1. BASIS OF PRESENTATION
The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim
financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying
unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are,
in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim
results are not necessarily indicative of results for a full year.
The unaudited condensed consolidated
financial statements and related disclosures have been prepared with the presumption that users of the interim financial information
have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year.
Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Annual Report on
Form 10-K for the year ended December 31, 2012.
2. ORGANIZATION AND BUSINESS BACKGROUND
CAM Group Inc. (the “Company”
or “CAMG”)
was originally incorporated as Savannah River Technologies, Inc. under the laws
of the State of South Carolina on March 2, 1995. On July 20, 2007, the Company formed a corporation pursuant to the laws of the
State of Nevada having a par value of $0.001 for both the preferred and common stock. On August 11, 2007, the stockholders of the
Company approved a change of corporate domicile which resulted in the dissolution of the South Carolina Corporation and the Company
became domiciled in the State of Nevada. On
September 13, 2012, the Company changed its name to CAM Group Inc. to more accurately
reflect its business after a stock exchange transaction with CAM Group set forth below.
On April 17, 2012, CAMG completed a
stock exchange transaction with China Agriculture Media Group Co., Ltd (“CAM Group”). CAM Group is organized and exists
under the laws of Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”), which
was incorporated on March 30, 2011. CAM Group is an investment holding company, whose only asset is 100% equity interest in China
Agriculture Media (Hong Kong) Group Co. Ltd. (“CAM HK”). CAM HK is an investment holding company organized and exists
under the laws of Hong Kong Special Administrative Region of PRC, with its only asset being a 98% equity interest in China Agriculture
Media (Hebei) Co. Ltd. (“CAM Hebei”). CAM Hebei was established in the Hebei Province, PRC on November 28, 2011
as a Chinese domestic enterprise.
The stock exchange transaction involved
two simultaneous transactions:
CAMG
issued
to CAM Group Shareholders an amount equal to 22,500,000
new investment
shares of Common Stock
of
CAMG
and 1,000,000 shares of
CAMG
super-voting Preferred
Stock in exchange for one hundred percent (100%) of the issued and outstanding share capital of CAM Group from CAM Group Shareholders.
CAMG issued 1,607,853 shares of Common
Stock to CAMG prior management and an advisor for services previously rendered. Simultaneously, Angela Ross, the former Chief Executive
Officer of CAMG, returned 2,500,000 shares of Common stock to the CAMG treasury for immediate cancelation.
Upon completion of the exchange, CAM
Group and its subsidiaries became subsidiaries of CAMG and the former owners of CAM Group then owned
a
‘controlling interest’ in
CAMG
representing 98% of the voting shares of
CAMG
and 90% of the issued and outstanding shares of Common Stock
.
The stock exchange transaction has
been accounted for as a reverse acquisition and recapitalization of CAMG whereby CAM Group is deemed to be the accounting
acquirer (legal acquiree) and CAMG to be the accounting acquiree (legal acquirer). The accompanying consolidated
financial statements are in substance those of CAM Group and its subsidiaries, with the assets and liabilities, and revenues
and expenses, of CAMG being included effective from the date of stock exchange transaction. Accordingly, the financial
position, results of operations, and cash flows of the accounting acquirer are included for all periods presented as if the
recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree
are included from the date of stock exchange transaction.
CAMG, CAM Group, CAM HK and CAM Hebei
are hereafter collectively referred to as the “Company”.
3. RECENTLY ISSUED ACCOUNTING
STANDARDS
The Company has reviewed all recently
issued, but not yet effective, accounting pronouncements up to ASU 2013-11, and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of
its operations.
4. RECLASSIFICATIONS
Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the current year presentation. These reclassifications had no effect on reported income or losses.
5. CASH AND CASH EQUIVALENTS
As of June 30, 2013, the cash balance
was $2,327,136, of which $1,916,680 was held in major financial institutions located in Hong Kong, and $407,001 was held in major
financial institutions located in the PRC and $3,455 cash in Hong Kong.
These bank balances are not insured.
The remittance of these funds out of China is subject to exchange control restrictions imposed by the Chinese government Management
believes that the major financial institutions in the PRC and Hong Kong have acceptable credit ratings.
6. CASH AND CASH EQUIVALENTS -
RESTRICTED
During the second quarter of 2013, the
restricted cash in amount of $300,000 was released from an escrow account to the Company. The restricted cash was in connection
with the sales of common stock during the third quarter of 2012. As of June 30, 2013, there was no restriction on cash.
7. ADVANCED TO
related
parties - BUSINESS TRADE
As of June 30, 2013 and
December 31, 2012, the Company had an advanced to related parties in the amount of $1,562,727 and 2,803,593,
respectively, representing the deposits made to suppliers pursuant to fertilizer contracts in order to secure lower price of
fertilizer. As of June 30, 2013, $3,500,000 was to Hebei Agricultural Means of Production Co. Ltd.
(Hebei AMP), a related party of the Company for the same purpose, see Note 9(a).
