UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 0R 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 8, 2012
China Media Group Corporation
(Exact name of registrant as specified in its charter)
Texas
(State or Other Jurisdiction of Incorporation)
000-50431 |
32-0034926 |
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(Commission File Number) |
(IRS Employer Identification No.) |
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+011 852 3171 1208
Registrant's telephone number, including area code
(Former name or Former Address, If Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
CURRENT REPORT ON FORM 8-K
CHINA MEDIA GROUP CORPORATION
TABLE OF CONTENTS
Item |
Description |
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2.01 |
Completion of Acquisition or Disposition of Assets |
1 |
Acquisition | 1 |
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Description of Business |
2 |
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Legal Proceedings |
10 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Risk Factors |
15 |
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Security Ownership of Certain Beneficial Owners and Management |
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Executive Officers and Directors |
32 |
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Executive Compensation |
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Certain Relationships and Related Transactions |
38 |
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3.02 |
Unregistered Sales of Equity Securities |
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Description of Capital Stock |
39 |
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5.01 |
Changes in Control of Registrant. |
40 |
5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers. |
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9.01 |
Financial Statements and Exhibits. |
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Definitions and Conventions |
References to "China" or "PRC" refer to the People's Republic of China. |
References to "Common Stock" means the Common Stock, no par value, of China Media Group Corporation. |
References to the "Commission" or "SEC" means the U.S. Securities and Exchange Commission. |
References to "ECE" means ECE Technologies Sdn. Bhd., a company incorporated in Malaysia. |
References to the "ATeam" means A-Team Resources Sdn. Bhd., a company incorporated in Malaysia that is engaged in the business of consumer electronics and light appliances. |
References to the "BRR" means Beijing Ren Ren Health Culture Promotion Co., Limited, a company incorporated in China that is a 50% subsidiary of Good World. BRR is engaged in advertising sales in China. |
References to the "ATC Marketing" means ATC Marketing Limited, a company incorporated in Hong Kong that is a 50% subsidiary of Good World. ATC Marketing is a joint venture company with AdvanceTech Communications Sdn. Bhd. holding the worldwide marketing rights, other than certain rights belonging to the Company, of a convergent communication device named M.A.G.I.C. |
References to the "Good World" means Good World Investments Limited, an investment holding company incorporated in the British Virgin Islands that is a wholly owned subsidiary of CMG. |
References to the "ATC" means AdvanceTech Communications Sdn. Bhd., a Malaysia incorporated company that is developing a convergent communication device named M.A.G.I.C. |
References to the "RRMG" means Ren Ren Media Group Limited, a company incorporated in Hong Kong that is a wholly owned subsidiary of CMG. RRMG is an administrative and advertising sales company in Hong Kong and China. |
Reference to "SEC" means the Securities Exchange Commission; |
Reference to "Closing Date" means June 8, 2012 the closing date of the Sale and Purchase Agreement dated March 15, 2012; |
References to "Company", "CMG", "we", "our", "Group" means China Media Group Corporation and includes, unless the context requires or indicate otherwise, the operation of its subsidiaries (all herein defined). |
References to "33 Act" or "Securities Act" means the Securities Act of 1933, as amended. |
References to "34 Act" or "Exchange Act" means the Securities Act of 1934, as amended. |
Item 2.01 | Completion of Acquisition or Disposition of Assets |
Acquisition |
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Changes to the Board of Directors and Executive Officers |
After the above changes, the board of directors consists of Mr. Mohd Mahyudin bin Zainal, Mr. Con Unerkov, Ms. Norlizah binti Zainal, Mr. Pui Kit Lam and Mr. Mohd Khairudin bin Ramli. In addition, CMG's board of directors appointed Mr. Mohd Mahyudin bin Zainal as the Chief Executive Officer, Mr. Mohd Suhaimi bin Rozali as Chief Financial Officer, Treasurer and Company Secretary, and Ms. Norlizah binti Zainal as Chief Technology Officer of CMG. Mr. Mohd Mahyudin bin Zainal and Ms. Norlizah binti Zainal are siblings. All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board. |
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1
Description of Our Company |
The Company conducts its advertising business through Ren Ren Media Group Limited, its wholly owned subsidiary company in Hong Kong. For its trading in mobile convergent devices, it will trade through a 50/50 joint venture subsidiary company ATC Marketing Limited. For the Millennium Development Goals Program, we conduct this business through our 50% owned subsidiary company Beijing Ren Ren Health Culture Promotion Co., Limited. In June 2012, we completed the acquisition for 100% equity interests in A-Team Resources Sdn. Bhd. which is in the consumer electronic and light appliances businesses. |
Description of Business |
We have now reorganized our business units to two business units mainly "Products and Services" and "Telecommunications and Mobile Computing" business units and with less focus on the "Advertising" business unit unless we have the necessary resources to pursue opportunities in this business segment. |
Products Services Unit |
In June 2012, we completed the acquisition of ATeam, a company that manufactures and distributes consumer electronics and light appliances. ATeam has a range of products and some under its own brand name of ECE, Maco and ATech. ATeam's products are currently being sold and distributed in Malaysia, Indonesia, Thailand, Vietnam, Singapore, Sri Lanka, South Africa, Middle East countries, and in India Sub-Continent. The growth of ATeam will be in the developing countries and CMG will look for opportunities to sell ATeam's range of products to China. |
2
ATeam produces washing machines, chest freezers, wine and display chillers, and refrigeration-based products. It has a manufacturing plant located at Port Klang, Selangor, Malaysia on a piece of land with an area of 110,000 square feet which houses a factory with a built-up of 60,000 square feet. It has a work force of 30 workers. ATeam was established in 2001 specialised in the manufacture, assembling and distribution/trading of home appliances products (white goods). Currently, the Group is operating from Selangor, which is located in the central part of Malaysia. |
Our future Products and Services |
Products Under Development |
We have several product/service initiatives under development: |
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Telecommunications Unit |
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We have secured the distribution rights for M.A.G.I.C. Convergent Device for the territory of China and Hong Kong. M.A.G.I.C. is a next generation convergent device that has the full capabilities of a notebook computer shrink to a size of a PDA phone. In 2009, we have also entered into a joint venture agreement with AdvanceTech Communications Sdn. Bhd. ("ATC") to market and distribute the devices developed by ATC worldwide other than the countries already under distribution rights of the Group. The current device under development, M.A.G.I.C. W3 is being positioned as the high end convergent device for professionals running special applications. We expect the M.A.G.I.C. W3 to enter the information and advertising sectors of the mobile phone market. We expect to receive the final prototype for M.A.G.I.C. W3 by Q3 2012. Subject to satisfactory technical review, we expect to launch the commercial product in second half of 2012. There has been no other significant update for the M.A.G.I.C. W3. |
Our Products - M.A.G.I.C. W3 |
The innovation is extremely handy and pocketable and is one one of the world's smallest microcomputer with a 4.8" screen at 140 x 80 x 23mm dimensions, and with a weight of just 270 grams. The MAGIC W3 is uniquely engineered to take advantage of Windows® 7 OS standby power saving sleep mode, and in the event of an incoming call or SMS instantaneously wakes up to retrieve the call or notification; features which are unavailable to today's laptop or tablet computers running a full Windows® operating system. The MAGIC W3 allows you to use the mobile phone as your
laptop in your workplace, you can comfortably do your work, emails and surf the internet
by connecting to a larger display via the HDMI port and high speed Wi-Fi or 3.5G HSDPA
connectivity. |
Our future Products - ATC's Product Road Map |
The MAGIC W4 is the 2nd generation upgrade to the MAGIC W3, utilizing ATC's patent pending technology. The W4 will be designed with a new magnesium hexa-shell casing that will make the device truly slim and lightweight compared to its predecessor. The W4 will support Windows® 8, Microsoft's next generation operating system that will work universally on desktop, laptop and tablet devices; and will work equally well on small form factor devices and with touch or mouse operation. |
Advertising Unit |
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Marketing & Sales Overview & Customers |
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Sales in Malaysia, i.e. OEM - ( 2011, 100% 2012 will be changed ) |
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Sales outside Malaysia - ( 2011, 0% 2012 will be changed ) |
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Washing Machines - 60% |
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Freezers - 32% |
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Others - 8% |
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South East Asia |
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Middle East |
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Indian Sub-Continent |
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Africa |
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Industry Overview and Competition |
After the economic downturn affected the industry, the manufacturing sector in Malaysia rebounded strongly to register a growth of 11.4% in 2010 (2009: - 9.4%), driven largely by the strong growth in the first half- year, with expansion in both the export and domestic oriented industries. In the export oriented industries, growth of the electronics and electrical products (E&E) cluster was underpinned by the revival of global corporate IT investments and higher consumer spending on electronics while growth of the primary-related cluster was in line with the recovery of the external environment. Robust growth in the domestic oriented industries was supported mainly by strong domestic consumption activity. The global market for major electrical household appliances is projected to reach 543 million units by the year 2015, driven by burgeoning sales in microwave ovens, air-conditions and electric ranges segments. Growing demand from rapidly developing countries including Asia-Pacific, Middle East and Latin America will provide the required impetus to the market. In Malaysia, manufactured exports expanded by 13% in 2010, with strong growth recorded across major products in the first half of the year, E&E exports rose significantly in the first half, benefitting from inventory restocking in the global electronics industry. Moving into the latter half of the year, the moderation in regional demand led to the softening of electronics exports. The E&E sub-sector rebounded significantly in the first half of 2010 by 27.4% (January - July 2009: -32.4%) following the broad-based global recovery in demand and restocking activities. Growth emanated mainly from the expansion in demand for semiconductor, audio visual and communication apparatus as well as electrical machinery. Apart from the restocking activities, the remarkable growth in semiconductor devices, which expanded 62.8% (January - July) 2009: -30.8%) was attributed to increased global spending on electrical and electronic gadgets. Export earnings of E&E rose 22.5% in the first half of 2010 (January - July 2009: -20.2%) supported by the favourable performance of electronic equipment and parts (26.2%), as well as machinery and electrical products (20.1%). Growth was driven mainly by demand for consumer electronic products in the Asia Pacific region, particularly from China, India, Japan and the US. |
