ChineseInvestors.com, Inc. (CIIX) SeeThruEquity Report

© 2011-2018 SeeThruEquity, LLC. Important disclosures appear at the back of this report. 1 | P a g e Update (September 24, 2018) Equity | Technology / Internet Information ChineseInvestors.com, Inc. (OTCQB: CIIX, Target Price: $3.75) ChineseInvestors.com, Inc. (OTCQB: CIIX, “CIIX”) is a relatively undiscovered specialized investment services company, which has recently added several new and intriguing business units focused on markets with high growth potential. With headquarters in Los Angeles, CA, and offices in Shanghai and New York, CIIX offers a range of intriguing consulting services, information products, and web-based tools for investor education, including real time market commentary, analysis and education in Chinese language character sets. CIIX recently launched commenced operations at subsidiaries ChinseHempOil.com and CBD Biotechnology Co. Ltd ., which provide hemp oil and CBD consumer products including hemp- infused skin care products to China and the Chinese community in the United States. Management believes its platform is the first CBD health products online store in the Chinese Language, and its Chinese language Yelp-style mobile application contains a location- enabled database of recreational and medical marijuana dispensaries, as well as a platform to review and discuss various cannabis products. CIIX has also launched a new suite of Chinese language services and educational products for the cryptocurrency market. Investment Highlights CIIX announces FY2018 results with 40.5% YoY growth On September 4, 2018, CIIX announced its full year fiscal 2018 (ended May 31, 2018) results. The company reported revenue growth of 40.5% over FY2017, with growth stemming from new business lines focused on consumer products and services in the hemp oil, CBD, and cryptocurrency markets. The company also reported an increase in revenues in its existing businesses, which include investor relations and subscription-based investor news products targeting the Chinese community. Combined, these segments increased to $1.75mn versus $1.65mn in FY2017, with Investor relations revenue increasing to $0.97mn from $0.81mn and subscription revenues of $0.78mn versus $0.84mn. CIIX management expects these businesses combined to grow moderately in FY2019, with significant growth in its hemp, CBD, and cryptocurrency initiatives. We note that gross margins improved for CIIX during FY2018, expanding to 40.5% from 27.4% in FY2017. Net Loss to common shareholders widened to $12.9mn, or $0.58 per share, due to preferred stock expenses and SG&A investments in growth initiatives. CIIX announced it was seeking to raise $3mn in a private placement in August 2018, and we expect the company to continue to seek external capital to cover costs until its growth initiatives reach a scale that supports free cash flow generation. Cryptocurrency offerings add layer of growth potential for CIIX In addition to growth from core existing products and new initiatives in CBD, CIIX is expecting a third pillar of growth to stem from its expanded offerings and ancillary products targeting the fast-growing cryptocurrency market. The company has established education and trading subscription services for Chinese-speaking investors, which will provide news, video and analysis covering the emerging digital currency market that include newcoins169.com and the Daily Cryptocurrency Chinese Video Newscast from the NYSE . Additionally, in calendar 2018 CIIX launched paid services Bitcoin Millionaire VIP Livestream and Bitcoin Trading Academy , and CIIX announced plans to establish a cryptocurrency ATM network and domestic online coin-to-coin exchange. Price target unchanged at $3.75 The price target reflects the significant growth potential from the company’s legal CBD initiatives in the US and the hemp CBD- infused skin care products in China, in addition to growth from its existing financial services businesses, as well as potential for a new cryptocurrency-focused unit. Stock Details (9/10/18) OCTQB CIIX Sector / Industry Technology / Internet Information Price target $3.75 Recent share price $0.50 Shares o/s (mn) 32.7 Market cap (in mn) $16.7 52-week high/low $1.75 / $0.37 Source: Thomson Reuters, SeeThruEquity Research Key Financial ($000, unless specified) FY16 FY17 FY18 Revenues 948.4 1,668.0 2,353.3 EBITDA (2,857.5) (4,898.1) (7,161.2) EBIT (2,877.6) (4,914.5) (7,214.9) Net Income (2,180.9) (7,251.1) (12,918.7) EPS ($) (0.26) (0.86) (0.58) Source: SeeThruEquity Research Key Ratios FY16 FY17 FY18 Gross margin (%) -1.7 27.4 40.5 Operating Margin (%) (303.4) (294.6) (306.6) EBITDA margin (%) (301.3) (293.7) (304.3) Net margin (%) (230.0) (434.7) (549.0) P/Revenue (x) 17.6 10.0 7.1 EV/EBITDA (x) NM NM NM EV/Revenue (x) 15.9 9.0 6.4 Source: SeeThruEquity Research Source: Thomson Reuters 0.00 0.50 1.00 1.50 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

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