e*n
发帖数: 1511 | 1 For anyone who truly understands finance and accounting, reading the 8-K
filed by China Marine Food Group (CMFO) on March 16, 2010 could be a
horrible experience. I have seen potentially fraudulent companies, and I
have had to piece information from various sources to draw my conclusion.
But I have never seen a company so openly aggregate self-incriminating
evidences in one single file submitted to the SEC, challenging the
intelligence of the investors.
Here I present China Marine Food Group, hereafter mentioned by its ticker,
CMFO, as an ongoing example on how a company can possibly take money away
from its public investors, all references coming from the SEC filing
mentioned above.
A little background on CMFO first. According to Yahoo Finance, “China
Marine Food Group Limited, through its subsidiaries, engages in processing,
distributing, and selling processed seafood products in the People’s
Republic of China.” It became listed on AMEX after a reverse merger in late
2007, during which it had a concurrent private placement to attract about $
20m. It did not have any other significant financial events until it
acquired 80% interest of another company called “XiangHe”, who supposedly
makes an algae energy drink, at a price of $27.8m, and subsequently did a
PIPE for $30m.
With the help of the 8-K filed to the SEC, we can rearrange the facts in
sequence and assemble the jigsaw for this incredible acquisition.
1. January 2009, Mr. Qiu, the future owner of XiangHe, paid on behalf of the
Company (XiangHe, later we will know that this company did not even exist
at this time) an amount of $8,776 to Yellow Sea Fisheries Research Institute
[YSFRI] for the development of the algae-based drink know-how. XiangHe did
not make any application for the patent during 2009. (Page F-15 bottom)
2. April 2009, Qiu leased an office space from ShiShi Huabao Jixiang Water
Products Co., a subsidiary of CMFO for a term of 3 years, but XiangHe never
paid a dime for rent. A later agreement exonerated XiangHe from paying any
rent to CMFO. (Page F-15 bottom)
3. July 28, 2009, XiangHe was finally set up. Qiu paid $44K for registered
capital. (Later I will cast doubt on whether Qiu indeed paid the money. But
for now look up Page F-15 top)
4. At the same time, CMFO paid $219 to apply for trademarks for XiangHe. (So
I suppose that XiangHe either did not have the people or did not have the
money to apply for trademarks. Page F-16 top)
5. Oct 2009, registered and paid-in capital was increased to $733k. (Later I
will cast doubt on whether Qiu indeed paid the capital. Page F-15 top)
6. For the whole year 2009, XiangHe invested $414, which reads four hundred
and fourteen dollars, on purchase of property, plant and equipment. (No, I
did not miss a comma or any zeros after 414! See Page F-5) This fixed assets
depreciated $19, and was recorded $395 at the year end. (Page F-3)
7. With the mere $400 fixed assets, indicated as ‘Office Equipment’ in
Page F-8, cheaper than the laptop that I am using to type up this article,
this marvelous XiangHe made $7.6m revenue, $3.0m gross profit and $1.7m net
income in the last 5 months of 2009! (Page F-4)
8. With this impressive operating result, the inventory support was a mere $
11k, composed of $8.6k raw materials and $2.3k packing supplies (Page F-13).
Apparently XiangHe does not need any inventory for finished products
manufactured from the phantom $400 office equipment. Knowing that it
incurred $4.5m (Page F-4) cost of revenue for the last 5 months of 2009, we
can calculate that this amount of input materials supports its production by
11 / 4,500 x 30 x 5 = 0.4 day. Put another way, the company's inventory
turnover was 409x in its first 5 months of operation, 975x if annualized. I
have no further comment on this amazing production efficiency.
9. November 27, 2009, XiangHe, Qiu and CMFO entered a three-party agreement,
in which CMFO supplied a 3-month term loan to XiangHe in the amount of $26.
4m for working capital purposes (Note that XiangHe had total assets
supposedly at $3.3m). This loan was secured by all the registered capital of
Qiu in XiangHe, which was supposedly worth $2.4m. (Page F-13)
10.The agreement also offers CMFO an option to purchase 80% of XiangHe at $
27.8m, all cash consideration. (Page F-14 top)
11. On January 1, 2010, CMFO exercised the option. (Page F-14)
12. This acquisition cost $27.8m cash, acquired book value $0.8m, and
classified $3.5m to goodwill and $23.5m to intangible assets which, if you
have not lost track, was purchased one year earlier by Mr. Qiu for $8,776. (
Page 4, almost the end of the file)
My dear readers, I sincerely hope that you haven’t dislocated your jaw by
now. I, for one, have never seen such an unfair transaction before.
