UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

For the quarterly period ended August 31, 2013

OR

For the transition period __________ to __________

Commission File Number: 000-54207

ChineseInvestors.COM, Inc.

(Exact name of registrant as specified in its charter)

13791 East Rice Place, Suite #107 Aurora, CO 80015

Brett Roper, Director of Administrative Services - (303) 481-4416 or (303) 345-1262

Copies to: Michael E. Shaff, Esq., Irvine Venture Law Firm, LLP

17901 Von Karman Avenue, Suite 500, Irvine, CA 92614 Telephone (949) 660-7700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 14, 2013, there were outstanding 5,969,585 shares of the issuer’s common stock, par value $0.001 per share and 2,003,776 shares of the issuer’s preferred stock, par value $0.001 per share.

ChineseInvestors.COM, Inc.

FORM 10-Q for the Quarter Ended August 31, 2013

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Chineseinvestors.com, Inc.

BALANCE SHEETS

  (Expressed in U.S. Dollars)

See accompanying notes

Chineseinvestors.Com, Inc.

STATEMENTS OF OPERATIONS AND (LOSS)

(UNAUDITED)

(Expressed in U.S. Dollars)

See accompanying notes

Chineseinvestors.Com, Inc.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

  (Expressed in U.S. Dollars)

See accompanying notes

NOTES TO THE FINANCIAL STATEMENTS

(AUDITED)

Organization and Nature of Operations:

Business Description Chinseinvestors.com, Inc. (the Company) was incorporated on June 15, 1999 in the State of California. During May, 2000, the Company entered into an agreement with MAS Financial Corp. (“MASF”) whereby MASF agreed to transfer control of a public shell corporation to the Company and perform certain consulting services for a fee of $30,000.

During June, 2000, the Company completed reorganization with MAS Acquisition LII Corp. (“MASA”) with no operations or significant assets. Pursuant to the terms of the agreement, the Company acquired approximately 96% of the issued and outstanding common shares of MASA in exchange for all of its issued and outstanding common stock. MASA issued 8,200,000 shares of its restricted common stock for all of the issued and outstanding common shares of the Company. This reorganization was accounted for as though it were a recapitalization of the Company and sale by the Company of 319,900 shares of common stock in exchange for the net assets of MASA. In conjunction with the reorganization MASA changed its name to Chineseinvestors.com, Inc.

ChineseInvestors.com, Inc. endeavors to be an innovative company, specializing in (a) providing real-time market commentary, analysis, and educational related endeavor(s) in Chinese language character sets (traditional and simplified), (b) providing support services to our various partners, (c) providing consultative services to smaller private companies considering becoming a public company, (d) providing various advertising as well as public relation support services, (e) providing various programming in China relative to the US Financial Marketplace via cable television and our various relationship and (f) other services we may identify having the potential to create value or partnership opportunity with our existing services.

The Company remains incorporated as a C corporation in good standing as of this filing date with the State of Indiana (since of June 1, 1997).

Cash Flows — During the quarter ending August 31, 2013, the Company primarily utilized cash, cash equivalents and proceeds from a series of loans guaranteed by securities it holds to fund its operations.

Cash flows used in operations for the quarters ended August 31, 2013 and 2012 were $334,775 and $416,182, respectively, which represents a decrease when compared to prior periods. Generally lower costs of operation(s) as well as the costs as associated with the operations of its Shanghai Offices (Representative Status) were the primary reasons for this decrease.

Capital Resources — As of August 31, 2013, the Company had cash and cash equivalents of $213,773 as compared to cash and cash equivalents of $211,442 as of May 31, 2013.

Since inception in 1997, the Company has primarily relied upon proceeds from private placements of its equity securities to fund its operations. The Company anticipates continuing to rely on lending or sales of our securities in order to continue to fund business operations. The potential issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that the Company will be able to complete any additional sales of our equity securities or that it will be able arrange for other financing to fund our planned business activities.

Basis of Presentation — These accompanying financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission for annual financial statements.

Foreign Currency – The Company has operations in the PRC; however, the functional and reporting currency is in US dollars.  To come to this conclusion the Company considered the direction of Accounting Standards Codification (“ASC”) section 830-10-55.

Selling Price and Market - As a representative office in PRC the Company is not allowed to sell directly to PRC based customers.  Over 90% of its customers are in the United States and 100% of all sales are paid in US dollars.  This indicates the functional currency is US dollars.

