U.S.
Securities and Exchange Commission
Washington,
D.C. 20549
FORM
10-K /A
Amendment
No. 1
☒ |
Annual
Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2013 |
[
] |
Transition
Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Transition Period from _______ to _______ |
Commission
File Number: 000-53009
CAM
Group, Inc.
(Exact
name of small business issuer as specified in its charter)
Nevada |
57-1021913 |
(State or other
jurisdiction of |
(IRS Employer
Identification No.) |
incorporation
or organization) |
|
Jixing
Building, 151 Shengli Avenue North, Shijiazhuang,
Hebei
Province, P.R. China 050041
(Address
of principal executive offices)
+86-0311-8696-4264
(Issuer's
telephone number)
Securities
registered under Section 12(b) of the Act:
Title
of each class |
|
Name
of each exchange
on
which registered |
None |
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Not
Applicable |
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, $.001 par value
(Title
of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No
[x]
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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 Website, 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 such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this Chapter) is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. Yes [ ] No [x]
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 definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer ☐ |
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Accelerated filer
☐ |
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Non-accelerated
filer ☐ |
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Smaller
reporting company ☒ |
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(Do
not check if a smaller reporting company) |
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Indicate
by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the exchange act). Yes [ ] No [x]
The
Registrant’s revenues for its fiscal year ended December 31, 2013 were $6,660,120.
The
aggregate market value of the voting stock on April 15, 2014 (consisting of Common Stock, $0.001 par value per share) held by
non-affiliates was approximately $656,075 based upon the most recent sales price ($0.10) for such Common Stock on April 15, 2014,
there were 25,295,000 shares of our Common Stock issued and outstanding, of which approximately 6,560,750 shares were held by
non-affiliates.
Number of shares of
the registrants’ common stock outstanding as of April 15, 2013: 25,075,000
DOCUMENTS
INCORPORATED BY REFERENCE
None
EXPLANATORY
NOTE
This Amendment No. 1 to Annual Report
on Form 10-K/A (this “Amended Report”) is being filed with the Securities and Exchange Commission (“SEC”)
to amend the Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Original 10-K”) of
CAM Group Inc. to respond to a comment letter issued by SEC on September 4, 2014.
This Amended Report restates only those
portions of the Original 10-K affected by the comments from SEC. This Amended Report includes currently-dated certifications of
the Company’s Principal Executive
Officer, Principal Financial Officer
and Principal Accounting
Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
TABLE
OF CONTENTS
PART I:
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff
Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. (Removed and Reserved)
PART II:
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6. Selected Financial
Data
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item
7A. Quantitative and Qualitative Disclosures about Market Risk
Item
8. Financial Statements and Supplementary Data
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item
9A. Controls and Procedures
Item
9A(T). Controls and Procedures
Item
9B. Other Information
PART
III:
Item 10. Directors, Executive
Officers and Corporate Governance
Item 11. Executive Compensation
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item
13. Certain Relationships and Related Transactions, and Director Independence
Item
14. Principal Accounting Fees and Services
PART
IV:
Item
15. Exhibits, Financial Statement Schedules
SIGNATURES:
The
Business section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the
forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and
include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be
identified by words such as “future,” “anticipates,” “believes,” “estimates,”
“expects,” “intends,” “plans,” “predicts,” “will,” “would,”
“could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of
future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of this
Form 10-K under the heading “Risk Factors,” which are incorporated herein by reference. Each of the terms the “Company”,
“we” and “our” as used herein refers collectively to refers to CAM Group, Inc., its subsidiaries and predecessors,
unless indicated otherwise. The Company assumes no obligation to revise or update any forward-looking statements for any reason,
except as required by law.
ITEM
1. Business
Company Background
As
used herein the terms "We", the "Company", "CAMG", the "Registrant," or the "Issuer"
refers to CAM Group, Inc., formerly known as “RT Technologies, Inc.”, its subsidiaries and predecessors, unless indicated
otherwise. The Company 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. (“CAMG”) to more accurately
reflect its business after a stock exchange transaction 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. Immediately upon the Closing date, CAMG issued to the
CAM Group shareholders 22,500,000 new investment shares of CAMG Common Stock and 1,000,000 shares of CAMG super-voting Preferred
Stock to the CAMG Shareholders in exchange for all of their shares of registered capital stock of CAM Group. 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.
Our corporate structure after closing is set forth as follows:
CAM
Group, Inc. (f/k/a RT Technologies, Inc.) |
100% |
China
Agriculture Media Group Co., Ltd. |
100% |
China
Agriculture Media (Hong Kong) Group Co., Ltd. |
China
Agriculture Media (Hebei) Co., Ltd. |
98% |
CAMG, CAM HK and CAM
Hebei are hereafter collectively referred to as the “Company”.
CAMG
manages the operations of CAM Hebei, a company which is principally engaged in developing the Chinese agricultural and consumer
market. CAMG is building and growing its core business in advertising, wholesale and retail sales and is analyzing new market
opportunities that would allow management to strategically expand into additional profitable and synergistic markets.
Current Business
Through
December 31, 2013, CAMG has acquired marketing rights to a comprehensive retail network composed of up to 16,000 retail stores
located in Hebei province that are currently owned and operating under the state-owned system of China Supply and Marketing Cooperative
Association (“China Co-Op”) and China National Agricultural Means of Production Group Corporation (“National
AMP”) and have been in operation for 60 years (the “Network”). CAMG does not have ownership of stores within
the Network. It draws a large percentage of the region’s farming population who take advantage of government subsidized
agricultural products only sold within the Network stores. Although farmers are free to visit stores outside the Network, the
restrictions on the sale of fertilizer products and subsidized pricing of the Network significantly reduce competition. As a result,
our Network has a “captive” audience consisting of farmers who would otherwise be priced out of purchasing fertilizer
at other locations because these government subsidies are only available within the Network. It is CAMG’s objective to capitalize
on the buying power of this captive market with additional products.
CAMG’s
primary source of revenues is from selling advertising time on monitors it has installed on the outside of 300 Network stores.
The Network covers a rural population of over 40 million people or approximately 55% of Hebei’s 70 million residents and
is managed by Hebei Agricultural Means of Production Co. Ltd. (“Hebei AMP”) Hebei AMP is a related party of the Company
by common shareholders.
Advertising
tools such as LCD displays, posters, and outdoor billboards will be available for potential clients who are intended to develop
Chinese rural market, to advertise their products. These tools will also assist clients to build their corporate images, and assist
government departments in providing general public service announcements to local residents.
By
utilizing existing resources, such as the facilities, network and experience of the Company’s strategic partners, Hebei
AMP and China Co-Op Hebei, CAMG can promptly establish its access to the rural retail market. The Company will act as the exclusive
sales and advertising agent for up to 16,000 retail outlets located in Hebei province and strives to assist our clients to promote
suitable products attractive to the rural consumer.
As
of April 14, 2014, our advertising agreement with Hebei AMP had not been extended. As a result, we will not have any revenues
during the first quarter of 2014. We are not certain as to whether the Hebei AMP agreement will be executed or whether we will
enter into advertising agreements with other parties.
We
do not believe the termination of our advertising contract with Hebei AMP will have an impact on our marketing rights because
we have acquired marketing
rights to a network
of 16,000 retail stores by forming
a joint venture company with Hebei AMP, which is an individual operating company,
and Hebei AMP indirectly owns 2% of the capital interest of the JV Company.
Our Products and
Services
Advertising
Solutions
CAMG
generates advertising service revenues from the sale of time slots in out-of-home television advertising networks and through
the sales of frame space on poster frames and on traditional billboard networks.
CAMG
will ultimately establish an advertising network primarily by installing LCD displays in up to 16,000 retail outlets within the
Network. Clients including service providers, product manufacturers and government agencies will be able to utilize our advertising
network to build corporate images, promote their products and spread the governments’ latest policies and news. Compared
to traditional print ads and posters, we believe LCD’s offer the following advantages:
|
• |
Ability
to immediately alter or edit content |
|
• |
Higher
return on investment by sharing space with multiple clients |
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• |
High
resolution graphics and increased visual appeal |
|
• |
Flexible
distribution of content |
Although
LCD’s display have many advantages, other advertising channels are also valuable. For example, a tire manufacturer may want
to have outdoor billboards placed near highways to catch drivers’ attention; a manufacturer may want to use leaflets to
promote their products; or an insurance company may prefer to use a brochure to elaborate on various insurance plans. Therefore,
CAMG will continue to develop a choice of advertising channels including:
|
• |
LCD
displays (26 or 32 inches) |
|
• |
Poster
boards displayed on metal racks |
|
• |
Posters
and outdoor billboards |
Clients
can choose the means of advertising based on the characteristics of their products or needs. The major advantages of using CAMG’s
advertising service include:
|
• |
High
market penetration |
|
• |
Cost-effective
and efficient |
|
• |
Customizable
service packages |
Wholesale
and Retail Solutions
CAMG
currently has the sole right to manage and operate sales areas under CAMG’s administration within the Network. It can distribute
consumer goods directly to the Network rather than going through various levels of distributors. By utilizing the existing resources,
such as the facilities, network and experience of our strategic partners, CAMG can promptly establish its access to the rural
retail market. The main features of our merchandising service include:
|
• |
Providing
clients with instant access to the rural retail market |
|
• |
Lowering traditional
barriers to entry into the rural market |
|
• |
Providing integrated
services including merchandising, logistics, and advertising |
|
• |
Saving clients’
time in establishing their own retail network |
|
• |
Giving clients an
opportunity to increase existing market share |
The
clients can distribute their products by themselves, send promoters to the stores, and advertise products using their own resources.
However, they are free to choose our value-added services to ease operations and lower capital costs in the stores. CAMG offers
logistic, storage, advertising, product and store management services for clients who are interested in minimizing their operating
risk.
Business Revenue
Model
CAMG will continue to
focus on developing the Network.
Advertising
Business
CAMG
installed the first batch of 300 LCD display in the Network during 2012. CAMG plans to charge at least RMB 2.54 ($0.41) per second
for a 30-second video broadcasting 60 times per day within the Network when the number of LCD display is less than 3,000. The
price per second will be increased when the number of LCD display exceeds 3,000 to reflect the increasing influence from the Network.
The LCD displays will operate up to 12 hours a day in some locations and allow a maximum capacity of 15.8 million seconds per
year available for sale.
CAMG
is also planning to execute agreements for the development of outdoor billboards and expects to operate approximately 20 locations
by the end of 2013. In addition, clients can place posters in the Network of stores in Hebei Province.
Wholesale
and Retail Business
CAMG
plans to generate wholesale and retail commissions by selling different kinds of products in the Network. CAMG will select appropriate
products among prospective product manufacturers and/or chain store companies so that the products match the needs of the rural
population.
CAMG
will provide value-added services in store management, logistics and warehousing. These value-added services will be calculated
based on a pre-determined percentage of sales volume.
Contractual Agreements
with Hebei Agricultural Means of Production Co., Ltd. (Related Party and major shareholder through a trustee holding)
Advertising Revenues
After
completing the installation of the LCD displays in 2012, CAMG has entered an advertising services contract with Hebei AMP, pursuant
to which Hebei AMP agrees 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 to December 2013. During the year of 2013, CAMG generated all its advertising revenues
from its major related party Hebei AMP in the amount of $6,641,060. As of April 14, 2014, our advertising agreement with Hebei
AMP was not renewed. As a result, we had no revenues in the first quarter of 2014 and without a renewal of the agreement or agreements
with other third parties, we may not have any sources of revenue.
Services revenues
Starting
from December 2012, CAMG serves as an agent for Hebei AMP in fertilizer trading and generated all its revenues of $19,060 from
the services provided in 2013. These services are generally billed on a time-cost plus basis. Revenue is recognized when services
are rendered, products have been delivered, payments have been received, and risk of ownership has been transferred and accepted
by the customers.
Target
Market and Audience
Hebei
Province
CAMG
will continue to focus its efforts on developing its advertising, retail and wholesale sales in the Network. Hebei province is
an agriculturally dominant province and an ideal location for developing the Chinese rural market. The following lists some key
attributes of Hebei province:
|
• |
40 million rural
population; total population of approximately 70 million; ranked 6th in China. |
|
• |
Natural birth rate
is 6.5%. |
|
• |
Gross GDP of RMB
1.7 trillion ($270 billion); ranked 6th in China |
|
• |
Gross production
of grains in Hebei reached 29 billion kilograms, which is 5.5% of the nation; ranked 7th in China |
|
• |
One of the 13 grain
production provinces in China; Hebei uses 6.3 million hectares as farmland for grains. |
The
income per capita of rural population increased from RMB 2,253 ($353) in 2000 to RMB 5,153 ($807) in 2009, and it is expected
to keep increasing under a series of supportive governmental policies.
Source:
National Bureau of Statistics of China
Marketing
Strategy
Market
Development for Advertising Business
CAMG
will target mature enterprises who want to build their corporate images in the rural market, such as national telecom providers,
state-owned banks and large fertilizer manufacturer.
Our
own market research has indicated that local service providers such as banks and hospitals are using various channels such as
newspaper and television to advertise their services in the rural markets. CAMG will provide other channels for governmental departments
to educate the rural population and spread news and the latest public policies. We provide a cost efficient and effective solution
compared to TV advertising and focus on out–of-home rather than in-home advertising.
Under
the guidance of current rural development policy promulgated by the government, various programs such as culture broadcast programs,
policy publishing and others could be implemented into our advertising channel.
Market
Development for Wholesale and Retail Business
We
believe CAMG offers an attractive, cost-effective alternative for established retailers and consumer products companies to access
the rural market without incurring the full cost and risk of prematurely entering or over-expending into the rural provinces.
However, the profit margin of cooperating with these companies may be lower because their products are mature and they have relatively
more bargaining power. CAMG will provide recommendations to prospective clients based on our market research of spending behavior
in the rural market.
CAMG
will cooperate with other media companies such as radio stations, television stations, and magazines to promote its clients.
Market
Expansion for Advertising Business
CAMG
will place LCD displays in the agricultural retail stores in Hebei province. It will also use outdoor billboards and poster frames
as a medium for advertisement. Once we have achieved the goal of developing the Network, CAMG will apply its business model to
other northern provinces of China and hopes to gradually expand to all rural areas in China.
Cost
Management
CAMG
plans to control the costs of their advertising network by placing advertising channels such as LCD displays and kiosks in targeted
public areas in order to take advantage of relatively low maintenance overhead.
Existing
Client Base
Hebei
AMP has been operating over 60 years and is one of the authorized companies by the PRC central government to sell chemical fertilizers
in Hebei Province, and as a result, there is an existing pool of agricultural product manufacturers and consumers who are loyal
to the Network stores. We believe this existing client base and loyalty towards the Network stores will create an opportunity
for CAMG’s rapid growth in Hebei Province.
Competition
CAMG
competes with other companies in advertising area such as Focus Media, JCDecaux, ClearMedia, SearchMedia, AirMedia and VisionChina
and the branded, like 7-11, and independent stores in China.
Comparison
to Competitors and Competitive Advantage
Developing
the Rural Market
Focus
Media, AirMedia and VisionChina mainly expand their advertising networks within commercial buildings in urban cities, airports,
and mass transportation systems respectively. The Company’s advertising business model is very similar to the business model
of our competitors, but CAMG focuses on the national rural market which has relatively less competition compared to the urban
areas. Although the income per capita of rural population is less than that of urban population, the volume of this market should
compensate for the income gap between the rural and urban population.