First, this business itself is nearly impossible. It has $400 fixed assets,
little inventory, zero finished product inventory, but it has a magic ramp-
up of sales. That $400 office equipment has more magic power than any wizard
wand you may find in Diagon Alley.
Second, CMFO had a special relationship with Qiu. CMFO paid for nearly
everything for XiangHe to start up, even including a minor cost for
trademarks.
Third, why did CMFO loan XiangHe so much money for such a short time, which
XiangHe never needed? How was this loan "secured" with less than 1/10 worth
of equity from a no-name company?
Fourth, The purchase price was ridiculous given XiangHe’s book value, short
history, and an impossible business model as I discussed in the first point
. The P/B ratio went as high as 35!
Who is this Mr. Qiu? If this person were real, this person has a magic wand
and this person has a personal Jesus, Mr. Liu, the majority owner of CMFO.
His single payout of less than $9k in January 2009 rewarded him $28.7m in
one year.
It is quite likely that this Mr. Qiu is merely a puppet of Liu. It may only
exist as a name, or an ID card that you can purchase for ten bucks from a
Chinese farmer who would never leave his land. The whole purpose of this
transaction is quite likely to funnel $27.8m from the public investors' hand
to the major owner’s private pocket.
The whole SEC 8-K filing challenged its intended readers' intelligence. To
end this article, I would like to raise two more issues with this company.
First, the true payment of Qiu into the company may well be below the
registered capital. It may be as low as zero. The balance sheet at the end
of 2009 showed an amount due from Qiu, the sole owner, for $1.4m in the
assets. No line in the bottom half of the balance sheet can offset this line
other than owner’s equity. Qiu supposedly paid $733k into the company, and
he apparently owed the company more than this amount! If this practice can
be accepted, people like you and me can set up a company and claim that we
have a billion dollar equity company. It is easy: add 1 billion in the
equity line and add one line of 'due from owner' for 1 billion in the assets
! (Page F-3)
Second, the quality of the accounting firm, ZYCPA, is very questionable. Not
only did they present an impossible business, but they made an obvious
accounting mistake as well. CMFO exercised the option to acquire XiangHe on
January 1, 2010, before which date the money loaned to XiangHe should be
reflected on the balance sheet at the end of 2009. Both the balance sheet (
Page F-3) and the cash flow statement (Page F-5) were mistakenly treated in
that the loan was not presented correctly.
My case rested.
Credit: This article is a result out of reading the ‘Chinese Company
Analyst’ blog here. I read the 8-K myself and generated my own view of this
8-K. Our views overlap. Without the original article, I would not have
noticed the 8-K. But without that, I would generate the same view regardless
. I also recommend reading his other article regarding the discrepancies
between SAIC and SEC financial statements of the same company. | e*n
发帖数: 1511 | 2 June 12, 2010 (FinancialWire) (Go to http://www.financialwire.net/?s=ftrdnwswnd for all of today's featured news.) -- China Marine Food Group Ltd. (AMEX: CMFO | PowerRating), a maker of seafood-based snack foods and algae-based beverages, and a distributor of frozen marine catch, said that sales of its Hi-Power marine algae-based beverages hit $2.8 million for the first three months of 2010 ended March 30. Hi-Power also has forecast $20 million for the full year 2010. The company acquired the brand in January 1, and said it has focused on market research and analysis to improve product packaging before launching Hi-Power under its Mingxiang brand.
2.8million sale for this?
【在 e*n 的大作中提到】
: For anyone who truly understands finance and accounting, reading the 8-K
: filed by China Marine Food Group (CMFO) on March 16, 2010 could be a
: horrible experience. I have seen potentially fraudulent companies, and I
: have had to piece information from various sources to draw my conclusion.
: But I have never seen a company so openly aggregate self-incriminating
: evidences in one single file submitted to the SEC, challenging the
: intelligence of the investors.
: Here I present China Marine Food Group, hereafter mentioned by its ticker,
: CMFO, as an ongoing example on how a company can possibly take money away
: from its public investors, all references coming from the SEC filing
| y***q
发帖数: 4147 | | J******s
发帖数: 913 | 4 Did you short it, or longed it? Why did you do all the research?
【在 e*n 的大作中提到】
: For anyone who truly understands finance and accounting, reading the 8-K
: filed by China Marine Food Group (CMFO) on March 16, 2010 could be a
: horrible experience. I have seen potentially fraudulent companies, and I
: have had to piece information from various sources to draw my conclusion.
: But I have never seen a company so openly aggregate self-incriminating
: evidences in one single file submitted to the SEC, challenging the
: intelligence of the investors.
