NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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%.
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
On
March 23, 2018, Qinghai Quanwang Investment Management Company Limited (“Quanwang”) acquired 8.3% equity interest
in SJAP for total cash consideration of $459,137. As of December 31, 2019, APWAM owned 41.25% of SJAP, Garwor owned 50.45% and Quanwang
owned the remaining 8.3%.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 owned a 75% equity interest in JFD, representing majority
of voting rights and controls its board of directors. On August 15, 2016, the acquisition agreement was executed by TRW for acquiring
the other 25% equity in JFD which was a Sino Foreign Joint Venture Co. that TRW had 100% equity interest with effect on October 5,
2016. Upon the acquisitions of 3 additional prawn farms assets at fair value of $238.32 million from respective third parties and the
master technology license at fair value of $30 million from Capital Award, Inc. by JFD, and the consideration of the above acquisitions
were planned to be settled by the new issue shares of 99,990,000 TRW shares at $3.41 amounting to $340.53 million on or before March 31,
2018. As a result, SIAF’s equity interest in TRW was diluted from 100% to 23.89% with effective on October 5, 2016. The above
transactions leaded the Company loss of control over TRW group, the Company’s investments in TRW and JFD were reclassified from
a subsidiary to investments in unconsolidated equity investees as of October 5, 2016. The dilution of the Company’s investments
in TRW group constituted a deemed disposal of the subsidiaries. The deemed gain on disposal of $56,947,005 was recorded in net income
from discontinued operations of the consolidated statements of income and other comprehensive income of the Company for the year ended
31 December 2016. On October 1, 2016, the Company took up all assets and all liabilities of TRW and JFD except plant and equipment
- fish farm. The Company converted the amount due from unconsolidated equity investee into equity interest during the fourth quarter
of 2018, which resulted in equity interest in TRW from 23.89% to 36.60%
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
CORPORATE
INFORMATION (CONTINUED)
|
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. As of December 31, 2018, MEIJI total investment in JHMC was $4,385,101.
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%. On April 5, 2018,
SJAP transfer all of its equity interest to MEIJI. As of December 31, 2018, MEIJI total investment in HSA was $1,651,774.
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”). During the year ended
December 31, 2016, SAFS changed to a private company. As of December 31, 2018, the Company invested $77,664 in SAFS. The Company
delisted from Merkur Market on 10th September 2019, and subsequently by 31st December 2019 SAFS was dissolved.
SJAP
formed Qinghai Zhong He Meat Products Co., Limited (“QZH”), with SJAP would owning 100% equity interest. SJAP formed
Qinghai Zhong He Meat Products Co., Limited (“QZH”), with SJAP would owning 100% equity interest. On October 25,
2015, both QZH and new stockholder, Qinghai Quanwang Investment Management Co., Ltd (“QQI”) contributed additional
capital of $4,157,682 and $769,941, respectively. As a result, SJAP decreased its equity interest from 100% to 85% and QQI owned a
14% equity interest. In addition, according to investment agreement between QZH and QQI, (i) QQI only enjoy interest 6%
annually on its capital contribution and did not enjoy profit distribution; (ii) investment period was 3 years only, and
(iii) SJAP shared 100% on profit or loss after deduction 6% interest to QQI and enjoyed 100% voting rights of QZH’s board
and stockholders meetings. SJAP disposed its 85% equity interest in QZH for RMB2 (equivalent to $0) for cash and completed on
December 30, 2018. As a result, QZH was derecognized as variable interest entity of the company. On September 30th 2019,
Mr. Solomon Lee resigned as the Chairman of SJAP resulting in categorization of SJAP as an Investor in Associate from a
subsidiary status.
Up
until September 30th 2019, revenues have been generated from activities that the Company divided into five stand-alone business
divisions or units: (1) Fishery development (in consulting and services), (2) Cattle & Beef (fully integrated activity),
(3) Organic Fertilizer, (4) HU Plantation, and (5) Marketing and Trading.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
CORPORATE
INFORMATION (CONTINUED)
|
The
fully integrated Cattle and Beef business was gradually being scaled down from year 2016 onward after the China Government relaxed its
importation policies to allow many countries (i.e. Australia, NZ, Countries of South America and Canada etc.) to import beef into China
affecting its domestic cattle rearing and beef industry. SJAP lost in excessive of US$30 million by year ended December 31st 2017
and by June 30th 2019, it reduced its large fully integrated activity into a small operation keeping and maintaining the production
of fertilizer at less than 8,000 MT per year comparing to over 35,000 MT per year in 2015 and the production of concentrated live-stock
feed at less than 3000 MT per year compares to over 15,000 MT in 2016 and fattening less than 1500 heads of live cattle at its own farm
compares to 2015’s around 25,000 heads of live cattle reared and fattening by 20 corporative farms that consisted over 2,000 individual
farmers collectively.
From
1st October 2019 onward, SJAP contracted the said small maintaining operation to its existing management.
The
Company currently maintains operations of its services in engineering consulting and specializing in the development of agriculture and
aquaculture projects whereas operations of its HU Plantation, Asian “Yellow cattle” demonstration farm, and HSA’s manufacturing
of fertilizer were contracted out to their respective farm’s management since 30th September 2019.