Financing - The Companies financing has been generated exclusively in US dollars from the United States.  This indicates the functional currency is US dollars.

Expenses – The majority of expense are paid in US dollars. The expenses generated in PRC are paid by a monthly cash transfer from the US when the expenses are due, resulting in very little foreign currency exposure. This indicates that the functional currency is US dollars.

Numerous Intercompany Transactions – The Company has multiple transactions each month between the US and Chinese representative office. This indicates that the functional currency is US dollars.

Due to the functional and reporting currency both being in US dollars, ASC 830-10-45-17 states that a currency translation is not necessary.

Reclassifications — Certain amounts in the prior period’s financial statements have been reclassified to conform to the current quarters presentation and to correct prior period errors.

Revenue recognition — Revenues are derived from six different sources:

1. Fees from banner advertisement, webpage hosting and maintenance, translation services, web based advertising and promotion fees for customers. These revenues are recognized within the corresponding quarter and finalized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured.

2. Fees from membership subscriptions; these revenues are recognized over the term of the subscription. Subscription terms are generally between 3 and 12 months but can occasionally be as short as 1 month or as long as 24 months. Long term deferred revenues are recognized from subscriptions over 12 months.

3. Fees related to setting up and providing ongoing administrative and translation support for currency trading accounts in association with Forex. These fees are recognized when earned. It should be noted at this time that such fees represent approximately one (1%) percent of the overall revenues as represented and as such are included in the general business services category.

4. Binary option service provide fees are earned various efforts supporting Option World, a Chinese base binary option trading platform for which the company had a contract with Krisworld Limited of Hong Kong. In March of 2013 the Company severed its relationship with Krisworld Limited of Hong Kong due to lack of response to their clients for which the Company had responsibility for coordinating, lack of payment on existing billings for services that resulted in a significant write off for the Company in FY 2013, and for general lack of response to the Company’s repeated inquiries on behalf of Krisworld Limited of Hong Kong related clients. Since March 2013 the Company has generated no revenue from binary option commissions and does not expect to pursue this revenue source in the foreseeable future.

5. Consulting revenues as associated with various pre-public company services as well as assistance in the development of general corporate strategies having to do with becoming a public company on various publically traded exchanges.

6. Service provider income is earned by the Company in return for publicizing other publicly traded companies in return for shares of the company’s common stock. These revenues are prepaid by the client company and then the revenue is recognized over the term of the services agreement. All valuation calculations were tied to the active trading value of the client’s stock on the specific stock exchange and therefore is considered a fair market level one item as directed by counting standards codification 820.

Costs of Services Sold — Costs of services sold are the total direct cost of the Company’s operations in Shanghai.

Website Development Costs — The Company accounts for its Development Costs in accordance with ASC 350-50, “Accounting for Website Development Costs.” The Company’s website comprises multiple features and offerings that are currently developed with ongoing refinements. In connection with the development of its products, the Company has incurred external costs for hardware, software, and consulting services, and internal costs for payroll and related expenses of its technology employees directly involved in the development. All hardware costs are capitalized as fixed assets. Purchased software costs are capitalized in accordance with ASC codification 350-50-25 related to accounting for the costs of computer software developed or obtained for internal use. All other costs are reviewed to determine whether they should be capitalized or expensed.

Cash and Cash Equivalents - The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. At certain times cash in bank may exceed the amount covered by FDIC insurance. At August 31, 2013 and May 31, 2013 there were deposit balances in a US bank of $211,175 and $210,000, respectively. In addition the Company maintains cash balance in The Bank of China, which is a government owned bank. The full balance of the deposits in China is secured by the Chinese government. At August 31, 2013 and May 31, 2013 there were deposits of $2,598 and $1,442, respectively, in The Bank of China.

Accounts Receivable and Concentration of Credit Risk — The Company extends unsecured credit to its customers in the ordinary course of business. Accounts receivable related to subscription revenue is recorded at the time the credit card transaction is completed, and is completed when the merchant bank deposits the cash to the Company bank account. Revenue related to advertising and Forex are regularly collected within 30 days of the time of services being rendered. However, since these are ongoing contracts there has been no instance of failure to pay. Revenue related to the binary option revenue and Krisworld start-up support are paid with a one month lag, noting this relationship was severed in March of 2013. As of August 31, 2013 and May 31, 2013, the Company had accounts receivable of $8,044 and $3,667, respectively.

