Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
May 31, 2017 | Aug. 29, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Chineseinvestors.com, Inc. | |
Entity Central Index Key | 1,459,482 | |
Document Type | 10-K/A | |
Document Period End Date | May 31, 2017 | |
Amendment Flag | true | |
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 Public Float | $ 10,946,291 | |
Entity Common Stock, Shares Outstanding | 12,696,805 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2,017 | |
Amendment description | Company float corrected |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | May 31, 2017 | May 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 1,770,729 | $ 197,231 |
Accounts receivable, net | 8,627 | 1,899 |
Investments, available for sale, in affiliate | 72,166 | 2,425,709 |
Investments, available for sale | 656,909 | 282,616 |
Inventory | 7,690 | 0 |
Other current assets | 271,401 | 55,780 |
Total current assets | 2,787,522 | 2,963,235 |
Investments, Other | 250,000 | 0 |
Property and equipment, net | 53,032 | 11,768 |
Website development, net | 81,687 | 78,147 |
Total non-current assets | 384,719 | 89,915 |
Total assets | 3,172,241 | 3,053,150 |
Current liabilities | ||
Accounts payable | 303,463 | 76,244 |
Deferred revenue | 270,296 | 321,416 |
Customer Deposit | 210,100 | 0 |
Unearned revenue paid in stock | 231,945 | 90,278 |
Accrued liabilities | 67,782 | 39,153 |
Accrued dividend & interest | 167,688 | 26,529 |
Short-term secured debt | 410,000 | 660,000 |
Embedded incentive interest | 23,520 | 39,600 |
Total current liabilities | 1,684,794 | 1,253,220 |
Non-current liabilities | ||
Long-term deferred revenue | 96,144 | 37,642 |
Total Non-current Liabilities | 96,144 | 37,642 |
Total liabilities | 1,780,938 | 1,290,862 |
Commitments and Contingencies | ||
Shareholders' equity | ||
Common stock $0.001 par value 80,000,000 authorized and 11,446,805 and 7,661,805 were issued and outstanding May 31, 2017 and 2016, respectively | 11,448 | 7,663 |
Additional paid-in capital | 23,928,741 | 14,735,888 |
Unrealized gain (loss) on investments | (206,892) | 2,114,170 |
Unrealized foreign currency gain/(loss) | 0 | (638) |
Accumulated deficit | (22,349,379) | (15,098,305) |
Total Shareholders' equity | 1,391,303 | 1,762,288 |
Total liabilities and shareholders' equity | 3,172,241 | 3,053,150 |
Preferred Class A [Member] | ||
Shareholders' equity | ||
Preferred stock | 615 | 905 |
Preferred Class B [Member] | ||
Shareholders' equity | ||
Preferred stock | 1,770 | 2,605 |
Preferred Class C [Member] | ||
Shareholders' equity | ||
Preferred stock | $ 5,000 | $ 0 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | May 31, 2017 | May 31, 2016 |
Stockholders' equity [note 3] | ||
Common stock par value | $ 0.001 | $ 0.001 |
Common stock authorized | 80,000,000 | 80,000,000 |
Common stock issued | 11,446,805 | 7,661,805 |
Common stock outstanding | 11,446,805 | 7,661,805 |
Preferred Class A [Member] | ||
Stockholders' equity [note 3] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock authorized | 20,000,000 | 20,000,000 |
Preferred stock issued | 615,000 | 905,000 |
Preferred stock outstanding | 615,000 | 905,000 |
Preferred Class B [Member] | ||
Stockholders' equity [note 3] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock authorized | 20,000,000 | 20,000,000 |
Preferred stock issued | 1,770,000 | 2,605,000 |
Preferred stock outstanding | 1,770,000 | 2,605,000 |
Preferred Class C [Member] | ||
Stockholders' equity [note 3] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock authorized | 20,000,000 | 20,000,000 |
Preferred stock issued | 5,000,043 | 0 |
Preferred stock outstanding | 5,000,043 | 0 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficiency) - USD ($) | Common Stock | Preferred Stock "A" | Preferred Stock "B" | Preferred Stock "C" | Additional Paid-In Capital | Foreign Currency Gain (Loss) | Unrealized Gain on Securities | Stockholders' Deficit | Total |
Beginning balance, shares at May. 31, 2015 | 7,724,305 | 905,000 | 1,885,000 | 0 | |||||
Beginning balance, value at May. 31, 2015 | $ 7,725 | $ 905 | $ 1,885 | $ 0 | $ 13,971,170 | $ 536 | $ 531,631 | $ (12,917,373) | $ 1,596,479 |
Stock issued for cash, shares issued | 720,000 | ||||||||
Stock issued for cash, value | $ 720 | 719,820 | 720,000 | ||||||
Deemed dividend associated with preferred stock issuance | 51,625 | (51,625) | |||||||
Preferred stock dividend | (148,300) | (148,300) | |||||||
Stock repurchased and retired, shares | (62,500) | ||||||||
Stock repurchased and retired, value | $ (62) | (6,187) | (6,249) | ||||||
Unrealized foreign currency gain/loss | (1,174) | (1,174) | |||||||
Unrealized investment gain/loss | 1,582,539 | 1,582,539 | |||||||
Net (loss) for the period | (1,981,006) | (1,981,006) | |||||||
Ending balance, shares at May. 31, 2016 | 7,661,805 | 905,000 | 2,605,000 | 0 | |||||
Ending balance, value at May. 31, 2016 | $ 7,663 | $ 905 | $ 2,605 | $ 0 | 14,735,888 | (638) | 2,114,170 | (15,098,304) | 1,762,288 |
Stock issued for cash, shares issued | 5,000,043 | ||||||||
Stock issued for cash, value | $ 5,000 | 4,995,043 | 5,000,043 | ||||||
Deemed dividend associated with preferred stock issuance | 3,685,520 | (3,685,520) | |||||||
Preferred stock dividend | (228,794) | (228,794) | |||||||
Unrealized foreign currency gain/loss | 638 | 638 | |||||||
Unrealized investment gain/loss | (2,321,062) | (2,321,062) | |||||||
Stock based compensation, shares | 1,335,000 | ||||||||
Stock based compensation, value | $ 1,335 | 513,615 | 514,950 | ||||||
Stock converted, shares issued | 2,450,000 | ||||||||
Stock converted, value issued | $ 2,450 | ||||||||
Stock converted, shares converted | (290,000) | (835,000) | |||||||
Stock converted, value converted | $ (290) | $ (835) | (1,325) | ||||||
Unamortized beneficial conversion feature | 1,244,622 | 1,244,622 | |||||||
Preferred stock discount | (1,244,622) | (1,244,622) | |||||||
Net (loss) for the period | (3,336,761) | (3,336,761) | |||||||
Ending balance, shares at May. 31, 2017 | 11,446,805 | 615,000 | 1,770,000 | 5,000,043 | |||||
Ending balance, value at May. 31, 2017 | $ 11,448 | $ 615 | $ 1,770 | $ 5,000 | $ 23,928,741 | $ 0 | $ (206,892) | $ (223,493,879) | $ 1,391,303 |
Consolidated Statement of Compr
Consolidated Statement of Comprehensive (Loss) and Income - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Operating revenues | ||
Investor relations | $ 808,362 | $ 351,615 |
Subscription | 838,897 | 533,965 |
Sales-Products | 1,265 | 0 |
Other | 19,453 | 62,805 |
Total revenue | 1,667,977 | 948,385 |
Cost of Revenue | ||
Products | 333 | 0 |
Services | 1,211,021 | 964,223 |
Total Cost of Revenue | 1,211,354 | 964,223 |
Gross profit | 456,623 | (15,838) |
Operating expenses | ||
General and administrative expense | 4,731,813 | 2,296,130 |
Uncollectible account write-off | 3,216 | 126,915 |
Advertising expense | 636,128 | 438,673 |
Total operating expenses | 5,371,157 | 2,861,718 |
Net (loss) from operations | (4,914,534) | (2,877,556) |
Other income/(expense) | ||
Debt forgiveness | 0 | 10,490 |
Interest expense | (92,062) | (63,554) |
Net realized gain/(loss) on marketable equity securities | 1,669,835 | 949,614 |
Total other income (expense) | 1,577,773 | 896,550 |
Net (loss) | (3,336,761) | (1,981,006) |
Deemed dividend for beneficial conversion of convertible preferred stock | (3,685,520) | (51,625) |
Preferred stock dividends | (228,794) | (148,300) |
Net (loss) attributable to common shareholders | $ (7,251,075) | $ (2,180,931) |