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The key to our success in the advertising business is the occupation of prime advertising locations throughout China. The premium locations with heavy pedestrian traffic are not common but are the focus of all advertising agencies and media owners. However you need to have the outdoor media to be able to compete for the premium sites. Many of our competitors have established outdoor billboards to offer to their clients where it would be difficult to compete since they are already in the market place and working with advertising agents. We will need to build up some outdoor media boards to show a presence in the market place before we can get commitments from advertising agents and customers. However, we believe there is ample room for our Company to grow in the China market. |
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Government Regulations |
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Suppliers |
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Statements in this Current Report on Form 8-K and other written reports made from time to time by us that are not historical facts constitute so-called "forward-looking statements," all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as "expects," "plans," "will," "forecasts," "projects," "intends," "estimates," and other words of similar meaning. Forward-looking statements are likely to address our growth strategy, financial results and product and development programs, among other things. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward-looking statements. Such risks and uncertainties include but are not limited to those outlined in the section entitled "Risk Factors" and other risks detailed from time to time in our filings with the SEC or otherwise. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. |
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This acquisition is accounted as a reverse merger and accordingly, the share equity of ATeam have become those of the registrant from retroactively restated for, and giving effect to, the number of shares received in the acquisition. The accumulated earnings of ATeam were also carried forward after the acquisition. Operations reported for periods prior to the acquisition are those of ATeam. |
Critical Accounting Policies |
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Revenue is recognized at the time the product is delivered. Provision for sales returns will be estimated based on the Company's historical return experience. Revenue is presented net of returns. |
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The Company accounts for stock based compensation in accordance with ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123, "Accounting for Stock-Based Compensation" prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity. The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity -Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date. |
Recently Issued Accounting Pronouncements |
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12
Results of Operations |
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13
Liquidity and Capital Resources |
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There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our Common Stock could decline and investors could lose all or part of their investment. |
Risks Related to Our Business |
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RISKS RELATED TO EXISTING AND PROPOSED OPERATIONS |
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We do not have substantial cash resources and if we cannot raise additional funds or generate more revenues, we will not be able to pay our vendors and will probably not be able to continue as a going concern. |
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Our limited operating history and rapidly evolving business makes it difficult for us to accurately forecast revenues and expenses. |
We commenced our advertising and mobile devices operations in April 2006 with a very limited operating history for these operations due to the lack of operating and financial resources. Our operating results to date relate principally to advertising and the mobile device business. Accordingly, our future prospects are uncertain in light of the risks and uncertainties experienced by early stage companies in evolving industries, and in particular our future operations in China. Due to our limited history and lack of resources, it is difficult for us to predict future revenues and operating expenses. We based our expense levels, in part, on our expectations of future revenues from anticipated transactions. If our advertising and mobile device business develops slower than we expect, our losses may be higher than anticipated, we may have to curtail parts of our business plan and to the market price of our stock may decline. Some of the other risks and uncertainties of our business relate to our ability to: |
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offer new and innovative products and services to attract and retain a larger consumer base; |
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- | attract customers; | |
- | increase awareness of our brand and continue to develop consumer and customer loyalty; | |
- | respond to competitive market conditions; | |
- | respond to changes in our regulatory environment; | |
- | manage risks associated with intellectual property rights; | |
- | maintain effective control of our costs and expenses; | |
- | raise sufficient capital to sustain and expand our business; | |
- | attract, retain and motivate qualified personnel; and | |
- | upgrade our technology to support increased traffic and expanded services. |
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We face significant competition and may suffer from a loss of users and customers as a result. |
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We may face intellectual property infringement claims and other related claims that could be time-consuming and costly to defend and may result in our inability to continue providing certain of our existing services. Electronics, technology and advertising companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of third-party rights. The validity, enforceability and scope of protection of intellectual property, particularly in China and Malaysia, are uncertain and still evolving. In addition, many parties are actively developing and seeking protection for electronics and technologies, including seeking patent protection. There may be patents issued or pending that are held by others that cover significant aspects of our technologies, products, business methods or services. As we face increasing competition and as litigation becomes more common in China, Malaysia and elsewhere in Asia for resolving commercial disputes, we face a higher risk of being the subject of intellectual property infringement claims. Intellectual property litigation is expensive and time consuming and could divert resources and management attention from the operations of our businesses. If there is a successful claim of infringement, we may be required to pay substantial fines and damages or enter into royalty or license agreements that may not be available on commercially acceptable terms, if at all. Our failure to obtain a license of the rights on a timely basis could harm our business. Any intellectual property litigation could have a material adverse effect on our business, financial condition or results of operations. |
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If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. |
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We may not be able to manage our expanding operations effectively. |
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Changes in governmental banking, monetary and fiscal policies to restore liquidity and increase credit availability may not be effective in alleviating the global economic declines. It is difficult to determine the breadth and duration of the economic and financial market problems and the many ways in which they may affect our customers and our business in general. Nonetheless, continuation or further worsening of these difficult financial and macroeconomic conditions could have a significant effect on our business and results of operations. |
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In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may lose customers, distributors, know-how and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement with us which contains confidentiality and non-competition provisions. Legal proceedings to enforce such provisions would be costly in both money and management time and such provisions may not be enforced or enforceable. |
The success of our business depends on the continuing contributions of Mohd Mahyudin bin Zainal and other key personnel who may terminate their employment with us at any time, and we will need to hire additional qualified personnel. |
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As competition in our industry intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel. If we do not succeed in doing so, we may be unable to grow effectively. |
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Our Company's business face inherent risk in the electronics and light appliances industry. |
Our Group's business is subject to certain risks inherent in the electronics and light appliances manufacturing industry. Our Group's revenue and operating results could be adversely affect by many factors which include, amongst others, changes in general economic, business and credit conditions, fluctuation in foreign exchange rates, changes in demand for and market acceptance of our products and services, our ability to introduce new products and services and enhancements in a timely manner, rapid technological changes, increase in operating expenses, lower profit margins due to pricing competition and delay in expansion plans. |
Our Group's seeks to limit these business risks through, inter-alia prudent management policies, keeping abreast with new developments and technologies in the relevant industries and maintaining good relationship with customers and suppliers. However there can be no assurance that any changes in these factors will not have any material adverse effect on our Group's business. |
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Our Group faces competition from both local and foreign competitors which offer similar products that of our Group offerings. Increased competition could result in competitive pricing resulting in lower profit margins. However, our Group believes that we have competitive edge over our competitors which include amongst others, production quality, R&D capabilities and technological expertise acquired over the years. Our Group seeks to limit the competitive risks through, inter-alia constant review of our development and marketing strategies to adapt to changes in economic conditions and market demands as well as focusing on certain markets and industries. However, there can be no assurance that our Group will be able to compete effectively against our competitors and that competitive pressure will not materially and adversely affect our Gorup's business, operations and results and or financial condition. |
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Our stock price may be volatile. |
The market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following: |
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changes in our industry; |
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* | competitive pricing pressures; | |
* | our ability to obtain working capital financing; | |
* | additions or departures of key personnel; | |
* | limited "public float" in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our Common Stock; | |
* | sales of our Common Stock; | |
* | our ability to execute our business plan; | |
* | operating results that fall below expectations; | |
* | loss of any strategic relationship; | |
* | regulatory developments; | |
* | economic and other external factors; and | |
* | period-to-period fluctuations in our financial results. |
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We may not pay dividends in the future. Any return on investment may be limited to the value of our Common Stock. |
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There is currently no liquid trading market for our Common Stock and we cannot ensure that one will ever develop or be sustained. |
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Our Common Stock is currently a "penny stock," which may make it more difficult for our investors to sell their shares. |
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RISKS RELATED TO DOING BUSINESS IN CHINA |
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The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations. |
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Our subsidiaries and affiliates are subject to restrictions on paying dividends and making other payments to us and we do not intend to pay cash dividends in the future. |
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In the event that the proper procedures are not followed under the SAFE October Notice, we could lose the ability to remit monies outside of the PRC and would therefore be unable to pay dividends or make other distributions. Our PRC resident stockholders could be subject to fines, other sanctions and even criminal liabilities under the PRC Foreign Exchange Administrative Regulations promulgated January 29, 1996, as amended. |
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Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to distribute profits to us or otherwise materially adversely affect us. |
