UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, DC
20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter
ended September 30, 2015
OR
| ¨ | TRANSACTION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________________ to ___________________________
Commission file number: 000-54191
(Exact Name
of Registrant as Specified in Its Charter)
Nevada |
|
33-1219070 |
(State of Other Jurisdiction of Incorporation or
Organization) |
|
(I.R.S. Employer Identification Number) |
|
|
|
Room
3801, Block A, China Shine Plaza
No. 9 Lin He Xi Road
Tianhe District, Guangzhou City,
P.R.C. |
|
510610 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
(860) 20 22057860
(Registrant’s
Telephone Number, Including Area Code)
Copies to:
Sichenzia Ross Friedman
Ference LLP
61 Broadway, 32nd
Floor
New York, NY10006
Attn: Marc Ross,
Esq.
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes ¨
No x
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” "non-accelerated filer" and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
¨ |
Accelerated filer |
¨ |
Non-accelerated filer |
¨ |
Smaller reporting company |
x |
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 12, 2015, there were 19,363,757
shares of our common stock issued and outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
SINO AGRO FOOD, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER
30, 2015
(Unaudited)
SINO AGRO FOOD, INC. AND SUBSIDIARIES
QUATERLY FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2015
SINO AGRO FOOD, INC. AND SUBSIDIARIES
INDEX TO QUATERLY FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANT’S
REPORT
To the Board of Directors and Stockholders of
Sino Agro Food, Inc.
(Incorporated in the State of Nevada, United States of America)
We have reviewed the consolidated balance
sheets of Sino Agro Food, Inc. and subsidiaries as of September 30, 2015 and December 31, 2014, the related consolidated statements
of income and other comprehensive income for the three-month and the nine-month periods ended September 30, 2015 and 2014, and
cash flows for the nine-month periods ended September 30, 2015 and 2014. This interim financial information is the responsibility
of the company's management.
We conducted our reviews in accordance
with standards established by the American Institute of Certified Public Accountants. A review of interim financial information
consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in
the United States of America, the objective of which is the expression of an opinion regarding the financial information taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware
of any material modifications that should be made to the accompanying interim financial information for it to be in conformity
with accounting principles generally accepted in the United States of America.
s/Anthony Kam & Associates Limited, CPA. |
Anthony Kam & Associates Limited, CPA. |
|
Hong Kong |
November 16, 2015 |
SINO AGRO FOOD,
INC.
CONSOLIDATED BALANCE SHEETS
| |
| |
September 30, | | |
December 31, | |
| |
| |
2015 | | |
2014 | |
| |
Note | |
(Unaudited) | | |
(Audited) | |
| |
| |
| | |
| |
ASSETS | |
| |
| | | |
| | |
Current assets | |
| |
| | | |
| | |
Cash and cash equivalents | |
6 | |
$ | 9,551,180 | | |
$ | 3,031,447 | |
Inventories | |
7 | |
| 51,133,915 | | |
| 45,967,993 | |
Costs and estimated earnings in excess
of billings on uncompleted contracts | |
19 | |
| 1,306,885 | | |
| - | |
Deposits and prepayments | |
8 | |
| 85,040,561 | | |
| 75,951,591 | |
Accounts receivable, net of allowance
for doubtful accounts | |
9 | |
| 129,257,822 | | |
| 104,503,071 | |
Other receivables | |
10 | |
| 66,633,542 | | |
| 52,305,260 | |
Total
current assets | |
| |
| 342,923,905 | | |
| 281,759,362 | |
Plant and equipment | |
| |
| | | |
| | |
Plant and equipment, net of accumulated
depreciation | |
11 | |
| 76,201,470 | | |
| 64,352,975 | |
Construction in progress | |
12 | |
| 93,080,574 | | |
| 69,120,277 | |
Land use rights,
net of accumulated amortization | |
13 | |
| 59,965,379 | | |
| 63,322,202 | |
Total
plant and equipment | |
| |
| 229,247,423 | | |
| 196,795,454 | |
Other assets | |
| |
| | | |
| | |
Goodwill | |
14 | |
| 724,940 | | |
| 724,940 | |
Proprietary technologies, net of
accumulated amortization | |
15 | |
| 10,969,666 | | |
| 11,480,298 | |
Long term investment | |
16 | |
| 786,040 | | |
| 817,127 | |
Temporary deposits
paid to entities for investments in Sino joint venture companies | |
17 | |
| 41,109,708 | | |
| 41,109,708 | |
Total
other assets | |
| |
| 53,590,354 | | |
| 54,132,073 | |
| |
| |
| | | |
| | |
Total
assets | |
| |
$ | 625,761,682 | | |
$ | 532,686,889 | |
| |
| |
| | | |
| | |
LIABILITIES AND
STOCKHOLDERS' EQUITY | |
| |
| | | |
| | |
| |
| |
| | | |
| | |
Current liabilities | |
| |
| | | |
| | |
Accounts payable and accrued expenses | |
| |
$ | 20,461,324 | | |
$ | 22,138,835 | |
Billings in excess of costs and estimated
earnings on uncompleted contracts | |
19 | |
| 3,874,480 | | |
| 8,060,580 | |
Due to a director | |
| |
| 692,906 | | |
| 1,172,059 | |
Series F Non-convertible preferred
stock redemption payable | |
20 | |
| - | | |
| 3,146,063 | |
Other payables | |
21 | |
| 8,059,260 | | |
| 11,695,982 | |
Borrowings - Short term bank loan | |
22 | |
| 273,876 | | |
| 4,410,727 | |
Bonds payable | |
23 | |
| 1,725,000 | | |
| 1,725,000 | |
Negotiable promissory
notes | |
24 | |
| 3,540,000 | | |
| - | |
| |
| |
| 38,626,846 | | |
| 52,349,246 | |
| |
| |
| | | |
| | |
Non-current liabilities | |
| |
| | | |
| | |
Other payables | |
21 | |
| 4,797,332 | | |
| - | |
Borrowings - Long term debts | |
22 | |
| 1,942,757 | | |
| 2,306,057 | |
Convertible
note payables | |
25 | |
| 35,468,110 | | |
| 15,803,928 | |
| |
| |
| 42,208,199 | | |
| 18,109,985 | |
| |
| |
| | | |
| | |
Commitments
and contingencies | |
| |
| - | | |
| - | |
| |
| |
| | | |
| | |
Stockholders' equity | |
| |
| | | |
| | |
Preferred stock: $0.001 par value (10,000,000 shares
authorized, 100 and 7,000,100 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively) | |
| |
| | | |
| | |
Series A preferred stock: $0.001 par value
(100 shares designated, 100 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively) | |
26 | |
| - | | |
| - | |
Series B convertible preferred stock: $0.001
par value (10,000,000 shares designated, 0 and 7,000,000 shares issued and outstanding as of September 30, 2015
and December 31, 2014, respectively) | |
26 | |
| - | | |
| 7,000 | |
Series F Non-convertible preferred
stock: $0.001 par value (1,000,000 shares designated, 0 shares issued and outstanding as of September
30, 2015 and December 31, 2014, respectively) | |
26 | |
| - | | |
| - | |
Common stock: $0.001 par value (22,727,272
shares authorized 19,178,757 and 17,162,716 shares issued as of September 30, 2015 and December 31, 2014, respectively) | |
26 | |
| 19,179 | | |
| 17,162 | |
Additional paid - in capital | |
| |
| 134,252,019 | | |
| 121,158,996 | |
Retained earnings | |
| |
| 327,848,251 | | |
| 273,261,108 | |
Accumulated other comprehensive income | |
25 | |
| 3,388,103 | | |
| 6,452,816 | |
Treasury stock | |
26 | |
| (1,250,000 | ) | |
| (1,250,000 | ) |
Total
Sino Agro Food, Inc. and subsidiaries stockholders' equity | |
| |
| 464,257,552 | | |
| 399,647,082 | |
Non - controlling
interest | |
| |
| 80,669,085 | | |
| 62,580,576 | |
Total
stockholders' equity | |
| |
| 544,926,637 | | |
| 462,227,658 | |
Total
liabilities and stockholders' equity | |
| |
$ | 625,761,682 | | |
$ | 532,686,889 | |
SINO AGRO FOOD,
INC.
CONSOLIDATED STATEMENTS OF INCOME AND
OTHER COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014 (UNAUDITED)
| |
| | |
Three months ended | | |
Three months ended | | |
Nine months ended | | |
Nine months ended | |
| |
Note | | |
September 30, 2015 | | |
September 30, 2014 | | |
September 30, 2015 | | |
September 30, 2014 | |
| |
| | |
| | |
| | |
| | |
| |
Revenue | |
| | | |
| | | |
| | | |
| | | |
| | |
- Sale of goods | |
| | | |
$ | 96,032,841 | | |
$ | 82,171,415 | | |
$ | 263,625,686 | | |
$ | 242,800,784 | |
- Consulting and service income from development contracts | |
| | | |
| 28,406,973 | | |
| 24,598,641 | | |
| 66,120,235 | | |
| 51,118,141 | |
- Commission and management fee | |
| | | |
| 226,585 | | |
| 450,003 | | |
| 1,250,656 | | |
| 1,191,427 | |
| |
| 3 | | |
| 124,666,399 | | |
| 107,220,059 | | |
| 330,996,577 | | |
| 295,180,352 | |
Cost of goods sold | |
| 3 | | |
| (75,264,268 | ) | |
| (59,121,526 | ) | |
| (200,762,654 | ) | |
| (173,035,915 | ) |
Cost of services | |
| 3 | | |
| (17,151,938 | ) | |
| (13,601,869 | ) | |
| (40,468,368 | ) | |
| (26,790,742 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| | | |
| 32,250,193 | | |
| 34,496,664 | | |
| 89,765,555 | | |
| 95,353,695 | |
General and
administrative expenses | |
| | | |
| (3,951,922 | ) | |
| (3,594,509 | ) | |
| (13,910,035 | ) | |
| (9,544,763 | ) |
Net income
from operations | |
| | | |
| 28,298,271 | | |
| 30,902,155 | | |
| 75,855,520 | | |
| 85,808,932 | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Government grant | |
| | | |
| 746,929 | | |
| 57,340 | | |
| 888,770 | | |
| 295,012 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other income | |
| | | |
| - | | |
| 155,032 | | |
| 152,467 | | |
| 159,555 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Gain of extinguishment of debts | |
| 4 | | |
| - | | |
| 33,693 | | |
| - | | |
| 275,086 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| | | |
| (1,328,616 | ) | |
| (263,664 | ) | |
| (3,438,694 | ) | |
| (483,157 | ) |
Net income
(expenses) | |
| | | |
| (581,687 | ) | |
| (17,599 | ) | |
| (2,397,457 | ) | |
| 246,496 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (expenses) before income
taxes | |
| | | |
| 27,716,584 | | |
| 30,884,556 | | |
| 73,458,063 | | |
| 86,055,428 | |
Provision for
income taxes | |
| 5 | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| | | |
| 27,716,584 | | |
| 30,884,556 | | |
| 73,458,063 | | |
| 86,055,428 | |
Less: Net (income)
loss attributable to the non - controlling interest | |
| | | |
| (6,194,484 | ) | |
| (6,382,694 | ) | |
| (18,870,920 | ) | |
| (17,678,609 | ) |
Net income from continuing operations
attributable to the Sino Agro Food, Inc. and subsidiaries | |
| | | |
| 21,522,100 | | |
| 24,501,862 | | |
| 54,587,143 | | |
| 68,376,819 | |
Other comprehensive
income (loss) Foreign currency translation gain (loss) |
|
|
|
|
|
|
(4,635,528 |
) |
|
|
869,931 |
|
|
|
(3,847,123 |
) |
|
|
(33,241 |
) |
Comprehensive income | |
| | | |
| 16,886,572 | | |
| 25,371,793 | | |
| 50,740,020 | | |
| 68,343,578 | |
Less: other
comprehensive (income) loss attributable to the non - controlling interest | |
| | | |
| (643,103 | ) | |
| (139,032 | ) | |
| (782,411 | ) | |
| 17,489 | |
Comprehensive
income attributable to the Sino Agro Food, Inc. and subsidiaries | |
| | | |
$ | 16,243,469 | | |
$ | 25,232,761 | | |
$ | 49,957,609 | | |
$ | 68,361,067 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Earnings per share attributable
to Sino Agro Food, Inc. and subsidiaries common stockholders: | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 31 | | |
$ | 1.14 | | |
$ | 1.49 | | |
$ | 3.02 | | |
$ | 4.42 | |
Diluted | |
| 31 | | |
$ | 1.14 | | |
$ | 1.43 | | |
$ | 3.02 | | |
$ | 4.23 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares outstanding: | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Basic | |
| | | |
| 18,822,876 | | |
| 16,469,314 | | |
| 18,089,629 | | |
| 15,465,642 | |
Diluted | |
| | | |
| 18,822,876 | | |
| 17,176,384 | | |
| 18,089,629 | | |
| 16,172,712 | |
SINO AGRO FOOD,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014 (UNAUDITED)
| |
Nine months ended | | |
Nine months ended | |
| |
September 30, 2015 | | |
September 30, 2014 | |
| |
| | |
| |
Cash flows from
operating activities | |
| | | |
| | |
Net income for the period | |
$ | 73,458,063 | | |
$ | 86,055,428 | |
Adjustments to reconcile net income
from operations to net cash from operations: | |
| | | |
| | |
Depreciation | |
| 2,145,020 | | |
| 1,768,047 | |
Amortization | |
| 1,513,426 | | |
| 1,619,267 | |
Common stock issued for services | |
| 1,940,294 | | |
| 255,033 | |
Gain on extinguishment of debts | |
| - | | |
| (275,086 | ) |
Other amortized cost | |
| 2,830,201 | | |
| 229,857 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
(Increase) in inventories | |
| (5,165,922 | ) | |
| (29,291,689 | ) |
(Increase) in costs and estimated
earnings in excess of billings on uncompleted contacts | |
| (1,306,885 | ) | |
| (560,991 | ) |
(Increase) in deposits and prepayments | |
| (1,824,342 | ) | |
| (583,670 | ) |
Increase in due to a director | |
| 1,645,472 | | |
| 2,450,751 | |
(Decrease) increase in accounts
payable and accrued expenses | |
| (1,677,511 | ) | |
| 5,361,625 | |
Increase in other payables | |
| 4,476,860 | | |
| 12,415,301 | |
(Increase) in accounts receivable | |
| (24,754,751 | ) | |
| (40,715,939 | ) |
(Decrease) increase in billings in
excess of costs and estimated earnings on uncompleted contracts | |
| (4,186,100 | ) | |
| 226,476 | |
(Increase) in
other receivables | |
| (12,428,932 | ) | |
| (12,692,737 | ) |
Net
cash provided by operating activities | |
| 36,664,893 | | |
| 26,261,673 | |
Cash flows from
investing activities | |
| | | |
| | |
Purchases of plant and equipment | |
| (3,949,521 | ) | |
| (3,418,741 | ) |
Payment for
construction in progress | |
| (40,594,640 | ) | |
| (22.227,905 | ) |
Net
cash used in investing activities | |
| (44,544,161 | ) | |
| (25,646,646 | ) |
Cash flows from
financing activities | |
| | | |
| | |
Proceeds from long term debts | |
| - | | |
| 2,436,193 | |
Net proceeds from convertible note
payable | |
| - | | |
| 5,237,000 | |
Short term bank loan repaid | |
| (4,085,635 | ) | |
| (4,100,377 | ) |
Series F Non-convertible preferred
stock redemption | |
| (3,146,063 | ) | |
| - | |
Director reimbursement for cash
originally deposited in due to a director | |
| | | |
| | |
-Net proceeds from convertible note payable | |
| 13,367,550 | | |
| - | |
-Net proceeds from negotiable promissory
notes | |
| 3,540,000 | | |
| - | |
Net
cash provided by financing activities | |
| 9,675,852 | | |
| 3,572,816 | |
Effects on exchange
rate changes on cash | |
| 4,723,149 | | |
| (823,960 | ) |
Increase in cash and cash equivalents | |
| 6,519,733 | | |
| 3,363,883 | |
Cash and cash
equivalents, beginning of period | |
| 3,031,447 | | |
| 1,327,274 | |
Cash and cash
equivalents, end of period | |
$ | 9,551,180 | | |
$ | 4,691,157 | |
Supplementary disclosures of cash
flow information: | |
| | | |
| | |
Cash paid
for interest | |
$ | 504,846 | | |
$ | 422,058 | |
Cash paid
for income taxes | |
$ | - | | |
$ | - | |
Non - cash transactions | |
| | | |
| | |
Common stock
issued for settlement of debts | |
$ | - | | |
$ | 12,006,374 | |
Common stock
issued for services and employee compensation | |
$ | 726,362 | | |
$ | 2,519,232 | |
Common stock
issued to decimal stockholders for rounding up shares holding | |
$ | 2,772,281 | | |
$ | - | |
Common stock
issued to secure debts loan and finance facilities | |
$ | 9,496,665 | | |
$ | - | |
Transfer to
plant and equipment from construction in progress | |
$ | 12,992,628 | | |
| 13,136,410 | |
Transfer to
land use rights from deposits and prepayments | |
$ | - | | |
$ | 4,404,179 | |
Series B convertible
preferred stock converted into common stock | |
| 7,000 | | |
$ | - | |
Transfer to
plant and equipment from deposits and prepayments expenses | |
$ | 9,323 | | |
$ | 513,272 | |
Reverse split
adjustment | |
$ | 5,639 | | |
$ | - | |
Proceeds from
convertible bond payables paid to director and applied to operating activities | |
$ | 17,823,400 | | |
$ | - | |
The accompanying notes are an integral
part of these consolidated financial statements.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
Sino Agro Food, Inc. (the “
Company ” or “ SIAF ”) (formerly known as Volcanic Gold, Inc. and A Power Agro Agriculture Development,
Inc.) was incorporated on October 1, 1974 in the State of Nevada, United States of America.
The Company was engaged in
the mining and exploration business but ceased its mining and exploring business on October 14, 2005. On August 24, 2007, the
Company entered into a Merger and Acquisition Agreement with Capital Award Inc., a Belize corporation (“ CA ”)
and its subsidiaries Capital Stage Inc. (“ CS ”) and Capital Hero Inc. (“ CH ”). Effective
the same date, CA completed a reverse merger transaction with SIAF. SIAF acquired all the outstanding common stock of CA from
Capital Adventure, a shareholder of CA, for 3,232,323 shares of the Company’s common stock.
On August 24, 2007 the Company
changed its name from Volcanic Gold, Inc. to A Power Agro Agriculture Development, Inc. On December 8, 2007, the Company changed
its name to Sino Agro Food, Inc.
On September 5, 2007, the Company
acquired three existing businesses in the People’s Republic of China (the “P.R.C.” ):
| (a) | Hang
Yu Tai Investment Limited (“ HYT ”), a company incorporated in Macau,
the owner of 78% equity interest in ZhongXingNongMu Ltd (“ ZX ”),
a company incorporated in the P.R.C.; |
| (b) | Tri-way
Industries Limited (“ TRW ”), a company incorporated in Hong Kong;
and |
| (c) | Macau
Eiji Company Limited (“ MEIJI”), a company incorporated in Macau,
the owner of 75% equity interest in Enping City Juntang Town Hang Sing Tai Agriculture
Co. Ltd. (“ HST ”), a P.R.C. corporate Sino-Foreign joint venture.
HST was dissolved in 2010. |
On November 27, 2007, MEIJI
and HST established a corporate Sino - Foreign joint venture, Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd. (“
JHST ”), a company incorporated in the P.R.C. with MEIJI owning a 75% interest and HST owning a 25% interest.
On November 26, 2008, SIAF
established Pretty Mountain Holdings Limited (“ PMH”), a company incorporated in Hong Kong with an 80% equity
interest. On May 25, 2009, PMH formed a corporate Sino-Foreign joint venture, Qinghai Sanjiang A Power Agriculture Co. Ltd. (“
SJAP ”), incorporated in the P.R.C., of which PMH owns a 45% equity interest. At the time, the remaining 55% equity
interest in SJAP was owned by the following entities:
| • | Qinghai
Province Sanjiang Group Company Limited (English translation) (“ Qinghai Sanjiang”),
a company incorporated in the P.R.C with major business activities in the agriculture
industry; and |
| • | Guangzhou
City Garwor Company Limited (English translation) (“ Garwor”), a company
incorporated in the P.R.C., specializing in sales and marketing. |
SJAP is engaged in the business
of manufacturing bio-organic fertilizer, livestock feed and development of other agriculture projects in the County of Huangyuan,
in the vicinity of the Xining City, Qinghai Province, P.R.C.
In September 2009, the Company
carried out an internal reorganization of its corporate structure and business, and formed a 100% owned subsidiary, A Power Agro
Agriculture Development (Macau) Limited (“ APWAM ”), which was formed in Macau. APWAM then acquired PMH’s
45% equity interest in SJAP. By virtue of the acquisition, APWAM assumed all obligations and liabilities of PMH under the Sino
Foreign Joint Venture Agreement. On May 7, 2010, Qinghai Sanjiang sold and transferred its equity interest in SJAP to Garwor.
The State Administration for Industry and Commerce of Xining City Government of the PRC approved the sale and transfer. As a result,
APWAM owned 45% of SJAP and Garwor owned the remaining 55%. This remains the case as of the date of this report (the “ Report”).
On September 9, 2010, an application
was submitted by the Company to the Companies Registry of Hong Kong for deregistration of PMH under Section 291AA of the Hong
Kong Companies Ordinance. On January 28, 2011, PMH was dissolved.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
1. |
CORPORATE INFORMATION
(CONTINUED) |
On February 15, 2011 and March
29, 2011, the Company entered into an agreement and a memorandum of understanding (an “ MOU” ), respectively,
to sell 100% equity interest in HYT group (including HYT and ZX) to Mr. Xin Ming Sun, a director of ZhongXingNong Nu Co., Ltd
for $45,000,000, with effective date of January 1, 2011.
On February 28, 2011, the Company
applied to form Enping City Bi Tao A Power Prawn Culture Development Co Limited (“ EBAPCD ”) , and the Company
would indirectly own a 25% equity interest in future Sino Joint Venture Company (pending approval).
On February 28, 2011, TRW applied
to form a corporate joint venture, Enping City Bi Tao A Power Fishery Development Co., Limited (“ EBAPFD ”),
incorporated in the PRC. TRW owned a 25% equity interest in EBAPFD. On November 17, 2011, TRW formed Jiang Men City A Power Fishery
Development Co., Limited (“ JFD ”) in which it acquired a 25% equity interest, while withdrawing its 25% equity
interest in EBAPFD. As of December 31, 2011, the Company had invested for total cash consideration of $1,258,607 in JFD. JFD operates
an indoor fish farm. On January 1, 2012, the Company acquired an additional 25% equity interest in JFD for total cash consideration
of $1,662,365. As of January 1, 2012, the Company had consolidated the assets and operations of JFD. On April 1, 2012, the Company
acquired an additional 25% equity interest in JFD for the total cash consideration of $1,702,580. These acquisitions were at our
option according the terms of the original development agreement. The Company presently owns a 75% equity interest in JFD, representing
majority of voting rights and controls its board of directors.
On April 15, 2011, MEIJI applied
to form Enping City A Power Cattle Farm Co., Limited (“ ECF ”), all of which the Company would indirectly own
a 25% equity interest on November 17, 2011. On January 1, 2012, the Company had invested $1,076,489 in ECF and the amount was
settled in contra against accounts receivable due from ECF. On September 17, 2012 MEIJI formed Jiang Men City Hang Mei Cattle
Farm Development Co., Limited (“ JHMC ”) and acquired additional 50% equity interest for the total cash consideration
of $2,944,176 on September 30, 2012 while withdrawing its 25% equity interest in ECF. This acquisition was at our option according
to the terms of the original development agreement. The Company presently owns 75% equity interest in JHMC, representing majority
of voting right and controls its board of directors. As of September 30, 2012, the Company had consolidated the assets and operations
of JHMC. Up to September 30, 2015, MEIJI further invested $400,000 in JHMC.
On July 18, 2011, the Company
formed Hunan Shenghua A Power Agriculture Co., Limited (“ HSA ”), in which the Company owns a 26% equity interest,
and SJAP owns a 50% equity interest with the Chinese partner owning the remaining 24%. As of September 30, 2015, MEIJI and SJAP
total investment in HSA were $857,808 and 629,344, respectively.
On November 12, 2013, the Company
acquired a shell company, Goldcup9203 AB, incorporated in Sweden, in which the Company owns a 100% equity interest. Goldcup 9203
AB changed its name to Sino Agro Food Sweden AB (publ) (“ SAFS ”). As of September 30, 2015, the Company invested
$77,664 in SAFS.
SJAP formed Qinghai Zhong He
Meat Products Co., Limited (“QZH”) , with SJAP would owning 100% equity interest. As of September 30, 2015,
the SJAP’s total investment in QZH was $487,805.
The Company’s principal
executive office is located at Room 3801, Block A, China Shine Plaza, No. 9 Lin He Xi Road, Tianhe District, Guangzhou City, Guangdong
Province, P.R.C., 510610.
The nature of the operations
and principal activities of the Company and its subsidiaries are described in Note 2.2.
| 2. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES |
The Company has adopted December
31 as its fiscal year end.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
Name of subsidiaries |
|
Place of incorporation |
|
Percentage of interest |
|
Principal activities |
|
|
|
|
|
|
|
Capital Award Inc. (“CA”) |
|
Belize |
|
100% (12.31.2014: 100%) directly |
|
Fishery development and holder of A-Power Technology master license. |
|
|
|
|
|
|
|
Capital Stage Inc. (“CS”) |
|
Belize |
|
100% (12.31.2014: 100%) indirectly |
|
Dormant |
|
|
|
|
|
|
|
Capital Hero Inc. (“CH”) |
|
Belize |
|
100% (12.31.2014: 100%) indirectly |
|
Dormant |
|
|
|
|
|
|
|
Sino Agro Food Sweden AB (“SAFS”) |
|
Sweden |
|
100% (12.31.2014: 100%) directly |
|
Dormant |
|
|
|
|
|
|
|
Tri-way Industries Limited (“TRW”) |
|
Hong Kong, P.R.C. |
|
100% (12.31.2014: 100%) directly |
|
Investment holding, holder of enzyme technology master license
for manufacturing of livestock feed and bio-organic fertilizer and has not commenced its planned business of fish farm operations. |
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”) |
|
Macau, P.R.C. |
|
100% (12.31.2014: 100%) directly |
|
Investment holding, cattle farm development, beef cattle and
beef trading |
A Power Agro Agriculture Development (Macau) Limited (“APWAM”) |
|
Macau, P.R.C. |
|
100% (12.31.2014: 100%) directly |
|
Investment holding |
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd
(“JHST”) |
|
P.R.C. |
|
75% (12.31.2014: 75%) indirectly |
|
HylocereusUndatus Plantation (“HU Plantation”). |
|
|
|
|
|
|
|
Jiang Men City A Power Fishery Development Co., Limited (“JFD”) |
|
P.R.C. |
|
75% (12.31.2014: 75%) indirectly |
|
Fish cultivation |
|
|
|
|
|
|
|
Jiang Men City Hang Mei Cattle Farm Development Co., Limited
(“JHMC”) |
|
P.R.C. |
|
75% (12.31.2014: 75%) indirectly |
|
Beef cattle cultivation |
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) |
|
P.R.C. |
|
76% (12.31.2014: 76%) indirectly |
|
Manufacturing of organic fertilizer, livestock feed, and beef
cattle and sheep cultivation, and plantation of crops and pastures |
|
|
|
|
|
|
|
Name of variable interest entity |
|
Place of incorporation |
|
Percentage of interest |
|
Principal activities |
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”) |
|
P.R.C. |
|
45% (12.31.2014: 45%) indirectly |
|
Manufacturing of organic fertilizer, livestock feed, and beef
cattle and plantation of crops and pastures |
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Ltd (“QZH”) |
|
P.R.C. |
|
100% (12.31.2014:100%) indirectly |
|
Cattle slaughter |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014 (UNAUDITED)
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.3 |
BASIS OF PRESENTATION |
The consolidated financial
statements are prepared in accordance with generally accepted accounting principles in the United States of America (“ US
GAAP ”).
Reverse stock split and new
conversion rate of Series B preferred stock to share of common stock on December 16, 2014, the Company implemented a 9.9-for-1
reverse stock split. On December 17, 2014, the Company implemented new conversion rate of 9.9 for 1 share of common stock. All
share information contained within this report, including consolidated balance sheets, consolidated statements of income and other
comprehensive income, and footnotes have been retroactively adjusted for the effects of reverse stock split and new conversion
rate of Series B preferred stock to share of common stock.
|
2.4 |
BASIS OF CONSOLIDATION |
The consolidated financial
statements include the financial statements of the Company, its subsidiaries CA, CS, CH, TRW, MEIJI, JHST, JFD, JHMC, HSA, APWAM,
SAFS and its variable interest entity SJAP and QZH. All material inter-company transactions and balances have been eliminated
in consolidation.
SIAF, CA, CS, CH, TRW, MEIJI,
JHST, JFD, JHMC, HSA, APWAM, SAFS, SJAP and QZH are hereafter referred to as (the “Company”).
The Company adopted the accounting
pronouncements relating to business combination (primarily contained in ASC Topic 805 “Business Combinations”), including
assets acquired and liabilities assumed on arising from contingencies. These pronouncements established principles and requirement
for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquisition as well as provides guidance for recognizing and measuring the goodwill
acquired in the business combination and determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction
between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require
an acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending
on their nature. The Company’s adoption of these pronouncements will have an impact on the manner in which it accounts for
any future acquisitions.
|
2.6 |
NON - CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS |
The Company adopted the accounting
pronouncement on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards
for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained
in ASC Topic “Consolidation.” It clarifies that a non-controlling interest in a subsidiary is an ownership interest
in the consolidated financial statements. The adoption of this standard has not had material impact on the Company’s consolidated
financial statements.
The preparation of consolidated
financial statements in conformity with US GAAP requires management to make assumptions and estimates that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting periods covered thereby. Actual results could
differ from these estimates. Judgments and estimates of uncertainties are required in applying the Company’s accounting
policies in certain areas. The following are some of the areas requiring significant judgments and estimates: determinations of
the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset
impairment tests of long-lived assets, estimates of the realization of deferred tax assets and inventory reserves.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
The Company’s revenue
recognition policies are in compliance with ASC 605. Sales revenue is recognized when all of the following have occurred: (i)
persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed
or determinable, and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of
shipment when risk of loss and title passes to the customer.
Government grants are recognized
when (i) the Company has substantially accomplished what must be done pursuant to the terms of the grant that are established
by the local government; and (ii) the Company receives notification from the local government that the Company has satisfied all
of the requirements to receive the government grants; and (iii) the amounts are received.
Multiple-Element Arrangements
To qualify as a separate unit
of accounting under ASC 605-25 “ Multiple Element Arrangements ”, the delivered item must have value to the
customer on a standalone basis. The significant deliverables under the Company’s multiple-element arrangements are consulting
and service under development contract, commission and management service.
Revenues from the Company’s
consulting and services under development contracts are performed under fixed-price contracts. Revenues under long-term contracts
are accounted for under the percentage-of-completion method of accounting in accordance with the Financial Accounting Standards
Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 605, Revenue Recognition
(“ASC 605”). Under the percentage-of-completion method, the Company estimates profit as the difference between
total estimated revenue and total estimated cost of a contract and recognizes that profit over the contract term. The percentage
of costs incurred determines the amount of revenue to be recognized. Payment terms are generally defined by the installation contract
and as a result may not match the timing of the costs incurred by the Company and the related recognition of revenue. Such differences
are recorded as either costs or estimated earnings in excess of billings on uncompleted contracts or billings in excess of costs
and estimated earnings on uncompleted contracts. The Company determines a customer’s credit worthiness at the time an order
is accepted. Sudden and unexpected changes in a customer’s financial condition could put recoverability at risk.
The percentage of completion
method requires the ability to estimate several factors, including the ability of the customer to meet its obligations under the
contract, including the payment of amounts when due. If the Company determines that collectability is not assured, the Company
will defer revenue recognition and use methods of accounting for the contract such as the completed contract method until such
time as the Company determines that collectability is reasonably assured or through the completion of the project.
For fixed-price contracts,
the Company uses the ratio of costs incurred to date on the contract to management’s estimate of the contract’s total
costs, to determine the percentage of completion on each contract. This method is used as management considers expended costs
to be the best available measure of progression of these contracts. Contract costs include all direct material, subcontract and
labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation. The Company
accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction work.
Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract.
Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final
contract settlements may result in revisions to the estimated profit ability during the contract. These changes, which include
contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions
are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company
anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period
in which the loss was identified.
The Company does not provide
warranties to customers on a basis customary to the industry, however, customers can claim warranty directly from product manufacturers
for defects in equipment or products. Historically, the Company has experienced no warranty claims.
The Company provides various
management services to its customers in the P.R.C. based on a negotiated fixed-price contract. The clients usually pay the fees
when the services contract is signed and services are rendered. The Company recognizes these services-based revenues from contracts
when (i) management services are rendered; (ii) clients recognize the completion of services; and (iii) collectability is reasonably
assured. Fees received in advance are recorded as deferred revenue under current liabilities.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
| 2. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| 2.9 | COST
OF GOODS SOLD AND COST OF SERVICES |
Cost of goods sold consists
primarily of direct purchase cost of merchandise goods, and related levies. Cost of services consist primarily direct cost and
indirect cost incurred to date for development contracts and provision for anticipated losses for development contracts.
| 2.10 | SHIPPING
AND HANDLING |
Shipping and handling costs
related to cost of goods sold are included in general and administrative expenses, which totaled $1,260, $1,673, $9,952 and $13,490
for the three months and the nine months ended September 30, 2015 and 2014, respectively.
Advertising costs are included
in general and administrative expenses, which totaled $712,614, $708,049, $1,421,458 and $1,661,103 for the three months and the
nine months ended September 30, 2015 and 2014, respectively.
| 2.12 | RESEARCH
AND DEVELOPMENT EXPENSES |
Research and development expenses
are included in general and administrative expenses, which totaled $549,020, $0, $549,020 and $0 for the three months and the
nine months ended September 30, 2015 and 2014, respectively.
| 2.13 | FOREIGN
CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME |
The reporting currency of the
Company is the U.S. dollars. The functional currency of the Company is the Chinese Renminbi (RMB).