Earnings per share attributable to common shareholders: | ||
Basic and diluted (loss) per share | $ (0.86) | $ (0.26) |
Weighted average number of shares outstanding - basic | 8,433,127 | 7,724,305 |
Other comprehensive income/(loss) | ||
Net unrealized gain/(loss) on securities | $ (2,321,062) | $ 1,582,539 |
Comprehensive Income/(Loss) attributable to common shareholders | $ (9,572,137) | $ (598,392) |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVTIES | ||
Net loss | $ (3,336,761) | $ (1,981,006) |
Adjustments to reconcile net loss (income) to net cash (used in) provided by operating activities: | ||
Gain on sale of available for sale securities | (338,333) | (198,533) |
Net, realized (loss)/gain on marketable equity securities | (1,669,835) | (949,614) |
Stock Compensation | 514,950 | 12,300 |
Depreciation and amortization | 16,410 | 20,071 |
Impairment Loss | 84,375 | 0 |
Foreign currency exchange (loss) gain | 710 | 9,731 |
Changes in operating assets and liabilities | ||
Accounts receivable | (6,728) | 100,019 |
Inventory Assets | (7,690) | 0 |
Other current assets | (215,621) | 69,019 |
Accounts payable | 196,621 | 53,434 |
Accrued interest and dividends | (103,716) | (117,118) |
Other accrued liabilities | 59,228 | (26,691) |
Investor Deposit | 210,100 | 0 |
Deferred revenue | 7,382 | 103,726 |
Net cash used in operating activities | (4,588,908) | (2,904,662) |
Cash flows from investing activities | ||
Investment in Affiliate | (250,000) | 0 |
(Purchase of)/ sale of assets, net | (61,215) | (20,558) |
Proceeds from the sale of marketable equity securities | 2,017,726 | 1,250,512 |
Purchase of marketable equity securuties-affiliate | (294,148) | 0 |
Net cash provided by investing activities | 1,412,363 | 1,229,954 |
Cash flows from financing activities | ||
Cash raised through sale of preferred stock | 5,000,043 | 720,000 |
Cash Paid for Debt | (660,000) | 0 |
Cash raised through issuance of debt | 410,000 | 660,000 |
Cash used to purchase and retire common stock | 0 | (6,250) |
Net cash provided by financing activities | 4,750,043 | 1,373,750 |
Net increase/(decrease) in cash and cash equivalents | 1,573,498 | (300,958) |
Cash and cash equivalents, beginning of year | 197,231 | 498,189 |
Cash and cash equivalents, end of year | 1,770,729 | 197,231 |
Supplemental cash flow disclosures | ||
Cash paid for income taxes | 800 | 0 |
Cash paid for China representative office tax | 35,646 | 62,298 |
Cash paid for interest | 75,639 | 0 |
Supplemental disclosure of non-cash activity | ||
Stock received for investor relations services | $ 480,000 | $ 115,200 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
May 31, 2017 | |
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 | 12 Months Ended |
May 31, 2017 | |
Cash and Cash Equivalents [Abstract] | |
Liquidity and Capital Resources | Cash Flows Cash flows used in operations for the years ended May 31, 2017 and 2016 were $4,588,908 and $2,904,663, respectively. The increase of cash used in operations was primarily caused by the net loss offset by increase in cash raised through financing activities. Capital Resources Going Concern – |
2. Critical Accounting Policies
2. Critical Accounting Policies and Estimates | 12 Months Ended |
May 31, 2017 | |
Accounting Policies [Abstract] | |
Critical Accounting Policies and Estimates | Basis of Presentation Foreign Currency Selling Price and Market Financing Expenses Numerous Intercompany Transactions Due to the functional and reporting currency both being in US dollars, ASC 830-10-45-17 states that a currency translation is not necessary. Revenue recognition The Company recognizes revenue pursuant to revenue recognition principles presented in SAB Topic 13. First, persuasive evidence of an arrangement. Second, deliver has occurred or services have been rendered, thirdly the seller’s price to the buyer is fixed or determinable and lastly collectability is reasonably assured. 1. Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services, advertising and promotion fees for customers in the Company’s Chinese Investment Guides, sponsorship fees from investment seminars, road shows, and forums. The sales prices of these services are fixed and determinable at the time the contracts are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. 2. Fees from membership subscriptions: these revenues are recognized over the term of the subscription. Subscription terms are generally between 3 and 12 months but can occasionally be as short as 1 month or as long as 60 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 company’s stock closing price multiplied by the numbers of shares earned within that specific accounting period. By recognizing the revenue incrementally, we are following the guidelines of SAB Topic 13, in that we are only recognizing revenue once the value of the revenue received is fixed and determinable. In addition, we are applying the definition of readily determinable fair value presented at Accounting Standards Codification 820-10-15-5 in assessing the amount to recognize in each accounting period. The number of shares earned is a function of the time period for which services are provided over the contract period in relation to the price of the shares at the time of the services being delivered, added to the value of cash received if any, then recognized as revenue in the period the services were delivered. 5. The Company recognizes revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and terms and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company has no product returns or sales discounts and allowances because goods delivered and accepted by customers are normally not returnable. Costs of Services/Products Sold are the total direct cost of the Company’s operations in Shanghai. Cost of goods sold includes cost of inventory sold during the period, net of discounts and inventory allowances, freight and shipping costs, warranty and rework costs. Website Development Costs Cash and Cash Equivalents and $195,669 respectively. In addition, the Company maintains cash balance in The Bank of China, which is a government owned bank. The full balance of the deposits in China is secured by the Chinese government. At May 31, 2017 and 2016 there were deposits of $4,591 and $1,562, respectively, in The Bank of China. The Company also maintains cash balance in Shanghai Pudong Development Bank, at May 31, 2017 and 2016 there were deposits of $50,000 and $0, respectively. Accounts Receivable and Concentration of Credit Risk The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of May 31, 2017 and 2016, the Company determined the uncollectible are $3,216 and $126,915, respectively, and all write-offs that have occurred were not of the recurring nature. The operations of the Company are located in the People’s Republic of China (“PRC”). Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. Investments, available for sale, in affiliate 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 Companies intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, equity securities that have readily determinable fair values that are classified as available-for-sale shall be measured subsequently at fair value in the statement of financial position. “Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized.” As these shares will be earned over the term of the contracts, the Company will defer the recognition of the earnings of the revenue over the period the services are performed. The value recorded will be determined by multiplying the average of the closing price on the last day of the month for the period being reported based on closing market price per share. Upon receipt, these shares were recorded as an asset on the Companies financials as "Investments, available for sale". The Company will also record a corresponding contra-asset account titled "Unearned Revenue paid in stock". Inventories Prepaid taxes Other Current Assets May 31, May 31, 2017 2016 Purchase deposit $ 66,125 $ – Prepaid Expense 151,283 12,010 Security Deposit-Rent 43,909 43,770 Other current assets 10,084 – $ 271,401 $ 55,780 Property and Equipment for the years ended May 31, 2017 and 2016, 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 . Unearned revenue, revenue paid in stock as of May 31, 2016 based on active market prices at the time of service contract being completed. During fiscal year 2017, the Company received additional shares of stock as payment for investor relation work total at $480,000 valued at contract dates that company will be providing through August 2017. The stock that had not been earned was valued at $231,945. As the Company earns the fee for this work, this balance will be reduced to reflect the portion still to be earned. Accrued dividend & interest Accrued Liabilities May 31, May 31, 2017 2016 China Employee Salaries and Commissions Accrual $ 6,799 $ 30,331 Representative Office Tax Accrual – 2,879 Other Accruals 60,983 5,943 $ 67,782 $ 39,153 Short-term Debt In September 2016, the Company obtained short-term debt of $410,000 from various individuals. Based on the original lending agreements, the loan is secured by shares of the stocks in the following companies. Company name Shares Secured for Loan Sino-Global Shipping America LTD (SINO) 80,000.00 Recon Technology LTD (RCON) 60,000.00 Nengfa Weiye Energy (NFEC) 185,000.00 SGOCO Group LTD (SGOC) 28,333.33 When entering the loan agreement, the Company believed that the contract would be executed and SINO shares would be delivered upon signing the contract. However, such IR service agreement was not executed due to the disagreement among SINO’s management, as a result, the Company did not obtain the SINO shares as of May 31, 2017. For NFEC, the Company obtained 100,000 shares at the time of entering the contract, and the remaining shares were fully received by the end of year 2016. For RCON, the Company obtained 50,000 shares at the time entering the contract, but the agreement called for collateral of 60,000 RCON shares. The collateral is now short by 10,000 shares of RCON common stock so the RCON shares are short by 10,000. The loan agreements are still valid after renegotiating the terms with the private lenders. These notes are due on September 2017. The lenders received a 20% of the deemed increase in value of these secured shares (“Incentive Feature”) at the maturity of the short-term note. We estimate the value of the Incentive Feature of the common stock collateralizing the debt using the fair market value as of May 31, 2017. We recorded the estimated value of the Incentive Feature as and increase to the debt liability and interest expense. As of May 31, 2017, the Incentive Feature of $23,520 was recorded. 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. Much of the Company’s financial instruments are level one and are carried at market value, requiring no adjustment to book value. The financial instruments classified as level one were deemed to qualify as that classification because their value was determined by the price of identical instruments traded on an active exchange. It should be noted that 60,000 shares of the stock earned for consulting work from Clear Current, was held qualifies as a Level two instrument and has a book value of $67,500 as of May 31, 2016. In year ended May 31, 2017, the Company determined Clear Current failed to meet investment goals and investment was no longer worth what it paid. The Company write-off this investment as of May 31, 2017. Level one instruments were based upon stated balance of financial institution or calculated based upon stock trading in the public market. Level two instruments were calculated based upon the sale of stock through a private placement at arms-length where our shares were an insignificant amount of the total volume of stock sold in the issuer. Level three financial instruments were valued by a professional independent appraiser hired by the Company to determine the valuation. The level three valuation calculation included discounted cash flow models and market based models as appropriately utilized by a professional valuation firm. The inputs they used included the entities past financial performance, projected budgets, prior private stock sale history and comparable company valuations. The following table summarizes the assets we are carrying and the fair value category in which they are currently classified: May 31, 2017 May 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash 1,770,729 – – 197,231 – – Investments 729,095 250,000 – 2,640,825 67,500 – Total Financial Instruments 2,499,804 250,000 – 2,838,056 67,500 – 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. Other Revenue For the year ended May 31, 2017, other revenue is comprised of revenue related to Forex service fees, interest income generated from bank and other miscellaneous income. For the year ended May 31, 2016, other revenue is comprised of revenue related to Forex service fees and rent generated through office space sublease revenue which is recognized over the period the term of the lease, the sublease ended as of May 31, 2016 . Uncollectable account write-off Advertising Costs Earnings (Loss) Per Share ”. Fully diluted loss per share are not calculated and presented on the financial statements as the calculation would be antidilutive. 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. On October 2016, the Company declared restricted stock award to its eligible employees and contractors. Total shares awarded were 1,035,000, and the fair market price at grant date was $0.37 per share. All these shares were fully vested at grant date, total stock compensation expense totaling $382,950 were recorded. 985,000 shares were issued on February 28, 2017, 50,000 shares were not recorded with transfer agent as of the filling date of the report. On December 15, 2016, the Company awarded and issued restricted stock award to corporate counsel and former COO and secretary 100,000 shares in total, and the fair market price at the grant date was $0.44 per share. All these shares were fully vested at grant date, total stock compensation expense totaling $44,000 were recorded. On December 15, 2016, the Company awarded and issued restricted stock award to various contractors and service provides 200,000 shares in total, and the fair market price at the grant date was $0.44 per share. All those shares were fully vested at grant date, total stock compensation expense totaling $88,000 were recorded. 200,000 shares were issued on December 15, 2016. Stock option activity was as follows (converted post reverse split): Number of Shares Weighted Balance at May 31, 2015 389,039 $ 0.48 Granted – – Exercised – – Forfeited or expired (389,035 ) – Balance at May 31, 2016 – $ – Granted – Exercised – – Forfeited or expired – – Balance at May 31, 2017 – $ – New Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which modifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards, and classification in the statement of cash flows. The Company will adopt ASU 2016-09 in its first quarter of 2018. Currently, excess tax benefits or deficiencies from the Company's equity awards are recorded as additional paid-in capital in its Consolidated Balance Sheets. Upon adoption, the Company will record any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the reporting periods in which vesting occurs. As a result, subsequent to adoption the Company's income tax expense and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards. The Company is still in progress of evaluating future impact of adopting this standard. In May 2017, the FASB issued ASU NO. 2017-09 Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, Effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information . |