The
Company is now the investor in two Associates originated from subsidiary status namely SJAP and Tri-way; whereas Tri-way is in the aquaculture
segment contracting out it’s aqua-farms’ operations (inclusive Aqua-farm 1, 2 and 3 & b) to respective farm’s
managements and JFD, it’s fully owned subsidiary in China, has the sole right to market and distribute the said Aqua-farms’
productions by buying from and selling all fishery productions of the said contracted aqua-farms. Operation of Aqua-farm 4 and 5 of the
Zhongshen Mega Farm Development ceased since September 30th 2019 failing the Company’s original ambition to become one of
the biggest prawn producers in the world by year end of 2024.
Therefore
from 1st October 2019 onward, Revenues of the Company are generated from (i). Incomes derived from CA’s Engineering Consulting
and services, (ii). Incomes derived from the contractual agreements of JHST, MEIJI and HSA, (iii). CA’s (or the Corporate) marketing
and Trading business and (iv). Incomes generated from its investments in SJAP and Tri-way.
The
Company’s principal executive office is located at Room 3520 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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
The
Company has adopted December 31 as its fiscal year end.
Name
of subsidiaries
|
|
Place
of incorporation
|
|
Percentage
of interest*
|
|
Principal
activities
|
Capital
Award Inc. (“CA”)
|
|
Belize
|
|
(2021: 100%) directly
|
|
Fishery development and holder of A-Power Technology master license.
|
|
|
|
|
|
|
|
Capital Hero Inc. (“CS”)
|
|
Belize
|
|
(2021:100%)indirectly
|
|
Dormant Capital HeroInc.
|
|
|
|
|
|
|
|
(“CH”)Capital Stage Inc. (CH)
|
|
Belize
|
|
(2021: 100%) indirectly
|
|
Dormant Capital Stage Inc.(CS)
|
|
|
|
|
|
|
|
Macau
Eiji Company Limited (“MEIJI”)
|
|
Macau, P.R.C.
|
|
(2021: 100%) directly
|
|
Investment holding, cattle farm development, beef cattle and beef trading
|
|
|
|
|
|
|
|
Sino
Agro Food Sweden AB (“SAFS”).
|
|
Sweden
|
|
|
|
Dormant: Dissolved 31st December
|
|
|
|
|
|
|
|
A
Power Agro Agriculture Development (Macau) Limited (“APWAM”)
|
|
Macau, P.R.C.
|
|
(2021: 100%) directly
|
|
Investment holding
|
|
|
|
|
|
|
|
Jiang
Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
P.R.C.
|
|
(2021: 75%) Indirectly
|
|
HylocereusUndatus Plantation (“HU Plantation”).
|
|
|
|
|
|
|
|
Jiang
Men City Hang Mei Cattle Farm Development Co., Limited (“JHMC”)
|
|
P.R.C.
|
|
(2021:75%) indirectly
|
|
Beef cattle cultivation
|
|
|
|
|
|
|
|
Hunan
Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
P.R.C.
|
|
(2021:76%) indirectly
|
|
Manufacturing of organic fertilizer, livestock feed, and beef cattle and sheep cultivation, and plantation of crops and pastures
|
Name
of associate (investee)
|
|
Place
of incorporation
|
|
Percentage
of interest*
|
|
Principal
activities
|
Qinghai
Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
P.R.C.
|
|
(2021: 41.25%) indirectly
|
|
Manufacturing of organic fertilizer, livestock feed, and beef cattle
|
|
|
|
|
|
|
|
Tri-way
Industries Limited
|
|
Hong Kong, P.R.C.
|
|
(2021: 36.6%) directly
|
|
A-Power Technology license (P.R.C.)
|
|
|
|
|
|
|
Sales and marketing of fishery production& products.
|
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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”).
|
2.4
|
BASIS OF CONSOLIDATION
|
The
consolidated financial statements include the financial statements of the Company, its subsidiaries CA, CS, CH, MEIJI, JHST, JHMC, HSA,
APWAM, SAFS and its variable interest entity SJAP. All material inter-company transactions and balances have been eliminated in consolidation.
SIAF,
CA, CS, CH, MEIJI, JHST, JHMC, HSA, APWAM, SAFS, and SJAP 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
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
In
May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces
numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for recognizing
revenue from contracts with customers. The Company adopted this standard effective January 1, 2018.
The
core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
This requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point
in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenues generated mainly
from trading of frozen food and sales of agricultural products are recognized at a point in time.
The
ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company
(i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not
occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue
when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared
to the prior guidance did not result in significant changes in the way the Company records its revenues.
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 recognize 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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
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
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 $0 and $85,475 for
the six months ended June 30, 2021 and 2020, respectively.