Rural
LCD Network
LCD
display advertising is relatively new in rural areas of the PRC. CAMG management believes LCD technology could attract the attention
of local people who may be curious about the new technology and as a result buy our advertised merchandise.
Mature
Network
The
Network has over 60 years of operating history, among it, Hebei AMP developed 19 large-scale logistic centers and more than 120
regional distribution centers. The total retail locations are approximately 16,000.
Barriers
to entry
The
barriers to entering the advertising market in Hebei Province and establishing an LCD network of this size would be unattainable
without enormous amounts of capital. By leveraging the pre-existing Network, and utilizing existing logistics systems, CAMG management
believes that CAMG can effectively reduce market costs and substantially lower its barriers to entry in this market. Since Hebei
AMP is a state-owned company and the Chinese government has officially granted them the rights to manage the 16,000 retail locations
in Hebei province covering a rural population of over 40 million people or approximately 55% of Hebei’s 70 million residents,
the Company believes that other outdoor advertising companies will be at a competitive disadvantage to us.
Outsourcing
The
development of our LCD network will be work intensive and likely require us to outsource additional employees for installation
of the LCD screens. We installed the first batch of 300 LCD displays in the Network during 2012 and are evaluating and monitoring
the cost effectiveness of continued expansion as compared to expansion into parallel and new markets. These stores are unevenly
distributed amongst the rural areas of Hebei, and it is difficult to calculate the exact travel distance between each of them.
The management team believes that it is not feasible to build a single engineering team to complete this task, therefore, we will
outsource future installation to third parties.
Government
Regulation
PRC
regulations require any foreign entities that invest directly in the advertising services industry to have at least two years
of direct operations in the advertising industry outside of China. Since December 10, 2005, foreign investors have been allowed
to own directly 100% of PRC companies operating an advertising business if the foreign entity has at least three years of direct
operations in the advertising business outside of China or less than 100% if the foreign investor has at least two years of direct
operations in the advertising industry outside of China.
Current
PRC regulations do not restrict domestic companies controlled by Wholly Foreign-Owned Enterprise (“WFOEs”) through
contractual arrangements from operating advertising businesses. Nevertheless, PRC governmental authorities may in the future deem
that such business operations by domestic companies controlled by WFOEs evade the qualifications requirements on foreign investment
in the advertising industry, and thus, restrict our business operations.
Despite
these restrictions, the PRC restriction on foreign investment in the advertising industry does not expressly apply to the investment
activities of WFOEs, and starting from late 2007, the advertising industry has been re-classified from a “restricted”
area to a “permitted” area for foreign investment. Thus, WFOEs may establish subsidiaries in China to operate advertising
business directly in China. However, the PRC governmental authority may determine in the future that such indirect investments
evade the qualification requirements on foreign investment in the advertising industry and thus bans such investment activities.
Relevant
PRC regulatory authorities, including the State Administration for Industry and Commerce, or SAIC, which regulates advertising
companies, and the Ministry of Commerce, which regulates foreign investments in China, have broad discretion in regulating business
entities, including:
|
· |
Imposing fines or
other monetary penalties on PRC subsidiaries or affiliates; |
|
· |
Revoking the business
and operating licenses of PRC subsidiaries and affiliates; |
|
· |
Discontinuing or
restricting PRC subsidiaries’ and affiliates’ operations; |
|
· |
Imposing conditions
or requirements that are impossible to comply with; |
|
· |
Requiring a restructuring
of the relevant ownership structure or operations; or |
|
· |
Restricting or prohibiting
the use of the proceeds of any offering or from other sources to finance business and operations in China. |
Tax
The
New Law, and the implementation regulations to the New Law issued by the PRC State Council, became effective as of January 1,
2008. Under the New Law, China adopted a uniform tax rate of 25% for all enterprises (including domestically-owned enterprises
and foreign-invested enterprises) and revoked the previous tax exemption, reduction and preferential treatments applicable to
foreign-invested enterprises. There is a transition period for enterprises, whether foreign-invested or domestic, which received
preferential tax treatments granted by relevant tax authorities prior to January 1, 2008. Enterprises that were subject to an
enterprise income tax rate lower than 25% prior to January 1, 2008 may continue to enjoy the lower rate and gradually transition
to the new tax rate within five years after the effective date of the New Law subject to relevant transaction rules. Enterprises
that were entitled to exemptions or reductions from the standard income tax rate for a fixed term prior to January 1, 2008 may
continue to enjoy such treatment until the fixed term expires. Preferential tax treatments may be granted to industries and projects
that are strongly supported and encouraged by the state, and enterprises that qualify as “High and New Technology Enterprise”
(“HNTE”) are entitled to a 15% enterprise income tax rate.
Other
relevant PRC tax regulations include the PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations for
the EIT Law issued by the PRC State Council, effective as of January 1, 2008. The EIT Law provides that enterprises established
outside of China whose “de facto management bodies” are located in China are considered “resident enterprises”
and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation
regulations for the EIT Law issued by the PRC State Council, “de facto management body” is defined as a body that
has material and overall management and control over the manufacturing and business operations, personnel and human resources,
finances and treasury, and acquisition and disposition of properties and other assets of an enterprise. Although substantially
all of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit)
us to be treated as a PRC resident enterprise.
Under
the EIT Law and implementation regulations issued by the State Council, PRC income tax at the rate of 10% is applicable to dividends
payable to investors that are “non-resident enterprises,” which do not have an establishment or place of business
in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the
establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized
on the transfer of shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from
sources within the PRC.
Similarly, any gain
realized on the transfer of shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income
derived from sources within the PRC.
Foreign
Currency Exchange
Under
the PRC foreign currency exchange regulations applicable to us, the RMB is convertible for current account items, including the
distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Conversion of RMB for capital
account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject
to the approval of the PRC State Administration of Foreign Exchange, or SAFE. Foreign-invested enterprises may only buy, sell
and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial
documents and, in the case of capital account item transactions, obtaining approval from SAFE. Capital investments by foreign-invested
enterprises outside of the PRC are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and
the State Reform and Development Commission.
The
People’s Bank of China, or PBOC, sets and publishes daily a Base Exchange rate with reference primarily to the supply and
demand of Renminbi against a basket of currencies in the market during the prior day. The PBOC also takes into account other factors,
such as the general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi
into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the PBOC, which are set
daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates in the world financial
markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable.
Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign
currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment,
loans or securities, requires the approval of the State Administration for Foreign Exchange and other relevant authorities. On
July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate
within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value
of the Renminbi appreciated by 2.0% against the U.S. dollar. Since then, the PRC government has made, and may in the future make,
further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the
Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central
parity for the trading against the Renminbi on the following working day.
In
January and April 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued two rules that require PRC residents
to register with and receive approvals from SAFE in connection with their offshore investment activities. SAFE has announced that
the purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of the cross-border
flow of funds.
On
October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fundraising and Reverse
Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective
as of November 1, 2005. Notice 75 replaced the two rules issued by SAFE in January and April 2005 mentioned above. According to
Notice 75:
|
· |
Prior
to establishing or assuming control of an offshore company for the purpose of financing that offshore company with assets
or equity interests in an onshore enterprise in the PRC, each PRC resident, whether a natural or legal person, must complete
the overseas investment foreign exchange registration procedures with the relevant local SAFE branch; |
|
· |
An amendment to
the registration with the local SAFE branch is required to be filed by any PRC resident that directly or indirectly holds
interests in that offshore company upon either (1) the injection of equity interests or assets of an onshore enterprise to
the offshore company, or (2) the completion of any overseas fund raising by such offshore company; and |
|
· |
An amendment to
the registration with the local SAFE branch is also required to be filed by such PRC resident when there is any material change
involving a change in the capital of the offshore company, such as (1) an increase or decrease in its capital, (2) a transfer
or swap of shares, (3) a merger or division, (4) a long term equity or debt investment, or (5) the creation of any security
interests over the relevant assets located in China. |
Notice
75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have
made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange registration
procedures by March 31, 2006. Under the relevant rules, failure to comply with the registration procedures set forth in Notice
75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the
payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity,
and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.
Dividend
Distributions
Under
applicable PRC regulations, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated profits, if
any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in the
PRC are required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year to its general
reserves until the cumulative amount of such reserves reach 50% of its registered capital. These reserves are not distributable
as cash dividends.
Approvals,
Licenses and Certificates
We
require a number of approvals, licenses and certificates in order to operate our business. Our principal approvals, licenses and
certificates are set forth below.
China Agriculture Media
(Hebei) Co., Ltd.
|
· |
Business
License (No. 130100400009277) issued by the Shijiazhuang Administration of Industry and Commerce, valid from November 28,
2011 to November 27, 2031. |
China Agriculture Media
(Hong Kong) Group Co., Ltd.
|
· |
Business
License (No. 37902611-000-05-12-0) issued by the Hong Kong Special Administrative Region of the People’s Republic of
China, valid from April 05, 2013 to March 05, 2014. |
China Agriculture Media
Group Co., Ltd.
|
· |
Business
License (No. 58158906-000-03-12-3) issue by the Hong Kong Special Administrative Region of the People’s Republic of
China, valid from March 30, 2013 to March 29, 2014. |
Employees
As
of December 31, 2013, CAM Hebei has 11 full-time employees and 5 part-time employees. The company expects to hire 14 more employees
in 2014.
In
addition CAMG will continue to share Hebei AMP’s existing workforce in most phases of development. This will consist of
all levels of personnel.
Item 1A. Risk Factors
In
addition to the other information set forth in this report, you should carefully consider the following factors, which could materially
affect our business, financial condition or future results. The risks described below are not the only risks facing us. Additional
risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition or results of operations.
Risks Related to
Our Business and Industry
We
rely on our related party for a significant portion of our business. If we are unable to maintain good relationships with our
related party, our business could suffer. Through December 31, 2013, all of our revenues were derived from Hebei AMP, a related
party and major shareholder through a trustee holding through common management located in the PRC. Our advertising agreement
with Hebei ended on December 31, 2013 and has not been renewed. As a result, we had no revenues through the first quarter of 2014.
We cannot assure that we will be able to enter into new agreements with Hebei AMP or other parties on terms favorable to us, or
at all, and any future agreement may expose us to risks that our partner might fail to fulfill its obligations and delay commercialization
of our products. We also could become involved in disputes with Hebei AMP, which could lead to delays in or terminations of our
development and commercialization programs and time consuming and expensive litigation or arbitration. Our inability to enter
into collaborative arrangements with other partners, or our failure to maintain such arrangements, would limit the number of product
candidates which we could develop and ultimately, decrease our sources of any future revenues.
Our
failure to maintain existing relationships with Hebei AMP, National AMP and China Co-op or obtain new relationships that allow
us to place our LCD flat-panel displays, advertising poster frames and outdoor traditional and LED digital billboards in desirable
locations would harm our business and prospects.
|
· |
We
will derive a substantial majority of our revenues from the provision of advertising services, and advertising is particularly
sensitive to changes in economic conditions and advertising trends. We may be unable to adequately deal with these changing
conditions and trends that could have a negative impact on our financial statements and the value of your investment. |
|
· |
Our
operating results are difficult to predict and may fluctuate significantly from period to period in the future resulting in
uncertainty and lower pricing for our shares. |
|
· |
Failure
to manage our growth and operations could strain our management, operational and other resources and we may not be able to
achieve anticipated levels of growth in the new networks and media platforms we operate, either of which could materially
and adversely affect our business and growth potential. |
|
· |
If
we are unable to adapt to changing regulatory requirements or advertising trends and the technology needs of advertisers and
consumers, we will not be able to compete effectively and we will be unable to increase or maintain our revenues which may
materially and adversely affect our business prospects and revenues. |
|
· |
We
may be deemed a PRC resident enterprise under the PRC Enterprise Income Tax Law and be subject to the PRC taxation on our
worldwide income which could create losses or a significant reduction in our net income and a decrease in the value of your
shares. |
The
newly enacted PRC Enterprise Income Tax Law, or the New Law, and the implementation regulations to the New Law issued by the PRC
State Council, became effective as of January 1, 2008. The New Law provides that enterprises established outside of China whose
“de facto management bodies” are located in China are considered “resident enterprises” and are generally
subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation regulations for the
New Law issued by the PRC State Council, “de facto management body” is defined as a body that has material and overall
management and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and
acquisition and disposition of properties and other assets of an enterprise.
Further,
on April 22, 2009, the State Administration of Tax (“SAT”) issued a Tax Circular, Guoshuifa [2009] No. 82 on Certain
Issues regarding the Determination of Offshore Companies Controlled by PRC Companies as Resident Enterprises pursuant to “De
Facto Management Bodies” Standard, or Circular 82, which took effect on January 1, 2008. According to Circular 82, any company
established pursuant to laws and regulations other than PRC laws but that is controlled by companies or company groups within
China shall be deemed as a resident enterprise for PRC tax purposes if all the following conditions are met: (i) the senior management
in charge of the daily operation and management of the company is based within China or the premises where the senior management
performs its duties are located within China; (ii) the financial matters (such as raising funds, financing or financial risk management)
and human resources matters (such as appointment and dismissal of employees or their payrolls) are decided by companies or individuals
within China or require approval from companies or individuals within China; (iii) primary property, books and accounts, company
seals and board and shareholder meeting minutes are kept or placed within China; and (iv) 50% or more of the directors with voting
rights or senior management habitually reside within China. According to this Circular 82, in determining the location of de facto
management, “substance over form” principle should be followed. Although Circular 82 was issued to regulate the PRC
tax resident judgment of companies established overseas and controlled by PRC companies, which is not applicable in our case,
the criteria in Circular 82 should be used as a reference to the SAT’s view on this issue.
Most
of our major board decisions, such as those relating to strategic planning, significant investments, raising funds and all matters
related to capital market activities are made outside of the PRC. We are based in Hong Kong, however there is uncertainty regarding
whether PRC tax authorities would deem us to be a PRC resident enterprise. If we are treated as a resident enterprise for PRC
tax purposes, we will be subject to PRC tax on our worldwide income, which would have an adverse effect on our effective tax rate
and net income.
Risks Relating to
the People’s Republic of China
Substantially
all of our assets are located in China and substantially all of our revenues are derived from our operations in China. Accordingly,
our business, financial condition, results of operations and prospects are subject, to a significant extent, to economic, political
and legal developments in China.
|
· |
The
PRC’s economic, political and social conditions, as well as governmental policies, could affect the financial markets
in China and our liquidity and access to capital and limit our ability to effectively operate our business. |
The
PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement,
level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced
significant growth over the past, growth has been uneven, both geographically and among various sectors of the economy. The PRC
government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these
measures benefit the overall PRC economy, but may also have a negative effect on us. For example, under current PRC regulations,
since December 10, 2005, foreign entities have been allowed to directly own 100% of a PRC advertising business if the foreign
entity has at least three years of direct operations of an advertising business outside of China, or to directly own less than
100% of a PRC advertising business if the foreign entity has at least two years of direct operations of an advertising business
outside of China. This may encourage foreign advertising companies with more experience, greater technological know-how and more
extensive financial resources than we have to compete against us and limit the potential for our growth. Moreover, our financial
condition and results of operations may be adversely affected by government control over capital investments or changes in tax
regulations that are applicable to us.