3. Stockholders' Equity
3. Stockholders' Equity | 12 Months Ended |
May 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | As of May 31, 2017 and 2016, the Company was authorized to issue 80,000,000 shares of common stock, $0.001 par value per share. In addition, 20,000,000 shares of $.001 par value preferred stock were authorized. All common stock shares have full dividend rights. However, it is not anticipated that the Company will be declaring distributions in the foreseeable future. During the year ended May 31, 2016, the company bought back 62,500 shares of company stock former COO Brett Roper, but those shares has not been returned as of May 31, 2017. The Company has communicated with Mr. Brett Roper, confirmed shares will be returned soon and recorded with transfer agent. During the year ended May 31, 2017, the Company converted 290,000 shares of Series A preferred stock for 362,500 of common stock shares at a conversion rate of $1.25 per share of preferred stock. During the year ended May 31, 2017, the Company converted 835,000 shares of Series B preferred stock for 2,087,500 of common stock shares at a conversion rate of $2.50 per share of preferred stock. During the year ended May 31, 2017, the Company granted 1,335,000 shares of restricted common stock or compensation. The stock was valued from $0.44 to $0.47 per share. The compensation and consulting expense was recorded as general and administrative expenses for the year ended May 31, 2017. 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 were entitled to receive a dividend of $0.06 per share per annum for the first two years from the issuance of the instruments. The Company maintained the right to suspend the dividend at its discretion if it is deemed necessary. Series B Convertible Preferred Stock In the years ended May 31, 2016 and 2015 the Company issued 720,000 and 1,885,000 shares of preferred stock as Series B convertible preferred stock for total proceeds of $2,605,000. The terms of the preferred stock allow the holder to convert each share of preferred stock into 2.5 shares of common 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 entitled to receive a dividend of $0.06 per share per annum for the first two years from the issuance of the instruments, which has been recorded as an accrued dividend on the liabilities section of the balance sheet. The Company maintained the right to suspend the dividend at its discretion if it is deemed necessary. Series C Convertible Preferred Stock In December 2016, the Company issued 5,000,043 shares of its Series C-2016 Preferred Stock at a price of $1.00 per share for total proceeds of $5,000,043. The terms of the preferred stock allow the holder to convert each share of preferred stock into 3 shares of common stock at any time after six months from the date of issuance. The holders of shares of preferred stock are entitled to receive a dividend of $0.06 per share per annum for the first year from the issuance of the instruments, which has been recorded as an accrued dividend on the liabilities section of the balance sheet. The Company maintained the right to suspend the dividend at its discretion if it is deemed necessary. 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 have recorded the intrinsic value of this beneficial conversion feature(“BCF”) . In according to ASC 470-20-30-6 Intrinsic value shall be calculated at the commitment date as the differences between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. In according to ASC 470-20-30-8, if the intrinsic value of the beneficial conversion feature is greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature shall be limited to the amount of the proceeds allocated to the convertible instrument. Since all the preferred stocks are issued on different date, we calculate the intrinsic value for each individual preferred stock issuance based on stock issuance date. If the intrinsic value exceeds actual proceed we received, actual proceeds will BCF, otherwise, the intrinsic value is BCF. Therefore, we got the BCF of the preferred shares as $4,930,143. The BCF would be recorded as paid-in capital with an offsetting debit to convertible preferred stock. The discount attributable to the BCF, however, is amortized as a deemed dividend over the period from issuance to the date the convertible preferred stock becomes convertible. In our case, preferred stock-series C is convertible after six months from the date of issuance. We then amortize the BCF over six months period, and record $3,685,520 as deemed dividend that reduce accumulated deficit and the remaining $1,244,622 as preferred stock discount on the balance sheet as contra account to additional paid-in-capital preferred stock. |
4. Property and Equipment
4. Property and Equipment | 12 Months Ended |
May 31, 2017 | |
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: May 31, 2017 May 31, 2016 Furniture & Fixtures $ 126,486 $ 87,413 Leasehold Improvements 32,061 23,417 $ 158,547 $ 110,830 Less: Accumulated Depreciation (105,515 ) (99,062 ) $ 53,032 $ 11,768 Depreciation on equipment is provided on a straight-line basis over its expected useful lives at the following annual rates. Computer equipment 3 years Furniture & fixtures 3 years Leasehold improvements Term of the lease Depreciation expense for the years ended May 31, 2017 and 2016 was $6,452 and $9,903, respectively. |
5. Intangible Assets
5. Intangible Assets | 12 Months Ended |
May 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible assets are comprised of the following: May 31, 2017 May 31, 2016 Website development 187,544 174,046 Less: Accumulated Depreciation (105,857 ) (95,899 ) $ 81,687 $ 78,147 Amortization is calculated over a straight-line basis using the economic life of the asset. Amortization expense for the twelve months ended May 31, 2017 and 2016 was $9,958 and $10,166 respectively. |
6. Commitments and Concentratio
6. Commitments and Concentrations | 12 Months Ended |
May 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Concentrations | Office Lease – Shanghai 2018 fiscal year $ 64,800 2019 fiscal year $ 64,800 2020 fiscal year $ 21,600 Office Lease – Denver, Colorado Office Lease – New York Office Lease – San Gabriel, California 2018 fiscal year $ 63,648 2019 fiscal year $ 63,648 2020 fiscal year $ 10,608 The Company entered another lease for retail store in San Gabriel, California. The lease period started February 1, 2017 to July 31, 2019, the current monthly rent is $3,243, resulting in the following future commitments: 2018 fiscal year $ 38,924 2019 fiscal year $ 38,924 2020 fiscal year $ 6,487 Office Lease – Irwindale, California Concentrations Litigation |
7. Related Party
7. Related Party | 12 Months Ended |
