Document and Entity Information
Document and Entity Information | 3 Months Ended |
Aug. 31, 2017shares | |
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 | Aug. 31, 2017 |
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 | 18,835,560 |
Document Fiscal Period Focus | Q1 |
Document Fiscal Year Focus | 2,018 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Aug. 31, 2017 | May 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 2,084,827 | $ 1,770,729 |
Accounts receivable, net | 11,344 | 8,627 |
Investments, available for sale, in affiliate | 47,835 | 72,166 |
Investments, available for sale | 951,532 | 656,909 |
Inventory | 82,065 | 7,690 |
Other current assets | 171,545 | 271,401 |
Total current assets | 3,349,148 | 2,787,522 |
Investments, Other | 250,000 | 250,000 |
Property and equipment, net | 49,134 | 53,032 |
Website development, net | 84,113 | 81,687 |
Total non-current assets | 383,247 | 384,719 |
Total assets | 3,732,395 | 3,172,241 |
Current liabilities | ||
Accounts payable | 235,778 | 303,463 |
Deferred revenue | 274,919 | 270,296 |
Investor Deposit | 2,125,000 | 210,100 |
Unearned revenue paid in stock | 357,953 | 231,945 |
Accrued liabilities | 85,805 | 67,782 |
Accrued dividend & interest | 97,313 | 167,688 |
Secured debt | 410,000 | 410,000 |
Embedded incentive interest | 24,160 | 23,520 |
Total current liabilities | 3,610,928 | 1,684,794 |
Non-current liabilities | ||
Long-term deferred revenue | 125,424 | 96,144 |
Total Non-current Liabilities | 125,424 | 96,144 |
Total liabilities | 3,736,352 | 1,780,938 |
Commitments and Contingencies | ||
Shareholders' equity | ||
Common stock $0.001 par value 80,000,000 authorized 18,835,560 and 11,446,805 were issued and outstanding August 31, 2017 and May 31, 2017, respectively | 18,836 | 11,448 |
Additional paid-in capital | 25,192,692 | 23,928,741 |
Foreign currency loss | 2,400 | 0 |
Unrealized gain on investments available for sale | (295,974) | (206,892) |
Accumulated deficit | (24,926,699) | (22,349,379) |
Total Shareholders' equity | (3,957) | 1,391,303 |
Total liabilities and shareholders' equity | 3,732,395 | 3,172,241 |
Preferred Class A [Member] | ||
Shareholders' equity | ||
Preferred stock | 565 | 615 |
Preferred Class B [Member] | ||
Shareholders' equity | ||
Preferred stock | 1,770 | |
Preferred Class C [Member] | ||
Shareholders' equity | ||
Preferred stock | $ 3,143 | $ 5,000 |
Balance Sheets (Unaudited) (Par
Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Aug. 31, 2017 | May 31, 2017 |
Stockholders' equity [note 3] | ||
Common stock par value | $ 0.001 | $ 0.001 |
Common stock authorized | 80,000,000 | 80,000,000 |
Common stock issued | 18,835,560 | 11,446,805 |
Common stock outstanding | 18,835,560 | 11,446,805 |
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 | 565,000 | 615,000 |
Preferred stock outstanding | 565,000 | 615,000 |
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 | 1,080,000 | 1,770,000 |
Preferred stock outstanding | 1,080,000 | 1,770,000 |
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 | 3,142,958 | 5,000,043 |
Preferred stock outstanding | 3,142,958 | 5,000,043 |
Statement of Comprehensive (Los
Statement of Comprehensive (Loss) and Income (Unaudited) - USD ($) | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Operating revenues | ||
Investor relations | $ 258,366 | $ 90,312 |
Subscription | 136,263 | 249,229 |
Sales-Products | 17,966 | 0 |
Other | 5,031 | 1,783 |
Total revenue | 417,626 | 341,324 |
Cost of Revenue | ||
Products | 4,902 | 0 |
Services | 272,630 | 228,871 |
Total Cost of Revenue | 277,532 | 228,871 |
Gross profit | 140,094 | 112,453 |
Operating expenses | ||
General and administrative expense | 1,173,482 | 845,676 |
Advertising expense | 225,243 | 180,724 |
Total operating expenses | 1,398,725 | 1,026,400 |
Net profit/(loss) from operations | (1,258,631) | (913,947) |
Other income/(expense) | ||
Other income | 7,031 | 300 |
Interest expense | (6,841) | (9,713) |
Net realized gain/(loss) on marketable equity securities | 0 | 750,878 |
Total other income | 190 | 741,465 |
Net (loss) | (1,258,441) | (172,482) |
Preferred stock deemed dividend | (1,244,622) | 0 |
Preferred stock dividends | (74,256) | (37,929) |
Net (loss) attributable to common shareholders | $ (2,577,319) | $ (210,411) |
Earnings per share attributable to common shareholders: | ||