Advertising
costs are included in general and administrative expenses, which totaled $0, and $485,568 for the six months ended June 30, 2021 and
2020, respectively.
|
2.12
|
RESEARCH AND DEVELOPMENT EXPENSES
|
Research
and development expenses are included in general and administrative expenses, which totaled $0 and $349,541 for the six months ended
June 30, 2021 and 2020, 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 $ (61,305,643) as of June 30,
2021 and $(54,997,545) as of December 31, 2020. The balance sheet amounts with the exception of equity as of June 30, 2021
and December 31, 2019 were translated using an exchange rate of RMB 6.46 to $1.00 and RMB 6.52 to $1.00, respectively. The average
translation rates applied to the statements of income and other comprehensive income and of cash flows for the six months ended June
30, 2021 and 2020 were RMB 6.47 to $1.00 and RMB 6.58 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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 - 30 years
|
|
Mature seeds and herbage cultivation
|
|
20 years
|
|
Furniture and equipment
|
|
2.5 - 10 years
|
|
Motor vehicles
|
|
4 - 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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
|
2.19
|
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 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 20 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.
|
2.20
|
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.
|
2.22
|
EQUITY METHOD INVESTMENTS
|
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.
|
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
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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|
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
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 June 30,
2021 and December 31, 2020 amounted to $173,738 and $188,846, 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 and E) whose business individually represented the following percentages of the Company’s
total revenue for the period indicated:
|
|
2021 Q1-2
|
|
|
2020 Q1-2
|
|
Customer A
|
|
|
53.22
|
%
|
|
|
31.54
|
%
|
Customer B
|
|
|
28.71
|
%
|
|
|
26.27
|
%
|
Customer C
|
|
|
18.07
|
%
|
|
|
18.32
|
%
|
Customer D
|
|
|
|
|
|
|
7.09
|
%
|
Customer F
|
|
|
|
|
|
|
3.09
|
%
|
|
|
|
100
|
%
|
|
|
86.31
|
%
|
|
|
|
|
Percentage of revenue
|
|
|
Amount
|
|
Customer A
|
|
Organic fertilizer and Bread Grass Division
|
|
|
53.22
|
%
|
|
$
|
2,790,309
|
|
Customer B
|
|
Cattle Farm Development and HU Plantation Division
|
|
|
28.71
|
%
|
|
$
|
1,505,258
|
|
Customer C
|
|
Corporate Division
|
|
|
18.07
|
%
|
|
$
|
947,404
|
|
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:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Customer A
|
|
|
43.05
|
%
|
|
|
44.89
|
%
|
Customer B
|
|
|
20.17
|
%
|
|
|
24.45
|
%
|
Customer C
|
|
|
12.56
|
%
|
|
|
14.66
|
%
|
Customer D
|
|
|
11.25
|
%
|
|
|
10.56
|
%
|
Customer E
|
|
|
2.54
|
%
|
|
|
0.02
|
%
|
Customer F
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
89.57
|
%
|
|
|
99.63
|
%
|
As
of June 30, 2021, amounts due from customers A, B and C are $8,558,719, $4,009,974 and $2,497,039 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
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 31 December 2019, 2020 and 30 June 2021, the Company provided impairment losses of -$3,834,658.00, -$104,492,817.00
and -$17,723,648.00 respectively.
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 six months ended June 30, 2021 and 2020, basic earnings (loss) per share attributable to Sino Agro Food, Inc. and subsidiaries
common stockholders amounted to $(0.28), and $(0.88), respectively. For the six months ended June 30, 2021 and 2020, diluted earnings
(loss) per share attributable to Sino Agro Food, Inc. and its subsidiaries’ common stockholders amounted to $(0.28), and $(0.88),
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
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.
|
Financial
instruments consist principally of cash, accounts receivable, Deposits and prepayments, accounts payable and accrued expenses, other
payables, due to a director and income tax payables. The carrying amounts of such financial instruments in the accompanying condensed
consolidated balance sheet approximate their fair values due to their relatively short-term nature. The Company’s long-term borrowing,
promissory notes and convertible notes payable approximates the fair value of such instrument based upon management’s best estimate
of interest rates that would be available to the Company for similar financial arrangement at December 31, 2019. It is management’s
opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
The
Company revalues its derivative liability at every reporting period and recognizes gains or losses in the consolidated statement of income
and other comprehensive income that are attributable to the change in the fair value of the derivative liability. The Company has no
other assets or liabilities measured at fair value on a recurring basis.
|
2.35
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
In
February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires
substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including
leases currently accounted for as operating leases. This ASU is effective for all interim and annual reporting periods beginning after
December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02
will have on its consolidated financial statements and related disclosures.
In
June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting. This ASU is effective for public business entities for fiscal years beginning after December 15, 2018, including
interim periods within that fiscal year. The Company is currently evaluating the impact that the adoption of this ASU will have on its
consolidated financial statements and related disclosures.