For those entities whose functional
currency is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the
balance sheet date; shareholders’ equity is translated at historical rates and items in the statements of income and of
cash flows are translated at the average rate for the period. Because cash flows are translated based on the average translation
rate, amounts related to assets and liabilities reported in the statements of cash flows will not necessarily agree with changes
in the corresponding balances in the balance sheets. Translation adjustments resulting from this process are included in accumulated
other comprehensive income in the statements of shareholders’ equity. Transaction gains and losses that arise from exchange
rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements
of income and comprehensive income, as incurred.
Accumulated other comprehensive
income in the consolidated statement of shareholders’ equity amounted to $3,388,103 as of September 30, 2015 and $6,452,816
as of December 31, 2014. The balance sheet amounts with the exception of equity as of September 30, 2015 and December 31, 2014
were translated using an exchange rate of RMB 6.36 to $1.00 and RMB 6.15 to $1.00, respectively. The average translation rates
applied to the statements of income and other comprehensive income and of cash flows for the nine months ended September 30, 2015
and 2014 were RMB 6.11 to $1.00 and RMB 6.15 to $1.00, respectively.
| 2.14 | CASH
AND CASH EQUIVALENTS |
The Company considers all highly
liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents
kept with financial institutions in the P.R.C. are not insured or otherwise protected. Should any of those institutions holding
the Company’s cash become insolvent, or should the Company become unable to withdraw funds for any reason, the Company could
lose the cash on deposit with that institution.
The Company maintains reserves
for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical
bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns
to evaluate the adequacy of these reserves. Reserves are recorded primarily on a specific identification basis.
The standard credit period
for most of the Company’s clients is three months. The collection period over 1 year is classified as long-term accounts
receivable. Management evaluates the collectability of the receivables at least quarterly. Provision for doubtful accounts as
of September 30, 2015 and December 31, 2014 are $0.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
| 2. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Inventories
are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing
each product to its location and conditions are accounted for as follows:
| (a) | raw
materials - purchase cost on a weighted average basis; |
|
(b) |
manufactured finished goods and work-in-progress
- cost of direct materials and labor and a proportion of manufacturing overhead based on normal operation capacity but excluding
borrowing costs; and |
|
(c) |
retail and wholesale merchandise finished goods - purchase cost on a weighted average basis. |
Net realizable value is the
estimated selling price in the ordinary course of business, less estimated costs for completion and the estimated costs necessary
to make the sale.
Plant and equipment are stated
at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that
are eligible for capitalization when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed,
its cost is recognized in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalization.
The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial
year end.
Depreciation is calculated
on a straight-line basis over the estimated useful lives of the assets.
Plant and machinery |
|
5 - 10 years |
Structure and leasehold improvements |
|
10 - 20 years |
Mature seeds and herbage cultivation |
|
20 years |
Furniture and equipment |
|
2.5 - 10 years |
Motor vehicles |
|
5 - 10 years |
An item of plant and equipment
is removed from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is included in the consolidated statements of income in the period the item is disposed.
Goodwill is an asset representing
the fair economic benefits arising from other assets acquired in a business combination that are not individually identified or
separately recognized. Goodwill is tested for impairment on an annual basis at the end of the Company’s fiscal year, or
when impairment indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting
unit. The Company directly acquired MEIJI, which is the holding company of JHST that operates the Hu Plantation. As a result of
this acquisition, the Company recorded goodwill in the amount of $724,940. This goodwill represents the fair value of the assets
acquired in these acquisitions over the cost of the assets acquired.
On October 29, 2014, the Company
invested in Huangyuan County Rural Credit Union (“RCU”), Huangyuan County , Xining City, Qinghai Province, the P.R.C.
RCU is engaged in the financing and crediting business to agricultural projects for local farmers. The Company has a 5% stake
in RCU. The Company has no representative on the board of directors to oversee corporate operations. The Company accounts for
its long term investment at cost.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
| 2. | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.20 |
PROPRIETARY TECHNOLOGIES |
A master license of stock feed
manufacturing technology was acquired and the costs of acquisition are capitalized as proprietary technologies when technological
feasibility has been established. Cost of acquisition of stock feed manufacturing technology master license is amortized using
the straight-line method over its estimated life of 20 years.
An aromatic cattle-feeding
formula was acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has
been established. Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its
estimated life of 25 years.
The cost of sleepy cods breeding
technology license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting
sleepy cods breeding technology license is amortized using the straight-line method over its estimated life of 25 years.
Bacterial cellulose technology
license and related trade mark are capitalized as proprietary technologies when technological feasibility has been established.
Cost of license and related trade mark is amortized using the straight-line method over its estimated life of 20 years.
The Company has determined
that technological feasibility is established at the time a working model of products is completed. Proprietary technologies are
intangible assets of finite lives. Management evaluates the recoverability of proprietary technologies on an annual basis at the
end of the Company’s fiscal year, or when impairment indicators arise. As required by ASC Topic 350 “Intangible -
Goodwill and Other”, the Company uses a fair-value-based approach to test for impairment.
|
2.21 |
CONSTRUCTION IN PROGRESS |
Construction in progress represents
direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction
in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for
their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended
use.
Land use rights represent acquisition
of rights to agricultural land from farmers and are amortized on the straight-line basis over their respective lease periods.
The lease period of agricultural land is in the range from 10 to 60 years. Land use rights purchase prices were determined in
accordance with the P.R.C. Government’s minimum lease payments on agricultural land and mutually agreed to terms between
the Company and the vendors.
|
2.23 |
CORPORATE JOINT VENTURE |
A corporation formed, owned,
and operated by two or more businesses as a separate and discrete business or project (venture) for their mutual benefit is considered
to be a corporate joint venture. Investee entities, in which the Company can exercise significant influence, but not control,
are accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the
earnings or losses of these companies is included in net income.
A loss in value of an investment
that is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but
would not necessarily be limited to, the absence of an ability to recover the carrying amount of the investment or inability of
the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.24 |
VARIABLE INTEREST ENTITY |
A variable interest entity
(“ VIE ”) is an entity (investee) in which the investor has obtained less than a majority interest, according
to the Financial Accounting Standards Board (FASB). A VIE is subject to consolidation if a VIE meets one of the following three
criteria as elaborated in ASC Topic 810-10, Consolidation:
|
(a) |
equity-at-risk is not sufficient
to support the entity’s activities; |
|
(b) |
as a group, the equity-at-risk holders
cannot control the entity; or |
|
(c) |
the economics do not coincide with the
voting interest. |
If a firm is the primary beneficiary
of a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with
the majority of variable interests. A corporation formed, owned, and operated by two or more businesses (ventures) as a separate
and discrete business or project (venture) for their mutual benefit is defined as a joint venture.
Treasury stock means shares
of a corporation’s own stock that have been issued and subsequently reacquired by the corporation. Converting outstanding
shares to treasury shares does not reduce the number of shares issued but does reduce the number of shares outstanding. These
shares are not eligible to receive dividends. Accounting for excesses and deficiencies on treasury stock transactions is governed
by ASC 505-30-30.
State laws and federal agencies
closely regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares must have a
legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as follows:
|
(a) |
to meet additional stock
needs for various reasons, including newly implemented stock option plans, stock for convertible bonds or convertible preferred
stock, or a stock dividend. |
|
(b) |
to make more shares available for acquisitions
of other entities. |
The cost method of accounting
for treasury shares has been adopted by the Company. The purchase of outstanding shares and thus converting them into treasury
shares is treated as a temporary reduction in shareholders’ equity in view of the expectation to reissue the shares instead
of retiring them. When the Company reissues the treasury shares, the temporary account is eliminated. The cost of acquiring outstanding
shares for converting into treasury shares is charged to a contra account, in this case a contra equity account that reduces the
stockholder equity balance.
The Company accounts for income
taxes under the provisions of ASC Topic 740 “Accounting for Income Taxes.” Under ASC Topic 740, deferred tax assets
and liabilities are determined based on the difference between the financial statement carrying amounts and the tax bases of assets
and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax
is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax
rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance
sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent
that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated
at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax
is charged or credited in the income statement, except when it related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net
basis.
ASC Topic 740 also prescribes
a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or for one expected
to be taken, in a tax return. ASC Topic 740 also provides guidance related to, among other things, classification, accounting
for interest and penalties associated with tax positions, and disclosure requirements. Any interest and penalties accrued related
to unrecognized tax benefits will be recorded as tax expense.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.27 |
POLITICAL AND BUSINESS RISK |
The Company’s operations
are carried out in the P.R.C. Accordingly, the political, economic and legal environment in the P.R.C. may influence the Company’s
business, financial condition and results of operations by the general state of the P.R.C.’s economy. The Company’s
operations in the P.R.C. are subject to specific considerations and significant risks not typically associated with companies
in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods
of taxation, among other things.
|
2.28 |
CONCENTRATION OF CREDIT RISK |
Cash includes cash at banks
and demand deposits in accounts maintained with banks within the P.R.C. Total cash in these banks as of September 30, 2015 and
December 31, 2014 amounted to $9,439,685 and $2,814,677, respectively, none of which is covered by insurance. The Company has
not experienced any losses in such accounts and believes it is not exposed to any risks to its cash in bank accounts.
The Company had 5 major customers
(A, B, C, D & E) whose business individually represented the following
percentages of the Company’s total revenue for the period indicated:
| |
Three
months | | |
Three
months | | |
Nine
months | | |
Nine
months | |
| |
ended | | |
ended | | |
ended | | |
ended | |
| |
September
30, 2015 | | |
September
30, 2014 | | |
September
30, 2015 | | |
September
30, 2014 | |
| |
| | |
| | |
| | |
| |
Customer A | |
| 16.51 | % | |
| 14.33 | % | |
| 15.21 | % | |
| 11.64 | % |
Customer B | |
| - | % | |
| 24.57 | % | |
| 13.96 | % | |
| 28.24 | % |
Customer C | |
| 7.20 | % | |
| 15.78 | % | |
| 10.27 | % | |
| 16.70 | % |
Customer D | |
| 9.02 | % | |
| 8.33 | % | |
| 9.94 | % | |
| - | % |
Customer E | |
| 13.17 | % | |
| 5.77 | % | |
| 9.80 | % | |
| 7.12 | % |
Customer F | |
| 8.83 | % | |
| - | % | |
| - | % | |
| 5.39 | % |
| |
| 54.73 | % | |
| 68.78 | % | |
| 59.18 | % | |
| 69.09 | % |
| |
| |
Percentage of revenue | | |
Amount | |
Customer A | |
Fishery Development Division | |
| 15.21 | % | |
$ | 50,329,220 | |
Customer B | |
Fishery Development and Corporate and Others Divisions | |
| 13.96 | % | |
$ | 46,205,071 | |
Customer C | |
Organic Fertilizer and Bread Grass Division | |
| 10.27 | % | |
$ | 33,990,991 | |
Accounts
receivable are derived from revenue earned from customers located primarily in the P.R.C. The Company performs ongoing credit
evaluations of customers and has not experienced any material losses to date.
The Company had 5 major customers
whose accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable:
| |
September 30, 2015 | | |
December 31, 2014 | |
Customer A | |
| 13.73 | % | |
| 10.23 | % |
Customer B | |
| 11.97 | % | |
| 13.51 | % |
Customer C | |
| 8.39 | % | |
| 21.21 | % |
Customer D | |
| 7.49 | % | |
| - | % |
Customer E | |
| 6.72 | % | |
| 9.68 | % |
Customer F | |
| - | % | |
| 7.12 | % |
| |
| 48.30 | % | |
| 61.75 | % |
As of September 30, 2015, amounts
due from customers A and B are $17,746,268 and $15,470,875, respectively. The Company has not experienced any significant difficulty
in collecting its accounts receivable in the past and is not aware of any financial difficulties of its major customers.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.29 |
IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS |
In accordance
with ASC Topic 360, “Property, Plant and Equipment,” long-lived assets to be held and used are analyzed for impairment
whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company reviews
the carrying amount of its long-lived assets, including intangibles, for impairment, during each reporting period. An asset is
considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying
amount of such asset is considered not recoverable, the asset is adjusted to its fair value. Fair value is generally determined
based on discounted future cash flow. As of September 30, 2015 and December 31, 2014, the Company determined no impairment losses
were necessary.
As prescribed in ASC Topic
260 “ Earnings per Share, ” Basic Earnings per Share (“ EPS ”) is computed by dividing net
income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted
EPS is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares
outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options
on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based
on assumed exercises are hypothetically used to repurchase the Company’s common stock at the average market price during
the period.
ASC 260-10-55 requires that
stock dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the year, or
retroactively if the stock dividends or stock splits occur after the end of the period but before the release of the financial
statements, by considering it outstanding of the entirety of each period presented. Dilution is computed by applying the treasury
stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time
of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during
the year.
For the three months ended
September 30, 2015 and 2014, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders
amount to $1.14 and $1.49 respectively. For the three months ended September 30, 2015 and 2014, diluted earnings per share attributable
to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $1.14 and $1.43, respectively,
For the nine months ended September
30, 2015 and 2014, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders amount
to $3.02 and $4.42 respectively. For the nine months ended September 30, 2015 and 2014, diluted earnings per share attributable
to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $3.02 and $4.23, respectively,
|
2.31 |
ACCUMULATED OTHER COMPREHENSIVE INCOME |
ASC Topic 220 “Comprehensive
Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements.
Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the
reported net income and net change in cumulative translation adjustments.
|
2.32 |
RETIREMENT BENEFIT COSTS |
P.R.C. state managed retirement
benefit programs are defined contribution plans and the payments to the plans are charged as expenses when employees have rendered
service entitling them to the contribution made by the employer.
|
2.33 |
STOCK-BASED COMPENSATION |
The Company
has adopted both ASC Topic 718, “Compensation - Stock Compensation” and ASC Topic 505-50, “Equity-Based Payments
to Non - Employees” using the fair value method in which an entity issues its equity instruments to acquire goods and services
from employees and non-employees. Stock compensation for stock granted to non-employees has been determined in accordance with
this accounting standard and the accounting standard regarding accounting for equity instruments that are issued to other than
employees for acquiring, or in conjunction with selling goods or services, as the fair value of the consideration received or
the fair value of equity instruments issued, whichever is more reliably measured. This accounting standard allows the “simplified”
method to determine the term of employee options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50,
stock compensation expenses is measured at the grant date on the value of the option or restricted stock and is recognized as
expenses, less expected forfeitures, over the requisite service period, which is generally the vesting period.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.34 |
FAIR VALUE OF FINANCIAL INSTRUMENTS |
The Company follows paragraph
825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph
820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of
its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under U.S. GAAP, and expands
disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures,
Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure
fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value
hierarchy defined by Paragraph 820-10-35-37 are described below:
|
Level 1 |
Quoted market prices available in active markets
for identical assets or liabilities as of the reporting date. |
|
Level 2 |
Pricing inputs other than quoted prices in active markets included
in Level 1, which are either directly or indirectly observable as of the reporting date. |
|
Level 3 |
Pricing inputs that are generally observable inputs and not
corroborated by market data. |
The carrying amounts of the
Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of
the short maturity of these instruments. The Company does not have any assets or liabilities measured at fair value on a recurring
or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured
at fair value as of September 30, 2015 or December 31, 2014, nor gains or losses are reported in the statements of income and
comprehensive income that are attributable to the change in unrealized gains or losses relating to those assets and liabilities
still held at the reporting date for the nine months ended September 30, 2015 or 2014.
|
2.35 |
NEW ACCOUNTING PRONOUNCEMENTS |
The Company does not expect
any recent accounting pronouncements to have a material effect on the Company’s financial position, results of operations,
or cash flows.
In April 2014, the FASB issued
ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which provides
a narrower definition of discontinued operations than under existing U.S. GAAP. ASU 2014-08 requires that only a disposal of a
component of an entity, or a group of components of an entity, that represents a strategic shift that has, or will have, a major
effect on the reporting entity’s operations and financial results should be reported in the consolidated financial statements
as discontinued operations. ASU 2014-08 also provides guidance on the consolidated financial statement presentations and disclosures
of discontinued operations. The new guidance is effective prospectively for the Company to all new disposals of components and
new classification as held for sale beginning April 1, 2015. The Company is evaluating the effects, if any, of the adoption of
this guidance will have on the consolidated financial position, results of operations or cash flows.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
|
2.35 |
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED) |
In May 2014, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers
(Topic 606) (ASU 2014-09), which amends the existing accounting standards for revenue recognition. In August 2015, the
FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which
delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as
of the original effective date. As such, the updated standard will be effective for us in the first quarter of 2018, with the
option to adopt it in the first quarter of 2017. We are still evaluating the effect that the updated standard will have on our
consolidated financial statements and related disclosures.
In June 2014, the FASB issued
ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including
an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation”. The guidance eliminates the definition
of a development stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development
stage entities, primarily presentation of inception to date financial information. The provisions of the amendments are effective
for annual reporting periods beginning after December 15, 2014, and the interim periods therein. However, early adoption is permitted.
Accordingly, the Company has adopted this standard as of July 31, 2014.
In August 2014, the FASB issued
ASU No. 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." ASU 2014-15
will explicitly require management to assess an entity's ability to continue as a going concern, and to provide related footnote
disclosure in certain circumstances. This pronouncement is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2016, and early adoption is permitted. Management is currently evaluating the impact of this pronouncement
on our consolidated financial statements.
In November 2014, FASB issued
ASU No. 2014-17, (Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force.)
The amendments in this update provide an acquired entity with an option to apply pushdown accounting in its separate financial
statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The adoption of ASU 2014-17
did not have a material impact on the Company’s consolidated financial statements.
In January 2015, FASB issued
ASU No. 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation
by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The
amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively
to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied
from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have material impact
on the Company’s consolidated financial statements.
In February 2015, the FASB
issued Accounting Standards Update ("ASU") No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation
Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate
limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable
interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require
the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim
periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period.
A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the
beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact
of the adoption of this guidance on the consolidated financial statements.
In April 2015, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, which simplifies
presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent
with debt discounts. ASU No. 2015-03 will be effective for fiscal years beginning after December 15, 2015, with early adoption
permitted. The Company has elected to adopt this ASU early and the adoption of this guidance did not have a material effect on
its consolidated financial statements.
Other accounting standards
that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
The Company establishes standards
for reporting information about operating segments on a basis consistent with the Company’s internal organization structure
as well as business segments and major customers in consolidated financial statements. The Company operates in five principal
reportable segments: Fishery Development Division, HU Plantation Division, Organic Fertilizer and Bread Grass Division, Cattle
Farm Development Division and Corporate and Others Division. No geographic information is required as all revenue and assets are
located in the P.R.C.
| |
For the three months ended September 30, 2015 | | |
| |
| |
| | |
| | |
Organic | | |
| | |
| | |
| |
| |
Fishery | | |
| | |
Fertilizer and | | |
Cattle Farm | | |
| | |
| |
| |
Development | | |
HU Plantation | | |
Bread Grass | | |
Development | | |
Corporate and | | |
| |
| |
Division (1) | | |
Division (2) | | |
Division (3) | | |
Division (4) | | |
Others Division (5) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 57,233,749 | | |
$ | 7,375,393 | | |
$ | 40,358,733 | | |
$ | 9,636,919 | | |
$ | 10,061,605 | | |
$ | 124,666,399 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 14,859,021 | | |
$ | 3,532,872 | | |
$ | 4,207,421 | | |
$ | 921,276 | | |
$ | (1,998,490 | ) | |
$ | 21,522,100 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 142,302,901 | | |
$ | 58,195,820 | | |
$ | 303,489,428 | | |
$ | 36,149,206 | | |
$ | 85,624,327 | | |
$ | 625,761,682 | |
| |
For the three months ended September 30, 2014 | | |
| |
| |
| | |
| | |
Organic | | |
| | |
| | |
| |
| |
Fishery | | |
| | |
Fertilizer and | | |
Cattle Farm | | |
| | |
| |
| |
Development | | |
HU Plantation | | |
Bread Grass | | |
Development | | |
Corporate and | | |
| |
| |
Division (1) | | |
Division (2) | | |
Division (3) | | |
Division (4) | | |
Others Division (5) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 47,780,135 | | |
$ | 5,813,667 | | |
$ | 33,700,137 | | |
$ | 6,814,990 | | |
$ | 13,111,130 | | |
$ | 107,220,059 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 13,754,241 | | |
$ | 2,567,126 | | |
$ | 6,994,954 | | |
$ | 641,963 | | |
$ | 543,578 | | |
$ | 24,501,862 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 131,700,632 | | |
$ | 55,471,908 | | |
$ | 218,710,852 | | |
$ | 39,995,639 | | |
$ | 35,116,673 | | |
$ | 480,995,704 | |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
3. |
SEGMENT INFORMATION (CONTINUED) |
| |
For the nine months ended September 30, 2015 | | |
| |
| |
| | |
| | |
Organic | | |
| | |
| | |
| |
| |
Fishery | | |
| | |
Fertilizer and | | |
Cattle Farm | | |
| | |
| |
| |
Development | | |
HU Plantation | | |
Bread Grass | | |
Development | | |
Corporate and | | |
| |
| |
Division (1) | | |
Division (2) | | |
Division (3) | | |
Division (4) | | |
Others Division (5) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 138,547,396 | | |
$ | 11,568,406 | | |
$ | 122,162,504 | | |
$ | 27,424,589 | | |
$ | 31,293,682 | | |
$ | 330,996,577 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 37,959,003 | | |
$ | 4,482,153 | | |
$ | 14,599,210 | | |
$ | 1,895,794 | | |
$ | (4,349,017 | ) | |
$ | 54,587,143 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 142,302,901 | | |
$ | 58,195,820 | | |
$ | 303,489,428 | | |
$ | 36,149,206 | | |
$ | 85,624,327 | | |
$ | 625,761,682 | |
| |
For the nine months ended September 30, 2014 | | |
| |
| |
| | |
| | |
Organic | | |
| | |
| | |
| |
| |
Fishery | | |
| | |
Fertilizer and | | |
Cattle Farm | | |
| | |
| |
| |
Development | | |
HU Plantation | | |
Bread Grass | | |
Development | | |
Corporate and | | |
| |
| |
Division (1) | | |
Division (2) | | |
Division (3) | | |
Division (4) | | |
Others Division (5) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Revenue | |
$ | 136,968,336 | | |
$ | 9,085,607 | | |
$ | 95,459,852 | | |
$ | 21,483,496 | | |
$ | 32,183,061 | | |
$ | 295,180,352 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
$ | 32,002,640 | | |
$ | 3,752,283 | | |
$ | 25,914,779 | | |
$ | 1,966,526 | | |
$ | 4,740,591 | | |
$ | 68,376,819 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 131,700,632 | | |
$ | 55,471,908 | | |
$ | 218,710,852 | | |
$ | 39,995,639 | | |
$ | 35,116,673 | | |
$ | 480,995,704 | |
(1) |
Operated by Capital Award, Inc. (“CA”)
and Jiang Men City A Power Fishery Development Co., Limited (“JFD”). |
(2) |
Operated by Jiang Men City Heng Sheng Tai Agriculture
Development Co., Limited (“JHST”). |
(3) |
Operated by Qinghai Sanjiang A Power Agriculture
Co., Limited (“SJAP”), Qinghai Zhong He Meat Products Co., Limited (“QZH”), A Power Agro Agriculture
Development (Macau) Limited (“APWAM”), and Hunan Shenghua A Power Agriculture Co., Limited (“HSA”). |
(4) |
Operated by Jiang Men City Hang Mei Cattle Farm
Development Co. Limited (“JHMC”) and Macau Eiji Company Limited (“MEIJI”). |
(5) |
Operated by Sino Agro Food, Inc. (“SIAF”)
and Sino Agro Food Sweden AB (publ) (“SAFS”). |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of revenue:-
| |
For the three months ended September 30,
2015 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of goods | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 28,600,191 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 28,600,191 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”) | |
| - | | |
| 7,375,393 | | |
| - | | |
| - | | |
| - | | |
| 7,375,393 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | |
| - | | |
| - | | |
| 4,871,273 | | |
| - | | |
| - | | |
| 4,871,273 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) | |
| - | | |
| - | | |
| 21,284,622 | | |
| - | | |
| - | | |
| 21,284,622 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Zhong He Meat Products Co., Limited (“QZH”) | |
| - | | |
| - | | |
| 14,202,838 | | |
| - | | |
| - | | |
| 14,202,838 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| 9,636,919 | | |
| - | | |
| 9,636,919 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,061,605 | | |
| 10,061,605 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
| 28,406,973 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 28,406,973 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commission and management fee | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
| 226,585 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 226,585 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
$ | 57,233,749 | | |
$ | 7,395,393 | | |
$ | 40,358,733 | | |
$ | 9,636,919 | | |
$ | 10,061,605 | | |
$ | 124,666,399 | |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of revenue (Continued):-
| |
For the three months ended September 30, 2014 | | |
| |
| |
Fishery Development Division (1) | | |
HU
Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate
and Others
Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of goods | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 22,731,491 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 22,731,491 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”) | |
| - | | |
| 5,813,667 | | |
| - | | |
| - | | |
| - | | |
$ | 5,813,667 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | |
| - | | |
| - | | |
| 5,794,162 | | |
| - | | |
| - | | |
| 5,794,162 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) | |
| - | | |
| - | | |
| 22,236,925 | | |
| - | | |
| - | | |
| 22,236,925 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Zhong He Meat Products Co., Ltd (“QZH”) | |
| - | | |
| - | | |
| 5,669,050 | | |
| - | | |
| - | | |
| 5,669,050 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| 6,814,990 | | |
| - | | |
| 6,814,990 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,111,130 | | |
| 13,111,130 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
| 24,598,641 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 24,598,641 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commission and management fee | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
| 450,003 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 450,003 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
$ | 47,780,135 | | |
$ | 5,813,667 | | |
$ | 33,700,137 | | |
$ | 6,814,990 | | |
$ | 13,111,130 | | |
$ | 107,220,059 | |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of revenue
(Continued):-
| |
For
the nine months ended September 30, 2015 | | |
| |
| |
Fishery
Development Division (1) | | |
HU Plantation
Division (2) | | |
Organic
Fertilizer and Bread Grass
Division (3) | | |
Cattle Farm
Development Division (4) | | |
Corporate and
Others Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of goods | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital
Award, Inc. (“CA”) | |
$ | 74,962,479 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 74,962,479 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Jiang Men City Heng
Sheng Tai Agriculture Development Co., Limited (“JHST”) | |
| - | | |
| 11,568,406 | | |
| - | | |
| - | | |
| - | | |
$ | 11,568,406 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hunan Shenghua A
Power Agriculture Co., Limited (“HSA”) | |
| - | | |
| - | | |
| 13,962,447 | | |
| - | | |
| - | | |
| 13,962,447 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Sanjiang
A Power Agriculture Co., Limited (“SJAP”) | |
| - | | |
| - | | |
| 65,109,790 | | |
| - | | |
| - | | |
| 65,109,790 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Zhong He
Meat Products Co., Ltd (“QZH”) | |
| - | | |
| - | | |
| 43,090,267 | | |
| - | | |
| - | | |
| 43,090,267 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company
Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| 27,424,589 | | |
| - | | |
| 27,424,589 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc.
(“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 27,507,708 | | |
| 27,507,708 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development
contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc.
(“CA”) | |
| 62,334,261 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 62,334,261 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc.
(“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,785,974 | | |
| 3,785,974 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commission and management fee | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc.
(“CA”) | |
| 716,588 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 716,588 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company
Limited (“MEIJI”) | |
| 534,068 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 534,068 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
$ | 138,547,396 | | |
$ | 11,568,406 | | |
$ | 122,162,504 | | |
$ | 27,424,589 | | |
$ | 31,293,682 | | |
$ | 330,996,577 | |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
|
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of revenue
(Continued):-
| |
For the nine months ended September 30, 2014 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of goods | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 86,218,455 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 86,218,455 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”) | |
| - | | |
| 9,085,607 | | |
| - | | |
| - | | |
| - | | |
$ | 9,085,607 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | |
| - | | |
| - | | |
| 15,750,656 | | |
| - | | |
| - | | |
| 15,750,656 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) | |
| - | | |
| - | | |
| 72,241,319 | | |
| - | | |
| - | | |
| 72,241,319 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Zhong He Meat Products Co., Ltd (“QZH”) | |
| - | | |
| - | | |
| 7,467,877 | | |
| - | | |
| - | | |
| 7,467,877 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| 21,483,496 | | |
| - | | |
| 21,483,496 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 30,553,374 | | |
| 30,553,374 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
| 49,558,454 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 49,558,454 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,629,687 | | |
| 1,629,687 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Commission and management fee | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
| 1,191,427 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,191,427 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
$ | 136,968,336 | | |
$ | 9,085,607 | | |
$ | 95,459,852 | | |
$ | 21,483,496 | | |
$ | 32,183,061 | | |
| $295,180,352 | |
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of cost of
goods sold and cost of services:-
COST OF GOODS SOLD
|
|
For the three
months ended September 30, 2015 |
|
|
|
|
|
|
Fishery
Development
Division (1) |
|
|
HU
Plantation
Division (2) |
|
|
Organic
Fertilizer and
Bread Grass
Division (3) |
|
|
Cattle Farm
Development
Division (4) |
|
|
Corporate
and Others
Division (5) |
|
|
Total |
|
Name of entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”) |
|
$ |
23,144,284 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
23,144,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited
(“JHST”) |
|
|
- |
|
|
|
2,447,904 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,447,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) |
|
|
- |
|
|
|
- |
|
|
|
2,955,147 |
|
|
|
- |
|
|
|
- |
|
|
|
2,955,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) |
|
|
- |
|
|
|
- |
|
|
|
17,967,937 |
|
|
|
- |
|
|
|
- |
|
|
|
17,967,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”) |
|
|
- |
|
|
|
- |
|
|
|
10,809,198 |
|
|
|
- |
|
|
|
- |
|
|
|
10,809,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,996,149 |
|
|
|
- |
|
|
|
8,966,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,943,649 |
|
|
|
8,943,649 |
|
|
|
$ |
23,144,284 |
|
|
$ |
2,447,904 |
|
|
$ |
31,732,282 |
|
|
$ |
8,996,149 |
|
|
$ |
8,943,649 |
|
|
$ |
75,264,268 |
|
COST OF SERVICES
| |
For the three months ended September 30,
2015 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 17,151,938 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 17,151,938 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
$ | 17,151,938 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 17,151,938 | |
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of cost of
goods sold and cost of services (Continued):-
COST OF GOODS SOLD
|
|
For the three
months ended September 30, 2014 |
|
|
|
|
|
|
Fishery
Development
Division (1) |
|
|
HU
Plantation
Division (2) |
|
|
Organic
Fertilizer and
Bread Grass
Division (3) |
|
|
Cattle Farm
Development
Division (4) |
|
|
Corporate
and Others
Division (5) |
|
|
Total |
|
Name of entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of goods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”) |
|
$ |
15,935,868 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
15,935,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited
(“JHST”) |
|
|
- |
|
|
|
1,704,741 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,704,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) |
|
|
- |
|
|
|
- |
|
|
|
4,698,541 |
|
|
|
- |
|
|
|
- |
|
|
|
4,698,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) |
|
|
- |
|
|
|
- |
|
|
|
15,270,656 |
|
|
|
- |
|
|
|
- |
|
|
|
15,270,656 |
|
Qinghai Zhong He Meat Products Co., Limited (“QZH”) |
|
|
- |
|
|
|
- |
|
|
|
3,519,966 |
|
|
|
- |
|
|
|
- |
|
|
|
3,519,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,443,072 |
|
|
|
- |
|
|
|
6,443,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sino Agro Food, Inc. (“SIAF”) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,548,682 |
|
|
|
11,548,682 |
|
|
|
$ |
15,935,868 |
|
|
$ |
1,704,741 |
|
|
$ |
23,489,163 |
|
|
$ |
6,443,072 |
|
|
$ |
11,548,682 |
|
|
$ |
59,121,526 |
|
COST OF SERVICES
|
|
For the three
months ended September 30, 2014 |
|
|
|
|
|
|
Fishery
Development
Division (1) |
|
|
HU Plantation
Division (2) |
|
|
Organic
Fertilizer and
Bread Grass
Division (3) |
|
|
Cattle Farm
Development
Division (4) |
|
|
Corporate
and Others
Division (5) |
|
|
Total |
|
Name of entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and service income for development contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Award, Inc. (“CA”) |
|
$ |
13,601,869 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
13,601,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Eiji Company Limited (“MEIJI”) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
$ |
13,601,869 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
13,601,869 |
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of cost of
goods sold and cost of services:-
COST OF GOODS SOLD
| |
For the nine months ended September 30,
2015 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of goods | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 57,904,256 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 57,904,256 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”) | |
| - | | |
| 3,592,659 | | |
| - | | |
| - | | |
| - | | |
| 3,592,659 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | |
| - | | |
| - | | |
| 8,187,619 | | |
| - | | |
| - | | |
| 8,187,619 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) | |
| - | | |
| - | | |
| 49,816,505 | | |
| - | | |
| - | | |
| 49,816,505 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Qinghai Zhong He Meat Products Co., Limited (“QZH”) | |
| - | | |
| - | | |
| 31,225,451 | | |
| - | | |
| - | | |
| 31,225,451 | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| 26,121,572 | | |
| - | | |
| 26,121,572 | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 23,914,592 | | |
| 23,914,592 | |
| |
$ | 57,904,256 | | |
$ | 3,592,659 | | |
$ | 89,229,575 | | |
$ | 26,121,572 | | |
$ | 23,914,592 | | |
$ | 200,762,654 | |
COST OF SERVICES
| |
For the nine months ended September
30, 2015 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 39,063,555 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 39,063,555 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,404,813 | | |
| 1,404,813 | |
| |
$ | 39,063,555 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 1,404,813 | | |
$ | 40,468,368 | |
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
3. |
SEGMENT INFORMATION (CONTINUED) |
Further analysis of cost of
goods sold and cost of services (Continued):-
COST OF GOODS SOLD
| |
For the nine months ended September 30,
2014 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of goods | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 54,861,550 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 54,861,550 | |
Jiang Men City Heng Sheng Tai Agriculture Development Co., Limited (“JHST”) | |
| - | | |
| 2,423,811 | | |
| - | | |
| - | | |
| - | | |
| 2,423,811 | |
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”) | |
| - | | |
| - | | |
| 10,371,555 | | |
| - | | |
| - | | |
| 10,371,555 | |
Qinghai Sanjiang A Power Agriculture Co., Limited (“SJAP”) | |
| - | | |
| - | | |
| 48,552,223 | | |
| - | | |
| - | | |
| 48,552,223 | |
Qinghai Zhong He Meat Products Co., Limited (“QZH”) | |
| - | | |
| - | | |
| 4,680,245 | | |
| - | | |
| - | | |
| 4,680,245 | |
Macau Eiji Company Limited (“MEIJI”) | |
| - | | |
| - | | |
| - | | |
| 20,418,345 | | |
| - | | |
| 20,418,345 | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 31,728,186 | | |
| 31,728,186 | |
| |
$ | 54,861,550 | | |
$ | 2,423,811 | | |
$ | 63,604,023 | | |
$ | 20,418,345 | | |
$ | 31,728,186 | | |
$ | 173,035,915 | |
COST OF SERVICES
| |
For the nine months ended September 30,
2014 | | |
| |
| |
Fishery Development Division (1) | | |
HU Plantation Division (2) | | |
Organic Fertilizer and Bread Grass Division (3) | | |
Cattle Farm Development Division (4) | | |
Corporate and Others Division (5) | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Name of entity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consulting and service income for development contracts | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital Award, Inc. (“CA”) | |
$ | 25,236,498 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 25,236,498 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sino Agro Food, Inc. (“SIAF”) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,554,244 | | |
| 1,554,244 | |
| |
$ | 25,236,498 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 1,554,244 | | |
$ | 26,790,742 | |
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
4. |
GAIN ON EXTINGUISHMENT OF DEBTS |
The Company
executed several agreements with third parties to settle debts by issuance of the Company’s common stock. The shares issued
by the Company were valued at the trading price of the stock on the date the shares were issued. Any excess of the fair value
of the shares over the carrying cost of the debt has been reported as a gain on the extinguishment of debts of $0, $33,693, $0
and $275,086 has been credited to consolidated statements of income as other income for the three months and the nine months ended
September 30, 2015 and 2014, respectively.
| |
Three months | | |
Three months | |
| |
ended | | |
ended | |
| |
September 30, 2015 | | |
September 30, 2014 | |
| |
| | |
| |
Total amounts of debts to be settled | |
$ | - | | |
$ | 2,431,374 | |
Less: Aggregate market fair
value of (9.30.2014: 599,008) shares of common stock in exchange of the above debts for debts extinguishment | |
| - | | |
| (2,397,681 | ) |
| |
| | | |
| | |
Gain on extinguishment of debts | |
$ | - | | |
$ | 33,693 | |
| |
Nine months | | |
Nine months | |
| |
ended | | |
ended | |
| |
September 30, 2015 | | |
September 30, 2014 | |
| |
| | |
| |
Total amounts of debts to be settled | |
$ | - | | |
$ | 12,006,374 | |
Less: Aggregate market fair
value of (9.30.2014: 2,034,607) shares of common stock in exchange of the above debts for debts extinguishment | |
| - | | |
| (11,731,288 | ) |
| |
| | | |
| | |
Gain on extinguishment of debts | |
$ | - | | |
$ | 275,086 | |
United States of America
The Company was incorporated
in the State of Nevada, in the United States of America. The Company has no trading operations in United States of America and
no U.S. corporate tax has been provided for in the consolidated financial statements of the Company.