: Here I present China Marine Food Group, hereafter mentioned by its ticker,
: CMFO, as an ongoing example on how a company can possibly take money away
: from its public investors, all references coming from the SEC filing
| M*P
发帖数: 6456 | 5 显然是网上抄的啊
【在 J******s 的大作中提到】
: Did you short it, or longed it? Why did you do all the research?
| b******g
发帖数: 491 | 6 DAFO mentioned this stock and did some FA on CMFO on 2010-1-20:
CMFO公司分析(推荐过的长期成长股, 还是把我怎么想的写出来, 仅供参考)
多次说了, 这股票只能封低买, 公司性质是长期成长的, 不适合没耐心的人, 我个人是
在退休帐户买, 有低点就买点
1, 做海产品和别的比如鸡, 猪, 蛋类公司根本不一样.
1) 海产品入门比较高, 你那地方得产海产品才行. 不会一下来很多竞争对手.
2) 所以, 该公司的MARGIN一直有保障. 这么多年来. 起伏很小. 当然了, 海产品的价
格也随季节等因素有起伏, 但和鸡, 猪, 蛋类比起来, 起伏小太多了. 简直可以用稳定
来说.
3) 海产品的MARGIN比较高, 和鸡, 猪, 蛋类的一会MARGIN是负, 一会是正形成鲜明对
比.
2, 公司是做海产品的家族公司. 对公司一直很珍惜. 从事行业这么多年. 股数没有增
加. 公司管理层不是搞一票就走的人.
有人说了, 最近不是做OFFER和搞收购吗?
1)仔细看, 做OFFER, DILUTION20%, 而收购来的带来的REVENUE和赢利增加都是25%. 也
就是说收购来的公司带有赢利产品. 而且本来就是与他们合作的机构, 被骗的可能是很
小的.
2)收购来的其实还是该公司的科研机构. 用公司的海鲜做的"高能"饮料. 这个目前看对
公司是的赢利抵消了OFFER的DILUTION. 长远看:
要是那饮料越做越大, 那当然更好. 要是做不大, 损失是一年的赢利成长.
3, 他的海鲜产品现在在向全国逐渐扩张
内地的市场是很大的. 但内地的人很难做这事情. 他扩张投资基本已经完成(这也是他
最近资本比较紧张的原因), 他在内地建了大冷库, 随后, 就是业务的成长.
4, 在6.7元买, 公司从没亏损过. 现在按今年赢利, PE在8. 所以, 成长型公司, 并不
显得贵.
5, 风险:
1) 除了我上边的红字, 就是警告不适合大多数人.
2) 他的饮料前景是还不明朗
3) 就是经济危机, 大的调整等他因为不是很热门板块, 会掉的比较多
【在 e*n 的大作中提到】
: June 12, 2010 (FinancialWire) (Go to http://www.financialwire.net/?s=ftrdnwswnd for all of today's featured news.) -- China Marine Food Group Ltd. (AMEX: CMFO | PowerRating), a maker of seafood-based snack foods and algae-based beverages, and a distributor of frozen marine catch, said that sales of its Hi-Power marine algae-based beverages hit $2.8 million for the first three months of 2010 ended March 30. Hi-Power also has forecast $20 million for the full year 2010. The company acquired the brand in January 1, and said it has focused on market research and analysis to improve product packaging before launching Hi-Power under its Mingxiang brand.
: 2.8million sale for this?
| p*****0
发帖数: 3104 | 7 看来就是把公司的钱转到自己手上了 如果这些信息靠谱的话
【在 b******g 的大作中提到】
: DAFO mentioned this stock and did some FA on CMFO on 2010-1-20:
: CMFO公司分析(推荐过的长期成长股, 还是把我怎么想的写出来, 仅供参考)
: 多次说了, 这股票只能封低买, 公司性质是长期成长的, 不适合没耐心的人, 我个人是
: 在退休帐户买, 有低点就买点
: 1, 做海产品和别的比如鸡, 猪, 蛋类公司根本不一样.
: 1) 海产品入门比较高, 你那地方得产海产品才行. 不会一下来很多竞争对手.
: 2) 所以, 该公司的MARGIN一直有保障. 这么多年来. 起伏很小. 当然了, 海产品的价
: 格也随季节等因素有起伏, 但和鸡, 猪, 蛋类比起来, 起伏小太多了. 简直可以用稳定
: 来说.
: 3) 海产品的MARGIN比较高, 和鸡, 猪, 蛋类的一会MARGIN是负, 一会是正形成鲜明对
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