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EX-31.1 - CAM Group, Inc.ex31_1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

FORM 10-Q

 

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the Quarterly Period Ended March 31, 2014


 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

       For the Transition Period From ____to _____

 

Commission File Number: 001-33907

 

CAM GROUP, INC.

(Exact name of registrant as specified in its charter) 

 

Nevada 57-1021913
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)  

 

151 Shengli Avenue North, Jixing Building, Shijiazhuang, Hebei Province, P.R.China

(Address of principal executive offices)

 

(86) 311-86964264

  (Registrant's telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

Yes [x]   No [  ]

 

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.

 

Large Accelerated filer ¨ Accelerated filer ¨

Non-accelerated filer ¨  Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ]     No [x]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

 

Number of shares of common stock, par value $.001, outstanding as of May 20, 2014: 25,295,000

  

(1)

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

 

The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Consolidated Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements.

  

(2)

TABLE OF CONTENTS        
PART I. FINANCIAL INFORMATION        
         
ITEM 1. FINANCIAL STATEMENTS      
         
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     11   
         
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     12   
         
ITEM 4. CONTROLS AND PROCEDURES      13   
         
         
PART II. OTHER INFORMATION        
         
ITEM 1. LEGAL PROCEEDINGS     14  
         
ITEM 1A. RISK FACTORS     14  
         
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS     14  
         
ITEM 3. DEFAULTS UPON SENIOR SECURITIES     14  
         
ITEM 4. MINE SAFETY DISCLOSURE     14  
         
ITEM 5. OTHER INFORMATION     14  
         
ITEM 6. EXHIBITS     14  
         
SIGNATURES     15  
         
INDEX TO EXHIBITS     16  

 

(3)

ITEM 1. FINANCIAL STATEMENTS

 

FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2014

 

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made.  These financial statements should be read in conjunction with the accompanying notes, and with the historical financial information of the Company.

 

(4)

 

CAM Group, Inc. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2014 and December 31, 2013
       
       
    March 31, 2014    December 31, 2013 
    (Unaudited)    (Audited) 
Current Assets          
           
Cash and cash equivalent  $418,887   $5,600,286 
Accounts receivable   1,647,229    1,675,831 
Advance to suppliers   3,170,110    3,225,615 
Prepayment and deposits   2,657    2,703 
Advance to related party   5,076,426    - 
Other receivable   3,260    2,335 
Total  Current Assets   10,318,569    10,506,770 
           
Plant and Equipment, Net   127,195    135,722 
           
Total Assets  $10,445,764   $10,642,492 
           
Liabilities          
Accounts payables and accrued expenses  $95,752   $81,279 
Due to shareholders   788,415    698,718 
Due to related parties   59,805    58,838 
Income Tax Payable   1,625,795    1,654,025 
Total Liabilities   2,569,767    2,492,860 
           
           
Equity          
Preferred stock, $.001 par value, 10,000,000 shares authorized, 1,000,000 shares   1,000    1,000 
issued and outstanding as of March 31, 2014 and December 31, 2013, respectively          
Common stock, $.001 par value, 90,000,000 shares authorized, 25,295,000 shares   25,295    25,295 
issued and outstanding as of March 31, 2014 and December 31, 2013, respectively          
Additional paid-in capital   556,790    556,790 
Accumulated other comprehensive income   17,500    153,321 
Retained earnings (deficits)   7,226,724    7,361,766 
Total equity   7,827,309    8,098,172 
           
Non-controlling interest   48,688    51,460 
           
Total Liabilities and Equity  $10,445,764   $10,642,492 
           
The accompanying notes are an integral part of these consolidated financial statements

 

(5)

 

 

CAM Group, Inc. and Subsidiaries
Consolidated Statements of Operations and Consolidated Comprehensive Income
For The Three Months Ended March 31, 2014 and 2013
(Unaudited)
       
   For the three months ended
   March 31, 2014  March 31, 2013
       
Revenue - related party  $—     $1,680,318 
Cost of revenue   —      29,347 
Gross profit   —      1,650,971 
           
Operating expenses:          
Selling, General & administrative expenses   135,373    171,651 
Total operating expenses   135,373    171,651 
           