Undistributed Earnings of Foreign
Subsidiaries
The Company intends to use
the remaining accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and accordingly,
undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision
for U.S. Federal and State income tax or applicable dividend distribution tax has been provided thereon.
The Company appointed US tax
professionals to assist in filing income tax returns for the years ended December 31, 2014 and 2013 in compliance with US Treasury
Internal Revenue Code and we filed our Tax returns with the Internal Revenue Service (“ IRS”) of USA Government.
As of September 30, 2015, the
Company reviewed its tax position with the assistance US tax professionals and believed that there would be no taxes and no penalties
assessed by the IRS in the United States of America.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
5. |
INCOME TAXES (CONTINUED) |
China
Beginning January 1, 2008,
the new Enterprise Income Tax (“ EIT ”) law replaced the existing laws for Domestic Enterprises (“ DE’s
”) and Foreign Invested Enterprises (“ FIE’s ”). The new standard EIT rate of 25% replaced
the 33% rate currently applicable to both DE’s and FIE’s. The Company is currently evaluating the impact that the
new EIT will have on its financial condition. Beginning January 1, 2008, China unified the corporate income tax rule on foreign
invested enterprises and domestic enterprises. The unified corporate income tax rate is 25%.
Under new tax legislation in
China beginning in January 2008, the agriculture, dairy and fishery sectors are exempt from enterprise income taxes.
No EIT has been provided in
the financial statements of SIAF, CA, JHST, JHMC, JFD, HSA, SJAP and QZH since they are exempt from EIT for the nine months ended
September 30, 2015 and 2014 as they are within the agriculture, dairy and fishery sectors.
Belize
CA, CS and CH are international
business companies incorporated in Belize, and are exempt from corporate tax in Belize.
Hong Kong
No Hong Kong profits tax has
been provided in the consolidated financial statements of TRW, since these entities did not earn any assessable profits arising
in Hong Kong for the nine months ended September 30, 2015 and 2014.
Macau
No Macau Corporate income tax
has been provided in the consolidated financial statements of APWAM and MEIJI since these entities did not earn any assessable
profits for the nine months ended September 30, 2015 and 2014.
Sweden
No Sweden Corporate income
tax has been provided in the consolidated financial statements of SAFS since SAFS incurred a tax loss for the nine months ended
September 30, 2015 and 2014.
No deferred tax assets and
liabilities are of September 30, 2015 and December 31, 2014 since there was no difference between the financial statements carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the period in which the differences are
expected to reverse.
Provision for income taxes
is as follows:
| |
Three months | | |
Three months | | |
Nine months | | |
Nine months | |
| |
ended | | |
ended | | |
ended | | |
ended | |
| |
September 30, 2015 | | |
September30, 2014 | | |
September 30, 2015 | | |
September 30, 2014 | |
| |
| | |
| | |
| | |
| |
SIAF | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
SAFS | |
| - | | |
| - | | |
| - | | |
| - | |
TRW | |
| - | | |
| - | | |
| - | | |
| - | |
MEIJI and APWAM | |
| - | | |
| - | | |
| - | | |
| - | |
JHST, JFD.JHMC, QZH and HSA | |
| - | | |
| - | | |
| - | | |
| - | |
| |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
The Company did not recognize
any interest or penalties related to unrecognized tax benefits in the nine months ended September 30, 2015 and 2014. The Company
had no uncertain positions that would necessitate recording of tax related liability. The Company is subject to examination by
the respective tax authorities.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
6. |
CASH AND CASH EQUIVALENTS |
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
| | | |
| | |
Cash and bank balances | |
$ | 9,551,180 | | |
$ | 3,031,447 | |
As of September 30, 2015, inventories are as follows:
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Sleepy cods, prawns, eels and marble goby | |
$ | 1,963,368 | | |
$ | 3,051,606 | |
Beef and mutton | |
| 8,910,315 | | |
| 2,908,886 | |
Bread grass | |
| 1,815,981 | | |
| 2,336,308 | |
Beef cattle | |
| 10,533,023 | | |
| 8,362,763 | |
Organic fertilizer | |
| 9,129,378 | | |
| 7,292,389 | |
Forage for cattle and consumable | |
| 4,372,822 | | |
| 6,547,333 | |
Raw materials for bread grass and organic fertilizer | |
| 13,739,322 | | |
| 14,223,407 | |
Immature seeds | |
| 669,706 | | |
| 1,245,301 | |
| |
$ | 51,133,915 | | |
$ | 45,967,993 | |
8. |
DEPOSITS AND PREPAYMENTS |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Deposits for | |
| | | |
| | |
- purchases of equipment | |
$ | 4,670,256 | | |
$ | 4,668,784 | |
- acquisition of land use rights | |
| 3,373,110 | | |
| 3,373,110 | |
- inventories purchases | |
| 15,398,833 | | |
| 14,221,199 | |
- aquaculture contracts | |
| 6,114,179 | | |
| 20,467,603 | |
- building materials | |
| 877,598 | | |
| 877,598 | |
- consulting service providers and others | |
| 20,408,374 | | |
| 5,188,473 | |
- construction in progress | |
| 20,467,357 | | |
| 20,467,357 | |
Prepayments - debts discounts and others | |
| 11,961,367 | | |
| 3,827,401 | |
Shares issued for employee compensation and overseas professional and bond
interest | |
| 1,769,487 | | |
| 2,860,066 | |
| |
$ | 85,040,561 | | |
$ | 75,951,591 | |
The Company has performed an
analysis on all of its accounts receivable and determined that all amounts are collectible by the Company. As such, all accounts
receivable are reflected as a current asset and no allowance for bad debt has been recorded as of September 30, 2015 and December
31, 2014. Bad debts written off for the three months and the nine months ended September 30, 2015 and 2014 are $0.
Aging analysis of accounts
receivable is as follows:
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
0 - 30 days | |
$ | 48,795,815 | | |
$ | 21,663,061 | |
31 - 90 days | |
| 35,626,953 | | |
| 38,324,554 | |
91 - 120 days | |
| 21,486,541 | | |
| 21,138,383 | |
over 120 days and less than 1 year | |
| 23,348,513 | | |
| 23,377,073 | |
over 1 year | |
| - | | |
| - | |
| |
$ | 129,257,822 | | |
$ | 104,503,071 | |
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Advanced to employees | |
$ | 635,214 | | |
$ | 476,630 | |
Advanced to suppliers | |
| 7,362,410 | | |
| 9,910,682 | |
Advanced to customers | |
| 28,736,568 | | |
| 13,917,948 | |
Advanced to developers | |
| 28,000,000 | | |
| 28,000,000 | |
Advanced to convertible bond holder | |
| 1,899,350 | | |
| - | |
| |
$ | 66,633,542 | | |
$ | 52,305,260 | |
Advanced to employees, suppliers,
customers and developers are unsecured, interest free and with no fixed terms of repayment.
The Company entered friendly
loan agreements with suppliers, customers and developers to assist them to procure project loans.
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Plant and machinery | |
$ | 5,573,254 | | |
$ | 5,507,571 | |
Structure and leasehold improvements | |
| 62,579,026 | | |
| 51,650,906 | |
Mature seeds and herbage cultivation | |
| 13,769,650 | | |
| 10,794,289 | |
Furniture and equipment | |
| 653,406 | | |
| 629,055 | |
Motor vehicles | |
| 765,858 | | |
| 765,858 | |
| |
| 83,341,194 | | |
| 69,347,679 | |
| |
| | | |
| | |
Less: Accumulated depreciation | |
| (7,139,724 | ) | |
| (4,994,704 | ) |
Net carrying amount | |
$ | 76,201,470 | | |
$ | 64,352,975 | |
Depreciation expense was $538,147,
$636,774, $2,145,020 and $1,768,047 for the three months and the nine months ended September 30, 2015 and 2014, respectively.
12. |
CONSTRUCTION IN PROGRESS |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Construction in progress | |
| | | |
| | |
- Office, warehouse and organic fertilizer
plant in HSA | |
$ | 31,511,246 | | |
$ | 20,205,123 | |
- Oven room, road for production of dried flowers | |
| 47,163 | | |
| 539,304 | |
- Organic fertilizer and bread grass production
plant and office building | |
| 11,111,744 | | |
| 12,325,685 | |
- Rangeland for beef cattle and office building | |
| 47,305,178 | | |
| 35,074,556 | |
- Fish pond | |
| 3,105,243 | | |
| 975,609 | |
| |
$ | 93,080,574 | | |
$ | 69,120,277 | |
Private ownership of agricultural
land is not permitted in the P.R.C. Instead, the Company has leased seven lots of land. The cost of the first lot of land use
rights acquired in 2007 in Guangdong Province, the P.R.C. was $6,408,289 and consists of 180.23 acres with the lease expiring
in 2067. The cost of the second lot of land use rights acquired in 2008 in Guangdong Province, the P.R.C. was $764,128, which
consists of 31.84 acres with the lease expiring in 2068. The cost of the third lot of land use rights acquired in 2011 was $12,040,571,
which consists of 79.48 acres in Guangdong Province, the P.R.C. with the lease expires in 2037. The cost of the fourth lot of
land use rights acquired in 2011 was $35,405,750 which consisted of 287.21 acres in the Hunan Province, the P.R.C. and the leases
expire in 2051, 2054 and 2071. The cost of the fifth lot of land use rights acquired in 2012 was $528,240 which consisted of 21.09
acres in Qinghai Province, the P.R.C. and the lease expires in 2051. The cost of the sixth lot of land use rights acquired in
2013 was $489,904 which consisted of 6.27 acres in Guangdong Province, the P.R.C. and the lease expires in 2023. The cost of the
seventh lot of land use rights acquired in 2014 was $4,453,665 which consisted of 33.28 acres in Guangdong Province, the P.R.C.
and the lease expires in 2044.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
13. |
LAND USE RIGHTS (CONTINUED) |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cost | |
$ | 67,145,859 | | |
$ | 69,428,143 | |
Less: Accumulated amortization | |
| (7,180,480 | ) | |
| (6,105,941 | ) |
Net carrying amount | |
$ | 59,965,379 | | |
$ | 63,322,202 | |
|
|
Expiry date |
|
Description |
|
Amount |
|
|
|
|
|
|
|
|
|
Balance @1.1.2014 |
|
|
|
|
|
$ |
65,192,615 |
|
Additions |
|
|
|
|
|
|
|
|
2014 |
|
2044 |
|
Zhongshan City, Guangdong Province, the P.R.C. |
|
|
4,453,665 |
|
Exchange difference |
|
|
|
|
|
|
(218,137 |
) |
Balance @12.31.2014 |
|
|
|
|
|
|
69,428,143 |
|
Exchange difference |
|
|
|
|
|
|
(2,282,284 |
) |
Balance @9.30.2015 |
|
|
|
|
|
$ |
67,145,859 |
|
Land use rights are amortized
on the straight-line basis over their respective lease periods. The lease period of agriculture land is 30 to 60 years. Amortization
of land use rights was $276,988 and $395,633, $1,074,539 and $1,155,667 for the three months and the nine months ended September
30, 2015 and 2014, respectively.
Goodwill represents the fair
value of the assets acquired the acquisitions over the cost of the assets acquired. It is stated at cost less accumulated impairment
losses. Management tests goodwill for impairment on an annual basis or when impairment indicators arise. In these instances, the
Company recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the
assets. To date, no such impairment loss has been recorded.
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Goodwill from acquisition | |
$ | 724,940 | | |
$ | 724,940 | |
Less: Accumulated impairment losses | |
| - | | |
| - | |
Net carrying amount | |
$ | 724,940 | | |
$ | 724,940 | |
15. |
PROPRIETARY TECHNOLOGIES |
By an agreement dated November
12, 2008, TRW acquired an enzyme technology master license, registered under a Chinese patent, for the manufacturing of livestock
feed and bioorganic fertilizer and its related labels for $8,000,000. On March 6, 2012, MEIJI acquired an aromatic-feed formula
technology for the production of aromatic cattle for $1,500,000. On October 1, 2013, SIAF was granted a license to exploit sleepy
cods breeding technology to grow out of sleepy cods for $2,270,968 for 50 years. SJAP booked bacterial cellulose technology license
and related trademark for $2,119,075 and amortized expenditures for 20 years starting from January 1, 2014.
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cost | |
$ | 13,814,353 | | |
$ | 13,886,098 | |
Less: Accumulated amortization | |
| (2,844,687 | ) | |
| (2,405,800 | ) |
Net carrying amount | |
$ | 10,969,666 | | |
$ | 11,480,298 | |
Amortization of proprietary
technologies was $141,438, $166,775, $438,887 and $463,600 for the three months and the nine months ended September 30, 2015 and
2014, respectively. No impairments of proprietary technologies have been identified for the three months and
nine months ended September 30, 2015 and 2014.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Investment in Huangyuan County Rural Credit Union | |
$ | 786,040 | | |
$ | 817,127 | |
Less: Accumulated impairment losses | |
| - | | |
| - | |
| |
$ | 786,040 | | |
$ | 817,127 | |
17. |
TEMPORARY DEPOSITS PAID TO ENTITIES FOR EQUITY INVESTMENTS
IN FUTURE SINO JOINT VENTURE COMPANIES |
Intended |
|
|
|
|
|
|
|
|
|
|
unincorporated |
|
Projects |
|
|
|
September 30, |
|
|
December 31, |
|
investee |
|
Engaged |
|
|
|
2015 |
|
|
2014 |
|
A |
|
Trade center |
|
* |
|
$ |
4,086,941 |
|
|
$ |
4,086,941 |
|
A |
|
Seafood center |
|
* |
|
|
1,032,914 |
|
|
|
1,032,914 |
|
B |
|
Fish Farm 2 GaoQiqiang Aquaculture |
|
* |
|
|
6,000,000 |
|
|
|
6,000,000 |
|
C |
|
Prawn farm 1 |
|
* |
|
|
14,554,578 |
|
|
|
14,554,578 |
|
D |
|
Prawn farm 2 |
|
* |
|
|
9,877,218 |
|
|
|
9,877,218 |
|
E |
|
Cattle farm 2 |
|
* |
|
|
5,558,057 |
|
|
|
5,558,057 |
|
|
|
|
|
|
|
$ |
41,109,708 |
|
|
$ |
41,109,708 |
|
The Company made temporary
deposits paid to entities for equity investments in future Sino Joint Venture companies (“SJVCs”) engaged in projects
development of trade and seafood centers, fish, prawns and cattle farms. Such temporary deposits represented as deposits of the
respective consideration required for the purchase of equity stakes of respective future SJVCs. The amounts were classified as
temporary because legal procedures of formation of SJVCs have not yet been completed. As of September
30, 2015, the percentages of equity stakes of A (trade and seafood centers), B ( fish farm 2 GaoQiqiang Aquaculture Farm ), C
(prawn farm 1), D (pawn farm 2) and E (cattle farm 2) are 31%, 23%, 56%, 29% and 35% respectively.
|
* |
The above amounts were subject to conversion to an additional
equity investment in the investees upon the completion of legal procedures of formation of SJVCs. |
18. |
VARIABLE INTEREST ENTITY |
On September 28, 2009, APWAM
acquired the PMH’s 45% equity interest in the Sino-Foreign joint venture company, Qinghai Sanjiang A Power Agriculture Co.
Limited (“ SJAP ”), which was incorporated in the P.R.C. As of September 30, 2015, the Company has invested
$2,251,359 in this joint venture. SJAP is engaged in its business of the manufacturing of organic fertilizer, livestock feed,
and beef cattle and plantation of crops and pastures.
Continuous assessment of the VIE relationship
with SJAP
The Company may also have a
controlling financial interest in an entity through an arrangement that does not involve voting interests, such as a VIE. The
Company evaluates entities deemed to be VIE’s using a risk and reward model to determine whether to consolidate. A VIE is
an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated financial
support from other entities, (2) where the group of equity holders does not have the power to direct the activities of the entity
that most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s expected
losses or the right to receive the entity’s expected residual returns, or both, or (3) where the voting rights of some investors
are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual
returns of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf
of an investor that has disproportionately fewer voting rights.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
18. |
VARIABLE INTEREST ENTITY (CONTINUED) |
The Company also quantitatively
and qualitatively examined if SJAP is considered a VIE. Qualitative analyses considered the extent to which the nature of its
variable interest exposed the Company to losses. For quantitative analyses, the Company also used internal cash flow models to
determine if SJAP was a VIE and, if so, whether the Company was the primary beneficiary. The projection of these cash flows and
probabilities thereof requires significant managerial judgment because of the inherent limitations that relate to the use of historical
data for the projection of future events. On September 30, 2015, the Company evaluated the above VIE testing results and concluded
that the Company is the primary beneficiary of SJAP’s expected losses or residual returns and that SJAP qualifies as a VIE
of the Company. As result, the Company has consolidated SJAP as a VIE.
The reasons for the changes
are as follows:
• Originally, the board
of directors of SJAP consisted of 7 members; 3 appointees from Qinghai Sanjiang (one stockholder), 1 from Garwor (one stockholder),
and 3 from the Company, such that the Company did not have majority interest represented on the board of directors of SJAP.
• On May 7, 2010, Qinghai
Sanjiang sold and transferred its equity interest in SJAP to Garwor. The State Administration for Industry and Commerce of Xining
City Government of the P.R.C. approved the sale and transfer.
Consequently Garwor and the
Company agreed that the new board of directors of SJAP would consist of 3 members; 1 appointee from Garwor and 2 appointees from
the Company, such that the Company now had a majority interest in the board of directors of SJAP. Also, and in accordance with
the Company’s Sino Joint Venture Agreement, the Company’s management appointed the chief financial officer of SJAP.
As a result, the financial statements of SJAP were included in the consolidated financial statements of the Company.
Continuous assessment of the VIE relationship
with QZH
The Company may also have a
controlling financial interest in an entity through an arrangement that does not involve voting interests, such as a VIE. The
Company evaluates entities deemed to be VIE’s using a risk and reward model to determine whether to consolidate. A VIE is
an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated financial
support from other entities, (2) where the group of equity holders does not have the power to direct the activities of the entity
that most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s expected
losses or the right to receive the entity’s expected residual returns, or both, or (3) where the voting rights of some investors
are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual
returns of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf
of an investor that has disproportionately fewer voting rights.
The Company also quantitatively
and qualitatively examined if QZH is considered a VIE. Qualitative analyses considered the extent to which the nature of its variable
interest exposed the Company to losses. For quantitative analyses, the Company also used internal cash flow models to determine
if QZH was a VIE and, if so, whether the Company was the primary beneficiary. The projection of these cash flows and probabilities
thereof requires significant managerial judgment because of the inherent limitations that relate to the use of historical data
for the projection of future events. On September 30, 2015, the Company evaluated the above VIE testing results and concluded
that the Company is the primary beneficiary of QZH’s expected losses or residual returns and that QZH qualifies as a VIE
of the Company. As result, the Company has consolidated QZH as a VIE.
SJAP is sole stockholder of
QZH and SJAP appointed sole director of QZH. Consequently, the Company indirectly control directorship of QZH, such that the Company
now had a majority interest in the directorship of QZH. Also, and in accordance with the Company’s Sino Joint Venture Agreement,
the Company’s management appointed the chief financial officer of QZH. As a result, the financial statements of QZH were
included in the consolidated financial statements of the Company.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
19. |
CONSTRUCTION CONTRACT |
|
(i) |
Costs and estimated earnings in excess of billings on uncompleted
contracts |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Costs | |
$ | 6,487,032 | | |
$ | - | |
Estimated earnings | |
| 10,995,534 | | |
| - | |
Less: Billings | |
| (16,175,681 | ) | |
| - | |
Costs and estimated earnings in excess of billings on uncompleted
contracts | |
$ | 1,306,885 | | |
$ | - | |
|
(ii) |
Billings in excess of costs and estimated earnings on uncompleted
contracts |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Billings | |
$ | 146,651,242 | | |
$ | 102,199,674 | |
Less: Costs | |
| (80,630,325 | ) | |
| (46,648,989 | ) |
Estimated earnings | |
| (62,146,437 | ) | |
| (47,490,105 | ) |
Billing in excess of costs and estimated earnings on uncompleted contracts | |
$ | 3,874,480 | | |
$ | 8,060,580 | |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Billings | |
$ | 162,826,923 | | |
$ | 102,199,674 | |
Less: Costs | |
| (87,117,357 | ) | |
| (46,648,989 | ) |
Estimated earnings | |
| (73,141,971 | ) | |
| (47,490,105 | ) |
Billing in excess of costs and estimated earnings on uncompleted contracts | |
$ | 2,567,595 | | |
$ | 8,060,580 | |
20. |
SERIES F SHARES MANDATORY REDEMPTION PAYABLE |
On August 13, 2014, the Company filed
a Certificate of the Designations, Powers, Preferences and Rights of the Series F Non-Convertible Preferred Stock (the “Certificate”)
to its Articles of Incorporation, with the Secretary of State of the State of Nevada, setting forth the terms of its Preferred
Stock. On June 10, 2014, the Company amended and restated the Certificate to (i) postpone the payment date of the dividend there
under to May 30, 2015, (ii) to delete a reference to the redemption or declaration of any cash dividend or distribution on any
Junior Securities, and (iii) make certain minor corrections to the Certificate. No share of Series F Non-Convertible Preferred
Stock was ever issued. The Company believes it to be in the best interests of its shareholders to delay the cash payment until
such time as its financial position would enable it to make the payment without harming its ability to develop its business in
accordance with management’s plans. As of May 30, 2015, payment on the F series shares has been made, and respective shares
cancelled, accordingly.
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Due to third parties | |
$ | 2,631,796 | | |
$ | 8,176,469 | |
Due to debts loan | |
| 4,797,332 | | |
| - | |
Promissory notes issued to third parties | |
| 3,100,000 | | |
| 1,100,000 | |
Due to local government | |
| 2,327,464 | | |
| 2,419,513 | |
| |
$ | 12,856,592 | | |
$ | 11,695,982 | |
| |
| | | |
| | |
Less: Amount classified as non-current liabilities | |
| | | |
| | |
Due to debts
loan | |
| (4,797,332 | ) | |
| - | |
Amount classified as current liabilities | |
$ | 8,059,260 | | |
$ | 11,695,982 | |
Due to
third parties are unsecured, interest free and have no fixed terms of repayment.
The Company
issued 753,304 shares of common stock ranging from $6.96 to $8.91 as collateral to secure debts loan of $4,797,332 from third
party. The shares issued by the Company were valued at the trading price of the stock on the date the shares were issued.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
There are no provisions in
the Company’s bank borrowings and long term debts that would accelerate repayment of debt as a result of a change in credit
ratings or a material adverse change in the Company’s business. Under certain agreements, the Company has the option to
retire debt prior to maturity, either at par or at a premium over par.
Short term bank loans |
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
Name of lender |
|
Interest rate |
|
|
Term |
|
2015 |
|
|
2014 |
|
Agricultural Development Bank of China |
|
|
6.4 |
% |
|
January 3, 2014 - December 17, 2018 |
|
$ |
273,876 |
^* |
|
$ |
325,092 |
^* |
Huangyuan County Branch,
Xining City, Qinghai Province, the P.R.C. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural Development Bank of China |
|
|
6.18 |
% |
|
October 21, 2014 - October 20, 2015 |
|
|
- |
^* |
|
|
4,085,635 |
^* |
Huangyuan County Branch, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xining City, Qinghai Province, the P.R.C. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
273,876 |
|
|
$ |
4,410,727 |
|
Long term debts | |
| | |
| |
September 30, | | |
December 31, | |
Name of lender | |
Interest rate | | |
Term | |
2015 | | |
2014 | |
| |
| | |
| |
| | |
| |
GanGuo Village Committee | |
| 12.22 | % | |
June 2012 - June 2017 | |
$ | 151,447 | | |
$ | 179,768 | |
Bo Huang Town | |
| | | |
| |
| | | |
| | |
Huangyuan County, | |
| | | |
| |
| | | |
| | |
Xining City, Qinghai Province, the P.R.C. | |
| | | |
| |
| | | |
| | |
| |
| | | |
| |
| | | |
| | |
Agricultural Development Bank of China | |
| 6.4 | % | |
January 3, 2014 - December 17, 2018 | |
| 2,065,186 | ^*# | |
| 2,451,381 | ^*# |
Huangyuan County Branch, | |
| | | |
| |
| | | |
| | |
Xining City, Qinghai Province, the P.R.C. | |
| | | |
| |
| | | |
| | |
Less: The current portion reclassified
as short term debts | |
| | | |
| |
| (273,876 | ) | |
| (325,092 | ) |
| |
| | | |
| |
$ | 1,942,757 | | |
$ | 2,306,057 | |
The above note agreements contained
regular provisions requiring timely repayment of principals and accrued interests, payment of default interest in the event of
default, and without specific financial covenants. Management of the Company believes the Company is in material compliance with
the terms of the loan agreements.
|
^ |
personal and corporate guaranteed by third parties. |
|
* |
secured by land use rights with net carrying amount of $471,048
(2014: $499,856). |
|
# |
repayable $273,876,
$650,184, $650,184 and $490,942 in 2015, 2016, 2017 and 2018, respectively.
|
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
On July 1, 2013 , the Company
offered a maximum of $21,000,000 of units (“ Units ”) for an aggregate of 840 Units; each Unit consisting of
a $25,000 principal amount promissory note made by the Subscription Agreement and Confidential Private Placement Memorandum with
maturity date two years from the Initial Closing Date of the Offering September 30, 2013. The interest rate of 5% is paid annually.
Commission, issue cost and discounts are amortized over 2 years from October 1, 2013.
Terms of the bonds are as follows:
Issue size: |
|
$16,800,000 |
Number of units offered: |
|
840 units |
Number of units issued: |
|
69 units |
Principal value per unit: |
|
$25,000 per unit |
Net payable value /bond: |
|
$20,000 per unit |
Discounted value/bond: |
|
$5,000 paid to bond holder |
Maturity date: |
|
2 years (September 30, 2015) |
Participating interest: |
|
5% per annum |
Effective yield: |
|
11.80% per annum |
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
Bonds payable | |
$ | 1,725,000 | | |
$ | 1,725,000 | |
The Company calculated professional
service compensation of $400,000 in respect of bond issue, and recognized $200,000 for the year ended December 31, 2014. As of
December 31, 2014, the deferred compensation balance was $100,000 and the deferred compensation balance of $100,000 was to be
amortized over 6 months beginning on January 1, 2015.
The Company calculated professional
service compensation of $400,000 in respect of bond issue, and recognized $0,
$50,000, $100,000 and $150,000 for the three months and the nine months ended September 30, 2015 and 2014, respectively. As of
September 30, 2015, the deferred compensation balance was $0.
| 24. | NEGOTIABLE
PROMISSORY NOTES |
On August 29, 2015 , TRW issued negotiable
promissory notes to three fund companies and one individual for $3,450,000 and the
company acted as guarantor for repayment.
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
Negotiable promissory notes | |
$ | 3,450,000 | | |
$ | - | |
| Issuer: | Tri-way
Industries Limited ("TRW") |
| Principal amount: | $3,450,000 |
| Interest rate | 2.50%
per month on principal amount. Interest shall be calculated on the basis of a 30/360
day count convention |
| Default interest rate | 15%
per month on principal amount. Interest shall be calculated on the basis of a 30/360
day count convention |
| Interest payment | Accrued
interest on the principal amount shall be paid by cash in arrears on each
interest payment date |
| Issue date: | August
29, 2015 |
| Repayment date: | Repaid
in full within 120 calendar days from the issue of notes |
| Conversion option: | Notes
holders can exercise at any time from and including the day falling 60 calendar days
from the date of the notes, upon the note holders giving not less than 5 business day
prior written notice to TRW and the Company., the principal amount shall be converted
to shares of the Company. The TRW may at their own discretion choose to settle such conversion
option with newly issue shares or existing shares, at their sole discretion. In the event
a dividend, share split or consolidation or spin-off (each a Corporate Event") from
the Company, the conversion price shall be adjusted to provide the same economic value
to the notes holders as if such Corporate Event did not occur. |
| Security: | Corporate
guarantee by the Company |
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
25. |
CONVERTIBLE NOTE PAYABLES |
On August 29, 2014, the Company
completed the closing of a private placement financing transaction with an accredited investor, which purchased a 10.5% Convertible
Note (the “Note”) in the aggregate principal amount of up to $33,300,000. The Company received the total advance
of $11,632,450. The Company shall offer investor a discount equal to 25% of the amount of the principal advanced by the investor.
Interest on the note shall
accrue on the outstanding principal balance of this Note from August 29, 2014. Interest shall be payable quarterly on the last
day of each of March, June, September and December commencing September 30, 2014 provided, however, that note holder may elect
to require the Company to issue to the note holder a promissory note in lieu of cash in satisfaction of any interest due and payable
at such time. Any interest payment note shall be subject to the same terms as the note. The note has a maturity date of February
28, 2020.
The note is convertible, at
the discretion of the note holder, into shares of the Company’s common stock (i) at any time following an Event of Default,
or (ii) for a period of thirty (30) calendar days following October 31, 2015 and each anniversary thereof, at an initial conversion
price per share of $1.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions
and subject to the terms of the note. As long as the note is outstanding, the investor shall have a right of first refusal, exercisable
for thirty (30) calendar days after notice to the note holder, to purchase securities proposed to be offered and sold by the Company.
| |
September 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
10.50% convertible note of maturity date February 28, 2020 | |
$ | 35,468,110 | | |
$ | 15,803,928 | |
The Company calculated the
fair value of the convertible note and the beneficial conversion feature utilizing the Discounted Cash Flows model at the date
of the issuance of convertible note. The relative fair values were allocated to the liability and equity components of the debt.
Accordingly, a discount was created on the debt and this discount will be amortized to interest expense over the life of the debt.
Debt premium of $378,788, $18,758, $838,832 and $18,758 was amortized for the three months and the nine months ended September
30, 2015 and 2014, respectively.
As of December 31, 2014, there
was $15,509,933 principal outstanding and accrued interest in the amount of $293,995 that was owed under the terms of the convertible
note. As of September 30, 2015, there was $33,333,333 principal outstanding and accrued interest in the amount of $2,135,777 that
was owed under the terms of the convertible note.
The above note agreement contained
regular provisions requiring timely repayment of principals and accrued interests, payment of default interest in the event of
default, default and optional conversion and without specific financial covenants. Management of the Company believes the Company
is in material compliance with the terms of the convertible note agreement.
The Company calculated professional
service compensation of $1,500,000 in respect of convertible note issue, and recognized $375,000, $0, $1,125,000 and $0 for the
three months and the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, the deferred compensation
balance was $375,000 was to be amortized over 3 months beginning on October
1, 2015.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
The Group’s share capital
as of September 30, 2015 and December 31, 2014 shown on the consolidated balance sheet represents the aggregate nominal value
of the share capital of the Company as of that date.
On March 22, 2010, the Company
designated 100 shares of Series A preferred stock at a par value per share of $0.001. As of the same date, 100 shares of Series
A preferred stock were issued at $1 per share for cash in the amount of $100.
The Series A preferred stock:
|
(i) |
does not pay a dividend; |
|
(ii) |
votes together with the shares of Common Stock of the Corporation
as a single class and, regardless of the number of shares of Series A Preferred Stock outstanding and as long as at least
one of such shares of Series A Preferred Stock is outstanding, shall represent eighty percent (80%) of all votes entitled
to be voted at any annual or special meeting of shareholders of the Corporation or action by written consent of shareholders.