The
PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has implemented
measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership
of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of
productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant
role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control
over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government
implemented a number of measures, such as raising bank reserves against deposit rates to place additional limitations on the ability
of commercial banks to make loans and raise interest rates, in order to slow down specific segments of China’s economy which
it believed to be overheating. These actions, as well as future actions and policies of the PRC government, could materially affect
our liquidity and access to capital and our ability to operate our business.
|
· |
If
tax benefits currently available to us in PRC were no longer available, our effective income tax rates for our PRC operations
could increase. If our PRC tax rates increase we may be unable to operate or turn a profit and you may lose the entire value
of your investment. |
|
· |
Dividends
we receive from our operating subsidiaries located in the PRC may be subject to PRC withholding tax. As a result, we may be
unable to receive income from our operations and our share price could drop significantly. |
|
· |
Restrictions
on currency exchange may limit our ability to utilize our revenues effectively. If we are not able to utilize our revenues
we may be unable to execute our business plan or compete with other companies in the advertising services market. |
Substantially
all of our revenues and operating expenses are denominated in Renminbi. The Renminbi is currently convertible under the “current
account”, which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital
account”, which includes foreign direct investment and loans. We cannot assure you that the relevant PRC governmental authorities
will not further limit or eliminate our ability to purchase foreign currencies in the future. Since a significant amount of our
future revenues will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability
to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in
foreign currencies. Foreign exchange transactions under the capital account are still subject to limitations and require approvals
from, or registration with, the State Administration of Foreign Exchange and other relevant PRC governmental authorities. This
could affect the ability of each of our operating subsidiaries to obtain foreign exchange through debt or equity financing, including
by means of loans or capital contributions from us. It may also restrict our ability to remit amounts overseas including to our
Hong Kong holding company. If we transfer amounts to overseas accounts, it may be deemed a dividend paid on profits which is subject
to PRC taxation, which could affect the feasibility and efficiency of conducting actions overseas, such as issuing dividends to
shareholders, conducting share repurchase programs or otherwise.
|
· |
Fluctuations
in exchange rates could result in foreign currency exchange losses. Such losses could negatively impact our financial statements
and in turn negatively affect your shares. |
Appreciation
or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar
terms without giving effect to any underlying change in our business or results of operations.
|
· |
The
failure to manage growth effectively could have an adverse effect on our employee efficiency, product quality, working capital
levels and results of operations. Any such adverse effects could negatively impact the value of your stock. |
|
· |
Failure
to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences
resulting in significant losses, disruption to our operations or even a complete failure of the company. As a result you could
lose your entire investment. |
As
our ultimate holding company is a U.S. corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally
prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining
or retaining business.
|
· |
Investors
may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions
in the PRC based upon U.S. laws, including federal securities laws or other foreign laws against us or our management so you
may be unable to ever file a claim against us or receive an enforceable judgment. |
All
of our current business operations are conducted in the PRC. Moreover, our directors and officers are nationals and residents
of the PRC or Hong Kong. All the assets of these persons are located outside the United States and in the PRC or Hong Kong. As
a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC and Hong Kong
upon these persons. In addition, uncertainty exists as to whether the PRC courts would recognize or enforce judgments of United
States courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities
laws of the United States or any state thereof, or be competent to hear original actions brought in the PRC against us or such
persons predicated upon the securities laws of the United States or any state thereof.
Risks Relating to
Investment in Our Securities
|
· |
Shares
eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount
of outstanding stock in the public marketplace could reduce the price of our common stock. |
Holders
of a significant number of our shares and/or their designees may be eligible to sell our shares of common stock by means of ordinary
brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended, or Rule
144, subject to certain limitations. In general, pursuant to Rule 144, a non-affiliate stockholder (or stockholders whose shares
are aggregated) who has satisfied a six-month holding period, and provided that there is current public information available,
may sell all of its securities. Rule 144 also permits the sale of securities, without any limitations, by a non-affiliate that
has satisfied a one-year holding period. Any substantial sale of common stock pursuant to any resale prospectus or Rule 144 may
have an adverse effect on the market price of our common stock by creating an excessive supply.
|
· |
If
we fail to maintain effective internal controls, we may not be able to accurately report our financial results or prevent
fraud, and our business, financial condition, results of operations and reputation could be materially and adversely affected
causing the value of your stock to significantly drop. |
We
have determined, based on the evaluation of our internal controls and financial reporting, that we had significant deficiencies
caused by our lack of sufficient qualified accounting and financing personnel with an appropriate level of US GAAP knowledge and
experience appropriate to our financial reporting requirements. This deficiency, if not corrected, could adversely affect our
ability to initiate, authorize, record, process or report financial data in accordance with US GAAP.
|
· |
We
do not foresee paying cash dividends in the near future and as a result you will not receive any dividend yield from holding
our securities. |
We
do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend
to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if
they require the investment to produce dividend income.
|
· |
We
may issue more stock, which could dilute your stock and negatively impact the value of your investment. |
We
may conduct additional capital-raising in order to pursue new market opportunities. To the extent that additional capital is raised
through the sale of equity and/or convertible debt securities, the issuance of such securities could result in dilution to shareholders
and/or increased debt service commitments. Accordingly, if we issue additional stock, it could reduce the value of your stock.
|
· |
Our
common shares are thinly traded and, you may be unable to sell at or near ask prices or at all if you need to sell your shares
to raise money or otherwise desire to liquidate your shares. As a result you may be unable to exit your position and you may
lose all or a portion of your investment. |
We
cannot predict the extent to which an active public market for our common stock will develop or be sustained.
Our
common shares have historically been sporadically or "thinly-traded" on the over-the-counter markets, meaning that the
number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or
non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively
unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to
follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more
seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal
or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally
support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active
public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
The
market price for our common stock is particularly volatile given our status as a relatively small company with a small and thinly
traded “float” and lack of significant current revenues that could lead to wide fluctuations in our share price. The
price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market. You may
be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
|
· |
The
market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. |
|
· |
Penny
stock markets have been prone to abuse in recent years. Such abuse represents an increased risk for you not only because only
because our shares may be subject to higher risk of abuse and manipulation but also because our shares will trade at a lower
valuation than securities traded on more reputable stock exchanges. |
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns
of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and
misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5)
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the
abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical
limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns
or practices could increase the volatility of our share price and lower our valuation.
|
· |
The
application of the "penny stock" rules could adversely affect the market price of our common stock and increase
your transaction costs to sell those shares. |
As
long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject
to the "penny stock" rules. The "penny stock" rules impose additional sales practice requirements on broker-dealers
who sell securities to persons other than established customers and accredited investors (generally those with assets in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules,
the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser's
written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt,
the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and
the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability
or decrease the willingness of broker-dealers to sell our common shares, and may result in decreased liquidity for our common
shares and increased transaction costs for sales and purchases of our common shares as compared to other securities.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
ITEM
2. PROPERTIES
We
lease our office space in Hebei Province, PRC, under a 2-year non-cancelable operating lease agreement which expires on June 30,
2014. The monthly lease payment is approximately $800.
We
believe that our existing facilities are well maintained, in good operating condition and sufficient to support growth of the
business. As we continue to analyze our business we will re-evaluate our facility needs which could include relocation.
ITEM
3. LEGAL PROCEEDINGS
We
may be subject to, from time to time, various legal proceedings relating to claims arising out of our operations in the ordinary
course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in
the aggregate, would have a material adverse effect on the business, financial condition, or results of operations of the Company.
ITEM
4. (REMOVED AND RESERVED
PART II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Trading
Market for Common Equity
Our
common stock currently trades over-the-counter on the OTC Bulletin Board under the designation CAMG. However, to date there has
been very limited trading for our common stock. The market price of our common stock is subject to significant fluctuations in
response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which
we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions,
may adversely affect the market for our common stock, regardless of our actual or projected performance. Further, these prices
reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions.
The following tables set forth the high and low sale prices for our common stock as reported on the Electronic Bulletin Board
for the periods indicated.
|
Fourth
Quarter |
|
Third
Quarter |
|
Second
Quarter |
|
First
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
2013
price range per share |
$ |
3.50
- .90 |
|
$ |
2.00
- .75 |
|
$ |
1.26
- .20 |
|
$ |
.20
- .14 |
2012
price range per share |
$ |
1.01-3.99 |
|
$ |
3.99-4.00 |
|
$ |
2.00-4.00 |
|
$ |
0.05-0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
General
We
are authorized to issue 90,000,000 shares of our common stock, par value $.001 per share and 10,000,000 shares of our preferred
stock, par value $.001 per share.
Common
Stock
As
of April 15, 2014, there were 25,295,000 shares of our common stock issued and outstanding, which were held of record by approximately
355 shareholders.
Holders
of Our Common Stock
The
holders of our common stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders.
There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of
the shares voting for the election of directors can elect all of the directors then up for election. The holders of our common
stock are entitled to receive dividends when, as and if declared by the board of directors out of funds legally available therefore.
In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share ratably
in all assets remaining which are available for distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the common stock. Holders of shares of our common stock, as such,
have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the common stock.
Preferred
Stock
We
are authorized to issue up to 10,000,000 shares of preferred stock. Shares of our preferred stock may be issued from time to time
in one or more classes or series, each of which class or series shall have such distinctive designation or title as shall be fixed
by the board of directors prior to the issuance any shares thereof. The voting powers, designations, preferences, and relative,
participating, optional, or other rights, if any, and the qualifications, limitations, or restrictions, if any, of the preferred
stock, in one or more series, shall be as follows:
Series
A Preferred Stock. The Company is authorized to issue up to ten million (10,000,000) shares of Preferred Stock, which
are hereby designated as “Series A Preferred Stock” with the following rights, preferences, privileges and
restrictions, qualifications and limitations. As of December 31, 2013, there were 1,000,000 shares of Series A Preferred Stock
issued and outstanding.
Voting
Rights. On any matter presented to the common stockholders of the Company for their action or consideration at any meeting
of stockholders of the Company (or by written consent of stockholders in lieu of meeting), notice shall be presented to the holders
of the Series A Preferred Stock, and each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast 100
votes for each share of Series A Preferred Stock held. Except as provided by law or by the other provisions of this Certificate,
holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.
Series
A Preferred Stock Protective Provisions. In addition to any other rights provided by law, at any time any shares of Series
A Preferred Stock are outstanding, as a legal party in interest, the Company, through action directly initiated by the Company’s
Board of Directors or indirectly initiated by the Company’s Board of Directors through judicial action or process, including
any action by common shareholders, shall not, either directly or indirectly by amendment, merger, consolidation or otherwise,
take any of the following actions without first obtaining the affirmative written consent of 51% of the Series A Holders:
|
a. |
Amend,
alter or repeal any provision of the Articles of Incorporation, this Certificate for the Series A Preferred Stock or Bylaws
of the Company in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock in any
respect; |
|
b. |
Declare
or pay any dividends or make any distributions to any holder(s) of Common Stock or other equity security of the Company or
purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of the Company; |
|
c. |
Sell,
transfer or otherwise dispose of any properties, assets and rights including, without limitation, its intellectual property; |
|
d. |
Create,
or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock
unless the same ranks junior to the Series A Preferred Stock with respect to dividends, the distribution of assets on the
liquidation, dissolution or winding up of the Company, the accrual of payment of dividends and rights of redemption, or increase
the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional
class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to the distribution
of assets on the liquidation, dissolution or winding up of the Company, or the payment of dividends and rights of redemption; |
|
e. |
(i)
Reclassify, alter or amend any existing security of the Company that is pari passu with the Series A Preferred Stock
in respect of the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends
or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the
Series A Preferred Stock in respect of any such right, preference or privilege, or (ii) reclassify, alter or amend any existing
security of the Company that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation,
dissolution or winding up of the Company, the payment of dividends or rights of redemption, if such reclassification, alteration
or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect
of any such right, preference or privilege; |
|
f. |
Purchase
or redeem (or permit any subsidiaries to purchase or redeem) or pay or declare any dividend or make any distribution on, any
shares of capital stock of the Company other than (i) redemptions of or dividends or distributions on the Series A Preferred
Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form
of additional shares of Common Stock or (iii) repurchases of stock from former employees, officers, directors, consultants
or other persons who performed services for the Company or any subsidiaries in connection with the cessation of such employment
or service at the lower of the original purchase price or the then-current fair market value thereof; |
|
g. |
Create,
or authorize the creation of, or issue, or authorize the issuance of any debt security, or permit any subsidiaries to take
any such action with respect to any debt security, if the aggregate indebtedness of the Company and its subsidiaries for borrowed
money following such action would exceed $500,000 other than equipment leases or bank warehouse lines of credit, unless such
debt security has received the prior approval of the Board of Directors; provided, however, that the Company may incur
up to an aggregate of $3,000,000 for a non-equity linked, non-convertible unsecured debt financing; |
|
h. |
Create,
or hold capital stock in, any subsidiaries that is not wholly owned (either directly or through one or more other subsidiaries)
by the Company, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiaries of the
Company, or permit any direct or indirect subsidiaries to sell, lease, transfer, exclusively license or otherwise dispose
(in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiaries;
and |
|
i. |
Initiate
any action with a regulatory, governmental, administrative, judicial entity or individual in an attempt to abrogate or diminish
in any way the rights, preferences and privileges of these Series A Preferred Stock. |
Transfer
Agent. So long as any shares of Series A Preferred Stock remain outstanding, the Company shall not change transfer agents
without the express written consent of 100% of the Series A Holders.
Redemption.
The Series A Preferred Stock shall not be redeemable by the Company.
Re-issuance.
No share or shares of Series A Preferred Stock acquired by the Company by reason of conversion, redemption or otherwise shall
be reissued as Series A Preferred Stock, and all such shares thereafter shall be returned to the Company’s treasury under
the status of undesignated and un-issued shares of Preferred Stock of the Company.
Dividends
Since
we have been a public company, we have not paid cash dividends on our common stock. Holders of our common stock are entitled to
receive dividends, if any, declared and paid from time to time by the Board of Directors out of funds legally available. We intend
to retain any earnings for the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of cash dividends will depend upon future earnings, results of operations,
capital requirements, our financial condition and other factors that our Board of Directors may consider.
Stock
Warrants Grants
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 third party escrow account. The Company is not the
beneficiary of the escrow account. Since the Company has not received the warrants proceeds, the Company recorded a subscription
receivable in the amount of $2,662,680 to the accompanying consolidated balance sheets.
During
April 2013, our board of directors advised our attorney to amend the investors’ warrants to be refunded in the event that
the warrants are not exercised on or before expiration. Accordingly, the transaction was independently negotiated between the
Company and the investors. The Company evaluated the transaction based on the fact that the Company had long-term contracts for
revenue generation, and positive shareholder equity at the time of entering the subscription agreements. 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.