Certain
balances have been reclassified in the December 31, 2018 consolidated balance sheet and the consolidated statement of cash flows
on a basis consistent with the financial statements as of and for the year ended December 31, 2019. There is no further reclassification
since.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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.
|
|
June 30, 2021
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
Revenue
|
|
$
|
0
|
|
|
|
1,308,333
|
|
|
|
2,653,964
|
|
|
|
1,280,674
|
|
|
|
0
|
|
|
$
|
5,242,971
|
|
Net income (loss)
|
|
$
|
(3,511,424
|
)
|
|
|
267,409
|
|
|
|
731,237
|
|
|
|
544,061
|
|
|
|
(14,861,681
|
)
|
|
$
|
(16,830,399
|
)
|
Total assets
|
|
$
|
128,023,261
|
|
|
|
47,414,554
|
|
|
|
103,670,726
|
|
|
|
33,706,092
|
|
|
|
185,175,354
|
|
|
$
|
497,989,987
|
|
|
|
June 30, 2020
|
|
|
|
Fishery
|
|
|
|
|
|
Organic Fertilizer
|
|
|
Cattle Farm
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
HU Plantation
|
|
|
and Bread Grass
|
|
|
Development
|
|
|
Corporate and
|
|
|
|
|
|
|
Division (1)
|
|
|
Division (2)
|
|
|
Division (3)
|
|
|
Division (4)
|
|
|
others (5)
|
|
|
Total
|
|
Revenue
|
|
$
|
0
|
|
|
|
1,103,592
|
|
|
|
2,618,490
|
|
|
|
1,224,117
|
|
|
|
0
|
|
|
$
|
4,946,199
|
|
Net income (loss)
|
|
$
|
(28,672,571
|
)
|
|
|
343,272
|
|
|
|
841,807
|
|
|
|
442,485
|
|
|
|
(24,727,135
|
)
|
|
$
|
(51,772,143
|
)
|
Total assets
|
|
$
|
124,547,854
|
|
|
|
56,524,872
|
|
|
|
75,482,876
|
|
|
|
58,745,778
|
|
|
|
157,418,784
|
|
|
$
|
472,720,164
|
|
Note
(1)
|
Operated by Capital Award, Inc. (“CA”).
|
(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”), A Power Agro Agriculture Development (Macau) Limited (“APWAM”), and Hunan Shenghua A Power Agriculture Co., Limited (“HSA”). On December 30, 2018 QZH was disposed to third party and derecognized as variable interest entity on the same date.
|
(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 (“SAFS”) ---- (Discontinued since 31st December 2019).
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of revenue:-
|
|
For the six
months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
1,308,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,308,333
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
2,653,964
|
|
|
|
|
|
|
|
|
|
|
|
2,653,964
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,280,674
|
|
|
|
|
|
|
|
1,280,674
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
1,308,333
|
|
|
|
2,653,964
|
|
|
|
1,280,674
|
|
|
|
0
|
|
|
|
5,242,971
|
|
Further analysis of revenue:-
|
|
For the six months ended June 30,
2020
|
|
|
|
Fishery
Development
Division
|
|
|
HU
Plantation
Division
|
|
|
Organic
Fertilizer
and Bread
Grass
Division
|
|
|
Cattle Farm
Development
Division
|
|
|
Corporate and
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
1,242,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,242,916
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
2,729,330
|
|
|
|
|
|
|
|
|
|
|
|
2,729,330
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
973,953
|
|
|
|
|
|
|
|
973,953
|
|
Sino Agro Food, Inc. (“SIAF”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
1,242,916
|
|
|
|
2,729,330
|
|
|
|
973,953
|
|
|
|
0
|
|
|
|
4,946,199
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SEGMENT INFORMATION (CONTINUED)
|
Further analysis of cost
|
|
For the six
months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
950,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
950,417
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271,240
|
|
|
|
|
|
|
|
271,240
|
|
Sino Agro Food, Inc. (SIAF)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
950,417
|
|
|
|
-
|
|
|
|
271,240
|
|
|
|
-
|
|
|
|
1,221,657
|
|
Further
analysis of cost
|
|
For the six
months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
Organic
Fertilizer
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishery
|
|
|
HU
|
|
|
and Bread
|
|
|
Cattle Farm
|
|
|
Corporate
|
|
|
|
|
|
|
Development
|
|
|
Plantation
|
|
|
Grass
|
|
|
Development
|
|
|
and
|
|
|
|
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
Division
|
|
|
others
|
|
|
Total
|
|
Name of entity Capital Award, Inc. (CA)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Jiang Men City Heng Sheng Tai Agriculture Development Co. Ltd (“JHST”)
|
|
|
|
|
|
|
944,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
944,616
|
|
Qinghai Sanjiang A Power Agriculture Co., Ltd (“SJAP”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hunan Shenghua A Power Agriculture Co., Limited (“HSA”)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Macau Eiji Company Limited (“MEIJI”)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,759
|
|
|
|
|
|
|
|
217,759
|
|
Sino Agro Food, Inc. (SIAF)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
944,616
|
|
|
|
-
|
|
|
|
217,759
|
|
|
|
-
|
|
|
|
1,162,375
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
As
of 30 June 2021, 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.
China
The 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, JHST, JHMC, HSA, and SJAP since they are exempt from EIT for the years ended December 31, 2019 and 2018 as they
are within the agriculture, and cattle sectors.
No EIT has been provided in the financial
statements of QZH since they are exempt from EIT for the period ended December 30, 2018 (date of de- recognition QZH as subsidiary)
and as it is within the cattle sectors.
