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, 2013.
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, liabilities, 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 2014-08, 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. CASH AND CASH EQUIVALENTS
As of March 31, 2014, the cash balance
was $418,887, of which $104,385 was held in major financial institutions located in Hong Kong, and $311,079 was held in major
financial institutions located in the PRC and $3,423 as petty cash.
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.
5. ADVANCED TO
suppliers
As of March 31, 2014 and December 31,
2013, the Company had advanced to suppliers in the amount of $3,170,110 and $3,225,615, respectively, representing the deposits
made to suppliers pursuant to fertilizer contracts in order to secure lower price of fertilizer. The amount and percentage of each
major supplier are set forth below.
Suppliers
|
|
|
|
|
|
|
As of
March 31, 2014
|
|
|
|
|
|
|
|
As of
December 31, 2013
|
|
|
|
Supplier A
|
|
|
|
|
|
$
|
1,471,889
|
|
|
|
46.4
|
%
|
|
$
|
1,497,447
|
|
|
46.4%
|
Supplier B
|
|
|
|
|
|
|
1,698,221
|
|
|
|
53.6
|
%
|
|
|
1,728,168
|
|
|
53.6%
|
|
|
|
Total
|
|
|
$
|
3,170,110
|
|
|
|
100.0
|
%
|
|
$
|
3,225,615
|
|
|
100.0%
|
6. ADVANCED TO
related
parties
As of March 31, 2014, the Company had a
loan advance to Parko (Hong Kong) Limited (“Parko”), Hebei AMP’s business affiliate for $5,076,426. The
loan advance to Parko is due on December 31, 2014 with zero interest.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following
amounts at the respective dates:
|
|
As of
|
|
|
March 31, 2014
|
|
December 31, 2013
|
Cost:
|
|
|
|
|
Computer equipment and software
|
|
$
|
12,859
|
|
|
$
|
13,083
|
|
Advertising equipment
|
|
|
164,571
|
|
|
|
167,429
|
|
Construction in progress
|
|
|
535
|
|
|
|
544
|
|
Total
|
|
|
177,965
|
|
|
|
181,056
|
|
Accumulated depreciation
|
|
|
(50,770
|
)
|
|
|
(45,334
|
)
|
Net
|
|
$
|
127,195
|
|
|
$
|
135,722
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31,
2014 and 2013, the Company had depreciation expenses of $6,327 and $8,522, respectively.
8. RELATED PARTY BALANCES AND
TRANSACTIONS WITH MAJOR SHAREHOLDERS
Due to related parties as of March 31,
2014 and December 31, 2013 consisted of following:
|
|
As of
|
|
|
March 31, 2014
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
Hebei AMP
(a)
|
|
$
|
59,805
|
|
|
$
|
58,838
|
|
|
|
|
|
|
|
|
|
|
PMI
(b)
|
|
|
670,989
|
|
|
|
579,253
|
|
Shareholder
(c)
|
|
|
117,426
|
|
|
|
119,465
|
|
Total
|
|
$
|
848,220
|
|
|
$
|
757,556
|
|
(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
during the period from April 17, 2012 through December 11, 2013, is the Chairman and President of Hebei AMP;
Mr. Peng Guo Jiang, General Manager,
Director of the Company during the period from April 17, 2012 through December 11, 2013, 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 March 31, 2014 and December 31,
2013, the balance due to Hebei AMP was $59,805 and $58,838, 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. During the three months ended March 31, 2014, the Company borrowed $103,526 from PMI to pay for its daily operations.
The fund borrowed from PMI was not evidenced by a promissory note, but rather was an oral agreement between PMI and the Company
and due on demand. As of March 31, 2014, the outstanding balance due to PMI was $670,989.
In addition, the Company had outstanding
balances of $117,426 due to the Company’s former President as of March 31, 2014. 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 was 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.
The contract was renewed on May 30, 2013 for seven months from June
1, 2013 to December 31, 2013
. The Company and Hebei AMP renegotiated the contract after the expiration on December 31, 2013.
There was no renewal as of March 31, 2014. Accordingly, the Company had no revenues generated from its advertising business during
the three months ended March 31, 2014.
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 which, fertilizer products 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 months ended March 31, 2014 and 2013, the Company had
no revenues generated from trading agent business.
9. 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 March 31, 2014.
As of March 31, 2014, the U.S. operation
had net operating losses of $555,135 available for federal tax purposes, which are available to offset future taxable income. The
net operating loss carry forwards begin to expire in 2034. 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 months ended March 31, 2014 and 2013 are as follows:
|
For three months ended
March 31, 2014
|
|
For three months ended
March 31, 2013
|
|
|
|
|
|
Current taxes
|
$
|
0
|
|
$
|
264,011
|
|
Deferred taxes
|
|
0
|
|
|
0
|
|
|
$
|
0
|
|
$
|
264,011
|
|
10. 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 March 31, 2014,
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 months ended March 31, 2014 and 2013, respectively:
|
|
For three months ended
|
|
|
March 31, 2014
|
|
March 31, 2013
|
|
Net (Loss) Income
|
|
|
$
|
(135,042
|
)
|
|
$
|
1,174,945
|
|
|
Net Income per Share
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
(0.01
|
)
|
|
|
0.05
|
|
|
Diluted
|
|
|
|
N/A
|
|
|
|
0.01
|
|
|
Weighted Average Number of Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
25,295,000
|
|
|
|
25,075,000
|
|
|
Diluted
|
|
|
|
125,295,000
|
|
|
|
125,075,000
|
|
11. CONCENTRATION AND RISK
For the three months ended March 31,
2014, 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.
12. 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
|
2014
|
$ 4,800
|
Total
|
$ 4,800
|
For the three months ended March
31, 2014 and 2013, rental expense was approximately $2,400 and $2,400, respectively.
13. SEGMENTS
The Company determined that it
did not operate in any material, separately reportable operating segments as of March 31, 2014.
14. SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10,
the Company has analyzed its operations subsequent to March 31, 2014 to the date these financial statements were issued, and has
determined that it does not have any material subsequent events to disclose in these financial statements.