Registration
Rights
A
non-affiliated shareholder has "Piggyback Registration Rights" on a total of 800,000 shares of common stock. He was
granted the right to "piggyback" the shares of their common stock on each registration statement filed by the Company
and/or its successors or assigns so long as the registration form to be used is suitable for the registration of the shares. The
Company will provide at least fifteen (15) days written notice of the intended filing date of any registration statement and the
shareholder shall have ten (10) days after receipt of such notice to notify the Company of its intent to include their shares
in the registration statement. The Company shall keep any registration statement onto which any shareholder has "piggybacked"
its shares current and effective for a period of up to two (2) years from the date on which the shareholder is first entitled
to sell the total number of its shares registered there under. Such securities will cease to have Piggyback Registration rights
when (a) they have been effectively registered under the 1933 Act and disposed of in accordance with the registration statement
covering them, (b) they have been sold, or may be sold without volume restrictions pursuant to Rule 144(b)(1) promulgated by the
SEC under the 1933 Act, or (c) they have been otherwise transferred and new certificates for them not bearing a restrictive legend
have been issued by the Company and the Company shall not have “stop transfer” instructions against them.
Securities
authorized for issuance under equity compensation plans
As
of the date of this Annual Report, we do not have any securities authorized for issuance under any equity compensation plans and
we do not have any equity compensation plans.
Penny
Stock Regulations
Our
shares of common stock are subject to the "penny stock" rules of the Securities Exchange Act of 1934 and various rules
under this Act. In general terms, "penny stock" is defined as any equity security that has a market price less than
$5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless
that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, issued by
a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on
the issuer's net tangible assets or revenues. In the last case, the issuer's net tangible assets must exceed $3,000,000 if in
continuous operation for at least three years or $5,000,000 if in operation for less than three years or the issuer's average
revenues for each of the past three years must exceed $6,000,000.
Trading
in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons
other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in
excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the
security and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document
relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered
representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information
for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock,
to the extent it is penny stock, and may affect the ability of shareholders to sell their shares.
Recent
Sales of Unregistered Securities; Use of Proceeds from Registered Securities
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.
The services agreement was consummated during the year of 2013.
Purchases
of Equity Securities by Issuer and Affiliated Purchasers
As
of the date of this Annual Report, we do not have any securities authorized for issuance under any equity compensation plans and
we do not have any equity compensation plans.
Transfer Agent
Our
transfer agent is Guardian Registrar & Transfer, Inc., located at 7951 SW 6th Street, Suite 216, Plantation, FL
33324. Their website is www.guardianstocktransfer.net.
ITEM
6. SELECTED FINANCIAL DATA
As
a smaller reporting company as defined by Rule 229.10(f)(1), the Company is not required to provide the information required by
this Item.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATION
This
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts
of the Form 10-K contain forward looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that are subject to certain events, risks and uncertainties that may be outside our
control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”,
“will”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update
or revise any forward-looking statements. These forward-looking statements include statements of management's plans and objectives
for our future operations and statements of future economic performance, information regarding our expansion and possible results
from expansion, our expected growth, our capital budget and future capital requirements, the availability of funds and our ability
to meet future capital needs, the realization of our deferred tax assets, and the assumptions described in this report underlying
such forward-looking statements. Actual results and developments could differ materially from those expressed in or implied by
such statements due to a number of factors, including, without limitation, those described in the context of such forward-looking
statements, our expansion strategy, our ability to achieve operating efficiencies, our dependence on distributors, capacity, suppliers,
industry pricing and industry trends, evolving industry standards, domestic and international regulatory matters, general economic
and business conditions, the strength and financial resources of our competitors, our ability to find and retain skilled personnel,
the political and economic climate in which we conduct operations and the risk factors described from time to time in our other
documents and reports filed with the Securities and Exchange Commission (the "Commission"). Additional factors that
could cause actual results to differ materially from the forward-looking statements include, but are not limited to: 1) our ability
to successfully develop and deliver our products on a timely basis and in the prescribed condition; 2) our ability to compete
effectively with other companies in the same industry; 3) our ability to raise sufficient capital in order to effectuate our business
plan; and 4) our ability to retain our key executives.
Critical
Accounting Policies
We
prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the
amounts reported in our combined and consolidated financial statements and related notes. We periodically evaluate these estimates
and assumptions based on the most recently available information, our own historical experience and various other assumptions
that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component
of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require
higher degrees of judgment than others in their application. We believe the following accounting policies involve the most significant
judgments and estimates used in the preparation of our financial statements.
Revenue
Recognition
In
accordance with ASC 605-10-S99-1 for revenue recognition, the Company recognizes revenue when persuasive evidence of an arrangement
exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability
is reasonably assured. Currently, our revenues are all generated from a related party.
(a)
Advertising revenues
The
Company set up its own media network by installing LCD displays in retail stores managed by a related party and provides air time
for the clients’ advertisement through the network. Revenue is recognized when the air time is used by the clients.
(b)
Services revenues
Service
revenue is primarily derived from acting as an agent in fertilizer trading. The Company serves primarily as a trading agent for
this related party during the transactions. These services are generally billed on a time-cost plus basis. Revenue is recognized
when services are rendered, products have been delivered, payments have been received, and risk of ownership has been transferred
and accepted by the customers.
Cost
of Revenues
Cost
of revenues consists primarily of the cost related to LCD display, direct labor, depreciation and overhead, which are directly
attributable to revenue generation and the provision of services. The depreciation expenses in connection with equipment for advertising
and broadcasting are included in cost of revenues.
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence.
Results
of Operations
Revenues
- Related Party
We
had revenue of $6,660,120 and $3,978,756 for years ended December 31, 2013 and 2012, respectively, of which $6,641,060 and $3,963,860
in 2013 and 2012, respectively, from the sales of air time for the clients’ advertisement through the LCD display network.
We currently gained all our advertising revenues from Hebei AMP; our related party and major shareholder through a trustee holding;
pursuant to the Agreement, dated June 1, 2012. We charge at least RMB 2.54 ($0.41) per second for a 30-second video broadcasting
60 times per day within the Network when the number of LCD display is less than 3,000. The price per second will be increased
when the number of LCD display exceeds 3,000 to reflect the increasing influence from the Network. The LCD displays will operate
up to 12 hours a day in some locations and allow a maximum capacity of 15.8 million seconds per year available for sale. However,
the sole advertising revenue contract with Hebei AMP will expire on December 31, 2013. This contract has not been renewed. As
a result, we have had no revenues through April 14, 2014.There is no assurance that such contract will be renewed in the
subsequent year or that we will enter into contracts with other third parties. Our revenues will drop significantly without the
renewal of the contract.
We
do not believe the termination of our advertising contract with Hebei AMP will have an impact on our marketing rights because
we have acquired marketing
rights to a network
of 16,000 retail stores by forming
a joint venture company with Hebei AMP, which is an individual operating company,
and Hebei AMP indirectly owns 2% of the capital interest of the JV Company.
Starting
from December of 2012, we served as a trading agent for Hebei AMP during the fertilizer trading. These services are generally
billed on a time-cost plus basis. Revenue is recognized when services are rendered, products have been delivered, payments have
been received, and risk of ownership has been transferred and accepted by the customers. The revenue from this section was $19,060
and $14,896 for the years ended December 31, 2013 and 2012, respectively. We expect our revenues from fertilizer trading to increase
during 2014 as our moves toward implementing our business plan, including direct contracts with fertilizer manufacturers and whole
sellers, instead of agent services.
Cost
of Revenues
Cost
of revenues recorded at $130,971 and $142,652 for the years ended December 31, 2013 and 2012, respectively. Cost of revenues consists
primarily of the cost related to LCD display, direct labor, depreciation and overhead, which are directly attributable to revenue
generation and the provision of services. The depreciation expenses in connection with equipment for advertising and broadcasting
were included in cost of revenues, which were $34,953 and $9,607 for the years ended December 31, 2013 and 2012, respectively.
Net
Income
We
had net income of $4,976,390 and $2,485,738 for the years ended December 31, 2013 and 2012, respectively. The net income during
the years of 2013 and 2012 was due to sufficient gross profit to cover our operating expenses. We currently gained all our advertising
revenues from Hebei AMP; our related party and major shareholder through a trustee holding; pursuant to the Agreement, dated June
1, 2012. We charged Hebei AMP $0.41 per second for the air time they used for their advertisement. However, the sole advertising
revenue contract with Hebei AMP will expire on December 31, 2013. There is no assurance that such contract will be renewed in
the subsequent year. Therefore, there can be no assurance that we will achieve or maintain profitability, or that any revenue
growth will take place in the future.
General
and Administrative Expenses
We
had general and administrative expenses of $565,606 and $497,435 for the years ended December 31, 2013 and 2012, respectively.
The expenses in 2013 were mainly composed of the expense of advertising recruitment, travelling expenses and expenses related
to expansion of its network. It also included stock based compensation of $50,000 resulting from the issuance of 220,000 shares
of its common stock 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 the fair value of the services to be rendered since the Company currently has a limited trading
market.
Liquidity
and Capital Resources
The following table
sets forth a summary of our net cash flow information for the periods indicated:
(All amounts
in U.S. dollars)
|
|
For
the Year |
|
|
Ended
December 31, |
|
|
|
2013* |
|
|
|
2012* |
|
|
|
|
|
|
|
|
|
|
|
|
(Consolidated) |
|
|
|
(Consolidated) |
|
|
|
|
|
|
|
|
|
Net
cash provided by/(used in) operating activities |
|
$ |
4,003,316 |
|
|
$ |
608,681 |
|
|
|
|
|
|
|
|
|
Net
cash (used in) investing activities |
|
$ |
(10,960) |
|
|
$ |
(164,564) |
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities |
|
$ |
275,505 |
|
|
$ |
788,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and equivalents |
|
$ |
4,351,613 |
|
|
$ |
1,244,532 |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period |
|
$ |
1,248,673 |
|
|
$ |
4,141 |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period |
|
$ |
5,600,286 |
|
|
$ |
1,248,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
The above financial data have been derived from our audited consolidated financial statements for the twelve months ended
December 31, 2013 and 2012.
Cash
flows provided by operating activities were $4,003,316 and $608,681 for the years ended December 31, 2013 and 2012, respectively.
Positive cash flows from operations in 2013 were due primarily to the net income of $4,976,390, the increase in taxes payable
in amount of $919,502, plus the non-cash stock compensation expense of $50,000, offset by the increase in accounts receivable
and advance to suppliers in amount of $1,654,147 and $1,705,807, respectively, pursuant to fertilizer contracts.
Positive
cash flows from operations in 2012 were due primarily to the net income of $2,485,738, the increase in taxes payable in amount
of $699,563, plus the non-cash stock compensation expense of $80,393, offset by the increase in advance to suppliers in amount
of $2,701,831 pursuant to fertilizer contracts.
Cash
flows used in investing activities were $10,960 and $164,564 during the years ended December 31, 2013 and 2012, respectively.
Cash flows used in investment during 2013 were due to the purchase of office equipment. Comparatively, the cash flows used in
investment during 2012 were due to purchase of LCD display for advertising business.
Cash
flows provided by financing activities were $275,505 and $788,538 during the year ended December 31, 2013 and 2012, respectively.
Cash flows from financing activities during 2013 were due primarily to the release of restricted cash of $300,000, which was in
connection with the sales of common stock during the third quarter of 2012, offset by the repayment of $24,495 to the shareholder
loan. Comparatively, positive cash flows from financing activities in 2012 was due primarily to proceeds of $24,779 from related
parties loan, and $700,595 from the shareholder loan, both of which bears zero interest and due on demand, and capital contribution
from non controlling interest in amount of $63,164. In addition, the Company had proceeds of $300,000 from sales of stock at a
price of $4.00 to our chairman. Since the total proceeds of $300,000 were held in escrow, there were no effects on cash flow from
financing activities.
Our
contract with Hebei AMP was not renewed at 2013 year end and we currently have no sources of revenue which will adversely impact
on our liquidity and capital resources.
Capital
Expenditures
We
had cash of $5,600,286 on hand as of December 31, 2013. Currently, we have enough cash to fund our operations for the next 12
months. This is based on our self-generated income and cash inflow from operations. However, our expansion objectives are significantly
affected by our ability to obtain extra funds. We estimate we would require about $10 million to meet our expansion objectives.
We intend to raise the funds in the US capital markets through road shows or investor presentation meetings. In October 2012 we
hosted two seminars at San Francisco and New York City respectively to let attendees meet with our management team and our marketing
and growth strategies. With regards to fund raising, we intend to hold road shows in different U.S. cities and reach various institutional
investors to present our business development plan in year 2014.
Overall,
we have funded our cash needs from inception through December 31, 2013 with a series of debt and equity transactions, primarily
with related parties. If we are unable to receive additional cash from our related parties, we may need to rely on financing from
outside sources through debt or equity transactions. Our related parties are under no legal obligation to provide us with capital
infusions. Failure to obtain such financing could have a material adverse effect on our operations and financial condition.
If
we are unable to raise additional capital, our growth potential will be adversely affected and we will have to significantly modify
our plans. For example, if we are unable to raise sufficient capital to develop our business plan, we may need to:
·
|
Curtail
number of stores in the Network
|
·
|
Limit
our future marketing efforts to areas that we believe would be the most profitable. |
Demand
for the products and services will be dependent on, among other things, market acceptance of our services, advertising market
in Hebei Province, PRC, and general economic conditions, which are cyclical in nature. Inasmuch as a major portion of our activities
is the receipt of revenues from selling advertising time to Hebei AMP, our related party and major shareholder through a trustee
holding, our business operations may be adversely affected if the relationship with Hebei AMP is broken.
Our
success will be dependent upon implementing our plan of operations and the risks associated with our business plans. We provide
air time for the clients’ advertisement through our own media network. We plan to strengthen our position in these markets.
We also plan to expand our operations through aggressively marketing our concept.
Off-balance
sheet arrangements
We
have not entered into, nor do we expect to enter into, any off-balance sheet arrangements. We also have not entered into any financial
guarantees or other commitments to guarantee the payment obligations of third parties. In addition, we have not entered into any
derivative contracts that are indexed to our equity interests and classified as shareholders’ equity. Furthermore, we do
not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing,
liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial
instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. We consider
investments in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be
cash equivalents. However, in order to manage the foreign exchange risks, we may engage in hedging activities to manage our financial
exposure related to currency exchange fluctuation. In these hedging activities, we might use fixed-price, forward, futures, financial
swaps and option contracts traded in the over-the-counter markets or on exchanges, as well as long-term structured transactions
when feasible.
Foreign
Exchange Rates
All
of our sales are denominated in Renminbi (“RMB”). As a result, changes in the relative values of U.S. Dollars and
RMB affect our reported levels of revenues and profitability as the results are translated into U.S. Dollars for reporting purposes.
Fluctuations in exchange rates between the U.S. dollar and RMB affect our gross and net profit margins and could result in foreign
exchange and operating losses.
Our
results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are
translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments
resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity.
We recorded net foreign currency gains of $127,110 in fiscal 2013. We have not used any forward contracts, currency options or
borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations
on our results of operations and may incur net foreign currency losses in the future.