Operating income   (135,373)   171,651 
           
Other income (expenses)          
Interest income (expenses)   202    (18)
(Income) loss from currency exchange   129    (40,346)
Total other income (expenses)   331    (40,364)
           
Income before income tax   (135,042)   1,438,956 
           
Income tax expense   —      264,011 
           
Net income   (135,042)   1,174,945 
Less: Net income attributable to noncontrolling interests   —      —   
Net income attributable to CAM Group common shareholders   (135,042)   1,174,945 
           
Net income per share:          
Basic  $(0.01)  $0.05 
Diluted    N/A    $0.01 
           
Weighted average number of shares          
Basic   25,295,000    25,075,000 
Diluted   125,295,000    125,075,000 
           
Comprehensive income:          
Net income  $(135,042)  $1,174,945 
Foreign currency translation adjustment   (138,593)   7,511 
Comprehensive income:   (273,635)   1,182,456 
Comprehensive income attributable to noncontrolling interests   (2,772)   150 
Comprehensive income attributable to CAM Group  $(270,863)  $1,182,306 
           
** less than $.01          
           
The accompanying notes are an integral part of these consolidated financial statements

 

(6)

 

 

CAM Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For The Three Months Ended March 31, 2014 and 2013
(Unaudited)
       
   For the three months ended
   March 31, 2014  March 31, 2013
       
Cash flows from operating activities:          
Net income (loss)  $(135,042)  $1,174,945 
Adjustments to reconcile net income to net cash          
provided by (used in) operating activities:          
Depreciation   6,327    8,522 
Changes in operating assets and liabilities:          
Advance to suppliers   460    (2,010,421)
Advance to related party   (5,171,512)    
Prepayments and other receivable   (983)   1,900 
Accounts payable and accrued expenses   14,828    22,985 
Taxes Payable   —      264,011 
Net cash provided by operating activities   (5,285,922)   (538,058)
           
Cash flows from financing activities:          
Proceeds from shareholders loan payable   103,526    127,201 
Proceeds from related party loan payable   2,009    —   
Net cash provided by financing activities   105,535    127,201 
           
Effect of changes in exchange rate   (1,012)   1,753 
           
Net (decrease) in cash and cash equivalents   (5,181,399)   (409,104)
           
Cash and cash equivalents at the beginning of the year   5,600,286    1,248,673 
           
Cash and cash equivalents at the end of the year  $418,887   $839,569 
           
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  

 

(7)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

 

The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2013.

 

2. ORGANIZATION AND BUSINESS BACKGROUND 

 

CAM Group Inc. (the “Company” or “CAMG”) was originally incorporated as Savannah River Technologies, Inc. under the laws of the State of South Carolina on March 2, 1995. On July 20, 2007, the Company formed a corporation pursuant to the laws of the State of Nevada having a par value of $0.001 for both the preferred and common stock. On August 11, 2007, the stockholders of the Company approved a change of corporate domicile which resulted in the dissolution of the South Carolina Corporation and the Company became domiciled in the State of Nevada. On September 13, 2012, the Company changed its name to CAM Group Inc. to more accurately reflect its business after a stock exchange transaction with CAM Group set forth below. 

 

On April 17, 2012, CAMG completed a stock exchange transaction with China Agriculture Media Group Co., Ltd (“CAM Group”). CAM Group is organized and exists under the laws of Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”), which was incorporated on March 30, 2011. CAM Group is an investment holding company, whose only asset is 100% equity interest in China Agriculture Media (Hong Kong) Group Co. Ltd. (“CAM HK”). CAM HK is an investment holding company organized and exists under the laws of Hong Kong Special Administrative Region of PRC, with its only asset being a 98% equity interest in China Agriculture Media (Hebei) Co. Ltd. (“CAM Hebei”). CAM Hebei was established in the Hebei Province, PRC on November 28, 2011 as a Chinese domestic enterprise.

 

The stock exchange transaction involved two simultaneous transactions:

 

CAMG issued to CAM Group Shareholders an amount equal to 22,500,000 new investment shares of Common Stock of CAMG and 1,000,000 shares of CAMG super-voting Preferred Stock in exchange for one hundred percent (100%) of the issued and outstanding share capital of CAM Group from CAM Group Shareholders.