Each outstanding share of the Series A Preferred Stock shall represent its proportionate share of the 80%, which is allocated
to the outstanding shares of Series A Preferred Stock; and |
|
(ii) |
ranks senior to common stockholders, holders of Series B convertible
preferred stockholders and any other stockholders on liquidation. |
The Company has designated
100 shares of Series A preferred stock with 100 shares issued and outstanding as of September 30, 2015 and December 31, 2014,
respectively.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
26. |
SHAREHOLDERS’ EQUITY (CONTINUED) |
The Series B convertible preferred
stock:
On March 22, 2010, the Company
designated 7,000,000 shares of Series B convertible preferred stock at a par value per share of $0.001. The Series B convertible
preferred stock is redeemable, the stockholders are not entitled to receive any dividend and voting rights but rank senior over
common stockholders on liquidation, and can convert to common stock on a one for one basis at any time. On June 26, 2010, 7,000,000
shares of common stock were surrendered for cancellation and the Company issued 7,000,000 shares of Series B convertible preferred
stock at $9.90 per share. Pursuant to share exchange agreement made as of December 22, 2012, between the Company and a stockholder,
Capital Adventure Inc., a holder of 3,000,000 shares of common shares, with the consent of Board of Directors, to exchange for
3,000,000 shares of Series B convertible preferred stock on a one-for-one basis. As of December 23, 2012, 3,000,000 shares of
Series B convertible preferred stock were issued to Capital Adventure Inc., for the exchange of its holding of 3,000,000 shares
of common stocks. As of December 31, 2012, 3,000,000 shares of common stocks were still not returned to the Company. On March
27, 2013, 3,000,000 Series B convertible preferred stock were cancelled. On December 17, 2014, the Company approved an amendment
to certificate designation in respect of Series B preferred stock. Pursuant to the above new amendment, each holder of Series
B preferred stock shall have the rights, at any time or from time to time, to convert each 9.9 shares of Series B preferred to
one fully paid and non assessable share of common stock of par value $0.001 per share. On June 15, 2015, Series B preferred stockholder
exercised at the above conversion ratio to convert 7,000,000 shares of Series B preferred stock to 707,070 shares of common stock.
There were 0 and 7,000,000
shares of Series B convertible preferred stock issued and outstanding as of September 30, 2015 and December 31, 2014, respectively.
The Series F Non-Convertible
Preferred Stock:
|
(i) |
is not redeemable subject to (iv); |
|
(ii) |
except for (iv), with respect to dividend rights, rights on
liquidation, winding up and dissolution, rank junior and subordinate to ( a) all classes of Common Stock,(b) all other classes
of Preferred Stock and (c) any class or series of capital securities of the Company. |
|
(iii) |
shall not entitled to receive any further dividend; and |
|
(iv) |
on May 30, 2014, the holders of shares of Series F Non-Convertible
Preferred Stock with coupon shall be entitled to a coupon payment directly from the Company at the redemption rate of $3.40
per share. Upon redemption, the Holder shall no longer own any shares of Series F with coupon that have been redeemed, and
all such redeemed shares shall disappear and no longer exist on the books and records of the Company; redeemed shares of Series
F which no longer exist upon redemption shall thereafter be counted toward the authorized but unissued “blank check”
preferred stock of the Company. |
On August 22, 2012, the Company’s
Board of Directors declared that the Company’s stockholders were entitled to receive one share of restricted Series F Non-convertible
Preferred Stock for every 100 shares of Common Stock owned by the stockholders as of September 28, 2012, with lesser or greater
amounts being rounded up to the nearest 100 shares of Common Stock for purpose of the computing the dividend. The holders of record
of shares of Series F Non-Convertible Preferred Stock shall be entitled to a coupon payment directly from the Company at the redemption
rate of $3.40 per share and be payable on May 30, 2014. However, the Company was unable to issue the Series F Non-convertible
Preferred Stock as originally contemplated. Consequently, The Company’s transfer agent was instructed to note in its record
date rather than actual issue the Preferred F shares. On June 14, 2014, the Company announced the delay in payment of the coupon
until May 30, 2015. The company reserved the excess over the nominal amount of the Series F Non-convertible Preferred Stock of
$3,124,737 as Series F Non-convertible Preferred Stock redemption payable. As of May 30, 2015, payment on the F series shares
has been made, and respective shares cancelled, accordingly.
As a result, total issued and
outstanding of Series F Non-Convertible Preferred Stock as of September 30, 2015 and December 31, 2014 are 0 shares and grand
total issued and outstanding preferred stock as of September 30, 2015 and December 31, 2014 are 100 and 7,000,100 shares, respectively.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
26. |
SHAREHOLDERS’ EQUITY (CONTINUED) |
Common Stock:
On November 10, 2014, the Company
approved an amendment to the Corporation’s Articles of Incorporation to effectuate a reverse stock split (the “Reverse
Split”) of the Corporation’s common stock, par value $0.001 per share (the “Common Stock”) affecting both
the authorized and issued and outstanding number of such shares by a ratio of 9.9 for 1. The Reverse Split became effective in
the State of Nevada on December 16, 2014. Subsequent to the balance sheet date, the Board of directors and the holders of a majority
of the voting power of our stockholders of the company have approved an amendment to articles of incorporation to increase its
authorized shares of Common Stock from 17,171,716 to 22,727,272.
During the year ended December
31. 2014, the Company issued (i) 2,734,625 shares of common stock for $13,006,373 at values ranging from $3.96 to $10.40 per share
to settle debts due to third parties. The Company executed several agreements with third parties to settle debts by issuance of
the Company’s common stock. The shares issued by the Company were valued at the trading price of the stock on the date the
shares were issued. Any excess of the fair value of the shares over the carrying cost of the debt has been reported as a gain
on the extinguishment of debts of $270,586 and $1,318,947 has been credited to consolidated statements of income as other income
for the year ended December 31, 2014 and 2013, respectively; (ii) 130,568 shares of common stock valued to employees at fair value
of $4.26 per share for $555,827 for employee compensation. The fair value of the common stock issued was determined by using the
trading price of the Company’s common stock on the date of issuance of $4.26 per share; (iii) 400,008 shares of common stock
valued to professionals at fair value ranging from $3.96 to $7.43 per share for $2,763,618 for service compensation. The fair
value of the common stock issued was determined by using the trading price of the Company’s common stock on the date of
issuance ranging from $3.96 to $9.90 per share; and (iv) 1,681 piecemeal shares of common stock valued at fair value of $9.49
per share for $15,951 for cancellation. The fair value of the common stock issued was determined by using the trading price of
the Company’s common stock on the date of cancellation of $9.49 per share.
During the three months ended
September 30, 2015, the Company issued 280,000 shares of common stock for $12.50 as collateral to secure trade finance facility
amounting to the extent of $3,500,000, and cancelled 514 shares for $10.97 per share for reverse splits adjustments.. Any excess
of the fair value of the shares over the carrying cost of the debt has been reported as a gain on the extinguishment of debts
of $0 and $33,693 has been credited to consolidated statements of income as other income for the three months ended September
30, 2015 and 2014, respectively.
During the nine months ended
September 30, 2015, the Company executed several agreements with third parties to raise debts loan by issuance of the Company’s
common stock. The Company issued (i) 753,304 shares of common stock ranging
from $6.96 to $8.91 as collateral to secure debts loan of $4,797,332, and the shares issued by the Company were valued at the
trading price of the stock on the date the shares were issued; (ii) 280,000 shares of common stock of $12.50 as collateral to
secure trade finance facility amounting to the extent of $3,500,000, and the shares issued by the Company were valued at the trading
price of the stock on the date the shares were issued; (iii) 153,392 shares at $11.13 per share and 75,002 shares at $14.20 per
share to decimal stockholder to round up its shares holding; (iv) 47,787 shares of common stock valued to employees and directors
at fair value of $15.20 per share for $726,315 for employee compensation; 7,000,000 shares of Series B preferred stock were converted
into 707,070 shares under terms of issue; and cancelled 514 shares for $10.97 per share for reverse splits adjustments. .Any excess
of the fair value of the shares over the carrying cost of the debt has been reported as a gain on the extinguishment of debts
of $0 and $275,086 has been credited to consolidated statements of income as other income for the nine months ended September
30, 2015 and 2014, respectively.
The Company has 19,178,757
and 17,162,716 shares of common stock issued and outstanding as of September 30, 2015 and December 31, 2014, respectively.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
27. |
OBLIGATION UNDER OPERATING LEASES |
The Company leases (i) 2,178
square feet of agriculture space used for offices for a monthly rent of $634 in Enping City, Guangdong Province, P.R.C., its lease
expiring on March 31, 2017; (ii) 5,081 square feet of office space in Guangzhou City, Guangdong Province, P.R.C. for a monthly
rent of $12,733, its lease expiring on July 8, 2016; and (iii) 1,555 square feet of staff quarters in Linli District, Hunan Province,
P.R.C. for a monthly rent of $163, its lease expiring on May 1, 2016.
Lease expense was $40,591,
$40,591, $121,773 and $118,709 for the three months and the nine months ended September 30, 2015 and 2014, respectively.
The future minimum lease payments
as of September 30, 2015, are as follows:
Year ending December 31, 2015 | |
$ | 40,591 | |
Thereafter | |
| 86,561 | |
| |
$ | 127,152 | |
28. |
STOCK BASED COMPENSATION |
On April 25, 2014, the Company
issued employees a total of 130,567 shares of common stock valued at fair value of $4.26 per share for services rendered to the
Company. The fair values of the common stock issued were determined by using the trading price of the Company’s common stock
on the date of issuance of $4.26 per share.
On June 16, 2014, the Company
issued professionals a total of 117,248 shares of common stock valued at fair value of $3.96 per share for services rendered to
the Company. The fair values of the common stock issued were determined by using the trading price of the Company’s common
stock on the date of issuance of $3.96 per share.
On September 16, 2014, the
Company issued professionals a total of 202,020 shares of common stock valued at fair value of $7.43 per share for services rendered
to the Company. The fair values of the common stock issued were determined by using the trading price of the Company’s common
stock on the date of issuance of $7.43 per share.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2015 AND 2014
28. |
STOCK BASED COMPENSATION(CONTINUED) |
On December 15, 2014, the Company
issued professionals a total of 80,739 shares of common stock valued at agreed price of $9.90 per share for services rendered
to the Company. The agreed prices of the common stock issued were determined by both parties and greater than the trading price
of the Company’s common stock on the date of issuance of $9.90 per share.
On May 6, 2015, the Company
issued directors and employees a total of 47,787 shares of common stock valued at fair value of $15.20 per share for services
rendered to the Company. The fair values of the common stock issued were determined by using the trading price of the Company’s
common stock on the date of issuance of $15.20 per share.
The Company calculated stock
based compensation of $4,246,495, $133,744 as of September 30, 2015 and December 31, 2014, respectively.
The Company recognized $1,123,030,
$288,469, $2,883,096 and $355,341 for the three months and the nine months
ended September 30, 2015 and 2014, respectively. As of September 30, 2015, the deferred compensation balance for staff was $1,107,272
and the deferred compensation balances of (i) $562,500; and (ii) $544,772 were to be amortized over 3 and 9 months respectively
beginning on October 1, 2015.
As of September 30, 2015 and
December 31, 2014, the Company did not have any pending claims, charges, or litigation that it expects would have a material adverse
effect on its consolidated balance sheets, consolidated statements of income and other comprehensive income or consolidated statements
of cash flows.
30. |
RELATED PARTY TRANSACTIONS |
In addition to the transactions
and balances as disclosed elsewhere in these consolidated financial statements, during the nine months ended September 30, 2015
and 2014, the Company had the following significant related party transactions:-
Name of related party |
|
Nature of transactions |
|
|
|
Mr. Solomon Yip
Kun Lee,
Chairman |
|
Included in due to a director, due to Mr. Solomon Yip Kun Lee
is $692,906 and $1,172,059 as of September 30, 2015 and December 31, 2014, respectively. The amounts are unsecured, interest
free and have no fixed terms of repayment. |
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
Basic earnings per share is
computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding
during the year. Diluted earnings per share reflects the potential dilution of securities by including other potential common
stock, including convertible preferred stock, stock options and warrants, in the weighted average number of common shares outstanding
for the year, if dilutive. The numerators and denominators used in the computations of basic and dilutive earnings per share are
presented in the following table:
| |
Three months ended September
30, 2015 | | |
Three months ended September
30, 2014 | |
BASIC | |
| | | |
| | |
Numerator for basic earnings per share attributable to the Company’s common stockholders: | |
| | | |
| | |
Net income used in computing basic earnings per share | |
$ | 21,522,100 | | |
$ | 24,501,862 | |
Basic earnings per share | |
$ | 1.14 | | |
$ | 1.49 | |
| |
| | | |
| | |
Basic weighted average shares outstanding | |
| 18,822,876 | | |
| 16,469,314 | |
| |
Three months ended September
30, 2015 | | |
Three months ended September 30, 2014 | |
DILUTED | |
| | | |
| | |
Numerator for basic earnings per share attributable to the Company’s common stockholders: | |
| | | |
| | |
Net income used in computing basic earnings per share | |
$ | 21,522,100 | | |
$ | 24,501,862 | |
Add back interest on convertible notes | |
| - | | |
| - | |
Net income used in computing diluted earnings per share | |
$ | 21,522,100 | | |
$ | 24,501,862 | |
| |
| | | |
| | |
Diluted earnings per share | |
$ | 1.14 | | |
$ | 1.43 | |
| |
| | | |
| | |
Basic weighted average shares outstanding | |
| 18,822,876 | | |
| 16,469,314 | |
Add: weight average of common stock converted from Series B Convertible
preferred shares outstanding | |
| - | | |
| 707,070 | |
Diluted weighted average shares outstanding | |
| 18,822,876 | | |
| 17,176,384 | |
| |
Nine months ended September 30, 2015 | | |
Nine months ended September
30, 2014 | |
BASIC | |
| | | |
| | |
Numerator for basic earnings per share attributable to the Company’s common stockholders: | |
| | | |
| | |
Net income used in computing basic earnings per share | |
$ | 54,587,143 | | |
$ | 68,376,819 | |
Basic earnings per share | |
$ | 3.02 | | |
$ | 4.42 | |
| |
| | | |
| | |
Basic weighted average shares outstanding | |
| 18,089,629 | | |
| 15,465,642 | |
| |
Nine months ended September
30, 2015 | | |
Nine months ended September
30, 2014 | |
DILUTED | |
| | | |
| | |
Numerator for basic earnings per share attributable to the Company’s common stockholders: | |
| | | |
| | |
Net income used in computing basic earnings per share | |
$ | 54,587,143 | | |
$ | 68,376,819 | |
Add back interest on convertible notes | |
| - | | |
| - | |
Net income used in computing diluted earnings per share | |
$ | 54,587,143 | | |
$ | 68,376,819 | |
| |
| | | |
| | |
Diluted earnings per share | |
$ | 3.02 | | |
$ | 4.23 | |
| |
| | | |
| | |
Basic weighted average shares outstanding | |
| 18,089,629 | | |
| 15,465,642 | |
Add: weight average of common stock converted from Series B Convertible
preferred shares outstanding | |
| - | | |
| 707,070 | |
Diluted weighted average shares outstanding | |
| 18,089,629 | | |
| 16,172,712 | |
For the three months ended
September 30, 2015 and 2014, full dilution effect of convertible note of $597,813 (9.30.2014: $6,982,667) was not taken into account
for calculation of the diluted earnings per share because convertible note holder is restricted to exercise shares before October
1, 2015 under terms of convertible note agreement.
For the nine months ended September
30, 2015 and 2014, full dilution effect of convertible note of $35,468,110 (9.30.2014: $6,982,667), was not taken into account
for calculation of the diluted earnings per share because convertible note holder is restricted to exercise shares before October
1, 2015 under terms of convertible note agreement.
SINO AGRO FOOD,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
The Company obtained banking facilities from Agriculture
Development Bank of China to the extent of $14,151,000.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q (the
“Form 10-Q”) contains “forward-looking statements,” within the meaning of the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).The
Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained
in Section 21E of the Exchange Act. Forward-looking statements can be identified by the use of forward-looking terminology, such
as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,”
“intends,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and
uncertainties These statements reflect management’s current beliefs and are based on information now available to it. Accordingly,
these statements are subject to certain risks, uncertainties and contingencies that could cause the Company’s actual results,
performance or achievements in 2015 and beyond to differ materially from those expressed in, or implied by, such statements. Such
statements, include, but are not limited to, statements contained in this Form 10-Q relating to the Company’s business,
financial performance, business strategy, recently announced transactions and capital outlook. Important factors that could cause
actual results to differ materially from those in the forward-looking statements include: a continued decline in general economic
conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products;
the impact of any litigation or infringement actions brought against us; competition from other providers and products; the inability
to raise capital to fund continuing operations; changes in government regulation; the ability to complete customer transactions,
and other factors relating to our industry, our operations and results of operations and any businesses that may be acquired by
us. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual
results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. Readers of this Form
10-Q should not place undue reliance on any forward-looking statements. Except as required by federal securities laws, the Company
undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.
You should read the following discussion
and analysis of the financial condition and results of operations of the Company together with the financial statements and the
related notes presented in Item 1 of this Form 10-Q.
Description
and interpretation and clarification of business category on the consolidated results of the operations
The Company’s strategy is to manage
and operate its businesses under five (5) business divisions or units on a standalone basis, namely:
Beef & Organic Fertilizer Division |
(SJAP, QZH and HSA) |
Plantation Division |
(JHST) |
Cattle Farm Division |
(MEIJI and JHMC) |
Corporate & Others Division |
(SIAF) |
Fishery Division |
(CA) |
A summary of each business division is
described below:
| l | Beef
and Organic Fertilizer Division refers to: |
| (i) | The operation of SJAP in
manufacturing and sales of organic fertilizer, bulk livestock feed, concentrated livestock
feed, and the sales of live cattle inclusive of: (a) cattle that are not being slaughtered
in our own slaughter house operated by Qinghai Zhong He Meat Products Co., Limited (“QZH”)
are sold live to third party livestock wholesalers and, (b) cattle that are sold to QZH
and slaughtered and deboned and packed by QZH; and the sales of meats deboned and packed
by QZH that are sold to various meat distributors, wholesalers and super market chains
and our own retail butcher stores. QZH is a fully owned subsidiary of our partially
owned subsidiary Qinghai Sanjiang A Power Agriculture Co., Ltd. (“SJAP”);
as such, the financial statements of these three companies (SJAP, QZH and HSA)
are consolidated into our wholly owned subsidiary, A Power Agro Agriculture Development
(Macau) Limited (“APWAM”), as one entity. SJAP and QZH are both variable
interest entities over which we exercise significant control. |
| (ii) | The operation
of Hunan Shenghua A Power Agriculture Co. Ltd. (“HSA”) in manufacturing and
sales of organic fertilizer. |
| l | Plantation
Division refers to the operations of Jiangmen City Heng Sheng Tai Agriculture Development
Co. Ltd. (“JHST”) in the HU Plantation business where dragon fruit flowers
(dried and fresh) and immortal vegetables are sold to wholesale and retail markets. JHST’s
financial statements are consolidated into the financial statements of Macau EIJI Company
Ltd. (“MEIJI”) as one entity. |
| l | Cattle
Farm Division refers to the operations of Cattle Farm 1 under Jiangmen City Hang
Mei Cattle Farm Development Co. Ltd (“JHMC”) where cattle are sold live to
third party livestock wholesalers who sell them mainly to Guangzhou and Beijing livestock
wholesale markets. The financial statements of JHMC are consolidated into MEIJI as one
entity along with MEIJI’s operation in the consulting and service for development
of other cattle farms (e.g., Cattle Farm 2) or related projects. |
| l | Corporate
& Others Division refers to the business operations of Sino Agro Food, Inc.,
including import/export business and consulting and service operations provided to projects
that are not included in the above categories, and not limited to corporate affairs. |
| l | Fishery
Division refers to the operations of Capital Award Inc. (“Capital Award”
or “CA”) covering its engineering, technology and consulting service management
of fishery farms and seafood sales operations and marketing, where; |
Capital Award generates revenues
from providing engineering consulting services as turnkey contractors to owners and developers of fishery projects that are being
designed and engineered into turnkey contracts by Capital Award in China using its A Power Module Technology Systems (“APM”)
as follows:
(A). Engineering and Technology
Services; via Consulting and Service Contracts (“CSC’s”) for the development, construction, and supply of
plant and equipment, and management of fishery (and prawn or shrimp) farms and related business operations.
(B). Seafood Sales from CA’s projected
farms
Capital Award generates following sales revenues
from:
(1). Sales to JFD (“Fish
Farm 1” or “FF1”), which is a Sino Foreign Joint Venture Company (“SFJVC”), and sales derived from
seafood sold by JFD (currently, only the JFD subsidiary is a SFJVC), being consolidated into our wholly owned Hong Kong subsidiary
Tri-way Industries Ltd. (“TRW”) as one entity.
FF1 generates sales from its
production of (a) its in-door APM farm with 16 APM production units and (b) its open dam farms producing fish and prawns from
310 Mu (52 acres) of land leased from Zhongshan A Power Prawn Culture Farms Development Co. Ltd. (“ZSAPP,” “Prawn
Farm 2” or “PF2”).
(2). Sales to and sales derived
from seafood from the unincorporated companies, including Enping City A Power Prawn Culture Development Co. Ltd. (“EBAPCD,”
“Prawn Farm 1” or “PF1”) and ZSAPP, are accounted for independently as follows:
CA and PF1:
(a) CA purchases prawn and/or fish fingerling and feed stocks from third party suppliers and resells them to PF1 at variable small
or no profit margins and (b) CA purchases matured prawns and fish from PF1 and sells to third parties (wholesale markets)
PF1 generates sales from its
production of (a) its indoor APM farm with 4 APM production units in 2014 and 16 APM production units from Q3 2015 and (b) its
open dam farms producing fish and prawns from a 290 Mu (or 48 acres) of land leased from PF2.
CA and PF2:
(a) CA earns commission from the sale of prawn fingerlings that are sold by PF2 to third parties, and in this respect PF2 produces
its own prawn fingerlings as compared to CA’s purchasing them from PF2 and reselling them to PF1 or FF1, as described above,
and (b) CA purchases matured prawns and fish from PF2 and sells to third parties (wholesale markets).
PF2 has 6
indoor APM production units producing mainly prawn fingerling and an open dam farms situated on about 400 Mu (about 66 acres)
producing prawns and fish.
CONSOLIDATED RESULTS OF OPERATIONS
Part A. Unaudited Income Statements of Consolidated Results
of Operations for three months ended September 30, 2015 compared to for three months ended September 30, 2014.
A (1) Income Statements (Unaudited)
In $ | |
Three months ended | | |
Three months ended | | |
Difference | | |
Note | |
| |
Sept. 30. 2015 | | |
Sept. 30. 2014 | | |
| | |
| |
Revenue | |
| 124,666,399 | | |
| 107,220,059 | | |
| 17,446,340 | | |
| 1 | |
Consulting, services, commission and management fee | |
| 28,633,558 | | |
| 25,048,644 | | |
| 3,584,914 | | |
| 1 | |
Sale of goods | |
| 96,032,841 | | |
| 82,171,415 | | |
| 13,861,426 | | |
| 1 | |
Cost of goods sold and services | |
| 92,416,206 | | |
| 72,723,395 | | |
| 19,692,811 | | |
| 2 | |
Consulting, services, commission and management fee | |
| 17,151,938 | | |
| 13,601,869 | | |
| 3,550,069 | | |
| 2 | |
Sale of goods | |
| 75,264,268 | | |
| 59,121,526 | | |
| 16,142,742 | | |
| 2 | |
Gross Profit | |
| 32,250,193 | | |
| 34,496,664 | | |
| (2,246,471 | ) | |
| 3 | |
Consulting, services, commission and management fee | |
| 11,481,620 | | |
| 11,446,775 | | |
| 34,845 | | |
| 3 | |
Sale of goods | |
| 20,768,573 | | |
| 23,049,889 | | |
| (2,281,316 | ) | |
| 3 | |
Other income (expenses) | |
| (581,687 | ) | |
| (17,599 | ) | |
| (564,088 | ) | |
| | |
General and administrative expenses | |
| (3,951,922 | ) | |
| (3,594,509 | ) | |
| (357,413 | ) | |
| 4 | |
Net income | |
| 27,716,584 | | |
| 30,884,556 | | |
| (3,167,972 | ) | |
| | |
EBITDA | |
| 30,001,773 | | |
| 32,347,402 | | |
| (2,345,629 | ) | |
| | |
Depreciation and amortization (D&A) | |
| (956,573 | ) | |
| (1,199,182 | ) | |
| 242,609 | | |
| 5 | |
EBIT | |
| 29,045,200 | | |
| 31,148,220 | | |
| (2,103,020 | ) | |
| | |
Net Interest | |
| (1,328,616 | ) | |
| (263,664 | ) | |
| (1,064,952 | ) | |
| | |
Tax | |
| 0 | | |
| 0 | | |
| 0 | | |
| | |
Net Income | |
| 27,716,584 | | |
| 30,884,556 | | |
| (3,167,972 | ) | |
| | |
Non - controlling interest | |
| (6,194,484 | ) | |
| (6,382,694 | ) | |
| 188,210 | | |
| 7 | |
Net income to SIAF Inc.
and subsidiaries | |
| 21,522,100 | | |
| 24,501,862 | | |
| (2,979,762 | ) | |
| | |
Weighted average number of shares outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 18,822,876 | | |
| 16,469,314 | | |
| 2,353,562 | | |
| | |
- Diluted | |
| 18,822,876 | | |
| 17,176,384 | | |
| 1,646,492 | | |
| | |
Earnings Per Share (EPS) | |
| | | |
| | | |
| | | |
| 8 | |
- Basic | |
| 1.14 | | |
| 1.49 | | |
| -0.35 | | |
| | |
- Diluted | |
| 1.14 | | |
| 1.43 | | |
| -0.29 | | |
| | |
Overview of Q3 2015 compared to
Q3 2014 (as illustrated in Table 1A above):
| l | Overall
sales revenues of the quarter have been good, increasing by $17.4 million (or 16.27%)
generating over $96.03 million from sales of goods and $28.6 million from Consulting
and Service Division. However overall gross profit went down marginally by $2.25 million
(or 6.5%) due mainly to SJAP’s sales of live cattle resulting in gross profit of
$1.1 million instead of $5.03 million in 2014 (a difference of $3.93 million) in overall
gross profit (please see below for more details). |
| l | Sales
revenues from the Consulting & Services division increased by $3.58 million (or 14.3%)
with a marginal increase in gross profit by $0.035 million due primarily to the fact
that lower margins could only be generated from the development of the Zhongshen New
Prawn Farm project because it is a much bigger project than any other project that Company
has undertaken and it is reasonable to do so at a lower profit margin. |
| l | The
other primary reasons causing the lower gross profits are: |
| • | The increase
in general and administration expenses due mainly to the expenses incurred by the Corporate
Division in carrying out various corporate exercises (e.g., seeking of new sources of
financing, upgrading of listing status, etc.) increases by $0.37 million to $3.96 million
compared to the already high expenses of $3.59 million of Q3 2014. |
| • | The increase in interest expenses
by $1.06 million from $0.26 million in Q3 2014 to $1.33 million in Q3 2015. |
Therefore, the overall results are within
expectations showing improvements in all segments of the Company’s business activities except the live cattle division of
SJAP and indicating that the Company’s business strategies are heading the right direction.
The fall of profit in SJAP’s live
cattle sales was anticipated since Q2 2015 due mainly to the lowering of local cattle prices impacted by the heavy volumes of
imports from other countries that was caused by the relaxed policies adapted by the Chinese Government to open up the local cattle
and beef markets for some the exporting countries (i.e., Australia, New Zealand, Brazil and other South American countries). For
more details please see below.
Notes to Table A.1’s 1,
2 & 3:
(A): Information of Note (1, 2 & 3) Sales, cost
of sales and gross profit and analysis:
| l | The
Company’s revenues were generated from (A) Sales of Goods and (B) Consulting and
Services provided in project and business developments covering engineering, construction,
supervision, training, managements and technology etc. |
Table
(A.2). Below shows segmental break-down figures of Sales of Goods, related cost of sales and GPs for the three months ended September
30, 2015(Q3 2015) and the three months ended September 30, 2014 (Q3 2014).
| l | Beef
and Organic Fertilizer Division refers to: |
| (i) | The operations of SJAP in manufacturing
and sales of organic fertilizer, bulk livestock feed, concentrated livestock feed, and
the sale of live cattle inclusive of: |
(a) Cattle
that are not slaughtered in our own slaughter house operated by QZH are sold live to third party livestock wholesalers.
| |
In US$ | |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
| |
| |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
SJAP | |
Sales of live cattle | |
| 16,360,557 | | |
| 17,599,116 | | |
| 15,261,704 | | |
| 12,572,988 | | |
| 1,098,853 | | |
| 5,026,129 | |
| |
Sales of feedstock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Bulk Livestock feed | |
| 1,623,585 | | |
| 1,101,471 | | |
| 753,825 | | |
| 528,982 | | |
| 869,760 | | |
| 572,488 | |
| |
Concentrate livestock feed | |
| 2,710,543 | | |
| 3,095,750 | | |
| 1,569,175 | | |
| 1,957,093 | | |
| 1,141,368 | | |
| 1,138,656 | |
| |
Sales of fertilizer | |
| 589,937 | | |
| 440,588 | | |
| 383,232 | | |
| 211,593 | | |
| 206,704 | | |
| 228,995 | |
| |
SJAP Total | |
| 21,284,622 | | |
| 22,236,925 | | |
| 17,967,937 | | |
| 15,270,656 | | |
| 3,316,685 | | |
| 6,966,269 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
% of increase or (decrease) | |
| -4% | | |
| 18% | | |
| -52% | |
| |
| |
| |
2015Q3 | | |
2014Q3 | | |
Difference | |
SJAP | |
Cattle Operation | |
| |
| | | |
| | | |
| | |
| |
Production and Sales of live cattle | |
Heads | |
| 5,136 | | |
| 4,777 | | |
| 359 | |
| |
Average Unit sales price | |
US$/head | |
| 3,185 | | |
| 3,684 | | |
| -499 | |
| |
Unit cost prices | |
US$/head | |
| 2,972 | | |
| 2,351 | | |
| 621 | |
| |
Production and sales of feedstock | |
| |
| | | |
| | | |
| - | |
| |
Bulk Livestock feed | |
MT | |
| 8,939 | | |
| 6,048 | | |
| 2,891 | |
| |
Average Unit sales price | |
US$/MT | |
| 182 | | |
| 182 | | |
| -0 | |
| |
Unit cost prices | |
US$/MT | |
| 84 | | |
| 87 | | |
| -3 | |
| |
Concentrated livestock feed | |
MT | |
| 6,000 | | |
| 7,625 | | |
| -1,625 | |
| |
Average Unit sales price | |
US$/MT | |
| 452 | | |
| 406 | | |
| 46 | |
| |
Unit cost prices | |
US$/MT | |
| 262 | | |
| 257 | | |
| 5 | |
| |
Production and sales of fertilizer | |
MT | |
| 3,000 | | |
| 2,348 | | |
| 652 | |
| |
Average Unit sales price | |
US$/MT | |
| 197 | | |
| 188 | | |
| 9 | |
| |
Unit cost prices | |
US$/MT | |
| 128 | | |
| 90 | | |
| 38 | |
The average of live cattle prices fell
by $499/head based on average prices at RMB25/Kg (live weight) compared to the average of RMB32/Kg in same period of 2014 representing
a drop of 21.87% in average live weight prices of local cattle.
The increase of bulk livestock feed sales
by some 2,891 MT in the quarter is due mainly to the natural increases of cattle being kept by regional farmers in preparation
for the coming winter season.
Overall sale revenues of SJAP’s
operations decreased by $1 million (or 4.5%) from 2014’s $22.2 million to 2015’s $21.2 million and gross profit fell
by $3.65 million (or 52%) from 2014’s $6.97 million to 2015’s $3.32 million because of the drop in live cattle prices.
(b) Cattle that are sold to QZH and being
slaughtered and deboned and packed by QZH; and the sales of meats deboned and packed by QZH that are sold to various meat distributors,
wholesalers and super market chains and our own retail butcher stores. QZH is a wholly owned subsidiary of SJAP; as such,
the financial statements of these three companies (SJAP, QZH and HSA) are consolidated into APWAM as one entity.
| |
| |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
In US$ | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | |
QZH | |
* QZH's (Slaughter & Deboning operation) | |
| 438,911 | | |
| 341,337 | | |
| 215,417 | | |
| 192,938 | | |
| | | |
| 148,399 | |
| |
** QZH's (Deboning operation) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | |
| |
(a) on cattle & Lamb locally supplied | |
| 3,396,515 | | |
| 3,595,291 | | |
| 2,625,413 | | |
| 2,376,128 | | |
| 771,102 | | |
| 1,219,163 | |
| |
(b) on imported beef and mutton | |
| 8,290,735 | | |
| 1,732,423 | | |
| 5,952,077 | | |
| 950,900 | | |
| 2,338,658 | | |
| 781,523 | |
| |
(C ) Sales of live cattle | |
| 2,076,677 | | |
| | | |
| 2,016,291 | | |
| | | |
| | | |
| - | |
| |
QZH Total | |
| 14,202,838 | | |
| 5,669,051 | | |
| 10,809,198 | | |
| 3,519,966 | | |
| 3,393,640 | | |
| 2,149,085 | |
| |
% of Increase or (decrease) | |
| 151% | | |
| 207% | | |
| 58% | |
* QZH
(Slaughter & De-boning operation)
Slaughter operation | |
| |
| | | |
| | | |
| | |
Slaughter of cattle | |
Heads | |
| 1,200 | | |
| 845 | | |
| 355 | |
Service fee | |
US$/Head | |
| 8 | | |
| 8 | | |
| - | |
Sales of associated products | |
Pieces | |
| 1,200 | | |
| 999 | | |
| 201 | |
Average Unit sales price | |
US$/Piece | |
| 358 | | |
| 335 | | |
| 23 | |
Unit cost prices | |
US$/Piece | |
| 180 | | |
| 193 | | |
| -14 | |
De-boning & Packaging activities | |
| |
| | | |
| | | |
| | |
From Cattle supplied locally | |
| |
| | | |
| | | |
| | |
De-boned Meats | |
MT | |
| 301 | | |
| 286 | | |
| 15 | |
Average Unit sales price | |
US$/MT | |
| 11,284 | | |
| 12,591 | | |
| -1,307 | |
Unit cost prices | |
US$/MT | |
| 8,722 | | |
| 8,321 | | |
| 401 | |
From imported beef | |
MT | |
| 996 | | |
| 84 | | |
| 912 | |
Average Unit sales price | |
US$/MT | |
| 8,324 | | |
| 8,722 | | |
| -398 | |
Unit cost prices | |
US$/MT | |
| 5,976 | | |
| 4,610 | | |
| 1,366 | |
From imported lamb | |
MT | |
| | | |
| 121 | | |
| | |
Average of sales price | |
US$/MT | |
| | | |
| 8,263 | | |
| | |
Average of cost prices | |
US$/MT | |
| | | |
| 4,659 | | |
| | |
Production and Sales of live cattle | |
Heads | |
| 867 | | |
| | | |
| | |
Average Unit sales price | |
US$/head | |
| 2,395 | | |
| | | |
| | |
Unit cost prices | |
US$/head | |
| 2,326 | | |
| | | |
| | |
Lowering of live cattle prices
impacts locally produced and dressed meat prices as well as imported meat prices. However, packed and dressed meat prices are
not a simple derivation due mainly to different cuts of meats having different demand and pricing (e.g., the demand for and therefore
the price of strip loin is much higher than those for cull-rolls).