Our
financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. The value of
your investment in our stock will be affected by the foreign exchange rate between U.S. dollars and RMB. To the extent we hold
assets denominated in U.S. dollars, including the net proceeds to us from this offering, any appreciation of the RMB against the
U.S. dollar could result in a change to our statement of operations and a reduction in the value of our U.S. dollar denominated
assets. On the other hand, a decline in the value of RMB against the U.S. dollar could reduce the U.S. dollar equivalent amounts
of our financial results, the value of your investment in our company and the dividends we may pay in the future, if any, all
of which may have a material adverse effect on the price of our stock.
The
exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements
or otherwise stated in this MD&A were as follows:
|
|
|
2013 |
|
|
|
2012 |
|
Balance
sheet items, except for the registered and paid-up capital as of December 31, 2013 and 2012 |
|
|
USD
1:RMB 6.1104 |
|
|
|
USD
1:RMB 6.2313 |
|
Amounts included in
the statement of operations, statement of changes in stockholders’ equity and statement of cash flows for the years
ended December 31, 2013 and 2012 |
|
|
USD
1:RMB 6.1905 |
|
|
|
USD
1:RMB 6.3105 |
|
Russell E. Anderson, CPA
Russ Bradshaw, CPA
William R. Denney, CPA
Sandra Chen, CPA
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
CAM Group,
Inc.
151 Shengli
Avenue North, Jixing Building, Shijiazhuang
Hebei
Province, P.R China
We have
audited the accompanying consolidated balance sheets of CAM Group, Inc. and Subsidiaries (the “Company”) as of December
31, 2012, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity
and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2012, and the results of its operations and its cash flows for the year in conformity with accounting
principles generally accepted in the United States of America.
/s/
Anderson Bradshaw PLLC
Anderson
Bradshaw PLLC
Salt Lake
City, Utah
April 15,
2013
5296 S. Commerce Dr.
Suite300
Salt Lake City, Utah 84107
USA
(T) 801.281.4700
(F) 801.281.4701
Suite A, 5/F
Max Share Center
373Kings Road
North Point
Hong Kong
(T) 852.21.555.333
(F) 852.21.165.222
Report
of Independent Registered Public Accounting Firm
To the Board of Directors
and Stockholders of CAM Group, Inc.
We have
audited the accompanying consolidated balance sheet of CAM Group, Inc. and subsidiaries (the “Company”), as of December
31, 2013 and the related consolidated statements of operations and comprehensive income, changes’ in stockholders’
equity and cash flows, for the year ended December 31, 2013. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audit.
We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control
over financial reporting. Our audit included consideration of internal control over finance reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our
opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2013 and the results of its operations and their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
Dominic
K.F. Chan & Co
Certified
Public Accountants
Hong Kong,
March 28, 2014
ITEM
8. FINANCIAL STATEMENTS
CAM Group, Inc. and Subsidiaries |
Consolidated Balance Sheets |
As of December 31, 2013 and 2012 |
| |
| |
|
| |
December 31, 2013 | |
December 31, 2012 |
Current Assets | |
| |
|
| |
| |
|
Cash and cash equivalent | |
$ | 5,600,286 | | |
$ | 1,248,673 | |
Cash and cash equivalent - restricted | |
| — | | |
| 300,000 | |
Accounts receivable | |
| 1,675,831 | | |
| — | |
Advance to suppliers | |
| 3,225,615 | | |
| 2,803,593 | |
Prepayment and deposits | |
| 2,703 | | |
| 1,095 | |
Other receivable | |
| 2,335 | | |
| 4,012 | |
Total Current Assets | |
| 10,506,770 | | |
| 4,357,373 | |
| |
| | | |
| | |
Plant and Equipment, Net | |
| 135,722 | | |
| 156,926 | |
| |
| | | |
| | |
Total Assets | |
$ | 10,642,492 | | |
$ | 4,514,299 | |
| |
| | | |
| | |
Liabilities | |
| | | |
| | |
Accounts payables and accrued expenses | |
$ | 81,279 | | |
$ | 42,521 | |
Due to shareholders | |
| 698,718 | | |
| 709,497 | |
Due to related parties | |
| 58,838 | | |
| 57,696 | |
Other payables | |
| — | | |
| — | |
Income Tax Payable | |
| 1,654,025 | | |
| 708,453 | |
Total Liabilities | |
| 2,492,860 | | |
| 1,518,167 | |
| |
| | | |
| | |
Equity | |
| | | |
| | |
Preferred stock, $.001 par value, 10,000,000 shares authorized, 1,000,000 shares | |
| 1,000 | | |
| 1,000 | |
issued and outstanding as of December 31, 2013 and 2012, respectively | |
| | | |
| | |
Common stock, $.001 par value, 90,000,000 shares authorized, 25,295,000 and 25,075,000 | |
| 25,295 | | |
| 25,075 | |
shares issued and outstanding as of December 31, 2013 and 2012, respectively | |
| | | |
| | |
Additional paid-in capital | |
| 556,790 | | |
| 3,169,690 | |
Subscription receivable | |
| — | | |
| (2,662,680 | ) |
Accumulated other comprehensive income | |
| 153,321 | | |
| 28,753 | |
Retained earnings (deficits) | |
| 7,361,766 | | |
| 2,385,376 | |
Non-controlling interest | |
| 51,460 | | |
| 48,918 | |
Total equity | |
| 8,149,632 | | |
| 2,996,132 | |
| |
| | | |
| | |
Total Liabilities and Equity | |
$ | 10,642,492 | | |
$ | 4,514,299 | |
The
accompanying notes are an integral part of these consolidated financial statement
CAM
Group, Inc. and Subsidiaries |
Consolidated
Statements of Operations and Consolidated Comprehensive Income |
For
The Years Ended December 31, 2013 and 2012 |
|
|
|
|
|
For
the years ended |
|
|
December
31, 2013 |
|
December
31, 2012 |
|
|
|
|
|
Revenue
- related party |
|
$ |
6,641,060 |
|
|
$ |
3,963,860 |
|
Revenue - other, related
party |
|
|
19,060 |
|
|
|
14,896 |
|
Total Revenues |
|
|
6,660,120 |
|
|
|
3,978,756 |
|
Cost of revenue |
|
|
130,971 |
|
|
|
142,652 |
|
Gross profit |
|
|
6,529,149 |
|
|
|
3,836,104 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, General &
administrative expenses |
|
|
565,606 |
|
|
|
497,435 |
|
Advertising expenses |
|
|
69,236 |
|
|
|
107,516 |
|
Total operating expenses |
|
|
634,842 |
|
|
|
604,951 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
5,894,307 |
|
|
|
3,231,153 |
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
Interest income |
|
|
9,692 |
|
|
|
|
|
Loss from currency exchange |
|
|
(8,107 |
) |
|
|
(45,852 |
) |
Total other income (expenses) |
|
|
1,585 |
|
|
|
(45,852 |
) |
|
|
|
|
|
|
|
|
|
Income before income
tax |
|
|
5,895,892 |
|
|
|
3,185,301 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
919,502 |
|
|
|
699,563 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
4,976,390 |
|
|
|
2,485,738 |
|
Less: Net income attributable
to noncontrolling interests |
|
|
— |
|
|
|
— |
|
Net income attributable
to CAM Group common shareholders |
|
|
4,976,390 |
|
|
|
2,485,738 |
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.20 |
|
|
$ |
0.10 |
|
Diluted |
|
$ |
0.04 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares |
|
|
|
|
|
|
|
|
Basic |
|
|
25,210,616 |
|
|
|
24,304,726 |
|
Diluted |
|
|
125,210,616 |
|
|
|
124,304,726 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
4,976,390 |
|
|
$ |
2,485,738 |
|
Foreign currency translation
adjustment |
|
|
127,110 |
|
|
|
30,235 |
|
Comprehensive income: |
|
|
5,103,500 |
|
|
|
2,515,973 |
|
Comprehensive income
attributable to noncontrolling interests |
|
|
2,542 |
|
|
|
605 |
|
Comprehensive income
attributable to CAM Group |
|
$ |
5,100,958 |
|
|
$ |
2,515,368 |
|
|
|
|
|
|
|
|
|
|
** less than $.01 |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements |
CAM Group, Inc. and Subsidiaries |
Consolidated
Statement of Cash Flows |
For The
Years Ended December 31, 2013 and 2012 |
|
|
|
|
|
For the
years ended |
|
|
December 31, 2013 |
|
December 31, 2012 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
4,976,390 |
|
|
$ |
2,485,738 |
|
Adjustments to reconcile net income to
net cash |
|
|
|
|
|
|
|
|
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
34,953 |
|
|
|
9,607 |
|
Stock based compensation |
|
|
50,000 |
|
|
|
80,393 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(1,654,147 |
) |
|
|
— |
|
Advance to suppliers |
|
|
(1,705,807 |
) |
|
|
(2,701,831 |
) |
Advance to related parties - business
trade |
|
|
1,343,995 |
|
|
|
— |
|
Prepayments and other receivable |
|
|
168 |
|
|
|
(3,962 |
) |
Accounts payable and accrued expenses |
|
|
38,262 |
|
|
|
42,025 |
|
Other payables |
|
|
— |
|
|
|
(2,852 |
) |
Taxes Payable |
|
|
919,502 |
|
|
|
699,563 |
|
Net cash provided by operating activities |
|
|
4,003,316 |
|
|
|
608,681 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(10,423 |
) |
|
|
(164,564 |
) |
Construction in progress |
|
|
(537 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(10,960 |
) |
|
|
(164,564 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Capital contribution |
|
|
— |
|
|
|
63,164 |
|
Proceeds from shareholders loan payable |
|
|
— |
|
|
|
700,595 |
|
Proceeds from related party loan payable |
|
|
— |
|
|
|
24,779 |
|
Repayments to shareholders loan payable |
|
|
(24,495 |
) |
|
|
— |
|
Changes in restricted cash |
|
|
300,000 |
|
|
|
(300,000 |
) |
Proceeds from stock issuance |
|
|
— |
|
|
|
300,000 |
|
Net cash provided by financing activities |
|
|
275,505 |
|
|
|
788,538 |
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rate |
|
|
83,752 |
|
|
|
11,877 |
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents |
|
|
4,351,613 |
|
|
|
1,244,532 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning
of the year |
|
|
1,248,673 |
|
|
|
4,141 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end
of the year |
|
$ |
5,600,286 |
|
|
$ |
1,248,673 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
— |
|
|
$ |
— |
|
Cash paid for income taxes |
|
$ |
— |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these consolidated financial statements |
|
|
CAM
Group, Inc. and Subsidiaries |
Consolidated
Statements of Changes in Stockholders' Deficits |
For
The Years Ended December 31, 2013 and 2012 |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
Preferred
shares | |
Common
Stock | |
| |
| |
| |
| |
| |
|
| |
Shares | |
Amount | |
Shares | |
Amount | |
Additional
Paid-In Capital | |
Subscription
Receivable | |
Other
Comprehensive Income | |
Accumulated
Deficits | |
Non-controlling
interest | |
Total |
Balance
at December 31, 2011 | |
| 1,000,000 | | |
$ | 1,000 | | |
| 22,500,000 | | |
$ | 22,500 | | |
$ | 129,192 | | |
$ | — | | |
$ | (1,482 | ) | |
$ | (100,362 | ) | |
$ | (14,039 | ) | |
$ | 36,809 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Reorganization
due to recapitalization | |
| | | |
| | | |
| 3,392,147 | | |
| 3,392 | | |
| (3,392 | ) | |
| | | |
| — | | |
| — | | |
| | | |
| — | |
Shares
cancelled in reverse re-capitalization | |
| | | |
| | | |
| (2,500,000 | ) | |
| (2,500 | ) | |
| 2,500 | | |
| | | |
| | | |
| | | |
| | | |
| — | |
Shares
issued for consulting service | |
| | | |
| | | |
| 1,607,853 | | |
| 1,608 | | |
| 78,785 | | |
| | | |
| | | |
| | | |
| | | |
| 80,393 | |
Shares
issued for cash purchase | |
| | | |
| | | |
| 75,000 | | |
| 75 | | |
| 299,925 | | |
| | | |
| | | |
| | | |
| | | |
| 300,000 | |
Warrants
issued for cash purchase | |
| | | |
| | | |
| | | |
| | | |
| 2,662,680 | | |
| (2,662,680 | ) | |
| | | |
| | | |
| | | |
| — | |
Non
controlling interest contribution | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 62,957 | | |
| 62,957 | |
Net
income | |
| | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| | | |
| 2,485,738 | | |
| | | |
| 2,485,738 | |
Foreign
currency translation adjustments | |
| | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| 30,235 | | |
| | | |
| | | |
| 30,235 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
at December 31, 2012 | |
| 1,000,000 | | |
$ | 1,000 | | |
| 25,075,000 | | |
$ | 25,075 | | |
$ | 3,169,690 | | |
$ | (2,662,680 | ) | |
$ | 28,753 | | |
$ | 2,385,376 | | |
$ | 48,918 | | |
$ | 2,996,132 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shares
issued for consulting service | |
| | | |
| | | |
| 220,000 | | |
| 220 | | |
| 49,780 | | |
| | | |
| | | |
| | | |
| | | |
| 50,000 | |
Cancellation
of warrants | |
| | | |
| | | |
| | | |
| | | |
| (2,662,680 | ) | |
| 2,662,680 | | |
| | | |
| | | |
| | | |
| — | |
Net
income | |
| | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| | | |
| 4,976,390 | | |
| | | |
| 4,976,390 | |
Foreign
currency translation adjustments | |
| | | |
| | | |
| — | | |
| | | |
| | | |
| | | |
| 124,568 | | |
| | | |
| 2,542 | | |
| 127,110 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
at December 31, 2013 | |
| 1,000,000 | | |
$ | 1,000 | | |
$ | 25,295,000 | | |
$ | 25,295 | | |
$ | 556,790 | | |
$ | — | | |
$ | 153,321 | | |
$ | 7,361,766 | | |
$ | 51,460 | | |
$ | 8,149,632 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
The
accompanying notes are an integral part of these consolidated financial statements |
1. 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”.
2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“US GAAP”).
The accompanying
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries CAM Group, CAM HK and
CAM Hebei All inter-company balances and transactions have been eliminated in consolidation
Use
of Estimates
The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and revenue and expenses in the financial statements and accompanying notes. Actual results
could differ from such estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Accounts
Receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due
accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements,
aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. As of December
31, 2013, the Company had balance in accounts receivable of $1,675,831, approximate 37% of our accounts receivable were aged
between 0-90 days, and approximately 63% of our accounts receivable were aged between 91-180 days. We did not made any provision
for bad debts because the credit period of 91-180 days is a normal industry practice of operation and we have conducted a credit
assessment on all creditors before granting credit to customers. In addition, we are constantly monitoring credit risk. We used
historical data as well as a subsequent period review of collections to determine no bad debt allowance was required as of December
31, 2013.
The creditors are
not related parties.
Fixed
Assets
Fixed
assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after
taking into account their estimated residual values:
|
Depreciable
life |
|
Residual
value |
Machinery
and Equipment |
5
years |
|
|
0 |
% |
Furniture and fixture |
7
years |
|
|
0 |
% |
Computer and software |
3
years |
|
|
0 |
% |
Expenditures
for maintenance and repairs are expensed as incurred.
Revenue
Recognition
In accordance
with ASC 605-10-S99-1 for revenue recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists,
transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is
reasonably assured. Currently, our revenues are all generated from a related party.