May 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party | Mrs. Lan Jiang is the spouse of the Company’s CEO, Mr. Warren Wang. During the year ended May 31, 2017, she received 200,000 shares of the Company’s stock compensation with the fair market value $74,000 as of grant date. Those 200,000 shares of the Company’s stock was issued and delivery on February 28, 2017. The Company also made investment of $250,000 to Breakwater MB LLC, a cannabis-focused investment and consulting company, formed by the Company’s board member and former CFO, Paul Dickman, as a means to invest capital in and provide consulting services to private, cannabis-focused companies as they transition into the public market. |
8. Income Taxes
8. Income Taxes | 12 Months Ended |
May 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company recorded no income tax provision or benefit for the years ended May 31, 2017 and 2016, because the Company believes it is more likely than not that these will not be utilized in the near future due to net losses. The Company generated no taxable income. The income tax provision (benefit) differs from the amount computed by applying the U.S. Federal income tax rate of 34% plus applicable state rates to the loss before income taxes due to the unrecognized benefit resulting from the Company’s valuation allowance, as well as due to nondeductible expenses. For income tax reporting purposes, the Company has approximately $10 As of May 31, 2017 and 2016, the Company had approximately $3.4 million and $2.7 million , respectively, of net deferred tax assets, comprised primarily of the potential future tax benefits from net operating loss carry forwards. Based upon the level of historical taxable income and projections for future taxable income over the period in which the deferred tax assets are deductible, management could not conclude that realization of the deferred tax assets as of May 31, 2017 and 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. The Company’s effective tax rate differs from the statutory rate due to the following (expressed as a percentage of pre-tax income): Description 2017 2016 Federal Statutory Rate 35% 35% State Statutory Rate 6% 5% Change in Rate / Other 4% 2% Permanent Tax Differences (6% ) (1% ) Calculated Rate 39% 41% Actual Calculated Rate (39% ) (41% ) Difference 0% 0% |
9. Correction of Immaterial Err
9. Correction of Immaterial Error | 12 Months Ended |
May 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Correction of Immaterial Error | Subsequent to November 30, 2016, the Company discovered a couple of prior period accounting transactions and one preferred stock sale that were not properly recorded. These were comprised of two transactions related to service revenue paid in stocks which were not reported to the accounting department. Second, when the Company raised $70,000 from selling 70,000 shares of Series B-2014 preferred stock was inadvertently recorded as IR-revenue. Due to these errors, the Company’s revenue was understated by $45,200 for the year ended May 31, 2016. On balance sheet as of May 31, 2016, total assets were understated by $171,600, total liabilities was understated by $2,575 and total shareholders’ equity were understated by $169,025. The Company assessed the materiality of the errors considering both quantitatively and qualitatively effect in accordance with Staff Accounting Bulletin No. 99, Materiality and determined that the errors are not material to the decision making to a reasonable investor. Accordingly, the Company has revised its balance sheet as of May 31, 2016. The Company intends to revise its financial statements for certain quarterly periods through subsequent periodic filings. The effect of recording this immaterial correction in the balance sheet as of May 31, 2016, and for financial statements in subsequent periods filings are as follows: Accounts For the As As Total Revenue $ 903,185 $ 948,385 Operating Loss (2,922,756 ) (2,877,556 ) Net Loss (2,026,206 ) (1,981,006 ) Net Loss Attributable to Common Shareholders (2,223,182 ) (2,180,932 ) Investment, Available for Sale 111,016 282,616 Unearned Revenue Paid in Stock Accrued Dividend & Interest 23,954 26,529 Preferred Stock Series B-2014 2,535 2,605 Additional Paid in Capital 14,665,583 14,735,888 Unrealized Gain on Investments Available for Sale 2,057,770 2,114,170 Accumulated Deficit (15,140,555 ) (15,098,305 ) Note: If blank, means no change |
10. Subsequent Events
10. Subsequent Events | 12 Months Ended |
May 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company is currently in the process of offering up to 10,000,000 shares of its Series D-2017 Convertible Preferred Stock. Each share of Series D-2017 Preferred Stock is convertible into 2 shares of the Company’s common stock. The Series D-2017 Convertible Preferred Stock will pay at least two years of dividends at the rate of 6% per year on the original investment of $1 per share of Series D-2017 Convertible Preferred Stock. |
2. Critical Accounting Polici18
2. Critical Accounting Policies and Estimates (Policies) | 12 Months Ended |
May 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation |
Foreign Currency | Foreign Currency Selling Price and Market Financing Expenses Numerous Intercompany Transactions Due to the functional and reporting currency both being in US dollars, ASC 830-10-45-17 states that a currency translation is not necessary. |
Revenue recognition | Revenue recognition The Company recognizes revenue pursuant to revenue recognition principles presented in SAB Topic 13. First, persuasive evidence of an arrangement. Second, deliver has occurred or services have been rendered, thirdly the seller’s price to the buyer is fixed or determinable and lastly collectability is reasonably assured. 1. Fees from banner advertisement, webpage hosting and maintenance, on-line promotion and translation services, advertising and promotion fees for customers in the Company’s Chinese Investment Guides, sponsorship fees from investment seminars, road shows, and forums. The sales prices of these services are fixed and determinable at the time the contracts are signed and there are no provisions for refunds contained in the contracts. These revenues are recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. 2. Fees from membership subscriptions: these revenues are recognized over the term of the subscription. Subscription terms are generally between 3 and 12 months but can occasionally be as short as 1 month or as long as 60 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 company’s stock closing price multiplied by the numbers of shares earned within that specific accounting period. By recognizing the revenue incrementally, we are following the guidelines of SAB Topic 13, in that we are only recognizing revenue once the value of the revenue received is fixed and determinable. In addition, we are applying the definition of readily determinable fair value presented at Accounting Standards Codification 820-10-15-5 in assessing the amount to recognize in each accounting period. The number of shares earned is a function of the time period for which services are provided over the contract period in relation to the price of the shares at the time of the services being delivered, added to the value of cash received if any, then recognized as revenue in the period the services were delivered. 5. The Company recognizes revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and terms and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company has no product returns or sales discounts and allowances because goods delivered and accepted by customers are normally not returnable. |