QHZ increased sales revenues
by $8.53 million (or 151%) from 2014’s $5.67 million to 2015’s $14.2 million due mainly to the increase in imported
beef jumping from 2014’s $1.73 million to 2015’s $8.29 million representing an increase of $6.56 million (or 379.2%),
which is a significant increase. In turn, gross profit increased by $1.24 million (or 58%).
| (ii) | The operations of HSA in manufacturing and sales of organic fertilizer. |
In US$ | |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
| |
| |
| 2015Q3 | | |
| 2014Q3 | | |
| 2015Q3 | | |
| 2014Q3 | | |
| 2015Q3 | | |
| 2014Q3 | |
HSA | |
Sales of Organic fertilizer | |
| 924,563 | | |
| 1,095,621 | | |
| 704,048 | | |
| 813,487 | | |
| 220,516 | | |
| 282,134 | |
| |
Sales of Organic Mixed Fertilizer | |
| 3,946,710 | | |
| 4,698,541 | | |
| 2,251,100 | | |
| 3,885,054 | | |
| 1,695,610 | | |
| 813,487 | |
| |
HSA Total | |
| 4,871,273 | | |
| 5,794,162 | | |
| 2,955,147 | | |
| 4,698,541 | | |
| 1,916,126 | | |
| 1,095,621 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
% of increase or (decrease) | |
| -16% | | |
| -37% | | |
| 75% | |
HSA | |
Fertilizer and Cattle operation | |
| | | |
| | | |
| | | |
| - | |
| |
Organic Fertilizer | |
| MT | | |
| 3,355 | | |
| 4,080 | | |
| -725 | |
| |
Average Unit sales price | |
| US$/MT | | |
| 264 | | |
| 264 | | |
| 0 | |
| |
Unit cost prices | |
| US$/MT | | |
| 204 | | |
| 198 | | |
| 6 | |
| |
Organic Mixed Fertilizer | |
| MT | | |
| 8,884 | | |
| 10,383 | | |
| -1,499 | |
| |
Average Unit sales price | |
| US$/MT | | |
| 444 | | |
| 453 | | |
| -8 | |
| |
Unit cost prices | |
| US$/MT | | |
| 253 | | |
| 374 | | |
| -121 | |
| |
Retailing packed fertilizer (For super marlet sales) | |
| MT | | |
| 51 | | |
| 20 | | |
| 31 | |
| |
Average Unit sales price | |
| US$/MT | | |
| 738 | | |
| 927 | | |
| -189 | |
| |
Unit cost prices | |
| US$/MT | | |
| 382 | | |
| 343 | | |
| 39 | |
Overall sales of organic mixed
fertilizer (“OMF”) was reduced to $3.95 million compared to 2014’s $4.7 million resulting in a reduction of
$ 1.75 million (or 15.95%), but that doesn’t mean that the demand for HSA’s OMF is decreasing since OMF is mainly
sold to lake fishermen producing cheap species of fish, such as carp. They plan their fertilizer inventories, usually based on
the quarter’s price of carp; however they have huge lakes with the capacity to grow the carps to meet the market demand.
However, they must eventually increase the application of our OMF to provide enough nutrients in the lakes to maintain their production
of carp. While we cannot predict accurately during which quarter this may happen, it usually occurs during one or two quarters
annually.
HSA managed to reduce its cost
of production of OMF by an average of $121/MT (or 32.35%) due to the lower cost of raw materials being sourced and applied, which
represents a significant cost savings.
Overall gross profit has increased
by $0.82 million (or 74.5%) from 2014’s $1.1 million to 2015’s $1.92 million due mainly to cost savings in raw materials.
| l | Plantation
Division refers to the operations of Jiangmen City Heng Sheng Tai Agriculture
Development Co. Ltd. (“JHST”). JHST is engaged in the HU Plantation business
where dragon fruit flowers (dried and fresh), cash vegetable crops and immortal vegetables
are sold to wholesale and retail markets. JHST’s financial statements are consolidated
into the financial statements of MEIJI as one entity. |
In US$ | |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
| |
| |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
JHST | |
Sales of Fresh HU Flowers | |
| 530,511 | | |
| 460,176 | | |
| 209,343 | | |
| 149,494 | | |
| 321,168 | | |
| 310,682 | |
| |
Sales of Dried HU Flowers | |
| 6,476,837 | | |
| 4,237,312 | | |
| 2,107,165 | | |
| 1,183,295 | | |
| 4,369,672 | | |
| 3,054,017 | |
| |
Sales of Dried Immortal vegetables | |
| 307,508 | | |
| 1,116,179 | | |
| 103,687 | | |
| 371,951 | | |
| 203,821 | | |
| 744,228 | |
| |
Sales of Vegetable products | |
| 60,537 | | |
| - | | |
| 27,709 | | |
| - | | |
| 32,828 | | |
| - | |
| |
JHST/Plantation Total | |
| 7,375,393 | | |
| 5,813,667 | | |
| 2,447,904 | | |
| 1,704,740 | | |
| 4,927,489 | | |
| 4,108,927 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
% of increase or (decrease) | |
| 27% | | |
| 44% | | |
| 20% | |
| JHST | Plantation of HU Flowers and Immortal vegetables |
Fresh HU Flowers |
Pieces |
3,000,000 |
3,045,250 |
-45,250 |
Average Unit sales price |
US$/Pieces |
0.18 |
0.15 |
0.03 |
Unit cost prices |
US$/Pieces |
0.07 |
0.05 |
- |
Dried HU Flowers |
MT |
398 |
307 |
91 |
Average Unit sales price |
US$/MT |
16,294 |
13,802 |
2,492 |
Unit cost prices |
US$/MT |
5,301 |
3,854 |
1,447 |
Dried Immortal vegetables |
MT |
4 |
15 |
-12 |
Average Unit sales price |
US$/MT |
87,859 |
74,412 |
13,448 |
Unit cost prices |
US$/MT |
29,625 |
24,797 |
4,828 |
Vegetable products |
MT |
25.26 |
- |
|
Average Unit sales price |
US$/MT |
2,396 |
- |
|
Unit cost prices |
US$/MT |
1,097 |
- |
|
Revenue from our plantation division increased
by $1.56 million (or 27%) from $5.8 million for Q3 2014 to $7.38 million for Q3 2015. The increase was primarily due to higher
prices both in fresh flowers by $0.03/piece and dried flowers by $2,492/MT and the increase in production 398 MT in 2015 (mainly
produced by our own farm without any flowers being brought from regional growers due to the extremely wet season causing many
problems associated with diseases for the regional growers) from 2014’s 307 MT (which comprised over 50% of flowers being
brought from regional growers); this means that our own farm has shown a marked improvement since 2014.
There was a decrease in sales by 12 MT
(or 80%) in immortal vegetables due primarily to the failure of marketing and promotional efforts that did not effectively reach
the right type of consumers. Consequently, the Company is exploring various options and is dedicated to finding a solution in
the near future. However, we have not reduced the price of the Immortal Vegetables because we remain confident that as an herbal
vegetable, especially one that contains heavy selenium content, our Immortal Vegetables will eventually find a suitable place
in the Asian markets.
| l | Cattle
Farm Division refers to the operations of Cattle Farm 1 under Jiangmen City Hang
Mei Cattle Farm Development Co. Ltd (“JHMC”) where cattle are sold live to
third party livestock wholesalers who are selling them mainly in Guangzhou and Beijing
livestock wholesale markets. The financial statements of JHMC are consolidated into MEIJI
as one entity along with MEIJI’s operation in the consulting and service for development
of other cattle farms, such as Cattle Farm 2, or related projects. |
In US$ | |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
| |
| |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
MEIJI | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
(CF1) | |
Sale of Live cattle (Aromatic) | |
| 9,636,919 | | |
| 6,814,990 | | |
| 8,996,149 | | |
| 6,443,072 | | |
| 640,770 | | |
| 371,918 | |
| |
MEIJI / Cattle farm Total | |
| 9,636,919 | | |
| 6,814,990 | | |
| 8,996,149 | | |
| 6,443,072 | | |
| 640,770 | | |
| 371,918 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
% of increase or (decrease) | |
| 41% | | |
| 40% | | |
| 72% | |
| |
| |
| | | |
| | | |
| | |
MEIJI | |
Production and sale of Live cattle (Aromatic) | |
| Heads | | |
| 4,449 | | |
| 2,846 | | |
| 1,603 | |
CF1 | |
Average Unit sales price | |
| US$/head | | |
| 2,166 | | |
| 2,395 | | |
| -228 | |
| |
Unit cost prices | |
| US$/head | | |
| 2,022 | | |
| 2,264 | | |
| -242 | |
Cattle Farm 1 increased sales
by $2.83 million (or 41%) from 2014’s $6.81 million to 2015’s $9.64 million with gross profit increased by $0.27 million
(or 72%) from $0.37 million in 2014 to 2015’s $0.64 million due primarily to an increase in sales of 1,603 head of cattle.
| l | Corporate
& Others Division refers to the business operations of Sino Agro Food, Inc.,
including import/export business and consulting and service operations provided to projects
not included in the above categories, and not limited to corporate affairs. |
In US$ | |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
| |
| |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
SIAF | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Sales of goods through trading/import/export activities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
on seafood | |
| 2,743,902 | | |
| 11,757,113 | | |
| 2,439,024 | | |
| 10,632,839 | | |
| 304,878 | | |
| 1,124,274 | |
| |
on imported beef and mutton | |
| 7,317,703 | | |
| 1,354,017 | | |
| 6,504,624 | | |
| 915,843 | | |
| 813,078 | | |
| 438,174 | |
| |
SIAF/ Others & Corporate total | |
| 10,061,605 | | |
| 13,111,130 | | |
| 8,943,649 | | |
| 11,548,682 | | |
| 1,117,956 | | |
| 1,562,448 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
% of increase and (decrease) | |
| -23% | | |
| -23% | | |
| -28% | |
SIAF | |
Seafood trading
from imports | |
| |
| | | |
| | | |
| | |
| |
Mixed seafoods | |
MT | |
| 132 | | |
| 728 | | |
| -596 | |
| |
Average of sales price | |
US$/MT | |
| 20,787 | | |
| 16,150 | | |
| 4,637 | |
| |
Average of cost prices | |
US$/MT | |
| 18,477 | | |
| 14,606 | | |
| 3,872 | |
| |
Beef & Lambs trading from imports | |
MT | |
| 955 | | |
| 206 | | |
| 749 | |
| |
Average of sales price | |
US$/MT | |
| 7,663 | | |
| 6,573 | | |
| 1,090 | |
| |
Average of cost prices | |
US$/MT | |
| 6,811 | | |
| 4,446 | | |
| 2,365 | |
Revenue from the corporate division decreased
by $3.1 million or (23%) from 2014’s $13.1 million to 2015’s $10.06 million. The decrease was primarily due to less
seafood being imported from Madagascar resulting from increased government restrictions on exports. While imports from other countries
are being carried out with the aim of bridging the shortfall from Madagascar, it will take some time to develop such business
from new countries. On the other hand, its imported beef activity has increased by $5.9 million (or 421%) from 2014’s $1.4
million to 2015’s $7.3 million.
Gross profit from the corporate decreased
by $0.45 million or (28%) from $1.56 million for the three months ended September 30, 2014 to $1.12 million for the three months
ended September 30, 2015. The decrease was primarily due to the reasons set forth above.
In this respect, the Company is
confident that this segment of activities will improve rapidly because there is high market demand in China for beef and seafood
compared to many other countries. Management therefore believes that the Company is positioned to capitalize on this favorable
environment especially when the disposable income of China’s middle class is rising.
| l | Fishery
Division refers to the operations of Capital Award covering its engineering, technology
and consulting service management of fishery farms and seafood sales operations and marketing,
where Capital Award generates revenues from providing engineering consulting services
as turnkey contractors to owners and developers of fishery projects that are being designed
and engineered into turnkey contracts by Capital Award in China using its APM technology
and management systems as follows: |
(A) Engineering and Technology
Services; via Consulting and Service Contracts (“CSC’s”) for the development, construction, and supply of
plant and equipment, and management of fishery (and prawn or shrimp) farms and related business operations.
(B) Seafood Sales from CA’s projected farms
Capital Award generates following sales revenues from:
(1) Sales to JFD (or Fish Farm
1 or FF1) which is an SFJVC and sales derived from seafood brought from JFD (currently, only the JFD subsidiary is a SFJVC), the
financial statements of which are consolidated into TRW as one entity.
FF1 generates sales from its production
of (a) its indoor APM farm with 16 APM production units and (b) its open dam farms producing fish and prawns from a 310 Mu (or
52 acres) of land leased from PF2.
(2) Sales to and sales derived
from seafood brought from the un-incorporated companies, covering EBAPCD (or Prawn Farm 1 or PF1) and ZSAPP (or Prawn Farm 2 or
PF2) are accounted for independently as follows:
CA and EBAPCD
(PF1): (a) CA purchases prawn and/or fish fingerling and feed stocks from third party suppliers and resells to PF1 at variable
small or no profit margins and (b) CA purchases matured prawns and fish from PF1 and sells to third parties (wholesale markets).
PF1 generates sales from its production
of (a) its indoor APM farm with 4 APM production units in 2014 and 16 APM production units from Q3 2015 and (b) its open dam farms
producing fish and prawns from a 290 Mu (or 48 acres) of land leased from PF2.
CA and ZSAPP
(PF2): (a) CA earns commissions from the sale of prawn fingerlings that are sold by PF2 to third parties, and in this respect
PF2 produces its own prawn fingerlings as compared to CA’s purchasing them from PF2 and resells them to PF1 or FF1, as described
above, and (b) CA purchases matured prawns and fish from PF2 and sells to third parties (wholesale markets).
PF2 has 6 indoor
APM production nurseries producing prawn fingerling and an open dam farms situated on about 400 Mu (about 66 acres) producing
prawns and fish.
In US$ | |
Sales of goods | | |
Cost of Goods sold | | |
Sales of Goods' Gross profit | |
| |
| |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | | |
2015Q3 | | |
2014Q3 | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
CA | |
Sales of | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Fish (Sleepy cods) | |
| 2,483,441 | | |
| 1,533,699 | | |
| 1,972,465 | | |
| 1,200,856 | | |
| 510,976 | | |
| 332,843 | |
| |
Eels | |
| 8,946,181 | | |
| 14,406,907 | | |
| 8,722,749 | | |
| 9,035,340 | | |
| 223,432 | | |
| 5,371,567 | |
| |
Prawns | |
| 11,080,543 | | |
| 6,790,885 | | |
| 8,199,790 | | |
| 5,699,673 | | |
| 2,880,753 | | |
| 1,091,212 | |
| |
Mixed fishes | |
| 6,090,026 | | |
| | | |
| 4,249,280 | | |
| | | |
| 1,840,746 | | |
| - | |
| |
CA/ Fishery total | |
| 28,600,191 | | |
| 22,731,491 | | |
| 23,144,284 | | |
| 15,935,869 | | |
| 5,455,907 | | |
| 6,795,622 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
% of increase or (decrease)of sales of | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Fish (Sleepy cods) | |
| 62% | | |
| 64% | | |
| 54% | |
| |
Eels | |
| -38% | | |
| -3% | | |
| -96% | |
| |
Prawns | |
| 63% | | |
| 44% | | |
| 164% | |
| |
Mixed fishes | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
CA/ Fishery total | |
| 26% | | |
| 45% | | |
| -20% | |
CA | |
Production and sale (Inclusive contrated farms) of live fish etc. | |
| |
| | |
| | |
| |
| |
Fish (Sleepy cods) | |
MT | |
| 145 | | |
| 98 | | |
| 47 | |
| |
Average Unit sales price | |
US$/MT | |
| 17,127 | | |
| 15,650 | | |
| 1,477 | |
| |
Unit cost prices | |
US$/MT | |
| 13,603 | | |
| 12,254 | | |
| 1,350 | |
| |
Eels | |
MT | |
| 425 | | |
| 577 | | |
| -152 | |
| |
Average Unit sales price | |
US$/MT | |
| 21,050 | | |
| 24,958 | | |
| -3,908 | |
| |
Unit cost prices | |
US$/MT | |
| 20,524 | | |
| 15,652 | | |
| 4,872 | |
| |
Prawns | |
MT | |
| 676 | | |
| 483 | | |
| 193 | |
| |
Average Unit sales price | |
US$/MT | |
| 16,391 | | |
| 14,060 | | |
| 2,332 | |
| |
Unit cost prices | |
US$/MT | |
| 12,130 | | |
| 11,801 | | |
| 329 | |
| |
Mixed fishes | |
MT | |
| 1,609 | | |
| | | |
| | |
| |
Average Unit sales price | |
US$/MT | |
| 3,784 | | |
| | | |
| | |
| |
Unit cost prices | |
US$/MT | |
| 2,640 | | |
| | | |
| | |
Revenue from fishery increased by $5.9 million
or (26%) from $22.7 million for Q3 2014 to $28.6 million for Q3 2015. The increase in fishery was primarily due to our increase
in productivity and in turn increasing the sale of sleepy cods, prawns and mixed fish.
Gross profit from fishery decreased by $1.34
million or (20%) from $6.8 million for the three months ended September 30, 2014 to $5.46 million for the three months ended September
30, 2015, which was primarily due to the lower profit generated from the sale of eels in 2015 compared to 2014 due to the reduced
supplies of fingerling eels in 2014, leading to lower production of eels; however, sales and gross profits both in sleepy cods
and prawns achieved good results during this quarter, increasing by 63% in revenues and gross profit of 54% for sleepy cods and
63% in sales revenues and gross profits of 164% for prawns as compared to same period Q3 in 2014 as shown in the table above.
In this respect, it shows the vitality of
our farms in adapting to the changes needed to grow different species of seafood whenever the supply or market conditions change,
affecting the supply or prices of a certain species of seafood.
Notes to Table A (1)
Note (1.1, 2.1 and 3.1)
Table A.5 below shows the revenue, cost
of services and gross profit generated from consulting, services, commission and management fee for three months ended September
30, 2015 (Q3 2015) and the three months ended September 30, 2014 (Q3 2014).
| |
| 2015Q3 | | |
| 2014Q3 | | |
| Difference | | |
Description of work |
Sales Revenues (Consulting and Services) | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
CA | |
| 28,633,558 | | |
| 24,598,641 | | |
| 4,034,917 | | |
Working in progress of PF(2), NPF |
SIAF | |
| | | |
| - | | |
| - | | |
|
Group Total Revenues | |
| 28,633,558 | | |
| 24,598,641 | | |
| 4,034,917 | | |
|
Cost of sales | |
| | | |
| | | |
| | | |
|
CA | |
| 17,151,938 | | |
| 13,601,869 | | |
| 3,550,069 | | |
|
Group Total Cost of sales | |
| 17,151,938 | | |
| 13,601,869 | | |
| 3,550,069 | | |
|
Gross Profit | |
| | | |
| | | |
| | | |
|
CA | |
| 10,380,667 | | |
| 10,996,772 | | |
| -616,105 | | |
|
Group Total Gross Profit | |
| 10,380,667 | | |
| 10,996,772 | | |
| -616,105 | | |
|
| |
| | | |
| | | |
| | | |
|
% of increase or (decrease) | |
| | | |
| | | |
| | | |
|
Group revenues | |
| 16% | | |
| | | |
|
Group gross profits | |
| -6% | | |
| | | |
|
Revenues (consulting,
service, commission and management fee):
Revenues increased by $4.0 million (or 16%)
from $24.6 million for Q3 2014 to $28.6 million for Q3 2015. The increase was primarily due to an increase in revenue from the
construction and development work done on the Zhongshan New Prawn of $19.36 million, which contributed 68% of the total revenue
of $28.6 million.
Cost of services for consulting, service,
commission and management fees increased by $3.5 million (or 26%) from $13.6 million for Q3 2014 to $17.15 million for Q3 2015,
in turn reducing overall gross profit by $0.6 million (or 6%) from $11 million for Q3 2014 to $10.4 million for Q3 2015.
| l | Table
A.6 below highlights information of ongoing Consulting and Services provided by Capital
Award, MEIJI and SIAF, respectively, as at September 30, 2015: |
Name of
the
developments |
|
Location of
development |
|
Designed
capacity
per year |
|
Land area
or
Built up area |
|
Current
Phase &
Stage |
|
Commencement
date of
development |
|
(Estimated)
development's
completion date
on or before |
|
Contractual
amount |
|
% of
completion as
of 30.09.2014 |
|
Notes |
Fish Farm (1) |
|
Enping City |
|
1,200 MT |
|
9,900 m2 |
|
fully operational |
|
July 2010 |
|
June 2011 |
|
$5.3 million |
|
Fully operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prawn Farm (1) |
|
Enping City |
|
2013=400MT 2014=800MT 2015=1200 MT |
|
23,100 m2 |
|
2 phases and road work |
|
2 phases and road work and Phase 3 extension of
grow-out farm & Phase 4 demonstrated hydroponic farm |
|
Phase 1 on June 2011 Phase (2.1) Phase (2.2) Road
work Started Aug. 2012 |
|
Phase (1) on December 2012 Phase (2) completed
Q1 2013 |
|
Phase (1) $11.6 million Phase (2) 6.39 million
Road work $2.94 million, Phase 3 US$5.2 million & Phase 4 US$1.6 million |
|
Extension work 90% completed with development
of the demonstration hydroponic farm outstanding and scheduling to start work within December 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fish Farm (2) "The Fish & Eel Farm |
|
Xin Hui District, Jiang Men. |
|
2014=800 MT 2015= 1600 MT 2016=2000MT |
|
165,000 m2 |
|
3 Phases |
|
Phase 1 January 15, 2012 Bridge & Road Oct.
2012 Phase (3) 2013 & (4)2014 |
|
Phase 1 June 2014 Bridge & Road Dec. 2013
Phase (3) & (4) 2015 |
|
Phase (1) $8.73 million Bridge & Road $2.48
Phase (3) $4.38 M Phase (4) $10.63 Million |
|
Phase (1) & Bridge and Road completed Jan.
2013 Phase (3) completed and Phase (4) not started. |
|
Phase's 4 work is to develop more RAS open dams
which progress is pending on the performance of the newly developed RAS open dams using our latest generation of APM technology
that are being developed in PF(2)that will show results during Q4 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prawn Farm (2) The Hatchery & Nusery & Grow-out prawn farm |
|
San Jiao Town, Zhong San City, |
|
2013=1.6 Billion Fingerling and 400MT of prawns
increasing yearly and by 2015 = 3.2 billion fingerling and 1200 MT of Prawns |
|
120,000 m2 |
|
2 phases |
|
Phase (1) and Phase (2) May 2012 Phase (3) 2014 |
|
Phase (1) Dec. 2012 and Phase (2) December 2013.Phase
(3) Dec. 2014 |
|
Phase (1) $9.26 m and
Phase (2) 8.42 Million Phase (3) 11.5 Million |
|
Phase (1) fully operational and Phase (2) in operation
and Phase (3) started and Phase 4 work is not started. |
|
Phase 3 is to develop new RAS open dams using
our latest generation of our APM technology on a 20,000 m2 block of land scheduling to be completed and in operation within
Q4 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle Farm (1) |
|
LiangXi Town, Enping City |
|
165,013 m2 |
|
1,500 Heads |
|
2 phases |
|
April 2011 |
|
December 2011 |
|
$3.0 million +$1.17 Million |
|
Fully Operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle Fram (2) |
|
LiangXi Town, Enping City |
|
230,300 m2 |
|
2,500 heads |
|
2 Phases |
|
February 2012 |
|
March. 2014 |
|
$10.6 million |
|
Operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle Farm (1) external road work |
|
LiangXi Town, Enping City |
|
4.5 Km road |
|
|
|
One Phase |
|
September 2012 |
|
March. 2013 |
|
$4.32 million |
|
Completed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cattle Farm (2) External Road work. |
|
LiangXi Town, Enping City |
|
5.5 Km Road |
|
|
|
One Phase |
|
September 2012 |
|
March. 2013 |
|
$5.28 Million |
|
Completed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHX Restaurants etc. |
|
Guangzhou City |
|
5,500 seatings in total |
|
|
|
Phase (1) Stage (1) |
|
June 2012 |
|
December 2015 |
|
$17.5 million |
|
Restaurant 7 is now in operation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NaWei wholesale Center |
|
Guangzhou City |
|
|
|
5,000 m2 |
|
One Phase |
|
July 2012 |
|
March. 2014 |
|
$ 9 million |
|
operational |
|
Alternation and renovation work to improve its
working environment is in progress. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shanghai City |
|
|
|
3,000 m2 |
|
Two Phases |
|
Sept. 2014 |
|
December. 2014 |
|
$5 million |
|
Operational |
|
Minor improvement works are in progress. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Zhangshan Prawn Project |
|
Zhongshan City |
|
Phase (1)S(1)= 10,000 MT S(2)= 30,000 MT Phase
(2) S(1)=100,000 MT Phase (3) 200,000 MT |
|
3600 MU land & BU area 3.57 million square
meter |
|
Phase (1) Stage (1) |
|
Nov. 2013 |
|
10 years for 100,000 MT capacity & 20 years
for whole integrated project |
|
10 years for US$2.6 billion |
|
Installation and finishing works are being carried
out on Stage 1 Phase 1 that with a designed capacity of 6,000 MT / year. |
|
Basic infrstractural work on Stage 2 Phase 1 is
in progress and upon completion total designed capacity is for 10,000 MT / year collectively from Stage 1 & 2 of Phase
1. |
Note (4) to Table A 1 Other Income
Table (Note 4.1) below shows the Gain/Loss on extinguishment
of debts (or Debt Settlement) representing recent sales of unregistered securities and the issuance of shares for
Q3 2015
Date | |
Shares issued/Bought back | | |
Market Price when issuance | | |
Par value | | |
Additional paid in capital | | |
Consideration received | | |
Income from issuance of shares | | |
Note |
As of July 1, 2015
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
9/22/2015 | |
| 280,000.00 | | |
| 12.50 | | |
| 280.00 | | |
| 3,499,720.00 | | |
| 3,500,000.00 | | |
| | | |
Restricted shares issued as security to secure trade facility of US$3.5 m |
9/30/2015 | |
| -514.00 | | |
| 10.97 | | |
| -0.51 | | |
| -5,638.07 | | |
| -5,638.58 | | |
| | | |
Readjustment to reversed split shares |
As of Sept.30, 2015 | |
| 279,486.00 | | |
| | | |
| 279.49 | | |
| 3,494,081.93 | | |
| 3,494,361.42 | | |
| - | | |
|
During the last three years, we have issued
unregistered securities to Chinese persons none of them residents of the United States. None of these transactions involved any
underwriters, underwriting discounts or commissions, or any public offering. The sales of these securities were, except as set
forth below, deemed to be exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(a)(2)
thereof, and/or Rule 506 of Regulation D promulgated there under, as transactions by an issuer not involving a public offering.
The recipients of securities in each transaction represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the certificates
issued in such transactions. All purchasers of our securities were accredited or sophisticated persons and had adequate access,
through employment, business or other relationships, to information about us.
We relied upon Regulation S of the Securities Act of 1933, as amended,
for the above issuances, none of which was made to US citizens or residents. We believe that Regulation S was available because:
|
• |
None of these issuances involved underwriters, underwriting discounts or commissions; |
|
• |
We placed Regulation S required restrictive legends on all certificates issued; |
|
• |
No offers or sales of stock under the Regulation S offering were made to persons
in the United States; and |
|
• |
No direct selling efforts of the Regulation S offering were made in the United
States. |
The other income for the three months ended
September 30, 2015 amounted to $(581,687 ) and derived from the combination of (1) Gain on extinguishment of debt $0 (Note 4),
Government Grant $746,929 and other income $0 less interest expenses of $1,328,616. The other income for the three months ended
September 30, 2014 was derived from the combination of (1) gain on extinguishment of debt $33,693 (Note 4), a government grant
of $57,340 and other income $155,032 less interest expenses of $263,664.
Gain (loss) of extinguishment of debts
Any deficit (excess) of the fair value of
the shares over the carrying cost of the debt has been reported as a gain (loss) on the extinguishment of debt of $ 0 and $33,693
has been credited (charged) to operations for the three months ended September 30, 2015 and 2014, respectively.
| l | Note
(5) to Table A 1 General and Administrative Expenses and Interest Expenses |
General and administrative
and interest expenses (including depreciation and amortization) increased by $1,422,365, or 37%, from $3,858,173 for Q3 2014 to
$5,280,538 for Q3 2015. The increase was primarily due to increase in Office and corporate expenses of $335,961 from $1,961,690
for Q3 2014 to $2,297,651 for Q3 2015, and the increase in interest expenses of $1,064,952 from $263,664 for Q3 2014 to $1,328,616
for Q3 2015. Overall, the situation is that there were much costly corporate expenses associated with a number of corporate exercises
that the Company has been doing in the past two years without much benefit; consequently, the Company decided to limit such expenses
until such time as the benefits to the Company will become more apparent.
Table (to Note 5)
Category | |
2015 Q3 | | |
2014 Q3 | | |
Difference | |
| |
$ | | |
$ | | |
$ | |
Office and corporate expenses | |
| 2,297,651 | | |
| 1,961,690 | | |
| 335,961 | |
Wages and salaries | |
| 495,734 | | |
| 486,172 | | |
| 9,562 | |
Traveling and related lodging | |
| 16,998 | | |
| 20,647 | | |
| -3,649 | |
Motor vehicles expenses and local transportation | |
| 43,966 | | |
| 48,635 | | |
| (4,669 | ) |
Entertainments and meals | |
| 24,813 | | |
| 33,030 | | |
| (8,217 | ) |
Others and miscellaneous | |
| 415,625 | | |
| 444,765 | | |
| (29,140 | ) |
Depreciation and amortization | |
| 657,135 | | |
| 599,570 | | |
| 57,565 | |
Sub-total | |
| 3,951,922 | | |
| 3,594,509 | | |
| 357,413 | |
Interest expenses | |
| 1,328,616 | | |
| 263,664 | | |
| 1,064,952 | |
| |
| | | |
| | | |
| | |
Total | |
| 5,280,538 | | |
| 3,858,173 | | |
| 1,422,365 | |
| |
| | | |
| | | |
| | |
Note (6) to Table A 1 Depreciation
and Amortization
Depreciation and amortization decreased by
$242,609 or 20 % to $956,573 for Q3 2015 from $1,199,182 for Q3 2014.The decrease was primarily due to the decrease of depreciation
by $98,627 to $538,147 for Q3 2015 from depreciation of $636,774 for Q3 2014 whereas the decrease of amortization by $143,982
to $418,426 for Q3 2015 from amortization of $562,408 for Q3 2014.
In this respect, total depreciation and amortization
amounted to $956,573 for Q3 2015, out of which amount $657,135 was reported under general and administration expenses and $299,438
was reported under cost of goods sold; whereas total depreciation and amortization was at $1,199,182 for Q3 2014 and out of which
amount $599,570 was reported under General and Administration expenses and $599,612 was reported under cost of goods sold.
Note (7) to Table A 1 Non-controlling interests
Table (F) below shows the derivation of non-controlling interest
Names of intermediate holdco.
subsidiaries | |
Capital
Award Inc.
(Belize) | |
Macau EIJI Company Ltd. (Macau) | | |
A Power Agro
Agriculture Development (Macau) Ltd. | | |
| | |
Triway
Industries Ltd.(HK) | | |
Total | |
Abbreviated names | |
CA | |
| (MEIJI) | | |
| (APWAM) | | |
| | | |
| (TRW) | | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
% of equity holding on below subsidiaries (in China) | |
n.a. | |
| 75 | % | |
| 75 | % | |
| 26 | % | |
| 45 | % | |
| | | |
| 75 | % | |
| | |
Name of China subsidiaries | |
None | |
| Jiangmen
City
Heng Sheng Tai
Agriculture
Development
Co. Ltd.(China) | | |
| Jiangmen
City
Hang Mei
Cattle Farm
Development
Co. Ltd.(China) | | |
| | | |
| Quinghai
Sangjiang A
Power Agrivulture Co.
Ltd. (China) | | |
| Qing
Hai
Zhonghe Meat
product Co.Ltd
(China) | | |
| Jiangmen
City
A Power
Fishery Development
Co. Ltd.
(China) | | |
| | |
Abbreviated names | |
| |
| (JHST) | | |
| (JHMC) | | |
| (HSA) | | |
| (SJAP) | | |
| (QZH) | | |
| (JFD) | | |
| | |
| |
| |
| | | |
| | | |
| Hunan
Shanghua A Power Agriculture Co. Ltd (China | | |
| 50 | % | |
| | | |
| | | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income of the P.R.C. subsidiaries for the period ended 30.
Sept. 2015 in $ | |
| |
$ | 4,710,497 | | |
$ | 480,260 | | |
$ | 1,068,535 | | |
$ | 4,277,613 | | |
$ | 3,267,575 | | |
$ | 1,961,973 | | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity % of non-controlling interest | |
| |
| 25 | % | |
| 25 | % | |
| 24 | % | |
| 55 | % | |
| 55 | % | |
| 25 | % | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Non-controlling interest's shares of Net incomes in $ | |
| |
$ | 1,177,624 | | |
$ | 120,065 | | |
$ | 256,448 | | |
$ | 2,352,687
| | |
$ | 1,797,166 | | |
$ | 490,493 | | |
$ | 6,194,484 | |
The Net Income attributed to non-controlling interest is $6,194,484
shared by (JHST, JHMC, HSA, SJAP, QZH and JFD collectively) for Q3 2015 as shown in Table (F) above.