(a)
Advertising revenues
The Company
set up its own media network by installing LCD displays in retail stores managed by a related party and provides air time for
the clients’ advertisement through the network. Revenue is recognized when the air time is used by the clients.
After
completing the installation of the LCD displays in 2012, the Company has entered an advertising services contract with this related
party, pursuant to which the related party agrees 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 year of 2013, the Company generated all its advertising
revenues from the related party in amount of $6,641,060.
(b)
Services revenues
Service
revenue is primarily derived from acting as an agent in fertilizer trading. The Company serves primarily as a trading agent for
this related party during the transactions. These services are generally billed on a time-cost plus basis. Revenue is recognized
when services are rendered, products have been delivered, payments have been received, and risk of ownership has been transferred
and accepted by the customers.
Cost
of Revenues
Cost
of revenues consists primarily of the cost related to LCD display, direct labor, depreciation and overhead, which are directly
attributable to revenue generation and the provision of services. The depreciation expenses in connection with equipments for
advertising and broadcasting are included in cost of revenues.
Advertising
costs are expensed as incurred. The Company had $69,236 and $107,516 advertising costs for the years ended December 31, 2013 and
2012, respectively.
Shipping
and Handling Costs
All shipping
and handling costs are included in cost of sales. The Company had no freight out expense during the period presented.
Income
Taxes
Income
taxes are determined in accordance with Accounting Standards Codification Topic 740, “Income Taxes” (“ASC
740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740
prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized
in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.
Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant
facts. Income tax periods 2011, 2012 and 2013 are open for tax examination by taxing authority.
The Company
conducts major businesses in the PRC and Hong Kong and is subject to tax liabilities in these two jurisdictions. As a result of
its business activities, the Company files tax returns that are subject to examination by the foreign tax authorities. As of December
31, 2013, the Company had no outstanding tax due with its tax authority in the PRC, and provisions for profit taxes due with its
tax authority in Hong Kong were accrued.
Comprehensive
Income (Loss)
FASB
ASC 220, “Reporting Comprehensive Income”, establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during the year
from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying consolidated balance sheets consists
of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation
of income tax expense or benefit.
Non-Controlling
Interests
Non-Controlling
interest represents the 2% equity interest of CAM Hebei held by Hebei Agricultural Means of Production Co. Ltd (“Hebei AMP”),
through its wholly-owned subsidiary, as of December 31, 2013.
The Parties
shall share the profits, losses and risks of the Company in proportion to and, in the event of losses, to the extent of their
respective contributions and contractual commitments to the registered capital of the Company.
The rights
of Non-Controlling Interest Shareholder: (a) Intellectual property contributed by non-controlling interest shareholder, if any,
remains the sole and exclusive property of non-controlling interest shareholder; (b) The Board of Directors shall be composed
of five Directors, of whom two shall be appointed by non-controlling interest shareholder.
Foreign
Currency Translation
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates
prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional
currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting
exchange differences are recorded in the statement of comprehensive income.
The reporting
currency of the Company is the United States Dollars ("US$"). The Company's subsidiaries in the PRC maintain its books
and records in its local currency, Renminbi Yuan ("RMB"), which is functional currency as being the primary currency
of the economic environment in which the entity operates.
In general,
for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into
US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on
the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated
other comprehensive income.
Translation
of amounts from RMB into US$1 has been made at the following exchange rates for the respective periods:
| |
| 2013 | | |
| 2012 | |
Balance sheet items, except for the registered and paid-up capital as of December 31, 2013 and 2012 | |
| USD 1:RMB 6.1104 | | |
| USD 1:RMB 6.2313 | |
Amounts included in the statement of operations, statement of changes in stockholders’ equity and statement of cash flows for the years ended December 31, 2013 and 2012 | |
| USD 1:RMB 6.1905 | | |
| USD 1:RMB 6.3105 | |
| |
| | | |
| | |
Basic
and Diluted Earnings per Share
The Company
calculates earnings per share in accordance with FASB ASC 260 “Earnings per Share”. Basic earnings
per share are calculated by dividing the Company’s net income or loss applicable to common shareholders by the weighted
average number of common shares during the period. If applicable, diluted earnings per share are computed by dividing the net
income for the period by the weighted average number of common and common equivalent shares outstanding, using the treasury stock
method for warrants and options and the if-converted method for convertible instruments when the conversion is not dependent on
a substantive non-market based contingency during the period. Accordingly, this presentation has been adopted for the periods
presented.
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence. A material
related party transaction has been identified in Note 6 in the financial statements.
Subsequent
Events
The Company
evaluated for subsequent events through the issuance date of the Company’s financial statements.
Recently
Issued Accounting Standards
The Company
has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2014-05, 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.
3. CASH
AND CASH EQUIVALENTS
As of
December 31, 2013, the cash balance was $5,600,286, of which $5,264,569 was held in major financial institutions located in Hong
Kong, and $325,829 was held in major financial institutions located in the PRC and $9,888 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.
4. ADVANCED
TO suppliers
As of
December 31, 2013 and 2012, the Company had advanced to suppliers in the amount of $3,225,615 and $2,803,593, 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 |
|
|
Advanced
to Suppliers |
|
|
|
|
Supplier
A |
|
|
$ |
1,497,447 |
|
|
|
46.4 |
% |
Supplier B |
|
|
|
1,728,168 |
|
|
|
53.6 |
% |
|
Total |
|
$ |
3,225,615 |
|
|
|
100.0 |
% |
5. PROPERTY, PLANT AND
EQUIPMENT
Property, plant and equipment
are comprised of the following amounts at the respective dates:
|
|
As
of |
|
|
December
31, 2013 |
|
December
31, 2012 |
Cost: |
|
|
|
|
Computer
equipment and software |
|
$ |
13,083 |
|
|
$ |
5,334 |
|
Advertising equipment |
|
|
167,429 |
|
|
|
161,321 |
|
Construction in progress |
|
|
544 |
|
|
|
- |
|
Total |
|
|
181,056 |
|
|
|
166,655 |
|
Accumulated depreciation |
|
|
(45,334 |
) |
|
|
(9,729 |
) |
Net |
|
$ |
135,722 |
|
|
$ |
156,926 |
|
|
|
|
|
|
|
|
|
|
During
the years ended December 31, 2013 and 2012, the Company had depreciation expenses of $34,953 and $9,607, respectively, included
in cost of revenues.
6. RELATED
PARTY BALANCES AND TRANSACTIONS WITH MAJOR SHAREHOLDERS
Due to
related parties as of December 31, 2013 and 2012 consisted of following:
|
|
As
of |
|
|
December
31, 2013 |
|
December
31, 2012 |
|
|
|
|
|
|
|
|
|
Hebei AMP (a) |
|
$ |
58,838 |
|
|
$ |
57,696 |
|
|
|
|
|
|
|
|
|
|
PMI (b) |
|
|
579,253 |
|
|
|
592,350 |
|
Shareholder (c) |
|
|
119,465 |
|
|
|
117,147 |
|
Total |
|
$ |
757,556 |
|
|
$ |
767,193 |
|
(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
December 31, 2013 and 2012, the balance due to Hebei AMP was $58,838 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. The Company repaid the loans payable to PMI in amount of $24,495 in 2013. As
of December 31, 2013, the outstanding balance due to PMI was $579,253.
In addition,
the Company had outstanding balances of $119,465 due to the Company’s former President as of December 31, 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. The contract was renewed on May 30,
2013 for seven months from June 1, 2013 to December 31, 2013. During the years ended December 31, 2013 and 2012, the Company
generated all its advertising revenues from Hebei AMP in amount of $6,641,060 and $3,963,860, respectively.
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 years ended December 31, 2013
and 2012, the Company generated revenues of $19,060 and $14,896, respectively, from trading agent business.
7. 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.
The services agreement was consummated during the year of 2013. Accordingly, the stock based compensation of $50,000 was included
in the consolidated statements of operations for the year ended December 31, 2013.
8. 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 December 31, 2013.
As of
December 31, 2013, the U.S. operation had net operating losses of $298,672 available for federal tax purposes, which are available
to offset future taxable income. The net operating loss carry forwards begin to expire in 2033. 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 years ended December 31, 2013 and 2012 are as follows:
|
For
the year ended
December
31, 2013 |
|
For
the year ended
December
31, 2012 |
|
|
|
|
|
Current taxes |
$ |
919,502 |
|
$ |
699,563 |
|
Deferred taxes |
|
0 |
|
|
0 |
|
|
$ |
919,502 |
|
$ |
699,563 |
|
9. 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 December 31, 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 years ended December 31, 2013 and 2012, respectively:
|
|
For
the years ended |
|
|
12/31/2013 |
|
12/31/2012 |
|
Net
Income |
|
|
$ |
4,976,390 |
|
|
$ |
2,485,738 |
|
|
Net Income per
Share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
0.20 |
|
|
|
0.10 |
|
|
Diluted |
|
|
|
0.04 |
|
|
|
0.02 |
|
|
Weighted Average
Number of Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
25,210,616 |
|
|
|
24,304,726 |
|
|
Diluted |
|
|
|
125,210,616 |
|
|
|
124,304,726 |
|
10. Warrants
The following
tables summarize all warrant outstanding as of December 31, 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 December 31, 2013 |
|
|
0 |
|
|
|
0 |
|
Warrants
Exercisable at December 31, 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.
11. CONCENTRATION
AND RISK
For the
years ended December 31, 2013 and 2012, 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 6(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 years ended December 31, 2013 and 2012, rental expense was approximately $9,600 and $4,800, respectively.
13. SEGMENTS
The
Company determined that it did not operate in any material, separately reportable operating segments as of December 31, 2013.
14. SUBSEQUENT EVENTS
In accordance
with ASC Topic 855-10, the Company has analyzed its operations subsequent to December 31, 2013 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.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On January
23, 2014, CAM Group, Inc. dismissed Anderson Bradshaw PLLC as its independent registered public accounting firm and engaged Dominic
K.F. Chan & Co. as our independent registered public accounting firm. Anderson Bradshaw PLLC had served as our independent
auditor since April 12, 2012 and audited our consolidated financial statements for the year ended December 31, 2012. The dismissal
of Anderson Bradshaw PLLC was approved by our Board of Directors. Anderson Bradshaw PLLC did not resign or decline to stand for
re-election.
The report
of Anderson Bradshaw PLLC dated April 15, 2013 on consolidated balance sheet as of December 31, 2012, and the related consolidated
statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for the year then ended
did not contain an adverse opinion or a disclaimer of opinion, nor was such report qualified or modified as to uncertainty, audit
scope, or accounting principles.
During
our two most recent fiscal years and the subsequent interim period preceding our decision to dismiss Anderson Bradshaw PLLC we
had no disagreements with the firm on any matter of accounting principles or practices, financial statement disclosure, or auditing
scope of procedure which disagreement if not resolved to the satisfaction of Anderson Bradshaw PLLC would have caused it to make
reference to the subject matter of the disagreement in connection with its report.
During
our two most recent fiscal years and the subsequent interim period prior to retaining Dominic K.F. Chan & Co. (1) neither
we nor anyone on our behalf consulted Dominic K.F. Chan & Co. regarding (a) either the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial
statements or (b) any matter that was the subject of a disagreement or a reportable event as set forth in Item 304(a)(1)(iv) and
(v), respectively, of Regulation S-K, and (2) Dominic K.F. Chan & Co. did not provide us with a written report or oral advice
that they concluded was an important factor considered by us in reaching a decision as to accounting, auditing or financial reporting
issue.
Item
9A. Controls and Procedures
Evaluation of Disclosure
Controls and Procedures
As
of December 31, 2013, we carried out an evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange
Act of 1934, as amended (Exchange Act”). Accordingly, based upon that evaluation, the Chief Executive Officer and Principal
Financial and Accounting Officer have concluded that our disclosure controls and procedures were not effective to ensure that
information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified by the Securities and Exchange Commission’s rules and regulations. Based on
the management's assessment and review of our financial statements and results for the year ended December 31, 2013, we have not
established effective internal controls.
Management’s
Report on Internal Control over Financial Reporting
Management,
under the supervision of our Chief Executive Officer and Principal Financial and Accounting Officer, is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting (as defined in Rules
13a-15(f) and 15d(f) under the Exchange Act) is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles in the United States, or GAAP. Internal control over financial reporting includes those policies and procedures that
(a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of assets, (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP, (c) provide reasonable assurance that receipts and expenditures are being made only in accordance with
appropriate authorization of management and the board of directors, and (d) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial
statements. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim
financial statements will not be prevented or detected on a timely basis by our internal controls. A “significant deficiency”
is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material
weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.
A “deficiency” in internal control over financial reporting exists when the design or operation of a control does
not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements
on a timely basis.
During
our review of our financial statements and results for the year ended December 31, 2013, our management, under the supervision
and with the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, assessed the effectiveness
of our internal control over financial reporting. Based on the evaluation of our internal control over financial reporting, we
determined that we had significant deficiencies which could adversely affect our ability to initiate, authorize, record, process
or report financial data in accordance with US GAAP. While the areas we identified are sources of potential risk, we do not believe
that these potential risks have affected our financial statements or that there are any errors in our previously reported financial
statements that would require restatement. The significant deficiencies we found related to a lack of sufficient qualified accounting
and financing personnel with an appropriate level of US GAAP knowledge and experience appropriate to its financial reporting requirements.
Based on our evaluation and because of the significant deficiencies we identified, our management concluded that our internal
control over financial reporting was not effective as of December 31, 2013.
This
Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control
over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting
firm pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act that permit us, as a smaller reporting company, to
provide only management’s report in this Annual Report.
Remediation Plan
We
are devoting significant resources to remediating, improving and documenting our disclosure controls and procedures and internal
controls and procedures, and implementing additional financial and management controls, reporting systems and procedures. These
measures may not ensure the adequacy of our internal controls over our financial processes and reporting in the future.
Subject
to the availability of capital, we are seeking to remediate our deficiencies. Until we are able to employ an employee, on a full
time basis, with the requisite background and experience, we will engage experienced consultants on a part time basis to help
remediate the deficiencies.
Changes in Internal
Controls
There
were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph
(d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last quarter of fiscal 2013 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
PART III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Our Directors and
Executive Officers
A
list of officers and directors of CAM Group, Inc. appears below. The directors of the Company are elected annually by the shareholders.
The officers serve at the request of the Board of Directors. The Board of Directors may authorize and establish reasonable compensation
of the Directors for services to the Company as Directors, including, but not limited to attendance at any annual or special meeting
of the Board. There are no employment contracts to compensate the officers and directors.
The
following table sets forth certain information concerning our directors and executive officers:
Name |
|
Age |
|
Position |
Kit Ka |
|
61 |
|
Chief Executive
Officer, Principal Financial and Accounting Officer |
Yichuan Wang |
|
52 |
|
Director |
Enrique Marchese |
|
46 |
|
Independent Director |
Yanhui Zhang |
|
60 |
|
Independent Director |
Yongli Xia |
|
50 |
|
Independent Director |
Renchang Ma |
|
41 |
|
Director |
Zhaohui Ma |
|
41 |
|
Director |
The
following is a summary of the biographical information of our current directors and executive officers:
Kit
Ka – President, Chief Executive Officer and Principal Financial and Accounting Officer
Ms.