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Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on governmental policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. |
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Governmental control of currency conversion may affect the value of your investment. The PRC government imposes controls on the conversion of RMB to foreign currencies and, in certain cases, the remittance of currencies out of China. As our internet and advertising business expands, we expect to derive an increasing percentage of our revenues in RMB. Under our current structure, we expect our income will be primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required when RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our demands, we may not be able to pay dividends in foreign currencies to our stockholders, including holders of our Common Stock. |
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RISKS RELATED TO THE ELECTRICAL AND ELECTRONICS SECTOR IN MALAYSIA |
Electrical and electronics sector is not homogeneous and therefore has its own life cycle and is difficult to track. |
The E & E sector is not homogeneous, covering a wide range of products and technologies including consumer electronics, semiconductors, personal computers, RF (radio frequency) and Wireless Systems, Test and Measurement as well as Light Emitting Diodes (LEDs). This diversity makes the sector difficult to track, as each of these technologies, individually, has its own life cycle, value supply chain, and accordingly issues and challenges. While the focus thus far has been on individual companies and their needs, there is a strong need to look at these companies as part of a technology platform ecosystem and understand how the activities can be expanded, integrated and linked to the local economy, so that a more holistic picture of the ecosystem emerges. |
The industry is dominated by the MNCs and the role of local companies has largely been confined to being vendors, suppliers or outsourcing partners. Despite this sector being in Malaysia for more than 35 years, there is no internationally acclaimed Malaysian company in this field. The role of local vendors, largely in the fields of metalworking (machining, mould and die, stamping) and plastics (injection moulding) and packaging and testing has been challenged by the practice of international procurement, driven by processes such as e-Bidding and Approved Vendor lists. Inability to secure long-term steady revenue and faced with cyclical demand that requires considerable staying power, many local companies shifted into other areas of business or downsized. |
Rapid technological developments can render the present technology utilised by E & E companies obsolete |
Rapid technological developments can render the present technology utilised by E & E companies obsolete and result in the inability of these companies to compete effectively. Realising that technology is a vital component in product development and manufacturing, such companies should provide for continuous research and development to ensure that its products maintain a high standard and quality suitable for its clients' brand names. The research and development undertaken also encompasses improvement to product design, material and finished goods development. |
Increase competition in China will have downward pressure on our pricing, business and profitability. |
The WTO, AFTA and other regional arrangements will further liberalise trade, intensifying competition both in the domestic as well as international markets. The strong emergence of China in the global economy will also increase competition, particularly for the common exports of both countries. |
At the firm and industry levels, initiatives must be taken to increase productivity so as to reduce the cost of production and raise the quality of the product or service. This will require firms to upgrade their technology by introducing new machinery and raising technological capability. Efforts towards this end must also be complemented by increasing labour productivity through continuous skill upgrading of employees as well as improving entrepreneurial and managerial skills. In addition, firms need to accelerate the implementation of the productivity linked wage system. |
Pricing of key components such as oil and crucial parts may fluctuate and increase our costs and reducing our profitability. |
The E & E manufacturing activities are dependent on petrochemical based raw materials; this includes raw materials for its parts and components. Hence, fluctuations in the price of oil could affect the E & E companies' cost structure whereby sudden increases in oil prices would impinge on their profitability. |
Also, the availability of raw materials will invariably have an impact on the performance of E & E manufacturing based companies which source its raw materials both locally and overseas. However, there can be no assurance that any shortages in raw materials will not have any impact on the performance of these companies. |
We are subject to foreign exchange fluctuations and government imposition of restrictions to capital market |
Most E & E companies are subject to foreign exchange fluctuations through the import of raw materials and export of finished goods. Previously, the Malaysian government imposed capital market restrictions and fixed the exchange rate of USD1 to RM3.80. Currently however, there can be no assurance that the removal of the capital control regime will not affect the performance of these companies. |
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Name/Address(1) |
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Con Unerkov(3) (4)(5) |
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Mohd
Mahyudin bin Zainal (3)(4)(9) |
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Norlizah binti Zainal(3)(4)(8) |
|
|
|
|
||||
Lam Pui Kit (3)
(7) No.4, Dong Wen Chan Street, West City District, Beijing, China. |
|
|
|
|
||||
Mohd Khairudin bin Ramli (3) |
|
|
|
|
||||
Mohd
Suhaimi bin Rozali ( 4) |
|
|
|
|
||||
All officers and directors as a group (6 persons) | 232,389,029 |
- |
232,389,029 |
20.48% |
||||
ECE
Technologies Sdn. Bhd. (ECE), of No. 55 Jalan Snuker 13/28, Tadisma Business Park, Section 13, 40100 Shah Alam, Malaysia |
358,779,837 |
- |
358,779,837 |
31.62% |
||||
Maxcom Group International Ltd. (MGIL) of P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. | 141,666,668 |
- |
141,666,668 |
12.48% |
||||
Liu Kang (6), No 42, Tujilin Wuchan, Wuhan City, Hubei Ching, China. | 141,666,668 |
- |
141,666,668 |
12.48% |
||||
Central High
Limited (CHL), of P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. |
125,000,000 |
- |
125,000,000 |
11.01% |
||||
Norjannah binti Zainal (10) | 79,864,392 |
- |
79,864,392 |
7.04% |
30
Notes: |
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
|
(8) |
|
(9) |
|
(10) |
|
31
Executive Officers and Directors |
|
NAME | AGE | POSITION | ||
Mohd Mahyudin bin ZAINAL | 43 | Director President and Chief Executive Officer | ||
Norlizah binti ZAINAL | 47 | Director and Chief Technology Officer | ||
Mohd Khairudin bin RAMLI | 41 | Director | ||
Con UNERKOV | 43 | Non Executive Director | ||
LAM Pui Kit | 71 | Non Executive Director | ||
Mohd Suhaimi bin ROZALI | 51 | Chief Financial Officer, Treasurer, Secretary | ||
|
|
Directors and Officers |
Prior to joining ECE Technologies in August 2008, he was a Chief Executive Officer/President of WWCable Berhad (company listed in Bursa Malaysia). He was involved in various industries such as manufacturing, property development, construction, financial and insurance and also an Executive Director and Director of several public listed companies listed in Bursa Malaysia namely Idaman Unggul Berhad, Idris Hydraulic Berhad, Mutiara Goodyear Development Berhad, Sern Kou Resources Berhad, Tap Resouces Berhad. He was also Director of Talasco Insurance Berhad, People Insurance Berhad and Tahan Insurance Berhad. Mr. Zainal is not an officer or director of any reporting company. |
32
NORLIZAH BINTI ZAINAL. Ms. Zainal was appointed as Director and Chief Technology Officer of the Company on June 8, 2012. Ms. Zainal graduated with a Degree in Electrical Engineering (Hons) from Universiti Teknologi Malaysia in 1989 and obtained a Diploma in Translation (Science and Technical) from Dewan Bahasa dan Pustaka Malaysia in 1990. She was attached to Muhibbah Engineering CMS Berhad as a consultant engineer before joining Ericsson Telecommunications, Malaysia in 1990. During her eleven years at Ericsson, she was responsible for local and international tenders as well as conducting training for local and international staff and clients. In 2002, she joined Unique Network Sdn Bhd. She joined ECE Technologies, the now major shareholder of China Media Group Corporation, on August 1, 2008 as Chief Technical Officer. Ms. Zainal is not an officer nor a director of any reporting company. |
|
|
|
|
|
|
33
The
table below sets forth, for our last two fiscal years, the compensation earned by our
directors and executive officers. The following table sets forth the annual and long-term
compensation for services in all capacities to the Company for its fiscal year ended
December 31, 2011 paid to our directors and executive officers who earned more than
$100,000 per year at the end of the last completed fiscal year. We refer to all of these
officers collectively as our "named executive officers." |
|
|||||||||
Name and principal position | Year (1) |
Salary ($) |
Bonus ($) |
Stock Awards |
Option Awards |
Non-Equity Incentive Plan Compensation |
Nonqualified Deferred Compensation Earnings |
All Other Compensation ($) |
Total ($) |
Cheng Pheng Loi (7) |
2011 |
- |
- |
- |
- |
- |
- |
- |
- |
2010 |
9,000 |
- |
- |
- |
- |
- |
- |
9,000 |
|
Con Unerkov (4) |
2011 |
- |
- |
- |
- |
- |
- |
- |
- |
2010 |
- |
- |
- |
- |
- |
- |
- |
- |
|
Alex Ho (8) |
2011 |
- |
- |
- |
- |
- |
- |
- |
- |
2010 |
- |
- |
- |
- |
- |
- |
- |
- |
|
Pui Kit Lam (5) |
2011 |
3,943 |
- |
- |
- |
- |
- |
- |
3,943 |
Mohd Khairudin bin Ramli (6) | 2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Mohd Mahyudin bin Zainal (2) | 2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Norlizah binti Zainal (3) | 2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Mohd Suhaimi bin Rozali(9) | 2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
(1) |
Figures represent the year ended December 31 for the indicative years. |
(2) | Mr. Mohd Mahyudin bin ZAINAL was appointed as CEO, President and Director on June 8, 2012. |
(3) | Ms. Norlizah binti ZAINAL was appointed as CTO and Director on June 8, 2012. |
(4) | Mr. Con Unerkov was the CFO, and Director. Mr. Unerkov resigned as the CFO on June 8, 2012. |
(5) | Mr. Pui Kit Lam was the Treasurer, Secretary, and Director since April 8, 2011. Mr. Lam resigned as Treasurer and Secretary on June 8, 2012. |
(6) | Mr. Mohd Khairudin bin Ramli was appointed as Director on March 9, 2012. |
(7) | Mr. Cheng Pheng Loi was the President, CEO, and Director of the Company with effect from May 2009 until June 8, 2012 when he resigned from all position. |
(8) | Mr. Alex Ho was the Treasurer, Secretary, and Director for 2010 and for the period until April 8, 2011 when he resigned. |
(9) | Mr. Mohd Suhaimi bin Rozali was appointed as CFO on June 8, 2012. |
|
Mr. Pheng Cheng LOI is working on 3 months contracts at a monthly fee of US$3,000. Messrs. Unerkov, and Ho did not receive any salary for 2011 and 2010. Mr. Lam received a salary remuneration of $3,943 in 2011. |
34
We have two equity compensation plans: (1) the 2002 Stock Option Plan and (2) the 2007 Stock Incentive Plan. The following table presents information relating to these plans as of the date of this report. |
|
||||||
Plan Category |
Number of Securities to be issued upon Exercise of outstanding options, warrants and rights |
Weighted average of exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (Excluding securities reflected in column a) |
|||
(a) |
(b) |
(c) |
||||
Equity compensation plans approved by security holders | 19,000,000 |
$0.010 |
158,011,112 |
|||
Equity compensation plans not approved by security holders | 5,811,300 |
- |
32,588,700 |
|||
Total |
24,811,300 |
$0.010 |
190,599,812 |
|||