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following
amounts at the respective dates:
|
|
As of
|
|
|
June 30, 2013
|
|
December 31, 2012
|
Cost:
|
|
|
|
|
Computer equipment and software
|
|
$
|
13,027
|
|
|
$
|
5,334
|
|
Advertising equipment
|
|
|
159,133
|
|
|
|
161,321
|
|
Total
|
|
|
172,160
|
|
|
|
166,655
|
|
Accumulated depreciation
|
|
|
(27,245
|
)
|
|
|
(9,729
|
)
|
Net
|
|
$
|
144,915
|
|
|
$
|
156,926
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2013
and 2012, the Company had depreciation expenses of $17,221 and $3,333, respectively, included in cost of revenues.
9. RELATED PARTY BALANCES AND
TRANSACTIONS WITH MAJOR SHAREHOLDERS
Due to related parties as of June 30,
2013 and December 31, 2012 consisted of following:
|
|
As of
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
Hebei AMP
(a)
|
|
$
|
58,586
|
|
|
$
|
57,696
|
|
|
|
|
|
|
|
|
|
|
PMI
(b)
|
|
|
536,096
|
|
|
|
592,350
|
|
Shareholder
(c)
|
|
|
118,955
|
|
|
|
117,147
|
|
Total
|
|
$
|
655,051
|
|
|
$
|
709,497
|
|
(a)
|
Hebei Agricultural Means of Production Co. Ltd.
|
Hebei Agricultural Means of Production
Co. Ltd. (“Hebei AMP”) indirectly owns 2% capital interest of CAM Hebei, through its wholly-owned subsidiary, Shijiazhuang
Qijin Cultural Presentation Inc. Hebei AMP has common management of the Company as follows:
Mr. Chen Lijun, Chairman of the Company
is the Chairman and President of Hebei AMP;
Mr. Peng Guo Jiang, General Manager,
Director of the Company is the Vice President of Hebei AMP.
Mr. Peng Guo Jiang holds approximate
36% of CAMG common stock and 38% of CAM preferred stock as a trustee holding the shares for Hebei AMP.
As of June 30, 2013 and December 31,
2012, the balance due to Hebei AMP was $58,586 and $57,696, respectively.
(b)
|
Precursor Management Inc.
|
On March 30, 2011, the Company entered
into an agreement with Precursor Management Inc. (“PMI”) which is controlled by the Company’s former President
and is also a shareholder of the Company. Since March 2011, PMI has assisted the Company with listing on the over the counter stock
market and SEC compliance work, and paid for the Company’s expenses related to daily operations. The agreement expired in
March 2013. Accordingly, the Company made payments to PMI loan in amount of $64,849 during the second quarter of 2013.
In addition, the Company had outstanding
balances of $118,955 due to the Company’s former President as of June 30, 2013. The funds borrowed from the Company’s
former President were to fund the Company’s operations. The balance due to shareholder was not evidenced by a promissory
note, but rather is an oral agreement between the shareholder and the Company and due on demand. On July 29, 2013, the President
resigned as President, director and Secretary of the Company due to his personal reason, without any specific disagreement with
the Company on any matter.
Advertising Revenues –
Related Party
After completing the installation
of the LCD displays in 2012, the Company has entered an advertising services contract with Hebei AMP, pursuant to which Hebei AMP
agreed to purchase a total of 15,768,000 seconds per year for LCD advertising time at a rate of no less than RMB2.54 (USD0.41),
starting from June 2012. During the three and six months ended June 30, 2013, the Company generated all its advertising revenues
from Hebei AMP in amount of $1,670,018 and $3,350,336, respectively. The advertising revenues from Hebei AMP during the comparative
periods ended June 30, 2012 were $572,120 and $572,120, respectively, since the Company had no revenues until June 2012.
Fertilizer Agreements - Related
Party
Starting on October 30, 2012 the
Company, through its subsidiary CAM Hebei entered into a series of oral and written agreements (collectively the “Agreements”)
with Hebei AMP for the purchase and sale of fertilizer in Hebei Province China.
Pursuant to the terms of
the Agreements entered into during the first quarter of 2013, fertilizer products (total of 3,900 tons) shall be sold by
Hebei AMP to CAM Hebei for a purchase price of approximately $2,000,000. Hebei AMP will deliver the fertilizer to CAM Hebei
as needed.
The Company serves primarily as a trading agent for Hebei AMP during the transactions
and therefore recognizes revenue for these transactions on a net rather than a gross basis. During the three and six months ended
June 30, 2013, the Company generated revenues of $13,412 and $13,412, respectively, from trading agent business.
10. STOCK
BASED COMPENSATION
On May 20, 2013,
the Company issued 220,000 shares of its common stock, which were approved by
the Board of Directors
on January 16, 2013,
at its fair value for one-year professional and accounting services related to the preparation and
filing of the Company’s quarterly and annual reports, EDGAR services, and the preparation of corporate tax returns. The value
of the shares in amount of $50,000 was determined using the value of the services to be rendered since the Company currently has
a limited trading market. Accordingly, the stock based compensation was booked pro rata within the relative service periods, which
was $12,500 and $25,000 for the three and six months ended June 30, 2013, respectively. In addition, the Company recorded deferred
compensation of $25,000 to the consolidated balance sheet as of June 30, 2013.