Basic and diluted (loss) per share | $ (.19) | $ (.03) |
Weighted average number of shares outstanding - basic | 13,258,553 | 7,661,805 |
Other comprehensive income/(loss) | ||
Net unrealized gain/(loss) on available for sale securities | $ (89,082) | $ (1,307,956) |
Comprehensive Income/(Loss) attributable to common shareholders | $ (2,666,401) | $ (1,518,367) |
Statement of Cash Flows (Unaudi
Statement of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVTIES | ||
Net loss | $ (1,258,441) | $ (172,482) |
Adjustments to reconcile net loss (income) to net cash (used in) provided by operating activities: | ||
Non-cash revenue received as available for sale securities | (233,366) | (46,283) |
Net realized (gain)/loss on marketable equity securities | 0 | (750,878) |
Foreign currency exchange (loss) gain | 2,400 | (264) |
Stock Compensation | 24,120 | 0 |
Depreciation and amortization | 6,465 | 3,370 |
Changes in operating assets and liabilities | ||
Accounts receivable | (2,718) | (11,967) |
Inventory | (74,375) | 0 |
Other current assets | 99,856 | 11,581 |
Accounts payable | (67,685) | (12,956) |
Accrued interest | 6,841 | 9,981 |
Deferred revenue | 33,902 | 141,138 |
Other accrued liabilities | 18,023 | 70,757 |
Net cash used in operating activities | (1,444,978) | (758,003) |
Cash flows from investing activities | ||
Purchase of equipment | (4,993) | (3,373) |
Proceeds from the sale of marketable equity securities | 0 | 876,858 |
Net cash provided by investing activities | (4,993) | 873,485 |
Cash flows from financing activities | ||
Cash paid for dividend | (150,831) | 0 |
Investor deposit | 1,914,900 | 0 |
Net cash provided by financing activities | 1,764,069 | 0 |
Net increase/(decrease) in cash and cash equivalents | 314,098 | 115,482 |
Cash and cash equivalents, beginning of period | 1,770,729 | 197,231 |
Cash and cash equivalents, end of period | 2,084,827 | 312,713 |
Supplemental cash flow disclosures | ||
Cash paid for interest | 0 | 0 |
Cash paid for income taxes | 9,878 | 0 |
Cash paid for China representative office tax | 13,950 | 0 |
Supplemental disclosure of non-cash activity | ||
Stock received for investor relations services | $ 359,375 | $ 96,000 |
Organization and Nature of Oper
Organization and Nature of Operations | 3 Months Ended |
Aug. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Business Description Chineseinvestors.com 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. In March 2017, the Company established and registered XiBiDi Biotechnology Co., Ltd. (“CBD Biotechnology Co., Ltd”) in the Pudong Free-Trade Area in Shanghai, established as a wholly owned foreign enterprise. In April, CIIX appointed XiangYang Yun as chief executive officer (CEO) of this wholly owned foreign enterprise. XiBiDi Biotechnology Co. Ltd.’s primary focus is online, retail and direct sales of hemp-based health products in China. Yun’s initial focus is the launch of the XiBiDi Magic Hemp Series (“CBD Magic Hemp Series”) cosmetics line which includes three initial products, namely, the CBDBIO TECH Brightening and Refreshing Moisturizer, the CBDBIO TECH Perfecting Shield Primer, and the CBDBIO TECH Peptide Collagen Solution. As noted above, the Chinese character “XiBiDi” is homophonic to “CBD” in English. In April 2017, the Company established ChineseHempOil.com, Inc. dba “Chinese Wellness Center” a Delaware corporation, as a subsidiary of the Company. ChineseHempOil.com, Inc. responsible for the development and operation of the online and retail sales of non-industrial hemp-based health products in the United States. Chinese Wellness Center is the retail store located in the predominantly Chinese community of San Gabriel, California, located next to the Company’s headquarters. In addition, ChineseInvestors.com, Inc. announced the release of its first hemp oil product line, OptHemp, a premium, private label oil, made from full-spectrum, Colorado grown, GMO-Free, non-industrial hemp, manufactured using a CO 2 Extraction process. |
1. Liquidity and Capital Resour
1. Liquidity and Capital Resources | 3 Months Ended |
Aug. 31, 2017 | |
Cash and Cash Equivalents [Abstract] | |
Liquidity and Capital Resources | Cash Flows Cash flows provided by (used in) operations for the three months ending August 31, 2017 and 2016 were $(1,444,978) and $(758,003), respectively. The decreased cash used in operations were due to increased deferred revenue from membership subscriptions and revenue related to investor relations. 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 | 3 Months Ended |