The Company evaluates the need for an allowance for doubtful accounts on a regular basis. As of August 31, 2013 and May 31, 2013, the Company determined that based on historically having no bad debts an allowance was not needed.

The operations of the Company (Representative Office status for general back of the house support) are partially located in the People’s Republic of China (“PRC”). Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy.

Investments available for sale – Investments available for sale is comprised of publicly traded stock received in return for providing various levels of corporate messaging support and certain investor relation services to a variety of unrelated companies with service contracts ranging from one week to twenty-four months, starting in August 2012. The Company considers the securities to be liquid and convertible to cash based upon the specific holding period requirements of Rule 144 in consideration of the corporate structure of the issuing entity. The Company has the ability and intent to liquidate or leverage any security that the Company holds to fund operations over the next twelve months, if necessary, and as such has classified all of its marketable securities as short term.

The Company followed the guidance of ASC 320-10-30 to determine the initial measure of value based on the cost method. These shares were classified as available for sale securities in accordance with ASC 948-310-40-1 as the Companies intention is to sell them in the near-term (less than one year). In compliance with ASC 320-10-35-1-a trading security that has a readily determinable fair value shall be measured subsequently at fair value in the statement of financial position. "Unrealized holding gains and losses for trading securities shall be included in earnings".

When the shares will be earned over a term longer than within the current reporting period, the Company has deferred the recognition of the earnings of the revenue over the period the services are performed. The value recorded is determined by multiplying the average of the closing price on the last day of the month for the period being reported on based on quotes from a reliable quotation source. Upon receipt, these shares will be recorded as an asset on the Companies financials as "Available for sale securities". The Company will also record a corresponding contra-asset account titled "Unearned Revenue".

Other Current Assets — Other current assets is comprised primarily of deposits in Chinese RMB on building space under an operating lease and are stated at the current exchange rate at quarter end.

Other current assets were $35,267 and $33,795 at August 31, 2013 and May 31, 2013, respectively.

Property and Equipment — Property and equipment are stated at cost. Depreciation and amortization of property and equipment is provided using the straight-line method over estimated useful lives ranging from three to five years. Leasehold improvements are amortized over the life of the lease. Depreciation and amortization expense was $6,422 and $8,438 for the quarters ended August 31, 2013 and 2012, respectively.

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Gains and losses from retirement or replacement are included in operations.

Impairment of Long-life Assets — In accordance with ASC Topic 360, the Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There was no impairment as of August 31, 2013 and May 31, 2013.

Accrued Liabilities— Accrued liabilities are comprised of the following:

Unearned revenue, investor relations work – The Company has received total shares of stock with a value of $983,660 at August 31, 2013 payment for investor relations work that the Company has provided and will continue to provide over a period starting August 1, 2012 and going through August 31, 2014. As the Company earns the fee for this work, this balance will be reduced to reflect the portion still to be earned.

Short-term debt, secured by stock – The Company has obtained short term debt of $340,000, from nine individuals, secured by 50,000 shares of the company owned stock in Nova Lifestyles, Inc. The notes are due to be repaid February 28, 2014 and are extendable for another 180 days at the lenders option. These notes have a variable interest rate of a minimum of 6% but may increase based on various factors. As of August 31, 2013, the assets securing these loans were valued at $210,000.

Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments — The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:      

The majority of the Company’s financial instruments is level one and are carried at market value, requiring no adjustment to book value. The financial instruments classified as level one were deemed to qualify as that classification because their value was determined by the price of identical instruments traded on an active exchange. It should be noted that 60,000 shares of the stock earned for consulting work, currently being held qualifies as a Level two instrument and has a book value of $67,500, $60,000 at May 31, 2013. The Company determined that the instrument was Level two because the market for this instrument was less active, as it was currently being distributed through a private placement memorandum, and was not a freely trading public stock. The value of the stock has been verified to be consistent with the carrying value and, therefore, not requiring an adjustment.

The following table summarizes the assets we are carrying and the fair value category in which they are currently classified:

Income Taxes — Income taxes are accounted for under the asset and liability method of ASC 740. Deferred tax assets and liabilities are recognized for net operating loss and other credit carry forwards and the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the tax effect of transactions are expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the year that includes the enactment date.