Costs of Services/Products Sold | Costs of Services/Products Sold are the total direct cost of the Company’s operations in Shanghai. Cost of goods sold includes cost of inventory sold during the period, net of discounts and inventory allowances, freight and shipping costs, warranty and rework costs. |
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 May 31, 2017 and 2016, the Company determined the uncollectible are $3,216 and $126,915, respectively, and all write-offs that have occurred were not of the recurring nature. The operations of the Company are located in the People’s Republic of China (“PRC”). Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. |
Investments, available for sale, in affiliate | Investments, available for sale, in affiliate |
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 Companies intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1, equity securities that have readily determinable fair values that are classified as available-for-sale shall be measured subsequently at fair value in the statement of financial position. “Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized.” As these shares will be earned over the term of the contracts, the Company will defer the recognition of the earnings of the revenue over the period the services are performed. The value recorded will be determined by multiplying the average of the closing price on the last day of the month for the period being reported based on closing market price per share. Upon receipt, these shares were recorded as an asset on the Companies financials as "Investments, available for sale". The Company will also record a corresponding contra-asset account titled "Unearned Revenue paid in stock". |
Inventories | Inventories |
Prepaid taxes | Prepaid taxes |
Other Current Assets | Other Current Assets May 31, May 31, 2017 2016 Purchase deposit $ 66,125 $ – Prepaid Expense 151,283 12,010 Security Deposit-Rent 43,909 43,770 Other current assets 10,084 – $ 271,401 $ 55,780 |
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 . |
Unearned revenue, revenue paid in stock | Unearned revenue, revenue paid in stock as of May 31, 2016 based on active market prices at the time of service contract being completed. During fiscal year 2017, the Company received additional shares of stock as payment for investor relation work total at $480,000 valued at contract dates that company will be providing through August 2017. The stock that had not been earned was valued at $231,945. As the Company earns the fee for this work, this balance will be reduced to reflect the portion still to be earned. |
Accrued Dividend and Interest | Accrued dividend & interest |
Accrued liabilities | Accrued Liabilities May 31, May 31, 2017 2016 China Employee Salaries and Commissions Accrual $ 6,799 $ 30,331 Representative Office Tax Accrual – 2,879 Other Accruals 60,983 5,943 $ 67,782 $ 39,153 |
Short-term debt | Short-term Debt In September 2016, the Company obtained short-term debt of $410,000 from various individuals. Based on the original lending agreements, the loan is secured by shares of the stocks in the following companies. Company name Shares Secured for Loan Sino-Global Shipping America LTD (SINO) 80,000.00 Recon Technology LTD (RCON) 60,000.00 Nengfa Weiye Energy (NFEC) 185,000.00 SGOCO Group LTD (SGOC) 28,333.33 When entering the loan agreement, the Company believed that the contract would be executed and SINO shares would be delivered upon signing the contract. However, such IR service agreement was not executed due to the disagreement among SINO’s management, as a result, the Company did not obtain the SINO shares as of May 31, 2017. For NFEC, the Company obtained 100,000 shares at the time of entering the contract, and the remaining shares were fully received by the end of year 2016. For RCON, the Company obtained 50,000 shares at the time entering the contract, but the agreement called for collateral of 60,000 RCON shares. The collateral is now short by 10,000 shares of RCON common stock so the RCON shares are short by 10,000. The loan agreements are still valid after renegotiating the terms with the private lenders. These notes are due on September 2017. The lenders received a 20% of the deemed increase in value of these secured shares (“Incentive Feature”) at the maturity of the short-term note. We estimate the value of the Incentive Feature of the common stock collateralizing the debt using the fair market value as of May 31, 2017. We recorded the estimated value of the Incentive Feature as and increase to the debt liability and interest expense. As of May 31, 2017, the Incentive Feature of $23,520 was recorded. |
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. Much of the Company’s financial instruments are level one and are carried at market value, requiring no adjustment to book value. The financial instruments classified as level one were deemed to qualify as that classification because their value was determined by the price of identical instruments traded on an active exchange. It should be noted that 60,000 shares of the stock earned for consulting work from Clear Current, was held qualifies as a Level two instrument and has a book value of $67,500 as of May 31, 2016. In year ended May 31, 2017, the Company determined Clear Current failed to meet investment goals and investment was no longer worth what it paid. The Company write-off this investment as of May 31, 2017. Level one instruments were based upon stated balance of financial institution or calculated based upon stock trading in the public market. Level two instruments were calculated based upon the sale of stock through a private placement at arms-length where our shares were an insignificant amount of the total volume of stock sold in the issuer. Level three financial instruments were valued by a professional independent appraiser hired by the Company to determine the valuation. The level three valuation calculation included discounted cash flow models and market based models as appropriately utilized by a professional valuation firm. The inputs they used included the entities past financial performance, projected budgets, prior private stock sale history and comparable company valuations. The following table summarizes the assets we are carrying and the fair value category in which they are currently classified: May 31, 2017 May 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash 1,770,729 – – 197,231 – – Investments 729,095 250,000 – 2,640,825 67,500 – Total Financial Instruments 2,499,804 250,000 – 2,838,056 67,500 – |
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. |
Other revenue | Other Revenue For the year ended May 31, 2017, other revenue is comprised of revenue related to Forex service fees, interest income generated from bank and other miscellaneous income. For the year ended May 31, 2016, other revenue is comprised of revenue related to Forex service fees and rent generated through office space sublease revenue which is recognized over the period the term of the lease, the sublease ended as of May 31, 2016 . |
Uncollectible write-off | Uncollectible account write-off |
Advertising Costs | Advertising Costs |
Earnings (Loss) Per Share | Earnings (Loss) Per Share ”. Fully diluted loss per share are not calculated and presented on the financial statements as the calculation would be antidilutive. |