2002 Stock Option Plan In October 2002, our Board of Directors authorized and approved the adoption of the 2002 Stock Option Plan effective the same date (the "2002 Stock Option Plan"). The purpose of the 2002 Stock Option Plan was to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service. The 2002 Stock Option Plan is administered by our Board of Directors or a committee ("Plan Administrator") appointed by and consisting of two or more members of our Board of Directors, which shall determine (i) the persons to be granted stock options under the 2002 Stock Option Plan; (ii) the number of shares subject to each option, the exercise price of each stock option; and (iii) whether the stock option shall be exercisable at any time during the option period of ten years or whether the stock option shall be exercisable in installments or by vesting only. The 2002 Stock Option Plan provides authorization to the Board of Directors to grant stock options to purchase a total number of shares not to exceed 211,111,112 shares as at the date of adoption by the Board of Directors. At the time a stock option is granted under the 2002 Stock Option Plan, the Plan Administrator shall fix and determine the exercise price at which shares may be acquired. In the event an optionee ceases to be employed by or to provide services to us for reasons other than cause or voluntary resignation of position, any stock option that is vested and held by such optionee generally may be exercisable within up to one year after the effective date that his position ceases, and after such one year period any unexercised stock option shall expire. In the event an optionee ceases to be employed by or to provide services to us for reasons of cause or voluntary resignation from the position, any stock option that is vested and held by such optionee shall forthwith terminate. No stock options granted under the 2002 Stock Option Plan will be transferable by the optionee other than by will or by the laws of descent and distribution following the optionee's death, and each stock option will be exercisable during the lifetime of the optionee subject to the option period of ten years or limitations described above. |
35
The exercise price of a stock option granted pursuant to the 2002 Stock Option Plan shall be paid in full to us by delivery of consideration equal to the product of the number of shares covered multiplied by the exercise price. The 2002 Stock Option Plan further provides that the Plan Administrator may grant to any key individuals who are employees eligible to receive options one or more incentive stock options to purchase the number of shares allotted by the Board of Directors (the "Incentive Stock Options"). The option price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option shall be at least 100% of the fair market value of the shares and in the case of an Incentive Stock Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of our stock, shall not be less than 110% of the fair market value. The option term of each Incentive Stock Option shall be determined by the Plan Administrator, and shall not commence sooner than from the date of grant and shall terminate no later than ten years from the date of grant, except for an optionee who owns more than 10% of the total combined voting power of all classes of our stock and whose Incentive Stock Option shall terminate no later than five year from the date of grant. |
There were 19,000,000 stock options issued in 2010. As of the date of this report, there were a total of 19,000,000 outstanding stock options to purchase shares of our Common Stock under the 2002 Stock Option Plan. |
On February 19, 2007, our Board of Directors authorized and approved the adoption of the 2007 Stock Incentive Plan effective the same date (the "2007 Stock Incentive Plan"). The purpose of the 2007 Stock Incentive Plan is to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service. The 2007 Stock Incentive Plan is to be administered by our Board of Directors or a committee ("Plan Administrator") appointed by and consisting of two or more members of our Board of Directors, which shall determine (i) the persons to be granted stock options under the 2007 Stock Incentive Plan; (ii) the number of shares subject to each option, the exercise price of each stock option; and (iii) whether the stock option shall be exercisable at any time during the option period of ten years or whether the stock option shall be exercisable in installments or by vesting only. The 2007 Stock Incentive Plan provides authorization to the Board of Directors to grant stock options to purchase a total number of shares, not exceed 38,400,000 shares as at the date of adoption by the Board of Directors. At the time a stock option is granted under the 2007 Stock Incentive Plan, the Board of Directors shall fix and determine the exercise price at which shares of our Common Stock may be acquired. In the event an optionee ceases to be employed by or to provide services to us for reasons other than cause, retirement, disability or death, any stock option that is vested and held by such optionee generally may be exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. The Plan Administrator shall have complete discretion either at the time an option is granted or at any time while the option remains outstanding, to i) extend the period of time which the option is to be exercisable following the optionees cessation of service, but not beyond the expiration of the option term and/or ii) permit the option to be exercised after the cessation of employment of both vested and unvested options at the time of cessation of employment. No stock options granted under the 2007 Stock Incentive Plan will be transferable by the optionee other than by will or by the laws of descent and distribution following the optionee's death, and each stock option will be exercisable during the lifetime of the optionee subject to the option period of ten years or limitations described above. The options can be assigned in whole or in part during the Optionee's lifetime to one or more members of the optionee's immediate family, provided the assignment is connected to estate planning or pursuant to a domestic relations order. |
36
The exercise price of a stock option granted pursuant to the 2007 Stock Incentive Plan shall be paid in full to us by delivery of consideration equal to the product of the number of shares multiplied by the exercise price. Any stock option settlement, including payment deferrals or payments deemed made by way of settlement of pre-existing indebtedness from the Company may be subject to such conditions, restrictions and contingencies as may be determined by the Plan Administrator. The 2007 Stock Incentive Plan further provides that, subject to the provisions of the 2007 Stock Incentive Plan and prior Stockholder approval, the Board of Directors may grant to any key individuals who are our employees eligible to receive options, one or more incentive stock options to purchase the number of shares of Common Stock allotted by the Board of Directors (the "Incentive Stock Options"). The option price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option shall be at lease 100% of the fair market value of the Common Shares of the Company and in the case of an Incentive Stock Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of our stock, shall not be less than 110% of the fair market value of our Common Stock. The option term of each Incentive Stock Option shall be determined by the Plan Administrator, which shall not commence sooner than from the date of grant and shall terminate no later than ten years from the date of grant of the Incentive Stock Option, except for optionee who owns more than 10% of the total combined voting power of all classes of our stock whom shall terminate no later than five year from the date of grant of the Incentive Stock Option. On March 8, 2007, we registered 38,400,000 shares underlying stock options under the 2007 Stock Incentive Plan with the SEC pursuant to a registration statement on Form S-8. In 2007, the Company issued 5,811,300 shares under the 2007 Stock Incentive Plan. From 2008 to 2011, the Company did not issue any shares under the 2007 Stock Incentive Plan. In April 2012, the Company issued 711,009 shares under the 2007 Stock Incentive Plan. As at the date of this report, (i) the Company has issued 6,522,309 shares under the 2007 Stock Incentive Plan, (ii) there are no outstanding stock options to purchase shares of our Common Stock under the 2007 Stock Incentive Plan and, (iii) there are still 31,877,691 shares issuable under the 2007 Stock Incentive Plan. |
37
Issuer Purchases of Equity
Securities No repurchases of our Common Stock were made during the fourth quarter and during our fiscal year ended December 31, 2011. |
Director Compensation |
|
Directors' and Officers' Liability Insurance |
|
Code of Ethics |
|
Board Committees |
|
|
|
|
|
|
Information set forth in Item 2.01 of this Current Report on Form 8-K with respect to the issuance of unregistered equity securities in connection with the Acquisition is incorporated by reference into this Item 3.02. |
Description of Capital Stock |
Authorized Capital Stock |
We have authorized 85,000,000,000 shares of no par value shares of capital stock. |
Capital Stock Issued and Outstanding |
|
Common Stock |
|
Dividend Policy |
There have been no cash dividends declared on our Common Stock since inception. It is the present policy of the Company to retain earnings to finance the growth and development of the business and, therefore, the Company does not anticipate paying dividends on its Common Stock in the foreseeable future. |
The holders of our Common Stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our Common Stock are entitled to receive dividends when, as and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of Common Stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our Common Stock. Holders of shares of our Common Stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our Common Stock. |
Trading Information |
|
Item 5.01 Changes in Control of Registrant. |
|
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
|
|
Mr. Cheng Pheng Loi resigned from the board of directors and as Chief Executive Officer. There were no disagreements between Mr. Loi and the Company. |
|
Mr, Mohd Mahyudin bin Zainal was appointed as Director and Chief Executive Officer of the Company. Mr. Zainal is the current Chief Executive Officer of ECE Technologies Sdn. Bhd, the now major shareholder of China Media Group Corporation. Prior to his appointment, Mr. Zainal obtained a Bachelor of Law Degree LLB (Hons) from Universiti Kebangsaan Malaysia and has been admitted as Advocate & Solicitor of High Court of Malaya in 1994. He has extensive experience in many spheres of law including commercial litigation, conveyancing and corporate legal practice. He has been involved in large scale corporate restructuring exercises involving corporate restructuring, mergers and acquisitions of public listed companies locally in Malaysia and also acquisitions of foreign countries in South East Asia. He was directly involved in the listing of Mutiara Goodyear Development Berhad on the Main Board of Bursa Malaysia and the restructuring of Idaman Unggul Berhad (formerly known as Idris Hydraulic (M) Berhad. He was also directly involved in the establishment of Tahan Insurance Berhad via the merger of three insurance companies namely Talasco Insurance Berhad, Tenaga Insurance Berhad and People Insurance Berhad. Prior to joining ECE Technologies, he was a Chief Executive Officer/President of WWCable Berhad (company listed in Bursa Malaysia). He was involved in various industries such as manufacturing, property development, construction, financial and insurance and also an Executive Director and Director of several public listed companies listed in Bursa Malaysia namely Idaman Unggul Berhad, Idris Hydraulic Berhad, Mutiara Goodyear Development Berhad, Sern Kou Resources Berhad, Tap Resouces Berhad. He was also Director of Talasco Insurance Berhad, People Insurance Berhad and Tahan Insurance Berhad. Mr. Zainal is not an officer or director of any other reporting company. |
|
|
|
|
40
Item 9.01 Financial Statements and Exhibits. | |
|
Financial Statements of Businesses Acquired. In accordance with Item 9.01(a), ATeam's audited financial statements for the fiscal years ended December 31, 2011 and 2010 are filed in this Current Report on Form 8-K as Exhibit 99.1. |
(b) |
Exhibits. |
The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K. |
|
Exhibit No. | Description | |
2.2 |
Sale Purchase Agreement between Good World Investments Limited, China Media Group Corporation and ECE Technologies Sdn. Bhd. dated March 15, 2012. (4) |
|
2.3 | Amendments to the Sale Purchase Agreement dated April 17, 2012, by and among Good World Investments Limited, China Media Group Corporation and ECE Technologies Sdn. Bhd. (5) | |
3.1 | Articles of Incorporation. (1) | |
3.1.1 | Certificate of Amendment to Article of Incorporation (2) | |
3.1.2 | Certificate of Amendment to Articles of Incorporation, as amended (3) | |
3.2 | Bylaws. (1) | |
99.1 | A-Team Resources Sdn. Bhd. financial statements for the fiscal years ended December 31, 2011 and 2010. (6) | |
99.2 | China Media Group Corporation and A-Team Resources Sdn. Bhd. proforma financial statements for the year ended December 31, 2011. (6) |
|
Incorporated by reference to our Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on April 15, 2003. |
|
Incorporated by reference to our Current Report on Form 8-K as filed with the SEC on February 3, 2005. |
|
Incorporated by reference to our Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on March 16, 2007. |
(4) |
Incorporated by reference from the Company's Form 8-K filed on March 16, 2012. |
(5 |
Incorporated by reference from Company's Form 8-K filed on April 20, 2012. |
|
Filed herewith. |
41
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 thereunto duly authorized. |
Date: June 11, 2012 |
CHINA MEDIA GROUP CORPORATION |
||
By: | /s/ Mohd Mahyudin bin Zainal | |
Mohd Mahyudin bin Zainal | ||
Chief Executive Officer |
42
Exhibit No. | Description | |
99.1 | A-Team Resources Sdn. Bhd. financial statements for the fiscal years ended December 31, 2011 and 2010. | |
99.2 |
China Media Group Corporation and A-Team Resources Sdn. Bhd. proforma financial statements for the year ended December 31, 2011. |
43
Exhibit 99.1 |
A-TEAM RESOURCES SDN. BHD.
FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
Exhibit 99.1 |
|
|
|
||
Independent Auditors' Report | F -1 |
|
Balance Sheets | F - 2 |
|
Statement of Income | F - 3 |
|
Statement of Shareholders' Equity | F - 4 |
|
Statement of Cash Flows | F - 5 |
|
Notes to the Financial Statements | F - 6 - F-26 |
|
Exhibit 99.1 |
REPORT OF INDEPENDENT AUDITORS |
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF |
A-TEAM RESOURCES SDN. BHD. (Company No. : 639284 - M) |
We conducted our audits 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. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position of A-Team Resources
Sdn. Bhd. at 31st December 2011 and 31st December 2010, and the results of its operations
and its cash flows for the years then ended in conformity with U.S. generally accepted
accounting principles. |
E. S. Lim & Co. |
Chartered Accountants |
Kuala Lumpur, Malaysia |
31st May 2012 |
Page F - 1
Exhibit 99.1 |
|
|
|
Page F - 2
Exhibit 99.1 |
|
|
|
Page F - 3
Exhibit 99.1 |
|
|
Share |
Comprehensive Income |
Retained earnings |
Total |
||||
USD | USD | USD | USD | ||||
At 1 January 2010 | 583,107 |
2,461 |
767,942 |
1,353,510 |
|||
Currency translation adjustment | - |
155,439 |
- | 155,439 | |||
Total comprehensive income for the financial year | - |
- |
71,390 |
71,390 |
|||
At 31 December 2010 | 583,107 |
157,900 |
839,332 | 1,580,339 | |||
Currency translation adjustment | - |
(51,442) |
- | (51,442) | |||
Total comprehensive income for the financial year | - |
- |
355,678 | 355,678 | |||
At 31 December 2011 | 583,107 |
106,458 |
1,195,010 | 1,884,575 | |||
|
Page F - 4
Exhibit 99.1 |
|
|
Note | 2011 |
2010 |
||
CASH FLOW FROM OPERATING ACTIVITIES | ||||
Profit before tax | 483,625 |
92,921 |
||
Adjustment for : | ||||
Depreciation | 64,835 |
60,229 |
||
Bad debts written off | - |
1,359 |
||
Waiver of non-trade liabilities | - |
(4,468) |
||
Net gain on disposal of property, plant and equipment | (11,364) |
- |
||
Trade and other receivables | (39,232) |
(635,111) |
||
Trade and other payables | (107,106) |
5,199 |
||
Amount owing to Directors | 67,639 |
(62,245) |
||
Net income tax refunded/(paid) | - |
(20,047) |
||
Restricted cash | (8,014) |
567,424 |
||
Net cash flow from/(used in) operating activities | 450,383 |
5,261 |
||
CASH FLOW FROM INVESTING ACTIVITIES | ||||
Purchase of property, plant and equipment | 6 |
(4,753) |
(22,323) |
|
Proceeds from disposal of property, plant and equipment | 42,813 |
- |
||
Net cash flow from/(used in) investing activities | 38,060 |
(22,323) |
||
CASH FLOW FROM FINANCING ACTIVITIES | ||||
Net repayments of trade financing payables | (524,059) |
(253,783) |
||
Term loans arising from rearrangement | 567,519 |
112,665 |
||
Repayment of term loans | (263,497) |
(975) |
||
Repayment of finance leases | (68,968) |
(24,471) |
||
Interest paid | 47,567 |
7,605 |
||
Net cash flow (used in)/from financing activities | (241,438) |
(158,959) |
||
NET INCREASE/(DECREASE ) IN CASH AND CASH EQUIVALENTS | 247,005 |
(176,021) |
||
Effect on exchange rate changes | (52,749) |
142,520 |
||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | (170,264) | (136,763) | ||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 3 |
23,992 |
(170,264) |
|
Supplemental disclosures of cash flow information | ||||
Net income tax paid | - |
20,047 |
||
Interest paid | 26,352 |
94,387 |
|
Page F - 5
Exhibit 99.1 |
|
|
1. |
CORPORATE INFORMATION |
In 2004, the Company carried out the business at Lot 1774, Jalan Balakong, Bukit Belimbing, 43300 Seri Kembangan, Selangor Darul Ehsan, Malaysia. In 2005, the shareholders had increased the paid up capital to USD 116,621 (RM400,000) divided into 400,000 unit shares. In 2006, the Company moved to Shah Alam, Selangor Darul Ehsan, Malaysia due to expansion. Now the Company is located at Telok Gong, Klang, Selangor Darul Ehsan, Malaysia with a paid-up capital of USD 583,107(RM2,000,000) divided into 2,000,000 unit shares. The key management personnel is Mr. BB Ng who has never failed to yield wealth to the shareholders even in economical crisis. The Company will continue to maximize the return for the shareholders. The registered office of the Company is located at No. 24A (Room 1), Jalan 21/19, SEA Park, 46300 Petaling Jaya, Selangor Darul Ehsan. |
2. |
SIGNIFICANT ACCOUNTING POLICIES |
|
2.1 |
(a) Basis of Presentation |
|
|
||
(b) Use of Estimates |
||
The preparation of the Company's financial statements in conformity with US GAAP, requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting periods. The management makes these estimated using the best information available at the time the estimates are made; however actual results could differ materially from those estimates. |
Page F - 6
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.2 |
|
|
|
|
Motor vehicles | 10-20 |
Furniture and fittings | 20 |
Office equipment | 20-60 |
Mould | 20 |
Renovation | 20 |
2.3 |
|
|
2.4 |
|
|
The Company's banking facilities are secured by deposits with financial institutions amounted to USD 57,395 (2010 : USD 49,381). These deposits are presented as "restricted cash" in the Company's balance sheet. |
||
2.5 |
|
|
The Company's operations are conducted in Malaysia. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in Malaysia, and by general state of Malaysia economy. | ||
2.6 |
Borrowing Costs |
|
|
Page F - 7
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.7 |
|
||
(a) |
Finance Lease |
||
Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term. |
|||
(b) |
Operating Lease |
||
Operating lease payments are recognised as an expense in statement of income on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is amortised as a reduction of rental expense over the lease term on a straight-line basis. |
|||
2.8 |
Income Taxes |
||
(a) |
Current Tax |
||
Current taxes are recognised in the statement of income except to the extent that the tax relates to items recognised outside the statement of income, either in other income or directly in equity. |
|||
(b) |
Deferred Tax |
||
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realised. |
Page F - 8
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.9 |
|
|
Functional and Presentation Currency |
||
The financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates ie. Ringgit Malaysia ('RM') ('the functional currency'). However, the Company uses the US dollar as its reporting currency. Therefore, the financial statements of the Company are translated into USD in accordance with ASC 830, Foreign Currency Matters, using the current rate method. Assets and liabilities are translated at the rate of exchange prevailing at the balance sheet dates. Shareholders' equity was translated at the applicable historical rate. Revenue and expenses are translated at the yearly average rates of exchange. Translation gains and losses were included in accumulated other comprehensive income. |
|||
The principal closing rates used in the translated of foreign currency amounts are as follows :- |
|
|
||
USD |
USD |
||
RM1- As at December 31 |
0.3153 |
0.3248 |
|
RM1- Average Rate |
0.3200 |
0.3076 |
|
|
Transactions and Balances |
||
Foreign currency transactions are accounted for at exchange rates ruling at the transaction dates. Foreign currency monetary assets and liabilities are translated at exchange rates ruling at the reporting date. Exchange differences arising from the translation of foreign currency monetary assets and liabilities are recognised in the statement of comprehensive income. |
2.10 |
|
|
2.11 |
|
|
Page F - 9
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.12 |
|
|
2.13 |
|
|
2.14 |
|
|
Certain statuary reporting amounts have been reclassified to conform to the US GAAP presentation. |
||
2.15 |
|
|
|
||
2.16 |
|
|
|
Page F - 10
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.17 |
|
(a) |
Recently Implemented StandardsASC 105, Generally Accepted Accounting Principles ("ASC 105") (formerly Statement of Financial Accounting Standards No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No.162 ) reorganized by topic existing accounting and reporting guidance issued by the Financial Accounting Standards Board ("FASB") into a single source of authoritative generally accepted accounting principles ("GAAP") to be applied by nongovernmental entities. All guidance contained in the Accounting Standards Codification ("ASC") carries an equal level of authority. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Accordingly, all other accounting literature will be deemed "non-authoritative". ASC 105 is effective on a prospective basis for financial statements issued for interim and annual periods ending after September15, 2009. The Company has implemented the guidance included in ASC 105 as of July1, 2009. The implementation of this guidance changed the Company's references to GAAP authoritative guidance but did not impact the Company's financial position or results of operations. ASC 855, Subsequent Events ("ASC 855") (formerly Statement of Financial Accounting Standards No.165, Subsequent Events) includes guidance that was issued by the FASB in May 2009, and is consistent with current auditing standards in defining a subsequent event. Additionally, the guidance provides for disclosure regarding the existence and timing of a company's evaluation of its subsequent events. ASC 855 defines two types of subsequent events, "recognized" and "non-recognized". Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet and are required to be reflected in the financial statements. Non-recognized subsequent events provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date and, therefore; are not required to be reflected in the financial statements. However, certain non-recognized subsequent events may require disclosure to prevent the financial statements from being misleading. This guidance was effective prospectively for interim or annual financial periods ending after June15, 2009. The Company implemented the guidance included in ASC 855 as of April1, 2009. The effect of implementing this guidance was not material to the Company's financial position or results of operations. |
Page F - 11
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.17 |
|
||
(a) |