Belize
CA,
CS and CH are international business companies incorporated in Belize, and are exempt from corporate tax in Belize.
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
5.
|
INCOME TAXES (CONTINUED)
|
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
years ended December 31, 2019 and 2018.
Sweden
Sweden Corporate income tax has been
provided at 22% on reported profit for the year ended December 31, 2019 and 2018 in the consolidated financial statements of SAFS.
No deferred tax assets and liabilities
are of December 31, 2019 and 2018 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:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
SIAF
|
|
$
|
-
|
|
|
$
|
-
|
|
SAFS
|
|
|
|
|
|
|
|
|
CA, CH and CS
|
|
|
|
|
|
|
|
|
MEIJI and APWAM
|
|
|
|
|
|
|
|
|
JHST, JHMC, SJAP, QZH and HSA
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
The Company did not recognize any interest
or penalties related to unrecognized tax benefits in the years ended December 31, 2020 and 2019. 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.
|
6.
|
NET LOSS FROM DISPOSAL OF A VARIABLE
INTEREST ENTITY
|
Historical no longer applicable
|
7.
|
CASH AND CASH EQUIVALENTS
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Cash and bank balances
|
|
$
|
173,738
|
|
|
$
|
188,84
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As
of June 30, 2021, inventories are as follows:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Bread grass
|
|
|
|
|
|
$
|
|
|
Beef cattle
|
|
|
|
|
|
|
|
|
Organic fertilizer
|
|
|
|
|
|
|
|
|
Forage for cattle and consumable
|
|
|
|
|
|
|
|
|
Raw materials for bread grass and organic fertilizer
|
|
|
|
|
|
|
|
|
Immature seeds
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
$
|
-
|
|
|
9.
|
DEPOSITS AND PREPAYMENTS
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Deposits for
|
|
|
|
|
|
|
- purchases of equipment
|
|
|
-
|
|
|
$
|
-
|
|
- acquisition of land use rights
|
|
|
-
|
|
|
|
-
|
|
- inventories purchases
|
|
|
13,929,779
|
|
|
|
13,141,301
|
|
- construction in progress
|
|
|
-
|
|
|
|
-
|
|
- issue of shares as collateral
|
|
|
-
|
|
|
|
-
|
|
Shares issued for employee compensation and overseas professional and bond interest
|
|
|
-
|
|
|
|
-
|
|
Others
|
|
|
-
|
|
|
|
-
|
|
|
|
|
13,929,779
|
|
|
$
|
13,141,301
|
|
All accounts receivable are reflected as a current asset
and no allowance for bad debt of June 30, 2021 and December 31, 2020, respectively.
Aging analysis of accounts receivable is as follows:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
0 - 30 days
|
|
|
1,125,414
|
|
|
$
|
4,695,820
|
|
31 - 90 days
|
|
|
3,820,785
|
|
|
|
10,238,862
|
|
91 - 120 days
|
|
|
2,100,461
|
|
|
|
5,389,705
|
|
over 120 days and less than 1 year
|
|
|
12,834,221
|
|
|
|
12,333,943
|
|
over 1 year
|
|
|
-
|
|
|
|
-
|
|
|
|
|
19,880,881
|
|
|
$
|
32,658,330
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Advanced to employees
|
|
$
|
|
|
|
$
|
-
|
|
Advanced to suppliers
|
|
|
298,554
|
|
|
|
2,028,907
|
|
Advanced to customers
|
|
|
|
|
|
|
|
|
Advanced to developers
|
|
|
-
|
|
|
|
-
|
|
Advanced to SJAP
|
|
|
75,640,904
|
|
|
|
76,404,954
|
|
Others
|
|
|
2,039,763
|
|
|
|
3,649,530
|
|
|
|
$
|
77,979,221
|
|
|
$
|
82,083,391
|
|
Advanced to employees, suppliers, customers and developers
are unsecured, interest free and with no fixed terms of repayment.
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Plant and machinery
|
|
$
|
10,489,442
|
|
|
$
|
9,712,446
|
|
Structure and leasehold improvements
|
|
|
92,939,669
|
|
|
|
91,547,512
|
|
Mature seeds and herbage cultivation
|
|
|
18,533,307
|
|
|
|
17,612,200
|
|
Furniture and equipment
|
|
|
3,536,281
|
|
|
|
3,367,887
|
|
Motor vehicles
|
|
|
3,452,512
|
|
|
|
3,332,541
|
|
|
|
|
128,951,211
|
|
|
|
125,572,586
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
33,731,577
|
|
|
|
27,693,043
|
|
Net carrying amount
|
|
$
|
95,219,634
|
|
|
$
|
97,879,543
|
|
|
13.