Note (8) to Table A 1 Earnings per share (EPS)
Earnings per share decreased by $0.35 (basic)
and $0.29 (diluted) per share from EPS of $1.49 (basic) and$1.43 (diluted) for Q3 2014 to EPS of $1.14 (basic) and$1.14 (diluted)
for Q3 2015.The reason for the decrease is primarily due to the decrease of net income attributable to Sino Agro Food, Inc. and
subsidiaries by $2.93 million from $24.50 million for Q3 2014 to $21.57 million for Q3 2015.
Part B. Unaudited Consolidated Balance Sheets as of September
30, 2015 and December 31, 2014 (audited)
Consolidated Balance sheets | |
| | |
| | |
| | |
Note |
| |
September 30, 2015 | | |
December 31, 2014 | | |
Changes +- | | |
|
| |
$ | | |
$ | | |
$ | | |
|
ASSETS | |
| | | |
| | | |
| | | |
|
Current assets | |
| | | |
| | | |
| | | |
|
Cash and cash equivalents | |
| 9,551,180 | | |
| 3,031,447 | | |
| 6,519,733 | | |
B |
Inventories | |
| 51,133,915 | | |
| 45,967,993 | | |
| 5,165,922 | | |
9 |
Cost and expected earnings in excess of billings on uncompleted contracts | |
| 1,306,885 | | |
| - | | |
| 1,306,885 | | |
|
Deposits and prepaid expenses | |
| 85,040,561 | | |
| 75,951,591 | | |
| 9,088,970 | | |
10 |
Accounts receivable, net of allowance for doubtful accounts | |
| 129,257,822 | | |
| 104,503,071 | | |
| 24,754,751 | | |
11 |
Other receivables | |
| 66,633,542 | | |
| 52,305,260 | | |
| 14,328,282 | | |
|
Total current assets | |
| 342,923,905 | | |
| 281,759,362 | | |
| 61,164,543 | | |
|
Property and equipment | |
| | | |
| | | |
| | | |
|
Property and equipment, net of accumulated depreciation | |
| 76,201,470 | | |
| 64,352,975 | | |
| 11,848,495 | | |
12 |
Construction in progress | |
| 93,080,574 | | |
| 69,120,277 | | |
| 23,960,297 | | |
13 |
Land use rights, net of accumulated amortization | |
| 59,965,379 | | |
| 63,322,202 | | |
| (3,356,823 | ) | |
14 |
Total Property and equipment | |
| 229,247,423 | | |
| 196,795,454 | | |
| 32,451,969 | | |
|
Other assets | |
| | | |
| | | |
| | | |
|
Proprietary technologies, net of accumulated amortization | |
| 10,969,666 | | |
| 11,480,298 | | |
| (510,632 | ) | |
15 |
Long term inverstment | |
| 786,040 | | |
| 817,127.00 | | |
| (31,087 | ) | |
|
Temporary deposits paid to entities for investments in future Sino Joint Venture
companies | |
| 41,109,708 | | |
| 41,109,708 | | |
| - | | |
|
Goodwill | |
| 724,940 | | |
| 724,940 | | |
| - | | |
|
Total Other assets | |
| 53,590,354 | | |
| 54,132,073 | | |
| (541,719 | ) | |
|
Total assets | |
| 625,761,682 | | |
| 532,686,889 | | |
| 93,074,793 | | |
|
Current liabilities | |
| | | |
| | | |
| | | |
16 |
Accounts payable and accruals | |
| 20,461,324 | | |
| 22,138,835 | | |
| (1,677,511 | ) | |
|
Billings in excess of cost and estimated earnings on uncompleted contracts | |
| 3,874,480 | | |
| 8,060,580 | | |
| (4,186,100 | ) | |
|
Due to a director | |
| 692,906 | | |
| 1,172,059 | | |
| (479,153 | ) | |
|
Other payables | |
| 8,059,260 | | |
| 11,695,982 | | |
| (3,636,722 | ) | |
|
Series F shares mandatory redemption payable | |
| - | | |
| 3,146,063 | | |
| (3,146,063 | ) | |
|
Short term bank loan | |
| 273,876 | | |
| 4,410,727 | | |
| (4,136,851 | ) | |
|
Bonds payable | |
| 1,725,000 | | |
| 1,725,000 | | |
| - | | |
|
Negotiable promissory Notes | |
| 3,540,000 | | |
| | | |
| | | |
|
Total current liabilities | |
| 38,626,846 | | |
| 52,349,246 | | |
| (13,722,400 | ) | |
|
Non-current liabilities | |
| | | |
| | | |
| - | | |
|
Other payables | |
| 4,797,332 | | |
| | | |
| | | |
|
Long term debt | |
| 1,942,757 | | |
| 2,306,057 | | |
| (363,300 | ) | |
|
Bonds payable | |
| 35,468,110 | | |
| 15,803,928 | | |
| 19,664,182 | | |
|
Total non-current liabilities | |
| 42,208,199 | | |
| 18,109,985 | | |
| 24,098,214 | | |
|
Total liabilities | |
| 80,835,045 | | |
| 70,459,231 | | |
| 10,375,814 | | |
|
Stockholders' equity | |
| | | |
| | | |
| - | | |
|
Preferred stock | |
| | | |
| | | |
| - | | |
|
Series A preferred stock | |
| | | |
| | | |
| - | | |
|
Series B convertible preferred stock | |
| - | | |
| 7,000 | | |
| (7,000 | ) | |
|
Series F Non-convertible preferred stock | |
| 19,179 | | |
| 17,163 | | |
| 2,016 | | |
17 |
Common stock | |
| | | |
| | | |
| - | | |
|
Additional paid - in capital | |
| 134,252,019 | | |
| 121,158,996 | | |
| 13,093,023 | | |
|
Retained earnings | |
| 327,848,251 | | |
| 273,261,108 | | |
| 54,587,143 | | |
|
Accumulated other comprehensive income | |
| 3,388,103 | | |
| 6,452,815 | | |
| (3,064,712 | ) | |
|
less: Treasury Stock (cost method) | |
| -1,250,000 | | |
| -1,250,000 | | |
| - | | |
|
Total Sino Agro Food, Inc. and subsidiaries stockholders' equity | |
| 464,257,552 | | |
| 399,647,082 | | |
| 64,610,470 | | |
|
Non - controlling interest | |
| 80,669,085 | | |
| 62,580,576 | | |
| 18,088,509 | | |
|
Total stockholders' equity | |
| 544,926,637 | | |
| 462,227,658 | | |
| 82,698,979 | | |
|
Total liabilities and stockholders' equity | |
| 625,761,682 | | |
| 532,686,889 | | |
| 93,074,793 | | |
|
This Part B discusses and analyzes certain
items (marked with notes) that we believe would assist stakeholders in obtaining a better understanding on the Company’s
results of operations and financial condition:
Note (B) Cash and Cash Equivalents
The change in cash and cash equivalents of
$6,519,733 derived from cash and cash equivalents of $9,551,180 and $3,031,447 as of September 30, 2015 and December 31, 2014,
respectively. In this respect it is a regular situation for cash & cash equivalents to return to its normal pattern after
the irregular pattern incurred due to seasonal impacts at the end of the year.
Note (9) Break down on inventories
| |
Sept. 30. 2015 | | |
Dec 31,2014 | | |
Difference | |
| |
$ | | |
$ | | |
$ | |
Sleepy cods, prawns, eels and marble goble | |
| 1,963,368 | | |
| 3,051,606 | | |
| (1,088,238 | ) |
Bread grass | |
| 1,815,981 | | |
| 2,336,308 | | |
| (520,327 | ) |
Beef cattle | |
| 10,533,023 | | |
| 8,362,763 | | |
| 2,170,260 | |
Organic fertilizer | |
| 9,129,378 | | |
| 7,292,389 | | |
| 1,836,989 | |
Forage for cattle and consumable | |
| 4,372,822 | | |
| 6,547,333 | | |
| (2,174,511 | ) |
Raw materials for bread grass and organic fertilizer | |
| 13,739,322 | | |
| 14,223,407 | | |
| (484,085 | ) |
Beef and mutton | |
| 8,910,315 | | |
| 2,908,886 | | |
| 6,001,429 | |
Immature seeds | |
| 669,706 | | |
| 1,245,302 | | |
| (575,595 | ) |
| |
| | | |
| | | |
| | |
| |
| 51,133,915 | | |
| 45,967,993 | | |
| 5,165,922 | |
Note
(10) Breakdown of Deposits and Prepaid Expenses
Note (10.1)
| |
Sept. 30. 2015 | | |
Dec 31,2014 | | |
Difference | |
Deposits for | |
$ | | |
$ | | |
$ | |
- purchases of equipment | |
| 4,670,256 | | |
| 4,668,784 | | |
| 1,472 | |
- acquisition of land use rights | |
| 3,373,110 | | |
| 3,373,110 | | |
| - | |
- inventories purchases | |
| 15,398,833 | | |
| 14,221,199 | | |
| 1,177,634 | |
- aquaculture contracts | |
| 6,114,179 | | |
| 20,467,603 | | |
| -14,353,424 | |
- building materials | |
| 877,598 | | |
| 877,598 | | |
| - | |
- consulting service providers and others | |
| 20,408,374 | | |
| 5,188,473 | | |
| 15,219,901 | |
- construction in progress | |
| 20,467,357 | | |
| 20,467,357 | | |
| - | |
Prepayments - debts discounts and others | |
| 11,961,367 | | |
| 3,827,401 | | |
| 8,133,966 | |
Shares issued for employee compensation and overseas professional and bond
interest | |
| 1,769,487 | | |
| 2,860,066 | | |
| -1,090,579 | |
| |
| | | |
| | | |
| | |
| |
| 85,040,561 | | |
| 75,951,591 | | |
| 9,088,970 | |
Note (10.1) Breakdown of Deposit for- acquisition
of Land Use Right:
As of September 30, 2015, we have $3,373,110
for a deposit paid for the acquisition of a Land Use Right derived from the following transactions:
| • | $3,182,180 (or RMB20,000,000) was
full payment made on June 6, 2012 for Land Use Right by HSA comprising a block of land
measuring 150 Mu (or 25 acres of prime agriculture land) located at Linli District of
Hunan Province within 10 Km of HSA’s complex. The process of application to register
the said “Land Use Right,” sometimes referred to as a LUR, is in progress,
and, as such, this payment is recorded as Deposit and Prepaid Expenses pending final
authority estimated to be granted on or before September 30, 2016, as the new local ordinances
on agriculture land delayed the processing of our application. Due to the delay in approving
the LUR of the said block of land, HSA has revised and supplemented the contract of this
land by a lease agreement until such time, the said official approval will be granted,
and in the interim, the deposit and prepayment on said land is being treated as a rent-to-own
lease arrangement providing pre-payment toward said land once approval is granted. |
| • | $190,930 (or RMB1, 200,000) was
paid by SJAP as deposit for the acquisition of “Land Use Right” on a block
of land measuring 15 Mu (or 2.475 acres) located at Huangyuan district next to SJAP’s
complex on October 15, 2012. The process of rezoning this piece of land to residential
(at present, agriculture) continues, and once completed will be transferred from the
Local Government (Huangyuan County) to SJAP to build new staff quarters. |
Part of the purchase of equipment
($4.7 million), acquisition of land use right ($3.7 million), construction in progress ($20.5 million) and building materials
($0.88 million) will be converted into fixed assets by year-end 2015, whereas inventory purchases ($15.4 million) will continue
to rise during year 2015 primarily due the increase of import of beef. We cannot treat the shipments at sea as inventory until
they are delivered to our storage facilities.
Note (10.2)
Information of “Temporary deposit and pre-payments for investments in future assets and in future Sino Foreign Joint Venture
companies”:
Project name | |
Estimated total | |
Estimated time | |
Current status | |
Deposit &
prepayments
made as of Sept. | | |
Land Bank | | |
% equivalent | |
| |
Asset value | |
of Acquisition | |
of Project | |
30, 2015 | | |
or Built Up area | | |
to equity paid | |
| |
$ | |
| |
| |
$ | | |
m2 | | |
| |
Trade Center | |
3.5 million | |
own development | |
30% completed | |
| 4,086,941 | | |
| 5,000 | | |
| 31 | % |
| |
| |
| |
| |
| | | |
| | | |
| | |
Seafood Center | |
| |
| |
| |
| 1,032,914 | | |
| | | |
| | |
| |
| |
| |
| |
| | | |
| | | |
| | |
Fish Farm (1) | |
26.22 Million | |
2016 | |
2 out 4 phases completed | |
| 6,000,000 | | |
| 23,100 | | |
| 23 | % |
Prawn Farm (1) | |
20.93 Million | |
2014 | |
in operation | |
| 14,554,578 | | |
| 165,000 | | |
| 56 | % |
Prawn Farm (2) | |
29.18 Million | |
2014 | |
Part operational Part work in progress | |
| 9,877,218 | | |
| 120,000 developed 96,000
m2 undeveloped | | |
| 29 | % |
| |
| |
| |
| |
| | | |
| | | |
| | |
Cattle Farm (2) | |
15.88 Million | |
2014 | |
95% completed | |
| 5,558,057 | | |
| 230,300 | | |
| 35 | % |
| |
| |
| |
| |
| 41,109,708 | | |
| | | |
| | |
During this quarter the Company
hasn’t paid further deposit and prepayment for investments in future assets and in future Sino Foreign Joint Venture companies.
Therefore, there are no changes to report for the quarter.
Note (11): Breakdown of Accounts receivable:
| |
| |
Accounts receivable | | |
0-30 days | | |
31-90 days | | |
91-120 days | | |
over 120 days and
less than 1 year |
|
| |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ |
|
Consulting and Service totaling | |
| |
| | | |
| | | |
| | | |
| | |
|
|
|
| |
CA | |
| 22,914,747 | | |
| 15,470,875 | | |
| - | | |
| 7,443,872 | | |
- |
|
| |
SIAF | |
| 2,873,833 | | |
| - | | |
| - | | |
| - | | |
2,873,833 |
|
| |
MEIJI | |
| 4,360,156 | | |
| | | |
| | | |
| | | |
4,360,156 |
|
Sales of Live Fish, eels and prawns (from Farms) (CA) | |
| |
| 20,515,659 | | |
| 6,215,574 | | |
| 9,342,100 | | |
| - | | |
4,957,985 |
|
Sales of imported seafood (SIAF) | |
| |
| 4,540,355 | | |
| 4,540,355 | | |
| | | |
| | | |
- |
|
Sales of Cattle and Beef Meats (from Enping Farm) (MEIJI) | |
| |
| 6,876,611 | | |
| 5,098,223 | | |
| | | |
| | | |
1,778,388 |
|
Sales of HU Flowers (Fresh & Dried) (JHST) | |
| |
| 14,405,202 | | |
| 2,653,048 | | |
| 4,605,238 | | |
| 4,034,152 | | |
3,112,764 |
|
Sales Fertilizer, Bulk Stock feed and Cattle by (SJAP) | |
| |
| 27,613,507 | | |
| 7,277,172 | | |
| 14,347,934 | | |
| 4,354,782 | | |
1,633,619 |
|
Sales Fertilizer from (HSA) | |
| |
| 10,288,782 | | |
| 1,599,138 | | |
| 3,194,789 | | |
| 1,594,032 | | |
3,900,823 |
|
Sales of Beef (QZH) | |
| |
| 14,868,970 | | |
| 5,941,430 | | |
| 4,136,892 | | |
| 4,059,703 | | |
730,945 |
|
| |
| |
| | | |
| | | |
| | | |
| | |
|
|
|
Total | |
| |
| 129,257,822 | | |
| 48,795,815 | | |
| 35,626,953 | | |
| 21,486,541 | | |
23,348,513 |
|
Information on trading terms and provision
for diminution in value of accounts receivable:
Our accounts receivable aging is less than
12 months old. Receivables from revenue derived from consulting and services billed for work completed are within our normal trading
terms of 180 days and therefore no diminution in value is required, as the credit quality of the receivables is not in doubt.
SIAF’s receivables in consulting and services are mainly provided to WHX, WC1 and Shanghai wholesale centers collectively,
and the extended credit terms for this quarter for more than 120 days to WHX and WC1 is primarily to allow them more time to accommodate
their development of import sales in beef that requires much more working capital; this also applies to the higher credit terms
on CA’s sales of fish to WC1 and Shanghai WC.
Fish Sales: Most farmed fish are sold
to wholesalers at prevailing daily market prices and ageing is within 90 days trading terms with a small portion at 180 days (for
oversized fish, as the sale of oversized fish takes time to sell). We sold $28.6 million in live fish, eels and prawns (live seafood)
to the wholesalers for the three months ended September 30, 2015, accounts receivable of $5.0 million were over 120 days. These
debtors represent credit quality receivables as they are well established wholesalers, profitable and viable businesses with a
good track record and therefore provision of diminution in value is not required as collection is not in doubt.
Sales of fertilizer and bulk livestock
feed: These comprise sales made to regional farmers contracted by us to grow crops and pastures using and purchasing our fertilizer.
We in turn agree to buy their cattle that are fed with our bulk and concentrated cattle feed purchased from us. Under this arrangement,
our accounts receivable are normally carried forward until such time they can be offset against our account payables due to these
contracted farmers(that is, the amount owed for the amount of crops and pastures is ultimately offset against the amount of cattle
that we have purchased from them, respectively). As these debtors are our contract farmers and operate a profitable and viable
business with us and have a good track record we consider their credit quality is good and collection from them is not in doubt,
thus no diminution in value is required.
Information on concentration
of credit risk of account receivables:
We have 4 major long-term customers (referring to Customer A, B,
C and D mentioned in the Financial Statement of this report under Note), who have accounted for 47.74% of our consolidated revenues
for Q3 2015 as shown in the table below:
| |
three months ended Sept. 30, 2015 | |
| |
% of total Revenue | |
|
$ |
| |
Customer's Total Revenue | |
Customer A | |
| 16.51 | % |
|
|
|
| |
| 20,581,216 | |
Customer B | |
| 13.17 | % |
|
|
|
| |
| 16,421,264 | |
Customer C | |
| 9.02 | % |
|
|
|
| |
| 11,246,726 | |
Customer D | |
| 8.83 | % |
|
|
|
| |
| 11,002,637 | |
| |
| | |
|
|
|
| |
| | |
| |
| 47.53 | % |
|
|
|
| |
| 59,251,843 | |
Customer A is one of our main
agents, namely Mr. Xian Zhiming (Zhongshan new prawn farm) who we agreed to extend trading terms between 120 days to 180 days
in the interim until such time as we assist them to procure a project loan of up to $60 million targeting on or before Q1 2016.
Customer B is Cattle Wholesale
represented by Mr. Zhen Runchi who buys our fattened cattle to sell them in the Guangdong and Beijing cattle markets and at the
same time supplies to us with young cattle. During Q3 2015, transactions through Mr. Zhen Runchi generated 13.17 % of our total
consolidated revenue (equivalent to $16,421, 264 out of our total revenue of $124,666,399).
Customer C is Wangjianwah, Guangzhou
Wholesale market (Store 12) represented by Mr. Wang Jian Wah, who distributes our live prawns to other wholesalers at the Guangzhou
Wholesale Fish Markets. During Q3 2015, Mr. Wang generated 9.02% of our total consolidated revenue (equivalent to $11,246,726
out of our total revenue of $124,666,399) derived from the sales of CA’s live prawns under the segment of Fishery.
Customer D is Wholesale center
(1) or WSC1 represented by Mr. Zhou Jian Fai who we sell much of import beef, import seafood and our live farmed seafood to. During
Q3 2015 WSC1 generated revenue (equivalent to $11,002,637 out of our total revenue of $124,666,399) or 8.83% of our total consolidated
revenue
The Company had 4 major customers whose
accounts receivable balance individually represented the following percentages of the Company’s total accounts receivable
during Q3 2015:
| |
Sept. 30.2015 | |
Total | |
| |
% of total Accounts receivables | | |
amount in $ | | |
Accounts receivables | |
Customer A | |
| 13.73 | % | |
| | | |
| 17,746,268 | |
Customer B | |
| 11.97 | % | |
| | | |
| 15,470,875 | |
Customer C | |
| 8.39 | % | |
| | | |
| 10,850,018 | |
Customer D | |
| 7.49 | % | |
| | | |
| 9,677,182 | |
| |
| 41.58 | % | |
| | | |
| 53,744,343 | |
Note (12) Property and equipment,
net of accumulation depreciation
| |
Sept. 30. 2015 | |
| |
$ | |
Plant and machinery | |
| 5,573,254 | |
Structure and lease hold improvements | |
| 62,579,026 | |
Mature seeds and herbage cultivation | |
| 13,769,650 | |
Furniture and equipment | |
| 653,406 | |
Motor vehicles | |
| 765,858 | |
| |
| 83,341,194 | |
| |
| | |
Less: Accumulated depreciation | |
| -7,139,724 | |
Net carrying amount | |
| 76,201,470 | |
Note (13) Construction in progress
| |
Sept. 30. 2015 | |
| |
$ | |
| |
| |
Construction in progress | |
| | |
- Oven room、road
for production of dried flowers | |
| 47,163 | |
- Office, warehouse and organic fertilizer plant in HAS | |
| 31,511,246 | |
- Organic fertilizer and bread grass production plant and office building | |
| 11,111,744 | |
- Rangeland for beef cattle and office building | |
| 47,305,178 | |
- Fish pond | |
| 3,105,243 | |
| |
| | |
| |
| 93,080,574 | |
It is anticipated that apart from the
Rangeland for beef cattle of $47.3 million, most of the other construction work in progress amounting to $45.78 million will be
converted into fixed assets within year end of 2015, as by such time most of said work in progress will be completed to the extent
to be qualified for said conversion.
Note (14) Land Use Rights, net of accumulated
amortization:
Item | |
Owner | |
Location | |
Acres | | |
Date
Acquired | |
Tenure | | |
Expiry
dates | |
Cost $ | | |
Monthly
amortization $ | | |
2015.09.30
Balance $ | | |
Nature of
ownership |
Hunan lot1 | |
HS.A | |
Ouchi Village, Fenghuo Town, Linli County | |
| 31.92 | | |
5/4/2011 | |
| 43 | | |
4/4/2054 | |
| 242,703 | | |
| 470 | | |
| 217,304 | | |
Lease |
Hunan lot2 | |
HS.A | |
Ouchi Village, Fenghuo Town, Linli County | |
| 247.05 | | |
1/7/2011 | |
| 60 | | |
30/6/2071 | |
| 36,666,141 | | |
| 50,925 | | |
| 34,068,956 | | |
Management Right |
Hunan lot3 | |
HS.A | |
Ouchi Village, Fenghuo Town, Linli County | |
| 8.24 | | |
24/5/2011 | |
| 40 | | |
23/5/2051 | |
| 378,489 | | |
| 789 | | |
| 336,698 | | |
Land Use Rights |
Guangdong lot 1 | |
JHST | |
Yane Village, Liangxi Town, Enping City | |
| 8.23 | | |
10/8/2007 | |
| 60 | | |
9/8/2067 | |
| 1,064,501 | | |
| 1,478 | | |
| 919,610 | | |
Management Right |
Guangdong lot 2 | |
JHST | |
Nandu Village of Yane Village, Liangxi Town, Enping City | |
| 27.78 | | |
14/3/2007 | |
| 60 | | |
13/3/2067 | |
| 1,037,273 | | |
| 1,441 | | |
| 888,886 | | |
Management Right |
Guangdong lot 3 | |
JHST | |
Nandu Village of Yane Village, Liangxi Town, Enping City | |
| 60.72 | | |
14/3/2007 | |
| 60 | | |
13/3/2067 | |
| 2,267,363 | | |
| 3,149 | | |
| 1,943,004 | | |
Management Right |
Guangdong lot 4 | |
JHST | |
Nandu Village of Yane Village, Liangxi Town, Enping City | |
| 54.68 | | |
12/9/2007 | |
| 60 | | |
11/9/2067 | |
| 2,041,949 | | |
| 2,836 | | |
| 1,766,853 | | |
Management Right |
Guangdong lot 5 | |
JHST | |
Jishilu Village of Dawan Village,Juntang Town, Enping City | |
| 28.82 | | |
12/9/2007 | |
| 60 | | |
11/9/2067 | |
| 960,416 | | |
| 1,334 | | |
| 831,027 | | |
Management Right |
Guangdong lot 6 | |
JHST | |
Liankai Village of Niujiang Town, Enping City | |
| 31.84 | | |
1/1/2008 | |
| 60 | | |
31/12/2068 | |
| 821,445 | | |
| 1,141 | | |
| 715,341 | | |
Management Right |
Guangdong lot 7 | |
JHST | |
Nandu Village of Yane Village, Liangxi Town, Enping City | |
| 41.18 | | |
1/1/2011 | |
| 26 | | |
31/12/2037 | |
| 5,716,764 | | |
| 18,323 | | |
| 4,672,355 | | |
Management Right |
Guangdong lot 8 | |
JHST | |
Shangchong Village of Yane Village, Liangxi Town, Enping City | |
| 11.28 | | |
1/1/2011 | |
| 26 | | |
31/12/2037 | |
| 1,566,393 | | |
| 5,020 | | |
| 1,280,225 | | |
Management Right |
Guangdong lot 9 | |
MEIJI | |
Xiaoban Village of Yane Village, Liangxi Town, Enping City | |
| 41.18 | | |
1/4/2011 | |
| 20 | | |
31/3/2031 | |
| 5,082,136 | | |
| 21,176 | | |
| 3,938,656 | | |
Management Right |
Qinghai lot 1 | |
SJAP | |
No. 498, Bei Da Road, Chengguan Town of Huangyuan County,Xining
City, Qinghai Province | |
| 21.09 | | |
1/11/2011 | |
| 40 | | |
30/10/2051 | |
| 527,234 | | |
| 1,098 | | |
| 475,609 | | |
Land Use Right & Building ownership |
Guangdong lot 10 | |
JHST | |
Niu Jiang Town, Liangxi Town, Enping City | |
| 6.27 | | |
4/3/2013 | |
| 10 | | |
3/3/2023 | |
| 489,904 | | |
| 4,083 | | |
| 363,345 | | |
Management Right |
Guangdong lot 11 | |
CA | |
Da San Dui Wei ,You Nan Village, Conghua District of Guangzhou
City | |
| 33.28 | | |
28/10/2014 | |
| 30 | | |
27/10/2044 | |
| 4,453,665 | | |
| 12,371 | | |
| 4,305,210 | | |
Management Right |
| |
JHST | |
Land improvement cost incurred | |
| | | |
1/12/2013 | |
| | | |
| |
| 3,914,275 | | |
| 6,155 | | |
| 3,778,876 | | |
|
Exchange difference | |
| |
| |
| | | |
| |
| | | |
| |
| -84,792 | | |
| | | |
| -536,576 | | |
|
| |
| |
| |
| | | |
| |
| | | |
| |
| | | |
| | | |
| | | |
|
| |
| |
| |
| 653.56 | | |
| |
| | | |
| |
| 67,145,859 | | |
| 131,789 | | |
| 59,965,379 | | |
|
Note (15) Other Receivables
| |
Sept. 30.2015 | | |
Note |
| |
$ | | |
|
Advanced to employees | |
| 635,214 | | |
15.A |
Advanced to suppliers | |
| 7,362,410 | | |
15.B |
Advanced to customers | |
| 28,736,568 | | |
|
Advanced to sub-contractors | |
| 28,000,000 | | |
|
Advanced to convertible bond holder | |
| 1,899,350 | | |
|
| |
| | | |
|
| |
| 66,633,542 | | |
|
Note 15 A & B: Breakdown of
Advances to Suppliers at SJAP’s operations:
At SJAP it is a common practice to make
cash advances to our cooperative growers (presently standing at 100 members) who are our suppliers, to carry them through respective
growing periods (for cropping or pasturing or cattle growing purposes) before final harvests of produce or sale of their cattle.
On average, it works out to less than $6,352 per member that in the management’s opinion is a normal season to season process
deemed fair and equitable. In this respect, as the average increases it means that the typical cooperative farmer is increasing
his productivity (whether in the growth of crops or cattle), and in simple terms, it represents good progress indicating that
SJAP’s revenue is also increasing.
The sub-contractors and suppliers of the
Zhongshan Projects are reputable entities that in management’s opinion are employing their funds in and are working on the
Zhongshan Project, such that the project will progress smoothly.
As of September 30, 2015, a convertible
note holder (ECAB) owes the Company $1.9 million, which the Company expects to be paid on or before year end 2015.
Note (16) Current Liabilities:
| |
Sept. 30, 2015 | | |
Note |
Current liabilities | |
| | | |
|
Accounts payable and accruals | |
| 20,461,324 | | |
16.A |
Billings in excess of cost and estimated earnings on uncompleted contracts | |
| 3,874,480 | | |
|
Dividend Payables | |
| - | | |
16 B |
Due to a director | |
| 692,906 | | |
|
Other payables | |
| 8,059,260 | | |
16.C |
Negotiable promissionary notes | |
| 3,540,000 | | |
|
Short term bank loan | |
| 273,876 | | |
|
Convertible Bond | |
| 1,725,000 | | |
16.D |
| |
| 38,626,846 | | |
|
Note
16A: Accounts payables and accrued expenses clarification:
Our current trading environment
is limited to a number of suppliers who offer prolonged credit terms, which means that most purchases are paid for in cash
or short credit terms (7 to 10 days); this grants us better bargaining ability to obtain cash discounts resulting in the low trade
account payables balance of $20,461,324, about 16% of total sales of $125 million for the reasons stated below:
Our main Account Payables during Q3 2015
were generated from the following activities:
|
1. |
We supply the following cost elements: our own staff, engineering and technology that enhanced
our profit margins and reduced the overall cost of sales. |
|
|
|
|
2. |
Implementation, supervision, training and associated management work and most of the building
sub-contractors worked at fixed costs; consequently, profit margins are contained providing ample opportunity for expanded
credit terms. For contracts related to the construction of farms we use plants, equipment, parts and components that were
specially manufactured and made as per our own design and engineering by local manufacturers and suppliers (who in the past
carried a high amount of initial development costs and inventories for us based on the understanding that we would pay for
the deliveries of goods sold within shorter trading terms such that they
could afford to carry such costs). However, in ZSNPP said development cost and cost of inventories are much too high
for said manufacturers and suppliers to carry, such that we made various advances to said manufacturers and suppliers during
year 2015 especially so in Q3 2015 to ensure there are no disruptions in supply of plants and equivalent and related parts
and components needed to complete the construction and installation of the APM farms in said project to ensure there are no
disruption of supply of plants and equivalent and related parts and components needed to complete the construction and installation
of the APM farms in said project. |
|
3. |
Cost of sales of live seafood was averaged at 81%for Q3 2015, (the bulk of the cost came from
the supplies of baby fingerlings and the live-bait as the main fish feed), and customary trading terms of Chinese suppliers
is on a cash on delivery basis, and suppliers who provide short credit terms presently, however, in 2015 our main supplier
in these items are from PF2 such that we are now enjoying much better credit terms in comparison to other years. |
|
|
|
|
4. |
Cattle sales at SJAP’s own cattle stations and from its cooperative farmers started
in 2011 at lower profit margins compared to the sales of fish and the cost of sales was averaged at 93% for Q3 2015; it is
also customary in China to pay for the young live cattle by cash on delivery. The Enping cattle farm started to buy young
cattle in 2011 and started sales of mature cattle in 2012; cost of sales is averaged at 93% for Q3 2015. Most of the young
cattle supplies were from small primary producers (local small farmers) who did not have significant financial resources;
as such we paid for these supplies of young cattle in cash on delivery or short credit term after delivery. |
|
|
|
|
5. |
In SJAP, the bulk of our fertilizers were sold to farmers who are growing pastures and crops
for us such that their fertilizer sales were kept as book entries that would be offset with the pastures and crops that we
would buy back from them. In the case of HSA, which is a developing stage company in fertilizer manufacturing, prolonged credit
term facilities have not been established for its purchase of raw materials. |
|
|
|
|
6. |
Bulk livestock feed are produced by regional cooperative growers under contract to us and
they use our supply of fertilizer and seeds that represented the main cost components enhancing cost of sales, which average
is at 46% for Q3 2015. Again, sale of fertilizer is held on credit against crops and pasture grass purchased from them, as
well as bulk livestock feed sold to them for cattle rearing, and reconciled once cattle are purchased from them. |
Note (16 B): Series F Non-convertible
preferred stock
On August 22, 2012, the Company’s
Board of Directors declared that the Company’s stockholders were entitled to receive one share of restricted Series F Non-convertible
Preferred Stock for every 100 shares of Common Stock owned by the stockholders as of September 28, 2012, with lesser or greater
amounts being rounded up to the nearest 100 shares of Common Stock for purpose of the computing the dividend. The holders of record
of shares of Series F Non - Convertible Preferred Stock shall be entitled to a coupon payment directly from the Company at the
redemption rate of $3.40 per share and be payable on May 30, 2014. During Q1 2013, our transfer agent recorded 924,180 shares
of Series F Non-Convertible preferred stock on the account. However,
the Company did not issue physical shares and only issued coupons to notify respective shareholders on that date. These 924,180
F shares were based on the 91,931,287 shares of Common Stock outstanding as of September 28, 2012, calculated at one share of
Series F Non-Convertible preferred stock for every 100 shares of Common Stock with decimal number of shares being rounded up to
one. All F shares have been cancelled as of September 30, 2015 and all requisite payments have been made to the former holders
of such shares.
Note (16C): Analysis
of Other Payables:
As of September 30 2015, other payables
totaling $18,284,056 was composed of the following:
During Q3 2015, the Company issued promissory
notes amounting to $0 to unrelated third parties for advances granted by third parties collectively to the Company (and/or to
its subsidiaries) that are personally guaranteed by a director, repayable within two (2) years at interest free term. Promissory
notes could be repaid either by cash or in shares of the Company or a combination thereof. If shares settled debt amounts, the
respective share conversion rates will be determined by both parties at the time of settlement. During Q3 2015 we redeemed $0
of promissory notes for advances granted by third parties in fiscal year 2012 as well as in early months of 2014 by the issuance
of shares leaving a balance of $3,100,000 of promissory notes still due and outstanding as of September 30, 2015.
A grant of $2,327,464 was received from
the Chinese government by SJAP for the development of a certain project; however if SJAP will not be able to complete the project,
it will have to repay the grant to the Government. As of September 30 2015, as work is in progress on the said project but it
is not yet completed, the grant is recorded as other payables.