   

CAMG issued 1,607,853 shares of Common Stock to CAMG prior management and an advisor for services previously rendered. Simultaneously, Angela Ross, the former Chief Executive Officer of CAMG, returned 2,500,000 shares of Common stock to the CAMG treasury for immediate cancelation.

 

Upon completion of the exchange, CAM Group and its subsidiaries became subsidiaries of CAMG and the former owners of CAM Group then owned a ‘controlling interest’ in CAMG representing 98% of the voting shares of CAMG and 90% of the issued and outstanding shares of Common Stock.

 

The stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of CAMG whereby CAM Group is deemed to be the accounting acquirer (legal acquiree) and CAMG to be the accounting acquiree (legal acquirer).  The accompanying consolidated financial statements are in substance those of CAM Group and its subsidiaries, with the assets, liabilities, revenues and expenses, of CAMG being included effective from the date of stock exchange transaction. Accordingly, the financial position, results of operations, and cash flows of the accounting acquirer are included for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree are included from the date of stock exchange transaction.

 

CAMG, CAM Group, CAM HK and CAM Hebei are hereafter collectively referred to as the “Company”.

 

3. RECENTLY ISSUED ACCOUNTING STANDARDS

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2014-08, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

 

(8)

 

4. CASH AND CASH EQUIVALENTS

 

As of March 31, 2014, the cash balance was $418,887, of which $104,385 was held in major financial institutions located in Hong Kong, and $311,079 was held in major financial institutions located in the PRC and $3,423 as petty cash.

 

These bank balances are not insured. The remittance of these funds out of China is subject to exchange control restrictions imposed by the Chinese government. Management believes that the major financial institutions in the PRC and Hong Kong have acceptable credit ratings.

 

5. ADVANCED TO suppliers

 

As of March 31, 2014 and December 31, 2013, the Company had advanced to suppliers in the amount of $3,170,110 and $3,225,615, respectively, representing the deposits made to suppliers pursuant to fertilizer contracts in order to secure lower price of fertilizer. The amount and percentage of each major supplier are set forth below.

 

Suppliers      

As of

March 31, 2014

         

As of

December 31, 2013

    
Supplier A       $1,471,889    46.4%  $1,497,447   46.4%
Supplier B        1,698,221    53.6%   1,728,168   53.6%
    Total   $3,170,110    100.0%  $3,225,615   100.0%

 

6. ADVANCED TO related parties

 

As of March 31, 2014, the Company had a loan advance to Parko (Hong Kong) Limited (“Parko”), Hebei AMP’s business affiliate for $5,076,426. The loan advance to Parko is due on December 31, 2014 with zero interest.

 

7. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment are comprised of the following amounts at the respective dates:

 

    As of
    March 31, 2014   December 31, 2013
Cost:        
Computer equipment and software   $ 12,859     $ 13,083  
Advertising equipment     164,571       167,429  
Construction in progress     535       544  
Total     177,965       181,056  
Accumulated depreciation     (50,770 )     (45,334 )
Net   $ 127,195     $ 135,722  
                 

During the three months ended March 31, 2014 and 2013, the Company had depreciation expenses of $6,327 and $8,522, respectively.

 

8. RELATED PARTY BALANCES AND TRANSACTIONS WITH MAJOR SHAREHOLDERS

 

Due to related parties as of March 31, 2014 and December 31, 2013 consisted of following:

 

    As of
    March 31, 2014   December 31, 2013
                 
Hebei AMP (a)   $ 59,805     $ 58,838  
                 
PMI (b)     670,989       579,253  
Shareholder (c)     117,426       119,465  
Total    $ 848,220      $ 757,556  

 

 (a) Hebei Agricultural Means of Production Co. Ltd.

 

Hebei Agricultural Means of Production Co. Ltd. (“Hebei AMP”) indirectly owns 2% capital interest of CAM Hebei, through its wholly-owned subsidiary, Shijiazhuang Qijin Cultural Presentation Inc. Hebei AMP has common management of the Company as follows:

 

Mr. Chen Lijun, Chairman of the Company during the period from April 17, 2012 through December 11, 2013, is the Chairman and President of Hebei AMP;

Mr. Peng Guo Jiang, General Manager, Director of the Company during the period from April 17, 2012 through December 11, 2013, is the Vice President of Hebei AMP.