|
CONSTRUCTION IN PROGRESS
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Construction in progress
|
|
|
|
|
|
|
- Office, warehouse and organic fertilizer plant in HSA
|
|
$
|
-
|
|
|
$
|
-
|
|
- Oven room, road for production of dried flowers
|
|
|
-
|
|
|
|
-
|
|
- Organic fertilizer and bread grass production plant and office building
|
|
|
-
|
|
|
|
-
|
|
- Rangeland for beef cattle and office building
|
|
|
-
|
|
|
|
-
|
|
- Fish pond and breeding factory
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Cost
|
|
$
|
70,052,058
|
|
|
$
|
68,293,896
|
|
Less: Accumulated amortization
|
|
|
(18,563,124
|
)
|
|
|
(15,811,679
|
)
|
Net carrying amount
|
|
$
|
51,488,934
|
|
|
$
|
52,482,217
|
|
SINO AGRO FOOD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Goodwill from acquisition
|
|
$
|
729,940
|
|
|
$
|
724,940
|
|
Less: Accumulated impairment losses
|
|
|
-
|
|
|
|
-
|
|
Net carrying amount
|
|
$
|
724,940
|
|
|
$
|
724,940
|
|
|
16.
|
PROPRIETARY TECHNOLOGIES
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Cost
|
|
|
9,692,600
|
|
|
$
|
9,232,228
|
|
Less: Accumulated amortization
|
|
|
(3,252,432
|
)
|
|
|
(2,164,475
|
)
|
Net carrying amount
|
|
|
6,440,168
|
|
|
$
|
7,067,753
|
|
|
17.
|
INTERESTS IN UNCONSOLIDATED EQUITY INTERESTS
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Investments at cost
|
|
$
|
|
|
|
$
|
|
|
- TRW
|
|
|
149,720,418
|
|
|
|
149,720,418
|
|
- SJAP
|
|
|
40,211,202
|
|
|
|
40,211,202
|
|
Cattle farm 2
|
|
|
20,078,441
|
|
|
|
20,078,441
|
|
Amount due from a consolidated equity investee
|
|
|
22,142,631
|
|
|
|
22,089,985
|
|
|
|
|
232,152,692
|
|
|
$
|
232,100,046
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Due to third parties
|
|
|
11,441,796
|
|
|
$
|
9,271,281
|
|
Straight note payable (note 23(i))
|
|
|
26,542,719
|
|
|
|
29,367,999
|
|
Promissory notes issued to third parties
|
|
|
-
|
|
|
|
-
|
|
Due to local government
|
|
|
-
|
|
|
|
-
|
|
|
|
|
37,984,515
|
|
|
$
|
38,639,280
|
|
|
|
|
|
|
|
|
|
|
Less: Amount classified as non-current liabilities
|
|
|
|
|
|
|
|
|
Promissory notes issued to third parties
|
|
|
-
|
|
|
|
|
|
Amount classified as current liabilities
|
|
|
37,984,515
|
|
|
$
|
38,639,280
|
|
Due to third parties are unsecured, interest free and have no fixed terms of repayment.
|
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Name of lender
|
|
Interest
rate
|
|
|
Term
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
China Development Bank
Qinghai Province, the P.R.C.
|
|
|
5.2835
|
%
|
|
November 29, 2019 - November 28, 2019
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Development Bank
Qinghai Province, the P.R.C.
|
|
|
5.2835
|
%
|
|
December 14, 2019 - December 13, 2019
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Development Bank
Qinghai Province, the P.R.C
|
|
|
4.7306
|
%
|
|
December 27, 2019 - December 27, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: current portion of a long term bank loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term bank loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Development Bank
Qinghai Province, the P.R.C.
|
|
|
5.39
|
%
|
|
December 16, 2016 - December 15, 2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: current portion of long term bank loan
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term bank loans
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
On
November 29, 2019 and December 14, 2019, the Company obtained two 1-year short term loans of RMB20 million (approximately
$3.06 million) and RMB10 million (approximately $1.53 million) respectively from China Development Bank for the period from
November 29, 2019 to November 28, 2019 and December 14, 2019 to December 13, 2019 respectively, bearing fixed
interest at 5.2835% per annum. Both loans were guaranteed by Xining City SME Guarantee Corporation and have been repaid on
November 28, 2019 and December 13, 2019, respectively.
On
December 16, 2016, the Company obtained a 10-year long term loan of RMB40 million (approximately $6.05 million) from China
Development Bank for the period from December 16, 2016 to December 15, 2026, bearing an annual interest rate at 110% of
the benchmark rate of PBOC on the date of the loan agreement and will be adjusted in line with any adjustment of the benchmark rate
which is 5.39% (2019: 5.39%). The loan was guaranteed by Mr. Zhao Yilin and Ms. Song Haixian, Mr. Zhao Yilin’s
wife. The loan was also secured by land use right with net carrying amount of $397,269 as of December 31, 2020 (2019: 429,982)
and a batch of plant, machinery and equipment with net carrying amount of $5,326,385 (2019: 5,954,915). On December 14, 2019,
RMB500,000 (approximately $75,563) was repaid to the bank. According to the loan agreement, RMB1,500,000 (approximately $218,563)
was schedule to be repaid by November 20, 2020 in two partial repayments.
On
December 27, 2019, the Company obtained a 1-year short term loan of RMB30 million (approximately $4.37 million) from China Development
Bank for the period from December 27, 2019 to December 27, 2020, bearing fixed interest at 4.7306% per annum. This loan was
guaranteed by Xining City SME Guarantee Corporation.