Kit Ka, age 6 1, has served as our Chief Executive Officer since September 24, 2012, served as our president since
July 29, 2013 and served as our Principal Financial and Accounting Officer since November 15, 2013. Ms. Kit Ka also is a founder
and director of Sharp Wind Development Limited (May 1995 to present), Southcom Internet Technology Limited and Southcom Limited,
both of which are referred to as “Southcom” (from July 2000 to present), which are principally engaged in the telecommunication
service industry. Apart from her experience in telecommunication service industry, Ms. Ka has also developed various businesses
in China involving property development and coal mining. Ms. Ka received her bachelor’s degree in English Language and Literature
at the Guangzhou University of Foreign Languages. We have selected Ms. Kit Ka as CEO based on her prior business experience.
Yichuan
Wang – Director
Mr.
Wang has been a director of the Company since April 2012 and served as the CEO of the Company until September 2012, upon the appointment
of Ms. Kit Ka. He was a member of the PRC military from 1978 to 1993 where he developed significant leadership skills and logistics
experience. In 1996 he successfully founded a conference tourism and Inspection Company called Tianpeng Holiday B&T Development
Co., Ltd., in Beijing, PRC, with which he was associated since June 1997. Mr. Wang has more than 15 years’ experience travelling
to various countries for governmental purposes and meeting with government officials. He has a developed business acumen and a
proven track record of entrepreneurship and success. Mr. Wang was selected as a director and as the initial CEO based on his experience
in working with the local government in China.
Enrique
Marchese – Independent Director
Mr.
Enrique Marchese has served as a director during the period from August 13, 2012 through March 31, 2014. Mr. Marchese resigned
from his directorship due to the expiration of the employment agreement. Mr. Marchese has been running his own corporate and investment
advisory firm since 2009. He is an experienced investment banker having completed a broad range of public and private financing
and M&A advisory assignments across the globe. His industry experience covers chemicals, transportation, manufacturing, retailing,
consumer products and consumer internet. Mr. Marchese began his investment banking career at Donaldson, Lufkin & Jenrette
in 1996 and subsequently held positions at Merrill Lynch and Deutsche Bank. Enrique also gained experience in global logistics
and supply chain management while serving in the U.S. Navy. Mr. Marchese was chosen as a director because of his investment
banking and industry experience.
Mr.
Marchese graduated with an M.B.A. from the Booth School at the University of Chicago and holds a B.S. from the United States Naval
Academy.
Yanhui
Zhang – Independent Director
Mr.
Zhang has served as a director since December 30, 2012. Mr. Zhang, a member of Communist Party of China, serves as a Secretary
for the party and is a member of the CPPCC (Chinese People's Political Consultative Conference). Mr. Zhang currently sits on the
Hebei Provincial Committee and is the council Director of the Hebei Supply and Marketing Cooperative Association. As a graduate
student Mr. Zhang attended the Central Party School of the Communist Party of China where he earned a master’s degree in
law. Mr. Zhang began his career in 1971 as an Office Director for the Hebei Supply and Marketing Cooperative Association. He has
worked as a Secretary for the general office of the Provincial Party Committee, he was a Vice Director at the research office
of the Provincial Party Committee Organization Department and was a Clerk for the Ningjin County Party Committee. In 2003, Mr.
Zhang was the President of the Hebei Cotton Association, in 2006 he served as President of the Federation of Farmers’ Cooperative
Economic Organization and in 2009 he was Chairman of the Board for New Cooperation Group Holdings Limited. Mr. Zhang was chosen
as a director because of his legal and business experience.
Yongli
Xia – Independent Director
Mr.
Xia has served as a director since December 30, 2012. Mr. Xia, a member of the Communist Party of China, also serves as a Deputy
Director of the Hebei Supply and Marketing Cooperative Association. As a graduate student Mr. Xia attended the Central Party School
of the Communist Party of China where he earned a master’s degree in law. Mr. Xia specializes in enterprise economics management.
He began his career in 1982 as a Vice Section Chief of the Supply and Marketing Cooperative Non-staple Food and Salt Company (the
“NSF-Cooperative”). He was later promoted to Section Chief for the salt and tea department, and the salt industry
department within the NSF-Cooperative. Mr. Xia has worked as General Manager of the Hebei Salt Sales Corp., he has been a Secretary
of the Communist Party, a Director of Provincial Salt Management Office, and Vice Chairman and Chairman of the Board of the Hebei
New Cooperation Group Holdings Limited. While serving as a Director of the Provincial Salt Management Office, he was recognized
as an “Advanced Party Member” and “Advanced Worker” in 1997, 1999 and 2002. He was also awarded the title
of “Udarnik” by the Provincial Youth League Committee in 1998 in recognition of his high productivity and enthusiasm.
Mr. Xia was chosen as a director because of his business experience.
Renchang
Ma - Director
Mr.
Renchang Ma, 41, has been employed by Hebei Supply and Marketing Cooperative Association since 1994, serving as general manager
assistant since March 2011. Prior to being named to this position, he also served as manager of the fertilizer trading company,
deputy manager of the fertilizer trading company and an accountant in the finance department. Mr. Ma, a statistics major, graduated
from the Hebei Supply and Marketing School in June 1994. Mr. Renchang Ma was selected to serve on the Board of Directors because
of his extensive marketing experience.
Zhaohui
Ma - Director
Mr.
Zhaohui Ma, 41, has been employed by Hebei Supply and Marketing Cooperative Association since 1992, serving as human resource
manager since January 2009. Prior to being named to this position, he has also served in a variety of positions including as office
director in the general manger office, deputy office director in general manager office, manager in trading company, deputy manager
of the trading company and an accountant in the finance department. Mr. Ma, a statistics major, graduated from the Hebei Supply
and Marketing School. Mr. Zhaohui Ma was selected to serve on the Board of Directors because of his marketing and management experience.
Except
as otherwise reported above, none of our directors hold directorships in other reporting companies.
There
are no family relationships among our directors or executive officers.
To
our knowledge we are not quoted on an inter-dealer quotation system which has any requirements that a majority of the board of
directors be independent.
To
our knowledge, during the last ten years, none of our directors and executive officers (including those of our subsidiaries) has:
|
• |
Had a bankruptcy
petition filed by or against any business of which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time. |
|
• |
Been convicted in
a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. |
|
• |
Been subject to
any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or
banking activities. |
|
• |
Been found by a court of competent jurisdiction
(in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities
or commodities law, and the judgment has not been reversed, suspended or vacated. |
|
• |
Been the subject
to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization,
any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over
its members or persons associated with a member. |
Directors and Officers
of the PRC Subsidiaries
The following table
sets forth certain information as concerning executive officers of each of the PRC Subsidiaries:
Name |
|
Age |
|
Position |
Lijun Chen |
|
56 |
|
President of China
Agriculture Media (Hebei) Co. Ltd. |
Guojiang Peng |
|
47 |
|
Vice President of
China Agriculture Media (Hebei) Co. Ltd. |
Audit Committee
We do not have an audit
committee.
Audit Committee Financial
Expert
We
do not have an “audit committee financial expert” as defined by Item 401(h) in Regulation S-K as promulgated by the
Securities and Exchange Commission.
Compensation Committee
We do not have a compensation
committee.
Nominating Committee
We do not have a nominating
committee.
Board Leadership
Structure and Role in Risk Oversight
Our
board of directors has overall responsibility for risk oversight. The board’s role in the risk oversight of the Company
includes, among other things:
|
|
• Appointing, retaining and overseeing
the work of the independent auditors, including resolving disagreements between the management and the independent auditors
relating to financial reporting; |
|
|
• Approving all auditing and non-auditing
services permitted to be performed by the independent auditors; |
|
|
• Reviewing annually the independence
and quality control procedures of the independent auditors; Reviewing and approving all proposed related party transactions; |
|
|
|
|
|
• Discussing the annual audited
financial statements with the management; |
|
|
|
|
|
• Meeting separately
with the independent auditors to discuss critical accounting policies, management letters, recommendations on internal controls,
the auditor’s engagement letter and independence letter and other material written communications between the independent
auditors and the management. |
Director
Qualifications
Directors
are responsible for overseeing the Company’s business consistent with their fiduciary duty to stockholders. This significant
responsibility requires highly skilled individuals with various qualities, attributes and professional experience. The board believes
that there are general requirements for service on the Company’s board of directors that are applicable to all directors
and that there are other skills and experience that should be represented on the board as a whole but not necessarily by each
director. The board considers the qualifications of director and director candidates individually and in the broader context of
the board’s overall composition and the Company’s current and future needs.
Qualifications
for All Directors
In
its assessment of each potential candidate, including those recommended by stockholders, the board considers the nominee’s
judgment, integrity, experience, independence, understanding of the Company’s business or other related industries and such
other factors the board determines are pertinent in light of the current needs of the board. The board also takes into account
the ability of a director to devote the time and effort necessary to fulfill his or her responsibilities to the Company.
The
board requires that each director be a recognized person of high integrity with a proven record of success in his or her field.
Each director must demonstrate innovative thinking, familiarity with and respect for corporate governance requirements and practices,
an appreciation of multiple cultures and a commitment to sustainability and to dealing responsibly with social issues. In addition
to the qualifications required of all directors, the board conducts interviews of potential director candidates to assess intangible
qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially. The board
does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional
experiences in evaluating candidates for board membership. Diversity is important because a variety of points of view contribute
to a more effective decision-making process.
Code
of Ethics
We
have adopted a code of ethic (the "Code of Ethics") that applies to our principal chief executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics is
designed with the intent to deter wrongdoing, and to promote the following:
|
· |
Honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships |
|
· |
Full, fair, accurate,
timely and understandable disclosure in reports and documents that a small business issuer files with, or submits to, the
Commission and in other public communications made by the small business issuer |
|
· |
Compliance with
applicable governmental laws, rules and regulations |
|
· |
The prompt internal
reporting of violations of the code to an appropriate person or persons identified in the code |
|
· |
Accountability for
adherence to the code |
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s executive officers and directors and persons who beneficially own more
than 10% of the Company’s common stock file reports of ownership and changes in ownership with the SEC. The Company believes
that during fiscal 2013, all reports were timely filed by its executive officers and directors.
Limitations
on Liability
Under
Nevada law, a Company may indemnify its officers, directors, employees and agents under certain circumstances, including indemnification
of such persons against liability under the Securities Act of 1933, as amended. Those circumstances include that an officer, director,
employee or agent may be indemnified if the person acted in good faith and in a manner that he or she reasonably believed to be
in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful.
Indemnification
against Public Policy
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling an issuer pursuant to the foregoing provisions, the opinion of the Securities and Exchange Commission is that such
indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.
The
effect of indemnification may be to limit the rights of the Company and its stockholders (through stockholders’ derivative
suits on behalf of the Company) to recover monetary damages and expenses against a director for breach of fiduciary duty.
ITEM
11. EXECUTIVE COMPENSATION
The
following tables set forth certain summary information concerning the compensation paid or accrued for each of the Company's last
three completed fiscal years to the Company's or its principal subsidiaries' chief executive officer and each of its other executive
officers that received compensation in excess of $100,000 during such period:
Compensation
Discussion and Analysis
Name
and
Principal
Position |
|
Fiscal
Year |
|
Salary
($) |
|
|
Bonus
($) |
|
|
Stock
Awards
($) |
|
|
Option
Awards
($) |
|
|
Non-equity
Incentive Plan
Compensation
($) |
|
|
Change
in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) |
|
|
All
Other
Compensation
($) |
|
|
Total
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lijun
Chen,
Chairman |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Weiheng
Cai,
President
and Director |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Kit
Ka
CEO |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Weixuan
Luo
Former
CFO |
|
2013
2012 |
|
$
$ |
33,727
4,500 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0 |
|
|
|
$
$ |
33,727
4,500 |
|
Guojiang
Peng
Vice
President
and
Director |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Yichuan
Wang
Director |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Enrique
Marchese
Independent
Director |
|
2013
2012 |
|
$
$ |
24,405
10,715 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
$
$ |
24,405
10,715 |
|
Yanhui
Zhang
Independent
Director |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Yongli
Xia
Independent
Director |
|
2013
2012 |
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
0
0 |
|
|
|
|
0
0 |
|
Compensation
Discussion and Analysis
We
strive to provide our named executive officers (as defined in Item 402 of Regulation S-K) with a competitive base salary that
is in line with their roles and responsibilities when compared to peer companies of comparable size in similar locations.
It
is not uncommon for PRC private companies in China to have base salaries as the sole form of compensation. The base salary level
is established and reviewed based on the level of responsibilities, the experience and tenure of the individual and the current
and potential contributions of the individual. The base salary is compared to the list of similar positions within comparable
peer companies and consideration is given to the executive’s relative experience in his or her position. Base salaries are
reviewed periodically and at the time of promotion or other changes in responsibilities.
We
plan to implement a more comprehensive compensation program, which takes into account other elements of compensation, including,
without limitation, short and long term compensation, cash and non-cash, and other equity-based compensation such as stock options.
We expect that this compensation program will be comparable to the programs of our peer companies and aimed to retain and attract
talented individuals.
We
will also consider forming a compensation committee to oversee the compensation of our named executive officers. The majority
of the members of the compensation committee would be independent directors.
Employment
Agreements
Ms.
Kit Ka, Chief Executive Officer of the Company, has entered into a two year employment agreement which has been attached hereto
as Exhibit 10.13. Ms. Ka shall receive an annual salary of $1 for her services as CEO of the Company.
Compensation
of Directors
Mr.
Marchese will receive an annual salary for his service as Independent Director in the amount of $24,405 paid in equal installments
throughout the year of 2013, consistent with the normal payroll practices of the Company. Mr. Marchese has not been awarded any
equity or stock options by the Company.
Mr.
Yanhui Zhang will receive an annual salary for his service as an Independent Director in the amount of $28,915 paid in equal installments
throughout the year, consistent with the normal payroll practices of the Company. Mr. Yanhui Zhang has not been awarded any equity
or stock options by the Company.
Mr.
Yongli Xia will receive an annual salary for his service as an Independent Director in the amount of $28,915 paid in equal installments
throughout the year, consistent with the normal payroll practices of the Company. Mr. Yongli Xia has not been awarded any equity
or stock options by the Company.
Option
Grants Table
There
were no individual grants or stock compensation options granted to purchase our common stock made to the executive officer named
in the Executive Compensation Table as compensation through December 31, 2013.
Aggregated
Option Exercises and Fiscal Year-End Option Value Table
There
were no stock options exercised during the fiscal year ended December 31, 2013 by the executive officer named in the Executive
Compensation Table.
Long-Term
Incentive Plan (“LTIP”) Awards Table
There
were no awards made to a named executive officer in the last completed fiscal year under any LTIP
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS.
The classes of equity
securities of CAMG issued and outstanding are Common Stock, $0.001 par value and Series A Preferred Stock, $0.001 par value.
The table on the following
page sets forth, as of April 15, 2014, certain information with respect to the Common Stock and Series A Preferred Stock owned
by (i) each Director, nominee and executive officer of CAMG; (ii) each person who owns beneficially more than 5% of the Common
Stock; and (iii) all Directors, nominees and executive officers as a group. The percentage of shares beneficially owned is based
on their having been 1,000,000 shares of Preferred Stock, and 25,295,000 shares of Common Stock as of April 15, 2014.