Aug. 31, 2017 | |
Accounting Policies [Abstract] | |
Critical Accounting Policies and Estimates | Basis of Presentation Principles of Consolidation The consolidated financial statements include the accounts of Chineseinvestors.com Inc and its subsidiaries (collectively the “Company”). The Company’s subsidiaries include 100% of ChineseHempOil.com Inc, XiBiDi Biotechnology Co, Ltd, Hemp Logic and CIIX Online. Intercompany accounts and transactions have been eliminated upon consolidation. Foreign Currency Selling Price and Market Financing Expenses Numerous Intercompany Transactions Beside the above, one subsidiary XiBiDi Biotechnoly Co Ltd's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Owners’ contribution is translated at historical rate. Income and expenditures are translated at the average exchange rate of the period. The RMB is not freely convertible into foreign currency and all foreign currency exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollar at the rates used in translation. XiBiDi Biotechnoly Co Ltd was not established until March 2017, therefore there is no translation for statement of comprehensive (loss) and income for the three-month period end August 31, 2017. The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements were as follows: August 31, 2017 Balance sheet RMB 6.57 to US $1.00 Statement of comprehensive (loss) and income-three-month period RMB 6.65 to US $1.00 May 31, 2017 Balance sheet RMB 6.80 to US $1.00 August 31, 2016 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 seller’s price to the buyer is fixed or determinable and lastly collectability is reasonably assured. 1. Fees from banner advertisements, 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 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 August 31, 2017 and May 31, 2017, the Company determined that an allowance was not needed. The operations of the Company are located in the 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 Company’s financials as "Investments, available for sale". The Company will also record a corresponding contra-asset account titled "Unearned Revenue paid in stock". Inventories Other Current Assets August 31, May 31, 2017 2017 Purchase deposit $ – $ 66,125 Prepaid expense 121,805 151,238 Security deposit-rent 40,583 43,909 Other current assets 9,157 10,084 $ 171,545 $ 271,401 Investment-affiliate 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 & interest Accrued Liabilities August 31, 2017 May 31, 2017 China Employees' Salaries and Commissions Accrual $ 6,799 $ 6,799 Other Accruals 79,006 60,983 $ 85,805 $ 67,782 Unearned revenue, revenue paid in stock Deferred revenue Short-term debt, secured by stock 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 August 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. 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 August 31, 2017. We recorded the estimated value of the Incentive Feature as and increase to the debt liability and interest expense. The liability from the Incentive Feature was recorded as Embedded incentive interest on the balance sheet, $24,160 was recorded as of August 31, 2017. It has recently been determined that these notes were not properly collateralized as the ownership did not transfer from the Company to the collateral agent. This issue has been addressed in the current period and all subsequent notes were properly collateralized. All notes that were not properly collateralized have been repaid or renegotiated into new notes. 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. 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: August 31, 2017 May 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash 2,084,827 – – 1,770,729 – – Investments 999,367 250,000 – 729,075 250,000 – Total Financial Instruments 3,084,194 250,000 – 2,499,804 250,000 – 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. Other Revenue 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. On July 14, 2017, the Company awarded and issued restricted stock award to a service provider 30,000 shares in total, and the fair market value at the grant date was $0.80 per share. All these shares were fully vested at grant date, total stock compensation expense totaling $24,120 were recorded. Reclassifications 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 | 3 Months Ended |