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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
20.
|
CONVERTIBLE
NOTE PAYABLES
|
|
(i)
|
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 1”) 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.
The
Company and the note holder entered into a restructuring agreement regarding the settlement of the Note 1. Both parties have agreed to
restructure the indebtedness represented by Note 1 as follows: (a) SIAF issues 5,196,333 shares of its common stock and transfer
400,000 shares of TRW to the note holder; and (b) SIAF executes a new promissory note in the principal amount of $15,589,000 to
the note holder to be paid in installments over a period of time. However, both parties remain open to negotiate an all-cash settlement
of the Note 1.
As
of December 31, 2020, as a result, the amount outstanding under Note 1 was reclassified as other payables – straight note
payable of $29,367,999 (see Note 21) and a loss on restructuring of $6,225,204 which representing the non-amortized part of the discount
upon the issuing of the convertible bond incurred during the year.
Subsequently,
Note 1 matured on February 28, 2020, the Company intends to offer the settlement of the note to the accredited investors based on
the following understanding, terms and conditions:
(i).
The earlier understanding of the restructured indebtedness is to be carried as follows: (a) SIAF issues 5,196,333 shares of its
common stock and transfer 400,000 shares of TRW to the note holder; and (b) SIAF is to pay the revised promissory note in the principal
amount of $15,589,000 to the note holder.
(ii).
It is the Company’s intension for the said 5,196,333 shares of its common stocks to be converted into the G Series Preferred
Stocks at conversion ratio of the offer of the Initial Public Offer stated in the registration statement filed with SEC targeting on
or before June 30, 2021.
(iii).
There were 500,050 Common Shares of the Company loaned to the said accredited investor on (Date: July 22, 2014) valued at US$18.10
/ share as security for the accredited investors to secure their investors to invest on the Bond prior to the completion of a registration
statement filed with SEC on June 2014 to allow the official issuing of additional common stocks to ECAB’s BOND investors,
and that ECAB would return back the loaned stocks back to the Company upon the time the said accredited investor invested the balance
of the Note 1 proceed of (US$ 13,362,550) needed to complete the disbursement of the total loan proceed of US$25,000,000 on or before
(Date: February 28th 2015). However the said investor sold the said loaned 500,050 common stocks of the Company in between
the period (Date: February to March 2015) and invested part or the full sum from the sales proceeds of said 500,050 common
stock of the Company (of US$10,500,000) back to the Company as part of the Note 1’s disbursement to the Company making total disbursement
sum of US$22,137,450.00 being advanced to the Company on or before 30th June 2015, and in turn, the investor did not
return the said 500,050 common stocks of the Company to the Company and didn’t help the Company to complete the said registration
statement by not giving the Company the Debenture Agreement needed to complete said registration statement with the SEC.
(iv).
In order that the principal amount of $15,589,000 of the cash settlement sum mentioned above may be settled amicably between the accredited
investor and the Company, the sales proceeds (of US$13,362,550.00) from the sales of the 500,050 shares loaned in good faith to ECAB
must be taken into consideration and be deduced from the said principal amount before this bond arrangements can be settled.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
20.
|
CONVERTIBLE
NOTE PAYABLES (CONTINUED)
|
|
(ii)
|
On October 20, 2019, the Company issued another Convertible Note (the “Note 2”) with a principal amount of $4,000,000 due on February 28, 2019. The note holder had the option to convert all or any part of the outstanding note into the common stock of the Company (the “Primary Optional Conversion”) or TRW (the “Secondary Optional Conversion”) at any time for a period of eight months from the note’s maturity date. The conversion price for Primary Optional Conversion is lesser of $1.5 per share or at 65% of the market share price of the Company. While the conversion price for Secondary Optional Conversion is $3.41 per share subject to equitable adjustment for stock split, stock dividend or right offerings.
|
Under
the agreement, the Company shall pay the note holder 120,000 common shares of SIAF or 32,000 common shares of TRW as an origination fee.
The note bears a flat interest payment which shall be settled by 200,000 common shares of SIAF or 55,000 common shares of TRW. As of
December 31, 2020, no settlement for both origination fee and interest payment. The supplemental agreement to the Bond Subscription
Agreement with the Subscriber to extend the Bond Issue by another year to December 31, 2021 was signed. All other terms and conditions
of the Bond Subscription Agreement and the Conditions continue in full force and effect.
The
fair value of the conversion option was approximately $211,320, the Company discounted the note and created a derivative liability, which
will be evaluated each quarter and adjusted for any change in value. For the year ended December 31, 2020 and 2019, the Company
recognized the amortization of the discount of approximately $nil and $106,297, respectively.