Deferred tax assets are reduced by a full valuation allowance since it is more likely than not that the amount will not be realized. Deferred tax assets and liabilities are classified as current or noncurrent based on the classification of the underlying asset or liability giving rise to the temporary difference or the expected date of utilization of the carry forwards.

Advertising Costs — Advertising costs are expensed when incurred. Advertising costs totaled $33,544 and $76,353 in the three months ended August 31, 2013 and 2012, respectively.

Earnings (Loss) Per Share — Earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period. The Company has adopted ASC 260 (formerly SFAS128), “Earnings Per Share”.

Stock Based Compensation — The Company accounts for share-based payments pursuant to ASC 718, “Stock Compensation” and, accordingly, the Company records compensation expense for share-based awards based upon an assessment of the grant date fair value for stock options and restricted stock awards using the Black-Scholes option pricing model.

Stock compensation expense for stock options is recognized over the vesting period of the award or expensed immediately under ASC 718 and EITF 96-18 when stock or options are awarded for previous or current service without further recourse. The Company issued stock options to contractors and external companies that had been providing services to the Company upon their termination of services. Under ASC 718 and EITF 96-18 these options were recognized as expense in the period issued because they were given as a form of payment for services already rendered with no recourse.

Share based expense paid to outside companies is expensed as occurred. Since the Company’s stock is publicly traded, the value is determined based on the number of shares issued and the trading value of the stock on the date of the transaction.

Stock option activity was as follows (converted post reverse split):

The following table presents information regarding options outstanding and exercisable as of August 31, 2013:  

As of August 31, 2013, future compensation costs related to options issued was $0.

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:

At August 31, 2013 and May 31, 2013, the Company was authorized to issue 80,000,000 shares of common stock, $0.001 par value per share.  In addition, 20,000,000 shares of $.001 par value preferred stock were authorized. All commons stock shares have full dividend rights.  However, it is not anticipated that the Company will be declaring distributions in the foreseeable future.

In October 2011 the Company executed the final documents with a private capital source describing the provision of a Financing Facility to the Company having a face value of $1.5 million; to be made available in $500,000 tranches in exchange for purchasing the Company's stock under a proposed S1 registration statement at 85% of the lowest daily volume average share price over a five (5) trading day period once the Company calls for the funding.  The agreement would remain in force for 24 months from the date of contemplated execution. This registration statement was cleared by the SEC in June of 2012.

When the final facility was approved and executed, the Company paid a document preparation fee to the funding source of $10,000 and paid them 50,000 restricted shares of the Company's stock in consideration of the Facility's creation and funds availability.  On November 4, 2011 when the shares were issued the most recent shares sold at the market rate of $0.96, resulting in a non-cash expense of $48,000 being recognized in the current quarter.  These shares are restricted in that they cannot be sold for six months.  In addition, if the Company does not use the capital raise or the funding source is unable to generate the agreed upon capital, the shares are to be returned to the Company.  However, in consideration of the accounting principal of “more likely than not” as explained in accounting standards codification 350-25-35-30 and 740-10-25-6 the Company recognized the expenses in the second quarter in general and administrative expense.

On September 8, 2010, in the third quarter of FY 2012 the Company reverse split its shares at a rate of 8 to 1 resulting in total shares outstanding changing from 38,579,925 to 4,822,491. All Company financials statements are retroactively adjusted at this ratio.

Series A Convertible Preferred Stock

During the third quarter, effective February 29, 2012, the Company issued 2,003,776 shares of preferred stock as Series A convertible preferred stock for total proceeds of $2,003,776. The terms of the preferred stock allow the holder to convert each share of preferred stock into 1.25 shares of common stock at any time after six months from the date of issuance. The holders of shares of preferred stock are also entitled to receive cumulative dividends in preference to any declaration or payment of any dividend at the rate of $0.06 per share per annum when, and if declared by the Board of Directors.

Upon issuance of preferred stock convertible in shares of common stock at a price lower than the fair market value of common stock on the date of issuance, in accordance with the guidance provided in ASC 505-10-50 and Emerging Issues Task Force (“EITF”) No. 00-27, we will record the intrinsic value of this beneficial conversion feature which we calculated to be $520,982 ($1.06 common stock price February 29th, 2012 compared to $0.80 effective conversion rate of $0.26 per share. $0.26 times 2,003,776 = $520,982), as a deemed dividend recognizable in the current year. This deemed dividend was calculated based upon a closing price on February 29, 2012 (the date the shares were formally accepted by the Company) of $1.06 per share and an effective sale price (with conversion) per the preferred share agreement of $0.80 per share of common stock.