Aug. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | As of August 31, 2017 and May 31, 2017, 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 have not been returned as of August 31, 2017. The Company has communicated with Mr. Brett Roper, who has confirmed shares will be returned soon and recorded with transfer agent. During the three months period ended August 31, 2017, the shareholders of preferred stock Series 2012 converted 50,000 shares of preferred stock for 62,500 shares of common stock shares at a conversion rate of 1 preferred stock A for 1.25 shares of common stock. During the three months period ended August 31, 2017 the shareholders of preferred stock Series A 2014 converted 690,000 shares of preferred stock for 1,725,000 of common stock shares at a conversion rate of 1 preferred stock B for 2.50 shares of common stock. During the three months period ended August 31, 2017, the shareholders of preferred stock C-2016 converted 1,857,085 shares of preferred stock for 5,571,255 of common stock shares at a conversion rate of 1 Series C-2016 share of preferred stock for 3.00 shares of common stock. During the three months period ended August 31, 2017, the Company granted 30,000 shares of restricted common stock for compensation. The stock was valued from $0.80 per share. The compensation and consulting expense was recorded as general and administrative expenses for the period ended August 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 A-2014 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-2016 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 into 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 proceeds we received, actual proceeds will be BCF, otherwise, the intrinsic value is the BCF. Therefore, we calculated 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-2016 is convertible after six months from the date of issuance. We then amortize the BCF over six months period, we recorded $3,685,520 as deemed dividend that reduce accumulated deficit as of May 31, 2017, and we recorded the remaining $1,244,622 as deemed dividend that reduce accumulated deficit for the period ending August 31, 2017. |
4. Property and Equipment
4. Property and Equipment | 3 Months Ended |
Aug. 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: August 31, 2017 May 31, 2017 Furniture & Fixtures $ 126,486 $ 126,486 Leasehold Improvements 32,061 32,061 $ 158,547 $ 158,547 Less: Accumulated Depreciation (109,413 ) (105,515 ) $ 49,134 $ 53,032 Depreciation on equipment is provided on a straight-line basis over their 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 three months ending August 31, 2017 and 2016 was $3,898 and $889, respectively. |
5. Intangible Assets
5. Intangible Assets | 3 Months Ended |
Aug. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible assets are comprised of the following: August 31, 2017 May 31, 2017 Website development $ 192,537 $ 187,544 Less: Accumulated Amortization (108,424 ) (105,857 ) $ 84,113 $ 81,687 Amortization is calculated over a straight-line basis using the economic life of the asset. Amortization expense for the three months ended August 31, 2017 and 2016 was $2,567 and $2,481 respectively. |
6. Commitments and Concentratio
6. Commitments and Concentrations | 3 Months Ended |
Aug. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Concentrations | Office Lease – Shanghai 2018 fiscal year $ 48,600 2019 fiscal year $ 64,800 2020 fiscal year $ 21,600 Office Lease – San Gabriel, California 2018 fiscal year $ 50,141 2019 fiscal year $ 67,064 2020 fiscal year $ 11,177 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 $ 29,193 2019 fiscal year $ 38,924 2020 fiscal year $ 6,487 Concentrations Litigation |
7. Subsequent Events
7. Subsequent Events | 3 Months Ended |
Aug. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company is currently in the process of offering up to 10,000,000 shares at $1 per share total $10,000,000 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 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. As of August 31, 2017, the company received $2,125,000 deposit from investors, those deposits have not been recorded with our stock transfer agent yet. The Company repaid $310,000 of loans in the aggregate amount of $410,000 in the beginning of October 2017 along interest. There are $100,000 in loans that remain unpaid and outstanding. It is anticipated that the principal, interest and any other fees outstanding on these loans will be rolled into new loans, in full or in part, with any remaining unpaid amounts to be repaid. These new loan agreements are currently being negotiated. |
