment in affiliate | $ 1,778,587 | $ 1,778,587 | $ 1,148,000 | |||
Cash and cash equivalents | 497,058 | $ 687,649 | 497,058 | $ 687,649 | 498,189 | $ 429,199 |
Accounts receivable | 118,672 | 118,672 | 101,918 | |||
Allowance for doubtful accounts | 0 | 0 | 0 | |||
Taxes expected to be refunded | 33,165 | 33,165 | 33,165 | |||
Other current assets | 55,265 | 55,265 | 91,634 | |||
Depreciation and amortization expense | 7,924 | 11,821 | ||||
Net deferred tax assets | 1,606,000 | 1,606,000 | ||||
Advertising costs | 62,859 | $ 125,069 | 258,551 | $ 263,545 | ||
United States | ||||||
Cash and cash equivalents | 459,091 | 459,091 | 496,828 | |||
China | ||||||
Cash and cash equivalents | $ 37,967 | $ 37,967 | $ 1,361 |
3. Stockholders' Equity (Detail
3. Stockholders' Equity (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Feb. 29, 2016 | Feb. 28, 2015 | May. 31, 2015 | |
Stock converted, preferred shares converted | 380,000 | ||
Stock converted, common shares issued | 475,000 | ||
Proceeds from stock issued | $ 650,000 | $ 1,405,000 | |
Dividends accrued | $ 48,854 | $ 34,947 | |
Preferred Class B [Member] | |||
Preferred stock issued, shares | 650,000 | 1,885,000 | |
Proceeds from stock issued | $ 650,000 | $ 1,885,000 | |
Deemed dividend from issuance of preferred stock | $ 51,250 |
4. Property and Equipment (Deta
4. Property and Equipment (Details - property and equipment) - USD ($) | Feb. 29, 2016 | May. 31, 2015 |
Property Plant and Equipment, Gross | $ 109,590 | $ 98,943 |
Less: accumulated depreciation | (97,084) | (89,160) |
Property Plant and Equipment. Net | 12,505 | 9,783 |
Furniture and Fixtures | ||
Property Plant and Equipment, Gross | 86,173 | 75,527 |
Leasehold Improvements | ||
Property Plant and Equipment, Gross | $ 23,417 | $ 23,416 |
4. Property and Equipment (De27
4. Property and Equipment (Details - useful lives) - USD ($) | 9 Months Ended | |
Feb. 29, 2016 | Feb. 28, 2015 | |
Depreciation expense | $ 7,924 | $ 11,821 |
Computer Equipment | ||
Expected Useful Lives | 3 years | |
Furniture and Fixtures | ||
Expected Useful Lives | 3 years | |
Leasehold Improvements | ||
Expected Useful Lives | Term of the lease |
5. Intangible Assets (Details)
5. Intangible Assets (Details) - USD ($) | 9 Months Ended | ||
Feb. 29, 2016 | Feb. 28, 2015 | May. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Website development | $ 175,580 | $ 165,374 | |
Less: accumulated amortization | (93,037) | (85,730) | |
Total Intangible Assets | 82,543 | $ 79,644 | |
Amortization expense | $ 7,307 | $ 11,761 |
6. Commitments and Concentrat29
6. Commitments and Concentrations (Details - Office lease) | May. 31, 2015USD ($) |
Shanghai | |
Office lease 2016 fiscal year | $ 15,572 |
Office lease 2017 fiscal year | 20,348 |
Denver, CO | |
Office lease 2016 fiscal year | 5,400 |
Office lease 2017 fiscal year | 18,687 |
Office lease 2018 fiscal year | 19,355 |
New York | |
Office lease 2016 fiscal year | 7,100 |
San Gabriel, CA | |
Office lease 2016 fiscal year | 13,970 |
Office lease 2017 fiscal year | $ 9,300 |