 

Mr. Peng Guo Jiang holds approximate 36% of CAMG common stock and 38% of CAM preferred stock as a trustee holding the shares for Hebei AMP.

 

As of March 31, 2014 and December 31, 2013, the balance due to Hebei AMP was $59,805 and $58,838, respectively.

 

(b) Precursor Management Inc.

 

On March 30, 2011, the Company entered into an agreement with Precursor Management Inc. (“PMI”) which is controlled by the Company’s former President and is also a shareholder of the Company. Since March 2011, PMI has assisted the Company with listing on the over the counter stock market and SEC compliance work, and paid for the Company’s expenses related to daily operations. The agreement expired in March 2013. During the three months ended March 31, 2014, the Company borrowed $103,526 from PMI to pay for its daily operations. The fund borrowed from PMI was not evidenced by a promissory note, but rather was an oral agreement between PMI and the Company and due on demand. As of March 31, 2014, the outstanding balance due to PMI was $670,989.

 

(c) Due to shareholder

 

In addition, the Company had outstanding balances of $117,426 due to the Company’s former President as of March 31, 2014. The funds borrowed from the Company’s former President were to fund the Company’s operations. The balance due to shareholder was not evidenced by a promissory note, but rather was an oral agreement between the shareholder and the Company and due on demand. On July 29, 2013, the President resigned as President, director and Secretary of the Company due to his personal reason, without any specific disagreement with the Company on any matter.

 

Advertising Revenues – Related Party

After completing the installation of the LCD displays in 2012, the Company has entered an advertising services contract with Hebei AMP, pursuant to which Hebei AMP agreed to purchase a total of 15,768,000 seconds per year for LCD advertising time at a rate of no less than RMB2.54 (USD0.41), starting from June 2012. The contract was renewed on May 30, 2013 for seven months from June 1, 2013 to December 31, 2013. The Company and Hebei AMP renegotiated the contract after the expiration on December 31, 2013. There was no renewal as of March 31, 2014. Accordingly, the Company had no revenues generated from its advertising business during the three months ended March 31, 2014.

Fertilizer Agreements - Related Party

Starting on October 30, 2012 the Company, through its subsidiary CAM Hebei entered into a series of oral and written agreements (collectively the “Agreements”) with Hebei AMP for the purchase and sale of fertilizer in Hebei Province China, pursuant to which, fertilizer products shall be sold by Hebei AMP to CAM Hebei for a purchase price of approximately $2,000,000. Hebei AMP will deliver the fertilizer to CAM Hebei as needed. The Company serves primarily as a trading agent for Hebei AMP during the transactions and therefore recognizes revenue for these transactions on a net rather than a gross basis. During the three months ended March 31, 2014 and 2013, the Company had no revenues generated from trading agent business.

(9)

 

9. INCOME TAXES 

 

The Company uses the asset and liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. There are no material timing differences and therefore no deferred tax asset or liability at March 31, 2014.

 

As of March 31, 2014, the U.S. operation had net operating losses of $555,135 available for federal tax purposes, which are available to offset future taxable income.  The net operating loss carry forwards begin to expire in 2034.  The Company has provided for a full valuation allowance for any future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

The effective income tax expenses for the three months ended March 31, 2014 and 2013 are as follows:

 

 

For three months ended

March 31, 2014

 

For three months ended

March 31, 2013

         
Current taxes $ 0   $ 264,011  
Deferred taxes   0     0  
  $ 0   $ 264,011  

 

10. EARNINGS PER SHARE

 

Basic net income per share is computed using the weighted average number of the common shares outstanding during the periods.  Diluted net income per share is computed using the weighted average number of all dilutive common stock equivalents during the periods. As of March 31, 2014, the Company had 1,000,000 shares of convertible preferred stock outstanding whose effect was dilutive and included in diluted net income per share during the periods.