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. On October 2016, the Company declared restricted stock award to its eligible employees and contractors. Total shares awarded were 1,035,000, and the fair market price at grant date was $0.37 per share. All these shares were fully vested at grant date, total stock compensation expense totaling $382,950 were recorded. 985,000 shares were issued on February 28, 2017, 50,000 shares were not recorded with transfer agent as of the filling date of the report. On December 15, 2016, the Company awarded and issued restricted stock award to corporate counsel and former COO and secretary 100,000 shares in total, and the fair market price at the grant date was $0.44 per share. All these shares were fully vested at grant date, total stock compensation expense totaling $44,000 were recorded. On December 15, 2016, the Company awarded and issued restricted stock award to various contractors and service provides 200,000 shares in total, and the fair market price at the grant date was $0.44 per share. All those shares were fully vested at grant date, total stock compensation expense totaling $88,000 were recorded. 200,000 shares were issued on December 15, 2016. Stock option activity was as follows (converted post reverse split): Number of Shares Weighted Balance at May 31, 2015 389,039 $ 0.48 Granted – – Exercised – – Forfeited or expired (389,035 ) – Balance at May 31, 2016 – $ – Granted 1,335,000 Exercised (1,335,000 ) – Forfeited or expired – – Balance at May 31, 2017 – $ – |
New Accounting Pronouncements | New Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which modifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards, and classification in the statement of cash flows. The Company will adopt ASU 2016-09 in its first quarter of 2018. Currently, excess tax benefits or deficiencies from the Company's equity awards are recorded as additional paid-in capital in its Consolidated Balance Sheets. Upon adoption, the Company will record any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the reporting periods in which vesting occurs. As a result, subsequent to adoption the Company's income tax expense and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards. The Company is still in progress of evaluating future impact of adopting this standard. In May 2017, the FASB issued ASU NO. 2017-09 Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, Effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”. The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information . |
2. Critical Accounting Polici19
2. Critical Accounting Policies and Estimates (Tables) | 12 Months Ended |
May 31, 2017 | |
Accounting Policies [Abstract] | |
Other Current Assets | May 31, May 31, 2017 2016 Purchase deposit $ 66,125 $ – Prepaid Expense 151,283 12,010 Security Deposit-Rent 43,909 43,770 Other current assets 10,084 – $ 271,401 $ 55,780 |
Accrued liabilities | May 31, May 31, 2017 2016 China Employee Salaries and Commissions Accrual $ 6,799 $ 30,331 Representative Office Tax Accrual – 2,879 Other Accruals 60,983 5,943 $ 67,782 $ 39,153 |
Short-term debt | Company name Shares Secured for Loan Sino-Global Shipping America LTD (SINO) 80,000.00 Recon Technology LTD (RCON) 60,000.00 Nengfa Weiye Energy (NFEC) 185,000.00 SGOCO Group LTD (SGOC) 28,333.33 |
Fair value of financial instruments | May 31, 2017 May 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash 1,770,729 – – 197,231 – – Investments 729,095 250,000 – 2,640,825 67,500 – Total Financial Instruments 2,499,804 250,000 – 2,838,056 67,500 – |
Stock option activity | Number of Shares Weighted Balance at May 31, 2015 389,039 $ 0.48 Granted – – Exercised – – Forfeited or expired (389,035 ) – Balance at May 31, 2016 – $ – Granted – Exercised – – Forfeited or expired – – Balance at May 31, 2017 – $ – |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 12 Months Ended |
May 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | May 31, 2017 May 31, 2016 Furniture & Fixtures $ 126,486 $ 87,413 Leasehold Improvements 32,061 23,417 $ 158,547 $ 110,830 Less: Accumulated Depreciation (105,515 ) (99,062 ) $ 53,032 $ 11,768 |
Schedule of property useful lives | Computer equipment 3 years Furniture & fixtures 3 years Leasehold improvements Term of the lease |
5. Intangible Assets (Tables)
5. Intangible Assets (Tables) | 12 Months Ended |
May 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible assets | May 31, 2017 May 31, 2016 Website development 187,544 174,046 Less: Accumulated Depreciation (105,857 ) (95,899 ) $ 81,687 $ 78,147 |
6. Commitments and Concentrat22
6. Commitments and Concentrations (Tables) | 12 Months Ended |
May 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Office lease commitment | Office Lease – Shanghai 2018 fiscal year $ 64,800 2019 fiscal year $ 64,800 2020 fiscal year $ 21,600 Office Lease – San Gabriel, California 2018 fiscal year $ 63,648 2019 fiscal year $ 63,648 2020 fiscal year $ 10,608 The Company entered another lease for retail store in San Gabriel, California. The lease period started February 1, 2017 to July 31, 2019, the current monthly rent is $3,243, resulting in the following future commitments: 2018 fiscal year $ 38,924 2019 fiscal year $ 38,924 2020 fiscal year $ 6,487 |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 12 Months Ended |
May 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Effective tax rate schedule | Description 2017 2016 Federal Statutory Rate 35% 35% State Statutory Rate 6% 5% Change in Rate / Other 4% 2% Permanent Tax Differences (6% ) (1% ) Calculated Rate 39% 41% Actual Calculated Rate (39% ) (41% ) Difference 0% 0% |
9. Correction of Immaterial E24
9. Correction of Immaterial Error (Tables) | 12 Months Ended |
May 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Schedule of error correction | Accounts For the As As Total Revenue $ 903,185 $ 948,385 Operating Loss (2,922,756 ) (2,877,556 ) Net Loss (2,026,206 ) (1,981,006 ) Net Loss Attributable to Common Shareholders (2,223,182 ) (2,180,932 ) Investment, Available for Sale 111,016 282,616 Unearned Revenue Paid in Stock Accrued Dividend & Interest 23,954 26,529 Preferred Stock Series B-2014 2,535 2,605 Additional Paid in Capital 14,665,583 14,735,888 Unrealized Gain on Investments Available for Sale 2,057,770 2,114,170 Accumulated Deficit (15,140,555 ) (15,098,305 ) Note: If blank, means no change |
1. Liquidity and Capital Reso25
1. Liquidity and Capital Resources (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Cash raised through sale of preferred stock | $ 5,000,043 | $ 720,000 |
Net cash used in operating activities | (4,588,908) | (2,904,662) |
Cash and cash equivalents, end of year | 1,770,729 | $ 197,231 |
Preferred Class C [Member] | ||
Cash raised through sale of preferred stock | $ 5,000,043 |
2. Critical Accounting Polici26
2. Critical Accounting Policies and Estimates (Details - Other Current Assets) - USD ($) | May 31, 2017 | May 31, 2016 |
Accounting Policies [Abstract] | ||
Purchase deposit | $ 66,125 | $ 0 |
Prepaid Expense | 151,283 | 12,010 |
Security Deposit-Rent | 43,909 | 43,770 |
Other current assets | 10,084 | 0 |
Total other current assets | $ 271,401 | $ 55,780 |
2. Critical Accounting Polici27
2. Critical Accounting Policies and Estimates (Details - Other liabilities) - USD ($) | May 31, 2017 | May 31, 2016 |
Accounting Policies [Abstract] | ||
China Employees Salaries and Commissions Accrual | $ 6,799 | $ 30,331 |
Representative Office Tax Accrual | 0 | 2,879 |
Other accruals | 60,983 | 5,943 |
Accrued liabilities | $ 67,782 | $ 39,153 |
2. Critical Accounting Polici28
2. Critical Accounting Policies and Estimates (Details - Fair Value) - USD ($) | May 31, 2017 | May 31, 2016 |