The
Company estimated the fair value of the derivative liabilities using the Binomial Option Pricing Model and the following key assumptions
during 2020
|
|
2021
|
|
Expected dividends
|
|
|
-
|
|
Expected term (years)
|
|
|
0.34
|
|
Volatility
|
|
|
52.09% - 54.32%
|
|
Risk-free rate
|
|
|
1.65% - 1.9%
|
|
The
following table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for
at fair value as of December 31, 2020 and 2019
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities as of December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
0
|
|
Derivative liabilities as of December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
2,100
|
|
|
|
2,100
|
|
The
following table represents the change in the fair value of the derivative liabilities during the year ended December 31, 2020
|
|
$
|
|
Fair value of derivative liabilities as of December 31, 2019
|
|
|
2,100
|
|
Change in fair value of derivative liabilities
|
|
|
-
|
|
Fair value of derivative liabilities as of 30 June 2021
|
|
|
0
|
|
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.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Group’s share capital as of December 31, 2020 and 2019 shown on the consolidated balance sheet represents the aggregate nominal
value of the share capital of the Company as of that date.
Common
Stock:
During
the year ended December 31, 2019, the Company (i) issued 535,598 shares of common stock valued to employees and directors at ranging
from $1 to $1.56 per share for $576,170 for employee compensation; (ii) issued 16,032,262 shares of common stock valued to professionals
and contractors ranging from $ 0.55 to $1.00 per share for $9,723,720 for service compensation; and (iii) issued 3,935,439 shares of
common stock valued at $ 0.30 to $0.50 per share for 1,478,029 for settlement of debts.
During
the year ended December 31, 2020, the Company (i) issued 6,511,081 shares of common stock at US$0.25 per share in quarter (1) for US$1,596,370
for settlement of debts and (ii) issued 1,876,166 shares of common stocks at US$0.25 per shares for US$469,041 for settlement of debts
and there was no further issuance of shares of common stock since thus total issuance of shares of common stocks for the year ended December
2020 is 8,387,247 shares for US$2,065,411.
The
Company has 60,352,942 and 59,963,332 shares of common stock issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.
|
22.
|
OBLIGATION
UNDER OPERATING LEASES
|
The
Company leases (i) 2,178 square feet of agriculture space used for offices for a monthly rent of $812 in Enping City, Guangdong
Province, P.R.C., its lease expiring on March 31, 2021; and (ii) 2,695 square feet of office space in Guangzhou City, Guangdong
Province, P.R.C. for a monthly rent of $3,034, its lease expiring on July 8, 2022.
Lease
expenses were $26,254 and $24,357 for the six months ended June 30, 2021 and 2020, respectively.
The
future minimum lease payments as of December 31, 2020, are as follows:
Within 1 year
|
|
$
|
31,541
|
|
2 to 5 years
|
|
|
26,485
|
|
Over 5 years
|
|
|
-
|
|
|
|
$
|
58,026
|
|
|
23.
|
STOCK
BASED COMPENSATION
|
On
June 30, 2019, the Company issued employees total of 117,000 shares of common stock valued at fair value of $3.45 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 $3.45 per share. On December 31, 2019, the Company issued employees total of 500,800 shares
of common stock valued at fair value of $1 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 $3.45 per share. On December 31,
2019, the Company issued employees total of 1,050,502 shares of common stock valued at fair value of $1 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 $1 per share.
As
of June 30, 2021, the deferred compensation balance for staff was $0 and $0 were to be amortized over 6 months and 1 year, respectively
beginning on January 1, 2020.
SINO
AGRO FOOD, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On
March 26, 2020, a shareholder derivative complaint was filed in the United States District Court for the Southern District of New
York against the Company, as well as four of its current directors. The Complaint alleges violations of securities law and state law,
breaches of fiduciary duties (including gross mismanagement of the Company) by the individual defendants, a material default of its obligations
under a commercial loan agreement, misleading and false statements (including material omissions) by the individual defendants, and unauthorized
issuance of new shares of Common Stock to pay debts that, in the view of the plantiffs, has diluted shareholder ownership and oppressed
shareholders of the Company. The Company and the individual defendants believe that these claims are without merit and intend to vigorously
defend against the Complaint.
On
July 23rd 2020 the settlement agreement between the plaintiffs and the Company to settle the shareholder derivate complaint
was preliminary approved and final approval was granted on October 13th 2021 as such the case was closed on October 13th
2020 officially.
On
September 22, 2015, the Company entered into a trade facility agreement with two independent third parties. Pursuant to the agreement,
the Company provides collateral in the form of Company’s common shares to a PRC based lender (the “Lender”) and the Lender
agrees to provide a revolving trade facility loan up to $20,000,000 to a PRC based borrower. The arrangement was commenced on February 15,
2016 and will be expired on September 15, 2020.
As
of December 31, 2020, the Company has issued aggregate 5,708,312 common shares as collateral and the trade facility line reduced
to $13 million that was settled and written off with the consent of the Lender on the understanding that it is due to the impacts of
the Covid-19 the borrower is no longer requiring the revolving trade facility. Therefore as at December 31st 2020 the Company
has no more contingent liability regarding to this trade facility to the Lender.
|
25.
|
RELATED
PARTY TRANSACTIONS
|
In
addition to the transactions and balances as disclosed elsewhere in these consolidated financial statements, during the years ended December 31,
2020 and 2019, the Company had the following significant related party transactions:-