11. INCOME TAXES
The Company uses the asset and liability
method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences
between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. There are no material timing
differences and therefore no deferred tax asset or liability at June 30, 2013.
As of June 30, 2013, the U.S. operation
had net operating losses of $348,039 available for federal tax purposes, which are available to offset future taxable income. The
net operating loss carry forwards begin to expire in 2032. The Company has provided for a full valuation allowance for
any future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these
assets will not be realized in the future.
The effective income tax expenses for
the three and six months ended June 30, 2013 are as follows:
|
For the three months ended
June 30, 2013
|
|
For the six months ended
June 30, 2013
|
|
|
|
|
|
Current taxes
|
$
|
254,376
|
|
$
|
518,387
|
|
Deferred taxes
|
|
0
|
|
|
0
|
|
|
$
|
254,376
|
|
$
|
518,387
|
|
12. EARNINGS PER SHARE
Basic net income per share is computed
using the weighted average number of the common shares outstanding during the periods. Diluted net income per share
is computed using the weighted average number of all dilutive common stock equivalents during the periods. As of June 30, 2013,
the Company had 1,000,000 shares of convertible preferred stock outstanding whose effect was dilutive and included in diluted net
income per share during the periods.
The following table sets forth the computation
of basic and dilutive net income per share for the three and six months ended June 30, 2013 and 2012, respectively:
|
|
For the three months ended
|
|
For the six months ended
|
|
|
6/30/2013
|
|
6/30/2012
|
|
6/30/2013
|
|
6/30/2012
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ 1,280,377
|
|
$ 334,457
|
|
$ 2,455,322
|
|
$ 273,160
|
Net income per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$ 0.05
|
|
$ 0.01
|
|
$ 0.10
|
|
$0.01
|
Diluted
|
|
$ 0.01
|
|
**
|
|
$ 0.02
|
|
**
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
25,175,222
|
|
24,555,556
|
|
25,125,111
|
|
23,522,099
|
Diluted
|
|
125,175,222
|
|
124,555,556
|
|
125,125,111
|
|
123,522,099
|
|
|
|
|
|
|
|
|
|
** Less than $.01
13.
Warrants
The following tables summarize all warrant
outstanding as of June 30, 2013, and the related changes during this period.
|
|
Number of Warrants
|
|
Weighted
Average Exercise Price
|
Stock Warrants
|
|
|
|
|
Balance at January 1, 2013
|
|
|
2,218,900
|
|
|
$
|
2.80
|
|
Granted
|
|
|
0
|
|
|
|
0
|
|
Exercised
|
|
|
0
|
|
|
|
0
|
|
Expired
|
|
|
(2,218,900
|
)
|
|
$
|
2.80
|
|
Balance at June 30, 2013
|
|
|
0
|
|
|
|
0
|
|
Warrants Exercisable at June 30, 2013
|
|
|
0
|
|
|
$
|
0
|
|
During the third quarter of 2012,
the Company issued 2,218,900 one-year warrants at a price of $1.20 per warrant to 166 accredited investors for total proceeds
of $2,662,680, of which $2,455,200 was collected through a thirty party escrow account. The Company is not the beneficiary of
the escrow account. Since the Company has not received the warrant proceeds, the Company recorded a subscription receivable
in amount of $2,662,680 to the accompanying consolidated balance sheets. On
April 15, 2013, the
Board of Directors
approved an amendment to its Warrant Agreements, dated June 28, 2012, pursuant to which the
proceeds from the Warrant Offering at the price of $1.20 per warrant will be refunded in the event that the warrants are not
exercised on or before June 28, 2013. There were no warrants exercised on or before the expiration. The proceeds of
$2,455,200 were refunded to the investors by the escrow agent during the third quarter of 2013.
14. CONCENTRATION AND RISK
For the three and six months ended June 30,
2013, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from Hebei
AMP, a related party through common management (see Note 8(a)) located in the PRC.
15. COMMITMENT AND CONTINGENCIES
The Company leases its office space
under a 2-year non-cancelable operating lease agreement which expires on June 30, 2014. The monthly lease payment is
approximately $800.
Accordingly,
the
future lease payments required as of December 31 are as follows:
Year ended December 31
|
Lease payment
|
2013
|
$ 9,677
|
2014
|
$ 4,838
|
Total
|
$ 14,515
|
For the three and six months ended
June 30, 2013, rental expense was approximately $2,400 and $4,800, respectively.
16. SEGMENTS
The Company determined that it
did not operate in any material, separately reportable operating segments as of June 30, 2013.
17. SUBSEQUENT EVENTS
On July 29, 2013, the President resigned
as President, director and Secretary of the Company due to his personal reason, without any specific disagreement with the Company
on any matter.