Name
and Address of Beneficial Owner(1) |
Amount
and Nature
of
Beneficial Ownership |
Percentage
of
Common Stock(2)(3) |
Percentage
of
Preferred Stock(4) |
Guojiang
Peng (5)
Vice
President and Director
House Unit 3, Rm 502,
Bldg #2, Cunnan St #2, Qiaodong District, Shijiazhuang City, Hebei Province P. R.
China |
380,000
Preferred Shares
8,550,000
Common Shares |
37.15% |
38% |
Siuping
Ka (6)
Unit
2004-2005, Kwan Chart Tower,
6
Tonnochy Road, Wanchai, Hong Kong |
210,000
Preferred Shares
4,725,000
Common Shares |
20.53% |
21% |
Precursor Management,
Inc.
Weiheng Cai
P.O. Box 957
Offshore Incorporations
Centre, Road Town
Tortola, British Virgin
Islands |
142,500
Preferred Shares
2,181,250
Common Shares |
13.11% |
14% |
Yichuan Wang
Director
Chief Executive Officer
and Director
Rm 601, Bldg #4, 20
Capital Stadium South
Rd, Haidian District,
Beijing, P. R. China |
100,000
Preferred Shares
2,250,000
Common Shares |
9.78% |
10% |
|
|
|
|
Kit
Ka
President,
Chief Executive Officer, Principal Financial and Accounting Officer |
- |
- |
- |
Enrique
Marchese
Independent
Director |
- |
- |
- |
Yanhui
Zhang
Independent
Director |
- |
- |
- |
Yongli
Xia
Independent
Director |
- |
- |
- |
Renchang
Ma
Director |
- |
- |
- |
Zhaohui
Ma
Director |
- |
- |
- |
Directors
and Officers as a Group (5 persons) |
100,000
Preferred Shares
2,250,000
Common Shares |
9.78% |
10% |
(1) Unless stated otherwise,
the business address for each person named is c/o CAM Group Inc.
(2) Calculated
pursuant to Rule 13d-3(d) (1) of the Securities Exchange Act of 1934. Under Rule 13d-3(d), shares not outstanding which are subject
to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating
the number and percentage owned by a person, but not deemed outstanding for the purpose of calculating the percentage owned by
each other person listed. We believe that each individual or entity named has sole investment and voting power with respect to
the shares of preferred stock and common stock indicated as beneficially owned by them (subject to community property laws where
applicable) and except where otherwise noted.
(3) Based
on approximately 125,295,000 fully diluted shares outstanding on April 15, 2014 computed from the Company’s recent filings.
(4)
Based on 1,000,000 shares of Preferred Stock outstanding on April 15, 2014 disclosed from the Company’s recent filings.
(5) Guojiang
Peng is a trustee holding the shares for Hebei AMP.
(6) Siuping
Ka is brother of Kit Ka, Chief Executive Officer of the Company.
Changes in Control
None.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Except
for the ownership of our securities, and except as set forth below, none of the directors, executive officers, holders of more
than five percent of the Company’s outstanding common stock, or any member of the immediate family of any such person have,
to the knowledge of the Company, had a material interest, direct or indirect, in any transaction or proposed transaction which
may materially affect the Company.
Advertising
Revenues
After
completing the installation of the LCD displays in 2012, CAMG has entered an advertising services contract with Hebei AMP, pursuant
to which Hebei AMP agrees 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 year of 2013, CAMG generated all its advertising revenues from Hebei AMP
in amount of $6,641,060.
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.
Peng Guo Jiang holds approximate 37% of CAMG common stock and 38% of CAM preferred stocks as a trustee holding the shares for
Heibi AMP.
Fertilizer
Agreements
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 years ended December 31, 2013
and 2012, the Company generated revenues of $19,060 and $14,896, respectively, from trading agent business.
Independence
of Management
Except
as set forth above, there were no material transactions, or series of similar transactions, since the beginning of the Company's
last fiscal year, or any currently proposed transactions, or series of similar transactions, to which the Company was or is to
be a party, in which the amount involved exceeds $60,000 and in which any director or executive officer, or any security holder
who is known to the Company to own of record or beneficially more than 5% of any class of the Company's common stock, or any member
of the immediate family of any of the foregoing persons, has an interest.
Transactions
with Promoters
There
have been no transactions between the Company and promoters during the last fiscal year.
Except
as disclosed above, no executive officer, director or any member of these individuals’ immediate families, any corporation
or organization with whom any of these individuals is an affiliate or any trust or estate in which any of these individuals serve
as a trustee or in a similar capacity or has a substantial beneficial interest in is or has been indebted to the Company at any
time since the beginning of the Company’s last fiscal year.
Warrants
sold to Board Member for Cash
During
the third quarter of 2012, the Company issued 97,000 one-year warrants at a price of $1.20 per warrant to Mr. Lijun Chen, Chairman
of the Board for total proceeds of $116,400, which was collected through a third party escrow account. The Company is not the
beneficiary of the escrow account. During April 2013, our board of directors has advised our attorney to amend the investors’
warrants to be refunded in the event that the warrants are not exercised on or before expiration. Accordingly, the transaction
was independently negotiated between the Company and the investors. 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.
Procedures
for Approval of Related Party Transactions
Our
board of directors is charged with reviewing and approving all potential related party transactions. All such related party transactions
must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval,
of such transactions, but instead review them on a case-by-case basis.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Fees
Billed For Audit and Non-Audit Services
The
following table represents the aggregate fees billed for professional audit services rendered during the year of 2013 and 2012
to the independent auditor, Anderson Bradshaw PLLC (“AB”). Audit fees and other fees of auditors are listed as follows:
| |
2013 | |
2012 |
Audit fees | |
$ | 73,977 | | |
$ | 18,500 | |
Audit-related fees | |
| 0 | | |
| 0 | |
Tax fees | |
| 0 | | |
| 0 | |
All other fees | |
| 0 | | |
| 0 | |
Total | |
$ | 73,977 | | |
$ | 18,500 | |
Audit
fees. Consists of fees for professional services for the audit of our annual financial statements, and for the review of the
interim financial statements included in quarterly reports and for services normally provided in connection with statutory and
regulatory filings or engagements.
Audit-related
fees. Consists of fees for the assurance and related services reasonably related to the performance of the audit or the review
of our financial statements and are not reported under “Audit fee”. These services include consultations concerning
transactions and consultations concerning financial accounting and reporting standards.
Tax
fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include
assistance regarding federal, state and international tax compliance, assistance with tax reporting requirements and audit compliance.
All
other fees. Consists of fees for professional services other than the services reported above, including permissible business
process advisory and consulting services, and the translation of filings.
Pre-Approval
Policy for Audit and Non-Audit Services
We do not
have a standing audit committee, and the full Board performs all functions of an audit committee, including the pre-approval of
all audit and non-audit services before we engage an accountant. All of the services rendered to us by Dominic K.F. Chan &
Co were pre-approved by our Board of Directors.
We
are presently working with our legal counsel to establish formal pre-approval policies and procedures for future engagements of
our accountants. The new policies and procedures will be detailed as to the particular service, will require that the Board or
an audit committee thereof be informed of each service, and will prohibit the delegation of pre-approval responsibilities to management.
It is currently anticipated that our new policy will provide (i) for an annual pre-approval, by the Board or audit committee,
of all audit, audit-related and non-audit services proposed to be rendered by the independent auditor for the fiscal year, as
specifically described in the auditor's engagement letter, and (ii) that additional engagements of the auditor, which were not
approved in the annual pre-approval process, and engagements that are anticipated to exceed previously approved thresholds, will
be presented on a case-by-case basis, by the President or Controller, for pre-approval by the Board or audit committee, before
management engages the auditors for any such purposes. The new policy and procedures may authorize the Board or audit committee
to delegate, to one or more of its members, the authority to pre-approve certain permitted services, provided that the
estimated fee for any such service does not exceed a specified dollar amount (to be determined). All pre-approvals shall be contingent
on a finding, by the Board, audit committee, or delegate, as the case may be, that the provision of the proposed services is compatible
with the maintenance of the auditor's independence in the conduct of its auditing functions. In no event shall any non-audit related
service be approved that would result in the independent auditor no longer being considered independent under the applicable rules
and regulations of the Securities and Exchange Commission.
(a)
On December 31, 2013, our Chief Executive Officer and Principal Financial and Accounting Officer made an evaluation of our disclosure
controls and procedures. In our opinion, the disclosure controls and procedures are adequate because the systems of controls and
procedures are designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded;
and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly
the financial condition, results of operations and cash flows for the respective periods being presented. Moreover, the evaluation
did not reveal any significant deficiencies or material weaknesses in our disclosure controls and procedures.
(b)
There have been no significant changes in our internal controls or in other factors that could significantly affect these controls
since the last evaluation.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Documents filed as part of this report
(1)
All financial statements
Report
of Anderson Bradshaw PLLC Registered Public Accounting Firm
Report
of Dominic K.F. Chan & Co
Balance
Sheets as of December 31, 2013 and 2012
Statements
of Operations for the years ended December 31, 2013 and 2012
Statements
of Stockholders’ Equity - for the years ended December 31, 2013 and 2012
Statements
of Cash Flows - for the years ended December 31, 2013 and 2012
Notes
to Financial Statements
All financial
statements are included in Part II, Item 8.
(2)
Financial Statement Schedules
All
financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts
sufficient to require submission of the schedule, or because the information required is included in the consolidated financial
statements and notes thereto included in this Form 10-K.
(3)
Exhibits required by Item 601 of Regulation S-K
The
information required by this Section (a)(3) of Item 15 is set forth on the exhibit index that follows the Signatures page of this
Form 10-K.
(b)
Reports on Form 8-K
1. |
On January 15, 2013,
we filed a current report on Form 8-K to announce the Fertilizer Agreements entered between the Company and Hebei Agriculture
Means of Production Co. Ltd. (“Hebei AMP”), a related party, for the purchase and sale of fertilizer in Hebei
Province China. |
2. |
On January 31, 2013,
we filed a current report on Form 8-K to announce the appointment of independent directors. |
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
|
|
CAM Group
Inc. |
|
|
Date:
October 20, 2014 |
|
/s/
Kit Ka |
|
|
Kit Ka |
|
|
Principal
Executive
Officer, Principal Financial Officer,
and Principal Accounting
Officer |
|
|
|
|
|
|
|
|
In
accordance with the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures |
|
Title |
|
|
Date |
|
|
|
|
|
|
|
|
/s/ Yichuan
Wang
Yichuan Wang |
|
Director |
|
|
October 20, 2014 |
|
|
|
|
|
|
|
|
/s/ Yanhui
Zhang
Yanhui Zhang |
|
Independent Director |
|
|
October 20, 2014 |
|
|
|
|
|
|
|
|
/s/ Yongli
Xia
Yongli Xia |
|
Independent Director |
|
|
October 20, 2014 |
|
|
|
|
|
|
|
|
/s/ Renchang
Ma
Renchang Ma |
|
Director |
|
|
October 20, 2014 |
|
|
|
|
|
|
|
|
/s/
Zhaohui Ma
Zhaohui Ma |
|
Director |
|
|
October 20, 2014 |
|
|
|
|
|
|
|
|
EXHIBIT
INDEX
|
3.1 |
Articles of Incorporation
of CAM Group, Inc. (f/k/a RT Technologies, Inc.) (1) |
|
3.2 |
Bylaws of CAM Group,
Inc. (f/k/a RT Technologies, Inc.) (1) |
|
3.3 |
Certificate of Designation
(1) |
|
10.1 |
Plan of Exchange
between China Agriculture Media Group Co., Ltd. and CAM Group, Inc. (f/k/a RT Technologies, Inc.) (1) |
|
10.2 |
Form of Chinese
Entrustment Agreement for Nominee Interest in CAMG (1) |
|
10.3 |
Joint Venture Agreement
(1) |
|
10.4 |
Executed Entrustment
Agreements (2) |
|
10.5 |
The board resolution
and shareholder consent of increase of registered capital of CAM Hebei (2) |
|
10.6 |
Written agreement
for work force sharing (2) |
|
10.7 |
Commitment letter
(2) |
|
10.10 |
Translated copy
of Executed Entrustment Agreements (3) |
|
10.11 |
Translated copy
of Written agreement for work force sharing (3) |
|
10.12 |
Offer letter with
Mr. Enrique Marchese, Director (4) |
|
10.13 |
Employment Agreement
with Chief Executive Officer (5) |
|
10.14 |
Employment Agreement
with Chief Financial Officer (6) |
|
10.15 |
Offer letter with
Mr. Yanhui Zhang, Independent Director (7) |
|
10.16 |
Offer letter with
Mr. Yongli Xia, Independent Director (7) |
|
14.1 |
Code of Ethics |
|
23.1 |
Consent of Anderson
Bradshaw LLP |
|
31.1 |
Rule 13a-14(a)/15d-14(a)
Certifications of Chief Executive Officer |
|
31.2 |
Rule 13a-14(a)/15d-14(a)
Certifications of Principal Financial and Accounting Officer |
|
32.1 |
Section 1350 Certifications
of Chief Executive Officer and Principal Financial and Accounting Officer |
|
101 |
The following materials
from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in Extensible Business
Reporting Language (XBRL). |
|
|
|
(1)
Filed with the Form 8K filed on April 24, 2012
(2)
Filed with the Form 8K/A filed on September 25, 2012
(3)
Filed with the Form 8K/A filed on December 3, 2012
(4)
Filed with the Form 8K filed on August 14, 2012
(5)
Filed with the Form 8K filed on November 9, 2012
(6)
Filed with the Form 8K filed on November 16, 2012
(7)
Filed with the Form 8K filed on January 31, 2013
EXHIBIT 31.1
I,
Kit Ka, certify that:
|
1. |
I have reviewed
this amendment to Annual Report of CAM Group, Inc. on Form 10-K/A for the year ended December 31, 2013; |
|
2. |
Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
The registrant's
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this
report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's
other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions): |
|
a. |
All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting. |
Date: October 20, 2014
/s/
Kit Ka
Kit Ka
Principal Executive
Officer
EXHIBIT 31.2
I,
Kit Ka, certify that:
|
1. |
I have reviewed
this amendment to Annual Report of CAM Group, Inc. on Form 10-K/A for the year ended December 31, 2013; |
|
2. |
Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
The registrant's
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this
report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's
other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions): |
|
a. |
All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting. |
Date: October 20, 2014
/s/
Kit Ka
Kit Ka
Principal
Financial Officer and Principal
Accounting Officer
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the amendment to Annual Report of CAM Group, Inc. (the "Company") on Form 10-K/A for the
year ended December 31, 2013 as filed with the Securities and Exchange Commission (the "Report"), the undersigned, in
the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
|
1. |
The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2. |
The information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Kit Ka
Kit Ka
Principal
Executive
Officer, Principal Financial Officer
and Principal Accounting
Officer
Date: October 20, 2014
A signed
original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting
the signature that appears in typed form within the electronic version of this written statement has been provided to the Company
and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Grafico Azioni CAM (PK) (USOTC:CAMG)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni CAM (PK) (USOTC:CAMG)
Storico
Da Set 2023 a Set 2024