Property and equipment are recorded at cost, net of accumulated depreciation and are comprised of the following:

Depreciation on equipment is provided on a straight line basis over its expected useful lives at the following annual rates

Depreciation expense for the three months ended August 31, 2013 and 2012 was $4,270 and $6,372, respectively.

Intangible assets are comprised of the following:

Amortization is calculated over a straight-line basis using the economic life of the asset. Amortization expense for the three months ended August 31, 2013 and 2012 was $2,152 and $2,146, respectively.

The Company reimburses its Chief Executive Officer (CEO) for an apartment pursuant to a month-to-month lease for the use of the CEO and his family in PRC for a monthly expense of approximately $900. This lease could be terminated at any time with no additional payments required.

Office Lease — During the first quarter of 2010 the Company renewed their office lease in Shanghai for an additional two years ending September 30, 2013 resulting in the following additional future commitments, based on the exchange rate at August 31, 2013.

Office Lease – Shanghai Call Center – The Company leased office space for twelve months in Shanghai, China as part of a new initiative to promote the binary options sales. The lease period started August 18, 2012 and will terminate August 17, 2013, resulting in the following future commitments, based on the exchange rate at August 31, 2013.

Concentrations — During the periods ending August 31, 2013 and 2012, the majority of the Company’s revenue was derived from its operations in PRC from individuals, primarily in the United States and Canada. During the period ended August 31, 2013, the majority of the Companies accounts receivable were due from one company.

Litigation — The Company is involved in legal proceedings from time to time in the ordinary course of its business. As of the date of this filing, the Company is not a party to any lawsuit or proceedings which, individually or in the aggregate, in the opinion of management, is reasonably likely to have a material adverse effect on the financial condition, results of operation or cash flow of the Company.

As of October 15, 2013, there had been no financially material subsequent events.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

ChineseInvestors.com, Inc. (“the Company”, “we” or “us”) endeavors to be an innovative company, specializing in (a) providing real-time market commentary, analysis, and educational related endeavor(s) in Chinese language character sets (traditional and simplified), (b) providing support services to our various partners, (c) providing consultative services to smaller private companies considering becoming a public company, (d) providing various advertising as well as public relation support services, and (e) other services we may identify having the potential to create value or partnership opportunity with our existing services.

Additionally and as of the 1^st quarter of FY 2014 we have extended several existing service agreements as well as have entered into several new service provider agreements for general corporate and stock support including the following:

Existing and or Extended Clients: STVS (Nova Lifestyle Inc.), Clear Currents Inc. (a privately held Delaware Corporation), GMEC (Great China Mania Holdings Inc.), and SING (Singlepoint Inc.)

New Clients: DDOO (Discount Dental Materials Inc.), DUMA (Duma Energy Corporation), ERNI (Rewards Nexus Inc.), EXHI (Exlites Holdings International), INVA (Inova Technology Inc.), LUVE (Luve Sports Inc.), NFEC (NF Energy Saving Corporation), RCON (Recon Technology Limited), UEC (Uranium Energy Corporation), UPZS (Unique Pizza and Subs Corporation), and XRMB (MyEZSmokes, Inc.).

These clients represent various public markets including the OTCBB, NASDAQ, and NYSE exchanges. As of October 14, 2013 the Company has thirteen (13) active Service Provider Agreements represented on various public exchanges including three (3) NASDAQ Companies, one (1) NYSE Company, seven (7) OTCQB Companies, and two (2) OTCPK Companies.

Business Environment and Trends

The global marketplace has been negatively impacted by a variety of factors and the financial services industry in particular has been adversely affected by losses in the mortgage and credit markets. We understand that our business is dependent upon the health of the financial markets as well as the financial health of the participants in those markets. The current financial crisis has resulted in lower activity levels and has led to the collapse of some market participants. We are also seeing customers intensify their focus on containing or reducing costs as a result of the challenging market conditions.

Three months ended August 31, 2013 compared to three months ended August 31, 2012.