2. Critical Accounting Polici14
2. Critical Accounting Policies and Estimates (Policies) | 3 Months Ended |
Aug. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Chineseinvestors.com Inc and its subsidiaries (collectively the “Company”). The Company’s subsidiaries include 100% of ChineseHempOil.com Inc, XiBiDi Biotechnology Co, Ltd, Hemp Logic and CIIX Online. Intercompany accounts and transactions have been eliminated upon consolidation. |
Foreign Currency | Foreign Currency Selling Price and Market Financing Expenses Numerous Intercompany Transactions Beside the above, one subsidiary XiBiDi Biotechnoly Co Ltd's functional currency is the Chinese Renminbi (RMB). The reporting currency is that of the US Dollar. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Owners’ contribution is translated at historical rate. Income and expenditures are translated at the average exchange rate of the period. The RMB is not freely convertible into foreign currency and all foreign currency exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollar at the rates used in translation. XiBiDi Biotechnoly Co Ltd was not established until March 2017, therefore there is no translation for statement of comprehensive (loss) and income for the three-month period end August 31, 2017. The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the financial statements were as follows August 31, 2017 Balance sheet RMB 6.57 to US $1.00 Statement of comprehensive (loss) and income-three-month period RMB 6.65 to US $1.00 May 31, 2017 Balance sheet RMB 6.80 to US $1.00 August 31, 2016 |
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 seller’s price to the buyer is fixed or determinable and lastly collectability is reasonably assured. 1. Fees from banner advertisements, 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 |
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 August 31, 2017 and May 31, 2017, the Company determined that an allowance was not needed. The operations of the Company are located in the 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 Company’s financials as "Investments, available for sale". The Company will also record a corresponding contra-asset account titled "Unearned Revenue paid in stock". |
Inventories | Inventories |
Other Current Assets | Other Current Assets August 31, May 31, 2017 2017 Purchase deposit $ – $ 66,125 Prepaid expense 121,805 151,238 Security deposit-rent 40,583 43,909 Other current assets 9,157 10,084 $ 171,545 $ 271,401 |
Investment affiliate | Investment-affiliate |
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 and Interest | Accrued dividend & interest |
Accrued liabilities | Accrued Liabilities August 31, 2017 May 31, 2017 China Employees' Salaries and Commissions Accrual $ 6,799 $ 6,799 Other Accruals 79,006 60,983 $ 85,805 $ 67,782 |
Unearned revenue, revenue paid in stock | Unearned revenue, revenue paid in stock |
Deferred revenue | Deferred revenue |
Short-term debt, secured by stock | Short-term debt, secured by stock 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 August 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. 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 August 31, 2017. We recorded the estimated value of the Incentive Feature as and increase to the debt liability and interest expense. The liability from the Incentive Feature was recorded as Embedded incentive interest on the balance sheet, $24,160 was recorded as of August 31, 2017. It has recently been determined that these notes were not properly collateralized as the ownership did not transfer from the Company to the collateral agent. This issue has been addressed in the current period and all subsequent notes were properly collateralized. All notes that were not properly collateralized have been repaid or renegotiated into new notes. |
