Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CHINA MARINE FOOD GROUP LTD (1099977) 10-Q published on Aug 14, 2013 at 5:41 pm
Reporting Period: Jun 29, 2013
During the six month ended June 30, 2013, the algae-based drink revenue was higher than that for the same period a year ago but still lower than the Company’s latest forecasts used in the annual impairment tests. Accordingly, the Company revised its forecasts of the drink business reflecting the lower-than-expected beverage demand as experienced during the first half of 2013 and performed an updated valuation of its drink business using revised forecasts. Preliminary estimated results prepared by the Company indicated a fair market value of $13.7 million which was less than the carrying value as of June 30, 2013. Accordingly, the Company recorded an impairment loss of $1.1 million to the intangible assets during the second quarter of 2013. The Company will closely monitor the performance of the drink business and engage an independent valuation expert during the third quarter of 2013 to perform a full valuation of the algae-based drink business reporting unit. If the final valuation results indicate that further intangible assets impairment is necessary, this impairment will be recorded during the third quarter of 2013.
During the first half of 2013, Mingxiang entered into a number of agreements with several independent suppliers in relation to the purchase of certain equipment and machineries for the cold storage facility. The equipment and machineries are expected to be operational in the second half of 2013. Total equipment and machinery costs are approximately $0.5 million. As of June 30, 2013, the Company recorded approximately $0.2 million as prepaid expenses and other current assets. Hence the aggregate contingent payments related to the independent suppliers are approximately $0.3 million as of June 30, 2013.
Our revenue during the six months ended June 30, 2013 decreased to $48.8 million by approximately $27.6 million or 36.1% compared to $76.4 million we realized during the six months ended June 30, 2012. Sales of our processed seafood products increased by $0.9 million or 4.4%, whereas sales of our marine catch segment decreased by $29.0 million. Sales of our algae-based beverage products increased by $0.5 million or 2.6% to $17.9 million during the six months ended June 30, 2013.
Whereas gross profit increased by 2.6% or $0.4 million, to $13.9 million for the six months ended June 30, 2013 comparing to the same period in 2012. Overall gross profit margin for the six months ended June 30, 2013 increased from 17.8% to 28.6% compared to the same period in 2012. Gross profit margin for the processed seafood products operations increased from 27.5% to 27.9%, which was mainly due to the improved scale of production and decreased direct labor costs as a result of reduced headcount achieved in the first quarter of 2013. Gross profit margin for the algae-based beverage segment was increased from 38.2% to 38.9% for the same periods under review with similar reasons as explained above.
Our sales and marketing expenses decreased to $11.8 million in the six months ended June 30, 2013 from $13.3 million in the six months ended June 30, 2012 and accounted for approximately 24.1% and 17.4% of our total revenue in the six months ended June 30, 2013 and 2012, respectively. The decrease in the sales and marketing expenses was mainly due to the decrease of promotional costs including subsidized products for promotional purposes, free gifts and other direct marketing events. We have spent approximately $6.1 million in advertising campaigns including TV commercials and $5.1 million in promotional costs during the six months ended June 30, 2013 to strengthen brand position and raise awareness of our processed seafood and algae-based beverage products. Accordingly, the number of sales staff has increased from 47 in 2010 to 74 as at June 30, 2013, of which 52 were related to the beverage products segment.