Recently Implemented Standards (Continued) ASC 944, Financial Services - Insurance ("ASC 944") contains guidance that was previously issued by the FASB in May 2008 as Statement of Financial Accounting Standards No.163, Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No.60 that provides for changes to both the recognition and measurement of premium revenues and claim liabilities for financial guarantee insurance contracts that do not qualify as a derivative instrument in accordance with ASC 815, Derivatives and Hedging (formerly included under Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging Activities). This financial guarantee insurance contract guidance also expands the disclosure requirements related to these contracts to include such items as a company's method of tracking insured financial obligations with credit deterioration, financial information about the insured financial obligations, and management's policies for placing and monitoring the insured financial obligations. ASC 944, as it relates to financial guarantee insurance contracts, was effective for fiscal years beginning after December15, 2008, except for certain disclosures related to the insured financial obligations, which were effective for the third quarter of 2008. The Company does not have financial guarantee insurance products, and, accordingly, the implementation of this portion of ASC 944 did not have an effect on the Company's results of operations or financial position. ASC 805, Business Combinations ("ASC 805") (formerly included under Statement of Financial Accounting Standards No.141 (revised 2007), Business Combinations) contains guidance that was issued by the FASB in December 2007. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with certain exceptions. Additionally, the guidance requires changes to the accounting treatment of acquisition related items, including, among other items, transaction costs, contingent consideration, restructuring costs, indemnification assets and tax benefits. ASC 805 also provides for a substantial number of new disclosure requirements. ASC 805 also contains guidance that was formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies which was intended to provide additional guidance clarifying application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. ASC 805 was effective for business combinations initiated on or after the first annual reporting period beginning after December15, 2008. The Company implemented this guidance effective January1, 2009. Implementing this guidance did not have an effect on the Company's financial position or results of operations; however it will likely have an impact on the Company's accounting for future business combinations, but the effect is dependent upon acquisitions, if any, that are made in the future. |
Page F - 12
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.17 |
|
||
(a) |
Recently Implemented Standards (Continued) ASC 810, Consolidation ("ASC 810") includes new guidance issued by the FASB in December 2007 governing the accounting for and reporting of noncontrolling interests (previously referred to as minority interests). This guidance established reporting requirements which include, among other things, that noncontrolling interests be reflected as a separate component of equity, not as a liability. It also requires that the interests of the parent and the noncontrolling interest be clearly identifiable. Additionally, increases and decreases in a parent's ownership interest that leave control intact shall be reflected as equity transactions, rather than step acquisitions or dilution gains or losses. This guidance also requires changes to the presentation of information in the financial statements and provides for additional disclosure requirements. ASC 810 was effective for fiscal years beginning on or after December15, 2008. The Company implemented this guidance as of January1, 2009. The effect of implementing this guidance was not material to the Company's financial position or results of operations. ASC 825, Financial Instruments ("ASC 825") includes guidance which was issued in February 2007 by the FASB and was previously included under Statement of Financial Accounting Standards No.159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No.115. The related sections within ASC 825 permit a company to choose, at specified election dates, to measure at fair value certain eligible financial assets and liabilities that are not currently required to be measured at fair value. The specified election dates include, but are not limited to, the date when an entity first recognizes the item, when an entity enters into a firm commitment or when changes in the financial instrument causes it to no longer qualify for fair value accounting under a different accounting standard. An entity may elect the fair value option for eligible items that exist at the effective date. At that date, the difference between the carrying amounts and the fair values of eligible items for which the fair value option is elected should be recognized as a cumulative effect adjustment to the opening balance of retained earnings. The fair value option may be elected for each entire financial instrument, but need not be applied to all similar instruments. Once the fair value option has been elected, it is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. This guidance was effective as of the beginning of fiscal years that began after November15, 2007. The Company does not have eligible financial assets and liabilities, and, accordingly, the implementation of ASC 825 did not have an effect on the Company's results of operations or financial position. |
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.17 |
|
||
(a) |
Recently Implemented Standards (Continued)ASC 820, Fair Value Measurements and Disclosures ("ASC 820") (formerly included under Statement of Financial Accounting Standards No.157, Fair Value Measurements) includes guidance that was issued by the FASB in September 2006 that created a common definition of fair value to be used throughout generally accepted accounting principles. ASC 820 applies whenever other standards require or permit assets or liabilities to be measured at fair value, with certain exceptions. This guidance established a hierarchy for determining fair value which emphasizes the use of observable market data whenever available. It also required expanded disclosures which include the extent to which assets and liabilities are measured at fair value, the methods and assumptions used to measure fair value and the effect of fair value measures on earnings. ASC 820 also provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. The emphasis of ASC 820 is that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, under current market conditions. ASC 820 also further clarifies the guidance to be considered when determining whether or not a transaction is orderly and clarifies the valuation of securities in markets that are not active. This guidance includes information related to a company's use of judgment, in addition to market information, in certain circumstances to value assets which have inactive markets. Fair value guidance in ASC 820 was initially effective for fiscal years beginning after November15, 2007 and for interim periods within those fiscal years for financial assets and liabilities. The effective date of ASC 820 for all non-recurring fair value measurements of nonfinancial assets and nonfinancial liabilities was fiscal years beginning after November15, 2008. Guidance related to fair value measurements in an inactive market was effective in October 2008 and guidance related to orderly transactions under current market conditions was effective for interim and annual reporting periods ending after June15, 2009. (b) Recently Issued Standards In June 2011, the Financial Accounting Standard Board ("FASB") issued Accounting Standard Update ("ASU") 2011-05, Presentation of Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 will be effective for the Company beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-05 to have a material effect on its operating results or financial position. However, it will impact the presentation of comprehensive income. |
Page F -14
Exhibit 99.1 |
|
|
2. |
SIGNIFICANT ACCOUNTING POLICIES (Continued) |
2.17 |
|
||
(b) |
Recently Issued Standards (Continued) In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS"). ASU 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and IFRS, and in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 will be effective for the Company beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-04 to have a material effect on its operating results or financial position. In April 2011, the FASB issued ASU 2011-03, Consideration of Effective Control on Repurchase Agreements, which deals with the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 changes the rules for determining when these transactions should be accounted for as financings, as opposed to sales. The guidance in ASU 2011-03 is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The adoption of ASU 2011-03 is not expected to have a material impact on the Company's financial condition or results of operation. In April 2011, the FASB issued ASU 2011-02, "A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring", which clarifies when creditors should classify loan modifications as troubled debt restructurings. The guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the year. The guidance on measuring the impairment of a receivable restructured in a troubled debt restructuring is effective on a prospective basis. A provision in ASU 2011-02 also ends the FASB's deferral of the additional disclosures about troubled debt restructurings as required by ASU 2010-20. The adoption of ASU 2011-02 is not expected to have a material impact on the Company's financial condition or results of operations. |
Exhibit 99.1 |
|
|
3. |
CASH AND CASH EQUIVALENTS |
(a) The fixed deposits with licensed banks bear interest rate at 3% (2010 : 3%) per annum. |
|
(b) Cash and cash equivalents comprise of the following as at the end of the reporting period: |
2011 |
2010 |
||||
USD |
USD |
||||
Cash and bank balances | 13,807 |
7,285 |
|||
Fixed deposits with licensed banks | 67,580 |
49,381 |
|||
81,387 | 56,666 | ||||
Less: Restricted cash | (57,395) |
(49,381) |
|||
Bank overdrafts (Note) | - |
(177,549) |
|||
23,992 |
(170,264) |
||||
Note: The bank overdrafts for financial year ended 31st December 2010 bear interest ranging from 1.85 to 3.50 percentage point above the Central Bank's funding rate for the first three years and thereafter at 2.00 percentage point above lender's base lending rates. The bank overdrafts w ere secured by the following during the previous year:- |