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. 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: August 31, 2017 May 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash 2,084,827 – – 1,770,729 – – Investments 999,367 250,000 – 729,075 250,000 – Total Financial Instruments 3,084,194 250,000 – 2,499,804 250,000 – |
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. |
Other revenue | Other Revenue |
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. On July 14, 2017, the Company awarded and issued restricted stock award to a service provider 30,000 shares in total, and the fair market value at the grant date was $0.80 per share. All these shares were fully vested at grant date, total stock compensation expense totaling $24,120 were recorded. |
Reclassifications | Reclassifications |
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 Polici15
2. Critical Accounting Policies and Estimates (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Accounting Policies [Abstract] | |
Exchange rate translation | August 31, 2017 Balance sheet RMB 6.57 to US $1.00 Statement of comprehensive (loss) and income-three-month period RMB 6.65 to US $1.00 May 31, 2017 Balance sheet RMB 6.80 to US $1.00 August 31, 2016 |
Other Current Assets | August 31, May 31, 2017 2017 Purchase deposit $ – $ 66,125 Prepaid expense 121,805 151,238 Security deposit-rent 40,583 43,909 Other current assets 9,157 10,084 $ 171,545 $ 271,401 |
Accrued liabilities | August 31, 2017 May 31, 2017 China Employees' Salaries and Commissions Accrual $ 6,799 $ 6,799 Other Accruals 79,006 60,983 $ 85,805 $ 67,782 |
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 | August 31, 2017 May 31, 2017 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Cash 2,084,827 – – 1,770,729 – – Investments 999,367 250,000 – 729,075 250,000 – Total Financial Instruments 3,084,194 250,000 – 2,499,804 250,000 – |
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. |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | August 31, 2017 May 31, 2017 Furniture & Fixtures $ 126,486 $ 126,486 Leasehold Improvements 32,061 32,061 $ 158,547 $ 158,547 Less: Accumulated Depreciation (109,413 ) (105,515 ) $ 49,134 $ 53,032 |
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) | 3 Months Ended |
Aug. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible assets | August 31, 2017 May 31, 2017 Website development $ 192,537 $ 187,544 Less: Accumulated Amortization (108,424 ) (105,857 ) $ 84,113 $ 81,687 |
6. Commitments and Concentrat18
6. Commitments and Concentrations (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Office lease commitment | Office Lease – Shanghai 2018 fiscal year $ 48,600 2019 fiscal year $ 64,800 2020 fiscal year $ 21,600 Office Lease – San Gabriel, California 2018 fiscal year $ 50,141 2019 fiscal year $ 67,064 2020 fiscal year $ 11,177 The Company entered another lease for retail store in San Gabriel, California. 2018 fiscal year $ 29,193 2019 fiscal year $ 38,924 2020 fiscal year $ 6,487 |
1. Liquidity and Capital Reso19
1. Liquidity and Capital Resources (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | May 31, 2016 | |
Net cash used in operating activities | $ (1,444,978) | $ (758,003) | ||
Cash and cash equivalents | 2,084,827 | $ 312,713 | $ 1,770,729 | $ 197,231 |
Series D Preferred Stock [Member] | ||||
Cash raised through sale of preferred stock | $ 1,914,900 | $ 100,000 |
2. Critical Accounting Polici20
2. Critical Accounting Policies and Estimates (Details - Exchange rates) - China, Yuan Renminbi | 3 Months Ended | |
Aug. 31, 2017 | May 31, 2017 | |
Translation rate | 6.57 | 6.80 |
Translation rate for duration period | 6.65 |
2. Critical Accounting Polici21
2. Critical Accounting Policies and Estimates (Details - Other Current Assets) - USD ($) | Aug. 31, 2017 | May 31, 2017 |
Accounting Policies [Abstract] | ||
Purchase deposit | $ 0 | $ 66,125 |
Prepaid Expense | 121,805 | 151,283 |
Security Deposit-Rent | 40,583 | 43,909 |
Other current assets | 9,157 | 10,084 |
Total other current assets | $ 171,545 | $ 271,401 |
2. Critical Accounting Polici22
2. Critical Accounting Policies and Estimates (Details - Other liabilities) - USD ($) | Aug. 31, 2017 | May 31, 2017 |
Accounting Policies [Abstract] | ||
China Employees Salaries and Commissions Accrual | $ 6,799 | $ 6,799 |
Other accruals | 79,006 | 60,983 |
Accrued liabilities | $ 85,805 | $ 67,782 |
2. Critical Accounting Polici23
2. Critical Accounting Policies and Estimates (Details - Short Term Debt) | Aug. 31, 2017shares |