For the three months ended March 31, 2015,
other advances had been provided by other unrelated third parties collectively to our subsidiaries with no fixed term of repayment
and interest free without promissory notes or agreements but instead, verbal understandings. These sums amount to $8,074,226 unpaid
and outstanding as of March 31, 2015. (Note. 10.3): Also there is the security (in common stock) provided for the two loans amounting
to $4,797,332 titled as “Due to Security” recorded in Other Payable of Q1 2015.
Note (16 D): Convertible Note
On August 29, 2015 the Company executed
a Convertible Note with Euro China AB (“ECAB”) Stockholm Sweden, whereby ECAB would lend to the Company US$25,000,000
Million based on following principal terms and conditions:
| (i) | Issuing Debt amount of US$33,000,000
with a 25% discount netting loan proceed to the Company US$25,000,000 |
| (ii) | Disbursement of loan is based
on 4 tranches: each tranche of US$5 million on or before on or before August 14th
2014, August 29th, 2014, and November 27th 2014 with the
last tranche of US$18 million on or before February 28th 2015 whereas ECAB
can deduct the 25% discount on the principal issuing debt amount upon each tranche of
disbursements. |
| (iv) | Interest Rate is at 8%/annual |
| (v) | Conversion rate is at US$1/share
applicable to both principal loan amount and accrued interest at option of ECAB. |
The Convertible Note was filed with SEC
on September 4, 2014.
As of September 30, 2015, the Company
has received $25 million (net proceeds) from the Convertible Note.
Part C. Nine Months Ended September
30, 2014 Compared to Nine Months Ended September 30, 2014 (presented in summarized Charts below):
Revenue:
Revenues increased by $35,816, 226 or
12% to $330,996,577 for the nine months ended September 30, 2014 from $295,180,352 for the nine months ended September 30, 2014.
The increase was primarily due to the increase of revenue generated from our fishery, plantation, beef, organic fertilizer, and
cattle farm and corporate and others operations and the maturity of on-going divisional businesses improving their revenues.
The following chart illustrates the changes
by category from the nine months ended September 30, 2014 to September 30, 2015
Revenue | |
| | |
| | |
| |
| |
2015 | | |
2014 | | |
| |
Category | |
Q1- Q3 | | |
Q1- Q3 | | |
Difference | |
| |
$ | | |
$ | | |
$ | |
Fishery | |
| 138,547,396 | | |
| 136,968,336 | | |
| 1,579,060 | |
| |
| | | |
| | | |
| | |
Plantation | |
| 11,568,406 | | |
| 9,085,607 | | |
| 2,482,799 | |
| |
| | | |
| | | |
| | |
Beef | |
| 92,037,375 | | |
| 60,053,322 | | |
| 31,984,053 | |
| |
| | | |
| | | |
| | |
Organic fertilizer | |
| 30,125,130 | | |
| 35,406,530 | | |
| (5,281,400 | ) |
| |
| | | |
| | | |
| | |
Cattle farm | |
| 27,424,589 | | |
| 21,483,496 | | |
| 5,941,093 | |
| |
| | | |
| | | |
| | |
Corporate and others | |
| 31,293,682 | | |
| 32,183,061 | | |
| (889,379 | ) |
| |
| | | |
| | | |
| | |
Total | |
| 330,996,578 | | |
| 295,180,352 | | |
| 35,816,226 | |
Cost
Cost increased by $41,404,365 or 21% to
$241,231,022 for the nine months ended September 30, 2015 from $199,826,657 for the nine months ended September 30, 2014. The
increase was primarily due to the increase from our fishery, plantation, beef, organic fertilizer, cattle farm and corporate and
others operations for nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014.
The following chart illustrates the changes
by category from the nine months ended September 30, 2015 to September 30, 2014.
Cost | |
| | |
| | |
| |
| |
2015 | | |
2014 | | |
| |
Category | |
Q1- Q3 | | |
Q1- Q3 | | |
Difference | |
| |
$ | | |
$ | | |
$ | |
Fishery | |
| 96,967,811 | | |
| 87,742,912 | | |
| 9,224,899 | |
| |
| | | |
| | | |
| | |
Plantation | |
| 3,592,659 | | |
| 2,423,811 | | |
| 1,168,848 | |
| |
| | | |
| | | |
| | |
Beef | |
| 72,105,028 | | |
| 43,598,633 | | |
| 28,506,395 | |
| |
| | | |
| | | |
| | |
Organic fertilizer | |
| 17,124,547 | | |
| 20,005,390 | | |
| (2,880,843 | ) |
| |
| | | |
| | | |
| | |
Cattle farm | |
| 26,121,572 | | |
| 20,418,345 | | |
| 5,703,227 | |
| |
| | | |
| | | |
| | |
Corporate and others | |
| 25,319,405 | | |
| 25,637,566 | | |
| (318,161 | ) |
| |
| | | |
| | | |
| | |
Total | |
| 241,231,022 | | |
| 199,826,657 | | |
| 41,404,365 | |
Gross Profit
Gross profit decreased by $5,588,140 or
6% to $89,765,555 for the nine months ended September 30, 2015 from $95,353,695 for the nine months ended September 30, 2014.The
increase was primarily due to the corresponding increase in operation revenues. The increase was primarily due to the corresponding
increase in scale of operation of revenues from plantation, beef, organic fertilizer, cattle farm, corporate and others.
The following chart illustrates the changes
by category from the nine months ended September 30, 2015 to September 30, 2014.
The gross profit by category is as follows:
Gross profit | |
| | |
| | |
| |
| |
2015 | | |
2014 | | |
| |
Category | |
Q1- Q3 | | |
Q1- Q3 | | |
Difference | |
| |
$ | | |
$ | | |
$ | |
Fishery | |
| 41,579,585 | | |
| 49,225,424 | | |
| -7,645,839 | |
| |
| | | |
| | | |
| | |
Plantation | |
| 7,975,747 | | |
| 6,661,796 | | |
| 1,313,951 | |
| |
| | | |
| | | |
| | |
Beef | |
| 19,932,346 | | |
| 16,454,689 | | |
| 3,477,657 | |
| |
| | | |
| | | |
| | |
Organic fertilizer | |
| 13,000,583 | | |
| 15,401,140 | | |
| -2,400,557 | |
| |
| | | |
| | | |
| | |
Cattle farm | |
| 1,303,017 | | |
| 1,065,151 | | |
| 237,866 | |
| |
| | | |
| | | |
| | |
Corporate and others | |
| 5,974,277 | | |
| 6,545,495 | | |
| -571,218 | |
| |
| | | |
| | | |
| | |
Total | |
| 89,765,555 | | |
| 95,353,695 | | |
| -5,588,140 | |
General and Administrative Expenses
and Interest Expenses
General and administrative expenses and
interest expenses (including depreciation and amortization) increased by $7,320,809 or 73% to $17,348,729 for the nine months
ended September 30, 2015 from $10,027,920 for the nine months ended September 30, 2014. The increase was primarily due to
(i) an increase in Office and corporate expenses paid for overseas professional services of $5,194,951 for the nine months ended
September 30, 2015 from $1,819,910 for the nine months ended September 30, 2014 and (ii) an increase in others and miscellaneous
amounting to $2,138,726 for the nine months ended September 30, 2015 as compared to $794,347 for the nine months ended September
30, 2014.
Category | |
2015 Q1-Q3 | | |
2014 Q1-Q3 | | |
Difference | |
| |
$ | | |
$ | | |
$ | |
Office and corporate expenses | |
| 7,154,024 | | |
| 4,915,961 | | |
| 2,238,063 | |
| |
| | | |
| | | |
| | |
Wages and salaries | |
| 1,701,679 | | |
| 1,459,702 | | |
| 241,977 | |
| |
| | | |
| | | |
| | |
Traveling and related lodging | |
| 115,087 | | |
| 111,991 | | |
| 3,096 | |
| |
| | | |
| | | |
| | |
Motor vehicles expenses and local transportation | |
| 139,028 | | |
| 140,986 | | |
| (1,958 | ) |
| |
| | | |
| | | |
| | |
Entertainments and meals | |
| 141,390 | | |
| 107,710 | | |
| 33,680 | |
| |
| | | |
| | | |
| | |
Others and miscellaneous | |
| 2,138,726 | | |
| 794,347 | | |
| 1,344,379 | |
| |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 2,520,101 | | |
| 2,014,066 | | |
| 506,035 | |
| |
| | | |
| | | |
| | |
Sub-total | |
| 13,910,035 | | |
| 9,544,763 | | |
| 4,365,272 | |
| |
| | | |
| | | |
| | |
Interest expenses | |
| 3,438,694 | | |
| 483,157 | | |
| 2,955,537 | |
| |
| | | |
| | | |
| | |
Total | |
| 17,348,729 | | |
| 10,027,920 | | |
| 7,320,809 | |
Depreciation and Amortization
Depreciation and amortization increase
by $271,132 or 8% to $3,658,446 for the nine months ended September 30, 2015 from $3,387,314 for the nine months ended September
30, 2014. The increase was primarily due to the increase of depreciation by$376,973 to $2,145,020 for the nine months ended September
30, 2015 from depreciation of $1,768,047for the nine months ended September 30, 2014, and the decrease of amortization by $105,841
to $1,513,426 for nine months ended September 30, 2015 from amortization of $1,619, 267 for nine months ended September 30, 2014.
In this respect, total depreciation and
amortization amounted to$3,658,446 for the nine months ended September 30, 2015, out of which amount $2,520,101was reported under
General and administration expenses and $1,138,345 was reported under cost of goods sold; whereas total depreciation and amortization
was at to $3,387,314 for the nine months ended September 30, 2014 and out of which amount $2,014,066 was reported under General
and Administration expenses and $1,373, 248 was reported under cost of goods sold.
PartD.
MD&A on records of historical performances reflecting the Company’s “Free Cash Flow “derivation: (Inclusive
the Group and subsidiaries in segments containing Non-GAAP derivation)
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 88 | | |
| 209 | | |
| 323 | | |
| 264 | | |
| 884 | |
Consulting income | |
| 51 | | |
| 52 | | |
| 81 | | |
| 67 | | |
| 251 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 51 | | |
| 139 | | |
| 231 | | |
| 201 | | |
| 622 | |
Cost of service | |
| 18 | | |
| 21 | | |
| 44 | | |
| 40 | | |
| 123 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 66 | | |
| 98 | | |
| 119 | | |
| 81 | | |
| 364 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| 2 | | |
| 3 | | |
| 5 | | |
| 4 | | |
| 13 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| 57 | | |
| 74 | | |
| 92 | | |
| 55 | | |
| 278 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| 6 | | |
| 20 | | |
| 22 | | |
| 19 | | |
| 66 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 63 | | |
| 94 | | |
| 114 | | |
| 74 | | |
| 345 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 242 | | |
| 368 | | |
| 540 | | |
| 626 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 134 | | |
| 147 | | |
| 282 | | |
| 343 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| 26 | | |
| 36 | | |
| 70 | | |
| 81 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| 23 | | |
| 31 | | |
| 52 | | |
| 43 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 219 | | |
| 337 | | |
| 488 | | |
| 583 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 216 | | |
| 332 | | |
| 462 | | |
| 545 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 29 | % | |
| 47 | % | |
| 55 | % | |
| 48 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| 34 | | |
| 71 | | |
| 35 | | |
| 36 | | |
| 176 | |
1. property and equipment | |
| 18 | | |
| 22 | | |
| 21 | | |
| 4 | | |
| 65 | |
2. construction in progress | |
| 13 | | |
| 41 | | |
| 10 | | |
| 32 | | |
| 96 | |
3. land use right | |
| 3 | | |
| 4 | | |
| 4 | | |
| - | | |
| 11 | |
4. proprietary technologies | |
| - | | |
| 4 | | |
| - | | |
| - | | |
| 4 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 111 | | |
| 116 | | |
| 230 | | |
| 300 | | |
| | |
1.cash and cash equivalents | |
| 8 | | |
| 1 | | |
| 3 | | |
| 10 | | |
| | |
2.inventories | |
| 17 | | |
| 8 | | |
| 46 | | |
| 51 | | |
| | |
3.deposits and prepaid expenses | |
| 47 | | |
| 51 | | |
| 76 | | |
| 85 | | |
| | |
4. account receivable | |
| 53 | | |
| 82 | | |
| 105 | | |
| 129 | | |
| | |
5.other receivables | |
| 9 | | |
| 5 | | |
| 52 | | |
| 68 | | |
| | |
6. account payables and accrued expenses | |
| -6 | | |
| -11 | | |
| -22 | | |
| -20 | | |
| | |
7. short term loan | |
| -3 | | |
| -4 | | |
| -4 | | |
| - | | |
| | |
8. other payables | |
| -14 | | |
| -16 | | |
| -26 | | |
| -23 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 53 | | |
| 5 | | |
| 114 | | |
| 70 | | |
| 242 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| 87 | | |
| 76 | | |
| 149 | | |
| 106 | | |
| 418 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| -21 | | |
| 22 | | |
| -30 | | |
| -24 | | |
| -54 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| -2 | | |
| -5 | | |
| -20 | | |
| -39 | | |
| | |
E.2 on APWA (holding company of SJAP).
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 21 | | |
| 62 | | |
| 102 | | |
| 108 | | |
| 293 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 15 | | |
| 38 | | |
| 68 | | |
| 81 | | |
| 202 | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
EBITDA | |
| 7 | | |
| 27 | | |
| 33 | | |
| 26.55 | | |
| 94 | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
Depreciation & amortization | |
| - | | |
| - | | |
| 1 | | |
| 0.72 | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
Net income attributable to SIAF & subsidiaries | |
| 3 | | |
| 12 | | |
| 13 | | |
| 5.00 | | |
| 33 | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
Non - controlling interest | |
| 4 | | |
| 15 | | |
| 18 | | |
| 14.90 | | |
| 52 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 7 | | |
| 27 | | |
| 31 | | |
| 25.71 | | |
| 85 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 43 | | |
| 88 | | |
| 134 | | |
| 195 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 24 | | |
| 35 | | |
| 83 | | |
| 94 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| 11 | | |
| 15 | | |
| 28 | | |
| 22 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| 6 | | |
| 14 | | |
| 16 | | |
| 10 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 37 | | |
| 74 | | |
| 118 | | |
| 185 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 32 | | |
| 73 | | |
| 106 | | |
| 173 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 19 | % | |
| 47 | % | |
| 55 | % | |
| 45 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| 14 | | |
| 38 | | |
| 20 | | |
| 23 | | |
| 95 | |
1. property and equipment | |
| 9 | | |
| 12 | | |
| 6 | | |
| 4 | | |
| 31 | |
2. construction in progress | |
| 4 | | |
| 24 | | |
| 14 | | |
| 19 | | |
| 61 | |
3. land use right | |
| 1 | | |
| - | | |
| - | | |
| | | |
| 1 | |
4. proprietary technologies | |
| - | | |
| 2 | | |
| - | | |
| | | |
| 2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 18 | | |
| 21 | | |
| 67 | | |
| 83 | | |
| | |
1.cash and cash equivalents | |
| 1 | | |
| 0.38 | | |
| 1 | | |
| 1 | | |
| | |
2.inventories | |
| 10 | | |
| 4 | | |
| 27 | | |
| 32 | | |
| | |
3.deposits and prepaid expenses | |
| 6 | | |
| 13 | | |
| 19 | | |
| 16 | | |
| | |
4. account receivable | |
| 7 | | |
| 16 | | |
| 34 | | |
| 43 | | |
| | |
5.other receivables | |
| - | | |
| 2 | | |
| 2 | | |
| 2 | | |
| | |
6. account payables and accrued expenses | |
| -2 | | |
| -5 | | |
| -4 | | |
| -5 | | |
| | |
7. short term loan | |
| -3 | | |
| -4 | | |
| -4 | | |
| - | | |
| | |
8. other payables | |
| -1 | | |
| -5 | | |
| -8 | | |
| -5 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 6 | | |
| 3 | | |
| 46 | | |
| 16 | | |
| 71 | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
Total capex and increase of wc | |
| 20 | | |
| 41 | | |
| 66 | | |
| 40 | | |
| 167 | |
| |
| | | |
| | | |
| | | |
| | | |
| - | |
Free Cash Flow (FCF) | |
| -13 | | |
| -14 | | |
| -33 | | |
| -13 | | |
| -73 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| -2 | | |
| -5 | | |
| -7 | | |
| -2 | | |
| | |
E.3.SIAF’s Corporate Operational division
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 2 | | |
| 22 | | |
| 51 | | |
| 28 | | |
| 103 | |
Consulting income | |
| 3 | | |
| 9 | | |
| 5 | | |
| 4 | | |
| 21 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 1 | | |
| 19 | | |
| 45 | | |
| 24 | | |
| 89 | |
Cost of service | |
| 1 | | |
| 3 | | |
| 5 | | |
| 1 | | |
| 10 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 2 | | |
| 6 | | |
| 6 | | |
| -0.70 | | |
| 14 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| - | | |
| - | | |
| 0 | | |
| 0.10 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| 2 | | |
| 6 | | |
| 6 | | |
| -4.00 | | |
| 10 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 2 | | |
| 6 | | |
| 6 | | |
| -4.00 | | |
| 10 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 10 | | |
| 19 | | |
| 50 | | |
| 85 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 9 | | |
| 10 | | |
| 39 | | |
| 78 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| 7 | | |
| 8 | | |
| 13 | | |
| 41 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| 9 | | |
| 6 | | |
| 10 | | |
| 13 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 1 | | |
| 13 | | |
| 40 | | |
| 72 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 3 | | |
| 11 | | |
| 29 | | |
| 44 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 286 | % | |
| 73 | % | |
| 35 | % | |
| 11 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| - | | |
| 2 | | |
| 1 | | |
| - | | |
| 3 | |
1. property and equipment | |
| - | | |
| - | | |
| - | | |
| | | |
| | |
2. construction in progress | |
| - | | |
| - | | |
| 1 | | |
| | | |
| 1 | |
3. land use right | |
| - | | |
| - | | |
| - | | |
| | | |
| | |
4. proprietary technologies | |
| - | | |
| 2 | | |
| - | | |
| | | |
| 2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| - | | |
| 4 | | |
| 29 | | |
| 66 | | |
| | |
1.cash and cash equivalents | |
| | | |
| | | |
| 2 | | |
| 1 | | |
| | |
2.inventories | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
3.deposits and prepaid expenses | |
| 5 | | |
| 2 | | |
| 2 | | |
| 27 | | |
| | |
4. account receivable | |
| 2 | | |
| 8 | | |
| 9 | | |
| 7 | | |
| | |
5.other receivables | |
| 2 | | |
| 0 | | |
| 26 | | |
| 43 | | |
| | |
6. account payables and accrued expenses | |
| - | | |
| -1 | | |
| -3 | | |
| - | | |
| | |
7. short term loan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
8. other payables | |
| -9 | | |
| -5 | | |
| -7 | | |
| -13 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| -18 | | |
| 4 | | |
| 25 | | |
| 37 | | |
| 48 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| -18 | | |
| 6 | | |
| 26 | | |
| 37 | | |
| 51 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| 20 | | |
| 0 | | |
| -20 | | |
| -37 | | |
| -37 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| - | | |
| - | | |
| -13 | | |
| -37 | | |
| | |
E.4. CA (Fishery Development Division)
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
In rounded figures of $ million | | |
| | |
| | |
| |
Sale of goods | |
| 28 | | |
| 47 | | |
| 54 | | |
| 41 | | |
| 170 | |
Consulting income | |
| 37 | | |
| 36 | | |
| 76 | | |
| 63 | | |
| 212 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 14 | | |
| 33 | | |
| 31 | | |
| 30 | | |
| 108 | |
Cost of service | |
| 14 | | |
| 13 | | |
| 39 | | |
| 39 | | |
| 105 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 35 | | |
| 37 | | |
| 55 | | |
| 36 | | |
| 163 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| - | | |
| - | | |
| - | | |
| 0.10 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| 35 | | |
| 37 | | |
| 55 | | |
| 36 | | |
| 163 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| - | | |
| - | | |
| - | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 35 | | |
| 37 | | |
| 55 | | |
| 36 | | |
| 163 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 60 | | |
| 81 | | |
| 149 | | |
| 107 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 53 | | |
| 54 | | |
| 79 | | |
| 84 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| 4 | | |
| 7 | | |
| 20 | | |
| 7 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| 3 | | |
| 4 | | |
| 20 | | |
| 9 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 57 | | |
| 77 | | |
| 129 | | |
| 98 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 56 | | |
| 74 | | |
| 129 | | |
| 100 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 61 | % | |
| 97 | % | |
| 98 | % | |
| 130 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| - | | |
| 3 | | |
| 4 | | |
| - | | |
| 7 | |
1. property and equipment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
2. construction in progress | |
| - | | |
| 3 | | |
| - | | |
| - | | |
| 3 | |
3. land use right | |
| - | | |
| - | | |
| 4 | | |
| - | | |
| 4 | |
4. proprietary technologies | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 50 | | |
| 50 | | |
| 59 | | |
| 76 | | |
| | |
1.cash and cash equivalents | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
2.inventories | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
3.deposits and prepaid expenses | |
| 19 | | |
| 16 | | |
| 32 | | |
| 23 | | |
| | |
4. account receivable | |
| 31 | | |
| 36 | | |
| 28 | | |
| 43 | | |
| | |
5.other receivables | |
| 3 | | |
| 2 | | |
| 19 | | |
| 19 | | |
| | |
6. account payables and accrued expenses | |
| - | | |
| - | | |
| -11 | | |
| -5 | | |
| | |
7. short term loan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
8. other payables | |
| -3 | | |
| -4 | | |
| -9 | | |
| -4 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 19 | | |
| - | | |
| 9 | | |
| 17 | | |
| 45 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| 19 | | |
| 3 | | |
| 13 | | |
| 17 | | |
| 52 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| 16 | | |
| 34 | | |
| 42 | | |
| 19 | | |
| 112 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
E.5.Triway (the holding company of Fish Farm (1))
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 16 | | |
| 25 | | |
| 52 | | |
| 34 | | |
| 127 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 10 | | |
| 19 | | |
| 41 | | |
| 28 | | |
| 98 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 5 | | |
| 6 | | |
| 10 | | |
| 5.68 | | |
| 27 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| 0 | | |
| 0 | | |
| 1 | | |
| 0.52 | | |
| 2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| 4 | | |
| 5 | | |
| 8 | | |
| 1.74 | | |
| 19 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| 1 | | |
| 1 | | |
| 2 | | |
| 1.37 | | |
| 5 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 5 | | |
| 6 | | |
| 10 | | |
| 5.16 | | |
| 24 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 12 | | |
| 19 | | |
| 31 | | |
| 36 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 8 | | |
| 6 | | |
| - | | |
| 8 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| - | | |
| - | | |
| - | | |
| 3 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| 1 | | |
| - | | |
| - | | |
| 3 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 11 | | |
| 19 | | |
| 31 | | |
| 33 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 12 | | |
| 19 | | |
| 31 | | |
| 33 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 45 | % | |
| 58 | % | |
| 67 | % | |
| 63 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| 6 | | |
| 2 | | |
| 1 | | |
| 2 | | |
| 11 | |
1. property and equipment | |
| 6 | | |
| - | | |
| 2 | | |
| | | |
| 8 | |
2. construction in progress | |
| - | | |
| 2 | | |
| -1 | | |
| 2 | | |
| 3 | |
3. land use right | |
| - | | |
| - | | |
| - | | |
| | | |
| - | |
4. proprietary technologies | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 7 | | |
| 6 | | |
| 10 | | |
| 5 | | |
| | |
1.cash and cash equivalents | |
| 2 | | |
| - | | |
| - | | |
| 1 | | |
| | |
2.inventories | |
| 5 | | |
| 2 | | |
| 3 | | |
| 2 | | |
| | |
3.deposits and prepaid expenses | |
| - | | |
| 4 | | |
| 4 | | |
| 2 | | |
| | |
4. account receivable | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
5.other receivables | |
| 1 | | |
| - | | |
| 3 | | |
| 3 | | |
| | |
6. account payables and accrued expenses | |
| | | |
| - | | |
| - | | |
| -3 | | |
| | |
7. short term loan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
8. other payables | |
| -1 | | |
| - | | |
| - | | |
| - | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 7 | | |
| -1 | | |
| 4 | | |
| -5 | | |
| 5 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| 13 | | |
| 1 | | |
| 5 | | |
| -3 | | |
| 16 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| -8 | | |
| 5 | | |
| 5 | | |
| 9 | | |
| 11 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| - | | |
| - | | |
| - | | |
| | | |
| | |
E.6. MEIJI (Cattle Farm Development and holding company
of CF(1))
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 6 | | |
| 18 | | |
| 33 | | |
| 27 | | |
| 84 | |
Consulting income | |
| 11 | | |
| 7 | | |
| - | | |
| | | |
| 18 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 4 | | |
| 13 | | |
| 31 | | |
| 26 | | |
| 74 | |
Cost of service | |
| 3 | | |
| 5 | | |
| - | | |
| | | |
| 8 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 9 | | |
| 5 | | |
| 2 | | |
| 2.60 | | |
| 19 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0.44 | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| 9 | | |
| 5 | | |
| 1 | | |
| 1.88 | | |
| 17 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| - | | |
| - | | |
| - | | |
| 0.28 | | |
| 0 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 9 | | |
| 5 | | |
| 1 | | |
| 2.16 | | |
| 17 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 20 | | |
| 33 | | |
| 38 | | |
| 36 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 8 | | |
| 11 | | |
| 17 | | |
| 20 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| - | | |
| 2 | | |
| 5 | | |
| 2 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| - | | |
| 1 | | |
| - | | |
| 4 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 20 | | |
| 32 | | |
| 38 | | |
| 32 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 20 | | |
| 31 | | |
| 33 | | |
| 34 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 45 | % | |
| 46 | % | |
| 39 | % | |
| 26 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| 2 | | |
| - | | |
| - | | |
| - | | |
| 2 | |
1. property and equipment | |
| - | | |
| - | | |
| - | | |
| | | |
| - | |
2. construction in progress | |
| - | | |
| - | | |
| - | | |
| | | |
| - | |
3. land use right | |
| 2 | | |
| - | | |
| - | | |
| | | |
| 2 | |
4. proprietary technologies | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 8 | | |
| 10 | | |
| 17 | | |
| 15 | | |
| | |
1.cash and cash equivalents | |
| - | | |
| 0.49 | | |
| - | | |
| 1 | | |
| | |
2.inventories | |
| 1 | | |
| 1 | | |
| 1 | | |
| 4 | | |
| | |
3.deposits and prepaid expenses | |
| 1 | | |
| 1 | | |
| 3 | | |
| 3 | | |
| | |
4. account receivable | |
| 6 | | |
| 9 | | |
| 13 | | |
| 11 | | |
| | |
5.other receivables | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
6. account payables and accrued expenses | |
| | | |
| - | | |
| - | | |
| -4 | | |
| | |
7. short term loan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
8. other payables | |
| - | | |
| -1 | | |
| - | | |
| -0.38 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 7 | | |
| 2 | | |
| 7 | | |
| -2 | | |
| 11 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| 9 | | |
| 2 | | |
| 7 | | |
| -2 | | |
| 18 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| 0 | | |
| 3 | | |
| -5 | | |
| 4 | | |
| 2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| | | |
| | | |
| | | |
| | | |
| | |
E.7. MEIJI and JHST plantation division
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 12 | | |
| 23 | | |
| 11 | | |
| 12 | | |
| 58 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 5 | | |
| 10 | | |
| 4 | | |
| 4 | | |
| 23 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 6 | | |
| 11 | | |
| 6 | | |
| 7.08 | | |
| 31 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| - | | |
| 1 | | |
| 1 | | |
| 0.94 | | |
| 3 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| 5 | | |
| 7 | | |
| 4 | | |
| 4.60 | | |
| 21 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| 1 | | |
| 3 | | |
| 1 | | |
| 1.54 | | |
| 7 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| 6 | | |
| 10 | | |
| 5 | | |
| 6.14 | | |
| 27 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 37 | | |
| 49 | | |
| 53 | | |
| 58 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 17 | | |
| 19 | | |
| 24 | | |
| 30 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| - | | |
| - | | |
| - | | |
| 1 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| - | | |
| - | | |
| 1 | | |
| - | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 37 | | |
| 49 | | |
| 52 | | |
| 58 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 37 | | |
| 49 | | |
| 53 | | |
| 57 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| 16 | % | |
| 33 | % | |
| 40 | % | |
| 36 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| 3 | | |
| 10 | | |
| 1 | | |
| -0.49 | | |
| 14 | |
1. property and equipment | |
| 3 | | |
| 6 | | |
| 1 | | |
| | | |
| 10 | |
2. construction in progress | |
| - | | |
| - | | |
| - | | |
| -0.49 | | |
| -0 | |
3. land use right | |
| - | | |
| 4 | | |
| - | | |
| | | |
| 4 | |
4. proprietary technologies | |
| - | | |
| - | | |
| - | | |
| | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 17 | | |
| 19 | | |
| 23 | | |
| 30 | | |
| | |
1.cash and cash equivalents | |
| 3 | | |
| - | | |
| - | | |
| 4 | | |
| | |
2.inventories | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1 | | |
| | |
3.deposits and prepaid expenses | |
| 8 | | |
| 9 | | |
| 11 | | |
| 10 | | |
| | |
4. account receivable | |
| 5 | | |
| 9 | | |
| 11 | | |
| 14 | | |
| | |
5.other receivables | |
| - | | |
| - | | |
| 1 | | |
| 1 | | |
| | |
6. account payables and accrued expenses | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
7. short term loan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
8. other payables | |
| - | | |
| - | | |
| -1 | | |
| - | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 13 | | |
| 2 | | |
| 4 | | |
| 7 | | |
| 26 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| 16 | | |
| 12 | | |
| 5 | | |
| 6 | | |
| 39 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| -10 | | |
| -1 | | |
| 1 | | |
| 1 | | |
| -9 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| | | |
| | | |
| | | |
| | | |
| | |
E.8. HS.A (the Hunan fertilizer Operation)
| |
2012 | | |
2013 | | |
2014 | | |
2015Q1-3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Sale of goods | |
| 3 | | |
| 12 | | |
| 20 | | |
| 14 | | |
| 49 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 2 | | |
| 7 | | |
| 11 | | |
| 8 | | |
| 28 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 0 | | |
| 4 | | |
| 7 | | |
| 4.30 | | |
| 16 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1.15 | | |
| 4 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income attributable to SIAF & subsidiaries | |
| -1 | | |
| 2 | | |
| 5 | | |
| 2.38 | | |
| 8 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Non - controlling interest | |
| | | |
| 1 | | |
| 1 | | |
| 0.77 | | |
| 2 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Incomes of the group | |
| -1 | | |
| 3 | | |
| 6 | | |
| 3.15 | | |
| 11 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Assets | |
| 60 | | |
| 79 | | |
| 85 | | |
| 109 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| 15 | | |
| 11 | | |
| 30 | | |
| 30 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| 4 | | |
| 4 | | |
| 4 | | |
| 5 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| 4 | | |
| 6 | | |
| 5 | | |
| 4 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Capital employed | |
| 56 | | |
| 73 | | |
| 80 | | |
| 105 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total stockholders equity | |
| 56 | | |
| 75 | | |
| 81 | | |
| 104 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
ROCE | |
| -2 | % | |
| 2 | % | |
| 10 | % | |
| 11 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Capex | |
| 9 | | |
| 16 | | |
| 8 | | |
| 11 | | |
| 51 | |
1. property and equipment | |
| - | | |
| 4 | | |
| 12 | | |
| | | |
| 16 | |
2. construction in progress | |
| 9 | | |
| 12 | | |
| -4 | | |
| 11 | | |
| 28 | |
3. land use right | |
| - | | |
| - | | |
| - | | |
| | | |
| 7 | |
4. proprietary technologies | |
| - | | |
| - | | |
| - | | |
| | | |
| - | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ending balance | |
| 11 | | |
| 5 | | |
| 25 | | |
| 26 | | |
| | |
1.cash and cash equivalents | |
| 2 | | |
| - | | |
| - | | |
| 1 | | |
| | |
2.inventories | |
| - | | |
| - | | |
| 14 | | |
| 12 | | |
| | |
3.deposits and prepaid expenses | |
| 8 | | |
| 6 | | |
| 5 | | |
| 5 | | |
| | |
4. account receivable | |
| 2 | | |
| 4 | | |
| 10 | | |
| 10 | | |
| | |
5.other receivables | |
| 3 | | |
| 1 | | |
| 1 | | |
| 1 | | |
| | |
6. account payables and accrued expenses | |
| -4 | | |
| -5 | | |
| -4 | | |
| -4 | | |
| | |
7. short term loan | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
8. other payables | |
| - | | |
| -1 | | |
| -1 | | |
| -0 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total increase of wc | |
| 19 | | |
| -6 | | |
| 20 | | |
| 1 | | |
| -6 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total capex and increase of wc | |
| 28 | | |
| 10 | | |
| 28 | | |
| 11 | | |
| 44 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Free Cash Flow (FCF) | |
| -28 | | |
| -6 | | |
| -21 | | |
| -7 | | |
| -28 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Debt | |
| | | |
| | | |
| | | |
| | | |
| | |
Income Taxes
The Company was incorporated in the State
of Nevada, in the United States of America. The Company has no trading operations in United States of America and no US corporate
tax has been provided for in the consolidated financial statements of the Company.
Undistributed Earnings of Foreign Subsidiaries
The Company intends to use the remaining
accumulated and future earnings of foreign subsidiaries to expand operations outside the United States and accordingly, undistributed
earnings of foreign subsidiaries are considered to be indefinitely reinvested outside the United States and no provision for U.S.
Federal and State income tax or applicable dividend distribution tax has been provided thereon.
The Company has appointed US tax professional
to assist in filing income tax returns with the IRS in July, 2015 for the years ended December 31, 2007 through December 31, 2013
in compliance with US Treasury Internal Revenue Service Code. The income tax return for 2014 is expected to be filed during calendar
year 2015.
At the same time, The Company has reviewed
its tax position with the assistance of a US tax professional and believes that there will be no taxes and no penalties assessed
by the Internal Revenue Service in the United States of America.
No EIT has been provided in the financial
statements of SIAF, CA, JHST, JHMC, JFD, HAS, QZH and SJAP since they are exempt from EIT for the nine months ended September
30, 2015 and 2014 as they are within the agriculture, dairy and fishery sectors.
CA, CS and CH are international business
companies incorporated in Belize, and are exempt from corporate tax in Belize.
No Hong Kong profits tax has been provided
in the consolidated financial statements, since TRW did not earn any assessable profits arising in Hong Kong for the nine months
ended September 30, 2015and 2014.