||
(i) |
|
|
|
Guarantee from Credit Guarantee Corporation under Flexi Guarantee Scheme coverage of 70% on clean exposure; |
|
(iii) |
|
|
(iv) |
Jointly and severally guaranteed by certain Directors of the Company. |
|
Page F-16
Exhibit 99.1 |
|
|
4. |
TRADE RECEIVABLES |
Note |
2011 |
2010 |
|||
Trade receivables | |||||
Third parties | 1,819,683 |
1,194,059 |
|||
Amount owing by a corporation in which a Director has financial interest | 19 |
1,197,686 |
1,878,156 |
||
3,017,369 |
3,072,215 |
||||
Less: Allowance for impairment losses | - |
(4,872) |
|||
Trade receivables, net | 3,017,369 |
3,067,343 |
|||
Allowance of impairment losses: |
|||||
At 1 January | 4,872 |
4,382 |
|||
Written-off | (4,872) | - | |||
Foreign currency translation reserve | - |
490 |
|||
At 31 December | - |
4,872 |
|||
Bad debts written-off during the year recognised in statement of income | - |
1,359 |
Trade receivables are non-interest bearing and the normal credit terms range from 30 to 90 days (2010: 30 to 90 days) terms. Other credit terms are assessed and approved on a case-by-case basis. The Company has no significant concentration of credit risk that arises from exposure to a single debtor or to groups of debtors. |
|
5. |
OTHER RECEIVABLES |
2011 |
2010 |
||||
Other receivables | 372 |
18,883 |
|||
Deposits | 25,302 |
26,065 |
|||
Prepayments | 113,381 | 29 |
|||
139,055 |
44,977 |
||||
Exhibit 99.1 |
|
|
6. |
PROPERTY, PLANT AND EQUIPMENT |
Motor |
Furniture and |
Office |
||||||||||
vehicles |
fittings |
equipment |
Mould |
Renovation |
Total |
|||||||
2011 | USD |
USD |
USD |
USD |
USD |
USD |
||||||
COST | ||||||||||||
At the beginning of the year | 244,455 |
64,181 |
88,597 |
4,352 |
81,688 |
483,273 |
||||||
Acquisition during the year | 26,301 |
- |
1,626 |
- |
- |
27,927 |
||||||
Disposal during the year | (81,825) |
- |
- |
- |
- |
( 81,825 ) |
||||||
Foreign currency translation reserve | (7,153) |
(1,878) |
(2,592) |
(127) |
(2,390) |
(14,140) |
||||||
At the end of the year | 181,778 |
62,303 |
87,631 |
4,225 |
79,298 |
415,235 |
||||||
ACCUMULATED DEPRECIATION | ||||||||||||
At the beginning of the year | 156,612 |
47,569 |
63,374 |
4,316 |
54,768 |
326,639 |
||||||
Charge for the year | 25,785 |
12,129 |
10,792 |
34 |
16,095 |
64,835 |
||||||
Disposal during the year | (50,376) |
- |
- |
- |
- |
( 50,376 ) |
||||||
Foreign currency translation reserve | (4,222) |
(1,570) |
(2,012 ) |
(126) |
(1,838) |
( 9,768 ) |
||||||
At the end of the year | 127,799 |
58,128 |
72,154 |
4,224 |
69,025 |
331,330 |
||||||
NET BOOK VALUE | ||||||||||||
At the end of the year | 53,979 |
4,175 |
15,477 |
1 |
10,273 |
83,905 |
||||||
Page F - 18
Exhibit 99.1 |
|
|
6. |
PROPERTY, PLANT AND EQUIPMENT (Continued) |
Motor |
Furniture and |
Office |
||||||||||
vehicles |
fittings |
equipment |
Mould |
Renovation |
Total |
|||||||
2010 | USD |
USD |
USD |
USD |
USD |
USD |
||||||
COST | ||||||||||||
At the beginning of the year | 187,923 |
56,375 |
73,604 |
3,914 |
64,705 |
386,521 |
||||||
Acquisition during the year | 35,505 |
1,498 |
6,756 |
- |
9,744 |
53,503 |
||||||
Foreign currency translation reserve | 21,027 |
6,308 |
8,237 |
438 |
7,239 |
43,249 |
||||||
At the end of the year | 244,455 |
64,181 |
88,597 |
4,352 |
81,688 |
483,273 |
||||||
ACCUMULATED DEPRECIATION | ||||||||||||
At the beginning of the year | 120,799 |
33,095 |
44,190 |
3,850 |
34,636 |
236,570 |
||||||
Charge for the year | 21,115 |
10,200 |
13,485 |
33 |
15,396 |
60,229 |
||||||
Foreign currency translation reserve | 14,698 |
4,274 |
5,699 |
433 |
4,736 |
29,840 |
||||||
At the end of the year | 156,612 |
47,569 |
63,374 |
4,316 |
54,768 |
326,639 |
||||||
NET BOOK VALUE | ||||||||||||
At the end of the year | 87,843 |
16,612 |
25,223 |
36 |
26,920 |
156,634 |
||||||
Page F - 19
Exhibit 99.1 |
|
|
6. |
PROPERTY, PLANT AND EQUIPMENT (Continued) |
(a) |
|
(b) |
|
2011 |
2010 |
|||||
Note |
USD |
USD |
||||
Total cost of property, plant and equipment | 27,927 |
53,503 |
||||
Less: Purchase consideration satisfied by obligation under finance leases | 11 |
(23,174) |
(31,180) |
|||
4,753 |
22,323 |
|||||
7. |
TRADE PAYABLES |
2011 |
2010 |
||||
Note |
USD |
USD |
|||
Trade payables |
44,197 |
82,983 |
|||
Amount owing to a corporation in which a Director has financial interest | 19 |
- |
73,924 |
||
44,197 |
156,907 |
||||
|
8. |
OTHER PAYABLES AND ACCRUALS |
2011 |
2010 |
||||
USD |
USD |
||||
Other payables |
128,369 |
106,156 |
|||
Accruals |
170,165 |
186,774 |
|||
298,534 |
292,930 |
||||
|
9. |
AMOUNT OWING TO DIRECTORS |
Note |
2011 |
2010 |
|||
USD |
USD |
||||
Amount owing to directors |
19 |
133,027 |
65,388 |
Page F - 20
Exhibit 99.1 |
|
|
10. |
TRADE FINANCING PAYABLES |
|
Trade financing payables for the financial year ended 31st December 2010 which bear interest at 2.0 percentage points above the lender's base lending rates provide by RCE Factoring Sdn. Bhd. and HSBC Bank Malaysia Berhad were secured as follows:- |
||
(i) |
Pledged of fixed deposits of the Company; |
|
(ii) | Guaranteed by Credit Guarantee Corporation; | |
(iii) | Jointly and severally guaranteed by the Directors of the Company; and | |
(iv) | Corporate guarantee given by a third party corporation in which the Directors have financial interest. | |
Trade financing payables for the financial year ended 31st December 2011 which bear interest at 2.0 percentage points above the lender's base lending rates are secured as follows:- |
||
(i) |
Acceptance of the Facility Offer Letter; |
|
(ii) | Execution of the Receivables Finance Agreement; and | |
(iii) | Jointly and severally guaranteed by a Director of the Company and a third party. | |
|
11. |
OBLIGATION UNDER FINANCE LEASES |
2011 |
2010 |
||||
USD |
USD |
||||
Minimum lease payments: | |||||
Not later than one (1) year | 30,332 |
40,136 |
|||
Later than one (1) year but not later than five (5) years | 68,512 |
105,213 |
|||
Total minimum lease payments | 98,844 |
145,349 |
|||
Less: Future interest charges | (19,490) |
(28,836) |
|||
Present value of minimum lease payments | 79,354 |
116,513 |
Repayable as follows: | |||||
Not later than one (1) year | 24,433 |
32,709 |
|||
Later than one (1) year and not later than five (5) years | 54,921 |
83,804 |
|||
79,354 |
116,513 |
||||
The effective rates implicit in the lease is range between 4.76% to 7.30% (2010 : 4.76% to 7.30%) per annum. |
Exhibit 99.1 |
|
|
12. |
TERM LOANS |
2011 |
2010 |
||||
USD |
USD |
||||
Current portion: | |||||
Not later than one (1) year | 181,030 |
112,665 |
|||
Non-current portion: | |||||
later than one (1) year and not later than two (2) years | 194,788 |
- |
|||
later than two (2) years and not later than five (5) years | 79,801 |
- |
|||
274,589 |
- |
||||
455,619 |
112,665 |
||||
|
The term loans are provide by Standard Chartered Bank Malaysia Berhad and Alliance Bank Malaysia Berhad are secured by the following:- |
Term loan I |
||
(i) |
Pledged of Company's fixed deposit; |
|
(ii) | Debentures over the fixed and floating assets of the Company; | |
(iii) | Guarantee by Credit Guarantee Corporation (M) Berhad; | |
(iv) | Notice of assignment and receivables finance agreement; and | |
(v) | Joint and several guarantee by the Directors of the Company. | |
The interest rates and discount charge applicable to the facilities range between 1.00 to 3.75 percentage points above the lenders' base lending rates. |
||
Term loan I is repayable by 60 equal monthly installment of USD1,941 (RM 5,976) per month. |
||
Term loan II |
||
(i) |
Pledged of Company's fixed deposit; |
|
(ii) | Guarantee by a third party corporation in which the Directors have financial interest; | |
(iii) | Notice of assignment and receivables finance agreement; and | |
(iv) | Joint and several guarantee by the Directors of the Company. | |
The interest rates to the facilities is fixed at 1.00 percentage points above the lenders' base lending rates. |
||
|
Page F - 22
Exhibit 99.1 |
|
|
13. |
SHARE CAPITAL |
Number of ordinary |
||||||||
shares of RM1 each |
Amount |
|||||||
2011 |
2010 |
2011 |
2010 |
|||||
USD |
USD |
|||||||
Authorised | ||||||||
At 1 January and 31 December | 5,000,000 |
5,000,000 | 1,457,768 |
1,457,768 |
||||
Issued and fully paid up | ||||||||
At 1 January and 31 December | 2,000,000 |
2,000,000 |
583,107 |
583,107 |
||||
The fully paid-up share capital of the Company and the related changes since its incorporation are as follows:- |
Balance As Of |
|
Par
value |
Consideration | USD |
RM |
|||||
January 10, 2004 |
2 |
1.00 |
Cash |
1 |
2 |
|||||
March 5, 2004 |
100,000 |
1.00 |
Cash |
29,155 |
100,000 |
|||||
February 19, 2005 |
400,000 |
1.00 |
Cash |
116,621 |
400,000 |
|||||
September 12, 2006 |
1,000,000 |
1.00 |
Bonus issue |
291,554 |
1,000,000 |
|||||
December 7, 2009 |
2,000,000 |
1.00 |
Cash |
583,107 |
2,000,000 |
|||||
14. |
REVENUE |
2011 |
2010 |
||||
USD |
USD |
||||
Sale of goods - Third parties |
6,932,545 |
4,994,706 |
|||
15. |
FINANCE COSTS |
2011 |
2010 |
||||
Interest expense on: | USD |
USD |
|||
Trade financing | 21,754 |
58,992 |
|||
Bank overdraft | 4,598 |
35,395 |
|||
Obligation under finance lease | 8,635 |
6,630 |
|||
Term loans | 38,932 |
975 |
|||
73,919 |
101,992 |
||||
Exhibit 99.1 |
|
|
16. |
INCOME TAX EXPENSE |
2011 |
2010 |
||||
USD |
USD |
||||
Income tax expenses: |
|||||
Estimated current tax |
127,988 |
21,531 |
|||
Overprovision in prior years |
(41) |
- |
|||
127,947 |
21,531 |
||||
A reconciliation of income tax expense applicable to the profit before tax at the applicable statutory income tax rate to income tax expense at the effective tax rate of the Company is as follows: |
2011 |
2010 |
|||
USD |
USD |
|||
Profit before taxation | 483,625 |
92,921 |
||
Tax at the applicable tax rate of : | 31,997 |
18,584 |
||
- 20% on the first RM500,000 chargeable income | 80,910 |
- |
||
- 25% on the balance of the chargeable income | ||||
Tax effects of: | ||||
Expenses which are not deductible | 16,497 |
7,446 |
||
Deferred tax liability not provided for | (1,416) |
(4,499) |
||
Overprovision in prior years in respect of income tax | (41) |
- |
||
127,947 |
21,531 |
|||
The Company has not recognised deferred tax liabilities due to its immateriality and the details are as follows :- |
2011 |
2010 |
|||
USD |
USD |
|||
Deferred tax liabilities :- | ||||
