I am out and will take my loss.
Our revenue decreased by approximately $11.6 million or 43.4% from $26.7 million for the three months ended March 31, 2011 to $15.1 million for the same period ended March 31, 2012. The decrease in revenue was attributed to the decrease in sales of our processed seafood and algae-based beverage products. Sales of our processed seafood products decreased by $10.0 million or 50.2% year over year to $9.9 million, whereas sales of algae-based beverage products decreased by $1.5 million or 22.8% to $5.2 million for the same periods under review.
The processed seafood products operations grew significantly in the first quarter of 2011 compared to the first quarter of 2010 as our products continued to gain market acceptance, particularly in Fujian and Zhejiang provinces. However, as a result of consumers’ perception of food safety in relation to the nuclear radiation leaks in Japan which occurred in March 2011, sales of processed seafood products have been significantly and adversely affected since the second quarter of 2011. While we are confident that the seafood we use to produce our processed seafood products is safe, it is unclear how long it will take for consumer confidence in seafood products to normalize.
2012 is the third year in which we recognize sales of our algae-based beverage products since the acquisition of Xianghe on January 1, 2010. In 2010, our distribution network for the beverage segment was solely Fujian province. After gaining experience in Fujian, we expanded our distribution into Zhejiang province in the second quarter of 2011. The growth from Fujian and Zhejiang has been adversely affected by public concern over the plasticizer contamination in the beverage industry as well as the lower-than-expected temperatures in the southern regions of China during the summer of 2011. Therefore, sales of our algae-based beverage products for the first quarter of 2012 decreased by $1.5 million, or 22.8%, compared to the first quarter of 2011. However, given our continuous contribution to the related sales and marketing campaigns and our expansion plan into additional untapped areas, we expect the sales of our beverage segment to remain strong in the coming years. Accordingly, the number of sales staff has increased significantly since January 1, 2010 from 23 to 96 as of March 31, 2012.
Trading of marine catch is deemed as opportunistic purchases and sales of frozen seafood materials and therefore the sales volume fluctuates significantly from period to period. We intend to buy marine catch in blocks from suppliers when their supplies are high and sell the stocks to customers when market prices go up. Usually the inventory cycle will be less than a year. Though the profit margin from the trading segment is relatively lower compared to that of both processed seafood and algae-based beverage products, the trading segment is a good source of revenue and profit given our expertise in the seafood industry and surplus cash in hand.
|Processed seafood products||$||9,903,103||$||19,868,771|
|Algae-based beverage products||5,180,826||6,711,817|
|COST OF REVENUE (inclusive of depreciation and amortization)|
|Processed seafood products||(7,270,735||)||(13,123,646||)|
|Algae-based beverage products||(3,214,251||)||(3,873,104||)|
|Depreciation and amortization||(696,070||)||(663,287||)|
|Sales and marketing||(4,581,249||)||(1,586,120||)|
|General and administrative||(538,141||)||(660,632||)|
|TOTAL OPERATING EXPENSES||(6,482,706||)||(2,910,039||)|
|(LOSS) INCOME FROM OPERATIONS||(1,883,763||)||6,702,425|
|OTHER INCOME (EXPENSES):|
|(LOSS) INCOME BEFORE INCOME TAXES||(1,836,715||)||6,747,557|
|INCOME TAX EXPENSE||(207,720||)||(1,129,801||)|
|NET (LOSS) INCOME||(2,044,435||)||5,617,756|
|Less: net loss attributable to non-controlling interests||46||44|
|NET (LOSS) INCOME ATTRIBUTABLE TO CHINA MARINE FOOD GROUP LIMITED||$||(2,044,389||)||$||5,617,800|
|Other comprehensive income:|
|- Foreign currency translation gain||830,593||738,499|
|COMPREHENSIVE (LOSS) INCOME||$||(1,213,796||)||$||6,356,299|
|Net (loss) income per share attributable to China Marine Food Group Limited|
|Weighted average shares outstanding|