No Macau Corporate income tax has been
provided in the consolidated financial statements, since APWAM and MEIJI did not earn any assessable profits in Macau for the
nine months ended September 30, 2015 and 2014.
No Swedish Corporate income tax has been
provided in the consolidated financial statements, since SAFS
incurred a tax loss for the nine months ended September 30, 2015.
No deferred tax assets and liabilities
are payable as of September 30, 2015 and December 31, 2014 since there was no difference between the financial statements carrying
amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the period in which the differences
are expected to reverse.
Off Balance Sheet Arrangements
None.
Liquidity and Capital Resources
As of September 30 2015, unrestricted
cash and cash equivalents amounted to $9,551,180 (see notes to the consolidated financial statements), and our working capital
as of September 30, 2015 was $304,297,059.
Contractual Obligations | |
Less than 1 year | | |
1-3years | | |
3-5 years | | |
More than 5 years | | |
Total | |
Short Term Bank Loan | |
| - | | |
| | | |
| | | |
| | | |
| | |
Bonds payable | |
| 1,725,000 | | |
| | | |
| 35,468,110 | | |
| | | |
| | |
Long Term Debts | |
| | | |
| 2,616,610 | | |
| | | |
| | | |
| | |
Promissory Notes | |
| | | |
| 3,100,000 | | |
| | | |
| | | |
| | |
Negotiable promissory notes | |
| 3,540,000
| | |
| | | |
| | | |
| | | |
| | |
Due to debts loan | |
| | | |
| 4,797,332
| | |
| | | |
| | | |
| | |
As of September 30, 2015, our total long-term
debts are as follows:
Cash provided by operating activities
amounted to $36,664,893 for Q3 2015. This compares with cash provided by operating activities totaled $26,261,673 for Q3 2014.
The increase in cash flows provided by operating activities resulted primarily from the decrease of accounts receivable of $(24,754,751)
for Q3 2015 from $(40,715,939) for Q3 2014.
Cash used in investing activities totaled
$(44,544,161) for Q3 2015.This compares with cash used in investing activities totaling $(25,646,646) for Q3 2014. The increase
in cash flows used in investing activities resulted primarily from payment for construction of $(40,594,640) for Q3 2015 from
$(22,227,905) for Q3 2014.
Cash provided by financing activities
totaled $9,675,852 for Q3 2015. This compares with cash provided by financing activities totaling $3,572,816 for Q3 2014. The
increase cash used in financing activities due to director reimbursement for cash originally deposited in due to a director (i)
for net proceeds from Convertible notes payable of $13,367,550; and (ii) net proceeds from negotiable promissory notes of $3,540,000
for Q3 2015 from $0 for Q3 2014.
Acquisition of SFJVC’s
and further acquisition plan:
A SFJVC agreement typically
contains an option clause for further investment. Initially, the China Developer of project companies invites us to invest
in their venture. If management feels compelled it carries out an in-depth study of the target company including legal due diligence,
business plan, budget and projected financial information. The final decision is made through the resolution of the Company’s
Board of Directors. If the decision is made to proceed with an investment, there is first formed an SFJVC, within which in turn
the Company acquires further equity interest. The acquisition price of such interest is determined in accordance to the book value
of the SFJVC as of the acquisition date. Consideration generally consists in part of cash and in part of contract against trade
debts owed by the China Developer due to Consulting & Services fees charged to the China Developer by the Company in accordance
with the Consulting & Services agreement. Project companies’ record development cost as construction in
progress and treat the amount due to us as partial investment in new SFJVC.
The Company’s expenditures as the
consulting and service provider providing turnkey services to the China Developer for the development of the project include (i)
administrative and operational expenses provided for and incurred in the project (charged and recorded under general and administrative
operation expenses), billable to the China Developer, (ii) other development expenditures (inclusive of subcontractors’
and sub-suppliers’ cost plus mark-up) billable to the Developer, as well. Consulting & Services fees are exclusively
billed to the 3rdparty China Developer, and not to the future SFJVC companies.
We plan to acquire further SFJVC’s
at the time they will be formed officially after their approval by relevant China Authorities with details shown in the Table
below:
|
|
Acquisition
by which
subsidiary |
|
Estimated
time of
SFJVC being
formed |
|
Estimated time of
completion of
acquisition |
|
Estimated Total
consideration |
|
Deposit paid
up to date |
|
Deposit paid
is equivalent
to % of equity |
|
Estimated time of
progress
payments |
Enping Prawn PF1 |
|
CA |
|
June 2014 |
|
August 2014 |
|
$20.94m |
|
$14.45 m |
|
56% |
|
Partially some time in 2016 |
Zhongshan Prawn PF2 |
|
CA |
|
Phase 3 Work still in progress, targeting completion Q3 2014 |
|
August 2015 |
|
$26.20 m |
|
$9.88 m |
|
33% |
|
Partially some time in 2016 |
Fish & eel Farm 2 |
|
CA |
|
Phase 3 & 4 work are in progress targeting completion Q4 2015 |
|
August. 2016 |
|
$26.22 m |
|
$6.0 m |
|
23% |
|
No plan currently |
Cattle Farm 2 |
|
MEIJI |
|
Final work is still in progress |
|
August 2014 |
|
$15.88 m |
|
$5.58 m |
|
35% |
|
Planning to merge it with CF1 and HSA some time in 2016 |
WXC businesses |
|
SIAF |
|
Work is in progress until end 2015 |
|
Not yet determined |
|
Not fully determined |
|
$4.08 m |
|
Not yet know |
|
No plan yet |
NaWei wholesale centers |
|
SIAF |
|
Work is in progress until end 2015 |
|
Phase (1) March 2014, new Phases are pending |
|
Not fully determined |
|
$1.03 m |
|
Not yet know |
|
No plan yet |
In accordance with our contract, prior to the official
formation of the SFJVC’s the Company will pay an initial deposit and additional deposits as pre-payments to the developer
(or owner) of the project as consideration toward future acquisition of the SFJVC upon its official formation.
The total consideration for each purchase of SFJVC is based
on its book value at that time of official formation having injected all of the related project’s development assets and
liabilities into the SFJVC.
As such the required acquisition cost is funded partly by cash
and partly by the set-off receivable due on the consulting and service fee.
CRITICAL ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements
for the nine months ended September 30, 2015 are prepared in accordance with generally accepted accounting principles in the United
States of America (“US GAAP”).
The unaudited quarterly financials for
the nine months ended September 30, 2015 results are for the months and do not necessarily indicate the results for a full year.
The information included in this interim report should be read in conjunction with the information included in the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2014.
BASIS OF CONSOLIDATION
The consolidated financial statements
include the financial statements of SIAF, its subsidiaries Capital Award, CS, CH, TRW, MEIJI, JHST, JFD, JHMC, HSA, APWAM, SAFS
and its variable interest entity SJAP and QZH. All material inter-company transactions and balances have been eliminated in consolidation.
The results of companies acquired or disposed of during the year are included in the consolidated Financial Statements from the
effective date of acquisition.
BUSINESS COMBINATIONS
The Company adopted the accounting pronouncements
relating to business combinations (primarily contained in ASC Topic 805 “Business Combinations”), including assets
acquired and liabilities assumed arising from contingencies. These pronouncements established principles and requirements for
how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquire as well as provides guidance for recognizing and measuring the goodwill
acquired in the business combination and determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. In addition, these pronouncements eliminate the distinction
between contractual and non-contractual contingencies, including the initial recognition and measurement criteria and require
an acquirer to develop a systematic and rational basis for subsequently measuring and accounting for acquired contingencies depending
on their nature. Our adoption of these pronouncements will have an impact on the manner in which we account for any future acquisitions.
NON
- CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted the accounting pronouncement
on non-controlling interests in consolidated financial statements, which establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance is primarily contained in
ASC Topic “Consolidation”. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in
the consolidated financial statements. The adoption of this standard has not had material impact on our consolidated financial
statements.
USE OF ESTIMATES
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires management to make assumptions
and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods
covered thereby. Actual results could differ from these estimates. Judgments and estimates of uncertainties are required in applying
the Company’s accounting policies in certain areas. The following are some of the areas requiring significant judgments
and estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation
assumptions in performing asset impairment tests of long-lived assets, estimates of the reliability of deferred tax assets and
inventory reserves.
REVENUE RECOGNITION
The Company’s revenue recognition
policies are in compliance with ASC 605. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence
of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable,
and (iv), the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk
of loss and title passes to the customer. Service revenue is recognized when services have been rendered to a buyer by reference
to the stage of completion. License fee income is recognized on the accrual basis in accordance with the underlying agreements.
Government grants are recognized upon
(i) the Company has substantially accomplished what we must be done pursuant to the terms of the policies and terms of the grant
that are established by the local government; and (ii) the Company receives notification from the local government that the Company
has satisfied all of the requirements to receive the government grants; and or (iii) the amounts are received.
Multiple-Element Arrangements
To qualify as a separate unit of accounting
under ASC 605-25“Multiple Element Arrangements”, the delivered item must have value to the customer on a standalone
basis. The significant deliverables under the Company’s multiple-element arrangements are consulting and service under development
contract, commission and management service.
Revenues from the Company's fishery development
services contract are performed under fixed-price contracts. Revenues under long-term contracts are accounted for under the percentage-of-completion
method of accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 605, Revenue Recognition (“ASC 605”). Under the percentage-of-completion method,
the Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognized
that profit over the contract term. The percentage of costs incurred determines the amount of revenue to be recognized. Payment
terms are generally defined by the installation contract and as a result may not match the timing of the costs incurred by the
Company and the related recognition of revenue. Such differences are recorded as either costs or estimated earnings in excess
of billings on uncompleted contracts or billings in excess of costs and estimated earnings on uncompleted contracts.
The Company determines a customer’s
credit worthiness at the time an order is accepted. Sudden and unexpected changes in a customer’s financial condition could
put recoverability at risk.
The percentage of completion method requires
the ability to estimate several factors, including the ability of the customer to meet its obligations under the contract, including
the payment of amounts when due. If the Company determines that collectability is not assured, we will defer revenue recognition
and use methods of accounting for the contract such as the completed contract method until such time as the Company determines
that collectability is reasonably assured or through the completion of the project.
For fixed-price contracts, the Company
uses the ratio of costs incurred to date on the contract (excluding uninstalled direct materials) to management's estimate of
the contract's total costs, to determine the percentage of completion on each contract. This method is used as management considers
expended costs to be the best available measure of progression of these contracts. Contract costs included all direct material,
subcontract and labor costs and those indirect costs related to contract performance, such as supplies, tool repairs and depreciation.
The Company accounts for maintenance and repair services under the guidance of ASC 605 as the services provided relate to construction
work. Contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract.
Changes in job performance, job conditions, and estimated profitability arising from contract penalty, change orders and final
contract settlements may result in revisions to the estimated profitability during the contract. These changes, which include
contracts with estimated costs in excess of estimated revenues, are recognized as contract costs in the period in which the revisions
are determined. Profit incentives are included in revenues when their realization is reasonably assured. At the point the Company
anticipates a loss on a contract, the Company estimates the ultimate loss through completion and recognizes that loss in the period
in which the possible loss was identified.
The Company does not provide warranties
to customers on a basis customary to the industry; however, the customers can claim warranty directly from product manufacturers
for defects in equipment or products. Historically, the Company has experienced no warranty claims.
The Company’s fishery development
consultancy services revenues are recognized when the relevant services are rendered, and are subject to a Chinese business tax
at a rate of 0% of the gross fishery development contract service income approved by the Chinese local government.
COST OF GOODS SOLD AND SERVICES
Cost of goods sold consists primarily
of direct purchase cost of merchandise goods, and related levies. Cost of services consists primarily of direct cost and indirect
cost incurred to date for development contracts and provision for anticipated losses on development contracts.
SHIPPING AND HANDLING
Shipping and handling costs related to
cost of goods sold are included in general and administrative expenses, which totaled $1,260, $1,673, $9,952 and $13,490 for the
three months and for the months ended September30, 2015 and 2014, respectively.
ADVERTISING
Advertising costs are included in general
and administrative expenses, which totaled $712,614, $708,049, $1,421,458 and$1,661,103 for the three months and nine months ended
September 30, 2015 and 2014, respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are
included in general and administrative expenses, which totaled $549,020, $0, $549,020 and $0 for the three months ended and the
nine months ended September 30, 2015 and 2014, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid
securities with original maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents kept
with financial institutions in People’s Republic of China (“P.R.C”) are not insured or otherwise protected.
Should any of those institutions holding the Company’s cash become insolvent, or the Company is unable to withdraw funds
for any reason, the Company could lose the cash on deposit on that institution.
ACCOUNTS RECEIVABLE
The Company maintains reserves for potential
credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis.
The standard credit period of the Company’s
most of customers is three months. Any amount that has an extended settlement date of over one year is classified as a long term
receivable. Management evaluates the collectability of the receivables at least quarterly. There were no bad debts written off
for the nine months ended September 30, 2015 or September 30, 2014.
INVENTORIES
Inventories are valued at the lower of
cost (determined on a weighted average basis) and net realizable value. Costs incurred in bringing each product to its location
and conditions are accounted for as follows:
| • | raw materials - purchase cost on a weighted average basis; |
| • | manufactured finished goods and
work-in-progress - cost of direct materials and labor and a proportion of manufacturing
overhead based on normal operation capacity but excluding borrowing costs; and |
| • | retail and wholesale merchandise finished goods - purchase cost
on a weighted average basis. |
Net realizable value is the estimated
selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make
the sale.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost
less accumulated depreciation and any accumulated impairment losses. Such costs include the cost of replacing parts that are eligible
for capitalization when the cost of replacing the parts is incurred. The assets’ residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate, at the end of each year.
Depreciation is calculated on a straight-line
basis over the estimated useful life of the assets.
Milk cows |
|
10 years |
Plant and machinery |
|
5 - 10 years |
Structure and leasehold improvements |
|
10 -20 years |
Mature seed and herbage cultivation |
|
20 years |
Furniture, fixtures and equipment |
|
2.5 - 10 years |
Motor vehicles |
|
5 -10 years |
An item of property and equipment is removed
from the accounts upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.
Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the item) is included in the consolidated statements of income in the period the item is disposed.
GOODWILL
Goodwill is an asset representing the
fair economic benefits arising from other assets acquired in a business combination that are not individually identified and separately
recognized. Goodwill is tested for impairment on an annual basis at the end of the company’s fiscal year, or when impairment
indicators arise. The Company uses a fair-value-based approach to test for impairment at the level of each reporting unit. The
Company directly acquired MEIJI which is engaged in Hu Plantation. As a result of this acquisition, the Company recorded goodwill
in the amount of $724,940. This goodwill represents the fair value of the assets acquired in these acquisitions over the cost
of the assets acquired.
PROPRIETARY TECHNOLOGIES
The Company has determined that technological
feasibility is established at the time a working model of products is completed. Master license of stock feed manufacturing technology
was acquired and the costs of acquisition were capitalized as proprietary technologies when technological feasibility had been
established. Proprietary technologies are intangible assets of finite lives. Proprietary technologies are amortized using the
straight line method over their estimated lives of 25 years.
An aromatic cattle-feeding formula was
acquired and the costs of acquisition are capitalized as proprietary technologies when technological feasibility has been established.
Cost of acquisition on aromatic cattle-feeding formula is amortized using the straight-line method over its estimated life of
25 years.
The cost of sleep cod breeding technology
license is capitalized as proprietary technologies when technological feasibility has been established. Cost of granting sleep
cod breeding technology license is amortized using the straight-line
method over its entitled life of 25 years.
Bacterial cellulose technology license
and related trademark are capitalized as proprietary technologies when technological feasibility has been established. Cost of
license and related trademark is amortized using the straight-line
method over its estimated life of 20 years.
Management evaluates the recoverability
of proprietary technologies on an annual basis of the end of the company’s fiscal year, or when impairment indicators arise.
As required by ASC Topic 350 “Intangible - Goodwill and Other”, the Company uses a fair-value-based approach to test
for impairment.
CONSTRUCTION IN PROGRESS
Construction in progress represents direct
costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction
in progress is transferred to property and equipment when substantially all the activities necessary to prepare the assets for
their intended use are completed. No depreciation is provided until construction is completed and the asset is ready for its intended
use.
LAND USE RIGHTS
Land use rights represent acquisition
of land use right rights of agriculture land from farmers and are amortized on the straight line basis over the respective lease
periods. The lease period of agriculture land is in the range from 10 years to 60 years. Land use rights purchase prices were
determined in accordance with the P.R.C Government’s minimum lease payments of agriculture land and mutually agreed between
the company and the vendors. No independent professional appraiser performed a valuation of land use rights at the balance sheet
dates.
CORPORATE JOINT VENTURE
A corporation formed, owned, and operated
by two or more businesses (ventures) as a separate and discrete business or project (venture) for their mutual benefit is considered
to be a corporate joint venture. Investee entities, in which the company can exercise significant influence, but not control,
are accounted for under the equity method of accounting. Under the equity method of accounting, the company’s share of the
earnings or losses of these companies is included in net income.
A loss in value of an investment that
is other than a temporary decline is recognized as a charge to operations. Evidence of a loss in value might include, but would
not necessarily be limited to absence of an ability to recover the carrying amount of the investment or inability of the investee
to sustain an earnings capacity that would justify the carrying amount of the investment.
VARIABLE INTEREST ENTITY
An entity (investee) in which the
investor has obtained less than a majority-owned interest, according to the Financial Accounting Standards Board (FASB).
A variable interest entity (VIE) is subject to consolidation if a VIE is an entity meeting one of the following three criteria
as elaborated in ASC Topic 810-10, Consolidation.
| (a) | equity-at-risk is not sufficient to support the entity's activities |
| (b) | as a group, the equity-at-risk holders cannot control the entity;
or |
| (c) | the economics do not coincide with the voting interest. |
If a firm is the primary beneficiary of
a VIE, the holdings must be disclosed on the balance sheet. The primary beneficiary is defined as the person or company with the
majority of variable interests
TREASURY STOCK
Treasury stock consists of a Company’s
own stock which has been issued, but is subsequently reacquired by the Company. Treasury stock does not reduce the number of shares
issued but does reduce the number of shares outstanding. These shares are not eligible to receive cash dividends. Accounting for
excesses and deficiencies on treasury stock transactions is governed by ASC 505-30-30.
State laws and federal agencies closely
regulate transactions involving a company’s own capital stock, so the purchase of outstanding shares and converting them
into treasury shares must have a legitimate purpose. Some of the most common reasons for purchasing outstanding shares are as
follows:
(i) to meet additional stock needs for
various reasons, including newly implemented stock option plans, the issuance stock for convertible bonds or convertible preferred
stock, or a stock dividend;
(ii) to eliminate the ownerships interests of a stockholder;
(iii) to increase the market price of the stock that returns
capital to shareholders; and
(iv) to potentially increase earnings per share of the stock
by decreasing the shares outstanding on the same earnings.
The cost method of accounting for treasury
stock shares has been adopted by the Company. The purchase of outstanding shares is treated as a temporary reduction in shareholders’
equity in view of the expectation to reissue the shares instead of retiring them. When the Company reissues the treasury shares,
the temporary account is eliminated. The cost of treasury stock shares reacquired is charged to a contra account, in this case
a contra equity account that reduces the stockholder equity balance.
INCOME TAXES
The Company accounts for income taxes
under the provisions of ASC 740 “Accounting for Income Taxes”. Under ASC 740, deferred tax assets and liabilities
are determined based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences are expected to reverse.
The provision for income tax is based
on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that
have been enacted or substantively enacted at the balance sheet date. Deferred taxes area accounted for using the balance sheet
liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred
tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that
it is probable that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred income taxes are calculated at
the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is
charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which
case the deferred tax is also adjusted in the equity accounts. Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities
on a net basis. ASC 740 also prescribes a more-likely-than-not threshold for financial statement recognition and measurement of
a tax position taken, or expected to be taken, in a tax return. ASC 740 also provides guidance related to, among other things,
classification, accounting for interest and penalties associated with tax positions, and disclosure requirements. Any interest
and penalties accrued related to unrecognized tax benefits will be recorded in tax expense.
POLITICAL AND BUSINESS RISK
The Company's operations are carried out
in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political,
economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC
are subject to specific considerations and significant risks not typically associated with companies in North America and Western
Europe. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLE ASSETS
In accordance with ASC 360, “Property,
Plant and Equipment”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances
indicate that the related carrying amounts may not be recoverable. The Company reviews the carrying amount of its long-lived assets,
including intangibles, for impairment, at the end of each fiscal year. An asset is considered impaired when estimated future cash
flows are less than the carrying amount of the asset. In the event the carrying amount of such asset is considered not recoverable,
the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow. As of September
30, 2015 and December 31, 2014, the Company determined no impairment losses were necessary.
EARNINGS PER SHARE
As prescribed in ASC Topic 260 “Earning
per Share”, Basic Earnings per Share (“EPS”) is computed by dividing net income available to common
stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing
net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year
plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined
through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are
hypothetically used to repurchase the Company’s common stock at the average market price during the period.
For the three months ended September 30,
2015 and 2014, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders amount
to $1.14 and $1.49 respectively. For the three months ended September 30, 2015 and 2014, diluted earnings per share attributable
to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $1.14 and $1.43, respectively.
For the nine months ended September 30,
2015 and 2014, basic earnings per share attributable to Sino Agro Food, Inc. and subsidiaries’ common stockholders amount
to $3.02 and $4.42 respectively. For the nine months ended September 30, 2015 and 2014, diluted earnings per share attributable
to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $3.02 and $4.23, respectively.
FOREIGN CURRENCY TRANSLATION
The reporting currency of the Company
is the U.S. dollar. The functional currency of the Company is the Chinese Renminbi (RMB). For those entities whose functional
currency is other than the U.S. dollars, all assets and liabilities are translated into U.S. dollars at the exchange rate on the
balance sheet date; shareholder equity is translated at historical rates and items in the statements of income and of cash flows
are translated at the average rate for the period.
Because cash flows are translated based
on the weighted average translation rate, amounts related to assets and liabilities reported in the statements of cash flows will
not necessarily agree with changes in the corresponding balances in the balance sheets. Translation adjustments resulting from
this process are included in accumulated other comprehensive income in the consolidated statements of equity.
For the nine months ended September
30, 2014
Translation gains and losses that arise
from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the
statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of September
30, 2014 and December 31, 2013 were translated at RMB6.15to $1.00 and RMB6.10 to $1.00, respectively. The average translation
rates applied to the consolidated statements of income and comprehensive income and of cash flows for the nine months ended September
30, 2014 and September 30, 2013 were RMB6.15to $1.00 and RMB6.21 to $1.00, respectively.
For the nine months ended September
30, 2015
Translation gains and losses that arise
from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the
statements of income and comprehensive income as incurred. The balance sheet amounts with the exception of equity as of September
30, 2015 and December 31, 2014 were translated at RMB6.36 to $1.00 and RMB6.15 to $1.00, respectively. The average translation
rates applied to the consolidated statements of income and comprehensive income and of cash flows for the nine months ended September
30, 2015 and September 30, 2014 were RMB6.17to $1.00 and RMB6.15 to $1.00, respectively.
ACCUMULATED OTHER COMPREHENSIVE INCOME
ASC Topic 220 “Comprehensive
Income” establishes standards for reporting and displaying comprehensive income and its components in financial statements.
Comprehensive income is defined as the change in stockholders’ equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. The comprehensive income for all periods presented includes both the
reported net income and net change in cumulative translation adjustments.
RETIREMENT BENEFIT COSTS
P.R.C. state managed retirement benefit
programs are defined contribution plans and the payments to the plans are charged as expenses when employees have rendered service
entitling them to the contribution.
STOCK-BASED COMPENSATION
The Company adopts both ASC Topic 718,
“Compensation - Stock Compensation” and ASC Topic 505-50,”Equity-Based Payments to Non-Employees” using
the fair value method in which an entity issues its equity instruments to acquire goods and services from employees and non-employees.
Stock compensation for stock granted to non-employees has been determined in accordance with this accounting standard and the
accounting standard regarding accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction
with selling goods or services, as the fair value of the consideration received or the fair value of equity instruments issued,
whichever is more reliably measured. This accounting standard allows the “simplified” method to determine the term
of employee options when other information is not available. Under ASC Topic 718 and ASC Topic 505-50, stock compensation expenses
is measured at the grant date on the value of the option or restricted stock and is recognized as expenses, less expected forfeitures,
over the requisite service period, which is generally the vesting period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
Level 1 Quoted market prices available
in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted
prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally
observable inputs and not corroborated by market data.
The carrying amounts of the Company’s
financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity
of these instruments.
The carrying amounts of the Company’s
financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity
of these instruments. The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring
basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value as
of September30, 2015 or December 31, 2014, nor gains or losses are reported in the statements of income and comprehensive income
that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting
date for the six months ended September 30, 2015 or 2014.
NEW ACCOUNTING PRONOUNCEMENTS
The Company does not expect any recent
accounting pronouncements to have a material effect on the Company’s financial position, results of operations, or cash
flows.
In May 2014, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which
amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from
Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year.
The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. As such, the updated
standard will be effective for us in the first quarter of 2018, with the option to adopt it in the first quarter of 2017. We are
still evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.
In June 2014, the FASB issued ASU 2014-10,
“Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment
to Variable Interest Entities Guidance in Topic 810, Consolidation”. The guidance eliminates the definition of a development
stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development stage entities,
primarily presentation of inception to date financial information. The provisions of the amendments are effective for annual reporting
periods beginning after December 15, 2014, and the interim periods therein. However, early adoption is permitted. Accordingly,
the Company has adopted this standard as of July 31, 2014.
In August 2014, the FASB issued ASU No.
2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." ASU 2014-15 will explicitly
require management to assess an entity's ability to continue as a going concern, and to provide related footnote disclosure in
certain circumstances. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2016, and early adoption is permitted. Management is currently evaluating the impact of this pronouncement on our
consolidated financial statements.
In November 2014, FASB issued ASU No.
2014-17, (Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force.) The amendments
in this update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon
occurrence of an event in which an acquirer obtains control of the acquired entity. The adoption of ASU 2014-17 did not have a
material impact on the Company’s consolidated financial statements.
In January 2015, FASB issued ASU No. 2015-01,
Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating
the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this
Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting
entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods
presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of
the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have material impact on the Company’s
consolidated financial statements.
In February 2015, the FASB issued Accounting
Standards Update ("ASU") No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation
standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities,
(b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"),
and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate
the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after
December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified
retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption
or may apply the amendments retrospectively. The Company is currently assessing the impact of the adoption of this guidance on
the consolidated financial statements.
In April 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, which simplifies presentation
of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability
be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt
discounts. ASU No. 2015-03 will be effective for fiscal years beginning after December 15, 2015, with early adoption permitted.
The Company has elected to adopt this ASU early and the adoption of this guidance did not have a material effect on its consolidated
financial statements.
Other accounting standards that have been
issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the
consolidated financial statements upon adoption.
PROGRESS REPORTS AND SUBSEQUENT EVENTS
| l | As
of November 12, 2015, the Zhongshan New Prawn Farm Project (ZSNPP) has made much progress
in its development and construction, though the aim to have its first roll of tanks to
stock with fingerling during October has not materialized due to certain workmanship
in troweling the tanks are not up to standard, requiring refurbishment that delayed the
installation work of various filters. However, the Company is working intensively with
the aim to initiate stocking as soon as possible. |
At the same
time, most of the basic infrastructure work has been carried out on Stage 2 of Phase 1 of the NSNPP in readiness for further construction
work in its APM tanks starting within the month of December 2015. Upon the completion of S1 & S2 of Phase 1 these sections
of farms will have the designed capacity 10 times of FF(1) (or the equivalent of 10,000 MT / year in production capacity), and
in this respect will become the biggest RAS indoor farm globally for growing prawn.
Subsequently, the plan is to
complete related developments in the R&D station, the brood stock station, the nursery station, related storages and related
hydroponic farms to demonstrate as the first commercial Aquaculture cum hydroponic farm in the world that will be built based
on a complete environmentally friendly concept of recycling waste with an aim to produce food year-round under the highest food
safety standards.
| l | As
of November 12, 2015, PF2’s development of new RAS covered dams on a 20,000 m2
block of land using our newly improved APM technology for open dams are just about completed
currently with roofing are being installed as of this report. The aim of this development
is to reduce the overall cost of APM farms by converting traditional open dams into RAS
dams that will improve the production capacity aiming at 6 to 7 harvests per year instead
of the 2 to 3 harvests/year of the open dams using the traditional aquaculture systems
currently used in China and with the advantage of cost of savings in water and power
usage while maximizing land application. |
The Company
is optimistic that the newly improved APM technology for open dams will open the door for the Company to speed up future developments
of the ZSNPP with the ability to save a big portion of capital expenditures during the initial years of its development, thus
improving its cash flow by having more production and sales that will help to complete its overall developments sooner than originally
anticipated.
| 2. | Business Operation and financing: |
| (1) | The Agriculture Development Bank
of China has increased SJAP’s bank facility on October 23, 2015 by an additional
RMB35 million comprised of a term loan of RMB25 million, short term loan of RMB35 million
and the new project loan of RMB35 million totaling RMB90 million. Said project loan can
be applied for purposes of new developments and mergers acquisitions etc., which, subject
to its final application, may be converted to long term or short term loan debt. |
| (2) | SJAP’s expansion to increase
its deboning capacity to 12,500 MT/year and its freezer capacity to 10,000 MT are in
progress and part of the finished developments are now operational thus allowing SJAP’s
capacity to debone more quarter-cut beef imported from Australia. |
| (3) | Negotiation to acquire 30% of
a company that has been established for more than 30 years with synergy to SJAP’s
business operation is in progress; the aim of this acquisition is to help to solve one
of SJAP’s problems of obtaining well trained human resources in the deboning and
marketing activities, in which the target has many resources. |
| l | SIAF’s
corporate sectors |
It is expected
that with the establishment of the Trading Facility (mentioned earlier), the import trade will increase at a much faster rate
for the remaining months of 2015 and in 2016 due primarily in helping to increase the working capital needed, resulting in more
profitability for 2015 and 2016, thus enhancing profitability for 2015 and 2016.
The private
placement bond of US$1.74 million is being paid beginning on November 12, 2015 and upon repayment, the Company will have one convertible
note outstanding.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS
AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
We maintain “disclosure controls
and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”),
under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure
Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this
Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this
report.
Changes in Internal Control over Financial
Reporting
We have also evaluated our internal controls
for financial reporting, and there has been no change in our internal control over financial reporting that occurred during the
three months ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect our internal
control over financial reporting
Limitations on the Effectiveness of
Controls
Our management, including our CEO and
CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also
is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II - OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
None
ITEM 1A. RISK
FACTORS
Not applicable
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the 3 months period ended September
30, 2015, we issued 279,486 shares and out of which 280,000 shares were issued as security to secure part of the said trading
facility and there were -514 shares being readjusted and taken out of the total issued and outstanding shares after further adjustment
made to share counts after the reversed split exercise.
ITEM 3. DEFAULTS
UPON SENIOR SECURITIES
None
ITEM 4. MINE
SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER
INFORMATION
None
ITEM 6. EXHIBITS
31.1 |
Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 (1) |
31.2 |
Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 (1) |
32.1 |
Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (2) |
|
|
101.INS |
XBRL Instance Document (1) |
101.SCH |
XBRL Taxonomy Extension Schema Document (1) |
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document (1) |
101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document (1) |
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document (1) |
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document (1) |
|
|
(1) Filed herewith. |
|
(2) Furnished herewith. |
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) 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.
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SINO AGRO FOOD, INC. |
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November 16, 2015 |
By: |
/s/ LEE YIP KUN SOLOMON |
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Lee Yip Kun Solomon |
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Chief Executive Officer |
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(Principal Executive Officer) |
Pursuant to the requirements
of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
November 16, 2015 |
By: |
/s/ LEE YIP KUN SOLOMON |
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Lee Yip Kun Solomon |
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Chief Executive Officer, Director |
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(Principal Executive Officer) |
November 16, 2015 |
By: |
/s/ Bertil Tiusanen |
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Bertil Tiusanen |
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Chief Financial Officer |
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(Principal Financial Officer) |
November 16, 2015 |
By: |
/s/ TAN POAY TEIK |
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Tan Poay Teik |
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Chief Marketing Officer and Director |
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November 16, 2015 |
By: |
/s/ CHEN BOR HANN |
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Chen Bor Hann |
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Corporate Secretary and Director |
November 16, 2015 |
By: |
/s/ YAP KOI MING |
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Yap Koi Ming |
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Director |
November 16, 2015 |
By: |
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Nils Erik Sandberg |
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Director |
November 16, 2015 |
By: |
/s/ DANIEL RITCHEY |
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Daniel Ritchey |
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Director |
November 16, 2015 |
By: |
/s/ SOH LIM CHANG |
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Soh Lim Chang |
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Director |
Exhibit 31.1
Certification
of the Chief Executive Officer
I, LEE YIP KUN SOLOMON, certify that:
1. I
have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 of Sino Agro Food, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed
such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is being prepared;
b) designed
such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent function):
a) all
significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
Date: November 16, 2015
By: |
/s/ LEE YIP KUN SOLOMON |
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Name: Lee Yip Kun Solomon |
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Title: Chief Executive Officer |
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(Principal Executive Officer) |
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Exhibit 31.2
Certification
of the Chief Financial Officer
I, BERTIL TIUSANEN, certify that:
1. I
have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 of Sino Agro Food, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) designed
such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is being prepared;
b) designed
such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
d) disclosed in this report any
change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent function):
a) all
significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
Date: November 16, 2015
By: |
/s/ BERTIL TIUSANEN |
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Name: Bertil Tiusanen |
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Title: Chief Financial Officer |
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(Principal Financial Officer) |
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with
the Quarterly Report of Sino Agro Food, Inc. (the “Registrant”) on Form 10-Q for the period ended September 30, 2015
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lee Yip Kun Solomon, Principal
Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) the Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: November 16, 2015 |
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By: /s/ LEE YIP KUN SOLOMON |
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Name: Lee Yip Kun Solomon |
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Title: Chief Executive Officer |
In connection with
the Quarterly Report of Sino Agro Food, Inc. (the “Registrant”) on Form 10-Q for the period ended September 30, 2015
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bertil Tiusanen, Principal
Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) the Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: November 16, 2015 |
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By: /s/ BERTIL TIUSANEN |
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Name: Bertil Tiusanen |
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Title: Chief Financial Officer |
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