Property, plant and equipment | 1,147 | 17,665 | ||
|
Subject to the confirmation of the Inland Revenue Board, as at 31st December 2010, the Company has tax exempt income derived from Income Tax (Exemption) (No.12) Order 2002 of approximately USD 624,096 (2010 : USD 642,907) which enable the Company to distribute tax exempt dividends of the equivalent amount. |
17. |
DIRECTORS' REMUNERATION |
2011 |
2010 |
||||
USD |
USD |
||||
Directors of the Company :- | |||||
- fees | 19,198 | 18,916 | |||
- salaries | 30,717 | 29,528 | |||
- other emoluments | 3,686 |
9,218 |
|||
Page F - 24
Exhibit 99.1 |
|
|
18. |
CONTINGENT LIABILITIES |
Note | 2011 |
2010 |
|||
USD |
USD |
||||
Corporate guarantee given to a financial institution for facilities granted to a corporation as disclosed in Note 19 in which a Director has financial interest |
19 | 415,934 |
123,578 |
||
The Directors are of the view that the chances of the financial institutions to call upon the corporate guarantees are remote. |
|
19. |
RELATED PARTY TRANSACTIONS |
|
Note |
2011 |
2010 |
|||
USD |
USD |
||||
Transactions | |||||
Purchase of goods | 5,315,415 |
3,146,480 |
|||
Storage charges | 44,782 |
274,709 |
|||
Administrative expenses | 159,985 |
- |
|||
Account balances as at 31 December | |||||
Trade receivables | 4 |
1,197,686 |
1,878,156 |
||
Trade payables | 7 |
- |
(73,924) |
||
Non-account balances as at 31 December | |||||
Contingent liability | 18 |
415,943 |
123,578 |
||
|
The above disclosure relates to a Malaysia incorporated corporation, Total E&E Industries Sdn. Bhd. in which Mr. Ng Boon Bhoay owns 97.5% (2010: 97.5%) of the equity interest of that corporation. |
Directors | 2011 |
2010 |
|||
Note |
USD |
USD |
|||
Account balances as at 31 December | |||||
Amount owing to directors | 9 |
33,027 | 65,388 | ||
Page F - 25
Exhibit 99.1 |
|
|
20. |
COMMITMENTS |
The Company leases office premises for its operations in Malaysia under operating leases. Rental expenses incurred under operating lease are as follows :- |
2011 |
2010 |
||||
USD |
USD |
||||
Rental of premises | 57,594 |
47,522 |
|||
Future minimum rental payments under non-cancelable operating leases as at 31st December 2011 are approximately USD 52,023. |
21. |
SEGMENT REPORTING |
The Company is currently operating in a single business segment as trader of electrical appliances. As such, there was no segment reporting prepared. In addition, the Company is operating in Malaysia only and there will have no geographic segment presentation. |
|
22. |
SUBSEQUENT EVENTS |
The Company has evaluated all subsequent events through 31st May 2012, the date this financial statement was issued, and determined that, there were no subsequent events or transactions that require recognition or disclosures in the financial statements. |
Page F - 26
Exhibit 99.2 |
CHINA MEDIA GROUP CORPORATION
PRO-FORMA COMBINED FINANCIAL STATEMENTS
December 31, 2011
(Unaudited)
Exhibit 99.2 |
CONTENTS
PAGE NO. |
||
Pro-forma Combined Balance Sheet at December 31, 2011 (Unaudited) | P - 1 |
|
Pro-forma Combined Statement of Operations for the year ended December 31, 2011 (Unaudited) | P - 2 |
|
Significant Notes and Assumptions to Pro-forma Combined Financial Statements (Unaudited) | P - 3 |
Exhibit 99.2 |
|
In connection with the SP Transaction, the Company issued 558,779,837 shares of its Common Stock in acquiring all the shares of the capital stock of ATeam. Upon completion of the SP Transaction, the prior shareholder of ATeam owned approximately 50% of the Common Stock of the CMG. |
Anticipated Accounting Treatment of the Acquisition Transaction |
|
|
|
|
Exhibit 99.2 |
China Media Group Corporation
Pro Forma Combined Balance Sheet
December 31, 2011
(Unaudited)
Historical | Year Ended |
|||||||||||||
China Media |
A-Team |
December 31, |
||||||||||||
Group |
Resources |
Pro Forma Adjustments | 2011 |
|||||||||||
Corporation |
Sdn. Bhd. |
Dr | Cr | Pro Forma |
||||||||||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | 15,600 |
$ | 23,992 |
$ | 39,592 |
||||||||
Trade receivables | - |
3,017,369 |
3,017,369 |
|||||||||||
Restricted cash | - |
57,395 |
57,395 |
|||||||||||
Due to related parties | 372,541 |
- |
372,541 |
|||||||||||
Prepayments, deposits and receivables | 169,152 |
139,055 |
308,207 |
|||||||||||
Total current assets | 557,293 |
3,237,811 |
3,795,104 |
|||||||||||
Non current assets | ||||||||||||||
Fixed assets, net | 2,232 |
83,905 |
86,137 |
|||||||||||
Advance payment for distribution rights | 69,000 |
- |
69,000 |
|||||||||||
Investment in shares | 81,556 |
- |
81,556 |
|||||||||||
Goodwill | - |
- |
(1) |
6,093,535 |
6,093,535 |
|||||||||
Total non current assets | 152,788 |
83,905 |
6,330,228 |
|||||||||||
Total Assets | $ | 710,081 |
$ | 3,321,716 |
$ | 10,125,332 |
||||||||
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)/EQUITY | ||||||||||||||
Liabilities | ||||||||||||||
Current liabilities | ||||||||||||||
Other payables and accruals | $ | 424,396 |
$ | 298,534 |
$ | 722,930 |
||||||||
Trade payables | - |
44,197 |
44,197 |
|||||||||||
Trade financing payables | - |
335,671 | 335,671 | |||||||||||
Short term debt | 100,000 |
205,463 |
305,463 |
|||||||||||
Due to officers and directors | 448,145 |
133,027 |
581,172 |
|||||||||||
Taxation | - |
90,739 |
90,739 |
|||||||||||
Due to related parties | 1,656,981 |
- |
1,656,981 |
|||||||||||
Other liabilities | 236,504 |
- |
236,504 |
|||||||||||
Total current liabilities | 2,866,026 |
1,107,631 |
3,973,657 |
|||||||||||
Non current liabilities | ||||||||||||||
Lease obligations | - |
54,921 |
54,921 |
|||||||||||
Long term debts | 2,000,000 |
274,589 |
2,274,589 |
|||||||||||
Total non current liabilities | 2,000,000 |
329,510 |
2,329,510 |
|||||||||||
Total liabilities | 4,866,026 |
1,437,141 |
6,303,167 |
|||||||||||
Stockholders' (deficiency)/equity | ||||||||||||||
Common Stock | 7,773,902 |
583,107 |
(1) |
7,773,902 |
2,580,543 |
|||||||||
(1) |
1,997,436 |
|||||||||||||
Additional paid up capital | 1,799,358 |
- |
(1) |
1,799,358 |
- |
|||||||||
Shares to be issued | 52,510 |
- |
52,510 |
|||||||||||
Comprehensive income | 66,176 |
106,458 |
(1) |
67,176 |
105,458 |
|||||||||
Accumulated deficits | (13,867,043) |
839,332 |
(1) |
13,867,043 |
839,332 |
|||||||||
Profit and loss | (99,304) |
355,678 |
256,374 |
|||||||||||
Uncontrolled interests | 118,456 |
- |
(1) |
130,508 |
(12,052) |
|||||||||
Total stockholders' (deficiency)/equity | (4,155,945) |
1,884,575 |
3,822,165 |
|||||||||||
Total liabilities and stockholders' equity | $ | 710,081 |
$ | 3,321,716 |
$ | 10,125,332 |
||||||||
See Summary of Significant Notes and Assumptions to Pro Forma Financial Statements
P -1
Exhibit 99.2 |
China Media Group Corporation
Proforma Combined Statement of Operations
For the Year Ended December 31, 2011
(Unaudited)
Historical | Year Ended |
|||||||||||
China Media |
A-Team |
December 31, |
||||||||||
Group |
Resources |
Pro Forma Adjustments | 2011 |
|||||||||
Corporation |
Sdn. Bhd. |
Dr | Cr | Pro Forma |
||||||||
Revenues | $ | 142,132 |
$ | 6,932,545 |
$ | 7,074,677 |
||||||
Cost of sales | 40,185 |
5,437,816 |
5,478,001 |
|||||||||
Gross profit | 101,947 |
1,494,729 |
1,596,676 |
|||||||||
Operating expenses: | ||||||||||||
Impairment of distribution rights | 68,800 |
- |
68,800 |
|||||||||
Selling, general and administrative | 213,754 |
953,784 |
1,167,538 |
|||||||||
282,554 |
953,784 |
1,236,338 |
||||||||||
(Loss) / Income from operations before other expenses | (180,607) |
540,945 |
518,238 |
|||||||||
Other income (expenses): | ||||||||||||
Gain on disposal of investment in unlisted shares | 251,538 |
- |
251,538 |
|||||||||
Gain on disposal of fixed assets | 1,498 |
- |
1,498 |
|||||||||
Other income | - |
16,599 |
16,599 |
|||||||||
Income tax expenses | - |
(127,947) |
(127,947) |
|||||||||
Interest expenses | (183,785) |
(73,919 |
) | (257,704) |
||||||||
Net (loss) / income before uncontrolled interest | (111,356) |
355,678 |
244,322 |
|||||||||
Uncontrolled interests | 12,052 |
- |
12,052 |
|||||||||
Net (loss) / Income | (99,304) |
355,678 |
256,374 |
|||||||||
Other comprehensive income | (1,000) |
(51,442) |
(52,442) |
|||||||||
Comprehensive (loss) / income | $ | (100,304) |
$ | 304,236 |
$ | 203,932 |
||||||
See Summary of Significant Notes and Assumptions to Pro Forma Financial Statements
P - 2
Exhibit 99.2 |
China Media Group Corporation
SIGNIFICANT NOTES AND ASSUMPTIONS TO PRO-FORMA FINANCIAL
STATEMENTS
(Unaudited)
(1) | The accompanying unaudited pro-forma financial information reflects the financial statements of China Media Group Corporation ("CMG") and A-Team Resources Sdn. Bhd. ("ATeam") regarding a planned acquisition of ATeam by CMG. The pro-forma adjustments to the balance sheet give effect to the acquisition as if it occurred on January 1, 2011 and the pro-forma statement of operations gives effect to the acquisition as if it occurred on January 1, 2011.The acquisition is treated as a reverse acquisition of CMG by ATeam since the stockholders of ATeam obtained a controlling interest in the voting Common Stock of CMG and management control of CMG as a result of the acquisition.Accordingly, the assets and liabilities of ATeam are recorded at their historical cost and the assets and liabilities of CMG are measured in accordance with the value at the date of combination. The retained earnings and other equity balances of ATeam before the business combination becomes the retained earnings and other equity balances of CMG after the combination. In addition, the amount recognized as issued share capital interests is determined by adding the issued share capital of acquiring ATeam immediately prior to the business combination and the equity interests CMG issued to effect the combination. Under reverse acquisition accounting, the historical results of operations are those of ATeam and the results of operations of CMG are included only from the acquisition date. |
(2) |
|
(3) |
The following reflect the pro forma adjustments as of December 31, 2011. |
First adjustment is to reflect the effect of the acquisition of ATeam by CMG by treating it as a reverse acquisition. |
Dr |
Cr |
|||
Share capital - CMG | 7,773,902 |
|||
Additional paid in capital - CMG | 1,799,358 |
|||
Comprehensive income - CMG | 67,176 |
|||
Accumulated deficits - CMG | 13,867,043 |
|||
Uncontrolled interests - CMG | 130,508 |
|||
Goodwill on acquisition of A-Team | 6,093,535 |
|||
Share capital - CMG | 1,997,436 |
P - 3