Level 1 | ||
Cash | $ 1,770,729 | $ 197,231 |
Investments | 729,095 | 2,640,825 |
Total Financial Instruments | 2,499,804 | 2,838,056 |
Level 2 | ||
Cash | 0 | 0 |
Investments | 250,000 | 67,500 |
Total Financial Instruments | 250,000 | 67,500 |
Level 3 | ||
Cash | 0 | 0 |
Investments | 0 | 0 |
Total Financial Instruments | $ 0 | $ 0 |
2. Critical Accounting Polici29
2. Critical Accounting Policies and Estimates (Details - Option activity) - Stock Options - $ / shares | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Number of Options Outstanding, Beginning | 0 | 389,039 |
Number of Options Granted | 0 | 0 |
Number of Options Exercised | 0 | 0 |
Number of Options Forfeited or Expired | (389,035) | |
Number of Options Outstanding, Ending | 0 | 0 |
Weighted Average Exercise Price Outstanding, Beginning | $ 0 | $ .48 |
Weighted Average Exercise Price Outstanding, Ending | $ 0 | $ 0 |
2. Critical Accounting Polici30
2. Critical Accounting Policies and Estimates (Details Narrative) - USD ($) | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Cash and cash equivalents | $ 1,770,729 | $ 197,231 | $ 498,189 |
Uncollectible account write-off | 3,216 | 126,915 | |
Depreciation and amortization expense | 16,410 | 20,071 | |
Impairment of Long-life assets | 84,375 | 0 | |
Unearned revenue paid in stock | 231,945 | 90,278 | |
Accrued dividends | 150,831 | 2,575 | |
Accrued interest | 16,857 | 23,954 | |
Proceeds from short term debt | $ 660,000 | ||
Short term debt, shares used as collateral | 600,000 | ||
Short term debt incentive liability | $ 23,520 | 39,600 | |
Share based compensation | 514,950 | 12,300 | |
Employees and Contractors [Member] | |||
Share based compensation | $ 382,950 | ||
Number of Options Granted | 1,035,000 | ||
Corporate Counsel and Former COO [Member] | |||
Share based compensation | $ 44,000 | ||
Number of Options Granted | 100,000 | ||
Various Contractors [Member] | |||
Share based compensation | $ 88,000 | ||
Number of Options Granted | 200,000 | ||
Medicine Man Technologies, Inc. [Member] | |||
Proceeds from sale of stock in affiliate | $ 1,996,939 | $ 1,334,304 | |
Stock held in affiliate | 41,238 | 1,347,616 | |
Stock held in affiliate, value | $ 72,166 | $ 2,425,709 | |
United States | |||
Cash and cash equivalents | 1,716,138 | 195,669 | |
China | |||
Cash and cash equivalents | $ 4,591 | $ 1,562 |
3. Stockholders Equity (Details
3. Stockholders Equity (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Stock repurchased and retired, value | $ 6,249 | |
Conversion rate | $ 1.25 | |
Proceeds from preferred stock | $ 5,000,043 | $ 720,000 |
Beneficial conversion feature | $ (3,685,520) | $ (51,625) |
Former COO Roper [Member] | ||
Stock repurchased and retired, shares | 62,500 | |
Series B Preferred Stock [Member] | ||
Preferred stock converted into common stock, preferred shares converted | 835,000 | |
Preferred stock converted into common stock, common stock issued | 2,087,500 | |
Conversion rate | $ 2.50 | |
Preferred stock issued, shares issued | 650,000 | 1,885,000 |
Series A Preferred Stock [Member] | ||
Preferred stock converted into common stock, preferred shares converted | 290,000 | |
Preferred stock converted into common stock, common stock issued | 362,500 | |
Conversion rate | $ 1.25 |
4. Property and Equipment (Deta
4. Property and Equipment (Details - property and equipment) - USD ($) | May 31, 2017 | May 31, 2016 |
Property Plant and Equipment, Gross | $ 158,547 | $ 110,830 |
Less: accumulated depreciation | (105,515) | (99,062) |
Property Plant and Equipment. Net | 53,032 | 11,768 |
Furniture and Fixtures | ||
Property Plant and Equipment, Gross | 126,486 | 87,413 |
Leasehold Improvements | ||
Property Plant and Equipment, Gross | $ 32,061 | $ 23,417 |
4. Property and Equipment (De33
4. Property and Equipment (Details - useful lives) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Depreciation expense | $ 6,452 | $ 9,903 |
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 ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Website development costs | $ 187,544 | $ 174,046 |
Less: accumulated amortization | (105,857) | (95,899) |
Total Intangible Assets | 81,687 | 78,147 |
Amortization expense | $ 9,958 | $ 10,166 |
6. Commitments and Concentrat35
6. Commitments and Concentrations (Details - Office lease) | May 31, 2017USD ($) |
Shanghai | |
Office lease 2018 fiscal year | $ 64,800 |
Office lease 2019 fiscal year | 64,800 |
Office lease 2020 fiscal year | 21,600 |
San Gabriel [Member] | |
Office lease 2018 fiscal year | 63,648 |
Office lease 2019 fiscal year | 63,648 |
Office lease 2020 fiscal year | 10,608 |
San Gabriel Retail Store [Member] | |
Office lease 2018 fiscal year | 38,924 |
Office lease 2019 fiscal year | 38,924 |
Office lease 2020 fiscal year | $ 6,487 |
7. Related Party (Details Narra
7. Related Party (Details Narrative) | 12 Months Ended |
May 31, 2017USD ($)shares | |
Stock issued for compensation, value | $ 514,950 |
Lan Jiang [Member] | |
Stock issued for compensation, shares | shares | 200,000 |
Stock issued for compensation, value | $ 74,000 |
Breakwater MB [Member] | |
Payment to related party | $ 250,000 |
8. Income Taxes (Details)
8. Income Taxes (Details) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal Statutory Rate | 35.00% | 35.00% |
State Statutory Rate | 6.00% | 5.00% |
Change in Rate / Other | 4.00% | 2.00% |
Permanent Tax Differences | (6.00%) | (1.00%) |
Calculated Rate | 39.00% | 41.00% |
Actual Calculated Rate | (39.00%) | (41.00%) |
Difference | 0.00% | 0.00% |
8. Income Taxes (Details Narrat
8. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 10,000,000 | $ 8,000,000 |
Expiration date of NOL | Dec. 31, 2036 | |
Net deferred tax assets | $ 3,400,000 | $ 2,700,000 |
9. Correction of Immaterial E39
9. Correction of Immaterial Error (Details) - USD ($) | 12 Months Ended | |
May 31, 2017 | May 31, 2016 | |
Total Revenue | $ 1,667,977 | $ 948,385 |
Operating Loss | (4,914,534) | (2,877,556) |
Net Loss | (3,336,761) | (1,981,006) |
Net Loss Attributable to Common Shareholders | (7,251,075) | (2,180,931) |
Investment, Available for Sale | 282,616 | |
Accrued Dividend & Interest | 167,688 | 26,529 |
Additional Paid in Capital | 23,928,741 | 14,735,888 |
Unrealized Gain on Investments Available for Sale | (206,892) | 2,114,170 |
Accumulated Deficit | (22,349,379) | (15,098,305) |
Preferred Class B [Member] | ||
Preferred Stock Series B-2014 | $ 1,770 | 2,605 |
Scenario, Previously Reported [Member] | ||
Total Revenue | 903,185 | |
Operating Loss | (2,922,756) | |
Net Loss | (2,026,206) | |
Net Loss Attributable to Common Shareholders | (2,223,182) | |
Investment, Available for Sale | 111,016 | |
Accrued Dividend & Interest | 23,954 | |
Additional Paid in Capital | 14,665,583 | |
Unrealized Gain on Investments Available for Sale | 2,057,770 | |
Accumulated Deficit | (15,140,555) | |
Scenario, Previously Reported [Member] | Series B-2014 Preferred Stock [Member] | ||
Preferred Stock Series B-2014 | $ 2,535 |
9. Correction of Immaterial E40
9. Correction of Immaterial Error (Details Narrative) - USD ($) | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Revenues | $ 1,667,977 | $ 948,385 | |
Assets | 3,172,241 | 3,053,150 | |
Liabilities | 1,780,938 | 1,290,862 | |
Shareholders' equity | $ 1,391,303 | 1,762,288 | $ 1,596,479 |
Scenario, Previously Reported [Member] | |||
Revenues | 903,185 | ||
Restatement Adjustment [Member] | |||
Revenues | (45,200) | ||
Assets | (171,600) | ||
Liabilities | (2,575) | ||
Shareholders' equity | $ (169,025) |