 

The following table sets forth the computation of basic and dilutive net income per share for the three months ended March 31, 2014 and 2013, respectively:

 

    For three months ended
    March 31, 2014   March 31, 2013
  Net (Loss) Income     $ (135,042 )   $ 1,174,945  
  Net Income per Share                  
     Basic       (0.01 )     0.05  
     Diluted       N/A       0.01  
  Weighted Average Number of Shares Outstanding                  
     Basic       25,295,000       25,075,000  
     Diluted       125,295,000       125,075,000  

 

11. CONCENTRATION AND RISK

 

For the three months ended March 31, 2014, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from Hebei AMP, a related party through common management (see Note 8(a)) located in the PRC.

 

12. COMMITMENT AND CONTINGENCIES

 

The Company leases its office space under a 2-year non-cancelable operating lease agreement which expires on June 30, 2014.  The monthly lease payment is approximately $800.

 

Accordingly, the future lease payments required as of December 31 are as follows:

 

Year ended December 31 Lease payment
2014  $                                 4,800
Total  $                                 4,800

 

For the three months ended March 31, 2014 and 2013, rental expense was approximately $2,400 and $2,400, respectively. 

13. SEGMENTS

 

The Company determined that it did not operate in any material, separately reportable operating segments as of March 31, 2014.  

14. SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to March 31, 2014 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

(10)

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

Special Note Regarding Forward-Looking Statements

 

This periodic report contains certain forward-looking statements with respect to the Plan of Operations provided below, including information regarding the Company’s financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities, and the plans and objectives of management. The statements made as part of the Plan of Operations that are not historical facts are hereby identified as "forward-looking statements."

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited Financial Statements and accompanying notes.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results could differ from these estimates under different assumptions or conditions.  The Company believes there have been no significant changes during the three months ended March 31, 2014, to the items disclosed as significant accounting policies in management's Notes to the Financial Statements in the Company's annual report on Form 10K for the year ended December 31, 2013.

 

Corporate History

 

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.
98%
China Agriculture Media (Hebei) Co., Ltd.

 

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.

 

(11)

 

PLAN OF OPERATIONS

 

Overview:

 

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 May 20, 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.

Results of Operations

 

Revenues – Related Party

 

We had revenue of $0 and $1,680,318 for the three months ended March 31, 2014 and 2013, respectively, all of which were from the sales of air time for the clients’ advertisement through the LCD display network. All our advertising revenues were 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 $.42 per second for the air time they used for their advertisement.

 

We renegotiated the advertising agreement with Hebei AMP after the expiration on December 31, 2013, which had not been extended as of May 20, 2014. As a result, we did 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.

 

Cost of Revenues

 

Cost of revenues recorded at $0 and $29,347 for the three months ended March 31, 2014 and 2013. 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. We had no cost of revenues during the three months ended March 31, 2014 due to no revenue activities in this period.

 

Net Income

 

We had net loss of $135,042 for the three months ended March 31, 2014, compared to net income of $1,174,945 for the same period ended March 31, 2013. The net loss during the first quarter of 2014 was primarily attributable to expenses incurred for daily operations since no revenues gained during the period. The net income during the first quarter of 2013 was due to sufficient gross profit to cover our operating expenses.

 

There can be no assurance that we will achieve or maintain profitability, or that any revenue growth will take place in the future.

 

Operating Expenses

 

We had operating expenses of $135,373 and $171,651 for the three months ended March 31, 2014 and 2013, respectively. The expenses were mainly composed of the expense of recruitment, advertising, travelling expenses and expenses related to expansion of its network.

 

Liquidity and Capital Resources

 

Cash flows used in operating activities were $5,285,922 and $538,058 for the three months ended March 31, 2014 and 2013, respectively. Negative cash flows from operations in the first quarter of 2014 were due primarily to the increase in advance to related parties by $5,171,512. During the three months ended March 31, 2014, there was a loan advance to Parko (Hong Kong) Limited (“Parko”), Hebei AMP’s business affiliate for $5,171,512. The loan advance to Parko is due on December 31, 2014 with zero interest. Negative cash flows from operations in the first quarter of 2013 were due primarily to the advance to a related party in amount of $2,010,421 pursuant to fertilizer contracts, partially offset by the net income of $1,174,945 and increase in taxes payable by $264,011.

 

We had no cash flow from investing activities during the three months ended March 31, 2014 and 2013.