Sino-Global Shipping America [Member] | |
Debt secured by shares of stock | 80,000 |
Recon Technology [Member] | |
Debt secured by shares of stock | 60,000 |
Nengfa Weiye Energy [Member] | |
Debt secured by shares of stock | 185,000 |
SGOCO Group [Member] | |
Debt secured by shares of stock | 28,333 |
2. Critical Accounting Polici24
2. Critical Accounting Policies and Estimates (Details - Fair Value) - USD ($) | Aug. 31, 2017 | May 31, 2017 |
Level 1 | ||
Cash | $ 2,084,827 | $ 1,770,729 |
Investments | 999,367 | 729,095 |
Total Financial Instruments | 3,084,194 | 2,499,804 |
Level 2 | ||
Cash | 0 | 0 |
Investments | 250,000 | 250,000 |
Total Financial Instruments | 250,000 | 250,000 |
Level 3 | ||
Cash | 0 | 0 |
Investments | 0 | 0 |
Total Financial Instruments | $ 0 | $ 0 |
2. Critical Accounting Polici25
2. Critical Accounting Policies and Estimates (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | May 31, 2016 | |
Cash and cash equivalents | $ 2,084,827 | $ 312,713 | $ 1,770,729 | $ 197,231 |
Allowance for doubtful accounts | 0 | 0 | ||
Uncollectible account write-off | 0 | 0 | ||
Depreciation and amortization expense | 6,465 | 3,370 | ||
Impairment of Long-life assets | 0 | 0 | ||
Accrued dividends | 74,256 | 150,831 | ||
Accrued interest | 23,057 | 16,857 | ||
Embedded incentive interest | 24,160 | $ 23,520 | ||
Share based compensation | $ 24,120 | 0 | ||
Service Provider [Member] | ||||
Number of Options Granted | 30,000 | |||
Medicine Man Technologies, Inc. [Member] | ||||
Proceeds from sale of stock in affiliate | $ 0 | $ 856,080 | ||
Stock held in affiliate | 41,238 | 41,238 | ||
Stock held in affiliate, value | $ 47,835 | $ 72,166 | ||
Breakwater MB LLC [Member[ | ||||
Investment in affiliate | 250,000 | |||
United States | ||||
Cash and cash equivalents | $ 2,013,512 | $ 1,716,138 |
3. Stockholders Equity (Details
3. Stockholders Equity (Details Narrative) - shares | 3 Months Ended | 12 Months Ended |
Aug. 31, 2017 | May 31, 2016 | |
Restricted Stock [Member] | ||
Stock granted for compensation, shares | 30,000 | |
Series A Preferred Stock [Member] | Common Stock | ||
Preferred stock converted into common stock, preferred shares converted | 50,000 | |
Preferred stock converted into common stock, common stock issued | 62,500 | |
Series B Preferred Stock [Member] | Common Stock | ||
Preferred stock converted into common stock, preferred shares converted | 690,000 | |
Preferred stock converted into common stock, common stock issued | 1,725,000 | |
Series C Preferred Stock [Member] | Common Stock | ||
Preferred stock converted into common stock, preferred shares converted | 1,857,085 | |
Preferred stock converted into common stock, common stock issued | 5,571,255 | |
Former COO Roper [Member] | ||
Stock repurchased and retired, shares | 62,500 |
4. Property and Equipment (Deta
4. Property and Equipment (Details - property and equipment) - USD ($) | Aug. 31, 2017 | May 31, 2017 |
Property Plant and Equipment, Gross | $ 158,547 | $ 158,547 |
Less: accumulated depreciation | (109,413) | (105,515) |
Property Plant and Equipment. Net | 49,134 | 53,032 |
Furniture and Fixtures | ||
Property Plant and Equipment, Gross | 126,486 | 126,486 |
Leasehold Improvements | ||
Property Plant and Equipment, Gross | $ 32,061 | $ 32,061 |
4. Property and Equipment (De28
4. Property and Equipment (Details - useful lives) - USD ($) | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Depreciation expense | $ 3,898 | $ 889 |
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 ($) | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Website development costs | $ 192,537 | $ 187,544 | |
Less: accumulated amortization | (108,424) | (105,857) | |
Total Intangible Assets | 84,113 | $ 81,687 | |
Amortization expense | $ 2,567 | $ 2,481 |
6. Commitments and Concentrat30
6. Commitments and Concentrations (Details - Office lease) | Aug. 31, 2017USD ($) |
Shanghai | |
Office lease 2018 fiscal year | $ 48,600 |
Office lease 2019 fiscal year | 64,800 |
Office lease 2020 fiscal year | 21,600 |
San Gabriel [Member] | |
Office lease 2018 fiscal year | 50,141 |
Office lease 2019 fiscal year | 67,064 |
Office lease 2020 fiscal year | 11,177 |
San Gabriel Retail Store [Member] | |
Office lease 2018 fiscal year | 29,193 |
Office lease 2019 fiscal year | 38,924 |
Office lease 2020 fiscal year | $ 6,487 |