Quarterly Revenues

Subscription Revenue: There was an increase in subscription revenues from $95,858 in the three months ended August 31, 2013 to $172,352 in the three months ended August 31, 2013. Please note that the values of these subscriptions are recognized over the period that the subscription is active and the services are delivered.

Business Services Revenue: The Company has experience extraordinary growth in this emerging revenue generation category noting that the four clients it had at the end of the 4^th quarter of FY 2013 grew to fifteen clients by the end of the 1^st quarter FY 2014. Three of the new eleven clients are listed on the NASDAQ or NYSE exchanges. Revenues in this category were comprised of $230,422 in stock (restricted) value and $115,388 in cash payments.

Other Revenue:  The slight variance in other revenue earned in the quarter ended August 31, 2012 of $5,876 to $5,845 in the quarter ended August 31, 2013, is consistent with variance in prior periods and is primarily determined by timing variance when the minor work is performed.

Cost of Services Sold: The cost of services sold decreased from $223,288 to $172,352 from Q1 2013 to Q1 2014 as the company experienced a modest reduction in the general expenses as associated with expanding its operations in the People’s Republic of China. This category of expenses primarily consists of the cost of the PRC operations.  Since a portion of these expenses are fixed, as the Company’s sales increase, the gross operating margin is expected to improve. 

Gross profit margin: The Company’s gross profit margin improved from 48% ($202,388 on $425,676 of revenue) in the quarter ending August 31, 2012 to 67% ($352,835 on $525,011 of revenue) in the quarter ending August 31, 2013. The reason for this improvement is that revenue related to business services has a lower cost obtain than the revenue related to binary option services that the Company provided the prior comparable period.

General & Administrative Expenses: The Company’s general and administrative expenses decreased from $380,170 (representing 53.5% of its total expenses including costs of goods sold representing the Shanghai operations expense in the quarter ending August 31, 2012) to $287,467 (representing 55% of its total expenses including costs of goods sold representing the Shanghai operations expense in the quarter ending August 31, 2013).  This reduction in this expense category of $92,703 was primarily related to the a general reduction in advertising costs as well as the overhead associated with operations.

Other Comprehensive Loss: In the past fiscal year the company began to maintain available for sale securities. In the current quarter the balance in unrecognized gain on securities changed from $75,166 at May 31, 2013 to $67,557 at August 31, 2013. This change of $7,609 is reflected in other comprehensive income on the Company’s income statement.

Equity and debt

In the first quarter of FY 2014 the Company secured $340,000 in financing based upon the value of certain marketable securities having a maturity date in late January of 2014.

Liquidity

The Company is currently addressing its liquidity issues by continually building upon subscription service products, increasing its advertising based revenues (as discussed) and by seeking investment capital through private placement of common stock and debt. Since inception, the Company has at times relied primarily upon proceeds from private placements and sales of shares of its equity securities to fund its operations. We anticipate continuing to rely on sales of our securities as well as increasing our subscriptions services revenues in order to continue to fund our business operations. It should be noted that the Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will be able to complete all of the additional sales of our equity securities as planned and noted herein or that we will be able arrange for other financing to fund our planned business activities.

In reviewing the sources of capital available to the Company to address the liquidity issue we find there are three avenues we have chosen to pursue. The first would be to increase our current revenues as they relate to existing services (now including the binary options related service offering) noting this effort will require the expenditure of some additional capital but should have a significant impact on our ability to become profitable based upon our experience this far over the past 9 months. The second would be to create new sources of revenue (as noted herein and outlined in prior disclosures). This would also result in additional cash demands on the Company. The third would be to raise capital through the private placements of our stock or PIPE devices through a point of being able to achieve a sustainable profit as well as positive cash flow for the Company. We should note that in July of 2012 the Company was successful in setting up a stock purchase agreement (as already disclosed in SEC filings) that would allow us to access up to $1,325,000 in tranches of up to $500,000 each. For further information on this arrangement please see the related SEC filings filed July 5, 2012. To date we have accessed $275,000 of the original $1,500,000 value of this line.

Plan of Continued Operations

The Company plans to continue to meet all of its obligations as well as conform with all of the requirements of remaining a fully reporting a public company while increasing its market presence as well as services offering spectrum.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is not a party to any legal proceeding that it believes will have a material adverse effect upon its business or financial position.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

There have been no defaults upon senior securities.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Signatures

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.