 

Cash flows provided by financing activities were $105,535 and $127,201 during the three months ended March 31, 2014 and 2013, respectively. Positive cash flows from financing activities in the first quarter of 2014 and 2013 were due primarily to proceeds from the shareholder loan, which bears zero interest and due on demand.

 

Capital Expenditures

 

We project that we will need additional capital to fund operations over the next 12 months. We anticipate we will need a minimum of $1,000,000 additional funds starting in 2014 to meet our expansion objectives. 

 

Overall, we have funded our cash needs from inception through March 31, 2014 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.

    

We had cash of $418,887 on hand as of March 31, 2014. Currently, we have enough cash to fund our operations for the next 6 months. This is based on our working capital surplus. Our current level of operations would require capital of approximately $1,000,000 per year starting in 2014.  Modifications to our business plans may require additional capital for us to operate. For example, if we are unable to raise additional capital in the future we may need to curtail our number of stores in the Network or limit our marketing efforts to the most profitable geographical areas. This may result in lower revenues and market share for us. In addition, there can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.

 

On a long-term basis, liquidity is dependent on continuation and expansion of operations, receipt of revenues, and additional infusions of capital and debt financing. Our current capital and revenues are insufficient to fund such expansion. If we choose to launch such an expansion campaign, we will require substantially more capital. However, there can be no assurance that we will be able to obtain additional equity or debt financing in the future, if at all. 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 the sales of our products, our business operations may be adversely affected by our competitors and prolonged recession periods.

        

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

 

The Company does not have any off-balance sheet arrangements and it is not anticipated that the Company will enter into any off-balance sheet arrangements.

 

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 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

N/A-Smaller Reporting Company

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

As of March 31, 2014, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial 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 Chief Financial 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. As a result of continuing weakness in our internal control over financial reporting as reported in our annual report on form 10-K for the year ended December 31, 2013.

 

Changes in Internal Control over Financial Reporting

 

During the first quarter of 2014, we engaged consultants to advise management on the preparation of Sarbanes-Oxley Section 404 compliance with internal controls over financial reporting for 2014, providing relevant training to our staff, implementing more rigorous policies and procedures relating to period-end financial reporting and other key processes, strengthening key controls such as journal-entry approval, reconciliation procedures and maintaining relevant supporting documentation. We expect to continue to implement additional financial and management controls and procedures going forward. As results of these measures and until we have completed the remediation process, there has been and will be changes and further improvement to our internal controls over financial reporting.

 

(13)

 

PART II. OTHER INFORMATION

 

ITEM 1.      LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

The information to be reported under this item has not changed since the previously filed 10K, for the year ended December 31, 2013. 

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.      MINE SAFETY DISCLOSURE

 

Not applicable.

 

ITEM 5.      OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

31.1 Certification of Chief Executive Officer

 

31.2 Certification of Chief Financial Officer

 

32.1Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2 Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the S arbanes-Oxley Act of 2002.

 

101.INS* XBRL    Instance Document
101.SCH*XBRL    Taxonomy Extension Schema
101.CAL*XBRL    Taxonomy Extension Calculation Linkbase
101.DEF* XBRL    Taxonomy Extension Definition Linkbase
101.LAB*XBRL    Taxonomy Extension Label Linkbase
101.PRE* XBRL    Taxonomy Extension Presentation Linkbase

 

* In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this report shall be deemed furnished and not filed.

 

(14)

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

  

 

CAM Group, Inc. 

(Registrant)

 

 

Date: May 20, 2014

By:  /s/ Kit Ka

        Kit Ka

        Chief Executive Officer,Principal Financial

and Accounting Officer

 

(15)

 

INDEX TO EXHIBITS

 

Exhibit No.   Description
     
31.1   Certification of Chief Executive Officer
     
31.2   Certification of Chief Financial Officer
     
32.1  

Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

 

 

101.INS* XBRL  Instance Document
   
101.SCH*XBRL  Taxonomy Extension Schema
   
101.CAL*XBRL  Taxonomy Extension Calculation Linkbase
   
101.DEF* XBRL  Taxonomy Extension Definition Linkbase
   
101.LAB*XBRL  Taxonomy Extension Label Linkbase
   
101.PRE* XBRL  Taxonomy Extension Presentation Linkbase

 

* In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 to this report shall be deemed furnished and not filed.

 

(16)